Forex Trader

Credit Crisis: Are We Set Up for The Perfect Storm?

noreply@blogger.com (Alex Wong) — Fri, 27 Jan 2012 06:02:00 +0000

Robert Prechter discusses what's backing your dollars

By Elliott Wave International

In this video clip, taken from Robert Prechter's interview with The Mind of Money, Prechter and host Douglass Lodmell discuss "real" money vs the FIAT money system, and what is backing your dollars under our current system. Enjoy this 4-minute clip and then watch Prechter's full 45-minute interview here >>

Watch the full 45-minute interview FREE

Get even more valuable insights as Mind of Money host Douglass Lodmell interviews Elliott Wave International's President, Robert Prechter, about how to keep your money safe, the deflation versus inflation debate, and many more topics that are critical to your financial future.

Start watching the free 45-minute interview now >>

EURUSD Forecast (2 Jan 2012)

noreply@blogger.com (Alex Wong) — Sun, 01 Jan 2012 17:20:00 +0000

Happy New Year everyone!! I hadn’t done any forecast for a long time, and that’s because I’d been hard at work at brushing up my trading, analyzing my trades, etc. I’d stopped trading in mid-dec 2011, and am starting to resume.

Here’s a quick and dirty forecast based on what I see for EURUSD.

Based on the daily chart:

Price has retraced 61.8% of its price movement.
Price is currently at a previous low, a support level (see red line).
Price is showing divergence (see green line)

I’m counting this as a complex correction. and for my final corrective wave down, I have wave c = wave a.

These series tells me that EURUSD’s momentum seems to be slowing, and I’m actually looking for some upside. I’ll be looking for opportunities to go long from here.

Ok, and on the 4h, the recent wave down looks anything but pretty. I must say it’s hard to count 5 waves for a wave C, and the price appears to be bounded by parallel lines. But we can see some divergence happening right now as well.

The 15 min chart shows some divergence, and then a sharp rejection of prices. I think that trade volume is still rather low right now, and prices look erratic. My sense is that prices will probably head downwards abit more before I have my more sustained upward rally.

Well, that’s my 2 cents worth. Do your own due diligence to your own personal satisfaction before trading. My position of the market may also change based on how the price patterns unfold. Afterall, its more important to be profitable than right in trading!

Good luck!

Preparing Your Finances for 2012

noreply@blogger.com (Alex Wong) — Sun, 01 Jan 2012 16:28:00 +0000

Looking ahead to a new year and planning for the future

By Elliott Wave International

It's hard to believe that 2011 has passed so quickly and that 2012 will now here. Now is a good time to look back over the past year and assess your finances. Did your choices this year put you in better or worse circumstances? Do you have the information needed to make wise decisions in the next year? Are you prepared to protect your financial future?

The following excerpt from Conquer the Crash explains the importance of preparing and taking action now so that you'll be ready for what's ahead. You can read 8 more chapters from Conquer the Crash -- 42 pages of critical information, including a list of imperative "dos and don'ts" -- Free. Find out how below.

Chapter 14: Making Preparations and Taking Action
The ultimate effect of deflation is to reduce the supply of money and credit. Your goal is to make sure that it doesn't reduce the supply of your money and credit. The ultimate effect of depression is financial ruin. Your goal is to make sure that it doesn't ruin you.
Many investment advisors speak as if making money by investing is easy. It's not. What's easy is losing money, which is exactly what most investors do. They might make money for a while, but they lose eventually. Just keeping what you have over a lifetime of investing can be an achievement. That's what this book is designed to help you do, in perhaps the single most difficult financial environment that exists.
Protecting your liquid wealth against a deflationary crash and depression is pretty easy once you know what to do. Protecting your other assets and ensuring your livelihood can be serious challenges. Knowing how to proceed used to be the most difficult part of your task because almost no one writes about the issue.
Preparing to Take the Right Actions
In a crash and depression, we will see stocks going down 90 percent and more, mutual funds collapsing, massive layoffs, high unemployment, corporate and municipal bankruptcies, bank and insurance company failures and ultimately financial and political crises. The average person, who has no inkling of the risks in the financial system, will be shocked that such things could happen, despite the fact that they have happened repeatedly throughout history.
Being unprepared will leave you vulnerable to a major disruption in your life. Being prepared will allow you to make exceptional profits both in the crash and in the ensuing recovery. For now, you should focus on making sure that you do not become a zombie-eyed victim of the depression.
The best news of all is that this depression should be relatively brief, though it will seem like an eternity while it is in force. The longest depression on record in the U.S. lasted three years and five months, from September 1929 to February 1933. The longest sustained stock market decline in U.S. history lasted seven years, from 1835 to 1842, and featured two depressions in close proximity. As the expected trend change is of one larger degree than those, it should be a commensurately large setback, but it should still be brief relative to the duration of the preceding advance.
Taking the Right Actions
Countless advisors have touted "stocks only," "gold only," "diversification," a "balanced portfolio" and other end-all solutions to the problem of attending to your investments. These approaches are usually delusions. As I try to make clear in the following pages, no investment strategy will provide stability forever. You will have to be nimble enough to see major trends coming and make changes accordingly. What follows is a good guide, I think, but it is only a guide.
The main goal of investing in a crash environment is safety. When deflation looms, almost every investment category becomes associated with immense risks. Most investors have no idea of these risks and will think you are a fool for taking precautions.
Many readers will object to taking certain prudent actions because of the presumed cost. For example: "I can't take a profit; I'll have to pay taxes!" My reply is, if you don't want to pay taxes, well, you'll get your wish; your profit will turn into a loss, and you won't have to pay any taxes. Or they say, "I can't sell my stocks for cash; interest rates are only 2 percent!" My reply is, if you can't abide a 2 percent annual gain, well, you'll get your wish there, too; you'll have a 30 percent annual loss instead. Others say, "I can't cash out my retirement plan; there's a penalty!" I reply, take your money out before there is none to get. Then there is the venerable, "I can't sell now; I'd be taking a loss!" I say no, you are recovering some capital that you can put to better use. My advice always is, make the right move, and the costs will take care of themselves.
If you are preoccupied with pedestrian concerns or blithely going along with mainstream opinions, you need to wake up now, while there is still time, and actively take charge of your personal finances. First you must make your capital, your person and your family safe. Then you can explore options for making money during the crash and especially after it's over.
As the subtitle implies, this book is designed as a guide for arranging your finances prior to any future deflationary depression, whether one occurs now, as I expect, or not. Although I want this book to have value beyond the present situation, some of the specifics of my suggestions are time-sensitive by nature. If you need to know today where you can find the few exceptionally sound banks, insurers and other essential service providers, if you want to locate the safest structures in the world for storing your wealth, whether in paper monetary instruments or physical assets such as precious metals, you will find the answers in these chapters. Yet over time, the best institutions and services today might be long gone, and others may have taken their place. For a few years at least, we will post free updates to this information at www.conquerthecrash.com/readerspage. But if you read this book 50 years from now, you may have to do your own research to fit the investment options and service providers available at the time. Nevertheless, the general nature of your goals should be much as outlined herein.
Most people do not have the foggiest idea how to prepare their investments for a deflationary crash and depression, so the techniques are almost like secrets today. The following chapters show you a few steps that will make your finances secure despite almost anything that such an environment can throw at them.

