Today's Forex Prediction

Today's Forex Prediction - August 11, 2010

2010-08-11T08:11:00.000+07:00

PAIR	TODAY'S PREDICTION
	TODAY'S PREDICTION
	MAX	MIN
EUR/USD	1.3173	1.3066
USD/JPY	87.66	86.02

See : How To Applying My Prediction

Yesterday Prediction Rate :
USD/JPY - ACCURATE (Average Error<50pips)
EUR/USD - FAILED (Average Error>50pips)

PAIR	YESTERDAY - August 10, 2010
	PREDICTION		ACTUAL		ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN	MAX	MIN	MAX	MIN
EUR/USD	1.3362	1.3179	1.3228	1.3075	+134	+104	1.01	0.80
USD/JPY	86.29	85.08	86.34	85.19	-5	-11	0.06	0.13

PAIR	AVERAGE ERROR (UNTIL August 10, 2010)
	ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN
EUR/USD	-5	-11	0.42	0.35
USD/JPY	-30	-53	0.35	0.62

Use my daily prediction with your own risk!!!
Predicted for August 11, 2010 at 00:01- 23.59 GMT

Today's Forex Prediction - August 10, 2010

2010-08-10T07:20:00.001+07:00

PAIR	TODAY'S PREDICTION
	TODAY'S PREDICTION
	MAX	MIN
EUR/USD	1.3362	1.3179
USD/JPY	86.29	85.08

See : How To Applying My Prediction

Yesterday Prediction Rate :
EUR/USD - ACCURATE (Average Error<50pips)
USD/JPY - FAILED (Average Error>50pips)

PAIR	YESTERDAY - August 09, 2010
	PREDICTION		ACTUAL		ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN	MAX	MIN	MAX	MIN
EUR/USD	1.3345	1.3205	1.3308	1.3212	+37	-7	0.28	0.05
USD/JPY	85.50	84.40	86.05	85.35	-55	-95	0.64	1.11

PAIR	AVERAGE ERROR (UNTIL August 09, 2010)
	ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN
EUR/USD	-16	-21	0.37	0.31
USD/JPY	-55	-95	0.64	1.11

Use my daily prediction with your own risk!!!
Predicted for August 10, 2010 at 00:01- 23.59 GMT

Today's Forex Prediction - August 09, 2010

2010-08-09T07:19:00.000+07:00

PAIR	TODAY'S PREDICTION
	TODAY'S PREDICTION
	MAX	MIN
EUR/USD	1.3345	1.3205
USD/JPY	85.50	84.40

See : How To Applying My Prediction

Yesterday Prediction Rate : NA

PAIR	YESTERDAY - August 06, 2010
	PREDICTION		ACTUAL		ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN	MAX	MIN	MAX	MIN
EUR/USD	-	-	-	-	-	-	-	-
USD/JPY	-	-	-	-	-	-	-	-

PAIR	AVERAGE ERROR (UNTIL August 06, 2010)
	ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN
EUR/USD	-	-	-	-
USD/JPY	-	-	-	-

Use my daily prediction with your own risk!!!
Predicted for August 09, 2010 at 00:01- 23.59 GMT

Today's Forex Prediction - Sorry, I'am on Vacation

2010-08-03T12:44:00.000+07:00

I'm sorry if in this week I can't publish my prediction cause I'm on vacation with my family. Feel free to get my prediction next week. Succes with your trade :-)

Today's Forex Prediction - August 02, 2010

2010-08-01T23:20:00.000+07:00

PAIR	TODAY'S PREDICTION
	TODAY'S PREDICTION
	MAX	MIN
EUR/USD	1.3081	1.2974
USD/JPY	87.69	86.34

See : How To Applying My Prediction

Yesterday Prediction Rate : ACCURATE (Average Error < 50pips)

PAIR	YESTERDAY - JULY 30, 2010
	PREDICTION		ACTUAL		ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN	MAX	MIN	MAX	MIN
EUR/USD	1.3120	1.2992	1.3094	1.2981	+26	+11	0.20	0.08
USD/JPY	-	-	-	-	-	-	-	-

