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%

The MACD Is Overrated

I read a pretty enlightening article on the MACD today and how this indicator has been elevated to mystical status.  Is this deserving?  According to the author, no.  The MACD is an indicator based on moving averages; that's it.  "In the end, the performance of moving averages and indicators based on moving averages will always be, well, average." I personally use the MACD and I'll admit that I've been guilty of elevating this indicator to mystical status as well.  I predominantly use it to identify divergence between price, but I also use it to identify momentum.  

I've talked in the past about my avoidance of lagging indicators and the author of this article says that if this is the route that you want to go (I do), then here is what your toolbox should and should not be.

Your toolbox if you want to perform technical analysis in a lagging manner:

1. Moving averages
2. MACD
3. Stochastics
4. Parabolic SARs
5. Bollinger Bands 

Your toolbox if you want to know where price "is likely to go next… as often as 80% of the time."

1. Trendlines
2. Pivot Points
3. Candlestick

This article presents far from revolutionary information but it goes against from the norm and states why you would be best served by using something other than the MACD.   That is why I like this article.  There are just so many articles on how to use the MACD to your advantage.  

The author also mentions some candlestick patterns (hammer, star) that when identifying them when price is near pivot points or trend lines, can be more powerful.

Article: http://www.investopedia.com/articles/trading/06/AgainstMACD.asp

Popularity: 8%

The Only Seven Indicators You Will Ever Need

I was reading an article today that talks about the top 7 indicators that can be incorporated into your trading style.  I tend to agree with most of them.  I have gone through that stage of jumping from indicator to indicator with the illusion that the previous indicator I was using was broke.  There is no perfect indicator but I feel that if you stick to those that lag least, you will be getting out of positions when lagging indicator followers are just getting in.  And now for the list….

The Top 7 Indicators

1. Candlesticks - I use these the least, probably because the can vary so much depending on your broker or charting provider.  As you increase your time frame though, the variations are less of a factor and I believe the candlesticks can be more valuable. (Daily charts)
2. Trendlines - I use these often as do a lot of you, I'm sure.  Need I say more.
3. MACD - This is on every one of my charts.  I use it to spot divergences in price.  I'm constantly referencing http://www.forexproject.com/technical_analysis/divergence.html to do so.
4. 200 EMA - I have been through so many moving averages.  I always seem to have at least 3 on my chart though.  If anything, I glance at them to spot the trend.  The article states that this is an all time favorite for traders across the board.  Take note whether price is above or below to give you a sense of price direction.
5. Pivot Points - I use these often but mainly for exiting positions.  I'm still doing a lot of experimentation with data to understand them better.  All of this experimentation will be posted on the http://www.allpivotpoints.com site.
6. Fibonacci - I've used these many times in the past but currently I don't use them at all.  They are very subjective but can be quite powerful especially at the 62% retracement level.
7. PRICE - Probably the most important of indicators but the hardest to master.  It takes lots of experience to do so.  The articles makes a good point by stating that "let price prove to you where it wants to go by setting entry order rather than market orders when entering a trade."

Top 7 Indicators For Developing Your Own Trading Style

Popularity: 5%

Waiting for a Yen pullback?

I’m waiting on a Yen pullback.  The price has been hanging around the S2 pivot point all day.  Depending on where the pair is during the Asian open, I may be shorting this pair if it pulls back a little more.   Remember that this pair is trending on the 240-minute and momentum indicators aren’t worth a bit.  Right now I’m watching the Directional Movement Index, pivot points, and trendlines.  The pair will have to pull back quite a bit for my continued interest, at least to the high 116’s.

The chart below shows the S2 pivot point at 116.08, .09 below the price (bottom red dotted line).  The pivot point for today was 116.807 (thin solid black line)

 

 

 

 

 

 

 

 

 

 

 

 

Popularity: 4%

Raghee Horner Tricks of the Trade

Raghee’s first webinar today just ended and if you have been to her previous webinars didn’t offer anything new.  As I have always said about Raghee, I definately admire her simplicity.  She relies on "The Wave" (34 EMA of high, low, close), fibonacci retracements, and trendlines.  These are all great indicators to rely on.

There were some users in the webinar that were bashing her methods which I think is uncalled for.  Not only do I admire her simplicity but also her dedication and consistency.  She has developed her own style of trading and in addition to wanting to make a couple of more bucks for herself is offering her time to teach others.  That should be worth something.  If anything, these webinars are quite motivational and that alone will carry me to her webinar at 4:00 EST.

Popularity: 3%