Short ETFs

By Ahmad Hassam

You can short stocks. You can even short ETFs. Have you ever heard of Short ETFs? The ProShares Short Dow 30 ETF (DOG) will return the inverse of the Dow Jones Industrial Average (DJIA) on daily basis. If the DJIA falls by 2%, DOG rises by 2% and if the DJIA rises by 2%, DOG will fall by 2%. Short ETF returns the inverse of the index it is linked to.

Short ETFs are also known as Inverse ETFs or Bear ETFs. During the past few years, the number of Short ETFs has risen dramatically. Short ETFs not only cover the major stock indices like the S&P 500 or the DJIA but also different sectors like the energy, utilities or technology. You will even find Inverse ETFs on currencies now.

Most of the ETFs are designed around some market index. ETF shares trade like ordinary stock shares. You can buy them. You can sell them unlike the mutual funds that can only be sold at the end of the day. The ProShares UltraShort Dow 30 ETF (DXD) rises 2% when the DJIA falls by 1%. So you can even find leverage short ETFs. A leveraged short ETF gives the trader leverage without the use of margins.

So short ETFs move in exact opposite direction to the index on which they are based. Short ETFs give you an excellent opportunity to profit from the volatility in the market and the major indices. Over the years, short ETFs have risen in popularity with the investors and hedge funds.

If you have been trading currencies, then you should know that inverse currency ETFs are a great way to profit from the volatility in the underlying currencies. Short ETFs are a great product as they have created new opportunities for traders. A trader had to actually short sell stocks to take advantage of a market drop before the introduction of short ETFs.

ETFs have opened up a whole new way of profiting from the markets. The trader had to go against the trend and buy or else move into cash or fixed income in the past if the market was dropping. Traders are not allowed to sell short stocks or ETFs in their retirement accounts. Short and leveraged ETFs provide traders with new opportunities.

ETFs also provide you with the opportunity to take advantage of the global market swings. China is one example that garners a lot of attention. The Shanghai Index in China rose 100% in 2007. In the first quarter of 2008, the Shanghai Index was down 35%.

The ProShares family of ETFs introduced the Ultrashort FTSE/Xinhua China 25 ETF (FXP). Now if you want to trade the fall of Chinese stocks, you can trade FXP ETF. In the past, traders who wanted to benefit from the fall of Chinese stocks could only short Chinese stocks that were traded in US Stock Exchanges.

Short ETFs can be used for other purposes as well. Assume you have a portfolio of $100,000 composed of 75% stocks and 25% money market fixed income. As a long term investor you can take advantage of short ETFs to hedge your portfolio position.

The forecast of the market for the next six months is not good. But you are reluctant to sell your stocks due to tax reasons. Suppose the market falls by 10%. Your stock portfolio falls by 7.5% assuming the same ratio between the market and your portfolio. - 32177

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Try This Cash Printing Forex Signal Service From Heaven! Learn Swing Trading!

Trading Systems (Part II)

By Ahmad Hassam

In simple terms, it is very difficult to adjust a mechanical trading system to a different market conditions if you are not the author of that system. It is very difficult to develop a trading system that can adjust to different market conditions.

You must know this that technical indicators also lose their effectiveness overtime as the market conditions change. So how do you cater for this fact that markets keep on changing all the time. By developing a trading system that uses different trading strategy under different market conditions. For that, you will need to develop a diversified trading system consisting of a set of trading systems that can be used as a basis for a specific trade tactics at any given moment.

Such a diversified trading system can be used according to a trader's free choice and considering the individual situation. Trading systems based on these principles can be complex and adjustable.

This optimization can provide an effective evaluation of market shifts and trends at any given time. Such a diversified trading system can be optimized for current market condition and the trader's resources at any given moment.

The only thing necessary is to find the tools for the probability evaluation for the trading system with maximum accuracy and minimum time. The optimal solution could be a diversified trading system based on the natural market features and regularities. A trading system needs to be evaluated by calculating its win ratio over let's say at least 100 trades.

Developing a mechanical trading system with a set of trading rules that you can apply rigorously in making your trading decisions in any market condition should be your goal. Mechanical trading is good in the sense that it helps you avoid emotions in making your trading decisions. Emotions are your biggest enemy in trading. Fear and greed will always force you to make wrong trading decisions. Have you ever heard about the turtle trading experiment?

Turtle trading experiment was conducted to demonstrate the fact that it's not the trader that matters; it's the trading system that matters. If you have a good trading system, you can become a highly successful trader.

What you need to do is learn from successful traders and try to copy their trading systems. As a young person you must have learned that just by observing good players play their games you could improve your level of playing tennis, golf, badminton, swimming or for that matter any type of game.

The same principle applies in trading. You need to take a look at these 25 forex trading systems that had emerged on the top of more than 5000 traders who had taken part in a recent forex trading championship. The best forex trading system had an ROI of almost 3000% in one month. By observing the trading systems of successful traders you can also develop your own highly successful trading system. - 32177

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Discover a Revolutionary Forex Robot Trading System. Read about a Forex Trading System with an ROI of 3000% per month.

Short Selling Stocks

By Ahmad Hassam

An investor who is short selling is borrowing stocks from the brokers and selling them to another buyer. The sale money goes to the account of the investor. At some point, the investor has to buy back the stock ideally at a lower price to make profit and return it to the broker.

You must be proficient in using technical indicators if you want to become a trader. Without learning technical analysis, you will always be doing trading on your hunches which is a bad thing. Suppose you are using the RSI technical indicator that is giving a crossover sell signal. All signs are pointing towards at least a small pullback. You feel that the stock ABC is overvalued at $60 and at some point in the near future the market will make a correction.

You place an order to short 1000 shares of ABC stock at $60. 1000 shares of stock ABC are sold at $60 and $60,000 is placed in your account. Over the next week, you are jittery as the stock ABC instead of going down climbs to $65.

Stock prices can go up as well as down. Technical indicators can give you a likely direction of the market but they are never 100% right. Did you cater for the situation when the stock price rises instead of falling? However, you have catered for this eventuality by placing a stop loss at 10% of your account. This comes out to be $6,000. So the stop loss is not triggered and you are still in the market hoping for the price to stop going up.

If the price goes up to $66, your stop loss will be triggered and you will be out of the market. You are prepared to lose $6,000 in anticipation of a stock price tumble as your technical indicators are giving you the sell signals.

