Saturday, December 31, 2011

Metatrader Criticisms - Finding a forex broker and Charting Considerations

Your chart vs Broker execution
When you trade there are 2 very important considerations to completing a trade - 1. How well can you chart your trading strategies. 2. How reliable your broker is at filling the trade weather you are entering a trade or exiting.

No matter how bad your broker, it is a must that you properly chart market data. If the data is bad or the charting software doesn't have the capabilities (including tools & indicators) there is no way to make money in the market with such bad charting methods. A chart is like a map. Just imagine Columbus sailing to America without a chart - he couldn't expect to just jump in the ocean without direction (just because he had an expensive ship) or expect to survive without past data. The past data is the key to it all. It wouldn't matter how good his leader was either if he didn't have any charts - he simple would not be able to sail the seas because he was ordered to and had a good ship. It would equal a dead crew and no ship.

But this is trading and nevertheless we still need to get a good fill when we click trade and many brokers have been criticized for delaying trades - this is more prevalent when there is a big event such as the dreaded Non Farm Payrolls or a Fed Bank meeting. During such times of high volatility the market may move so fast the price will be 50 pips or more from where you thought to trade or clicked buy/sell and the market just keeps pulling away from that point. Talk about intense!!!

You know those times you click buy or sell and the order doesn't execute immediately and you end up getting in at a price much different from when you clicked trade. Doesn't it suck? I actually don't get "bad fills" with my broker (GFT) but I do get those re-quotes that sometimes anger me but I usually can get in or out of the market without a problem because I stay in tune with the market. If your trying to get out of a bad trade fast it can be really costly in those moments and getting in won't be easy (imagine everyone trying to get into a ship out of "Dodge" or in a lifeboat from the sinking Titanic).

Since I usually trade the majors the spread isn't too bad so unless there's something crazy going on I usually get a good order fill with my broker and really that's all I personally expect with my own trading strategies - there's lots of opportunities to make a buck in FOREX. I tend to avoid those high volatility situations - but some people prefer to trade them and sometimes their just unavoidable. But there's never going to be a perfect broker for such a situation when everyone is trying to get out or in the market at the same time.

Electronic Market vs Real Life
Just imagine a real life situation where all the farmers go bankrupt because the food commodities crash (ie wheat or corn) and their all trying to sell their farm at the same exact time before the price falls too fast to get their money back on their investment - it's not going to be easy to get rid of the entire farm when the market collapses and in that case there's no such thing as a "good" broker because their not going to take your loss.

Broker Reputation
I'm not defending brokers there are some real crappy ones of course and their in business just like us. But that's were reputation comes in and you will find ample information of people bashing FOREX brokers and if they have been in business for awhile there will be ample information on them. The bad ones will try to save their reputation but if they are dishonest the word will be out. Of course they are going to put out bad words about each other because of how competitive the field is but there's no masking a very bad and dishonest broker.

The way I see it is a broker is like a car dealer - they are all going to lie to some extent but if you know what your doing you are not going to get ripped off easily and there are legitimate brokers that don't want to be accused of being scammers. This is like street smarts where the thief's are going to avoid messing with you because you are harder pray and not worth it for them. It's also where charting and trading strategies come in and why I personally like Metatrader to make my charts because of it's capabilities. If your brokers is relatively legitimate you should be able to operate as long as you are good at charting and have the required tools of the trade available to you.

If your unsure about a broker just google their name and a keyword like scam, complaint, ripoff, or report. You will always find complaints about them but if their reputation is horrible stay away from them. Some complaints will be by traders that just can't trade and blame the broker for their own trading errors. It's better to spend a few hours or even days of time researching brokers rather than losing all your money if they end up to be a scam.

But seriously why Metatrader?
There are some people that say Metatrader sucks or that it is designed by the bucketshops so that you can't make money. Sure it was created by the industry for the industry but I see it this way - they provide an opportunity to make money but on the most part only the good one's will be able to benefit from it because the big horses in the race are always going to win and be at the top of the pack. If a few end up in the middle they aren't going to fret because a large majority will be at the back.

