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Good morning everyone I saw a pairs trading webinar on the topic and found this code. I can not understand these two pieces of code, anyone is kind enough to explain % The strategy: % 1 Compute residuals over next N days res = series2 (i: i + N-1, 1) ... - (Reg1.coeff (1) + reg1.coeff (2). * Series2 (i: i + N-1, 2)); % 2 If the residuals are large and positive, then the first series % Is Likely to decline vs. the second series. Short the first % Series by a scaled number of shares and long the second series by 1% share. If the residuals are large and negative, do the % Opposite. indicated (i: i + N-1) = res / reg1.RMSE; s (i: i + N-1, 2) = (res / reg1.RMSE> spread) ... - (Res / reg1.RMSE <-spread); s (i: i + N-1, 1) = -reg1.coeff (2). * s (i: i + N-1, 2); end end Thank you very much for your cooperation ps do you know where I can find some code on the pairs trading?

What GoPro Has Done Right Now that the stock has surpassed the 90 mark, the owner has a worth of over 5bn (still holding 48% of the company after IPO). It raises the question as to what has Gopro done right? 1. Actually SELL something. (I’m looking at you Facebook) I’m not saying that you need to sell something physical, but when it comes down to it, people have faith in companies that actually do something. 2. Life is a popularity contest. I’ll quote Jesse Jones on this one “What other company do you own the product you trade?” (Forgive me if the quote is off Jesse). Simply put, Gopro is in people’s faces day after day. Every time you go on YouTube, there will be a new video up, and many people, including myself, own one. They aren't just selling an idea; they are selling a physical product attached to an idea. Business side: What have they done right? A few key points here you will see effect the stock in the coming months. 1. Their launch date was chosen to perfection. 2. Mid October they are slated to launch a new camera. This will be perfect timing if the stock does falter, breathing new life into the company. They will be on the front page with this move. Not only will it help their stock (assuming they don’t have a bendable camera #bendgate), but they will reap the rewards of the increased media attention from their successful IPO. Free advertising. 3. Here is the big one. Their lockup expiration is 12/23/2014. Christmas Eve. The last point is what I will end on. They have crucially chosen a time to allow for their 180 day lockup period to end on Christmas Eve… This goes in the best form of announcing any kind of bad news late on Friday to let the market forget about it over the weekend. How do you prevent a sell off of company stocks post lockup period? Provide the sellers with one of the quietest times of the year in the stock market. Well played Gopro. A bit about me: I'm a Futures and Forex trader who has been personally trading for years. I find all aspects of trading interesting, and on occasion, like this one, I even write articles on the stock market. Trader psychology has facinated me since the first time I moved from a paper trading to real live trading. The difference sparked an interest that I write about today.

If you have $10,000 to put towards your trading account, don’t waste your time. As a matter of fact if you have $15,000 or even $25,000 in your trading account, don’t waste your time. That is, don’t waste your time with careless mistakes because every trade counts. The Learning Curve is Flat The learning curve for learning how to trade futures for a living can be extremely flat, that is you may spend countless hours learning all there is to know about the trading the markets, but you aren’t seeing a return in profits. Your time spent learning increases, but your account stays the same, or in many cases shrinks. If you want to win at this game and become consistently profitable over time then you absolutely, positively, must be disciplined 100% of the time, all of the time. Don't Waste Your Money on Tuition Many people like to credit their trading losses in the early years towards “tuition” or “paying their dues” and while there is something to be said for learning by doing, there is no reason for justifying a trading mistake. Every error you make in trading is costing you money. That First Step When starting out as a trader, you probably traded a practice account for a couple of months and began to learn the ropes, testing your strategy (my broker of choice is Infinity Futures for both practice accounts and live trading). After becoming anxious you make the switch to live trading and realize that most of what you learned goes out the window when you’re in a live trade. Your emotions come into play and your methodology becomes foggy. And the Light Bulb Goes Off There are many “light bulb moments” along the way, but limiting the mistakes when you’re trading a small account is crucial if you want to prevent blowing up your account. Along with reading the material on the EminiMind Blog I recommend reading and learning from the mistakes of other top traders in the Market Wizards series. 3 trading mistakes that will lead to disaster: Impulse trades – If you find yourself clicking sporadically on the trading ladder you need to stop immediately and reevaluate your trading plan. Revenge trading – Just because you had a loss doesn’t mean your next trade needs to be a home run, try for consistent singles and doubles with a few strikeouts in the mix. Trading too big for your account size – If you’re trading an account size of $10,000 then the max number of contracts you should be trading on the ES or 6E is 2, enough said. The Only Guarantee While no one can guarantee your success trading the markets (if you come across such claims be leery) I can guarantee you that if you make any of these 3 trading mistakes you will lose money. Treat your trading capital like you would your children, or if you don’t have children, like a one of a kind Porsche, you wouldn’t throw your kids in front of a bus so don’t piss away your trading account with avoidable mistakes. Patience pays in trading the markets so don’t waste your time trading a small account. Every trade is a valuable step towards generating consistent income trading futures for a living.