Every quarter companies are supposed to release their earnings reports. You can time your trade around the release of such a report. Now most earnings mishaps last a few days. So you wait and don't cover your short position for the next few days. Suddenly on the release of a disappointing earnings report, the stock price tumbles 20% in one day.

Market hates sudden surprises. Anything that is already known to the market is already included in the price of the stock. So this negative earnings report was a sudden surprise. You decide to cover your short position, stock ABC price falls to $45. You need to buy back the 100 shares of ABC that were sold short earlier at the market price of $45 in order to close your position.

Now should be able to understand short selling as easy as long buying. With this simple example, you should be able to understand the mechanics of short selling stocks. You pay $45,000 to buy back 1000 shares of stock ABC and return them to your broker. So your net profit in this case is $60,000-$45,000= $15,000.

Assume that you had bought the stocks for $45 per share and sold them at $60 per share, the same profit would have been made. In reality, you paid $45 per share to buy ABC stocks and sold them at $60 per share giving you a profit of $15 per share.

The goal of buying a stock is to sell it at a higher price in the future. When you short a stock, the goal is to sell it at a higher price but in the case of short selling stocks, selling takes place first instead of buying. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Try This Cash Printing Forex Signal Service From Heaven! Learn Swing Trading!

What Are LEAP Options?

By Ahmad Hassam

Great Britain was finding it difficult to stay within the tight exchange rate band set by the European Monetary Union (EMU) in the early'90s. One person who made history with options was George Soros who is famously known as the man who broke the Bank of England.

George Soros had this intuition that the Bank of England would be forced to devalue British Pound. So he bought call options on German Marks and put options on British Pound. He made a bet of $10 Billion by leveraging all the assets in his hedge fund.

Bank of England had made a number of public statements regarding its intention of staying within the EMU. However, within a few days of the speculative attack on the British Pound, Bank of England was brought to its knees as it was unable to sustain the immense selling pressure on the British Pound. Bank of England was forced to devalue British Pound in view of the speculative attack on the British Pound.

In a matter of a few days, George Soros made a cool $1 Billion profit on his bet. Can you make such a bet? Maybe not but this one example show the immense power options have if used correctly. Options are risky; there should be no doubt about it.

Options contract give you the right to buy or sell an underlying security like stocks, futures, commodities or currencies at a price before a certain date. This price is known as the Strike Price. This date is known as the Expiry Date. However, in European Style options you can only buy or sell on the expiry date not before that. Most people who trade options lose money, plain and simple.

Time factor is very important when valuing an option. Further out the options contract is from expiration, you will have to pay a higher premium. As the options contract approaches the expiration date and if it is out of money, it loses its value very fast.

Have your heard about the LEAP options? LEAP stands for long term equity anticipation. It basically means that the option is much like the regular option except that the timeframe to expire is greater than 1 year. LEAP options are basically long term options. Leap options can help you profit over the long haul. You can use LEAP options in options strategies like the covered calls, straddles, spreads and so on.

LEAP options are risky because the option writer usually demands a hefty premium for taking on the long term risk. However, LEAP options can be incredibly profitable if used correctly. The buyer of the LEAP options has the right to exercise the option prior to expiration should the price of the underlying stock move in the money.

Far away from expiration, the higher the value of the options contract! Closer the out of money option is to expiration, faster its value drops. What this means is that the buyer of the options loses the premium that was paid for getting the right to buy or sell the underlying security. LEAP options can be a great trading vehicle for swing traders as they mitigate some of the time decay that is inherent in short term options. If you need to learn options trading than you should consider joining the Live Options Mastery Classes online at the Options University. Learn options trading from a former options floor trader for safer and better investing! - 32177

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Learn Candlestick Charting! Know Fibonacci Retracement!

Trading System Essentials (Part I)

By Ahmad Hassam

You need to develop your own forex trading system overtime. Using someone else's trading system won't help if you really want to become a successful trader. At one point in your trading career that might come soon rather than later, you would want to switch over to a mechanical trading system. Using a mechanical trading system not only helps traders to make decisions and increase profits but it also provides great psychological comfort to the traders.

You will find most of the trader using a trading system approach to trading. Some of them may use a discrete trading system while others prefer a mechanical trading system. You will realize the necessity of switching over to the system trade in order to lower the psychological pressure experienced when making every market transaction.

Once you have a mechanical trading system you can easily develop it into an automated trading system. The mechanical trading system set of rules may be translated into a computer program for automated trading. However, the mechanical trading system lacks fundamental analysis capacity.

The trading system then generates trading signals that can be used by traders having access to the trading system. The creator of such a mechanical trading system then becomes just another user of the trading system monitoring the computer generated signals.

Many traders over their trading careers develop their own trading systems. Besides the traders using their own trading systems, there are now many actively developed trading systems for sale as computer programs. These trading systems may be taken as grey and black boxes. Their prices might vary from a few hundred dollars to hundred of thousands of dollars.

Sometimes these trading systems are developed for big banks and corporations. The most significant thing about these programs is that the traders should be able to accomplish transactions in accordance with the signals generated by the trading system.

Majority of the successful individual traders use self developed mechanical trading systems. However, it is very difficult for a mechanical trading system to cope with different market conditions.

For example, many trading systems that are satisfactory in trending conditions become highly ineffective in nontrending environment. Change of market behavior leads to negative results from a previously effective trading system which obviously would require replacement.

The most common disadvantage of these trading systems is the negative balance between the profitable and unprofitable trades. Many trading systems now depend on complex mathematical formula which is not understandable by the trader if the trader is not the author of the trading system.

Obviously the trading system can only be profitable in the long run if the ratio of the profitable trades is higher than the non-profitable trades. In other words the average profit of each profitable transaction is greater than the average loss of each unprofitable transaction.

The trader must accurately and unconditionally follow the trading system without making any attempt to adjust it to the market conditions. Making correction in any mechanical trading system in the process of the trade is almost impossible. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Discover a Revolutionary Forex Robot Trading System. Read about a Forex Trading System with an ROI of 3000% per month.

Shorting Stocks

By Ahmad Hassam

Many beginning investors get confused when they realize that it is possible to make money when the stock falls in price. In practice, shorting a stock is as easy as buying stocks once you get hang of it. When the market is falling, investors sell short a stock with the goal of profiting from the fall in the price of that stock.

