TOP 10 FOREX BROKERS

TOP 10 FOREX BROKERS   COMPANY 1. Interactive Brokers 2. TradeStation Securities, Inc. 3. FXCM / Forex Capital Markets LLC 4. Global Futures Exchange & Trading Company, Inc. 5. A. Packard Trading 6. FCStone LLC Futures Direct 7. Interbank FX, Member of Monex Group 8. Robbins Trading Company 9. Lightspeed Trading / Lightspeed Financial Inc. 10. Beverly Hills Capital

Momentum tracking and Trend-following

Momentum tracking and Trend-following

Mel Widner, PhD.

Repeated smoothing of data gives a spectrum of trends that, when plotted in color, have the appearance of a rainbow. Observe them all, pick your time frame, and act accordingly. 

One approach to finding gold is momentum tracking and trend-following. Trend-following is a common, if not the most common, timing method used by traders and investors.

The underlying premise is that prices have momentum and inertia and will continue in the same direction until something occurs fundamentally to change that.

Fibonacci

What Does Fibonacci Retracement Mean?
A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci retracement is the potential retracement of a financial asset's original move in price. Fibonacci retracements use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

Fibonacci retracement is a very popular tool used by many technical traders to help identify strategic places for transactions to be placed, target prices or stop losses. The notion of retracement is used in many indicators such as Tirone levels, Gartley patterns, Elliott Wave theory and more. After a significant price movement up or down, the new support and resistance levels are often at or near these lines

 

 

What Does Fibonacci Extensions Mean?
Levels used in Fibonacci retracement to forecast areas of support or resistance. Extensions consist of all levels drawn beyond the standard 100% level and are used by many traders to determine areas where they will wish to take profits. The most popular extension levels are 161.8%, 261.8% and 423.6%.

In practice, most traders use Fibonacci extensions in combination with other technical indicators/patterns to help them determine appropriate target prices. As this chart shows, the 161.8% level is often used to set the price target on a breakout of an ascending triangle. This specific target is calculated by multiplying the vertical distance of the triangle by the key Fibonacci ratio of 61.8% and then adding the result to the upper resistance of the triangle.

Fibonacci Arc

What Does Fibonacci Arc Mean?
A charting technique consisting of three curved lines that are drawn for the purpose of anticipating key support and resistance levels, and areas of ranging.

Fibonacci arcs are created by first drawing an invisible trendline between two points  (usually the high and low in a given period), and then by drawing three curves that intersect this trendline at the key Fibonacci levels of 38.2%, 50% and 61.8%. Transaction decisions are made when the price of the asset crosses through these key levels.

Fibonacci Fan

What Does Fibonacci Fan Mean?
A charting technique consisting of three diagonal lines that use Fibonacci ratios to help identify key levels of support and resistance.

Fibonacci fans are created by first drawing a trendline through two points (usually the high and low in a given period), and then by dividing the vertical distance between the two points by the key Fibonacci ratios of 38.2%, 50% and 61.8%. The result of these divisions each represent a point within the vertical distance. The three 'fan' lines are then created by drawing a line from the leftmost point to each of the three representing a Fibonacci ratio.

Fibonacci Numbers/Lines

What Does Fibonacci Numbers/Lines Mean?
Leonardo Fibonacci was an Italian mathematician born in the 12th century. He is known to have discovered the "Fibonacci numbers," which are a sequence of numbers where each successive number is the sum of the two previous numbers.

e.g. 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.

These numbers possess a number of interrelationships, such as the fact that any given number is approximately 1.618 times the preceding number.

Investopedia explains Fibonacci Numbers/Lines
Interpretation of the Fibonacci numbers in technical analysis anticipates changes in trends as prices tend to be near lines created by the Fibonacci studies. The four popular Fibonacci studies are arcs, fans, retracements, and time zones

The Top 10 Best Candlestick Patterns

The Top 10 Best Candlestick Patterns

When you see one of these patterns on the daily chart, move down to the hourly chart. Does the hourly chart agree with your expectations on the daily chart? If so, then the odds of a reversal increase.

Bullish Candlestick Patterns

Engulfing: This is my all time favorite candlestick pattern.

