USEFUL TIPS

There is a series of free trading lessons, which consists of 10 topics that traders, both beginners and experienced traders, should find them very useful.

The 10 Free Trading Lessons will cover the following topics:

(1) The importance of psychology in price movement.
(2) How to spot mega trends.
(3) Understanding of technical price objectives.
(4) How to picture price objectives.
(5) How to trade with moving averages.
(6) How to use point and figure trading techniques.
(7) How to use the RSI indicator.
(8) How to correctly use stochastics in your trading.
(9) How to use the ADX indicator to capture trends.
(10) How to capitalize on natural market cycles.

On top of the above, you will learn all about Fibonacci retracements, MACD, Bollinger Bands, and much more.

These 10 free trading lessons will be sent via email.

In order to get this, just fill out the form here. Then you should be able to get it started right away. Hope this info can be useful to you.

Saturday, May 30, 2009

Market Analysis Video: S&P 17 Week Cycle

Found an interesting video on S&P 500 analysis.
You can watch and see whether you agree with the analysis.
Personally, I just feel that in June and July we might need to be extra cautious in trading, as the market is already extended and it’s possible that correction may happen in the near future.
Certainly, no one knows whether it’s going to happen. Only time will tell.

Take care... and meanwhile, have a good weekend! :)

Analysis Tool:
Get Free Trend Analysis for your favorite symbols

Related Topics:
* FREE Trading Educational Videos You Should Not Miss
* Trading Tips Video: Fibonacci Retracement, Support/Resistance, Stop Loss, Price Target
* Learning Candlestick Charts
* Learning Charts Patterns

Wednesday, May 27, 2009

How much are you paying per course?

Even in these tough economic times companies are still trying to exploit people’s desire to expand their trading minds!

Companies are charging hundreds and even thousands for access to 2-3 hours’ worth of mediocre education from their own experts. If anyone has actually paid for the education, they quickly realize that in order to continue and get the “expanded education” they need to continue to spend! It’s all a vicious cycle to separate you from your hard earned pay checks without actually providing you with worthwhile material.

There is only one place where you have access to over 150 experts and 500 hours of seminars, for one price and that’s INO TV.

INO TV gives its 30,000 members access to massive amounts of educational material that has been handpicked to provide you with the most for the least. If you’ve been duped in the past, here is your way to get back at those companies… learn something and stretch your pay check!

Visit the education page of INO TV to learn more.

Full access to INO TV will not cost you thousands, and won’t cost you hundreds. A full year subscription is only 99.95. Yes, access to the world’s top experts, streaming on demand, and new authors being added monthly, will not cost you a month’s salary.

It’s important that you continue to design your trading methods that fit your lifestyle, and with INO TV you can do that with access to hundreds of experts who have done it before and want to show you their strategies.

Learn more about INO TV and see if you’re ready to refresh your knowledge base.

Saturday, May 23, 2009

DOUBLE TOP PATTERN – Part 2: Important Characteristics

Go back to Part 1: Double Top Formation

Important Characteristics of Double Top Pattern

Existing Trend:
There should be an established existing UPWARD trend. The uptrend should be fairly long and healthy (at least about 3 to 6 months). “Healthy” uptrend means the price trend has generally moving upwards with some moderate retracements in between (forming a “stair-step” shape) and should never undergo a retracement in an extended decline.
The longer the price has been in a healthy upward trend, the more likely the pattern to develop into a reversal pattern. If the uptrend is short, the pattern has lower probability to work out, and the upward trend is more likely to continue.

Shape of Double Top Pattern:
1) The Two Peaks:
* The peaks / tops can be either sharp & narrow (like inverted V) or a bit rounded looking & wider. Ideally, the price peaks should be the same. However, some difference in the price peaks is still acceptable.
Although the price peaks do not necessarily need to be exactly the same, but it should appear near the same price level. The price difference between the two peaks should be less than 3%.
* If the high of the 2nd peak does not hit the high of the 1st peak, it is less worrying.
However, if high of the 2nd peak is even higher than the high of the 1st peak, we should be more cautious, as the probability that the uptrend would resume is still higher.

2) The Trough:
The depth of the trough between the two peaks should be around 10% - 20% from the peak (It could be even more than 20%, but it should not be less than 10%).
In general, the deeper the trough between the two peaks, the better the performance of the pattern.
If the two peaks are not exactly the same, the lower peak should be used as the benchmark for the depth measurement.

Duration:
The duration of time period between the two peaks may vary from a few weeks to many months (generally about 1 to 3 months).
Basically, the longer the time duration between the two peaks, the more likely the pattern could work out as a reversal pattern.
However, we should be extra cautious if a pattern only has a few days apart between the two peaks.

Breakout:
Even when the price has declined from the 2nd peak, the pattern is not completed yet. The chances that the existing uptrend will continue are still higher that the chances of reversal to take place, as it is normal during an uptrend for the price to peak at a resistance level a few times, then retreat, and then resume the uptrend again.