Short selling is confusing for new traders. It shouldn't be. It is simple. The difference between the selling price and the buying price in case the price goes down is your profit. You borrow a stock from your broker and sell it with the intention of buying it back at a lower price in the near term future and returning it to your broker when you short a stock.

You are anticipating further fall in the price of the stock when you short a stock. When the price of a stock goes down, you make profit. However, if the price of the stock instead of going down starts to go up, you get a loss.

Theoretically a stock price can go up and up making your loss as big as infinity. So shorting a stock without proper risk and money management is not wise. However, before that happens most probably you will receive a margin call from your broker that leads to a forced sale before your losses reach unmanageable proportions.

Short selling can play havoc with companies. If there is a short selling attack on a company's stock by speculators, the company can easily go bankrupt. This is precisely what happened in 2008. Short sellers were responsible for bringing many blue chip companies down. In the stock market crash of 2008, many financial companies went bankrupt due to the short selling of their shares by the speculators. Some people are against the strategy of shorting stocks. A temporary ban was put on shorting for sometime during that period.

However, the goal of short selling is not to drive the price of a stock to zero and put the company out of business. In swing trading, we are simply looking to profit from the ups and downs of stock prices. When the price of a stock goes down, short selling is the best swing trading strategy.

One reason why swing traders love short selling is due to the velocity of the moves! Negative news like poor earning, credit rating downgrade or a poor product launch can bring down a stock price in a matter of minutes and wipe out the steady gains made in months.

Shot selling can be a good hedging strategy for long term investors too. So if you a long term investor, you can lessen the impact of the sharp price drop on your portfolio by using a short selling hedging strategy. Swing traders always look for big winners and this brings them to the short side of the market. When the price of a stock starts to fall, chances are it will fall more before the market stabilizes and the price starts to rise again. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Try This Cash Printing Forex Signal Service From Heaven! Learn Swing Trading!

Backtesting Explained (Part II)

By Ahmad Hassam

Automated Backtesting is easy. The second method of Backtesting is performed manually and visually by the trader. Why would someone do a manual backtest? There are difficulties in doing Backtesting manually but at the same time there are a few advantages of Backtesting. The trader would take the historical data and scroll back in time on a chart and manually apply the trading strategy as if it was in a real time environment.

The trader would advance the chart bar by bar in order to refrain from seeing price action subsequent to the trade at hand. This eliminates trading in hindsight that is detrimental to an objective backtest.

The major disadvantage of Backtesting as compared to automated testing is the significant potential for human error in executing simulated trades and recording performance results.

Additionally the normal range of human emotions and biases that often interfere with actual trading can be a detrimental factor in achieving objective backtest results. Furthermore, it takes a great deal of work and discipline to simulate trades manually over a large data set without straying from the strict rules of the trading strategy.

However, Backtesting manually can provide the trader with the real feel for actually trading the strategy. This provides valuable trading experience although simulated but still a valuable trading experience that no automated backtest could possibly provide.

No matter whether you do Backtesting manually or automatically, Backtesting can save traders a great deal of time and money that might otherwise had been wasted on trading unprofitable strategies. Backtesting whether done manually or automatically can be one of the most important elements of building a solid trading strategy. Backtesting is now an important element of testing a trading system performance.

Autotrading is the latest fad especially in forex where the number of major currency pairs is only six and this makes programming autotrading easy. Any mechanical trading system can be backtested. This leads us to the important question of autotrading. These autotrading systems are popularly known as Expert Advisors or Forex Robots.

The US Stock Market has got more than 50,000 stocks listed with them as compared to the forex market where there are not more than six major currency pairs. This makes programming a stock trading robot a bit complicated. However, during the past decade major breakthrough in computer programming has been made.

Backtesting is one of the most important components of testing an autotrading system. Big institutions like banks, corporations and hedge funds have always been taking benefit of these autotrading systems.

Backtesting and autotrading are two important components of implementing trading strategies that generally do not rely upon the trader's judgments or discretion. These types of strategies are primarily technical in nature, and they must necessarily have rules and criteria that are unambiguous.

Backtesting gives you the benefit of testing your trading system on a large historical dataset. Backtesting allows the trader to determine if a given strategy would have been profitable using past price data, which is an indication of how it might potentially perform in the future. In contrast, autotrading actually executes real trades automatically according to a pre - programmed set of instructions that sets trade entries, stop losses, and profit limits. - 32177

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account!

Piggyback Trading Strategy

By Ahmad Hassam

You will have to do a lot of research while selecting yours stocks for swing trading. Why not piggyback on the research done by wealthy fund managers and large financial firms. Name of the game is to find stocks that are not popular but have a great swing trading potential. Easier said than done! How do you find such stocks? Here is a very simple strategy that you can use to choose the hottest stocks best for swing trading. When a large financial firm builds an ETF, the first step is always to choose an index of stocks that is expected to outperform the market. The premise of the piggyback strategy is to use the large dollar research of the major financial firms to come up with new and fresh swing trading ideas.

The ETF is then based on this index of stocks. The price of the ETF then changes as the basket of stocks within the index moves. Large financial firms spend millions to choose the index on which they will base their ETF. Why not piggyback on that research and save yourself a few millions? Cool, huh!

So what is this ETF piggyback strategy all about? How do you implement this ETF piggyback strategy? Have you been investing in ETFs before? No! Then you need to do some research to find the best performing ETFs. Your first step should be to analyze ETFs. You need to make a list of ETFs that have outperformed in the last 3 to 6 months. This will give you an idea where the big money is flowing and which ETFs have buying momentum behind them.

After making your list of top 20, narrow it down to the five top performers and choose a few areas worth trading. Choose the best performing ETF in your opinion to begin with. Now you need to analyze the top ten holdings of that ETF.

Etfconnect.com is a great resource for information on ETFs and closed end funds. What makes this trading strategy great is that it often generates fresh ideas for swing traders. With thousands of potential stocks to choose from, the piggyback trading strategy allows you as a swing trader to choose stocks that have a buying momentum behind them.