If you really don't trust metatrader terminal to place your trades you can chart in metatrader with a demo (they are always free) and have your trade placed by a separate non-metatrader broker or ecn.

You can make money and there is a way it's just that odds are most people will not be able to find that way or will fall short. In a sense it's gambling in that aspect because the house is always going to come out ahead in the long run. They are not going to make a path to a safe for you to just take money and say here you go just take it but if you can find the correct path it's there. The market is a huge place with lots of slop so don't let anyone tell you there isn't a way and don't believe the way is simple.

Metatrader gives you a chance to chart and if you are good at charting you can become a successful trader providing you have enough money to invest and are able to correctly manage your money. But no amount of skill is going to allow profit from every trade. The market is like a combination of the currents in the ocean and the weather patterns. It's hard to predict like the weather and like the ocean if you get on the wrong end of the current it takes no prisoners. So even if your an expert chartist if you can only buy 1 lot and if that one lot must be right (ie no loss) the trader still stands a good chance of losing because it is very competitive - 1 chance is not enough to win big.

Just having the tool/terminal (ie Metatrader, Tradestation, Metastock, eSignal, any of them) is not enough to beat the top dogs. Watch a NASCAR race and every-time the big winner of the circuit is going to be those guys that got everything into the races including: top equipment, the best crew, the resources, and promoters. They won't be running used tires, run low grade fuel, or hire inexperienced crew members. So just because you have a car it isn't a threat to the top dogs at the highest level of competition because their cars are maxed out to a science and their trading 100's of big lots a day or more. 1 lot traders are not a threat to them even if 1 out of 10 make a living they aren't going to fret one bit. In fact any one trader (an independent trader) is not a threat to them by themselves - the big dogs have a staff working for them 24/7 - full staff of trained professionals. Remember 2 minds working together are better than one and they are a finely tuned machine.

With all that said Metatrader is not a scam in itself or the other trading vessels and you won't be able to beat the top dogs with it - but if your good you can make a living with the tools that are available to everyone willing to find and employ them properly. Trading in itself is a racket like any other racket including sports. Only so many are going to be able to make it but most will not make it professionally. The opportunity is there though and genuine. In my opinion Metatrader is the best thing invented for independent traders to have a chance at becoming professionals.

Let's take a sports analogy
Top traders often take losses but losing is actually part of getting it right.
Losses can be like incomplete passes or sacks for a top trader that takes a small or a moderate loss. Their like a pro QB. The leading QB's don't try to score a td every play but they look for it if there's an opportunity ie the defense is asleep and a receiver is open. If the opportunity is not there a good QB usually doesn't try to force it but rather they will throw the ball away or would rather give up a sack rather than cause a turnover - that's the mentality a pro trader has to have.

Since there is no time limit like in sports this should never happen (ie big turn over) but you often see inexperienced traders blowing up their accounts - it is equivalent to forcing a pass to get a touchdown because the time is running out but the defense intercepts and scores a td the other way - just take the loss if your wrong and if you don't have enough equity you better get some before for you expect to survive the markets. Some will even resort to blaming their brokers for this but in reality they made a bad play and refused to take a sack (a stop loss) or an incomplete pass (no trade in volatility ect.).
If the opportunity is there the trader scores big and makes up for the few small losses that incurred to get to the prime moment which like the weather is hard to predict but like the current will take you with it. You can't blame the broker as a professional trader if you simply fight the trend.

Football Statistic For NFL Champion QB Aaron Rodgers:
For last years Superbowl the winning QB stats for the Superbowl were 24 of 39, 3 TDS, and 0 interceptions. That means he threw the ball away 15 times and out of 39 passes he "only" threw 3 touchdowns in 39 passes - I know 3 is alot for football but think about it - he threw 39 times for only 3 scores. For the year he only threw 11 interceptions which is excellent and was 68% on his pass completions which is very high actually but nevertheless nowhere near 100% and when I went to school 68% on a test score was barely passing. In my Microsoft Certifications Exam I took for programming 68% would be a fail - I got something like 65% my first try but I never went back because of the cost at the time. Rodgers didn't try to throw a touchdown on every play was the key to his success for the year and the Superbowl. QB's that try to make the big play and force it unusually end up losing from throwing interceptions(unless their competition sucks). An interception in trading is like a really big loss where the trader neglects to abide by a stop loss and gets hammered.

