Articles
FOREX: Exiting positions at a right time
The presented article covers one of the most important (in author’s opinion) aspects of trading in general and Forex trading in particular - managing of orders and positions. This includes choosing entry points, making decisions about exit points, stop-loss and take-profit of the trader. I hope this article will help new traders, who just began to work with Forex, and also to experienced traders who trade regularly and regularly make or loose their money to the market.
When I started to trade Forex and made my first big losses and profits I began to notice when very important thing about the whole trading process. While the right time to enter a position was rarely a problem for myself (nearly 80% of all my open positions had gone into the "green" profit zone), the problem was hidden in the determining the right exit point for that position. Not only was it important to cut my risk on the potential losses with stop-loss orders, but to limit my greediness and take profit when I can take it and make it as high as I can.
There are many known guidelines and ways to enter a right position at a right time - like major economic news releases, global world events, technical indicators combinations, etc. But while the entering into a position is optional and trade can decide to miss as many good/bad entry point moments as they wish, this is untrue if we talk about exiting a position. Margin trading makes it impossible to wait too long with an open position. More than that, every open position in a certain way limits trader’s ability to trade.
Choosing the good exit points for positions could be an easy task if only the Forex market wasn’t so chaotic and volatile. In my opinion (backed by my trading experience) exit orders for every position should be toggled constantly with time and as the new market data (technical and fundamental) appear.
Let’s say, you took a short position on EUR/USD at 1.2563, at the time you are taking this position the support/resistance level is 1.2500/1.2620. You set your stop-loss order to 1.2625 and your take-profit order to 1.2505. So now, this position can be considered as an intraday or 2-3 days term position.
This means that you must close it before it’s "term" is over, or it will become a very unpredictable position (because market will differ greatly from what it was at the time you have entered this position). After the position is taken and initial exit orders are set, you need to follow the market events and technical indicators to adjust your exit orders. The most important rule is to tighten the loss/profit limit as time goes by. Usually if I take a middle term position (2-4 days) I try to lower the stop and target order by 10-25 pips every day.
I also monitor global events, trying to lower my stop-losses when very important news can hurt my position. If the profit is already quite high, I try to move my stop-loss the entry point, making a sure-win position. The main idea here is to find an equilibrium point between greed and caution. But as your position gets older the profit should be more limited and losses cut. Also, trader should always remember that if the market began to act unexpectedly, they need to be even more cautious with exit order, even if the position is still showing profits.
Every trader has their own trading strategy and habits. I hope this article will make its readers think about such an important aspect of trading as the exit orders and this will only improve their trading results.
by Andrey Moraru
The Properties Of Price Movement
You might look at the stock prices at the bottom of your television screen or, if you are trading currencies in the forex market, you might look at the exchange rates go up and down your computer screen.
Prices move and you wonder whether their behaviour means something. Could the market be sending out signals that you can use to make your decisions? How, exactly, are you going to study the market?
For anybody to make money from the market, they must have a way of studying it. There are predominantly two approaches: fundamental and technical.
Fundamental analysis focuses on value but this is the subject of another article. Technical analysis, on the other hand, focuses on price and its movement.
The movement of price has the following properties which traders can study to aid in their decisions:
1. Trend - its persistence to move in one direction,
2. Volatility - the magnitude of its fluctuations on a periodic basis,
3. Momentum - the rate of its acceleration and deceleration,
4. Cycle - its tendency to move in cyclical patterns, most especially in the futures market,
5. Market Strength - the number of transactions supporting its movements,
6. Support and Resistance - its tendency to rise or fall to a certain level and then reverse, repeatedly.
Analysts, using the technical approach of analysing the markets, have developed their own set of indicators, different to those used by fundamental analysts. These indicators are used to measure the properties of price movement.
Fortunately for modern-day traders like you, you do not have to devise your own tools. You just need to learn how they work and how to use them.