Investing in stocks that are well known and being actively recommended as hot investments is never a good idea. When information becomes public, it gets impounded into the market price immediately according to the Efficient Market Hypothesis. A great advantage of this piggyback strategy is that it can identify stocks that may not be household names to the average trader. With this strategy you will come across many stocks that may not be household names and have a great swing trading potential. ETFs can be utilized to find stocks for swing trading ideas that are based outside the US.

The way to do that is to use the ETF piggyback strategy with either single country ETFs or regional ETFs. The single country ETFs invests 100% of their assets in one country. A good example can be the iShares MSCI Mexico ETF (EWW), an ETF that invests only in companies headquartered in Mexico.

Hedging your risk is what a good investment is all about. Instead of putting all your eggs in one basket, you should try to diversify your investment. A regional ETF covers several countries concentrated in a region. The iShares S&P Latin America 40 ETF (ILF) invests in Brazil, Mexico and Chile. So if you want to find international stocks for your swing trading strategy than you should begin by picking the region or the specific country.

Are international stocks safe? You must be thinking why you need to think outside of US Stocks. International stocks also give you the ability to create some hedging strategies in combining US and non US Stocks into a pair trade in addition to volatility that you need as a swing trader. The traders who refuse to consider international stocks only hurt themselves because with the US in the mature business cycle, the real growth and volatility that you need as a swing trader can only come from international stocks. - 32177

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account!

Autotrading

By Ahmad Hassam

Many hedge funds and other entities that manage money through forex trading use some form of autotrading in their daily activities. Autotrading is common in the currency trading.

Big institutions have the resources to finance their inhouse development teams. Big institutions always had proprietary autotrading systems developed by their inhouse programming teams. These autotrading programs also known as Expert Advisors or Forex Robots were expensive costing like thousands of dollars and only wealthy individuals or big institutions like hedge funds could afford them. These autotrading systems were proprietary in nature and were not available to the general public.

However, the recent developments in computer programming have changed the field. Many private individual traders have also begun to adopt autotrading to execute their thoroughly backtested and highly optimized forex trading strategies. The recent advancement in computer programming has made it possible for professional forex traders to team up with a software expert to develop their own autotrading systems.

The price of these Expert Advisors has also come down to around a few hundreds that can be easily purchased by ordinary investors like you and me. Metatrader platform makes it real easy to program such type of Expert Advisors.

So what is autotrading? You must have heard or read a lot about the benefits or advantages of autotrading. Recent advancements in computer programming has led to the development of trading platforms that allow an API ( Application Programming Interface) which connects the trader's system to the dealer's trade execution structure through the trading platform.

The trading system needs to be ruled based and mechanical in nature with clear cut entry and exit rules. Once all of the trading rules and criteria are determined by the trader, programming an API can be relatively straight forward for anyone with programming experience. APIs requires programming skills on the part of either the trader or a programmer hired by the trader. After the specific trading rules and criteria are determined, the trading strategy is backtested with positive results.

When this occurs not only trades entered when predetermined technical criteria is met but trade exits in the form of stop loss and take profit rules can also be programmed into the API. Autotrading is almost as simple as flipping a switch to begin the trading process.

However, before an autotrading system is put on live trading, it is thoroughly backtested and forward tested to make sure the likely success of the autotrading system. This creates an entirely self contained autotrading system. So autotrading can actually execute real trades on current real time market prices. When a predetermined signal emerges, the software actually places a trade automatically.

In fact, if the trader has optimized and perfected this type of black and white trading strategy that runs devoid of human judgment, autotrading is perhaps the best way to achieve it. Any nondiscretionary technical trading strategy that has clear cut, unambiguous rules is a good candidate for autotrading. Autotrading effectively eliminates all human biases, errors and emotions in the trading process.

Every month you will come across a new forex autotrading system. The best two forex autotrading systems are FAPT and Ivy Bot. There are a number of successful autotrading systems now available in the market for the ordinary retail investors. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account!

Point and Figure Trading (Part II)

By Ahmad Hassam

A new column is only added when a reversal in an existing column exceeds the reversal threshold. The most common amount of reversal threshold is three boxes or three points.

What should be the reversal threshold or the reversal amount before a new column is added? The reversal amount in pips is 30 pips if the box size is set at 10 pips and the reversal amount is set at three boxes. So in case of a rising X column, price would need to turn back by at least 30 pips before a new O column would be added.

By only focusing on the pure price action, a point and figure chart reduces the unrelated noise in the price action. These two variables the box size and the reversal threshold make the point and figure chart so effective at representing only the most major market moves disregarding all minor fluctuations known as noise. The significance of these two variables, the box size and the reversal threshold should be clearly understood.

Since point and figure charts outline support and resistance so well, one of the best trading strategies in most common use with the point and figure charts is breakout trading. The point and figure charts are excellent indicators of both trend and support/resistance.

In bar and candlestick charts, a double top is a potential bearish reversal signal. Now there is a notable distinction between the bar and candlestick charts and the point and figure charts in the interpretation of double and triple tops and bottoms.

Are you familiar with the chart patterns like the double and triple tops and bottoms? They are taken as important reversal signals in the trend. However, a double top is a resistance point where traders should be looking for a bullish break to the upside on the point and figure charts. The same difference holds for the double bottoms as well as triple tops and bottoms.

Charts patterns like triangles are prevalent as well. Like the horizontal support and resistances levels on these charts, the main method of trading trendlines and pattern on the point and figure charts is through breakouts. Point and figure charts also have their own versions of diagonal trend lines which are drawn at 45 degrees.

Price action is the most important aspect of technical trading. Point and figure charts give a very clear view of the market movements. The point and figure charts focus exclusively on the price action.

It is because of this clarity in viewing and interpreting the price movements that the point and figure charts have withstood the test of time and are still popular with traders today as an increasingly relevant analytical tool for forex traders. Point and figure charts had originated in the'th century.

Point and figure trading depends on the trendlines, support/resistance and breakouts. Point and figure charts excel at representing clear evidence of such important technical characteristics as trend, support/resistance and breakout without the extraneous elements to clutter the picture.

What makes the point and figure charts so special? Other data that is readily available on the bar and candlestick charts like time, period opens/closes are generally excluded on the point and figure charts. This leaves only the uncluttered purity of price action. Some may characterize point and figure trading as based upon pure price action. - 32177

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account!

Point and Figure Trading (Part I)

By Ahmad Hassam

Point and figure trading in many ways is similar to the support and resistance breakout trading on bar or candlestick charts. The main difference is the look and functionality of the price charts themselves!