8 Chapters of Conquer the Crash -- FREE!

This free, 42-page report can help you prepare for your financial future. You'll get valuable lessons on what to do with your pension plan, what to do if you run a business, how to handle calling in loans and paying off debt and so much more.

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This article was syndicated by Elliott Wave International and was originally published under the headline Preparing Your Finances for 2012. 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.

Trade Statement Analysis (22 Dec 2011)

noreply@blogger.com (Alex Wong) — Wed, 21 Dec 2011 17:27:00 +0000

I’ve closed my trades for the year and run an analysis on all my trades for this year. I plan to do this about every 3 months to make sure I review my trading constantly. For now, I’m looking to see if there are ways to prevent to fairly obvious dips in my account.

How to Identify and Use Support and Resistance Levels

noreply@blogger.com (Alex Wong) — Wed, 21 Dec 2011 16:14:00 +0000

By Elliott Wave International

Since 1999, Elliott Wave International senior analyst and trading instructor Jeffrey Kennedy has produced dozens of Trader's Classroom lessons exclusively for his subscribers. While commodity markets are known as some of the toughest trading environments around, these actionable lessons from a skilled veteran can help you trade commodities, or any market for that matter, with more confidence.

Enjoy this excerpt from Elliott Wave International's free Club EWI resource, the 32-page Commodity Trader's Classroom.

Congestion
"Congestion" is my term for sideways price movement or range trading. And the Elliott wave pattern that best fits this description is a triangle. Those of you who have held a position during these periods know that it's not fun. But the upside is that congestion often provides support or resistance for future price movements regardless of when it occurs. In May Coffee (Figure 6-1), notice how the brief period of congestion that occurred in early November 2003 acted as support for the December pullback. This happened again when the January selloff fell into listless trading for the rest of the month.

The weekly chart of Sugar (Figure 6-2) shows how these periods can also act as resistance.

And if you think about it, the tendency of congestion phases to act as support or resistance is right in line with the Elliott wave guideline on fourth wave retracements: support for a fourth wave pullback is the previous fourth wave extreme of one lesser degree.
Highs, Lows and Gaps
Other areas to watch for price reversals are previous highs and lows and also gaps. You can see on the chart of May Corn (Figure 6-3), for instance, that the September 2003 high was a significant hurdle for prices to overcome. For three months, each attempt to break through this level failed to produce a sizable decline. Also notice the small gap that occurred in early October. The December selloff closed this gap, and in doing so, introduced the subsequent rally. I have mentioned before how gaps often attract prices like magnets at first. Then they repel them -- literally. Prices fill the gap and flee the scene, you could say.

The April chart of Lean Hogs (Figure 6-4) gives us two examples of the same setup: The February advance failed at the previous high made in November 2003, and then fell back to close the late January gap. Prices failed at a previous high again in March and then closed the gap that occurred in February.

The last chart for Orange Juice (Figure 6-5) offers one example of how previous lows can provide resistance. Each bounce within the last ten months in OJ has met resistance at or near a previous low.

Learn more trading techniques in Jeffrey's 32-page collection of practical trading lessons -- absolutely free!

Here's what else you'll learn:

How to Make Yourself a Better Trader
How the Wave Principle Can Improve Your Trading
When to Place a Trade
How to Apply Fibonacci Math to Real-World Trading
How to Integrate Technical Analysis into an Elliott Wave Forecast

Download your copy of Commodity Trader's Classroom now.

This article was syndicated by Elliott Wave International and was originally published under the headline How to Identify and Use Support and Resistance Levels. 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.

Learn Elliott Wave Analysis -- Free

noreply@blogger.com (Alex Wong) — Thu, 15 Dec 2011 22:56:00 +0000

Often, basics is all you need to know.
By Elliott Wave International

Understand the basics of the subject matter, break it down to its smallest parts -- and you've laid a good foundation for proper application of... well, anything, really. That's what we had in mind when we put together our free 10-lesson online Basic Elliott Wave Tutorial, based largely on Robert Prechter's classic "Elliott Wave Principle -- Key to Market Behavior." Here's an excerpt:

Successful market timing depends upon learning the patterns of crowd behavior. By anticipating the crowd, you can avoid becoming a part of it. ...the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. In markets, progress ultimately takes the form of five waves of a specific structure.
The personality of each wave in the Elliott sequence is an integral part of the reflection of the mass psychology it embodies. The progression of mass emotions from pessimism to optimism and back again tends to follow a similar path each time around, producing similar circumstances at corresponding points in the wave structure.
These properties not only forewarn the analyst about what to expect in the next sequence but at times can help determine one's present location in the progression of waves, when for other reasons the count is unclear or open to differing interpretations.
As waves are in the process of unfolding, there are times when several different wave counts are perfectly admissible under all known Elliott rules. It is at these junctures that knowledge of wave personality can be invaluable. If the analyst recognizes the character of a single wave, he can often correctly interpret the complexities of the larger pattern.
The following discussions relate to an underlying bull market... These observations apply in reverse when the actionary waves are downward and the reactionary waves are upward.

1) First waves -- ...about half of first waves are part of the "basing" process and thus tend to be heavily corrected by wave two. In contrast to the bear market rallies within the previous decline, however, this first wave rise is technically more constructive, often displaying a subtle increase in volume and breadth. Plenty of short selling is in evidence as the majority has finally become convinced that the overall trend is down. Investors have finally gotten "one more rally to sell on," and they take advantage of it. The other half of first waves rise from either large bases formed by the previous correction, as in 1949, from downside failures, as in 1962, or from extreme compression, as in both 1962 and 1974. From such beginnings, first waves are dynamic and only moderately retraced.

Read the rest of this 10-lesson Basic Elliott Wave Tutorial online now, free!

Here's what you'll learn:

What the basic Elliott wave progression looks like
Difference between impulsive and corrective waves
How to estimate the length of waves
How Fibonacci numbers fit into wave analysis
Practical application tips for the method
And More

Keep reading this free tutorial today.

This article was syndicated by Elliott Wave International and was originally published under the headline Learn Elliott Wave Analysis -- Free. 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.

Happy Holidays! Take a Trading Break!

noreply@blogger.com (Alex Wong) — Thu, 15 Dec 2011 22:00:00 +0000

As the holiday approaches, it is time for me to take a short break, review my year and set goals for the next one. And I’m not just talking about setting financial or trading goals for the next year. If you are trading, you probably already have a trading goal but likely you would have missed out goals in other areas of your life: Family, Social, Personal Improvement, Education (other than trading related), health and fitness, etc.

It’s important to have some balance in our lives, and to achieve that, it is important to plan for it!