.. Apparently I'm a shark. (I would have liked to think I was a bull!) What are your thoughts on this quiz? Would you say you could relate yourself to any of these animals?

Today, We would be going back to the basics and understanding " How Forex works ?'' As you may know any other market demand and supply determine the price of an asset, in this case the asset is the exchange rate between one currency and another currency. Exchange-rate Regime This is valid for a currency regime with free floating rates. The other two main exchange rate regimes are: - the so called pegged float and - the fixed rate regime Currencies such as the Chinese Yuan are not floating freely as they are allowed only to trade within a limited range around a certain price level (pegged float). It is almost impossible to make money trading a currency like the Yuan which can only be traded in a fixed corridor. Other currencies are fixed completely to the value of another currency and are not tradable independently. Four Main Fundamental Factors If you trade the highly liquid major currency pairs which are available to trade via the Forexchampionship you need to be aware of the fundamental factors which influence the exchange rate between two currencies. The four main factors are: -Inflation -Monetary policy -Economic growth -Interest rates These factors are linked and influence each other. Furthermore the creditworthiness of a country and its status as a reserve currency play an important role. These are the most important fundamental factors which can influence a currency but certainly this list is not “complete”. Other Factors As we have seen lately with the tensions between Russia and Ukraine – geopolitical events can influence currency prices. The immediate reaction of the market after the events in Ukraine over the weekend was to buy the US dollar and the Japanese yen. The USD is still the world’s reserve currency No.1 and the yen is the favorite funding currency in the carry trade. In times of crisis investors seek the “safe haven” of the US dollar and carry trades get unwinded as they are considered risky. Conclusion If you are aware of what’s driving a specific currency fundamentally and if you manage to combine this knowledge with technical analysis you have a good chance to succeed in currency trading.

There are different interpretations of success, reaching form “participation is everything” to attainment of wealth and fame. Let us take the same range of interpretation for trading/investing then it would read as follows: “Success is making money” to “success is attaining wealth”. Trading is a professional business and professional attainment is measured on score cards. Fund managers performance for example is measured in how close the fund performs to the referring index. For funds, which relate to large caps or the overall stock market, the S&P 500 index is generally used as the base line. If you want to do the same as a private investor, take SPY: The ETF of the S&P 500, which has a year-to-date-November-2013 performance of 27% growth. If your trading/investing account grew with the same rate of return, you met the index. In case you run on a lower return rate, you are in good company, because most of the fund managers: Mutual Funds, Exchange Traded Funds, Hedge Funds are not achieving the average fund performance either; only a small number of funds is beating the S&P 500, where the best in class run at double the return rate of the S&P 500 (We will report separately in giving you a detailed overview on Hedge- and Investment Fund performance). Let us take a look at the top 10 stocks of the S&P 500 and their year-to-date-November performance: 1 Exxon Mobil Corporation Common (XOM): 8.0% 2 Apple Inc. (AAPL): -1.1% 3 Microsoft Corporation (MSFT): 42.6% 4 Johnson & Johnson Common Stock (JNJ): 32.2% 5 General Electric Company Common (GE): 25.8% 6 Google Inc. (GOOG): 43.7% 7 Chevron Corporation Common Stock (CVX): 10.8% 8 Procter & Gamble Company (PG): 21.6% 9 Berkshire Hathaway Inc. Class B (BRK.B): 24.2% 10 Wells Fargo & Company Common Stock (WFC): 26.0% The results show that we have a wide spread of developments, reaching from -1.1% (AAPL) to +43.7% (GOOG), with an average performance of the top 10 stock at a return rate of 23.4%. Take a look at the Berkshire Hathaway Fund performance in relation to the S&P 500: -2.8%, which would be seen as an average good performance for fund managers. However, had you bought SPY-shares, you would have been better on. How can you do better than average and most important, how will you be able to produce wealth, when the markets might not give such a positive development in 2014? You need a trading or investing system, which shall give you the following: Seven Critical Elements of a Trading Flexibility to trade/invest in various assets. Why various assets? In case stocks halter, institutional money might flow into assets like commodities, currencies, treasuries and you should be prepared to participate in institutional money moves when they happen. A system, which lets you produce income if the markets move up, down or sideways. In average, markets drop with three to five times the speed they grow. Hence, you should be ready for applying short trading strategies applicable to all kind of account holdings: IRA, 401(k), Cash, Custodian, and Margin. Clearly defined entries and exits: Institutional money is moving the markets and institutions leave their trace of directional intends. With the right trading system on hand, you can spot and trade along with those actions. Focus on spotting and trading along with institutional money moves, produce constant income and reinvestment. Such method makes you independent from picking the right stocks with long term growth. Imagine, you were able to win two out of three trades, with an average trade duration of four days, aiming for a 1.5% return/trade, making income to the up- or downside; then you are striving for an annual return of 62%, regardless of the directions the market take. If you can apply this method successfully, you will beat the best hedge fund managers of the world by far. Risk management: Professional traders have clear guidelines of how they act. As a private investor/trader, you need the same: Define the odds ratio for every trade and adjust the lot size of your investments to hedge and leverage your positions accordingly. Have trade repair strategies in place, helping you to turn potential losers into winners for all account types. Have a method to spot key assets on the move. Never fall in love with a stock or asset. No stock has to grow. The performance of an asset is the result of supply and demand. Apply a system which helps you to visualize when changes in supply and demand occur in an asset and be part of the directional move. [*]Journal your performance to see where you do well and where you have needs for improvement. Pros of every genre: Sports, theater, movies, trading, do this and you need to do the same to strive for constant improvement and long-term trading success. Clear cut documentation for every trade situation and asset, so you can always go back to the drawing board for revisions. Hence, please consider: Those who fail to prepare, prepare to fail. Good trading. Thomas