PAIR	AVERAGE ERROR (UNTIL JULY 30, 2010)
	ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN
EUR/USD	-10	-13	0.35	0.30
USD/JPY	-	-	-	-

Use my daily prediction with your own risk!!!
Predicted for August 02, 2010 at 00:01- 23.59 GMT

The 25 Point Discipline For Day Trader - #17 And #18

2010-08-01T11:13:00.000+07:00

I continue my post about The 25 Point Discipline For Day Trader. And below is the 17th and 18th point.

#17 NEVER TAKE A BIG LOSS.ONLY A BIG LOSS CAN HURT YOU.
Please review rules #5, #8, #10, #11 and #15. If you follow any one of these rules you will never violate rule #17.
Big losses prevent you from having a winning day. They wipe out too many small winners that you have worked so hard to achieve. Big losses also "kill you" from a psychological and emotional standpoint. It takes a long time to get your confidence back after taking a big loss on a trade.

#18 MAKE A LITTLE BIT EVERYDAY. DIG YOUR DITCHES. DON’T FILL THEM IN.
When I was a young bond trader, my goal every day was to make 10 bond tics. A tic is $31.25, so if I made 10 tics on the day, I would be up $312.50.
It may not sound like a lot of money to you, but it surely was to me. My mentor, David Goldberg, told me that if I could make 10 bond tics every trading day of the year, at the end of the year I would be up $72,500 in my trading account. Not bad for a 23-year old kid in 1982. It is amazing how quickly your trading account will build up over time just by making a little bit every day. If you are a new e-Mini S&P trader try to make just 5 or 6 points per day. If you can do that youíll have that $72,000 at the end of the year.

Technical Indicators - Momentum

2010-07-31T10:46:00.000+07:00

The Momentum indicator compares where the current price is in relation to where the price was in the past. How far in the past the comparison is made is up to the technical analysis trader. The calculation of Momentum is quite simple (n is the number of periods the technical trader selects):

The current price minus the price n-periods ago

Hence, if the current price is higher than the price in the past, then the Momentum indicator is positive. In contrast, when the current price is lower than the price in the past, then the Momentum indicator is negative.

Technical Indicators - Momentum Divergences

2010-07-31T10:45:00.001+07:00

Identifying divergences between price and technical indicators is important aspect of technical analysis trading. Bullish divergences can signal a trader to exit their short position; similarly, bearish divergences warn that prices could correct and it is advisable to exit any longs.
In the chart below of the S&P 500 exchange traded fund (SPY), Momentum divergences can be seen:

The first bearish divergence occured when price formed a double top formation. The Momentum indicator confirmed when price of the S&P 500 ETF failed to make a higher high.
The next divergence was a bullish divergence, where price made lower lows, yet the momentum indicator made higher lows. This signaled that the recent downtrend was losing steam and that a bottom could be forming.
The last divergence occured because the S&P 500 ETF was increasing, but at a decreasing rate. The momentum indicator shows this perfectly, by making lower highs over the course of about 15 stock trading days.
Just because a stock trader or futures trader sees a divergence doesn't mean that they should reverse their stock or futures trade. Divergences warn of potential reversals. A more concrete signal, like a trendline break would have been a great signal in the last example. Nevertheless, the Momentum indicator offered the stock trader plenty of time to reduce the size of their long stock position.
The Momentum indicator is a simple yet effective technical analysis tool, offering suggestions as to when to buy and sell and warning of potential price reversals. A similar, and arguably superior tool for measuring momentum is the Rate of Change indicator.

Technical Indicators - Momentum, Buy and Sell Signals

2010-07-31T10:45:00.000+07:00

An example of the Momentum indicator is shown below in the chart of the E-mini Nasdaq 100 Future:

Potential buy or shortsell entries are shown above in the chart.

