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%

Asian Session May 8th

Journal Entry

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I decided to trade the Asian session and shorted the USD/JPY.  I was just stopped out at 0 profit/loss. 

I shorted the pair on a break of the support trendline and a break of RSI trendline.  It was good entry execution.  I waited for the price to break the trendline and then waited for the 15 minute candle to close.  After I was up 20 pips, I moved my stop to break even at 111.52.  My limit was still 111.05, right above a lower support line.  The trade was up as much as 28 pips where I typically would have closed the position.  Tonight, I wanted to show a little restraint and patience so I waited.  The pair never made it back down before stopping me out for a scratch.  

Should I have taken the 28 pip profit? Would you have?  

Popularity: 3%

A Rob Booker Exclusive Treat

EUR/USD     March 10, 2006

Here is a great Head and Shoulders pattern.  They are super reliable, and fairly easy to trade.  Here is the chart.  We want to sell below the neckline, and go long above the trendline connecting the head to the right shoulder.

 

 

 

Popularity: 2%

Consolidation Flags and Broadening Formations

There is a new article on Investopedia with instructions on trading 2 consolidation patterns for profit.

The first is the flag formation which is a common formation in the currency market and indicative of a continuation trend.

1.    Apply trendline to identify the flag formation
2.    Place stop 5 pips above the high or 5 pips below the low of the recently closed candle ONCE a close above or below the trendline has occurred.
3.    Place a corresponding stop two-thirds below previous session’s high or low.
4.    Use your specific rules regarding corresponding limits 

The second is the broadening formation which is commonly a consolidation before the reverse but could also be a continuation indicator

 
1.    Identify the broadening formation through diverging trendlines
2.    Apply entry 5 pips below the low or high of the session once a break has occurred
3.    Use appropriate money management
4.    Use your specific rules regarding corresponding limits

 

 

This article is elementary yet a good refresher.  http://www.investopedia.com/articles/forex/06/ConsolidationPatterns.asp

Popularity: 3%