Free Trading Books

I was reading about a little known trendline trick at swing-trade-stocks.com which states, "in an uptrend, if a higher high is made but fails to carry through,
and then prices drop below the previous high, then the trend is apt to
reverse."  Though this information may seem obvious, I still find it valuable.  I looked back at the 240 minute EUR/USD chart and noticed that more often than not, this is the case.  Why? 

"…the locals as well as the brokers who trade on their own account
have a vested interest in driving prices slightly above or below these
"resistance" or "support" points to force execution of the stop loss
orders. This is called "taking out the stops." After the stops are
executed, the market will readjust."

This information was provided by a trader (Trader Vic) who was featured in the popular "Market Wizards" books.  This leads me to how you can get free trading book content.  The above "trendline trick" is just one of three of Trader Vic's criteria for a trend change.  I wanted to find out the other two criteria.  I easily found it by searching for the book "Trader Vic" at Google's Book Search.  The entire book isn't provided but a lot of content from the book is.  This is the case for many more trading books.  I've said it before but sometimes a tidbit of information can go a long way and there is a lot more than a tidbit of information at http://books.google.com.   Search for Forex and you'll find a lot of books on the subject, just be sure to skip over the "Forex Made Easy" book by James Dicks.

What are the 3 criteria for trend change? (Provided by the book, "Trader Vic–Methods of a Wall Street Master")

1. break in the trend line
2. test of preceding high or low
3. breaking of a preceding minor rally high or minor sell-off low

Rule 2b is actually the trendline trick mentioned above.

Here is a graphic corresponding to the 3 criteria for trend change:

 

 

 

 

 

 

Popularity: 6%

Yen Swing Trade Analysis

TRADE

Date: Friday, February 24th

Entry: Short USD/JPY at 117.05

Reason for trade/setup: With a downward trend in motion, I was looking for a swing trade to short the USD/JPY.  I was waiting for price to retrace back up where a minor Asian session breakdown occurred several hours prior at 117.10.  The DMI indicator was used as confirmation that the existing trend was still in place.

Initial Stop:  117.19; the high of previous bar

Initial Target:  116.40

RESULT 

Exit: 116.76

Reason for Exit:  End of day

Profit/loss:  +29 pips/ +$745.10 (3 lots)

Trade executed according to plan? yes

Outcome: This trade entry went exactly according to plan so much so that it surprised me.  The price didn’t reach my limit and that didn’t surprise me. 

Thoughts:  The market doesn’t generate trades like this everyday and this setup would only apply to trending markets.

 

 

 

 

 

Popularity: 5%

Trading Environments for Beginners

As an absolute beginner, I’ve always found it difficult to understand what everyone meant by trending markets, ranging markets, swing markets, etc.  Now that I’ve had about 6 months to digest some of this information, sometimes I forget to really identify the market environment a currency pair is trading in. 

Here are 4 types of markets that you will encounter as a forex or any other securities trader:

1.  Trending Market

Defined:  Overall Direction of pair is moving up or down. 

Goal: Join the move early and hold the position until the trend reverses!

2.  Ranging Markets

Defined: Currency pairs that are trading in sideways ranges or channels

Goal: Sell at top of channel or buy at the bottom of the channel

3.  Swing Markets

Defined: Catching major trends but getting in later than most regular trend followers

Goal: Wait for pull back and then buy or sell in direction of trend

4.  Volatile Markets

Defined:  Market that has no particular direction and has very large swings and reversals

Goal: Look to take advantage of break-outs and large spikes

Popularity: 1%