About The Author:
Marquez Comelab is the author of the book: The Part-Time Currency Trader. It is a guide for men and women interested in trading currencies in the forex market. Discusses analysis, tools, indicators, trading systems, strategies, discipline and psychology. See: http://marquezcomelab.com
A Sneaky Way to Steal Someone Else’s Forex Trading System
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Anyone who is serious about trading needs to have a Forex Trading System that is tailored to them, but there is no reason to start constructing your Forex trading system from scratch. Why try and reinvent the wheel when you can benefit from other traders years of experience and borrow your trading system’s ideas and concepts? It’s easy to do, and there are some pretty good Forex trading systems out there for you to work with. Some of them are free and some are very expensive, but the price tags don’t always reflect the actual value of the Forex trading systems. But, many of these systems won’t work for you, and I am not talking about out-right dishonesty here, which can be a big problem when trading. What I am talking about is your ability to effectively trade with the system that you may be considering using or buying. You need to use a system that matches your life style and personality. If you have a day job (not trading), a Forex Trading System that requires you to stare at a screen all day wouldn’t be appropriate. You would be distracted at work and miss the opportunities to make money, or even worse, you will not close a trade effectively and could lose money. Some Forex trading systems have a potential to lose 20, 30 or 40% of your money before they are profitable. Can you handle a system that can drop your trading capital to half before making money? Or, are you prepared to have a string of 8 to 10 loses in a row before you have a winning trade? Some of the best traders in the world lose money on more than 50% of their trades. These are all important points to consider when you are creating your Forex Trading System. Choose aspects of the different systems that are out there that fit your trading style best, and then build your Forex trading system. An excellent trading method, which was made famous by Richard Dennis and William Eckhardt and is sometimes referred to as Turtle Trading, is one of the best Forex trading systems that I know of. They get returns in excess of 20 to 100% per year using this system. But, could most traders trade their system? Not a chance! Dennis and Eckhardt also loose on over 60% of their trades. Once you know what sort of Forex Trading System will work best for you, look at the components that make it work. Face it; if you are a new, or even a fairly serious, trader how likely are you to come up with a totally new concept? There are some very smart and wealthy traders out there. Why not use their ideas. Consider Dennis and Eckhardt’s turtle trading, their system is based on a "breakout" method. I know most traders could not trade using their exact method, but they could take parts of it, such as the breakouts, to confirm a trend. You can also use other Forex trading systems to give you an outline of what parts a system has to have for it to make money. All great Forex trading systems have these three basics: 1. Entry Rules, 2. Money Management Rules and 3. Exit Rules. Study and learn from the Forex trading systems out there, borrow their concepts, and steal their ideas. It will put you on the track to the system that will make you a successful trader. by David Jenyns |
Should You Be Concerned About the Lack of Leadership in Gold and Commodities
Yesterday the DOW fell over 100 points and the S&P fell 14 as the market has had its first encounter with resistance(the 1/3 retracement level and December lows) since it bottomed the other week.
Today futures are in the red as I write this, with S&P 500 futures down 5. If the market is weak in the first half of the day then its 60 minute stochastics will get oversold.I don’t see much more downside if the market falls today.Yesterday I talked about the sectors that have been leading this rally.Today I want to focus on the sectors lagging, with a close look at gold stocks.
I use TC2007 to study the market and find stocks to buy. TC2007 breaks the market up into 239 sectors so that I can track how the sectors behave relative to the rest of the market and each other. The above is a sort of the performance of the worst performing sectors, with their return, since January’s bottom.
As you can see the stocks in the bottom 9% of performance since the bottom include silver, gold, drugs, and health care stocks. Oil stocks are also lagging, posting a ranking under 30%.
The gold and health care stocks were actually leading the market in the first few weeks of January. Normally in bull markets sectors that lead towards the end of a market decline become leaders on the next rally. But in this bear rally this hasn’t been the case, as a lot of beaten down and heavily shorted sectors have been leading. This is classic for bear rallies.
