Category Archives: Educational Material

educational material

Top 3 Expert Advisor Design Tips

forex robot

Almost nobody turns their first EA into a winning strategy. Like any new task, you’re more than likely going to fumble the first few attempts. It takes time and experience to anticipate design mistakes that may lead to trading losses.

I cannot promise that following this guide will turn your expert advisor into a winning strategy. But, what I can promise is that you’ll be less likely to lose if you following these three simple tips.

Time of Day

The forex market has a personality. Each currency pair also acts somewhat differently from all the others.

We’ve all seen the warnings to never trade the Asian session, but sometimes it makes sense. Australia shares that time zone. It’s one of the most liquid times of day for AUD/JPY.

You shouldn’t avoid sessions just because they are generally bad. On the other hand, you shouldn’t be trading all time sessions either.

Adding time restrictions is one of the simplest and easiest ways to only trade when it makes sense.

Choose the right currency

A strategy is more likely to outperform on one currency over another. So, it makes sense to focus your limited trading capital where it stands the best chance of suceeding.

EAs fall into one of of two categories: range trading or trend trading. Forex pairs fall into the same categories, too. Make sure thee currency pair that you’re trading matches the expert advisor’s style.

The GBP/JPY is among the most notorious trending pairs. The EUR/GBP is a total snoozefest. Trying to trade a trending EA on the EUR/GBP is a surefire loser.

Stop trading so much

Everyone wants a scalper EA. Unless you have a compelling reason to scalp, it’s not a good idea. Trading costs a lot of money.

Consider a strategy that trades 1 standard lot once per weekday. That’s about $20 per trade in spread costs on the EURUSD for most brokers. Multiply that by 260 (the number of trading days per year) and you come out with an annual cost of $5,200. That is a steep hill to overcome.

It makes a lot more sense to kick back and let your expert advisor do what it needs to do.

Conclusion

Trading is hard. Making an EA that earns a profit over the long run is even harder.

My advice is to focus on doing the big things right and worry about the little things later. It may seem obvious, but forcing a trend trading method onto a range bound pair is something many people try. As my old boss loved saying, “Remember the 40,000 foot perspective.”

You have to fit the expert advisor into the general environment. Only once that’s done will you be able to start tweaking the finer details.

Author: Shaun Overton

Shaun Overton writes a forex blog on trading with expert advisors for his company OneStepRemoved.com. The company specializes in building automated trading strategies with a particular emphasis on MetaTrader.

Learn to Label Elliott Waves More Accurately

EWI Senior Analyst Jeffrey Kennedy shows you how to use momentum patterns to confirm your count

By Elliott Wave International

Are you looking for an easy way to improve your confidence as you analyze the charts you trade? Take a quick look at this chart (adapted from Jeffrey Kennedy’s December 26 Elliott Wave Junctures lesson) to see how divergence relationships help clarify your analysis.

According to Jeffrey, divergence relationships are easy to identify. Whenever prices make a new extreme, look for underlying indicators to move in the opposite direction. Specifically,

The momentum relationship most often seen in waves 3 and 5 is divergence. Bullish divergence forms when prices make a new low while an accompanying indicator does not. Conversely, bearish divergence occurs when prices register a new high while an accompanying indicator does not. Bullish and bearish divergences are common to waves A and C, just as they are waves 3 and 5.

Notice the bearish divergence between waves 3 and 5 in the daily price chart of Halliburton Company (HAL) — Prices reach a new high, yet the MACD indicator moves in the opposite direction:

Jeffrey notes that if you label an advance as a 5th wave move, and yet you do not see momentum divergence, that tends to argue for an extended 5th wave.

Next, at waves A and C, you can see an example of bullish divergence. Wave A bottomed at $32.90 in HAL and wave C ended much lower at $29.83. The histogram readings that correspond to waves A and C are -36.26 and -26.60, respectively.

Here’s another example of divergence between waves A and C in Akamai Technologies (AKAM).

Notice that wave C is lower in price than wave A. However, if you look at the MACD histogram, you’ll see that it registered a higher reading in wave C than it did in wave A, thus giving us a bullish divergence.

Understanding that Elliott waves demonstrate unique momentum relationships as well as price structure allows you to label waves more accurately and with greater confidence.


Learn to Use Technical Indicators to Improve Your Trading and Analysis

This is merely one chart example of how you can use technical indicators to strengthen your analysis. You can also learn about Moving Averages, one of Jeffrey Kennedy’s favorite indicators, in a Free 10-page eBook from Elliott Wave International.

Moving averages are one of the most widely-used methods of technical analysis because they are simple to use, and they work. Now you can learn how to apply them to your trading and investing in this free 10-page eBook. Learn step-by-step how moving averages can help you find high-confidence trading opportunities.

Improve your trading and investing with Moving Averages! Download Your Free eBook Now >>

This article was syndicated by Elliott Wave International and was originally published under the headline Learn to Label Elliott Waves More Accurately. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Fibonacci in Nature: The Golden Ratio and the Golden Spiral

The more you learn about Fibonacci, the more amazed you will be at its importance

By Elliott Wave International

If you’ve studied the financial markets, even for a short time, you’ve probably heard the term “Fibonacci numbers.” The ratios and relationships derived from this mathematical sequence are applied to the markets to help determine targets and retracement levels.

