Articles

Sam Seiden · Nov 17, 2008

Advances in technology have been the driving force behind the change and growth in the world of market speculation. One of the many recipients of faster and stronger technology is system trading as high speed computers now help retail and institutional traders develop systems, crunch numbers, and back test hypothetical results in seconds. In the world of professional money management, I have seen plenty of trading systems. Ironically, most don't seem to work and of the ones that do, they typically work for a bit and then fail. Being on the education side of the industry as well, I have seen hundreds of automated systems yet, I can only say that I have seen less than a hand full actually produce a consistent profit year after year. I...

David Waring · Nov 3, 2008

Most consider the father of technical analysis (the science of forecasting market movements based on price patterns) to be Charles Dow, the founder of Dow Jones and Company which publishes the Wall Street Journal. Around 1900 he wrote a series of papers which looked at the way prices of the Dow Jones Industrial Average and the Dow Jones Transportation Index moved. After analyzing the Indexes he outlined his belief that markets tend to move in similar ways over time. These papers, which were expanded on by other traders in the years that followed, became known as "Dow Theory". Although Dow Theory was written over 100 years ago most of its points are still relevant today. Dow focused on stock indexes in his writings, but the basic...

Lance Beggs · Oct 27, 2008

Despite all the hype from the internet marketers who try to sell you the latest trading 'secrets', the fact is there are NO secrets. Identify setups which provide the potential for lower risk and/or higher probability trades. Enter and manage those trades in a consistent and disciplined manner. Minimize risk. Manage your money. Manage your emotions. Journal your results, and review them to identify what's working and what's not working. Keep doing what is working, and Improve what is not working. If you're not trading successfully, it's because you're not doing one (or perhaps all) of these things. There are no secrets! So, it's time to stop searching for this holy-grail solution and get down to some good old-fashioned work...

Sam Seiden · Sep 9, 2008

Over the past weeks, I have focused my weekly articles on strategies. I have tried to share with you the various strategies I see traders using and finding success with. Today, we will end the strategy series with far and away the most popular entry strategy, the "breakout". The Forex markets are markets that move. In a market that has significant and consistent movement, using breakouts is very appropriate. As with any strategy, there is a right way to understand and use it and a wrong way. In this piece, I will discuss the two most popular breakout entries; Support and Resistance Breakouts and Trend Line Breakouts. Support and Resistance Breakouts Once in a while I hear someone say that breakout trading worked best in the late 90's...

Chris Perruna · Aug 14, 2008

The new high/new low ratio (NH-NL) ratio has been around for many years but different investors use this indicator in different ways. Some investors plot the ratio on a chart using the number zero as a neutral designation with positive numbers equaling more new highs than new lows and a negative number equaling more new lows than new highs based on a specified period of time. I have developed and used the NH-NL ratio in a completely different way from some of the more popular methods. I started to follow stocks making new highs while reading the paper Investor's Business Daily many years ago. I didn't use the news highs as an indicator but I only studied stocks to buy from the list. As I became a more experienced investor, I...

Brandon Wendell · Jun 26, 2008

I love Thursdays in our Professional Trader class. That is the day we discuss Fibonacci numbers and how to use them. It still amazes me when I realize how well these Fibonacci numbers work. You can use them to measure price retracements and projections for new impulses. These levels will give you possible support and resistance levels at which traders can enter trades and/or take profits. The first part of using the Fibs as they are known is to identify the cycle or impulse in the stock, Forex pair, E-Mini or whatever you are trading. The cycle or impulse is the predominant direction and thrust of the security. We commonly call it the trend. In our classes we also teach how to identify the impulsive and corrective environments and what...

Sam Seiden · May 5, 2008

Whether I am trading or instructing a stock, futures, or options class, our lowest risk and highest reward trade each day is typically the opening gap entry. As soon as I suggest the trade to the class, someone always says: "I was told we are not supposed to trade the open because it is not for the novice trader". That is not exactly what we say. What we say is that the open is not for the novice trader. It is, however, a fantastic opportunity for the astute trader who knows how to identify a novice trader. Most of the time, our entry is within seconds to minutes of the opening bell. There is a reason for this? Why do prices gap up? They gap up because there are more buy orders at the open than there is available supply at the prior...