I’m growing more concerned about gold stocks. Last Friday I got stopped out of my gold stock positions, as reported in WSW Power Investor, and today gold is trading under $15 an ounce. Many gold stocks are going to gap down and actually be in the negative from where they opened up at on the January bottom. At the moment gold stocks are very oversold on a 60 minute chart. They also are trading on their lower 10-day bollinger band, which is an important support area. Support on the XAU is currently at 179. If the XAU can close above this level today then gold stocks will be set to bounce over the next week. We should then see the XAU bounce back up to the 188-190 area. However, if the XAU closes below 179 then you can expect a drop to the 170-174 area.
I’m hopeful that gold stocks can bounce here, because the broad market should find a new footing today or tomorrow morning.
I’m long-term bullish on gold stocks, but it appears to me that they are eventually going to have get in trouble with the rest of the market. Once this bear rally in the broad market ends I expect gold stocks to correct hard - harder than the rest of the market. I see them falling hard in the spring, and making a new bottom in the summer. At some point gold stocks will break away from the broad market and have a massive rally, but this doesn’t look like it is going to happen over the next few months. Perhaps in the Fall or in the 4th quarter, but right now all signs point to them having a big correction in the 2nd quarter.
In the first half of January gold and silver stocks rallied sharply. However, other all other commodity stocks dropped. The CRX index, which is heavily weighted by base metal and oil stocks fell while the gold stocks went up and began to underperform the S&P 500 in January.
What this means is that in the commodity complex leadership narrowed to only gold and silver stocks. Gold was the only commodity still making new 52-week highs in January. The other commodities have looked weak for weeks and appear poised to correct over the next few months. If they do it looks like they will take gold and gold stocks down with them for a temporary 3-6 month correction.
At the moment I think the broad market can hold commodities and gold stocks together for the next 4-6 weeks. But once the broad market tops I expect to see a brutal correction in commodities and gold stocks.
The Chinese stock market also appears to have made a major top. Remember back in December how I made note of how the 150 and 200 day moving average begins to slope down when a market makes a major stage three top? Back then I told you how the major US indices were doing this and warning that they were entering bear markets. Now China is doing the same thing. For the past three weeks the Chinese stock market has been lagging the US.
Last year the market was led by commodities, Chinese stocks, and tech stocks such as Google, Yahoo, APPL, and RIMM.
In the past few weeks we have seen major breakdown in the tech stocks that led the rally last year. This month Chinese stocks and commodities stocks have broken down. The sectors that led the market last year are all breaking down and are now lagging during this bear rally. Gold stocks were also leading the market from August to just now. They appear to have lost their leadership and are poised to breakdown just as the tech stocks did.
The weakness in Chinese stocks is particularly ominous for gold stocks, because gold stocks have been more closely correlated to Chinese stocks than to the S&P 500 over the past few years. The same can be said about gold stocks and energy stocks.
When you take a look at gold stocks they also are badly lagging the metal. Even though they made new 52-week highs early in January they underperformed the metal when they did so. This is important, because usually the XAU/gold and HUI/gold ratios lead gold and gold stocks. It is bullish when gold stocks outperform gold and when they both go up and gold stocks lag that is a powerful negative divergence that usually spells some sort of top being made.
I do expect the broad market to continue to rally - and expect that rally to keep a bid under gold stocks and commodities.But once the broad market tops, and I expect this to happen in March, I think we will see a big 25-30% correction in commodities and gold stocks. The Chinese stock market is likely to fall 40-60%! If we get such a correction I look to see the XAU bottom in the 130-145 area.Right now though it has support at 179 and 175. It should put in a bottom there for the next 4-6 weeks. A rally back up to the 190 area would be a good place to lighten up on positions.I know most of you are heavily involved in gold and silver stocks. Take this posting as a warning sign and discussion of what is happening in the market right now. Maybe the underperformance of gold stocks in comparison to the S&P 500 and the gold metal is just a temporary phase. However, if they are continuing into March then you should take action on the warnings in these charts that I’m bringing to you today.
I’ll close with this graphic. Compare it with the chart of the Chinese stock market above:
by Mike Swanson
http://www.wallstreetwindow.com/
Exiting positions at a right time
The presented article covers one of the most important (in author’s opinion) aspects of trading in general and Forex trading in particular - managing of orders and positions. This includes choosing entry points, making decisions about exit points, stop-loss and take-profit of the trader. I hope this article will help new traders, who just began to work with Forex, and also to experienced traders who trade regularly and regularly make or loose their money to the market.
