Category Archives: Forex University

forex university

Adam teaches you 17 candlestick formations

Today’s short video is something quite special.In many of my previous videos we’ve looked at charts using Japanese candlestick charts. While this is interesting, I’ve never quite explained to you some of the powers behind using Japanese candlestick charts.

So here’s what we are going to do; watch the video, and I will point out to you some powerful Japanese candlestick formations on Google, Gold and Crude Oil.

http://www.ino.com/info/433/CD3336/&dp=0&l=0&campaignid=3

MarketClub is making available to you with just a phone call a very special PDF booklet on Japanese candlestick charting. The title of the booklet is “17 Moneymaking Candlestick Formations You Can Use Today”.

So enjoy the video.

http://www.ino.com/info/433/CD3336/&dp=0&l=0&campaignid=3

Thanks.
Adam Hewison

Did you win the Ultimate Swing Trader?

Time is running out!

Did you win the Ultimate Swing Trader software system?  SOMEONE has
to win and why not you?

Submit your blog entry and sign up for the UST Release Party
webinar. Then, make sure you attend today and listen for your name
to be called!

(The Release Party Webinar is the only place they’re announcing
it!). The festivities begin today (Tuesday) at 12pm EST U.S. (New
York Time)/ 9am PST / 5:00 GMT.

Visit the blog and click the registration button at the top right:

http://www.netpicks.com/cmd.php?af=1004071

The preparations have been made for a massive turnout at the PARTY.
With well over 2,000 traders registered for the event, you’ll want
to secure your spot. The Winner MUST be present to take home the
UST-get there and pay attention!   🙂

Not only will the blog contest champion be announced, but you’ll
get the SCOOP on how to trade in just 10 minutes a day AND you’ll
see how easy this system is to use whether you’re trading Forex,
futures or stocks.

Don’t forget, these guys are known for rewarding their webinar
attendees with some cool stuff.  If I were you, I’d listen up for a
chance at some pretty sweet party gifts!

Don’t miss out:
http://www.netpicks.com/cmd.php?af=1004071

See you at the RELEASE PARTY today!

Good Trading,
Alan

P.S. And while the contest is all well and good – let’s not forget
about the actual system that allows you to trade in minutes (not
hours!)
per day.

Check out the system walk-throughs posted on the blog right now:
http://www.netpicks.com/cmd.php?af=1004071

The Three Phases of a Trader’s Education: Psychology, Money Management, Method

By Jeffrey Kennedy

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. Now through August 10, Elliott Wave International is offering a special 45-page Best Of Trader’s Classroom eBook, free.

———–

Aspiring traders typically go through three phases in this order:

Methodology. The first phase is that all-too-familiar quest for the Holy Grail – a trading system that never fails. After spending thousands of dollars on books, seminars and trading systems, the aspiring trader eventually realizes that no such system exists.

Money Management. So, after getting frustrated with wasting time and money, the up-and-coming trader begins to understand the need for money management, risking only a small percentage of a portfolio on a given trade versus too large a bet.

Psychology. The third phase is realizing how important psychology is – not only personal psychology but also the psychology of crowds.

But it would be better to go through these phases in the opposite direction. I actually read of this idea in a magazine a few months ago but, for the life of me, can’t find the article. Even so, with a measly 15 years of experience under my belt and an expensive Ph.D. from S.H.K. University (i.e., School of Hard Knocks), I wholeheartedly agree. Aspiring traders should begin their journey at phase three and work backward.

I believe the first step in becoming a consistently successful trader is to understand how psychology plays out in your own make-up and in the way the crowd reacts to changes in the markets. The reason for this is that a trader must realize that once he or she makes a trade, logic no longer applies. This is because the emotions of fear and greed take precedence – fear of losing money and greed for more money.

Once the aspiring trader understands this psychology, it’s easier to understand why it’s important to have a defined investment methodology and, more importantly, the discipline to follow it. New traders must realize that once they join a crowd, they lose their individuality. Worse yet, crowd psychology impairs their judgment, because crowds are wrong more often than not, typically selling at market bottoms and buying at market tops.

Moving onto phase two, after the aspiring trader understands a bit of psychology, he or she can focus on money management. Money management is an important subject and deserves much more than just a few sentences. Even so, there are two issues that I believe are critical to grasp: (1) risk in terms of individual trades and (2) risk as a percentage of account size.

When sizing up a trading opportunity, the rule-of-thumb I go by is 3:1. That is, if my risk on a given trading opportunity is $500, then the profit objective for that trade should equal $1,500, or more. With regard to risk as a percentage of account size, I’m more than comfortable utilizing the same guidelines that many professional money managers use – 1%-3% of the account per position. If your trading account is $100,000, then you should risk no more than $3,000 on a single position. Following this guideline not only helps to contain losses if one’s trade decision is incorrect, but it also insures longevity. It’s one thing to have a winning quarter; the real trick is to have a winning quarter next year and the year after.