Point and figure charts represent price in a radically different manner from the more familiar bar and candlestick charts. Many forex charting platforms provide the option of point and figure charts.

Point and figure charts are a pure price action play because these charts generally exclude all other elements like time, volume and open/close other than price. Point and figure trading is based exclusively on price action.

Thus a point and figure chart focuses on the behavior of price action which is the most important factor from the technical analysis point of view. Point and figure charts represent clear evidence of such important technical characteristics like trend, support/resistance and breakouts.

A point and figure chart has got Xs and Os. A point and figure chart is constructed with a column of boxes alternately labeled with Xs and Os. An X column means that the price has risen in that column. Conversely, an O column means that the price has declined in that column.

When a reversal occurs on any column, a new column is created going in the opposite direction. So there is no time, volume, opens and close on point and figure charts. Only when price moves a significant amount regardless of time will an existing column grow or a new column is created.

How is a point and figure chart constructed? It depends on two variables. Two variables can alter the way the point and figure charts look and act. The first variable is the box size. This is the minimum amount that the price is supposed to move before a new box in the existing column is created.

You will see many columns of Xs and Os in the point and figure chart. X is equal to fixed price increase. Each X denotes a rising trend. For example, price would need to move an additional amount equal to the preset box size before another X would be added to the top of the column if a column of Xs has 10 boxes.

You can use the charting software to do the actual drawing. However, you should understand the concept behind the point and figure chart. Suppose, you are using the point and figure chart. You set the box size on the point and figure chart to be equal to 10 pips on the point and figure charting software.

So 10 pips is box size or the minimum price increase! Now the price would have to move another 10 pips above each X box before another X could be added on top of that X. On the other hand, price would have to move 10 pips lower than the each box in O column to add another O box on the bottom of the column.

How do you decide to add another column to the point and figure chart? The second important variable is the reversal amount. This is the amount of pips the price needs to reverse before a new column is created. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account!

What is Backtesting? (Part I)

By Ahmad Hassam

Backtesting any trading strategy allows a trader to simulate its expected performance using historical price data. With Backtesting, traders can actually test their trading strategies and know how well they would have done if executed in the past.

What type of a trading strategy can be backtested? Any trading strategy that does not have any ambiguity in its rules can be backtested effectively. Example of a simple trading strategy that can be backtested can be as follows.

Go long when the 5 period moving averages has crossed above the 20 period moving average and the MACD histogram has crossed above the zero line and the DMI+ is above DMI-.

When the MACD histogram has crossed below the zero line and DMI- is above DMI+, sell short when the 5 period moving averages has crossed below the 20 period moving average.

However, using the past price data to simulate future results often misleads traders into thinking that their backtested results will also give similar results in actual real time trading. This one example is just meant to illustrate that any trading strategy having clear cut rules can be backtested with the historical data.

There is much difference between live trading performance and the backtested trading performance. Many potential factors can and will make hypothetical performance and actual performance differ significantly. So you should not fall into the trap of thinking that Backtesting may be a perfect method for identifying the most profitable trading strategies.

A trading strategy that may have worked very well over the past three years may work in an entirely different manner for the next three years as the market changes and evolves. One of the most important facts that you should always keep in your mind is that market change considerably overtime.

Often technical indicators that have been giving profitable signals in the past are subsequently unable to replicate their performance in the future. This may frustrate you. But this is exactly what makes trading a challenging endeavor.

Secondly, a trading strategy in real time may be much different from the way the trading strategy behaves on Backtesting in term of trade execution. These differences can potentially skew the results.

However, you should still not underestimate the benefits of Backtesting. Backtesting can provide a trader with a reasonable expectation of the trading strategy's potential worth and usefulness. Backtesting is still the best available method for evaluating a trading strategy without actually trading it in real time environment.

Now let's discuss how to do Backtesting. Backtesting can be done by using two methods. The first one is the automated Backtesting. This is the most popular method. Automated Backtesting entails using a specialized program. The trader inputs the specific rules and criteria for the trading strategy into the Backtesting program.

The software than automatically applies those rules to the past price data and tallies the past hypothetical profits, losses and other information. An entire picture of the past performance is created. - 32177

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account!

Trading Multiple Timeframes

By Ahmad Hassam

Have you ever traded multiple timeframes? No, then let me explain what multiple timeframe trading is. In multiple timeframe trading, a trader first looks at a longer timeframe like a monthly or weekly chart to determine the overall direction of the trend. Multiple time frame trading is a trading method used extensively by forex traders. It involves the use of multiple timeframes.

Professional traders always use multiple timeframes. Multiple timeframe trading means using three or more timeframes in your trading. You as a trader decide to drill down to a shorter timeframe like the daily or 4 hourly chart to look for dips or pullbacks in the trend if you find a decisive long term trend on this timeframe.

First identify the main trend on the long term chart. A minor downward retracement would represent a potentially high probability entry to get in the trend at a reasonably good price in a strong long term uptrend. Finally the trader may drill down to an even shorter timeframe like the 30 minutes or 15 minutes charts to pinpoint and time the exact entry.

Learn to use multiple timeframes in your trading. How do you trade multiple timeframes? Suppose, you are interested in trading multiple timeframes! You identify the retracement in an uptrend on a 4 hourly chart. What you need to do is to wait for a resistance breakout on a 15 minute chart in the direction of the trend before entering into a long position.

Trading is all about reading the charts correctly. Multiple timeframe trading can be very powerful if used correctly. What make multiple timeframe trading so powerful is that it puts the traders on the right side of the market while also identifying the highest probability entries available.

Have you heard of the triple screen trading method? One of the multiple timeframe trading strategies is known as Triple Screen. A triple screen resolves the contradiction between the technical indicators and timeframes. The first screen is the long term charts and strategic decisions on long term charts are made using the trend following indicators.

The second screen is used to make technical decisions about entries and exits using oscillators. The second screen is the intermediate charts. Suppose your favorite timeframe is the 4 hour chart. Call it your intermediate time frame. The third screen can be an intermediate chart or a short term chart. The third screen is used to place buy and sell orders.

Begin by looking at your favorite chart, the one that you use the most. Call it intermediate chart. Multiply its length by five to find the long term chart. Now use trend following indicators on the long term charts.