TRADING GOLD “ The desire for gold is the most universal and deeply rooted commercial instinct of the human race.” Gerald M. Loeb, EVERYONE’S TALKING ABOUT GOLD – WHAT IS IT ALL ABOUT? Human beings have long valued and treasured gold for its inherent lustre and malleability. In fact, gold has been used in human commerce since the societies of the ancient Middle East over 2,500 years ago, making it the oldest form of money still recognized today.Gold’s long track record as a store of value despite wars, natural disasters, and the rise and fall of great empires means that it is generally seen as the ultimate “safe haven” asset. Therefore, it’s not surprising that interest in owning and trading in gold has skyrocketed in recent years with the onset of the Great Financial Crisis in 2008. Gold prices have risen in sympathy, hitting an all-time high above $1900 in late 2011. In this brief guide we will discuss the major forces that drive gold prices, along with some of the common methods for trading gold and a brief overview of possible trading techniques. THE MECHANICS OF GOLD TRADING Physical gold is valuable because it represents many of the qualities of ideal money. It is scarce, durable, portable, uniform across the world, and widely accepted—in part due to its long history of being widely accepted. However, in the current digital world, few traders actually take physical possession of gold bullion. Instead, most traders focus on trading the current “spot” gold price, which is based on the price of the most active futures contract on the COMEX (Commodity Exchange) in New York. For all intents and purposes, you can trade gold as you would any other trading instrument at GFT Markets. Two of the most common ways to trade the price of gold are through CFDs or spread betting. Both of these products offer leverage, meaning that traders can control £1,000 of gold with less than £1,000 of margin. Leverage can offer great potential for profit if the market moves in your favor, but it can also lead to a large, rapid loss if the market moves against you. Therefore, it is essential to practice good risk management and place a stop loss with every trade. FACTORS THAT INFLUENCE ITS PRICE Gold is one of the most difficult financial assets to value. As we alluded to above, gold is similar to a currency, such as the U.S. dollar or the euro, in many ways; unlike these more commonly traded currencies, though, gold is not supported by an underlying economy of workers, companies, and infrastructure. In other ways, gold is more similar to a commodity like oil or corn because it comes from the ground and has standardized physical characteristics. Unlike other commodities, however, gold often fluctuates independent of its industrial supply and demand. One of the most reliable historical determinants of gold’s price is the level of real interest rates, or the interest rate less inflation. If you think about it, this relationship is relatively straightforward. When real interest rates are low, investment alternatives like cash and bonds tend to provide a low or negative return, pushing investors to seek alternative ways to protect the value of their wealth. On the other hand, when real interest rates are high, strong returns are possible in cash and bonds and the appeal of holding a yellow metal with few industrial uses diminishes. One easy way to see a proxy for real interest rates in the United States, the world’s largest economy, is to look at the yield on Treasury Inflation Protected Securities (TIPS). GOLD TRADING STRATEGIES As with any trading instrument, there is no one “best” way to trade gold. Many traders from other markets have found that the technical trading strategies they employ on other instruments can easily be adapted to the gold market, especially given gold’s tendency to form durable trends. That said, longer-term traders could go a step further by using a filter based on the level of real interest rates discussed above. The below chart shows the relationship between gold prices and the yield on TIPS, a proxy for real interest rates in the United States. The inverse correlation is obvious, but it looks like the recent gold rally accelerated further as real yields dropped below 1% in early 2009. A longer-term look at the relationship would reveal that gold prices generally fell in the late 1990s, for instance, which were characterized by real yields above the 1% threshold. Therefore, longer-term traders may want to consider only buy trade opportunities if real yields are below 1%, a level which has historically been supportive of gold prices. Conversely, if real yields rise above 2%, traders may want to focus only on sell trades. The ability to use a filter based on real interest rates is one of the unique features that long-term traders can use to gain an edge when trading gold, but the trading strategies and opportunities in trading the world’s oldest “currency” are truly limitless.

When everything comes together, the best technique to make money in the stock market. If you don't have a watch list, you are losing money.