I’ve often heard of people saying that the best time to take a break from trading is in December. Personally, it’s because of the festive season and for the reasons I mentioned above. I like what Jeff Quinto wrote in this article : Trading Smarter, Not Harder – Making Your Own Holiday Trading Schedule

Here is how to trade smarter, not harder, this Holiday season. The first 2½-3 weeks of December can be excellent for trading. Every year traders tell me they were surprised at how good their trading was in the first part of December. The markets are liquid and volatile for the first 2½-3 weeks of December and, then, on the Friday a week before Christmas (December 17th this year), this exciting market comes to a screeching halt and remains quiet for the last two weeks of the year.
Therefore, resolve to stop trading for the year on Friday, December 17th and concentrate your attention on having the Merriest of Christmases and the Happiest of New Years.
As for January, traders come back from the holidays on January 3rd ready to start what they hope will be their best year ever. Instead of the predicted great start to the New Year, they very often get “cooked” during the first few trading days of the New Year. This typical slow start for the new year is due to the fact that many “other time-frame traders” take several days to several weeks to restart their trading and re-establish the positions they closed out in December to secure their year-end bonuses.
My advice is to avoid the first full week of the year, altogether. This year, go someplace warm and extend your holiday to January 10th. By doing so, you will have avoided a potentially disappointing start to the year and you will arrive on January 10th prepared to confidently face 2011 fully rested and nicely tanned – ready to begin your best trading year, ever.

I’m taking his advice and wrapping up my trading activities for the year. I will analyze my trade for this year (as how I described in my earlier post : Trade Statement Analysis (Fun with Monte Carlo), and share the results with everyone here.

European Union Agreement: Good or Bad?

noreply@blogger.com (Alex Wong) — Wed, 14 Dec 2011 22:09:00 +0000

By Elliott Wave International

Did European Union leaders make the sovereign debt crisis "go away" last week?

Not even close. What they did agree on is tougher budget rules:

"...17 countries of the euro zone...agreed to run only minimal budget deficits in the future and allowed the European Court of Justice the right to strike down national laws that don't enforce such discipline properly..."
Wall Street Journal, (12/9)

Will the EU agreement prove bullish or bearish for world stock markets, including the Dow Industrials?

Let's put it this way: The evidence suggests that government intervention in the economy does not alter the dominant trend of financial markets.

For example: Look at the DJIA chart and try to identify when the U.S. government bailed out Fannie Mae, Freddie Mac, and other financial institutions.

"[The chart below] shows that in fact these actions took place in the early portion of the biggest stock market decline in 76 years. These actions did not push stock prices back up. The market finally bottomed months later, at a time when nothing along these lines happened.
"It is no good to claim that these actions had results eventually. By that reasoning, any future turn in the stock market would prove the contention."
Elliott Wave Theorist, March 2010

If anything, the face value of this chart argues that economic government intervention makes stocks go down.
There is simply no "cause and effect" relationship between government actions and stock market trends.

The stock market's price pattern is governed by the Wave Principle:

"Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life.
"....The market's progression unfolds in waves. Waves are patterns of directional movement."
Elliott Wave Principle, (p. 21)

If you found this insight into stock market behavior eye-opening, read the2011 Independent Investor eBook, an educational, powerful and FREE 50-page eBook to help you think independently about what really moves the markets.
Thousands of investors have downloaded the Independent Investor eBook, and it has changed the way they think forever. Now YOU can get this important eBook, packed with insightful analysis from 2010 and 2011 Elliott Wave Theorist and Elliott Wave Financial Forecast, free.
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This article was syndicated by Elliott Wave International and was originally published under the headline European Union Agreement: Good or Bad for the Dow Industrials?. 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.

What Is Backing Your Deposits in the Bank?

noreply@blogger.com (Alex Wong) — Fri, 09 Dec 2011 21:45:00 +0000

By Elliott Wave International

Is the bank really the safest place to keep your money? Robert Prechter joins the Mind of Money host Douglass Lodmell to discuss what backs bank deposits and how you can keep your hard-earned money safe.

We invite you to watch the interview below. Then read Robert Prechter's free report, Discover the Top 100 Safest U.S. Banks.

What is the best course of action to safeguard your money?

Read our free 10-page report, Discover the Top 100 Safest U.S. Banks, to learn:

The 5 major conditions at many banks that pose a danger to your money.
The top two safest banks in your state.
Bob Prechter's recommendations for finding a safe bank.
And more!

Download your free report, Discover the Top 100 Safest U.S. Banks, now.

This article was syndicated by Elliott Wave International and was originally published under the headline What Is Backing Your Deposits in the Bank?. 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.

The Light Bulb Moment for the Eurozone

noreply@blogger.com (Alex Wong) — Thu, 08 Dec 2011 21:41:00 +0000

EWI's free EU debt report sheds some light on what's in store
December 8, 2011

By Elliott Wave International

How many European bankers does it take to change a light bulb? That's a joke in search of an answer, but EWI's European analyst Brian Whitmer explained five months ago that the "light bulb moment" was coming -- that's the time when most people would clearly recognize the severity of the European debt crisis. He offered this spot-on analysis back in July 2011, before the larger world came to know recently how bad things really are in the eurozone.

This chart shows how markets in Greece, Ireland and Portugal have behaved over the past five years, including the bailouts. Whitmer says that the turmoil in Greece is due mostly to both social mood and Greek markets having plummeted for more than a year and a half, while the larger EU stock markets have levitated. Once they turn down, he forecasts that what you saw in Greece will be replayed in the eurozone.

To help his subscribers see the light and get the full picture, he compared EU member nations under financial scrutiny to those that are usually viewed as being safe -- and showed that they weren't as safe as most people thought.

Specifically, Whitmer warned that the debt per person in Greece looked eerily similar to the debt per person in highly regarded countries, such as Germany and France -- and even to non-eurozone countries, such as the United Kingdom.

In 2010, Britain proposed a five-year, 25% budget reduction that affects nearly every area of the government. While it sounds like a drastic measure, it has played out differently during the past year. According to member of European Parliament Daniel Hannan, statistics show that not only is government spending and borrowing significantly higher than this time last year, but taxes, too, are way up. Whitmer notes that the budget cuts rely heavily on the future and lack near-term bite.

Why has the worst of Europe's violence taken place on the streets of Athens rather than London? Athenians did not suddenly grow more violent in 2011. What has changed since 2007 is their stock market. Whitmer's words of advice: "...should your country's stock market begin to look like Greece's, watch out. Trouble will be on the way."

*****

European Financial Forecast Editor Brian Whitmer has covered Europe's debt crisis since March 2010 -- and his forecasts kept subscribers ahead of the downward spiral every step of the way. Read more of his analysis in our free report, "The European Debt Crisis and Your Investments."

View your free report.

Free Report
The European Debt Crisis and Your Investments
Continue reading more articles like this one by Brian Whitmer in our European Debt Crisis report. This free report offers commentary from February 2010 through November 2011 that will help you to better understand what could be in store in the coming months and years.

Download your free report now.

This article was syndicated by Elliott Wave International and was originally published under the headline The Light Bulb Moment for the Eurozone. 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.