Double Top pattern is only completed and confirmed when the price declines and closes below the lowest point of the trough in between the 2 peaks, which serves as the key support level in this pattern. This lowest point is called the “Confirmation Point”.

Remember that we should always assume the existing trend (i.e. in this case is uptrend) is in force unless proven otherwise.
Therefore, it is important to wait for the price to make a decisive breakout by breaking through and closing below the Confirmation Point (preferably with an increase in volume), in order to avoid jumping the gun and/or prevent deceptive Double Tops pattern.

Nevertheless, sometimes the price may also make a deceptive/invalid breakout whereby it touches below the Confirmation Point, but then it moves back up again & resumes uptrend.
One possible way to prevent this is by having certain criteria to confirm if the breakout is a valid one.
A minimum penetration criteria for a breakout should be the price closes below the Confirmation Point, not just an intraday penetration.
Some traders may apply certain price criteria (e.g. 3% - 5% break from the Confirmation Point depending on the stock’s volatility) or time criteria (e.g. the breakout is sustained for 3 days) to confirm the validity of the breakout.

Volume:
Usually, volume is lower during the formation of the right peak than the left peak, showing an indication that the demand is drying up.
In general, volume tends to be diminishing as the pattern is forming. The volume may pick up when the price hits the 2nd peak, but it is often only a slightly higher than the average volume during the trough.
During the breakout of the Confirmation Point, the volume should preferably increase again, although not always necessary to be so.
However, when the breakout occurs with high volume, the price decline tends to drop further and it may provide higher chances that the pattern is a reversal pattern.
(It is even better if during the decline from the 2nd peak, the price experiences an accelerated drop, perhaps with a gap down or two).

Potential Price Target:
1) Compute the depth of the trough: The distance between the peak (resistance) and the Confirmation Point (support).
If the two peaks are not the same, the lower peak should be used for this calculation.
2) To compute the potential price target: Subtract the result from the Confirmation Point.

Hence, the above formula implies that the deeper the trough between the two peaks, the larger the potential of the decline.

In general, any price target should only be used as a rough guide. To determine the price target, other factors, such as previous support / resistance levels, Fibonacci retracements, or long-term moving averages, should be considered as well.

Return to Breakout Level:
After the breakout occurs, it is common that prices may return to the breakout level for an immediate test of this new resistance level before continuing their moves in the direction of the breakout. (Remember that the support now has become a new resistance level).
This could actually offer an opportunity to participate in the breakout with a better reward to risk ratio.

To find out more about other Chart Patterns, please refer to:
Learning Charts Patterns

Analysis Tool:
Get Free Trend Analysis for your favorite symbols

Related Topics:
* Learning Candlestick Charts
* Options Trading Basic – Part 1
* Options Trading Basic – Part 2

Saturday, May 16, 2009

Trading Tips Video: Using TREND LINES in Analyzing the Market

Trend Line Analysis is one important tool in technical analysis. It is normally used for trend identification as well as confirmation.

What is Trendline?
Trend line is a straight line which connects two or more price points. The line is then extended to the future to act as a Support or Resistance line.
In technical analysis, the general rule to establish a trend line is that it takes two price points to draw a trend line. The third point is typically used to confirm the validity.

There are 2 types of Trend Line:

1) UPTREND LINE
An uptrend line is a trend line that has a positive slope (trending upwards).
It is formed by connecting two or more low points. The second low must be higher than the first low.
An Uptrend line will act as a Support line. As long as prices stay above the uptrend line, the uptrend is considered solid and intact. A break below the uptrend line indicates that buying forces are weakening, and a change in trend could be imminent.

2) DOWNTREND LINE
A downtrend line is a trend line that has a negative slope (trending downwards).
It is formed by connecting two or more high points. The second high must be lower than the first high.
A Downtrend lines will act as Resistance line. As long as prices stay below the downtrend line, the downtrend is considered solid and intact. A break above the downtrend line indicates that selling forces are weakening, and a change in trend could be imminent.

How To Use Trend Line Analysis For Trading
Trend line analysis is used in several ways by traders.
One way is when the price returns to an existing trend line, it provides an opportunity to open / add new positions in the direction of the trend.
In Uptrend Line, buy when the price make a pullback to the support trend line.
In Downtrend Line, short when the price make a retracement to the resistance trend line.
This is because in technical analysis, it is believed that the trend line will hold and the trend will continue further. Basically, “Trend is your friend”.

A second way is that when prices break through the existing trend line, it may indicate that the trend might be going to fail. In this case, traders may consider exiting positions in the direction of the trend, or start to find opportunity to trade in the opposite direction of the existing trend.

Markets are made up of several different kinds of trends. There are short, intermediate and long-term trends.
However, basically the longer the trend line, the greater the importance.
It is the recognition of these trends that will largely determine the success or failure of your long-term or short-term investing / trading.

There is a video that show a good example about Trend Line Analysis.
Some more, it’s relevant to the current market situation. Therefore it may provide a trading opportunity for you as well.
Check it out HERE.