Are there any regulated binaries brokers out there?? (that aren’t from Cyprus). I'm not much of a forum person but this question has been bugging me. I definitely feel like I'm being ripped off if I'm putting money into overseas accounts. I've been trading Forex and metals for years but I'm interested in binaries now. Are there any New Zealand or Australian ones?

NSFX has been a great broker, providing great trading conditions, personalized to my needs, with the help of their account manager. The service is very good, close attention to detail and to the client needs. Easy withdrawals as well.

The big focus for the forex markets in 2013 was on whether or not the US Federal Reserve was going to start tapering its $85 billion a month bond purchases. It hinted at its meeting in May that it wanted to start reining in its quantitative easing programme unleashing considerable volatility. After some poor communications, volatility and speculation the Fed finally announced in December that it would start tapering at a rate of $10 billion a month. In retrospect it communicated the event well as the markets took it as good news – a sign that conditions are returning to normal. Nonetheless, the run up to the taper saw many emerging market currencies take a hit particularly in countries with large current account deficits, which had become dependent on the Fed's largess. The Euro – a surprise winner Surprisingly, the EUR turned out to be one of the best performing currencies in 2013. On Dec 23 the EUR was 103.79 versus a basket of 21 currencies, compared with 99.22 the same time a year ago. And 2013 didn't start particularly well for the single currency. Amid the usual concerns over the state of the peripheral Eurozone economies one them, Cyprus, had to be bailed out to the tune of EUR 10 billion in March. The political furore which accompanied the whole episode reignited concerns over contagion and even a break-up of the EUR. The Eurozone pulled through and as the year wore on it appeared that the leading peripheral Eurozone economies were beginning to stabilise and even show signs of growth. Meanwhile, German chancellor Angela Merkel, considered by many to be the Eurozone's real leader, won a decisive election victory. Also, the Eurozone managed to make some slow progress on a bail-out mechanism for failing banks. USD shrugs of political paralysis USD was also a star performing currency despite a show of very divided politics in the US, which led to a government shut-down in October 1-16. Democrats and Republicans were eventually able to come to a longer-term agreement over the US budget heading off another damaging shut down in the new year. Against a basket of the major currencies USD was 76.33 versus 73.12 the same time a year ago. But while the politicians were busy arguing the US economy was recovering as was the key real estate market. This enabled the Fed to announce the start of its tapering – a very bullish event for the USD. Also, Janet Yellen was nominated to takeover at the Fed from Ben Bernanke on January 31, 2014. It will be her job to see through the end of quantitative easing, which is unlikely to be a smooth process. Abenomics hammers JPY Whilst the Fed was shifting to taper mode the Bank of Japan was just getting started in a bid to banish deflation and restore growth to Japan. The policy became known as Abenomics with the BoJ aiming to double the country's money supply. JPY was also a target for Japanese officials who desired a rate of UJSD/JPY 100. They got their wish. By late December it was flirting with levels of 104 and looks set for further weakness. UK recovery gather pace The UK economy in 2013 looked its best in five years. With an eye on elections in May 2015 the UK government initiated a series policies to stimulate the all important real estate market and eased up a bit on its austerity measures. Towards the end of 2013 the economy was growing at an annualised rate of 1.9% and real estate prices were rising strongly. This led to the Bank of England deciding not to extend its quantitative easing programme beyond GBP 375 billion. In June, former Canadian central bank governor Mark Carney took over at the Bank of England – the first foreigner to do so. Cable is looking to finish slightly higher than this time last year following a rocky performance between March and August.

This thread is for those wishing to discuss the advantages and disadvantages of stock options trading. I am waiting your thoughts.. One positive for stock options trading I believe is leverage, with options you can achieve a greater amount of leverage than when purchasing the underlying stock.

After seeing the popular thread that's updated regularly with open source trading platforms, I've decided to create a thread that I'm going to regularly update with free trading webinars that look to be interesting. I attend a lot of free webinars to try and catch any new trends/indicators that people are using. It's been one of the easier ways to find and/or try new techniques. Feel free to use the comments as reviews. I'll be monitoring this to try and keep it from becoming spam filled. Ongoing List of FREE Education Webinars on Trading Why Value? A Value Investing Legend Reveals His Strategy - I've been following this guy for a while and enjoy his articles on InvestorPlace, Benzinga, and TheStreet. Looks interesting Time to Buy Detroit? - I've been fascinated by this whole event. It will be interesting to hear several experts discuss how to take advantage of a bankruptcy like this