America's Biggest Banks: How Safe Are They?

noreply@blogger.com (Alex Wong) — Tue, 06 Dec 2011 21:43:00 +0000

"The Coming Worldwide Bank run"
December 6, 2011

By Elliott Wave International

Lost in the clamor over the central banks' "let there be liquidity" pronouncement, Standard & Poor's just downgraded fifteen major U.S. and European banks.

The downgrade doesn't mean Bank of America, Goldman Sachs, Citigroup, Barclays, UBS, Wells Fargo and others will close shop tomorrow. But the long-term credit downgrade does raise questions about their stability.

After all, the 2007-2009 financial crisis has supposedly passed. But during the two-year "recovery," did most big banks really return to sound fiscal health? Well, Standard & Poor's downgrade speaks for itself.

One reason for the downgrades was Standard & Poor's own revision to its rating system. Nonetheless, CNBC reported (11/29), "The outcome of the re-rating of the biggest banks was worse than S&P has forecast for all banks."

And apparently, the big banks were in worse shape in 2008 than most people realized. Thanks to the Freedom of Information Act, Bloomberg just revealed that banks got more bailout money from the Federal Reserve than was previously made public:

"The Fed didn't tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn't mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy."
-- Bloomberg, November 28

And in light of the downgrades, what does this revelation say about assurances of financial stability that come from the banks today?

Please consider this insightful excerpt from the September Elliott Wave Theorist:

"The Coming Worldwide Bank run"
"In the late 1990s and mid 2000s, the loan-to-deposit ratio for U.S. banks was nearly 1.00, meaning that almost all deposits were lent out. That shortfall alone was a serious problem, because if even 5% of depositors had decided to withdraw their money, banks would have been unable to pay. Some of the banks' loans were quickly callable, but by 2006, the credit-fueled real estate boom had claimed a large percentage of outstanding loans, both inside and outside the banking system. These loans are not quickly callable. The problem was serious in 2002 and enormous in 2006. Now it has become acute, because many loans are becoming fossilized, as the market for mortgage investing has dried up while foreclosures on the 'collateral' have been slowed by court actions and politics.
"The specter of a banking panic has become far darker since the collateral for bank deposits -- land and buildings -- has fallen globally in value at the steepest rate since the Great Depression. One day this shortfall in collateral value will impress itself on people's minds, and there will be an unprecedented run on banks around the globe.... Yes, I know about the FDIC, but I don't believe it will be able to fulfill its promises when most banks go bust."

Notice the phrase in the last sentence of the quote, "most banks" This obviously implies that some banks are safer than others.

What is the best course of action to safeguard your money? Read our Free 10-page Report titled "Discover the Top 100 Safest U.S. Banks" to learn:

The top two safest banks in your state.
The 5 major conditions at many banks that pose a danger to your money.
Robert Prechter's recommendations for finding a safe bank.
And more!

Download your free report now.

This article was syndicated by Elliott Wave International and was originally published under the headline America's Biggest Banks: How Safe Are They?. 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.

Currency Trader Magazine (Dec 2011)

noreply@blogger.com (Alex Wong) — Tue, 06 Dec 2011 12:39:00 +0000

The December issue of the currency trader magazine is out! Click here to get it if you hadn’t already.

€CONOMIA - The Monetary Policy Game (Now available on iPad/iPhone)

noreply@blogger.com (Alex Wong) — Tue, 06 Dec 2011 04:12:00 +0000

The European Central Bank has launched an iPad and iPhone game that allows the public to take control of a monetary union and see how they would cope
when faced with an economic crisis. The bank, now battling to save the euro, produced the game in which players set interest rates to keep inflation low
and growth steady. – The Daily Telegraph

Ever wondered what monetary policy is? Or how the key interest rate affects inflation? Play €CONOMIA and find out how it works.
Your goal: Keep inflation low and stable at just under 2%. Your tool: the key interest rate.

I came across this interesting game in the papers and thought it would be rather interesting. One can learn a little more about monetary policies and its impact on the economy. Otherwise, it might just be plain fun to see what happens, and best of all… its a FREE app.

Click here for more information on €CONOMIA.

Single- and Multi-Bar Price Analysis: Could It Help You Forecast the Markets?

noreply@blogger.com (Alex Wong) — Mon, 05 Dec 2011 22:36:00 +0000

EWI's Jeffrey Kennedy shows you what a simple price bar can tell you about a market
December 5, 2011

By Elliott Wave International

Senior Analyst Jeffrey Kennedy has spent over 15 years developing techniques to "read between the lines" on a price chart, and he shares some of his techniques with you in a new FREE eBook: Learn to Identify High Probability Trading Opportunities Using Price Bars and Chart Patterns.

You'd be amazed at how a simple price bar can provide you with so much information that can improve your trading success. In this excerpt from his new eBook, Jeffrey explains how to interpret price bars and what that means for the subsequent market moves. Learn how you can download the entire 14-page eBook below.

Here's a picture of two different price bars that we will consider to be daily price bars. What story does the single price bar on the left tell you?

Prices opened that day at the lowest price and closed at the highest price, which means that the buyers, or bulls, are in total control of the market. The bears have no power whatsoever, and, because the market closed so high, odds are that the price will continue up the next day. As I said, one price bar can give you tons of information about a financial market.

Now, look at the price bar on the right. It tells you a similar story in the opposite direction. Once the market opened, it got slammed to the down side. It stayed down hard all day and closed on the lows. A market like this is dominated by the bears, the sellers, and odds favor further decline the following day. It means that the bulls, or the buyers, have no control in this market.

Although these kinds of price bars are fairly rare, they may open your eyes to how much information a single price bar can contain, especially if you know how to interpret it.

These two price bars are more like what you will encounter every day.

The price bar on the left side shows that the bears, or the sellers, opened the market up and pushed it down a little bit. In a sense, they had some control, but not much. Then the buyers, or the bulls, took control of this market so that it closed above the open. This type of price bar shows up in an uptrending market.

Conversely, the price bar on the right often shows up in downtrending markets. It signifies that the bears control the market. You could say that the buyers gave it a feeble attempt early on, but by the close, the sellers had taken over. Closes don't lie, and they are the most important item on the price chart.

Learn to Identify High Probability Trading Opportunities Using Price Bars and Chart Patterns

When you look at a price chart, can you quickly spot the dominant trend? What about important reversals, or possible support/resistance levels?

EWI has just released a free 14-page eBook: Learn to Identify High Probability Trading Opportunities Using Price Bars and Chart Patterns. Senior Analyst Jeffrey Kennedy has spent over 15 years developing techniques to "read between the lines" on a price chart, and he shares some of his techniques with you in this new resource. You'll be amazed at how a simple price chart can provide you so much information that can improve your trading success.

Download your free report now.

This article was syndicated by Elliott Wave International and was originally published under the headline Single- and Multi-Bar Price Analysis: Could It Help You Forecast the Markets?. 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.

Download Your Free Price Bars and Chart Patterns Trading eBook.

noreply@blogger.com (Alex Wong) — Fri, 02 Dec 2011 16:23:00 +0000

Sometimes understanding the most basic elements of a chart can improve your trading success. That's why Elliott Wave International (EWI) created a new eBook, Learn to Identify High Probability Trading Opportunities Using Price Bars and Chart Patterns, by EWI Senior Analyst Jeffrey Kennedy. Find out how price bars and chart patterns can improve your trading success.