Staying out of the trade is a legitimate position. Use these trend following indicators like the moving averages, MACD or trendlines in the long term charts to make your strategic decision to go long, short or stay out of the trade.

If the long term chart is bearish or bullish, return to the intermediate chart. Use oscillators to look for entry or exit points in the direction of the long term trend. Set stops and profit targets before you switch to short term charts to fine tune entries and exits.

On the short term chart look for the support/resistance breakout in the direction of the long term trend to pinpoint the trade entry! Use it on your demo account to get familiar with it before you trade live with the triple screen method. Triple screen is a simple but ingenious multiple timeframe approach to forex trading. - 32177

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account!

Trading Divergences

By Ahmad Hassam

Divergence trading is one of the ways to trade the market. Though divergence trading is not often used but if used correctly it can be highly profitable. Divergences are often used as important trading signals. But it doesn't mean that divergences will always predict a reversal correctly. Price oscillator divergences have long been acknowledged by technical traders as a solid indicator of potential price reversals. Well defined divergences particularly on the long term charts can be surprisingly accurate in many instances.

Price divergence oscillators can be spotted with just two elements on the price charts. Catching a major price reversal at the correct time can be so profitable that only a few accurate divergence signals are needed to offset the inevitable false signals.

How do you determine a divergence? The first element is the price and the second element is an oscillator that runs either above or below a price level. This second element can be Stochastics, RSI, MACD or any similar oscillator.

Many traders use Moving Average Convergence Divergence (MACD- pronounced McDee) as their sole confirming indicator. The MACD is among the most popular technical indicator or an oscillator invented.

MACD acts as a sign of trend momentum by representing the relationship between two moving averages. MACD is a multifaceted indicator. Some traders also take trading signals exclusively from MACD.

MACD can be traded by taking signals from the crossovers of two lines, crosses above and below the zero line. Relative Strength Indicator (RSI) is another popular oscillator that provides a measure of price momentum.

RSI is an indicator that gives overbought and oversold signals in ranging markets. However, its usefulness like most other indicators tends to diminish during a trending market. RSI may also be used for divergence purposes. Stochastic indicator may also be used for divergence trading.

What is a divergence technically speaking? A divergence occurs when there is an imbalance between the price element and the oscillator element. Both begin to go separate ways and start telling opposite tales. This is the point when the oscillator is providing a strong hint that price may be losing its momentum and a change in price direction may therefore be impending.

A bearish divergence occurs when the price hits a higher high while the oscillator hits a lower high. A bearish divergence is a hint for an impending reversal back down.

In case of a bearish divergence, it is an indication that price may soon turn and go back down as the higher high in the price may lose its momentum and begin falling.

On the other hand, a bullish divergence hints at an impending reversal back up. A bullish divergence occurs when price hits a lower low while the oscillator hits a corresponding higher low.

Divergences can be a remarkably effective method for helping to time major market events when used in conjunction with other trading tools. Divergences are often used as hints of possible turns and reversals. However, divergences are not frequently used as a full fledged self sufficient trading strategy. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Try These Cash Printing Forex Signals From Heaven! Learn Fibonacci Retracement

Pivot Point ... Fibonacci Trading (Part II)

By Ahmad Hassam

Pivot points are considered to be leading indicators unlike most of the other technical indicators. This makes them highly useful to the traders to tell them about the market sentiment whether it is bullish or bearish. There are a number of pivot points that you need to calculate. How is the pivot levels calculated? Beginning with the main Pivot Point that is calculated from the previous day's key price points, the resulting support and resistance are subsequently derived from the following calculations:

Resistance 1 R1 = 2PP- Previous Low. Resistance 2 R2 = PP + (R1-S1). Resistance 2 R3 = Previous High + 2(PP-Previous Low).

PP (Pivot Point) = (Yesterday's Low + Yesterday's High + Yesterday's Close)/3.

S3 (Support 3) = Yesterday's Low-2(Yesterday's High -PP). S2= PP- (R1-S1). S1 (Support 1) = 2PP - Yesterday's High.

After calculating these points they are plotted on the currency price chart. Trader's can calculate the current days pivot points using the above formulas based on the previous day's price data.

Many traders are afraid of pivot points. They consider them to be difficult to understand and master. Nothing is far from the truth. Breakouts or bounces may be traded with pivot points. Once these pivot levels are calculated and plotted, they are used in much the same way as Fibonacci Retracement. These pivot points are often also used as profit targets. Pivot points also indicate whether the market sentiment is bullish or bearish. Traders also use pivot points as reference levels to provide information as to whether the current price is relatively low or relatively high within its expected price range for the day.

You can further refine your pivot point levels by using the S1, R1 and other levels. S1, S2 and S3 as well as R1, R2 and R3 are used as references in pivot point trading. For example, traders may look for long trading opportunities with the view that the price will reasonably move towards equilibrium around the main PP level if the price is near the day's S2.

You can also calculate the pivot levels for a week and for a month too. Instead of calculating the pivot points for the current day you can also calculate the above levels for 4 hour charts as well as 8 hour charts.

When calculating the pivot points for the other time frames just replace the day's highs, lows and the closing prices with the appropriate time frame highs, lows and closing prices. Both Fibonacci and Pivot Points are excellent technical tools that often encompass entire trading discipline in themselves.

The pivot point can become the target low for the trading session in an extremely bullish market condition. This number represents the true value of a prior session. It is important to understand that especially in strong bull or bear market conditions, it can be used as an actual trading number in determining the high or the low of a given time period.

Pivot point trading has been successfully used by traders in making trading decisions. Traders will step in and buy the pullback until that pivot point is broken by prices trading below that level. A retracement back to the pivot will attract buyers if the market gaps higher above the pivot point in an uptrending market. The opposite is true for the pivot point will act as the target high for the session in an extremely bearish market condition.

Technically speaking, in a bearish market, the highs should be lower and the lows should be lower than in the preceding time frame. Generally prices come back up to test the pivot point if a news-driven event causes the market to gap lower after traders take time interpreting the information and the news. Sellers will take action and start pressing the market lower again if the market fails to break that level and trade higher. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Try These Cash Printing Forex Signals From Heaven! Learn Fibonacci Retracement

A Psychic Forcefield - Does it Really Exist

By Amos Amos

Much of the lore surrounding psychic phenomena can get quite far fetched if you are reading the wrong things and looking in questionable places for answers. Let's take a look at the notion of a psychic force field, and see whether it has any basis in fact, or whether it exists strictly in the shallow waters of popular fiction.