Social trading platforms are possibly one of the most exciting developments in recent years; in short, they mean that we’ve now got unprecedented access to the actions carried out by a huge number of other traders, and the result is that we can improve on our own successes like never before. Social media means that many people can work together on finding signals and working out a strategy, rather than doing everything yourself. As the saying goes; two heads are better than one. Part of the reason large investment companies can be so successful is that they have a lot of people working on positions and monitoring price actions and events. The more people you’ve got looking out for patterns and opportunities, the more chance you’ve got at making a successful trade. One of the major benefits of social platforms is that they are more trustworthy than a lot of advice that you’ll find on the internet; you can see exactly how people are trading themselves, and how successful they are. You don’t need to take someone’s word for something; you can see what they’re doing. When discussing the next big opportunity on a forum, you’ll be able to find out how well it turns out for other people. Many social outlets display top performing users, and you can actually copy their trades yourself. There are numerous social applications available, some of which will work with certain brokers and platforms, and some of which won’t. It’s important to do your research first, as there can be certain exclusions. If you want to use expert advisors for instance, you’re likely to need to choose a MetaTrader compatible one such as TraderConnect. eToro is the largest outlet, but it is not free, and only higher level subscriptions are compatible with MT4. Of course, it’s very important that social media is treated as a tool just like any other. Relying on others for all your signals and strategy is not a good idea, because what’s right for one person might not be right for another. Instead, you should incorporate social media into your own strategy, and use it as a method of finding more information than you’d normally be able to. It’s also a great way of learning new things, and is a place where you can ask questions too. If you’re looking for a way to increase productivity, this could be it.

AlgoTrader is based on Complex Event Processing (CEP) using Esper and therefore accommodates strategies that cannot be programed with procedural programming languages. CEP is a very good technique to get started with algorithmic trading. With this technology time-based Market Data Analysis and Signal Generation are coded in EPL (similar to SQL) statements, whereas procedural actions like placing an order are coded in plain Java Code. The combination of the two provides a best-of-both-worlds approach and accommodates strategies that are predominantly time-based and therefore cannot be programed with traditional procedural programming languages. Also, the total amount of code is usually much smaller, even for complex strategies. AlgoTrader is not a Chart based Trading Platform (like Tradestation, MetaTrader or NinjaTrader). It does not have drag-and-drop functionality and hundreds of indicators. It is our belief, that successful strategies are based on economic facts and not on extensive back-testing or chart pattern analysis based on many different technical indicators. Features: Automate Trading Strategies based on Complex Trading Rules Develop, Simulate and Trade multiple Strategies in parallel Multiple Broker Interfaces and Market Data Providers Support for Forex, Options, Futures, Stocks, Commodities & more Support for Synthetic Instruments & Custom Derivative Spreads Several build-in Execution Algorithms Multi-Account Functionality Automated Forex Hedging & Options Pricing Engine Based on Open Source Technology like Esper, Spring & Hibernate Scalable / Low Latency / High Throughput Architecture and much more… There are two versions available of AlgoTrader: An Open Source Version that you can download for free from http://code.google.com/p/algo-trader/ A Commercial Version (with Support and Professional Services) is available from http://www.algotrader.ch

This thread is for those who like to discuss about the Fundamental Valuation (Relative valuation / Discounted Cash Flow valuation) of stocks listed on NYSE. I am waiting for your thoughts in this thread and their usefulness in trading. We all know valuation is done by Research analyst and if the current market price is below (above) than the Intrinsic value of the stock, then the stock is Undervalued (overvalued) and we do the trading accordingly. Awaiting more inputs to this thread so that it helps in trading decision making. Happy Learning

Reviewing what we need to trade and showing this weeks past trades broken down into a basic easy to understand chart and discussion on limiting risk by staying out of risky events.

An S&P outlook for next week and should you sell in May and go away? Some great charts accompany this video which outlines what I see happening in the next 2 weeks. Basically the big question is will the market start to retreat soon? I myself can't help but look at recent historical charts (Back to 2010) and not get swayed to that side of the fence. The other side is just more upside. We see in the video and on the charts we have all the makings of a classic flag or continuation pattern. Even the stochastics have set up in a very nice level that could shift the momentum back to the buyers. We might have already seen this Friday. I think we have a nice 2 day rally early this week, then I want to watch to see if we fail at making new highs. That could happen after a nice bounce out of a flag. I see it a lot and would not bet against it. Better yet I don't want to take this bet and rather take shorter trades and try not to get into a position that I am dependent on the market but to trade the smaller intraday patterns with maybe a couple overnight holds.

This thread is for those who like to discuss about the Money Management in Forex Trading . I am waiting for your thoughts in the most important ingredient to successful trading. Risk reward is the most important aspect to managing your money in the markets. Every trader in the market wants to maximize their rewards and minimize their risks. A risk-reward ratio of 1:2 means your profit target is twice your stop loss. If your trade has a Risk - Reward ratio of 1:3, it means that for every winner, you will need to lose an equivalent trade three times to lose all your profits. If you gain 900 pips in a trade (with a 300 pip stop loss) you would need to lose three trades using the same Risk-Reward ratio to cancel the profitable trade. This is why a forex trader can have two winners and three losers in a month and still make money.

Automated Forex Trading is a broad term that could refer to stop or limit orders that have been previously established by a trader, or in the algorithmic trading that defines trade parameters independently through mechanisms such as an Expert Advisor in MetaTrader. Automated trading can carry a higher risk of loss and position sizes should be lowered as a means of protection against adverse market movements.