Related Topics:
* FREE Trading Educational Videos You Should Not Miss
* Trading Tips Video: Fibonacci Retracement, Support/Resistance, Stop Loss, Price Target
* Trading Tips Videos: How To Determine MARKET TREND & How To Use FIBONACCI To Measure Market Retracement
* Learning Candlestick Charts
* Learning Charts Patterns

Analysis Tool:
Get Free Trend Analysis for your favorite symbols

Saturday, May 9, 2009

DOUBLE TOP PATTERN – Part 1: Formation

Double Tops Pattern is a bearish reversal pattern that normally forms after an extended uptrend, which marks a shift in trend from bullish to bearish.
Sometimes, this pattern is called “M pattern” because it looks like one.

The Formation of Double Top Pattern



Double Top Pattern contains two consecutive, distinct peaks / tops at about the same price level, with a moderate trough between the peaks.
This pattern forms when the price is in an existing uptrend. It occurs when the price increases to a resistance level (forming the 1st peak), then decline (forming the trough), and then return to the resistance level again (forming the 2nd peak) before subsequently decline further.

The peaks / tops can be either sharp & narrow or a bit rounded looking & wider.
Although the price peaks do not necessarily need to be exactly the same, but it should appear near the same price level.

The pattern is completed and confirmed when the price declines and closes below the lowest point of the trough in between the 2 peaks, which serves as the key support level in this pattern. This lowest point is called the “Confirmation Point”.

This pattern occurs because the buyers are trying to push the price higher, but are not able to do so as they are facing resistance, which prevents the continuation of the uptrend. Then they try to make a second attempt to drive the price higher again, but still fail. In the end, the buyers in the market have dried up & exhausted, and the sellers begin to be more aggressive to take control of the market and drive the price lower, sending it down into a new downtrend.

Double Top Deception
Although Double Top is viewed as a common pattern and quite easy to identify, it’s actually not the case. Many people have actually incorrectly identified patterns that look like “M” shape as Double Top, but in fact it is not a Double Top formation.
Actually, this pattern can be quite difficult to identify correctly. Even when a pattern follows the characteristics of a Double Top, the failure rate is still high particularly when one never waits for the breakout. However, one waits for the breakout through the Confirmation Point, the failure rate would be considerably lower.

Therefore, one should pay close attention & take proper steps to analyze the characteristics of Double Top in order to minimize / avoid deceptive Double Top.
Some important characteristics of a Double Top that need to be paid more attention are the duration / time taken to develop the formation, the depth of the trough, the volume during the formation of the pattern, and the breakout from the Confirmation Point

All these characteristics will be discussed in more detail in the next post.

Continue to Part 2: Important Characteristics of Double Top pattern.

To find out more about other Chart Patterns, please refer to:
Learning Charts Patterns

Analysis Tool:
Get Free Trend Analysis for your favorite symbols

Related Topics:
* Learning Candlestick Charts
* Options Trading Basic – Part 1
* Options Trading Basic – Part 2

Useful Learning Resource:
FREE Trading Educational Videos: APPLYING TECHNICAL ANALYSIS ON TODAY’S TRADING by John Murphy
Note:
This video has been available for free for quite some time already, and hence, like what has happened previously, it may not be offered for free anymore anytime soon. So, if you’re interested to learn from it, don’t delay anymore to watch it.

Update as at 22 May 09:
Effective from 18 May 09, the above video is no longer available for free.
Sorry if you've missed this opportunity. However, I'll update you again when there are new free trading educational videos. Hope you won't miss the chance to learn from trading experts for free anymore next time.

Friday, May 1, 2009

Difference between STOP Order and Market-If-Touched (MIT) Order

Stop Order is actually quite similar to Market-If-Touched (MIT) order.
The difference between Stop Order and MIT order is basically on the placement of predetermined price that triggers its execution (i.e. “Stop Price” for Stop Order and “Trigger Price” for MIT Order) relative to the current market price of the security.

* For Sell order, the Stop Price for a Sell Stop Order is placed below the current market price of the security, whereas the Trigger Price for a Sell MIT Order is placed above the current market price of the security.
Note:
Sell Stop Order is a normally used for "Sell To Close” order, which is a order to sell to close the long position you previously entered.
Sell MIT Order is a normally used for “Sell To Open” order, which is a order to sell in order to open/enter a short position.

* For Buy order, the Stop Price for a Buy Stop Order is placed above the current market price of the security, whereas the Trigger Price for a Buy MIT Order is placed below the current market price of the security.
Note:
Buy Stop Order is a normally used for “Buy To Close” order, which is a order to buy to close the short position you previously entered.
Buy MIT Order is a normally used for “Buy To Open” order, which is a order to buy in order to open/enter a long position.


















For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* A Chance to Learn from World Class Trading Experts For FREE You Should Not Miss
* Options Trading Basic – Part 1
* Options Trading Basic – Part 2
* Learning Candlestick Charts
* Learning Charts Patterns