Download your free 14-page eBook today.

When you look at a price chart, what do you see? A bunch of ticks, some ups and downs, perhaps a pattern? Do you see the trend, support and resistance levels, and who's in charge of the market -- the bulls or the bears?

Learn to spot these critical elements and more in Elliott Wave International's free eBook, Learn to Identify High Probability Trading Opportunities Using Price Bars and Chart Patterns.

In this free 14-page eBook, EWI Senior Analyst Jeffrey Kennedy will teach you how to look at your charts and find critical support and resistance levels. Even more importantly, you'll learn what these levels mean to your trading positions and stop levels.

You will learn how to look at the simplest part of the chart -- the price bar -- so that you can determine the next most likely market move.

Jeffrey pulls from over 15 years of experience analyzing and trading the markets, to teach you the very same techniques that helped him become a successful trader.

Learn how to identify trading opportunities using price bars and chart patterns.

Download your free 14-page eBook today.
(Hurry -- offer expires December 19!)

---

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.

7 Pips a day to build your first million?

noreply@blogger.com (Alex Wong) — Fri, 02 Dec 2011 01:40:00 +0000

Recently, I’ve come across this concept of building 7 pips a day to build a million dollars in 3 years. And with the power of compounding, this doesn’t seem all that improbable. After all, Einstein did declare that the power of compound interest is the most powerful force in the universe.

Here’s the theory of what I’ve come across recently (though I’m sure this idea has been around for a long time!):

You risk 5% of your account as your risk/money management.
Target Monthly Profit – 25% (7 pips a day x 22 trading days = 154 pips a month)
Starting Capital $500

For the first month, 1 pip was equals to $1, so 154 pips was $154 i.e. 30% profit which is already more than the target 25%. So by projecting 25% monthly, the author provides the following projection:

So theoretically, we grow an account from $500 to $1.5m in just 3 years!! And with just 7pips a day… that actually seems very achievable!

I don’t actually have more information other than what I just wrote. I don’t know what the trading system is, i.e. Entry and Stop loss. And I will assume that the trade is closed once 7pips are hit – i.e. a daily hunt for 7pips.

Dissecting the Idea

The idea is extremely exciting, and I’ve heard of people who told me it was working well for them (they have their own entries and stop loss strategies). But I’m one for analysing if this is the approach for me.

Psychologically and on first impression, I think that 25% target profit monthly is somewhat of a stretched target for me at this point. And at the same time, I think that 5% risk is a little too high for me because the risk of drawdown from consecutive losses can build up pretty quickly.

At $1 per pip, that’s a mini-lot. So the author is trading a mini-account with a starting capital of $500. At a 5% risk level, his risk is in fact only $25 bucks (500 x 5%), i.e. 25 pips. So with a target of 7 pips, that’s a reward/risk ratio of 7/25. This means that If the risk is 1R, the reward is 0.28R. This means he will need to have 78.1% winning trades just to breakeven!

Next, I tried to calculate what’s the winning percentage that’s required to make 7 pips a day with such a risk-reward ratio. Any guesses? The answer is….. *Drum roll*….. 100%!! Any loss at all will take your average below 7 pips. So over long term, unless your wins of 7 pips are close to 100%, I don’t think this will work.

Achieving 7 pips seems like an achievable task….. how about getting close to 100% wins? Is that achievable? Perhaps there’s some guru out there who can, but I’m lead to believe that’s not a probable target for me.

Tweaking the Idea

Don’t worry, I’m not going to just throw cold water on this idea. I’m going to attempt to tweak the idea a little. Let’s assume that instead of targeting just 7 pips, we now target a 1:1 risk-reward ratio. So now our new target is 25 pips per trade, but we still need only on average 7 pips in a day. Now I can calculate a winning percentage that’s more probable – 64%. If you can achieve a winning percentage of at least 64% on average, you would have averaged at least 7pips a day.

So now, I have tweaked the idea from achieving close to 100% wins of 7 pips daily, to about 64% wins of 25 pips daily. For me, that’s a more probable approach to the idea of building 7pips daily. So the broader objective is the same, but the perspective is different. Of course you can always keep the 7 pips expectancy, tweak the target of 25pips and look at the required winning percentage accordingly. Here’s a table below:

So here you have my take on the 7 pips a day approach to trading. This does not cover the trading system / strategy itself, but rather what is the expected performance of the system to achieve the same objective of the 7-pips a day approach.

What do you think? Well, I hope this provided you with a new or alternative way of thinking about approaches to trading.

That’s all for today, good luck with your trading!

The European Debt Crisis

noreply@blogger.com (Alex Wong) — Wed, 30 Nov 2011 21:35:00 +0000

---------------------------------------
In 1999, 11 European countries surrendered their currencies for the euro and a shared monetary authority. Barely a decade later, the once-celebrated EU and its currency are facing collapse. Elliott Wave International has just published a free report to help you gain a valuable perspective on the European debt crisis and get ahead of what it could mean for your portfolio.

Read Your Free Report: The European Debt Crisis and Your Investments.
---------------------------------------

In 1999, 11 European countries surrendered their currencies for the euro and a shared monetary authority. But as the world applauded, Elliott Wave International (EWI) forecast that those countries had also sealed a shared fate: to eventually collapse together in a liquidity-driven deflationary spiral.

Barely a decade later, the once-celebrated EU and its currency are facing collapse. In November 2011, EWI observed that its “pageant of concession and agreement focuses (now) on rescue and preservation rather than expansion.”

EWI's analysts have been anticipating and tracking the credit contagion across the European nations for the past two years. Back in December 2009, EWI analyst Brian Whitmer warned that a set of troubling events across Europe were signaling that the entire continent was on edge.

In April 2011, Whitmer wrote:

Back in February 2010, we stated, "Greece's woes aren't over and neither are its neighbors." Four months later, as nearly every country in Europe said they would avoid a "Greek-like fate," the June 2010 issue added, "The only thing separating these countries from Greece is the fragile confidence that they are, indeed, distinct."

Will the Central Bank coordination bolster confidence enough to turn around the economies of the world? Or is this just another hopeful attempt that will provide nothing more than a short-term fix?

You owe it to yourself and your investments to find out. Remember, even if you believe you're not directly invested in Europe, there's a very good chance that some of the companies in your portfolio are -- possibly even your money market funds.

Gain a valuable perspective on the European debt crisis and get ahead of what is yet to come in this free report from Elliott Wave International.

Read Your Free Report Now: The European Debt Crisis and Your Investments.

----------

Prechter: "The Trend Is Exhausted"

noreply@blogger.com (Alex Wong) — Mon, 28 Nov 2011 18:13:00 +0000

Robert Prechter explains what's the real problem with today's market
November 28, 2011

By Elliott Wave International

What is the real problem with today's market? Watch this excerpt from Robert Prechter's special, video issue of the August 2011 Elliott Wave Theorist. Prechter shows you how the buildup of dollar-denominated debt has brought us to what he calls a critical market juncture.