Mike Estrey · Mar 21, 2008

Within technical analysis, the examination of volume should always be hand in hand with examination of the trend and other technical patterns. Many traders ignore volume at their peril, and strangely enough there are very few volume based indicators compared to the many hundreds of price based signals available on current trading software. Although volume has great relevance to trading signals, price action is though always the ultimate determinant of buying or selling decisions. On-balance volume The most popular indicator until very recently, and the one featured on most software, is called 'On Balance Volume', which is simply a running total of volume. This simple indicator aims to highlight if volume is flowing into or out of a...

Sam Seiden · Mar 20, 2008

We all know emotion can be the devil in your trading career. Often, it is emotion based decisions that keep people from even having a trading career longer than a few months. While emotion often has you buying signals way after a move higher in price which is likely near resistance which almost ensures a losing trade, there is another culprit that leads to the same losing behavior in trading. It is the misuse of indicators and oscillators. Understand that the movement in price in any and all free markets is a function of the pure laws and principles of supply and demand. Opportunity exists when this simple and straight forward relationship is out of balance, period. What most people don't understand is that when you ignore a governing...

Larry Swing · Mar 7, 2008

Once in a while a pattern comes along discovered by little known trader that stood the test of time can be a useful tool to trade even in this modern-day markets. It only goes to show the validity of the pattern's profitability factor. This is a complex pattern that beginners may have a hard time finding them in their charts. Identifying double-top, double-bottom, triangles are easy. Then head-and-shoulders come in many shapes and sizes, these take more time to spot them. But the Gartleys are more complex in a sense that Fibonacci measurements must be taken into account unlike the traditional patterns. This pattern is also known as the Gartley Butterfly because of the movements of the prices and the drawn lines that connect to other...

Nick McDonald · Jan 14, 2008

Fibonacci Retracements - A Precision Trading Strategy Deciding on a topic for this article, I reviewed the top ranked articles in T2W and found some fantastic material. I did not however find inspiration for a new article idea that readers may like. Perhaps strangely, I then looked at the lowest rated articles. I noticed that two of them discussed Fibonacci which both surprised and intrigued me. It was not necessarily that people did not like Fib, just that perhaps it had not been explained well enough for their liking. I am a huge Fibonacci fan and it plays a big part in my trading so the following will explain how I use it to trade successfully. While this strategy can be applied to almost any market, I will focus on the Dow Jones...

Sam Seiden · Nov 19, 2007

Does your trading lack the "trader's edge" needed to be a consistent winner in the markets? Do you find yourself entering and exiting positions at the very wrong time? If the answer is yes, you're not alone. The good news is that there is a very specific reason why the majority of traders enter and exit trades with very poor timing. Also, the answers needed to fix this problem are far simpler than you may think. To gain the edge and learn how to stack the odds in our favor, we will go back to the school of basics, not just to review the basic concepts but more importantly to look at them very differently than we have before. We know that if we look at charts, indicators, and any other tools used to perform market analysis the same way...

Scott Percival · Nov 5, 2007

When discussing market analysis, we generally consider the two contending schools of thought to be Fundamental Analysis and Technical Analysis. However, in the early 1970's, there emerged a third view known as the "Random Walk Theory", which was not so much an approach to market analysis as it was a critique of the other two methods. The Random Walk Theory is the popular name for a market model known in academic circles as Efficient Market Theory. This model of the market contends that prices are "efficient" in the sense that all known information and market expectations are immediately factored into the market through the movement of prices. But these price movements are caused by so many different factors that they become random in...