An Experienced Traders Trading Advice For The Newbee
My earnest advice is worry less about who your broker is and focus on your charting abilities - finding a good broker is least of your worries. Metatrader provides ample tools and indicators. I'm not just talking about the indicators that come with Metatrader but custom ones that are created by indicator designers (myself being one). You can even hire a programmer to make you a custom indicator if you have a good idea or strategy off of current indicators. Even simple modifications can make an indicator come to life.

If your not prepared to trade - Don't trade - It's simple advice. You stand a better chance of winning the lottery or going to the casino if your unprepared to handle situations that arise. Don't blame the broker or mechanisms because of laziness or radical behavior. An example is a trader places a trade and takes a vacation. I actually knew a guy that did this. He was way ahead on his stock options. He and his wife thought they were on the path to riches and played at the beech. When they got back their account was blown -- And this was a guy I could not beat in chess even if I cheated. This was before the wireless age so he couldn't manage his trade that way. Now he drives a truck for a living - I did too at one tie and in fact that is how I first met him and he told me the story because he noticed I was charting on my laptop many years ago in Florida.

Bottom line is if your not willing to give 100% expect to take serious financial losses. I have a saying and it is this:
"100% is a losing effort in FOREX but if you give a little more you just might make it."
Neal Vanderstelt

Actually you have to go above and beyond the limits to expect to make a trading dream come true.

MT4 vs MT5
Metatrader uses a programming language called MQL4 (for mt4/metatrader 4.0 indicators, ea's, and scripts). I personally write my own indicators and the language is much like the C programming language.

C is a simple linear programming language. MT5(metatrader 5.0) is more object oriented and like c++. For this reason it really hasn't taken off that fast so I speculate it will be a few more years (maybe even 5 yrs some say never) before MT5 really takes off. Because it's object oriented it's a little more difficult to program in and the MT4 programmers have had a hard time in transition. Least to say I don't think all the bugs have been worked out of MT5 yet. Personally I'm sticking to 4 until 5 takes off (if it does).

MT5 does offer more power by adding more object choices to programmers but personally as a programmer I still prefer MT4 simple because it's easy to use. There's a wealth of resouces in MT4 perhaps because MT5 hasn't fully evolved but maybe because the transition is too much of a leap. We shall see.

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Thursday, December 29, 2011

In regards to AUD-USD

We are finding out that this range could be a continuation but it has to break up higher which means 1.0200 will have to be taken out. We are finding out that the previous area (circa 1.0042) served as strong support. But it is still in a range. The market has not fully decided - it is just favoring the upside. Take in mind this is end of year price action - be careful - as you can see it has been choppy.

(refresh for charts - adding in 10 minutes - or if from exterior site go to real link

My indicator "The Last Jedi" caught the major moves in the market even in these tough end of year conditions. It does not repaint. It's not free but you can get further details and purchase here.

The horizontal lines were manually drawn. They are visually chosen levels that serve to filter out the small moves. The concept is to buy crosses above and sell crosses below the horizontal lines.

Here is the same move as above with stronger horizontal filter lines. It captures the 2 major moves while the market consolidates in the weaker ones:

*note that the market was irrational do to the post holiday and end of year trading so the first move in particular would have been harder to jump in on (surely not a loss) just harder to capture maximum profit . Contrary (and without as much risk from the volatility) the next move was completely workable for sizable gains since the price action slowed down a bit and the currency began a smooth trend rather than desperately trying to find support. The Last Jedi was not fooled in either case. The 1st trade was actually feasible it just required more skill and I'm pointing out the differences between the 2 big moves that occurred nearly back to back providing a rare opportunity to win big in both directions.

The Last Jedi

The Last Jedi will not be defeated!

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Wednesday, December 28, 2011

MACD for MT4 Indicator

Looking for MACD for Metatrader 4.0?