Momentum Buy Signal

When the Momentum indicator crosses above the zero line. The crossing of the zero line implies that the price of the stock, future, or currency pair is reversing course, either by having bottomed out or by breaking out above recent highs, a bullish signal.

Momentum Sell Signal

Momentum indicator crosses below the zero line. A cross of the zero line can generally mean two things: the future, currency pair, or stock's price has topped out and is reversing or that the price has broken below recent lows, either way, a bearish signal.

Momentum Exit Signals

Generally speaking the buy and sell signals discussed above are poor exits, either selling out of a long position or buying to cover a short position. By the time the Momentum indicator returns back to the zero line, most or all of the profits have probably eroded, or even worse the trader has let a winning position turn into a losing position.
When the Momentum is reversing course and is heading back towards the zero line, that means profits have been eroded. How much of a retracement back towards the zero line before an exit is triggered is up to the trader. Another alternative is to draw a trendline; when the trendline is broken, that could be the exit signal. Like most technical analysis indicators, interpreting them is part science, part art form.

The 25 Point Discipline For Day Trader - #15 And #16

2010-07-30T12:22:00.000+07:00

I continue my post about The 25 Point Discipline For Day Trader. And below is the 15th and 16th point.

#15 LOVE TO LOSE MONEY.
This rule is the one that I get the most questions and feedback on by traders from all over the world. Traders ask, "What do you mean, love to lose money. Are you crazy?"
No, I'm not crazy. What I mean is to accept the fact that you are going to have losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly. It will save you a lot of trading capital and will make you a much better trader.

#16 IF YOUR TRADE IS NOT GOING ANYWHERE IN A GIVEN TIMEFRAME, IT’S TIME TO EXIT.
This rule relates to the theory of capital flow. It is trading capital that pushes a market one way or another. An oversupply or imbalance of buy orders will push the market up. An oversupply of sell orders will push the market lower.
When price stagnation is present (as typically happens many times throughout the trading session), the market and its participants are telling us that, at the present time, they are happy or satisfied with the prevailing bid and offer.
You don't want to be in the market at these times. The market is not going anywhere. It is a waste of time, capital and emotional energy. It's much better to wait for the market to heat up a little and then place your trade.

Today's Forex Prediction - July 30, 2010

2010-07-30T00:50:00.000+07:00

PAIR	TODAY'S PREDICTION
	TODAY'S PREDICTION
	MAX	MIN
EUR/USD	1.3120	1.2992

See : How To Applying My Prediction

Yesterday Prediction Rate : ACCURATE (Average Error < 50pips)

PAIR	YESTERDAY
	PREDICTION		ACTUAL		ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN	MAX	MIN	MAX	MIN
EUR/USD	1.3090	1.2946	1.3106	1.2979	-16	-33	0.12	0.25

PAIR	AVERAGE ERROR (UNTIL JULY 29, 2010)
	ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN
EUR/USD	-15	-16	0.37	0.33

Use with your own risk!!!
Predicted for July 30, 2010 at 00:01- 23.59 GMT

Technical Indicators - Relative Strength Index (RSI)

2010-07-29T22:58:00.000+07:00

One of the most popular technical analysis indicators, the Relative Strength Index (RSI) is an oscillator that measures current price strength in relation to previous prices. The RSI is a versatile tool, it can be used to:

Generate buy and sell signals
Show overbought and oversold conditions
Confirm price movement
Warn of potential price reversals through divergences

Technical Indicators - RSI Alternative Buy and Sell Signals and Divergences

2010-07-29T22:57:00.000+07:00

An alternative way that the Relative Strength Index (RSI) gives buy and sell signals is given below:

Buy when price and the Relative Strength Index are both rising and the RSI crosses above the 50 Line.
Sell when the price and the RSI are both falling and the RSI crosses below the 50 Line.