Richard Ratchford · Oct 29, 2007

Recently I sent out to my free newsletter subscribers a lesson I had written a couple years ago dealing with what I call the PAUSE formation. The reason for this was that a market that I had been sharing future cycle turn dates on had formed the early warning sign for a PAUSE formation and may present an opportunity for a trade. At the very least, it should help those looking to learn more about cycle turns, swings, pivots and other associated phenomena to cycles. The more you understand a tool or indicator the better you can exploit it. The PAUSE formation is very simple to identify. But what I want to discuss first is what to look for in order to determine a POTENTIAL PAUSE formation. Unless you have some advanced warning, who cares...

Sam Seiden · Oct 25, 2007

The most important thing in any type of trading is to have a solid set of rules and then to have the self control to follow those rules. Day traders especially need to have rules to follow as emotion can and will have you buying and selling at the wrong time. Day Trading Rules: Only enter trades when price is at a support (demand) or resistance (supply) level, no matter what time of day or night. Two types of entries: Breakouts and first pullbacks (see below). Each day, identify one demand and supply level in each market, using a larger intra-day time frame. Always know where the market is in the larger picture with regard to supply and demand. Only trade opportunities that offer at least a 3:1 profit zone to the first target...

Sunil Mangwani · Oct 9, 2007

The Pivot point system is a technique developed by floor traders, to help ascertain where the price is relative to previous market action. It can be classified as a technical indicator derived by calculating the numerical average of the high, low and closing prices, of any currency / index / stock etc. A look at market movement tells us that price always fluctuates between a level of support and a level of resistance. Properly identifying key support and resistance levels can improve the ability to enter, exit, and manage your trades. The pivot point is a level at which the sentiment of the market changes. It can tell us where the sentiment of traders and investors changes, from bull to bear or vice versa. The main advantage of this...

Sam Seiden · Sep 2, 2007

There are literally hundreds of options strategies, many more if you include the vast array of complex strategy combinations. Why so many? Simple, it s because most options speculators can't figure out price direction. Instead, they rely on complex option strategies and a variety of standard pricing models that don t work and simply add illusion to a constant simple reality of all markets: supply (resistance) and demand (support). When you filter out illusion and replace it with pure supply and demand analysis in options trading, you not only simplify the useless complexity of options, you discover endless low risk-high reward opportunity based on a set of objective rules. This opportunity is one in which the reality-based options...

Larry Swing · Aug 20, 2007

Parallel channels are one of the most commonly seen patterns in charts. They give many opportunities to profit whether or not the market is trending. Horizontal channels are better known as trading ranges when the market is not trending; rising channels occur when market is trending up and falling channels appear when the market is trending down. Regardless of the market conditions seen, parallel channels can be found in all shapes and sizes. Trade Recap During the weeks in mid-June to early July, 2007, S&P 400 MidCap E-mini future has been moving up steadily inside a rising channel, as seen on the 60-minute chart below. Although the MidCap has been moving near the all time high, it has been trading in a large trading range. This...

Richard Ratchford · Jul 23, 2007

Newton's Third Law of Motion states that "for every action, there is an equal and opposite reaction." Such 'action' can be by direct contact, such as from friction, tension or applied forces. Then you have such 'actions' as a result of gravity, electrical and magnetic. Forces come in pairs. For every action, there is opposite reaction. The size of the reaction is equal to the size of the action. Nature is filled with such evidences of this law. For example, when a bird flies it uses its wings to push air downwards. As a result, the air reacts by pushing the bird upwards. The size of the force on the air equals the size of the force on the bird. The direction of the force on the air is opposite the direction of the force on the bird...

Larry Swing · Jun 11, 2007

Gaps are a common occurrence in the markets. Everyday there is always at least one stock that has gapped up or down when the market opens. Why? As long there is some event happening somewhere between the market close of the previous day to the opening of today, there will be gaps. Even if the markets eventually move little by little toward the inevitable 24-hour format, there will always be gaps. After all, somewhere around the world, there is some event happening during the weekends as well. Plus, there is always an excited group of investors who making a big deal out of something or even for no reason unknown to the rest of us. So, gaps are a fact of life and there is no avoiding them. The best thing to do is take it in your stride...