When aspiring traders grasp the importance of psychology and money management, they should then move to phase three – determining their methodology, a defined and unwavering way of examining price action. I principally use the Wave Principle as my methodology. However, wave analysis certainly isn’t the only way to view price action. One can choose candlestick charts, Dow Theory, cycles, etc. My best advice in this realm is that whatever you choose to use, it should be simple. In fact, it should be simple enough to put on the back of a business card, because, like an appliance, the fewer parts it has, the less likely it is to break down.

For more trading lessons from Jeffrey Kennedy, visit Elliott Wave International to download the Best of Trader’s Classroom eBook. It’s free until August 10.


Jeffrey Kennedy is the Chief Commodity Analyst at Elliott Wave International (EWI). With more than 15 years of experience as a technical analyst, he writes and edits Futures Junctures, EWI’s premier commodity forecasting service. 

Forex Tips – Avoid Making Predictions in the Market

forexprediction1

Most people make a big deal out of forex market prediction. They think they need to be right 70% or better in order to “pass” the exam that the forex market gives them. They also believe that they might get an “A” if they could be right 95% of the time. The need to predict the market steps from this desire to be right. People believe that they cannot be right unless they can predict what the market is doing.

Among our best clients, I have forex traders who continually make 50% or more each year with very few losing months. Surely, they must be able to predict the market very well to have that kind of track record. Well, I recently sent out a request for predictions and here is what I got back from some of the better forex traders.

Trader A; “I don’t predict the market, and I think this is a dangerous exercise.”

Trader B: “…these are just scenarios, the market is going to do what the market is going to do.”

Ironically, I got these comments from them despite the fact that I was not interested in any of their specific opinions, just the consensus opinion.

So how do they make money if they have no opinions about what they market is going to do? Well, there are five critical ingredients involved:

1.They follow the signals generated by the system.
2. They get out when the market proves them wrong.
3. They allow their profits to run as much as possible—meaning they have a high positive expectancy system.
4. They have enough opportunity so that there is a great chance of realizing the positive expectancy any given month and little chance of having a losing month.
5. They understand position sizing well enough so that they will continue to be in the game if they are wrong and make big money when they are right.

Most forex traders, including most professionals, do not understand these four points. As a result, they are very much into prediction. The average Wall Street Analyst usually makes a large six-figure income analyzing companies. Yet very few of these individuals, in my opinion, could make money trading the companies they analyze. Nevertheless, people believe that if analysts tell you the fundamentals of the marketplace, someone can use that information to make money.

Others have decided that fundamental analysis doesn’t work. Instead, they have chosen to draw lines on the computer or in their chart book to analyze the market technically. These people believe that if you draw enough lines, and interpret enough patterns, you can predict the market. Again, it doesn’t work. Instead, cutting losses short, really riding profits hard and managing your risk so that you continue to survive is what really makes you money. When you finally understand this at a gut level, you will know one of the key secrets to forex trading success. In the meantime, we will continue to make predictions in our column, so that you will begin to understand that they are entertaining, but nothing more!

Originally written by Van K. Tharp PHD

Brought to you by Alan’s Forex Blog:

http://alansforexblog.com

Forex Tips – Four Ways You Can Use Pivot Points

forexpivot

Forex market reactions depend largely on pivot points. This is because a large majority of forex traders uses these points as a guiding aspect. If you find the market opening above a pivot point value, you can expect the remaining part of the day trading to be focused on short trades.

You will typically need three pivot points namely R1, actual pivot value and S1. You would ideally need to check for any break or reversal in the values of S1 or R1. You need to use the pivot point values as an indicator of your exit times instead of entry times.

Pivot Points In Forex Day Trading

In the world of Forex trading market conditions change very frequently. The concept of pivot points is very useful but only certain tactics can apply in certain situations. This is where knowing which tactic to apply when becomes most important. Here are four ways in which pivot points can be used as per the situation.

1) Breakout trade: If the day began with being below pivot point value, then you would prefer short trades. You would want to also look for a break for values biased to the downside values. The entry order for selling in such a case would be below lower line of channel with the stop order being above line of upper channel.

2) Pullback trade: The market would typically pass through the S1 value and then come back in value. You need to place your entry order below support and then place your stop just above pullback.

3) Breaking out: In such a case you should place entry order above line channel of the upper value and the stop order below the value of lower line of channel.

4) Advanced: You can use the intersection of two sets of moving averages to determine the breakout. This is an advanced technique in Forex trading using pivot points.

Originally written by Ferris Malone.

Brought to you by Alan’s Forex Blog:
http://alansforexblog.com

Five Fatal Flaws of Trading

By Jeffrey Kennedy

Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?

That’s an age-old question. While there is no magic formula, one of Elliott Wave International’s senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don’t claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person’s life. Maybe you’ll find one in Jeffrey’s take on trading? We sincerely hope so.

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.

Why Do Traders Lose?

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, ‘How do you stop the Hand?’ Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.

Fatal Flaw No. 1 – Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.

Fatal Flaw No. 2 – Lack of Discipline

When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

Fatal Flaw No. 3 – Unrealistic Expectations

Between you and me, nothing makes me angrier than those commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.

Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.


For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.


Fatal Flaw No. 4 – Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.

All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month … I promise.

I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: ‘Aim small, miss small.’ I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small.”

Fatal Flaw No. 5 – Lack of Money Management

The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% – 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.

Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).

To overcome this fatal flaw, let me expand on the logic from the ‘aim small, miss small’ movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.

Break the Hand’s Grip

Trading successfully is not easy. It’s hard work … damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.

For more information on trading successfully, visit Elliott Wave International to download Jeffrey Kennedy’s free report, How to Use Bar Patterns to Spot Trade Setups.


Jeffrey Kennedy is the Chief Commodity Analyst at Elliott Wave International (EWI). With more than 15 years of experience as a technical analyst, he writes and edits Futures Junctures, EWI’s premier commodity forecasting package.

Forex Nitty Gritty – Forex Basics Course

forexnittygritty.png

Dear Trader,

Even though Bill Poulos sold out of his Forex Income Engine
2.0 course, many people felt that they just weren’t ready
for it yet — some felt they just needed a “Forex Basics”
course before taking the plunge.

So if that sounds like you, then I think you’ll be
pleasantly surprised with this:

http://www.openforextraining.com/y/?i=773362&u=3&l=f7

Bill squeezed all the Forex “basics” knowledge he could come
up with into a digital training course that’s better than
most high end courses out there.

Because it’s digital, you can watch it INSTANTLY… and the
price… well, I think you’ll be SHOCKED.

He put together an information page here that spills the
beans on everything:

http://www.openforextraining.com/y/?i=773362&u=3&l=f7

Hundreds of beginner Forex traders are out there right now
“doing it”. They’re trading the markets the INDEPENDENT way.
They’re making their own decisions… and they don’t have to
listen to anybody but themselves.

So if you’re not doing it yet, get started here:

http://www.openforextraining.com/y/?i=773362&u=3&l=f7

Good Trading!

Free Elliott Wave Online Tutorial

elliott_wave_international-logo.gif

Greetings Investor/Trader!

“Successful market timing depends upon learning the patterns of crowd behavior. By anticipating the crowd, you can avoid becoming a part of it.”

I pulled this quote directly from the opening paragraphs of the free Elliott Wave Online Tutorial. It’s critical to your understanding of how markets really work.

Now some might say, “What’s wrong with following the crowd? I’m just following the easy money, right?” The problem with this logic is that most investors follow the crowd (or herd) all the way up the mountain … then right off the cliff.

Look at today’s situation: How many people you know got out of the stock market before the October 2007 top? Heck, how many you know cut losses and cashed out even six months after the top?

If you’re like most people, your answer ranges from “zero” to “very few.”

Being a successful investor over the long term means you must always strive to be part of that “very few.”

Famed market analyst Robert Prechter, the leading practitioner of the Elliott wave method of market analysis, once said, “Missing a market move may be a shame, but getting caught on the wrong side of one means you lose money. People who have gone through the experience know there’s a big difference.”

To be a successful individual investor, you must understand what it means to take risks when the probabilities are behind you and shun risk when they’re not.

Robert Prechter’s method of analysis, the Elliott Wave Principle, is designed to help him and his subscribers do just that. In fact, just this week, a MarketWatch.com columnist wrote this about Prechter’s performance:

“Over the past 12 months the Elliott Wave Financial Forecaster is up 22.8% by Hulbert Financial Digest count, vs. negative 43.32% for the dividend-reinvested Dow Jones Wilshire 5000.

“And so terrible has the damage to the stock market been that the HFD now shows EWFF ahead over the past 10 years, with a annualized gain of 1.7% vs. negative 2.55% annualized for the total return DJ-W.”

Buy and hold is dead. Trading isn’t any easier. Having a big-picture outlook doesn’t mean you must “set it and forget it,” as the late-night infomercial guy says. And it certainly doesn’t mean you must be in and out of the markets every day. It simply means you can see the forest for the trees.

You can go long when the markets are behind you, short if you have the guts, and stay out completely when the risk is too high. Simply put, adopting an independent, unbiased method is the very best way to ensure you don’t get caught up in the investment herd.

Elliott wave analysis is not for everyone. It’s highly technical. And it presents probabilities, not certainties (there’s no such thing as a black box trading system). The most successful investors and analysts – the guys who are still around after 30 years like Prechter – are able to assign probabilities and assess risk; and they act only when probabilities are high and risk is not.

I encourage you to learn more about the method that has kept Robert Prechter out of the herd and in the game for more than three decades. His company, Elliott Wave International, has an extremely useful Elliott Wave Tutorial for free online. It’s broken up into 10 lessons across 50 pages, so it’s easy to read and review at your leisure.

Check it out at the link below, give yourself some time to digest it, and decide for yourself if Elliott is a method you should add to your investment arsenal.

Separate your investments from the herd; get started with the free Elliott Wave Tutorial today

Yours truly,

Alan

 


About the Publisher, Elliott Wave InternationalFounded 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.