Looking at a chart, you always know in retrospect that prices moved sideways, but how to know in advance? In the NeverLossTrading concept, we integrated a study, which measures changes in implied volatility and informs the trader by painting a "Purple Zone" on the chart, indicating, that the price/volume development of a share has reached this critical stage of consolidation. Then, we either apply short term sideways strategies, or wait for the breakout signal, to trade along with the direction after the breakout. In the “Purple Zone”, we find little directional movement with various counter price trend activities until a breakout to the up- or downside occurs. To support the visibility of such price development, we shade the price chart for the time-period purple and produce a very powerful indicator, signifying: Apply short term sideways strategies, with limited risk or do not to initiate trades when the Purple Zone continues, by not knowing when it ends and in which direction prices might breakout. rend-trade when the Purple Zone is over, if the first candle outside the Purple Zone shows an arrow pointing to the trade direction: o Purple Arrow: To the upside o Purple Arrow: To the downside. GE Breakout After a Purple Zone At times we get asked why the zone is purple? The answer is: It marks a time-zone of indecision where the market forces negotiate until an upside or downside price-move concludes the decision making process. The color purple is achieved by mixing red (down-color) and blue (up-color). For the beginning financial market investor, the best is not to trade in the “Purple Zone”, but right after, when a trend is established. More advanced traders gauge the price range in the zone and take trades already at the first break out. By being aware that even light-tower-candles that occur can quickly be reverted while the “Purple Zone Indicator” is present. If we are in a trade that enters a “Direction Change Zone”, we either exit the trade or adjust the range for the stop not to be taken out by radical price movements. If we are unwilling to accept additional risk and still want to stay in the trade, the stop line (red line) of the Double-Decker at entry into the “Purple Zone” builds the point where we put our stop. A directional arrow after the Purple Zone identifies a high probable trade entry. If there is no arrow on the first candle after the Purple Zone, the study recommends not to enter into a directional trade. The best trade entry for a trend trade is two ticks above/below the trade proposal painted on the chart. The same functionality applies for Intra-Day- and Swing-Trading Charts. After our new software update, we are now allowing in the NLT-Purple-Zone-Indicator to put a computer generated price proposal at the end of the Purple Zone arrow: SPY, ETF of S&P 500 Index Signifying the Overall Market Move The trade direction-pointing arrow after the Purple Zone now resides on the price level of the cloud and identifies the new price direction to trade. The width of the cloud can be adjusted from the factory setting of 2 to a higher or lower level: If the level is set to zero, the Purple Zone Cloud disappears. If it is set to 1, it narrows the width of the cloud. A setting above 2 widens the cloud setting. Further: The alert sound and the end of Purple Zone alert can be set to individual preferences. Additional Switch Functions: - If you want the computer generated trade proposal, set the switch on “Yes”. - To receive a sound alert, when the End-of-Purple-Zone -Indicator is triggered, put the switch on “Yes”. The “Purple Zone Indicator” is an integral part of our software package. See, how you can integrate it in your trading. We offer four mentorship programs, geared to the need of the individual Investor: NLT Top-Line, for the Independent investor, where we install real-time analysis software. NLT HF-Stock-Trading: For frequent traders, able to trade the markets every day. NLT Wealth Building: If you are trading two times a week/month. NLT Income Generating: For day-trading futures and options.

Trading Indicators are used in technical analysis to help confirm chart patterns or specific support and resistance levels. Common examples include the RSI or MACD indicators, which allow traders to see when a currency is overbought or oversold.

With the rise inpopularity of margin and leverage accounts, many traders will look to maximize their exposure levels in the hopes of maximizing gains. Experienced traders tend to advise against this, however, as this will also increase your Transaction Risk.

