Financial Market Fisherman http://financialmarketfisherman.com Fishing the Markets for Opportunity Wed, 20 Aug 2008 11:05:31 +0000 http://wordpress.org/?v=2.6 en Get Free Forex Forecasts From the World’s Largest Market Forecasting Firm http://financialmarketfisherman.com/2008/08/20/get-free-forex-forecasts-from-the-worlds-largest-market-forecasting-firm/ http://financialmarketfisherman.com/2008/08/20/get-free-forex-forecasts-from-the-worlds-largest-market-forecasting-firm/#comments Wed, 20 Aug 2008 10:59:08 +0000 Dean http://financialmarketfisherman.com/?p=52 From noon to noon on August 20 through August 27, you can have full, free access to Elliott Wave International’s 24-hour-a-day forex forecasts inside EWI’s Currency Specialty Service!

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]]> http://financialmarketfisherman.com/2008/08/20/get-free-forex-forecasts-from-the-worlds-largest-market-forecasting-firm/feed/ A Trading Pattern For The Impatient Or Time Sensitive Trader http://financialmarketfisherman.com/2008/08/11/a-trading-pattern-for-the-impatient-or-time-sensitive-trader/ http://financialmarketfisherman.com/2008/08/11/a-trading-pattern-for-the-impatient-or-time-sensitive-trader/#comments Mon, 11 Aug 2008 05:12:46 +0000 Dean http://financialmarketfisherman.com/?p=44 Your major focus in trading should be the softer side of trading, the business and psychological side of it; the harder side which relates more to the technical side is a secondary thought, however in this article I am combining the two because one of my favourite patterns is an ideal pattern for the impatient trader who does not like to hold on to trades for too long.

Impatience is not a good trait to have in the markets when trading or investing. It breeds laziness when it comes to research, planning and analysis, it causes some to exit trades too early, and it causes other’s to constantly monitor their positions. To add to this, trades that linger on can incur costs such as time premium erosion for options traders, and interest costs for CFD traders or stock traders using margin, to name a couple.

Weaknesses are a part of human nature; your job is to ‘manage’ them, not to try and eliminate them or even turn them into strengths. We were brought up to take our weaknesses and try and turn them into strengths which I believe is the wrong approach. Build on your strengths and manage your weaknesses is the best motto I ever heard.

Some traders who don’t like to be in trades for too long will use an exit strategy that will force them out of the trade if the particular stock or market consolidates and moves sideways for a few days, which is a good strategy. Let’s look at an entry technique which is the trading pattern for the impatient trader.

This pattern signals a turning of the market. It does not necessarily signal a top or bottom, it will sometimes just signal a correction, either way; it tells you that a swift and sharp move the other way is imminent, and usually enough to give a good reward to risk. The emphasis here is ‘swift and sharp’, because this is what the impatient trader is looking for.

The pattern unfolds in 5 waves with the highs and lows of the waves overlapping each other to the point where the 5th wave ends in a spike. Here is a diagram showing what to expect at the end of a run up, and the end of a run down.

 

This is what you need to see and how to trade it:

1. You join the highs of wave 1 and 3 together, and the lows of wave 2 and 4 together if in an up market, and these lines need to converge [or lows of waves 1 and 3, and highs of waves 2 and 4 if in a down market].
2. You want the high of wave 5 to break the upper line and spike [low of wave 5 to break lower line and spike].
3. The break of the lower line is your entry [the break of upper line is your entry].
4. Your stop goes on the other side of the 5th wave.
5. You want your exit or your first profit target to be within the range between the low of wave 1 and wave 2.
6. You shouldn’t take the trade if this range does not offer you at least a reward to risk ratio of 1:1, however this is obviously a personal choice

This is an example that occurred on the SP500 index in July 2008 on a 30 minute chart.

Elliott Wave users will be familiar with this pattern, known as an ending, leading and 5th wave diagonal; others may know it as three drives pattern, and others may just say it’s a wedge pattern.

The point I wanted to make in this article, so as to benefit you is that when these patterns occur they produce swift and sharp moves and this is an obvious benefit to those who don’t like spending too much time in the markets, whether it’s due to being impatient or because of trading instruments that are time sensitive.

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]]> http://financialmarketfisherman.com/2008/08/11/a-trading-pattern-for-the-impatient-or-time-sensitive-trader/feed/ Using candlesticks to signal reversals http://financialmarketfisherman.com/2008/06/26/using-candlesticks-to-signal-reversals/ http://financialmarketfisherman.com/2008/06/26/using-candlesticks-to-signal-reversals/#comments Wed, 25 Jun 2008 14:51:18 +0000 Dean http://financialmarketfisherman.com/?p=41 Candlesticks in trading have two main purposes;

One is to tell the trader the open, low, high and closing price of that particular time period, and two, whether the close was higher (green bodied), or lower (red bodied) than the open.

However they can alert the trained eye to pending reversals offering the chance for a trader to get a head start on a possible new trend, or to alert the trader who is already in the markets that the trend is ending and to tighten stops or take profits now.

The two candlestick patterns we are demonstrating here is the hammer (& hangman), and the tweezers (also known as railway tracks).

When looking at either pattern, they look quite different, however when it comes to what is going on in the market place, the same thing is happening. So let’s see what that is.

After a significant run up in price, the market will exhaust itself or be overbought; however this is when the most action usually takes place. The reason is because towards the end of the trend, the misinformed public are still buying, not wanting to miss out on what is probably a well talked about market and trend. However at the same time, the professional traders are the ones selling to the misinformed public.

This activity creates a resistance to any higher prices because all the late buying is being absorbed by the professional selling. On a candlestick chart, this will often be shown by either a bearish pair of tweezers or a hangman. Essentially price moves up and then moves all the way back down again, in the space of one or two candles (see diagram below).

Likewise, after a significant move down the market will exhaust itself or be oversold; the misinformed public are the ones selling because they can’t handle their losses anymore, and the professionals are the ones buying from them.

Again, this activity creates support for price and the candlestick patterns will show price move down and then all the way back up again. This is shown by a bullish pair of tweezers or a hammer.

The bearish tweezers pattern and the hangman show the same activity, price moves up, and then moves back down roughly the equivalent amount. The bullish tweezers pattern and the hammer show the same, price moves down and then moves back up roughly the same distance.

If you look at the diagram below, you’ll see this in action. The main difference between the tweezers and the hangman or hammer is the time period. The tweezers are two candles, but the activity is the same. The other difference is that the colour of the hangman or hammers body is not relevant because the open and close are very close to each other.

Two things that make these candlestick patterns more powerful is when the range of the candles are longer than the average range, and there is higher than average volume to go with it.

candlestick-reversals.jpg

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