Did you know that Fibonacci numbers are found in nature as well? In fact, we can see examples of the Fibonacci sequence all around us, from the ebb and flow of ocean tides to the shape of a seashell. Even our human bodies are examples of Fibonacci. Read more about the fascinating phenomenon of Fibonacci in nature.


Let’s start with a refresher on Fibonacci numbers. If we start at 0 and then go to the next whole integer number, which is 1, and add 0 to 1, that gives us the second 1. If we then take that number 1 and add it again to the previous number, which is of course 1, we have 1 plus 1 equals 2. If we add 2 to its previous number of 1, then 1 plus 2 gives us 3, and so on. 2 plus 3 gives us 5, and we can do this all the way to infinity. This series of numbers, and the way we arrive at these numbers, is called the Fibonacci sequence. We refer to a series of numbers derived this way as Fibonacci numbers.

We can go back to the beginning and divide one number by its adjacent number – so 1�1 is 1.0, 1�2 is .5, 2�3 is .667, and so on. If we keep doing that all the way to infinity, that ratio approaches the number .618. This is called the Golden Ratio, represented by the Greek letter phi (pronounced “fie”). It is an irrational number, which means that it cannot be represented by a fraction of whole integers. The inverse of .618 is 1.618. So, in other words, if we carry the series forward and take the inverse of each of these numbers, that ratio also approaches 1.618. The Golden Ratio, .618, is the only number that will also be equal to its inverse when added to 1. So, in other words, 1 plus .618 is 1.618, and the inverse of .618 is also 1.618.

This is a diagram of the Golden Spiral. The Golden Spiral is a type of logarithmic spiral that is made up of a number of Fibonacci relationships, or more specifically, a number of Golden Ratios. For example, if we take a specific arc and divide it by its diameter, that will also give us the Golden Ratio 1.618. We can take, for example, arc WY and divide it by its diameter of WY. That produces the multiple 1.618. Certain arcs are also related by the ratio of 1.618. If we take the arc XY and divide that by arc WX, we get 1.618. If we take radius 1 (r1), compare it with the next radius of an arc that’s at a 90° angle with r1, which is r2, and divide r2 by r1, we also get 1.618.

Now here are some pictures of this Golden Spiral in various aspects of nature. For example, on the left is a whirlpool that displays the Golden Spiral and, therefore, these Fibonacci mathematical properties. We also see the Golden Spiral in the formation of hurricanes (center) and in the chambered nautilus shell (right), which also happens to be a common background that Elliott Wave International uses for a number of its presentations and graphics.

We can also see the Golden Ratio in the DNA molecule. Research has shown that if you look at the height of the DNA molecule relative to its length, it is in the proportion of .618:1. If we look at the components of the DNA molecule, there is a major groove in the left section and a minor groove in the right section. The major groove is equal to .618 of the entire length of the DNA molecule, and the minor groove is equal to .382 of the entire length.

This graphic of the human body also shows how the Golden Ratio exists in certain relationships of the human anatomy.


Learn How You Can Use Fibonacci to Improve Your Trading

If you’d like to learn more about Fibonacci and how to apply it to your trading strategy, download the entire 14-page free eBook, How You Can Use Fibonacci to Improve Your Trading.

EWI Senior Tutorial Instructor Wayne Gorman explains:

  • The Golden Spiral, the Golden Ratio, and the Golden Section
  • How to use Fibonacci Ratios/Multiples in forecasting
  • How to identify market targets and turning points in the markets you trade
  • And more!

See how easy it is to use Fibonacci in your trading. Download your free eBook today >>

(VIDEO) GBP/USD: How Elliott Wave Patterns Predicted Recent Drop Under 1.60

A great 6-minute video lesson in Elliott wave analysis of forex markets

By Elliott Wave International

Every Friday, the editor of EWI’s forex-focused Currency Specialty Service, Jim Martens, records a video update for his subscribers. Each video delivers a real-life lesson on Elliott wave application to forex markets.

Watch this 6-minute video Jim recorded on October 12. Jim called for cable (GBP/USD) to drop below 1.60 in wave 5 of the developing Elliott wave sequence.

Ten days later, on October 23, GBP/USD fell as low as 1.5925.


Download Your Free 14-page eBook: “Trading Forex: How the Elliott Wave Principle Can Boost Your Forex Success”

Here’s some of what you’ll learn:

  1. Which Elliott waves to trade
  2. Which Elliott waves set up your forex trade
  3. When your analysis is wrong
  4. Guidelines for projecting price targets
  5. How to evaluate an Elliott wave structure
  6. How to use the bigger picture to give you perspective on the market’s next major move

Jim also takes you through two real-world trading examples to reinforce what you’ve learned and apply it to your own trading.