An example of this methodology for buying and selling based on 50 Line crosses is given below in the chart of Wal-Mart (WMT):

Relative Strength Index Confirmations & Divergences

A powerful method for using the Relative Strength Index is to confirm price moves and forewarn of potential price reversals through RSI Divergences.
The chart below of the E-mini Nasdaq 100 Futures contract shows the RSI confirming price action and warning of future price reversals:

Low #1 to Low #2

The E-mini Nasdaq 100 Futures contract's price made a substantial move from Low #1 to Low #2. The RSI confirmed this move, helping a trader have confidence jumping on board the price move higher.
The break of trendline of the e-mini future was also confirmed by the trendline break of the Relative Strength Index, confirming that the price move was likely over.

Low #3 to Low #4

A bullish divergence was registered between Low #3 and Low #4. The e-mini Nasdaq 100 future made lower lows, but the RSI failed to confirm this price move, only making equal lows. An astute trader would see this RSI divergence and begin taking profits from their shortsells.

High #1 to High #2

A bearish divergence occured when the e-mini futures contract made a higher high and the RSI made a lower high. This bearish divergence warned that prices could be reversing trend shortly. A trader should consider reducing their long position, or even completely selling out of their long position.
The Relative Strength Index is a popular tool for generating buy and sell signals, confirming trends, and warning of impending price reversals.

Technical Indicators - RSI Buy and Sell Signals

2010-07-29T22:55:00.000+07:00

The chart below of eBay (EBAY) shows how the RSI can generate easy to follow buy and sell signals:

RSI Buy Signal

Buy when the RSI crosses above the oversold line (30).

RSI Sell Signal

Sell when the RSI crosses below the overbought line (70).
Varying the time period of the Relative Strength Index can increase or decrease the number of buy and sell signals. In the chart below of Gold, two RSI time periods are shown, 14-day (default) and 5-day. Notice how decreasing the time period made the RSI more volatile, increasing the number of buy and sell signals substantially.

There is another way the Relative Strength Index gives buy and sell signals. This, and how to interpret RSI divergences

Today's Forex Prediction - July 29, 2010

2010-07-29T00:31:00.000+07:00

PAIR	TODAY'S PREDICTION
	TODAY'S PREDICTION
	MAX	MIN
EUR/USD	1.3090	1.2946

See : How To Applying My Prediction

Yesterday Prediction Rate : ACCURATE (Average Error < 50pips)

PAIR	YESTERDAY
	PREDICTION		ACTUAL		ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN	MAX	MIN	MAX	MIN
EUR/USD	1.3096	1.2949	1.3042	1.2967	+54	-18	0.41	0.14

PAIR	AVERAGE ERROR (UNTIL JULY 28, 2010)
	ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN
EUR/USD	-15	-13	0.40	0.34

Use with your own risk!!!
Predicted for July 29, 2010 at 00:01- 23.59 GMT

The 25 Point Discipline For Day Trader - #12, #13 And #14

2010-07-28T18:17:00.000+07:00

I continue my post about The 25 Point Discipline For Day Trader. And below is the 12nd, 13th and 14th point

#12 DON’T HOPE AND PRAY. IF YOU DO, YOU WILL LOSE.
When I was a new and undisciplined trader, I can't tell you how many times that I prayed to the "Bond god". My prayers were a plea to help me out of a less-than-pleasant trade position. I would pray for some sort of divine intervention that, by the way, never materialized. I soon realized that praying to the "Bond god" or any other "futures god" was a wasted exercise. Just get out!

#13 DON’T WORRY ABOUT NEWS. IT’S HISTORY.
I have never understood why so many electronic traders listen to or watch CNBC, MSNBC, Bloomberg News or FNN all day long. The "talking heads" on these programs know very little about market dynamics and market price action. Very few, if any, have ever even traded a one lot in any pit on any exchange. Yet they claim to be experts on everything.
Before becoming a "trading and markets expert", the guy on CNBC reporting hourly from the Bond Pit, was a phone clerk on the trading floor. Obviously this qualifies him to be an expert! He, and others, can provide no utility to you. Treat it for what it really is.....entertainment.
The fact is: The reporting that you hear on the business programs is "old news". The story has already been dissected and consumed by the professional market participants long before the ìnewsî has been disseminated. Do not trade off of the reporting. It's too late.