Hammer: Hammers can develop after a cluster of stop loss orders are hit. That's when professional traders come in to grab shares at a lower price.

Harami: Note: Do not confuse this pattern with the engulfing pattern. The candles are opposite!

Piercing: Those that shorted the stock on first day are now sitting at a loss on the rally that happens on the second day. This can set up a powerful reversal.

Doji: The doji is probably the most popular candlestick pattern. This can often trigger reversals in the opposite direction.

Bearish Candlestick Patterns

Kickers

There is one more pattern worthy of mention. A "kicker" is sometimes referred to as the most powerful candlestick pattern of all.

 

This "shock event" forces short sellers to cover and brings in new traders on the long side.

Wait For Confirmation?

Most traders are taught to "wait for confirmation" with candlestick patterns. This means that they are supposed to wait until the following day to see if the stock reverses afterward. This is absolutely ridiculous!

As a swing trader I have to get in before the crowd piles in, not when they get in! In other words, I want to be one of the traders that make up the pattern itself! That is the low risk, high odds play.

 

 

Hammer Candlestick

Bullish Hammer Candlestick

·         Direction: Bullish

·         Type: Reversal

·         Reliability: Moderate

The Hammer candlestick formation is a significant bullish reversal candlestick pattern that mainly occurs at the bottom of downtrends.

 Strength and Confirmation
The strength of a Hammer formation depends on where it appears. If a hammer forms near support levels, then the likelihood of a strong bullish reversal is high. However, if the hammer forms in the middle of a trading range it tends to have little significance. In ideal conditions traders want the wick length to be several times longer than the body of the candle. The longer the candle, the more buyers were able to drive price back up and the stronger the bullish signal this candle provides.

The bullish Dragonfly Doji serves as a stronger buy signal than the Hanging Man pattern. Since a Dragonfly candle reflects more uncertainly and lack of direction, candlestick analysts will usually take it as a stronger buy signal.

 Hammer vs. Hanging Man
Alone, Hammer and Hanging Man candles look identical. If the market had been trending up for a while the formation is a Hanging Man. Hammers follow a bearish trending market.

Although traders will usually wait for confirmation the next day, look for buying opportunities to come.

Hammer Candlestick Chart Example

 

 

Doji Star

The Morning Doji Star

The Morning Doji Star structure is a special form of the Morning Star model. The main divergence is that the middle candle of the morning doji star is a doji

The first candle of the pattern is always bearish. The second candle has an insignificant or preferable a zero size real body (a doji). The third candle is always bullish. The open and close of the second candle lies below the real body of the first candle but it could overlie with the lower shadow of this candle. The body of the first and third candle is usually long.

 If the high of the second candle (the doji) is below the low of the first candle (the bearish candle) then the formation is called an abandoned baby bottom. This formation rarely occurs.

©      Note: Both Morning and Evening Doji Star patterns generate many false signals. It is important to make sure they are located at the extremes of the chart and also use other technical or fundamental tools to confirm them.

Locating “Doji Star” Creation In The Chart

Analysts can Act as an Early Bird for Market Fiascos

Security analysts who focus on financial fundamentals failed to flag the major stock-market fiascos,  such as Enron and WorldCom, until it was too late. Could technical analysis have provided a better early warning? The answer seems to be yes.

Rather than relying on something outside the market to forecast stock prices, relying on the market itself has proven to be a sound method. Above all, market gives one continuous information whereas fundamentals not.

By looking at where the market is and how it got there using charts, technical analysts rely measuring changes in supply and demand.

Over time, the price changes, created by buying and selling behavior, create partners on the charts. Each pattern is usually followed by a certain high- probability response in the market. This is not to say that charts can predict the future. rather they lay the foundation for the bottom-line decision to buy, sell or hold, which is really all that counts.

In other words would technical analysis have told us to get out of stocks like Enron and WorldCom? The answer is “yes”. May be not at their peaks but certainly before they imploded, and that is no trivial triumph. Technical analysts did not know what was coming down the pike, but they knew enough not to own the stock.

It is usually kind enough to tell us to get out of the way before small losses become catastrophic. The charts are simply the earpieces we just to listen the message.