Get even more information about current market trends and how to prepare for what's ahead with our new 14-page investing report. See details below.

The Most Important Investment Report You'll Read for 2012

Every year or two Elliott Wave International (EWI) publishes analysis with a message so critical that they decide to share it, FREE.

They have just released The Most Important Investment Report You'll Read for 2012, a free report to help you navigate the markets and prepare for what's ahead. You'll get hard facts, 25 eye-opening charts and 14 pages of straightforward commentary that will put the volatile market action of the past months into perspective within the "big picture" to help you position for the years to come.

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This article was syndicated by Elliott Wave International and was originally published under the headline Prechter: "The Trend Is Exhausted". 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.

Trade Statement Analysis (Fun with Monte Carlo)

noreply@blogger.com (Alex Wong) — Thu, 24 Nov 2011 00:01:00 +0000

Just to satisfy my curiosity, I’ve decided to work with one lucky person to analyse his/her trade statements (subject to some conditions of course). Interested? Read on below.

On my previous entry “Trade Statement Analysis”, I showed how we can analyse our trading statements to find:

Number of Trades, per month per currency
Percentage of winning trades, per month per currency
Nett P&L, per month per currency

I’ve since taken it further to also look at trade statistics by

Day of Week (Mon, Tue…)
Day of Month (1st, 2nd…)
Time of Day
Trade Duration
Percentage of Winning Trades (by currency, by month, overall, you name it)
Expectancy
Van Tharp’s System Quality Number (SQN)

And being the analysis junkie that I am, I’ve decided to take it even further by playing around with Monte Carlo Simulations. I’ve taken my R-Multiple Distributions, and ran it through an Excel Monte Carlo Simulation of 300 trades.

And the Monte Carlo is really interesting because while the earlier statistics shows the expectancy, it doesn’t capture the possibility of drawdowns based on my trading system. So I do not know how it might go wrong. E.g. If your system has a 1% probability of a 100R loss, and a 99% of 1.2R win (i.e. a system with really large stops and really small take-profit levels). It only takes 1 wrong trade to wipe your account out, although your expectancy is 0.19R. (i.e. avg profit of 0.19 per dollar risk)

Here are what the variables mean:
a) Starting Capital – How much money you start with in your account
b) Risk – How many percent is risked per trade based on current trade balance
c) Target – What’s your target trade balance at the end of 300 trades
d) Ruin Threshold – The threshold of your account where you decide that you will decide that your trades are not working and you will stop entirely to re-strategize. 80% would mean that your trade balance falls to below 80% of your starting capital.

So there you are, the table below shows the probabilities by Risk amount, so that I can identify what percentage of risk (position sizing) I am willing to take per trade.

Now, I’ve just about taken apart my trading behaviour by all ways possible based on my trade statements. Naturally, there are much more ways to analyse trading behaviour if I had kept a consistent trade journal of all my trades, reasons for entry, market conditions etc. But for now, I’m just going to use my trade statements as my reference.

And there’s only so much I can do…. next is to eliminate currency pairs that don’t seem to respond well to my trading approach, moderate my risk level to my comfort level and come back perhaps 6 months time to see if this has improved.

FREE TRADING STATEMENT ANALYSIS

I’m interested to know how this analysis can help one of you (yeah, if you are reading this blog, I’m referring to you). The first person comment on this post will get the opportunity to have his trade statements analysed for FREE. This is to satisfy my personal curiosity and I can only limit it to ONE person due to the amount of time I have to work on this.

Naturally, there are some conditions and disclaimer that I have to state upfront

I am not trading coach or professional trader. I’m a trader just like you, learning how to improve my income stream with trading.
I will not be responsible for any losses (or wins) as a result of any tweaking made to your trading strategy as a result of this analysis. Trading is extremely personal, and the only person responsible for how it turns out is YOU.
You are willing to share the results (good or bad) of any tweaking as a result of this analysis.
The analysis will be completed on my timeline. I will spend as much time as I can on the analysis, but I cannot promise to complete it within any specific timeline. I will also probably need to write a macro to extract your trade information from your statement. A good guideline would be that I can complete it in 2 weeks.
Preferably, your broker is GFT. This is because that’s what I built this analysis upon, and will greatly reduce the amount of time I can work on this
You have been trading using a consistent approach for about 1 year. You need to give your trading approach some time to test out how it works and have sufficient trades for it to be statistically significant.
You are willing for me to post parts of the analysis on this blog. Sensitive information such as trading capital, Profit and Loss can be omitted. Other non-sensitive figures like winning percentage, number of trades, profit percentage, will be used. I will discuss with you what information is used before posting.
You use Skype… This is the best way I can think which I can communicate with anyone in the world.
You will get your analysis results back in Excel format (without the macros and formulas).

That’s it! So if you are comfortable, comment away with your email address and skype id, and I’ll be contacting you soon. Meanwhile…. Happy Thanks Giving!

Get Your Free "Most Important Investment Report for 2012"

noreply@blogger.com (Alex Wong) — Tue, 22 Nov 2011 22:04:00 +0000

There are just a few days left to get your free report, The Most Important Investment Report You’ll Read for 2012.

Every year or two Elliott Wave International (EWI) publishes analysis with a message so critical that they decide to share it, FREE.

Now is that time.

The Most Important Investment Report You'll Read for 2012 includes 25 charts and 14 pages of analysis on the markets and economy that you will not find anywhere else.

You get a review of ALL of the charts and ALL of the indicators that EWI has been watching over the past year or so -- to provide you the full impact of what they are seeing. The entire picture will show you a rather radical conclusion about the future of stock prices.

Subscribers pay up to $59/month for this critical analysis, but until November 30 you can read it free.

Don't delay! "Most Important 2012" is only available for a few more days.

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Trade Statement Analysis

noreply@blogger.com (Alex Wong) — Sat, 19 Nov 2011 13:05:00 +0000

I’m now working on my trading skills on a live training account (i.e. a smaller live account). Until I get some consistency in my trading, I shouldn’t be trading anything larger. A very good practice for all disciplined traders is to keep a trading journal. But I'd not been able to be very consistent with logging down my trades. I mean, I’d intended to track down R-Multiples as prescribed by Van Tharp, but really…. I hadn’t spend that time to do that.

So if you are like me and have the same struggle. Here is a (self-proclaimed) brilliant approach – Simply use your brokers Transaction Statement Report, because all your trades will be automatically tracked in the system! Naturally, the statements would defer from broker to broker, but I would suppose most would be largely similar.

Here’s how it works.

I’m using GFT, and my account is currently net-based. That’s a hassle because unlike position-based accounts, the positions are closed and re-opened daily. So the entry prices change, and unrealised P&L also gets logged daily and is reflected in the statement (see below)

So one good way is to use your trusty Microsoft Excel!

I copied my statements into an Excel Sheet, and wrote a macro to calculate the number of trades, and the overall PnL for each trade. I definitely need a macro for that because I trade multiple lots. I trade 3 lots upfront, and then TP 2 lots, and when there’s opportunity may re-enter the trade. So if you do any form of scaling in and out, you will need a macro to help calculate your trades.