#14 DON’T SPECULATE. IF YOU DO, YOU WILL LOSE.
In all of the years that I have been a trader and associated with traders, I have never met a successful speculator. It is impossible to speculate and consistently print large winners. Don't be a speculator. Be a trader.
Short-term scalping of the markets is the answer. The probability of a winning day or week is greatly increased if you trade short term: small winners and even smaller losses.

Technical Indicators - Pivot Points

2010-07-28T18:03:00.000+07:00

Pivot Points are used to project potential support and resistance levels. The main time periods used are daily, weekly, and monthly pivots. The formula for the daily pivot point, support, and resistance is shown below:

Pivot Point = [Yesterday's High + Yesterday's Low + Yesterday's Close] / 3

A 15-minute chart of the mini-Dow futures contract and the corresponding floor trader pivots are shown below:

Technical Indicators - Pivot Point Trade Examples

2010-07-28T18:02:00.001+07:00

In addition to giving buy and sell signals, pivot points give traders a good time to get out of their trade. To illustrate, during a rally some traders will set their sell orders right below the next resistance line. Thus, pivot point resistance and support lines can generate ready made profit targets.
A 5-minute chart of the Nasdaq 100 ETF (QQQQ) is shown next:

In the 5-minute chart of the Nasdaq 100 ETF above, the QQQQ's opened the day downward, but held steady at Support 2 (S2).
From there, the Nasdaq 100 ETF rallied past S1 and the Pivot Point. Eventually, the QQQQ's found resistance at Resistance 1 (R1).
Next, the Pivot Point offered support initially, but then the QQQQ's meandered slightly above and below the pivot point, until finally, the QQQQ's accelerated past R1 and then past R2.
The rally continued until one candlestick reached R3, where the bulls were promptly rejected.

Technical Indicators - Pivot Points, Support, and Resistance

2010-07-28T18:02:00.000+07:00

Pivot Point = [Yesterday's High + Yesterday's Low + Yesterday's Close] / 3 A 15-minute chart of the mini-Dow futures contract and the corresponding floor trader pivots are shown below:

Support Levels

S1 = [Pivot Point * 2] - Yesterday's High
S2 = Pivot Point - Yesterday's High + Yesterday's Low
S3 = S2 - Yesterday's High + Yesterday's Low

Resistance Levels

R1 = [Pivot Point * 2] - Yesterday's Low
R2 = Pivot Point + Yesterday's High - Yesterday's Low
R3 = R2 + Yesterday's High - Yesterday's Low

To calculate weekly or monthly numbers, simply replace "yesterday's" with "last week's" or "last month's" high or low.

Pivot Point Example

In the chart above, and going from left to right, Resistance Level 1 (R1) held and the Dow Jones Industrial Average mini-Dow futures contract reversed course and headed downward.
After that, the next potential support was at the Pivot Point. However, the mini-Dow broke through the Pivot Point. Notice that when the mini-Dow attempted to reverse course, it was rejected by the Pivot Point now acting as resistance. An important technical analysis concept is that when resistance is penetrated the prior resistance then becomes support. Similarly, when support is penetrated the prior support then becomes resistance.
From there, the next support was Support Level 1 (S1). S1 held strong and the mini-Dow reversed direction yet again.
The next resistance line was at the Pivot Point, which failed.
The trading day ended by the mini-Dow testing the Pivot Point, now acting as support, which subsequently held. From there, the index rallied on into the close.