Sunil Mangwani · Jun 1, 2007

If there is one thing that a trader would want to know for certain, it would be to catch the bottom or top of a trend. But simple as it sounds, it is easier said than done. Knowing that a certain price wave is completed, or is just a retracement in the larger trend, becomes more of an art than a science. In such situations, using multiple sources of confirmation helps to avoid the potential false signals, and preserve our capital for only those situations that provide us with the most favorable risk to reward scenarios. Keeping that in mind, we will use two very different indicators - the ADX (Average Directional Movement Index) and the PSAR (Parabolic Stop & Reverse) - to form a system which should help us to trade as close to the...

Gabe Velazquez · Apr 23, 2007

After last Wednesday's brief pullback, the market resumed its upward trajectory, this in defiance of those skeptics who continue to espouse their bearish views. I'm sure at some point the market will experience a considerable correction or even go into a full- blown Bear market (we haven't had one of those in over 4 years). For now at least, every piece of news is being spun positive. The inflation data, the housing data, good news is good news and bad news is good news. The glass is half full. This is emblematic of a market in a bull phase. As traders, my view is that we should take our directive only from the market itself; not the media nor the pundits nor anyone else for that matter. I believe a trader's job is to get good at...

James Okada Lee · Mar 15, 2007

What is a TICK? A TICK is the number of NYSE upticking stocks vs downticking stocks. If 1000 stocks are upticking and 600 stocks are downticking you will get a TICK reading of + 400. The TICK is a useful market internal tool to gauge market sentiment, design trading strategies, to prevent one from chasing, etc... Traders use the TICK in various ways: some choose to fade TICK extremes, others use it to confirm market direction, and others incorporate the TICK into their trading setups. In this article, I want to go over some of the TICK strategies and methods I personally use in my trading. TICK HOOK Let's begin with a TICK hook. The difference between a candlestick TICK chart and a line on close TICK chart is the visual TICK hook. A...

Mircea Dologa · Mar 8, 2007

In this article we look at preparation, techniques and money management for using integrated pitchfork analysis. Spotting the Trade Opportunity The process of low-risk high-probability spotting trades is very systematized for the experienced trader. He/she should visually scan the various choices of the operational time frame charts: 60-min, 30-min, 15-min and less frequently the 5-min chart. Our goal is to detect candidates representing low-risk high-probability trades. Once these opportunities revealed, we will employ different techniques with all the recommended disciplined rigour and patience. One of these is the zoom-and-retest technique, which is applied to a German Dax up-sloping failure. Finding the Optimal Set-Up In this...

Henry To · Feb 27, 2007

Charles H. Dow It is interesting and amazing to note that not until Charles Dow started compiling the Dow Jones Industrial and Dow Jones Rail Index and started writing about the stock market a little over a hundred years ago, stock speculation was regarded merely as a game for the rich or as gambling for the brave. Sure, there were the tape readers, but the majority of the public regarded Wall Street as a source of excitement - the entertainment provided freely (unless you were on the wrong side) by figures such as Cornelius Vanderbilt, Jay Gould, and the infamous Daniel Drew. In a series of stunning editorials for the Wall Street Journal at the turn of the century, Dow laid out the foundation of his own theory on the stock market...

Clive Corcoran · Jan 19, 2007

If "volume precedes price" as is often suggested then it should be possible to apply analytical techniques to certain volume attributes that will have some predictive capabilities with regard to future price development. Using various techniques that come under the general heading of money flow analysis it becomes feasible to decide whether a particular security is being accumulated or distributed. A security that is undergoing accumulation can be expected to gain in price and a security that is displaying the characteristics of distribution will probably offer opportunities on the short side. Equally, it can be very informative to see whether there are divergences between the security's price behaviour and its volume behaviour. The...