I read somewhere recently -- and can't remember where -- having to do with Market Profile, I believe -- that most experienced traders will avoid trying to catch the tops and bottoms and focus on "the middle", waiting for confirmations to enter and confirmations to exit. However, since "the middle" is by definition where most of the trading is going on and is largely non-directional, there is also a lot of whipsawing in the middle, and that generates a lot of losing trades. One can sometimes avoid this by widening the stops, but, since the market always teaches us to do what will lose the most money, this will turn out to be an unproductive tactic. The safest and generally most profitable trades are found at the extremes. Therefore, you wait for the extremes. Wyckoff used a combination of events to tell him when a wave was reaching its natural crest or trough: the selling/buying climaxes, the tests, higher lows/lower highs, and so on, all confirmed by what the volume was doing and by the effect the volume had on price (effort and result). As a result of this work and of his exploration of trading ranges, he developed the concepts of support and resistance along with their practical application. Auction Market Theory (AMT) takes these investigations into support and resistance further, an “organic” definition of support and resistance like Wyckoff’s, that is, determined by traders’ behavior, not by a calculation originating from one’s head or from a website somewhere. Determine whether you are trending or “balancing” (ranging, consolidating, seeking equilibrium, etc), determine the limits of the range (support and resistance), and you’re in business. The notion of support and resistance has been and is the missing piece for many market practitioners. One can try to hit what appear at the time to be the important swings again and again and be stopped out again and again, hoping all the while that once one hits the true turning point, all the effort will turn out to have been worthwhile and the P&L will change from red to black. But by waiting for the extremes, one avoids most or all of those losing trades, and, even more important, avoids trading counter-trend. These boxes -- which are simply a graphic variation of the Market Profile distribution curve, whether skewed or not, or of the VAP (Volume At Price) pattern -- are nothing more than a means of locating those extremes. What I've found more useful about them is that they are encapsulated by time, i.e., the price and volume ranges have a beginning and an end. This enables me to see at a glance where the important S&R are, or at least are likely to be. Without them, one ends up with line after line after line until the S/R plots become a parody of themselves. All of this can be very confusing to someone who’s learned to view the market in a different way, perhaps less so to someone who’s just starting since he has so much less to unlearn. But backing up to the basic tenets of AMT, as well as to the concepts developed by (and in some cases originated by) Wyckoff, one can perhaps find a solid footing and proceed from there. To begin with, in the market, price is often not the same as “value”. In fact, one could say that since the process of “price discovery” is a search for value, they match only by accident, and then perhaps for only an instant. Blink and you missed it. Add to this the fact that for all intents and purposes there is no such thing as “value” but rather the perception of value. After all, what is the “value” of, say, Microsoft or GE or that little stock your stylist told you about? This state of affairs may seem like a recipe for chaos, but it is in fact the basis for making a market, that is, reconciling the differences – sometimes extraordinarily wide differences – in perceptions of value. As Wyckoff put it, if a stock (or whatever) is thought to be below “value” and a trader or group of traders see a large potential for profit ahead, he/they will buy all they can at or near the current level, preferably on “reactions” (or pullbacks or retracements), so they don’t overpay. If the stock is above what they perceive to be value, they'll sell it (or short it), supporting the price on those pullbacks and unloading the stock on rallies until they are out (or as much out as they can be before the thing begins its downward slide). “This”, he writes, “is why these supporting levels and the levels of resistance (a phrase originated by me many years ago), are so important for you to watch.” When price then begins to lose momentum and move in a generally sideways direction, you’ve found “value” (if value hasn’t been found, then price won’t stop advancing or declining until it has). Value, then, becomes that area where most of the trades have been or are taking place, where most traders agree on price. Price shifts from a state of trending to a state of balancing (or consolidation or ranging), the only two states available to it. The trading opportunities come (a) when price is away from value and (b) when price decides to shed its skin and move on to some other value level (that is, there’s a change in demand). This is also where it gets tricky, partly because demand is ever-changing, partly because you’ve got multiple levels of support and resistance to deal with and partly because we trade in so many different intervals, from monthly to one-tick. If we all used daily charts exclusively, it would all be much simpler, though not necessarily easier. But that’s not the case, so we must remember always that a trend in one interval – say hourly – may be a consolidation in another, such as daily. The hourly may be balancing, but there are trends galore in the 5m chart. Or the 5s chart. Or the tick chart. Regardless of how one chooses to display these intervals – line, bar, dot, candle, histogram, etc – there are multiple trends and consolidations going on simultaneously in all possible intervals, even if they’re in the same timeframe, even if that timeframe is only one day (to describe this ebb and flow, Wyckoff used an ocean analogy: currents, waves, eddies, flows, tides). To sum up where we are so far, and keeping in mind that there is no universally-agreed-upon auction market theory, the following elements are, to me, basic, and are consistent with what I've learned from Wyckoff et al: An auction market's structure is continuously evolving, being revalued; future price levels are not predictable An auction market is in one of two conditions: balancing or trending. Traders seek value; value is price over time; price is arrived at by negotiation between buyers and sellers. Change in demand drives change in price. One can expect to find support where the most substantial buying has occurred in the past and resistance where the most substantial selling has occurred. Now let’s translate all of this into a chart. I'm sure everyone has noticed that swing highs and lows and the previous days’ highs and lows and other /\ and \/ formations can serve as turning points and appear to act as resistance. However, this type of resistance stems from an inability to find a trade and is accompanied by low volume*. Price then reverts to an area where the trader finds it easier to close that trade. That's what provides that ballooning look to the volume pattern “A” in the following chart. "Resistance" in this sense, then, refers to resistance to a continuation of the move, whether up or down. *Volume may look “big” at the highs and lows, but the price points are vertical, not horizontal (as they would be in a consolidation), so the volume – or trading activity – at each price point is lessr than it would be if the same price were hit repeatedly (again, as it would be in a consolidation). Note that you may have more than one "zone of concentration" (this is how jargon gets started), as in the first balloon. Nearly all the volume is encompassed by the pink lines, but there is a heavier concentration within the blue lines because of where price spends the greater part of its time. The volume in the balloon “B”, however, is more evenly distributed throughout the zone, partly because price spends so much time in it and partly because it ranges fairly steadily within it. Instead of rushing to the limits and bouncing back toward the center, they linger at those limits, the sellers trying to push price lower, the buyers trying to push price higher. Thus there is more volume at these edges than in balloon “A”, but buyers eventually fail in their task as sellers do in theirs, and trading drifts back toward the center, providing, again, a relatively even distribution of volume throughout the range. Balloon “C” is similar to “A” but much thinner due to the fact that price has made only a single round trip to the bottom of the range. It lingered a bit in the middle, simultaneously creating that protrusion in the center of the volume pattern. But volume at each end is thinner than in “B”, thinnest at the bottom due to the \/ shape, giving the volume – if one is fanciful – something of a P shape. If price drops through one of these zones, those who bought within that zone are going to be miffed. Some of these people are going to try to sell if and when price re-approaches that zone. This is the basis of resistance. There's just too much old trading activity to work through in order for price to progress unless there is enough buying pressure to take care of all those people who want to sell what they have, then push price even higher (in which case those who sold may think they screwed up yet again and buy back what they just sold). However, those who bought or sold at the outer reaches of these zones will also be disappointed if they can't find buyers for whatever it is they just bought, not because there's too much volume but because there isn't enough. So how does one trade all this? First, you will have to monitor several intervals at the same time in order to (a) find out what interval you want to trade and (b) where price is within whatever range or ranges is/are in that interval. For example, if you’re most comfortable with a 5m interval, you’ll want to check a smaller interval or two to see what price is up to down there, but you’ll also want to look at larger intervals, such as the 15m or 60m or even the daily (I’m using time intervals here in order to keep this from becoming even longer than it will be, but the same approach applies whether you’re using range bars, volume bars, tick bars, candles, lines, etc). Second, locate the ranges. Box them or circle them or color them or in some other way highlight them. If you find a range that is wide enough for you to trade (that is, there are enough points from top to bottom to make a trade worthwhile), get “into” the range via a smaller interval in order to find a trend. Perhaps at some smaller interval, price is at the bottom of that range. That gives you a good possibility for a long (or it may be at the top of the range, giving you a good possibility for a short). At this point, you have three options: a reversal, a breakout, or a retracement. If, for example, price bounces off or launches itself off the bottom of the range (support), trade the reversal and go long. If instead it falls through support, short the breakout (or breakdown, if you prefer). If you don’t catch the breakout, or you prefer to wait in order to determine whether or not the breakout was “real”, prepare yourself to short whatever retracement there may be to what had been support and may now be resistance. A more boring alternative is that price is nowhere near the top or bottom of any range that you can find but rather drifting up and down, aimlessly. No change is occurring; therefore, there is no trade, or at least no compelling trade. Finding the midpoint of the range may be useful since price sometimes ricochets off the midpoint, or launches itself off the midpoint if it has settled there. Such actions represent change since price may be looking for a different value level. It may come to a screeching halt and reverse when it gets to one side or the other of the range and return to the midpoint, or it may launch itself through in breakout form and extend itself into the next range, if there is one, or create a new range above or below the previous range (in determining which, back off into larger intervals in order to determine whether or not price is in a range in one of those larger intervals). NEXT: [THREAD=12809]Getting Down to Cases[/THREAD]