When I started to trade Forex and made my first big losses and profits I began to notice when very important thing about the whole trading process. While the right time to enter a position was rarely a problem for myself (nearly 80% of all my open positions had gone into the “green” profit zone), the problem was hidden in the determining the right exit point for that position. Not only was it important to cut my risk on the potential losses with stop-loss orders, but to limit my greediness and take profit when I can take it and make it as high as I can. There are many known guidelines and ways to enter a right position at a right time - like major economic news releases, global world events, technical indicators combinations, etc. But while the entering into a position is optional and trade can decide to miss as many good/bad entry point moments as they wish, this is untrue if we talk about exiting a position. Margin trading makes it impossible to wait too long with an open position. More than that, every open position in a certain way limits trader’s ability to trade.
Choosing the good exit points for positions could be an easy task if only the Forex market wasn’t so chaotic and volatile. In my opinion (backed by my trading experience) exit orders for every position should be toggled constantly with time and as the new market data (technical and fundamental) appear.
Let’s say, you took a short position on EUR/USD at 1.2563, at the time you are taking this position the support/resistance level is 1.2500/1.2620. You set your stop-loss order to 1.2625 and your take-profit order to 1.2505. So now, this position can be considered as an intraday or 2-3 days term position. This means that you must close it before it’s “term” is over, or it will become a very unpredictable position (because market will differ greatly from what it was at the time you have entered this position). After the position is taken and initial exit orders are set, you need to follow the market events and technical indicators to adjust your exit orders. The most important rule is to tighten the loss/profit limit as time goes by. Usually if I take a middle term position (2-4 days) I try to lower the stop and target order by 10-25 pips every day. I also monitor global events, trying to lower my stop-losses when very important news can hurt my position. If the profit is already quite high, I try to move my stop-loss the entry point, making a sure-win position. The main idea here is to find an equilibrium point between greed and caution. But as your position gets older the profit should be more limited and losses cut. Also, traders should always remember that if the market began to act unexpectedly, they need to be even more cautious with exit order, even if the position is still showing profits.
Every trader has their own trading strategy and habits. I hope this article will make its readers think about such an important aspect of trading as the exit orders and this will only improve their trading results.
by Andrey Moraru
Contrarian Stock Market Investing Guide Part II
The smartest thing we can say about the markets right now is probably nothing. Confusion reigns.
The credit markets are seizing up, derivative contracts are defaulting, central banks are pumping out money but nobody is borrowing or lending. The term ‘credit crunch’ is mainstream but the word deflation has not permeated the airwaves just yet.
So what?
A Wheat “Blow-Off” Advance…What’s Next?
Hi All,
The wheat is the first member of the grain or soybean complexes which has advanced to new all-time highs. The question is whether the potential upside will be as substantial as that of the crude oil and copper when they advanced to new all-time highs. Or whether it will be a modest advance as occurred in the platinum.
I just recently watched James Flanagan’s take on the latest happenings in the wheat market, from a very unique perspective. James uses a combination of basic W.D. Gann research principles, and his HUGE historical database of commodity price history. Take a look at this complimentary video and I believe you’ll be as impressed with his work as I am.
Watch the video here ==> Click Here
James gives you a look at some detailed historic charts NOT available anywhere else, as well as tables outlining the most probable future direction for the wheat market. Without a doubt, whether you trade wheat or not, the implications of this forecasting video are compelling, and could possibly affect your trading strategy (especially if you trade within the grain complex).
Watch the video here ==> Click Here
Hunter Roberts
TradeJuice.com
Power Forex Profit Principles
Hi there,
Here’s an interesting little report for you to read. Great for beginners and a bit on the basic side but there are a few good trading ideas that really make it worth reading.
Click Here to download your complimentary copy.
Hunter Roberts
TradeJuice.com
P.S. The report starts to get interesting from
about page 19
Gold Stock Market Quote says BUY!