All you need is a free Club EWI profile to download this FREE 14-page eBook now >>

This article was syndicated by Elliott Wave International and was originally published under the headline (VIDEO) GBP/USD: How Elliott Wave Patterns Predicted Recent Drop Under 1.60. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

USD/JPY: Lemons into Lemonade

How Elliott wave analysis helps you as a forex trader with built-in, risk-defining safeguards
November 29, 2012

By Elliott Wave International

Elliott wave analysis is not a crystal ball. (No market-forecasting method is.)

But here’s what is remarkable: Even when your Elliott wave forecast doesn’t pan out, you have built-in safeguards to alert you — and help you manage risk. Here’s a real-life example.

Going into the November 14 low, USD/JPY charts had been showing an impulsive downward Elliott wave pattern. Impulses are 5-wave moves, but on November 13-14, the pattern looked incomplete: the fifth wave down seemed to be missing.

Here’s a chart our Currency Specialty Service subscribers saw early on November 13:

So, our analysis on November 13 suggested that USD/JPY would fall further. But USD/JPY just would not fall; instead, it went sideways.

That suggested to our Currency Specialty Service team that the wave (4) you see in the chart above was extending. Perhaps it was developing as another Elliott wave pattern — maybe a contracting triangle? This chart and analysis described to subscribers that scenario:

“A bearish fourth-wave triangle is another idea that’s in a position to yield new lows in wave (5). Resistance rests at 79.655/765.”

Note that line: “Resistance rests at 79.655/765” — it represents the very risk-defining safeguards I mentioned earlier.

How? Well, there are things that Elliott wave patterns just are not allowed to do. In a contracting triangle (an A-B-C-D-E formation), prices must stay within converging trendlines — and they cannot overlap the start of wave A, the origin of the pattern. Resistance at 79.655/765 was exactly that: the price point where the contracting triangle interpretation would be invalidated.

Practical application: If you were bearish on USD/JPY on November 14, you could have used the price area of 79.655/765 to manage your position risk.

As you probably know, USD/JPY did not go sideways for long. Nor did it go down. Soon after, it went higher and breached that key resistance level:

When one Elliott wave pattern ends, another one begins. As soon as that key resistance in USD/JPY was breached, a new road map for the Japanese yen became clear.


Download Your Free 14-page eBook: “Trading Forex: How the Elliott Wave Principle Can Boost Your Forex Success”

Here’s some of what you’ll learn:

  1. Which Elliott waves to trade
  2. Which Elliott waves set up your forex trade
  3. When your analysis is wrong
  4. Guidelines for projecting price targets
  5. How to evaluate an Elliott wave structure
  6. How to use the bigger picture to give you perspective on the market’s next major move

Jim also takes you through two real-world trading examples to reinforce what you’ve learned and apply it to your own trading.

All you need is a free Club EWI profile to download this FREE 14-page eBook now >>

This article was syndicated by Elliott Wave International and was originally published under the headline USD/JPY: Lemons into Lemonade. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

EWI’s FOREX FreeWeek is now on: Get charts, analysis and forecasts for the dollar, euro, yen and more

Greetings,

Our friends at Elliott Wave International have just announced the start of their popular FreeWeek!

That’s where they throw open the doors for you to test-drive some of their most popular premium services — at ZERO cost to you.

You can access all the charts, analysis, videos and forecasts from EWI’s trader-focused Currency Specialty Service right now through noon Eastern time Wednesday, Oct. 24. This service is valued at $494/month, but you can get it free for one week only!

It is an exciting time of year for forex traders who are in the know:

  • There’s the upcoming Obama/Romney U.S. Presidential election
  • The “fiscal cliff” the U.S. might be standing on
  • And the ongoing European debt crisis

Wouldn’t you want to know where the currency markets are headed in the days and weeks ahead?

Don’t wait on “the fundamentals.” Elliott wave patterns are telling you — right now! — where the major forex markets should go soon. Find out now during EWI’s Forex FreeWeek!

Learn more and get instant access to EWI’s FreeWeek of FOREX analysis and forecasts now — before the opportunity ends for good.

Regards,

Alan

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

“deliberately trading” markets? (it’s like this)

Dear Trader,

I just got done talking to Bill Poulos over at Profits Run and
he was telling me what a great time he’s been having working
with his new “Cashflow Catalyst” students that joined up this
week.

He says one of the biggest joys is to hear feedback from a new
student as they finally discover how to trade INDEPENDENTLY.

And one of the biggest steps to trading independently is
something he teaches you in The “Cashflow Catalyst” video.

What is it?

Well, it’s a technique Bill uses to identify what he calls:
“deliberately trading markets”.

This video shows you a profit-taking technique that’s the
complete opposite of how most people trade (and why they often
lose).

You can “eyeball” this technique in just seconds, and once you
“get it”, you’ll NEVER look at a chart the same way again.

Personally, I think trading this way is a breath of fresh air
for many traders, because it puts the odds squarely in your
favor…

-maybe for the first time EVER.

You can download his entire “Cashflow Catalyst” trading
method, along with the trading blueprint and 2 bonus trainings:
The Trade Position Worksheet AND the special Options Strategy
Tutorial that shows you how to supercharge what you learn with
the “Cashflow Catalyst”.

Get it instantly here…

Good Trading!