Today's Forex Prediction - July 28, 2010

2010-07-28T00:39:00.000+07:00

PAIR	TODAY'S PREDICTION
	TODAY'S PREDICTION
	MAX	MIN
EUR/USD	1.3096	1.2949

See : How To Applying My Prediction

Yesterday Prediction Rate : ACCURATE (Average Error < 50pips)

PAIR	YESTERDAY
	PREDICTION		ACTUAL		ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN	MAX	MIN	MAX	MIN
EUR/USD	1.3069	1.2897	1.3046	1.2951	+23	-54	0.18	0.42

PAIR	AVERAGE ERROR (UNTIL JULY 27, 2010)
	ERROR PIPS		ERROR %
	MAX	MIN	MAX	MIN
EUR/USD	-26	-13	0.40	0.37

Use with your own risk!!!
Predicted for July 28, 2010 at 00:01- 23.59 GMT

Technical Indicators - Bollinger Bands

2010-07-27T22:11:00.000+07:00

Bollinger Bands is a versatile tool combining moving averages and standard deviations and is one of the most popular technical analysis tools available for traders. There are three components to the Bollinger Band indicator:

Moving Average: By default, a 20-period simple moving average is used.
Upper Band: The upper band is usually 2 standard deviations (calculated from 20-periods of closing data) above the moving average.
Lower Band: The lower band is usually 2 standard deviations below the moving average.

Bollinger Bands (in blue) are shown below in the chart of the E-mini S&P 500 Futures contract:

There are three main methodologies for using Bollinger Bands, discussed in the following sections:

Technical Indicators - Option Volatility Strategies

2010-07-27T22:10:00.001+07:00

There are two basic ways to trade volatility:

Buy options with low volatility in hopes that volatility will increase and then sell back those options at a higher price.
Sell options with high volatility in hopes that volatility will decrease and then buy back those same options at a cheaper price.

Since Bollinger Bands adapt to volatility, Bollinger Bands give options traders a good idea of when options are relatively expensive (high volatility) or when options are relatively cheap (low volatility). The chart below of Wal-Mart stock illustrates how Bollinger Bands can be used to trade volatility:

Buy Options when Volatility is Low

When options are relatively cheap, such as in the center of the chart above of Wal-Mart when the Bollinger Bands significantly contracted, buying options, such as a straddle or strangle, might be a good options strategy.
The reasoning is that after sharp moves, prices tend to stay in a trading range to rest. After prices have rested, such as periods when the Bollinger Bands are extremely close together, then prices usually will begin to move once again. Therefore, buying options when Bollinger Bands are tight together, might be a smart options strategy.

Sell Options when Volatility is High

At times when options are relatively expensive, such as in the far right and far left of the chart above of Wal-Mart when the Bollinger Bands were significantly expanded, selling options in the form of a straddle, strangle, or iron condor, might be a good options strategy to use.
The logic is that after prices have risen or fallen significantly, such as periods when the Bollinger Bands are extremely far apart, then prices usually will begin to consolidate and become less volatile. Hence, selling options when Bollinger Bands are far apart, potentially could be a smart options volatility strategy.

Technical Indicators - Bollinger Band Breakouts

2010-07-27T22:10:00.000+07:00

Basically the opposite of "Playing the Bands" and betting on reversion to the mean is playing Bollinger Band breakouts. Breakouts occur after a period of consolidation, when price closes outside of the Bollinger Bands. Other indicators such as support and resistance lines can prove beneficial when deciding whether or not to buy or sell in the direction of the breakout.
The chart of Wal-Mart (WMT) below shows two such Bollinger Band breakouts:

Bollinger Band Breakout through Resistance Buy Signal

Price breaks above the upper Bollinger Band after a period of price consolidation. Other confirming indicators are suggested, such as resistance being broken in the chart above of Wal-Mart stock.

Bollinger Band Breakout through Support Sell Signal

Price breaks below the lower Bollinger Band. It is suggested that other confirming indicators be used, such as a support line being broken, such as in the example above of Wal-Mart stock breaking below support.
This strategy is discussed by the man who created Bollinger Bands, John Bollinger.
Bollinger Bands can also be used to determine the direction and the strength of the trend. The chart below of the E-mini S&P 500 Futures contract shows a strong upward trend:

Bollinger Band Showing a Strong Trend

The chart above of the E-mini S&P 500 shows that during a strong uptrend, prices tend to stay in the upper half of the Bollinger Band, where the 20-period moving average (Bollinger Band centerline) acts as support for the price trend.
The reverse would be true during a downtrend, where prices would be in the lower half of the Bollinger Band and the 20-period moving average would act as downward resistance.