Weak hands capitulated in a panic sell-off whilst the fundamentals became even more bullish. So what’s next for Gold Stocks?
Gold Stock investors have taken it on the chin lately. The fact that market turmoil strengthened the bullish case for Gold was of no consolation to investors as their Gold Stocks got Smashed.
In fact, it was nothing short of a Gold slaughter as the Gold Stocks were taken out back and systematically shot!
Here’s A Complimentary Momentum Trading Video
Hi everyone,
I have a really nice little method you can use in your trading. It revolves around using momentum. This is a very simple method but very effective. I managed to get a short video made for you to help explain how it works.
You can watch the video here:
http://www.tradeology.com/momentum.html
Hunter Roberts
TradeJuice.com
P.S. Watch out over the next few days for a big announcement that will dramatically improve your trading.
Stock Options
Stock Options
By Steve Burk
Hello,
Successful traders learn to follow a set of rules consistently. These set of rules are called a trading system. When using stock options, it is very important to use a stock option trading system. I’ve backtesting several stock option trading systems and have learned to avoid commonly taught systems that result in a net loss over time. A new stock option trading system I am still backtesting
involves high flying stocks Google, CME, or RTP.
The leverage of stock options can cut both ways. You can lose faster as well as win faster with stock options. Therefore, you want to get past the point of trading because of emotions or addiction and trade by your rules. Of course, your stock option trading system needs to be backtested with lots of samples to ensure you have positive expectancy.
Positive expectancy means that when you trade many times over the long run, you will have a net profit. You will be surprised that some stock option trading systems being taught or sold may have a NEGATIVE expectancy in the long run. That is, you will be trading at a net loss. They may have worked in a strong trending market a few years ago but they do not work in our current 2005-2006 slightly trending stock market.
That’s why I am focusing on stocks that are expensive and that have a high intra-day range - or average true range. Google, CME, and RTP are in the $200 to $500 range. In fact, there are not many other stocks over $200 that have options besides those three. Normally, options two strikes out of the money are relatively expensive for these stocks - except during the expiration week.
Let’s look at a stock option trading system I’m still backtesting:
On the Monday before option expiration, buy three strangles on Google, CME, or RTP that are 2 strikes out of the money for that expiration. For example, on Monday, May 15th, with expiration Friday on May 19th, Google is at 400. Buy the 420 call and the 380 put. If it is not earnings month, the strangle should cost around $300 to $350.
You’ll have to watch the price quote most of the day for Tuesday, Wednesday, Thursday, and even Friday
Try to estimate based on chart patterns whether a certain time is close to the high or low for the day. Better than that, if the price of the total strangle is profitable by $100 or more per strangle, sell one. The normal intra-day range for these three stocks swings enough to cause some profit.
Repeat step 3 on Wednesday and Thursday. Many times a year, there is a news event that can cause a $10 to $30 move on a single day. These are the home runs you are looking for that will more than cancel the strike outs of the relatively inactive days.
This stock option trading system has precise definitions for entry and relatively precise definitions for exit. Trade like a robot one week a month. I’ve traded this system a few times and have gained more than 50% twice and lost 50% once. In future articles I will present the detailed backtesting results of this system.
Steve Burke
http://www.breakthroughbacktesting.com
Fibonacci to filter Signals
I have a really interesting two part video lesson for
you. The first part covers how to identify a real break
of a trendline and the second part covers how to use
Fibonacci to filter those signals. Watch the first part
here: http://www.tradeology.com/dt/t/tlft1_1.php
Emini Simulated Trading
Emini Simulated Trading - The “voodoo science” theory would make sense if it wasn’t for the fact that there is a significant number of traders who are able to consistently make profits in the stock/futures market. These traders use technical analysis as their main tool. Since any trader has or can have access to the same TA tools we have to ask how can a small group of traders consistently win and the other larger group, more or less consistently lose in the stock market game. What is it that winning traders know about technical analysis that gives them the upper hand?
Adaptation to the Realities of the Market
Do you think adaptation to the realities of the market is the most important thing?