I will try to make a compilation in my spare time since MACD is such an important indicator in forex trading strategies and doing technical analysis. These should work on all brokers (ie fxpro ect) / version 4 trading terminals. If there are any problems leave a message. Some of these have alerts, some are colored + histogram, and some are good for trading divergence. Also I have included similar indicators in the list.

You can download for free here: (just click the slow download - I think the wait is like 20 seconds)

MACD True.mq4 Also called "Real MACD".
MACD_ColorHist_Alert 12 26 9 LA .mq4
JMA_MACD.mq4 jurik research?
MACD (DEMA) DiNapoli.mq4

Just add to your indicators folder and restart metatrader.

MACD was developed by Gerald Appel in the late 70's. Moving Average Convergence-Divergence (MACD)turns 2 moving averages into a momentum oscillator by subtracting the larger moving average from the shorter moving average. More correctly it is a "price momentum oscillator".

MACD fluctuates above and below the zero line as the moving averages converge, cross and diverge. MACD is unbounded, it is not particularly useful for identifying overbought and oversold levels especially since moving averages don't work that way.

MACD Line(Price Velocity): (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram (Price Acceleration): MACD Line - Signal Line

12, 26 and 9 is the typical setting used by traders although they can be changed to give sharper or duller signals.

Broadening Formations

*Occurs during high volatility.
*A period of great movement but little direction.
*Identified by a series of higher pivot highs and lower pivot lows.
*Considered a rare formation.
*Can be a period of consolidation or reversal.
*Considered difficult to spot.
*False Break-Outs and confusing price action are often prevalent.
*Can be powerful continuation or reversal patterns.

Variations Right Angled, Descending Wedge(falling wedge), Ascending Wedge (rising wedge).

Rules (Falling Wedge):
1. Must be a prior downtrend to reverse.
2. There must be 2 reaction highs from the peak to form the resistance trendline.
3. Similarly there must be 2 reaction lows with the 2nd low lower than the 1st.
4. As the pattern matures the upper and lower trendlines should converge (ie come together). Ideally there will be a 3rd shallower low before breakout to the upside occurs.
5. There is a convincing breakout to the upside through resistance trendline.
6. Volume pickup also occurs at the breakout. Low volume moves are prone to a higher rate of failure.
alternatively watch for a breakout above a previous high.
Unlike symmetrical triangles falling wedges have a definite slope to the downside and a definite bias to the upside.

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Sunday, December 25, 2011

Linear Regression for Trend Analysis in Trading

In trading linear regression is the analysis of 2 variables price and time - basically an algorithm. The 2 lines are graphically displayed by an indicator (or can be drawn) - the parallel lines comprise a price channel where price action is prominent. In general more bars will yield a larger channel. The upper trend line of the channel serves as the resistance and the lower trend line serves as support. If there is a center line it serves as an equilibrium point which usually has a slope. All lines will actually slope together at a fixed distance from each other unless the channel resets. The slope depicts the trend direction.

The name "linear" refers to a straight line while "regression" (a statistical term) is the relationship between the mean value of a random variable and the corresponding values of one or more independent variables. In trading we are most concerned with the variables of time and price.

Example of linear regression in statistics:

Background - Historically
Linear regression was the first type of regression analysis to be studied rigorously in statistics (used first in astrology) and it was later incorporated into financial theories. The first form of regression was "The method of least squares" circa 1794 by Carl Friedrich Gauss when he was only 17 or 18 but the method was not published until 1809. Gauss's method was applied to track a newly discovered asteroid called "Ceres". The method is not considered perfect but was a breakthrough in science, mathematics, and statistics. Gauss is ranked as one of history's most influential mathematicians.

It took awhile for regression analysis to be used in trading and even longer to become popular. In the 50's - 60's economist used desk calculators to calculate regressions. Before the 70's it could take up to 24hrs to receive the result from one regression. Today regression analysis is very common in trading and new methods have been developed. Where it once took nearly 24hrs - today a channel can be drawn in a fraction of a second by advanced indicators like the one's I use in mt4.