Technical Indicators - Playing the Bands

2010-07-27T22:09:00.000+07:00

Playing the bands is based on the premise that the vast majority of all closing prices should be between the Bollinger Bands. That stated, then a stock's price going outside the Bollinger Bands, which occurs very rarely, should not last and should "revert back to the mean", which generally means the 20-period simple moving average. A version of this strategy is discussed in the book Trade Like a Hedge Fund by James Altucher.

Buy Signal

In the example shown in the chart below of the E-mini S&P 500 Future, a trader buys or buys to cover when the price has fallen below the lower Bollinger Band.

Sell Signal

The sell or buy to cover exit is initiated when the stock, future, or currency price pierces outside the upper Bollinger Band.
These buy and sell signals are graphically represented in the chart of the E-mini S&P 500 Futures contract shown below:

More Conservative Playing the Bands

Rather than buying or selling exactly when the price hits the Bollinger Band, the more aggressive approach, a trader could wait and see if the price moves above or below the Bollinger Band and when the price closes back inside the Bollinger Band, then the trigger to buy or sell short occurs. This helps to reduce losses when prices breakout of the Bollinger Bands for a while. However, many profitable opportunities would be lost. To illustrate, the chart of the E-mini S&P 500 Future above shows many missed opportunities. However, in the chart on the next page, the more conservative approach would have prevented many painful losses.
Also, some traders exit their long or short entries when price touches the 20-day moving average.

Technical Indicators - Elliott Wave

2010-07-27T19:08:00.000+07:00

Elliott Wave theory states that prices move in waves. These waves occur in a repeating pattern of a (1) move up, (2) then a partial retracement down, (3) another move up, (4) a retracement, (5) then finally a last move up. Then, there is a (A) full retracement, followed by a (B) partial retracement upward, then (C) a full move downward. This repeats on a macro and micro time frame. A visual illustration of the basic pattern of the Elliott Wave is given below. A real life example of Elliott Wave in action is given further down:

Elliott Wave is based on crowd psychology of booms and busts, rallies and retracements. Traders often use fibonacci numbers (see: Fibonacci) to anticipate where a retracement is likely to end and thus the place where they should place their trade. The chart below illustrates the Elliott Wave pattern applied to crowd psychology (i.e. S&P 500) and Fibonacci Retracements:

Trading the Elliott Wave

In the example above of the S&P 500 ETF, if the Elliott Wave theorist recognizes that he/she just completed a the leg from (2) to (3) and the market is beginning to retrace, the trader might put a buy order at the 38% Fibonacci retracement. In the example above, that trade would have failed and the trader would have been stopped out of their long position. The trader then might consider putting an order in at the 50% retracement. In the example above, that would have been an extremely profitable trade, making up for the previous loss and more.
Next, realizing that the latest trend was the (4) to (5) upmove, the Elliot Wave theorist would next expect a downward move to (A). This retracement is larger than the previous (1) to (2) retracement and (3) to (4) retracement. A reasonable guess as to where the retracement (5) to (A) will end is the 0.618, the golden fibonacci ratio.
Selecting the 61% retracement would have proved profitable for a little while, assuming the trader didn't have extremely tight stop losses in place, but the retracement turned out to be a head fake. Subsequently, the next often used Fibonacci retracement is 100%. This trade would have been very profitable, given the S&P 500 retraced almost perfectly at 100% of the move from (4) to (5).
A likely profit target to exit at least part of the trade initiated at point (A) is the 38% Fibonacci level. This also happened to be the turning point for the next leg down from (B) to (C).
Suggested further reading is Fibonacci tools (see: Fibonacci).