Much of the early lab work done on psychics, back in the 1950's and 1960's dealt with the idea of a psychic being able to generate a "ring" of energy around themselves, purely through the power of their mental focus of conviction. The Soviet Union, both before and even during the cold war, was studying the possibility that a group of psychics might be able to construct a field of protection so wide and dense, that it would have military grade purposes!

Now - for those who believe in both science, and psychic phenomena, I've got both good, and bad news..:-) The Good news is, any objective evaluation of the tests done on psychic phenomena in a laboratory setting on a large scale basis have shown an incredible body of evidence to support that we do ABSOLUTELY posses amazing, life changing psychic skills as a human race. From remote viewing experiments done by the C.I.A, to the random number generator tests done at Princeton University, to the incredible body of work produced by the Rhine Institute and far, far beyond - there is a wealth of facts that support the notion that human beings have incredible, untapped psychic skills that can be DEVELOPED and practiced much like playing the piano, or a good jump shot on the basketball court can.

There is not, however, any evidence that we are able to generate a force field of psychic protection around us either as individuals or sovereign countries! It might be nice if there was, though, right? So the next time someone tells you they can create a star trek like shield around themselves using nothing but psychic energy, you may want to walk in the other direction!

Now - the one thing caveat I will make to the above is this: Most scientists and parapsychologists who study PSI ( the scientific name for the study of psychic phenomena) will tell you it APPEARS to be an evolving skill. This means that it can be improved upon, maybe both as individuals, as well as a species. Lots of good theories abound that the next great evolution in human beings might be in these very realms.

So, who knows - maybe 50, 100, 200 years from now we will all have the ability to generate a psychic force field around us when we are having a bad day, in a rotten mood, or just feel like being left alone..:-) Until then though, for now, it's as much science fiction as Mr. Spock and the rest of the crew! - 32177

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Fibonacci ... Pivot Point Trading (Part I)

By Ahmad Hassam

Some traders are diehard fans of the Fibonacci and pivot point trading. The use of Fibonacci retracement levels and pivot points are often considered by their adherents as complete, self contained trading strategies.

I want to make it clear the Fibonacci Retracement and the Pivot Points are two different methods and must not be confused as a single trading method. The horizontal price levels that are generated through Fibonacci retracement levels and the pivot points are calculated using different methods and formulas. However, both produce mathematically derived support and resistance levels that traders may use either as indicators of possible retracement turns or as zones to watch for breakouts.

Why Fibonacci retracement levels and the pivot points work most of the time? What makes these tools work surprisingly well under diverse market conditions is the simple fact that many traders both small and large use Fibonacci retracement levels and pivot points in their trading.

This is why significant price action occurs around these levels due to the fact that many traders are watching and reacting to these price levels. Therefore the levels derived from these two tools become self fulfilling prophecy.

The most common Fibonacci retracement levels are 23.6%, 38.2% and 61.8%. These three Fibonacci retracement levels are most frequently followed by the traders. This phenomenon contributes to the Fibonacci retracement levels and pivot points frequent effectiveness and accuracy in describing the market movement.

Very often, you will hear the commentary on CNBC or Bloomberg that price is approaching the 38.2% retracement level and something important like a turn could occur at this level. This shows the popularity of Fibonacci retracement levels among the trading community.

Fibonacci retracements can be traded either as a breakout opportunity or as a retracement bounce. Both methods have clear cut locations for the stop loss placement similar to most support/resistance trading methods. Fibonacci levels can also be used as profit targets for existing open trades.

Pivot points are leading indictors of the price action in the market. Pivot points are derived mathematically from the previous day's data that includes the previous day's high. Low and close. The main pivot point (PP) is calculated by taking the average of the high, low and close of the previous days' price action.

Four other primary pivot points are calculated from the main pivot point (PP). Two are below the main PP. Two are above the main PP. The levels above are R1 and R2 where R stands for resistance.

You can easily find a pivot point calculator online. Most of the charting software also can calculate the pivot points. The two levels below the main PP are the S1 and S2 where S stands for the Support. Often these pivot points are further extended to R3 and S3.

Many trader use pivot points in their trading! Pivot point trading can be a highly profitable trading method. However, it is always good for the trader to know how these pivot point numbers are calculated. This will give the trader an understanding of how these numbers are calculated and what are the variables that are used to calculate them. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Try These Cash Printing Forex Signals From Heaven! Learn Fibonacci Retracement

What Are Market Cycles?

By Ahmad Hassam

Knowing the major market cycles is important for you and your trading system. Each market cycle requires a different approach from your trading system. There are four major market cycles. Adapting to market cycles can improve your profitability.

Lets discuss these market cycles now. The four major market cycles are: 1) Trending, 2) Consolidating, 3) Breaking out of a consolidation and 4) Corrective.

Remember the saying, Trend is your friend. Trending is when the market starts to move consistently in one direction either up or down. How a trend is inherently defined? A trend can be defined as progressively higher lows and higher highs. If price movement consisted of a straight line either up or down, identifying a trend would obviously be too simple. In reality, currency prices move around incessantly, often denying the technical analyst an easy trend read. There are primarily three modes of price movement that can be readily identified. They are uptrend mode, downtrend mode, and non -trending (sideways) or consolidation mode.

On a chart, a Consolidation market will look like a sideways horizontal line. Consolidating is when the market is struck between two horizontal support and resistance levels.

Now what is breaking out of a Consolidation? After the market has been consolidation for at least 20 bars Breaking out of a Consolidation is when there is a sharp increase or decrease in the price.

Corrective is a short sharp reverse in prices during a longer market trend. In addition to these four market cycles, many traders also use Elliott Wave Theory to determine waves which are also an indication of market cycles.

Elliott Wave Analysis is a full subject in itself. Some traders dont believe in Elliott waves while others are its die hard fans. However, using Elliott Waves is somewhat advanced for most traders. There are five Elliott waves and each one has its own relevance in determining the trading strategy. You need to have a thorough understanding and ability to correctly determine which wave the market is in at that point.