For me, one trade is considered completed only when it is completed closed off, and my macro helps me to calculate the overall P&L for each trade until that condition is met.

So for the above example (Trade 37), my macro will help me track
- Sell EURUSD 1,000
- Sell EURUSD 2,000
- BUY EURUSD 2,000 – Booked $2.53
- SELL EURUSD 1,000
- BUY EURUSD 1,000 – Booked $1.85
- BUY EURUSD 1,000 – Booked –$1.32

It records
- Trade 37, Overall P&L – $3.06, “Short” Trade (i.e. taken a short position)

So with all that information, I use excel formulas (SUMIFS, COUNTIFS…etc) and get this:

It tells me that my average trades per month is fairly consistent around 9-11 trades monthly. I do rather well with GBP/USD, GBP/JPY, AUD/USD, and perhaps the EUR pairs. and I should really avoid the USD/JPY pairs because somehow…. they don’t work out for me.

Well, I’m not saying that this should replace your trade journal (which could include a whole host of other information if you have the discipline to note them down), but this approach should give a pretty good idea of your trading pattern and inclination. There’s lots more you can do, look at number of long vs short positions, average length of time for each trade, or even cross-tab the duration of the trades against its profitability to tell you if you should do shorter-term or longer-term trades with your method.

Hope that give you something interesting to think about! Good luck with your trading!

What Are the BEST Technical Indicators for Successful Trading?

noreply@blogger.com (Alex Wong) — Tue, 15 Nov 2011 01:43:00 +0000

8 technical analysis tools that give any trader an edge
November 14, 2011

By Elliott Wave International

You may have seen a TV ad where "traders" describe their strategies, and one says, "I trade on fundamentals." That sounds very reassuring -- except that, on any given day, "fundamentals" are a mixed bag:

You might have a good U.S. employment report...but bad news from Europe
A positive Fed statement...but a negative housing number
Strong earnings...but slowing consumer spending

And so on. Which "fundamental" factor trumps the other? Which one carries more weight in your forecast? Your guess is as good (or bad) as anybody's.

Your alternative is technical analysis, which forecasts the markets' short- and long-term moves based on objective metrics, not guesses.

Here at EWI, we've always strived to help our readers learn to think for themselves. So we've put together for you a free 8-lesson report, "Best Technical Indicators for Successful Trading" that teaches you how to use these technical tools:

The Personality of Elliott Waves
Head and Shoulders Pattern
Fibonacci Retracements
Advance-Decline Line
Sentiment
Volume
Trendlines
Momentum Analysis Using MACD

Here's a small preview of this free 8-lesson report.

Trendlines
A trendline represents the psychology of the market; specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control.

Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic, as it was in the upwards sloping line in Figure 1-1 or extremely pessimistic, as it was in the downwards sloping line in the same figure.
Now we're on to the fun part -- drawing trendlines. You can do this several different ways...

Finish Reading This 8-Lesson Report Today, FREE

In this free report, you will learn some of the most effective tools of the trade from analysts at Elliott Wave International, the world's largest technical analysis firm.

Find out which technical indicators are best for analyzing chart patterns, which are best for anticipating price action, even which are best for spotting high-confidence trade setups -- plus how they all complement Elliott wave analysis.

Download your "Best Technical Indicators" report now >>

This article was syndicated by Elliott Wave International and was originally published under the headlineWhat Are the BEST Technical Indicators for Successful Trading?. 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.

How Do You Get from Dow Theory to Elliott Wave Analysis?

noreply@blogger.com (Alex Wong) — Wed, 02 Nov 2011 01:10:00 +0000

Happy 160th Birthday, Charles Dow
November 01, 2011

By Elliott Wave International

If you are interested in Elliott wave analysis, odds are that you have also heard of Dow Theory, whose best and longest-lived proponent is Richard Russell. (Best wishes to Richard as he recovers his health.) This excerpt from Prechter's Perspective explains how Elliott wave analysis and Dow Theory are connected. We wanted to run it now in honor of the 160th anniversary of the birth of Charles Dow, which the Market Technicians Association celebrates on Wall Street on Thursday, November 3, 2011.

* * * * *
Excerpted from Prechter's Perspective, 2004

Q: What was R. N. Elliott looking for in the stock market data in the late 1930s? Did he have a model or theory about price behavior?

Bob Prechter: Elliott had no basic premises, just a mind that was open to the idea that the market might be patterned, which he may have adopted from the then relatively new Dow Theory, which was a set of very few and far more general observations about market behavior. Though the Dow Theorists formed only very rough concepts, they broke ground, tremendous ground, in merely coming up with their observations that market behavior was non-random and tied to investor psychology. That was probably the germ of the idea that kicked off Elliott's research.

Q: What was his procedure?

Bob Prechter: He did what every good researcher must do. First, he recorded the data that reality provided. He looked at the movements on chart paper and wondered, "Can I find forms that occur over and over again?" His answer was, "Yes." He found that they occurred on hourly moves, daily moves, weekly, yearly. He even plotted moves that were decades long and noticed that they were following the same form. Likewise, the specific market did not matter. It could be the stock market, the gold price, interest rates or any other market. Then he organized the data, which was his talent. He began recognizing recurrences in the data, so it became clear that there were indeed repetitive patterns, which he ultimately organized into concepts.

Q: What exactly is Dow Theory and how does it relate to the Wave Principle?

Bob Prechter: The Dow Theory was developed by Charles Dow in the late 1800s. One of the tenets of Dow Theory is that, in general, a primary bull market runs in three upward phrases. In the initial phase, there is a lot of disbelief, and the markets are at very depressed levels. The middle phase is a kind of recognition phase when people begin to realize that the fundamentals are improving, and the markets are rising in harmony with them. The final stage is when the euphoria and the gambling come in. Elliott discovered that this basic formula of three steps up, separated by two intervening corrections, making five waves, was applicable not just to a primary bull market but to any degree of advance. He then observed that corrections take a different path: a three-wave shape or variation thereof. Then he observed that these cycles were not independent of each other but part of the market's larger structure, which in turn developed according to these principles.

Q: It is through Charles Collins that we know about the genesis of the theory. He more or less sponsored Elliott's introduction to Wall Street and helped him think through various aspects of becoming professional. In fact, he was the ghostwriter of a good deal of Elliott's first important book, The Wave Principle, which came out in 1938. Did Collins make any contribution to the theory itself?

Bob Prechter: Yes. The catalyst for tying the Wave Principle to grander natural forces was Collins's discovery that the number of waves in Elliott's idealized pattern reflected the Fibonacci sequence. Collins wrote Elliott during the development of the theory and said in essence, "You ought to read this book by Jay Hambidge on Fibonacci ratios and spirals, because I noticed that when you count the waves through lower and lower degrees of trend, you find the Fibonacci sequence." That sent Elliott off on the track to his grand conclusion. It is comforting to know that he did not start with the Fibonacci sequence or a theory based on it and then force nature to it. Nature showed its law, and these two men observed it.

Q: Is Fibonacci really that crucial to the theory?