Many times in the past I’ve written about the need to adapt, the need to be able to change your behavior relative to the market because the markets are ever changing.
I’ve stated that mechanical systems may be workable, but for only a short time relative to the life of markets. You must learn to trade what you see and to understand what you see on a chart.
When I first began trading there was no such things as futures contracts for foreign currencies. Why didn’t they exist? Because there was no need for them! In the 1970’s all that changed when the US dollar went off the gold standard and began to float against other currencies. Following that, the Chicago Mercantile Exchange began to create currency futures to provide a place where currency traders could hedge the risks associated with dealing in foreign currencies. Some of these risks are direct and some are indirect. Direct risk is involved for those who deal directly in foreign exchange. Indirect risk involves companies who export or import and receive payments or make payments in the currency of another country.
Ever since currency futures were created, they have been in a state of flux. More recently, for purposes of futures trading, currency gyrations have centered on a massive move away from currency futures to more direct trading in the forex markets. Currency futures, while maintaining their volume and open interest figures, are actually less liquid than they had been previously. Volume and open interest do not reveal the picture of what is happening in the currency futures pits. Volume and open interest levels are being maintained by fewer and fewer futures traders.
In the period from 1992 to the present, we’ve witnessed currency futures moving from “red-hot” to “cool” and now hot again insofar as speculators are concerned. Foreign exchange, which in 1992 was one of the hottest plays, first turned dull and then back again to exciting.
Don’t Overtrade!
If you are experiencing a run of wins, don’t get getting carried away in the flush of success. You don’t want to give it all back.
Over Trading is the greatest single cause for losses in the markets. Whether you are winning now or losing now, ninety-five or more percent of all traders trade too often.
Even a daytrader trading a five minute chart has no need to trade every day nor to trade all day long. You should be filtering your trades so that you take only the best of the best.
Overtrading was a problem that took me a long time to overcome because I did not know what I was looking for. Overtrading is a very serious problem, and veteran traders learn to avoid it. In fact, one way to know if a trader is a mature professional is to know if that trader conquered the problem of overtrading.
The biggest problem with overtrading is that you don’t even know you’re doing it. You can overtrade by trading too many contracts (too much size), trading too often, attempting too many positions or sitting and staring at the screen all day.
One trader I met, who was following a system in twenty markets, received entry signals in fourteen of the twenty. The entry prices were such that probably only two or three of them had any chance of being filled. Yet this trader boldly called in to enter all fourteen orders. After the first six, his broker refused to take any more orders. Had they all been filled, the trader would have been several thousand dollars over margin.
Read: Don’t Overtrade!
Gbp trade
Gbp/Usd - Sell at 1.9435; Stop at 1.9475; Target at 1.9370 / 1.9325
Suniiel.
No trades today. We wait for the currenies to settle down, digesting the
weekend news.
Suniiel.
Eur trade
Eur/Usd - Sell at 1.3250; Stop at 1.3285; Target at 1.3175 / 1.3125
Suniiel.
Trade for 17.12.04
Usd/Cad - Buy at 1.2315; Stop at 1.2285; Target at 1.2370 / 1.2420
Suniiel
Trade for 16.12.04
USD/CHF - Sell at 1.1415; Stop at 1.1445; Target 1.1325 / 1.1290.
Suniiel.
Trade for 15.12.04
<BODY><P>USD/CHF - Sell at 1.1505; Stop at 1.1535; Target at 1.1425.</P>
<P>USD/CHF - Buy at 1.1527; Stop at 1.1497; Target at 1.1610</P>
<P>Suniiel.</P></BODY>
Euro trade for 13.12.04
Eur/Usd - Sell at 1.3255; Stop at 1.3290; Target at 1.3180 / 1.3090
Gbp/Usd - Sell at 1.9155; Stop at 1.9190; Target at 1.8960 / 1.8930.
Fw: System test
If you are getting strange posts on this site please be patient, we are testing a new system. This new system will enable us to get an Analysis out every single day. Just another way we are trying to improve our service to you our valued reader.
Kind Regards,
Chris