Incorrectly identifying the market with either the four market cycles or by using the Elliot Waves can be a costly mistake. For example suppose the market is only in consolidation and you incorrectly determine that the market has entered a trend.

You might enter a trend trade and get immediately stopped out. Your best plan of action should be constant observation. Market experience is the best teacher and only overtime you will be able to correctly figure out the market cycle.

Right side of the chart is always an unknown quantity for the trader until it reveals itself. Hindsight is always perfect but trying to predict the markets can be an elusive and impossible endeavor.

Remember spring, summer, autumn and winter, the four seasons of a year. The markets have four cycles just as there are four seasons in a year. You need to learn what the different market cycles are in addition to having a trading system. That means you should develop the skill of correctly identifying the different market cycles at the right time.

Effectively identifying the market cycles is a skill that all successful traders have mastered. You need to learn how to adopt your approach to those cycles to remain profitable. For example in a choppy, sideways bracketed market, you need to adopt your system and rules so that you do not get whip sawed and stopped out a lot. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Learn These Candlestick Patterns. Try These 1500 Pips A Day Forex Signals from heaven!

Psychic Spoon Bender or Trickster

By Michael Russell

Uri Geller is, without a doubt, one of the most famous psychics in the world. His primary claim to fame is the bending of spoons using only his mind. Most of us have seen him do this on television. But is it real?

No, it isn't. It wasn't. It was all parlor tricks. That was proven in a court of law and Mr. Geller has the empty pockets to show for it.

But what makes us believe a man like this? How did he gain so many followers? How did he even fool a team of scientists at Stanford Research Institute, which pronounced Geller such a gifted psychic that they invented a term to describe his powers, the "Geller effect"? The bending spoon or key trick is accomplished by bending the object beforehand. Then during the show, it was all in the angles he revealed. At first, he'd show the object with the bowl or flat side facing out and the bend wasn't visible to the audience. Then he'd start rubbing and slowly revealing the bend, as if he had just made it happen, when it had been there all along. Sound easy? It's not. It took him years of practice. Witnesses would claim they had never taken their eyes off him, but never saw it. Video tapes showed he distracted these people just long enough to make whatever adjustments he needed.

He had other tricks that seemed to fool people endlessly, even though they see the same kind of tricks hawked at fairs. He'd "see" a drawing inside a sealed envelope by secretly holding it up to the light. He'd copy down license plate numbers and car models from the parking lot of his shows to later amaze their owners with his psychic car-matching abilities. He'd ask audiences to bring in old, stopped watches and he'd make them run. Many times shaking a broken watch will make it run for a short time and this is what he banked on. He could always find one of those. Within a few hours or days, it would stop again. But in the meantime, he was "amazing".

So why do simple parlor tricks fool even intelligent people into thinking they've seen magic? As one astute writer said, "Because even many intelligent people are too foolish to realize that they are not so intelligent as to be beyond being fooled". But think about this - if there ARE people with the ability to move things with their minds; or read other peoples' thoughts; or see hidden objects; or predict the future, why are they messing around entertaining us? Why wouldn't they be playing the stock market, working the casinos, finding a cure for cancer, or changing the course of rivers to put out forest fires? Easy. That would take a little more than simple distraction.

There is something mysterious about a man who has made a career of breaking things! Sure, he can bend 'em, but can he straighten 'em out again? If so, I've got a bunch of bent up silverware in my kitchen drawer for him! But this very mysteriousness attracted detractors.

James Randi, a famous debunker of the paranormal and a magician himself, was constantly in battle with Uri Geller. As many times as Geller demonstrated his amazing abilities, Randi was right there behind him to give an interview on how the trick was done. Eventually, he and other detractors convinced the public of Geller's fraud. Randi's point that this would have been accepted by everyone if Geller had just been honest in that he was an entertainer, not a supernormal psychic was well taken. Law suits were lost and Geller, you'd think, would have slowly faded into history. - 32177

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Market Cycles Explained

By Ahmad Hassam

Knowing the major market cycles is important for you and your trading system. Each market cycle requires a different approach from your trading system. There are four major market cycles. Adapting to market cycles can improve your profitability.

Lets discuss these market cycles now. The four major market cycles are: 1) Trending, 2) Consolidating, 3) Breaking out of a consolidation and 4) Corrective.

Trending is when the market starts to move consistently in one direction either up or down. An uptrend means each higher high is higher than the previous high and each lower low is also higher from the previous low. Similarly for the down trend!

On a chart, a Consolidation market will look like a sideways horizontal line. Consolidating is when the market is struck between two horizontal support and resistance levels.

After the market has been consolidation for at least 20 bars Breaking out of a Consolidation is when there is a sharp increase or decrease in the price.

And the last market cycle is the corrective cycle. Corrective is a short sharp reverse in prices during a longer market trend. Many traders also use Elliott Wave Theory to determine waves which are also an indication of market cycles In addition to these four market cycles.

There are five Elliott waves and each one has its own relevance in determining the trading strategy. However, using Elliott Waves is somewhat advanced for most traders. You need to have a thorough understanding and ability to correctly determine which wave the market is in at that point.

You need to learn how to correctly a market cycle. For example suppose the market is only in consolidation and you incorrectly determine that the market has entered a trend. Incorrectly identifying the market with either the four market cycles or by using the Elliot Waves can be a costly mistake.

You might enter a trend trade and get immediately stopped out. Your best plan of action should be constant observation. Market experience is the best teacher and only overtime you will be able to correctly figure out the market cycle.

When you trade, you base your trading decisions on technical indicators most of which are lagging. Hindsight is always perfect but trying to predict the markets can be an elusive and impossible endeavor. Right side of the chart is always an unknown quantity for the trader until it reveals itself.

Just as there are four seasons in a year, the markets have four cycles. So in addition to having a trading system, you need to learn what the different market cycles are. That means you should develop the skill of correctly identifying the different market cycles at the right time.

If you want to become a successful trader than you should be adapt at identifying the market cycle. Effectively identifying the market cycles is a skill that all successful traders have mastered. You need to learn how to adopt your approach to those cycles to remain profitable. For example in a choppy, sideways bracketed market, you need to adopt your system and rules so that you do not get whip sawed and stopped out a lot. - 32177

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. Learn These Candlestick Patterns. Try These 1500 Pips A Day Forex Signals from heaven!