Abe Cofnas · Jan 17, 2007

Do you need to catch the initial move to trade a breakout, or are there other ways of trading it? In this article we look at an alternative method using Fibonacci retracements. When markets move, particularly in Forex, they move fast. We all have witnessed breakouts and have had the occasion to lament a trade that got away. The beginning trader sees breakouts as a way of riding a strong wave of volatility and providing a quick profit. The problem with the strategy of playing a breakout is that breakouts are technically unstable. They present difficult questions to answer, such as: How long will it last? Especially when there is an absence of news, the question of what caused it is difficult to determine. The better way to trade a...

Garrett Jones · Jan 5, 2007

"We begin with a clean slate" There is something refreshing about the first day of a New Year - for a brief period of time, it feels like a clean slate where we have the opportunity to begin anew and possibly right the wrongs of the year that just ended. Let's all hold that thought and see if we can "will" some good things for 2007. It would appear that the machine that runs our country can use all the help it can get. As bad as the news was on occasion last year, the market put in a good showing. The following performance for the major indices is worth viewing: The stock market did well in 2006. It was robust into the spring; had a sharp decline into the summer and then came on strong the rest of the year. The blue chips were the...

Justin Small · Dec 18, 2006

Introduction The key to successful trading is having a methodical approach and not being emotional about your trading decisions. Never forget that it is always best to accept when you are wrong and cut your losses where appropriate. Technical analysis, also referred to as "charting", involves the use of charts or graphs to present historical performance and price changes at a glance and the ability to use this information in order to make investment decisions. The first golden rule of technical trading is, where possible, to keep charts as simple as possible. Technical Analysis and Charting Even those new to trading will be familiar with the image of a chart in relation to the financial markets. They appear on City Traders? screens...

Dima Vonko · Dec 18, 2006

In this article the author explains the basics about Neural Networks and looks at the myths that have formed around them. In this age of previously unheard of technological progress many technology-related things either come unnoticed as they appear or, vice versa, are vastly extolled and turned into totems that inevitably attract a following of ardent worshippers. If such a popular technology-related phenomenon can make a difference to your business, it is, sometimes, vital to learn about this phenomenon as much as possible before you start with it so that you know what to expect from the selected technology and what to beware of while using it. For a modern trader, one of such potentially important phenomena is neural nets. So what...

Articles

Show only:

Getting Started Technical Analysis Trading Systems Trading Systems – A Complex World with Simple Answers

Getting Started Technical Analysis How the Dow Theory Can Help You Understand Market Movements

Technical Analysis Support and Resistance: The Greatest Trading Tool

Forex Technical Analysis The Most Popular Entry Strategies in Forex

Technical Analysis Predict Market Tops and Bottoms

Technical Analysis This Fib Can tell the Truth

Equities Technical Analysis Trading the Morning Gap

Technical Analysis Different Types of Volume

Technical Analysis The Objective Filter for an Oscillator

Technical Analysis Trading Gartley Patterns

Indices Technical Analysis Fibonacci Retracements on the Mini Dow

Getting Started Technical Analysis Objective Rule Based Trading

Forex Technical Analysis A Random Rant on the Random Walk Theory

Technical Analysis Cycles, Trends and Pause Formation

Getting Started Technical Analysis Day Trading & Scalping Important Rules to follow

Technical Analysis Trading with Pivot Points

Options Technical Analysis Cross the Bridge – Away from Illusion

Indices Technical Analysis Parallel Channel Breakdowns

Fundamental Analysis Technical Analysis Market Action And Reaction

Technical Analysis Types and Characteristics of Gaps

Technical Analysis Trading with ADX and PSAR

Technical Analysis The Glass Half Full

Technical Analysis NYSE Tick and Tick Strategies

Technical Analysis Integrated Pitchfork Analysis

Getting Started Technical Analysis The Dow Theory: A History

Swing & Position Trading Technical Analysis A Quantile Approach to Money Flow

Forex Technical Analysis Playing the Breakout

Indices Technical Analysis A Clean Slate

Getting Started Technical Analysis The Basics of Technical Analysis

Technical Analysis Trading Systems Neural-networks: Myths and Realities