Are you one of the many swing traders that takes the same level of risk notwithstanding the market conditions? Do you always trade "a thousand" shares just because that's an easy number to remember? I will discuss some finer points that might help you to become better at managing risk. First and foremost, the Pristine Trained Trader (PTT) should have a Trading Plan outlining his money management rules. Here you should establish parameters such as a "maximum loss per week-month". When establishing a maximum loss per trade (because no one can know which trade is going to work out), the PTT has to decide whether he wants to follow a more "static" approach where all his potential losses will be similar, or whether to adopt a more "dynamic" set of guidelines created with the purpose of governing when to be more aggressive, less aggressive, or not active at all. First and foremost, you have to understand the fact that not all market conditions present the same odds for a particular trade. Let's say for example that market "x" is in an up-trend, and has pulled back to support for several days. Today we get a reversal bar, and tomorrow the reversal is complete. Thus, the swing trader will likely find several high odds entries both today and tomorrow (depending on the tactics used, many of which are taught in our Trading The Pristine Method seminars. Then the third day comes along, the market continues to climb, and some more entries might be executed. As the market continues to rally, the odds of every new entry will diminish, as the probability of a reversal to the downside in market "x" is greater. Based on this scenario, a swing trader might enter into larger positions on days one and two, and might reduce his share lots as the market continues to climb. There will be a time when the market has climbed for 5 or 6 days in a row, and so the Pristine Swing Trader will devote more and more of his time to manage already open positions, by selling partial lots and raising his stops, instead of being too active in entering new swing positions. (He might be more active in micro trading activities though) Trade Well! Kurt Capra Contributing Editor Instructor and Traders Coach