Bob Prechter: It is not crucial to the what, but it is crucial to the why. First, Elliott observed the Wave Principle operate. Then he took the next step and asked, "Why does it exist?" He concluded that there must be some progression that human beings go through as they move overall from a state of deep pessimism to extreme optimism and back again, because they continue to trace out these patterns. His eventual conclusion was that it was a natural law of human behavior, that human beings were part of the natural world, and just like trees and wolves and lemmings and anything else you can name, they have certain ways of acting. It shows up in the charts vividly, making it clear that mass psychology is structured. The unifying conclusion, that mankind's progress follows a law of nature exhibited by countless forms of life, is a profound and reasonable explanation that fits the facts.

Learn about R.N. Elliott's Wave Analysis with The Basic Tutorial -- Free from Elliott Wave International

Now you know how R.N. Elliott did his research. Next, learn how to analyze price charts using his form of analysis. The Elliott Wave Basic Tutorial is a 10-lesson comprehensive course with the same content you'd receive in a formal training class -- but you can learn at your own pace and review the material as many times as you like!

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This article was syndicated by Elliott Wave International and was originally published under the headline How Do You Get from Dow Theory to Elliott Wave Analysis?. 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.

How You Can Make Yourself a Better Trader

noreply@blogger.com (Alex Wong) — Mon, 31 Oct 2011 01:43:00 +0000

Define Yourself: What Kind of Trader Are You?
October 27, 2011

By Elliott Wave International

The idea of being a successful trader is exciting. The reality of becoming one is another thing. You need to understand more than the markets -- you need to understand yourself.

EWI's Senior Analyst Jeffrey Kennedy knows what it takes. He has analyzed and traded the markets for over 15 years. Jeffrey has learned what it takes to be successful, and he has the discipline to apply that knowledge. Enjoy this excerpt from his free Club EWI eBook Best of Traders Classroom, in which he answers: What kind of trader am I?

As a trader, it is imperative that you define your approach to the markets. For instance, do you follow the trend or do you like to play breakouts? Are you a commodity trader or an index trader at heart? What's your trading time frame, five minutes or five weeks? Moreover, how do you analyze markets, fundamentally or technically? Do you prefer using a black box type trading system or making your own calls?

My trading style is to trade with the trend. Specifically, I like to buy pullbacks in uptrends and sell bounces in downtrends. My markets are commodities, and my time frame is three to five days. If I catch a trade that has some legs to it, and it lasts a little longer, that's fine with me. Bottom line, though, I'm a take-the-money-and-run kind of guy. This is who I am as a trader.

In addition to the Wave Principle, I include basic chart reading and bar patterns in my analysis. While I do use a few select technical studies in arriving at my decisions, I have always believed that "price" is the ultimate indicator and that everything else is secondary.

Remember, success in trading comes from the consistent application of a proven methodology. If you don't define your methodology, then your trading style could change with each new issue of Stocks and Commodities magazine. Trying a variety of analytical techniques rather than consistently following one is a problem for traders, and it's also a great way to lose your trading account.

Read more of Jeffrey's lessons in his free 45-page eBook: The Best of Trader's Classroom. This valuable eBook, adapted from the $189 set of the same name, offers the 14 most actionable lessons every trader should know.

Download your free eBook now.

This article was syndicated by Elliott Wave International and was originally published under the headline How You Can Make Yourself a Better Trader. 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.

It's FreeWeek at EWI: Get Complimentary Commodity Forecasts, Video Analysis, Trading Lessons and More!

noreply@blogger.com (Alex Wong) — Fri, 21 Oct 2011 05:21:00 +0000

Elliott Wave International has just announced the beginning of their popular commodity FreeWeek event, where non-subscribers can test-drive some of their most popular premium services.

Now through noon Thursday, October 27 (Eastern time), you'll get complete access to all of EWI's most-promising daily, weekly and monthly opportunities in the world's leading commodities, plus all the charts, world-class analysis, video forecasts along with a treasure chest of trading lessons and more! (Subscribers normally pay $49/month for these services.)

Learn more and get instant access to EWI's FreeWeek of commodity forecasts and trading education now -- before the opportunity ends for good.

FreeWeek is one of EWI's most popular programs, and it's perfect for anyone curious about EWI's subscription services. Please don't hesitate to tell your friends about the exciting opportunity FreeWeek provides.

Forex Trader

Credit Crisis: Are We Set Up for The Perfect Storm?

By Elliott Wave International

EURUSD Forecast (2 Jan 2012)

Preparing Your Finances for 2012

Looking ahead to a new year and planning for the future

By Elliott Wave International

Trade Statement Analysis (22 Dec 2011)

How to Identify and Use Support and Resistance Levels

By Elliott Wave International

Learn Elliott Wave Analysis -- Free

Often, basics is all you need to know. By Elliott Wave International

Happy Holidays! Take a Trading Break!

European Union Agreement: Good or Bad?

By Elliott Wave International

What Is Backing Your Deposits in the Bank?

By Elliott Wave International

The Light Bulb Moment for the Eurozone

EWI's free EU debt report sheds some light on what's in store December 8, 2011

By Elliott Wave International

America's Biggest Banks: How Safe Are They?

"The Coming Worldwide Bank run" December 6, 2011

By Elliott Wave International

Currency Trader Magazine (Dec 2011)

€CONOMIA - The Monetary Policy Game (Now available on iPad/iPhone)

Single- and Multi-Bar Price Analysis: Could It Help You Forecast the Markets?

EWI's Jeffrey Kennedy shows you what a simple price bar can tell you about a market December 5, 2011

By Elliott Wave International

Download Your Free Price Bars and Chart Patterns Trading eBook.

7 Pips a day to build your first million?

The European Debt Crisis

Prechter: "The Trend Is Exhausted"

Robert Prechter explains what's the real problem with today's market November 28, 2011

By Elliott Wave International

Trade Statement Analysis (Fun with Monte Carlo)

Get Your Free "Most Important Investment Report for 2012"

Trade Statement Analysis

What Are the BEST Technical Indicators for Successful Trading?

8 technical analysis tools that give any trader an edgeNovember 14, 2011

By Elliott Wave International

How Do You Get from Dow Theory to Elliott Wave Analysis?

Happy 160th Birthday, Charles Dow November 01, 2011

By Elliott Wave International

How You Can Make Yourself a Better Trader

Define Yourself: What Kind of Trader Are You? October 27, 2011

By Elliott Wave International

It's FreeWeek at EWI: Get Complimentary Commodity Forecasts, Video Analysis, Trading Lessons and More!

Often, basics is all you need to know.
By Elliott Wave International

EWI's free EU debt report sheds some light on what's in store
December 8, 2011

"The Coming Worldwide Bank run"
December 6, 2011

EWI's Jeffrey Kennedy shows you what a simple price bar can tell you about a market
December 5, 2011

Robert Prechter explains what's the real problem with today's market
November 28, 2011

8 technical analysis tools that give any trader an edge
November 14, 2011

Happy 160th Birthday, Charles Dow
November 01, 2011

Define Yourself: What Kind of Trader Are You?
October 27, 2011