The principle
Prices usually exceed the channel frames for a short time. If they keep outside of the channel frames for a longer time than usual, it forecasts the possibility of trend turn. The big idea is to define a previous trend, hopefully predict it's trajectory, and establish support and resistance points. If price action stays within an established channel it can be good points of entry or exit at or near the tops and bottoms - additionally if price breaks the channel it can be a possible reversal. In essence it is a probability theory. As with all trading strategies: experiement, set a stop loss, and set a target price. Never float a trade without a plan.

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Thursday, December 22, 2011

ZUP indicator metatrader

This is a forex reversal indicator for mt4. I found it while browsing the internet and thought I would share it. It is based off of Gartley patterns that look like a butterfly. The last leg will repaint so use with caution.

Scott Carney published the book "The Harmonic Trader" published in 1999 was based on H.M. Gartley early works of circa 1935 and of course harmonic trading. Carney added Fibonacci ratios to the distances between points.

The pattern starts from x point and has waves a,b,c,d with d being the last leg.
Each wave has an angle / fibonacci ratio. These patterns are similar to M or W type Elliott wave patterns.

according to Carney:
1.27/1.618% is ideal ratio for A-B points.
ideal for C is .618/.786%
ideal for D is 76.8% (he considers this to be vital)

Key Features:
Must have an AB=CD pattern that converges in the same area as the .786 Fibonacci on the XA, and also the 1.27 or 1.618 BC. The B point retracement ideally at .618 of the XA leg.

download ZUP for MT4 (just click slow download - it should be free)

Here is a different version:

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Risk On Crude Up, Stocks Up, Shinny Christmas?

Despite troubles in Europe the market is moving up and risk takers are at the table. The market remained thin with market in holiday mode. I'll remain skeptical until the holidays are over with to see if this bullishness will last.

Crude Oil 1hr trend reflects strong upchannel. "Crude oil rose a fourth day as applications for unemployment benefits in the U.S. decreased to a three-year low and the index of U.S. leading indicators signaled that economic growth will accelerate."

Looking for forex metatrader indicators? look here

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Saturday, December 3, 2011

Friday, December 2, 2011

Reversal Patterns Part 1a Inverse Head and Shoulders

Common Characteristics

1. (Left Shoulder) trading volume increases notably
followed by a minor recovery on which volume runs less
than it did during the days of the final decline and at the bottom.
2. (Head) Another decline carries prices below the bottom
of the left shoulder on which activity shows some increase
(as compared with the preceding recovery) but usually
does not equal the rate attained on the left decline, followed
by another recovery which carries above the Bottom level of the
left shoulder and on which activity may pick up, at any rate
exceed that on the recovery of the left shoulder.
3. (Right Shoulder) A third decline on decidedly less volume than accompanied the
making of either the left shoulder or head which fails to reach the level of the head before another rally starts.
4. An advance on which activity increases notably, which pushes up through the neckline and closes above by an amount approximately equivalent to 3% of the market price, with a conspicuous burst of activity attending this penetration. This is the confirmation or breakout.

(you must click image to enlarge )

The neckline is also the resistance line. If volume is strong through the resistance line it is considered a better break. These patterns appear usually after a notable downtrend and mark the bottom or a short term reversal in a prior trend.

Thursday, December 1, 2011

New Indicator To Be Released Soon

This is a non-repainting indicator. By non-repainting I mean once the current bar has formed the previous bars won't turn from positive to negative or negative to positive to look like it captured every move. The current bar of course repaints because it is calculating. This will be available soon on ebay or buy directly through paypal.

Monday, November 21, 2011

Projection 1 met - Massive call in gold is spot on nearly 1000 pips!

(see 2 previous post and compare to this one) November 16, 2011 weakness was spotted and projections drawn based on indicators results.

The drawings are mine based on the combination of a couple of indicators that I modified. If your interested in the indicators contact me - leave a message or email me - or click link below to see purchasing information - includes both .exe and .mt4 files for metatrader 4.0. Simply installation and can be used infinitely on demo charts so you can use a non-metatrader broker to trade and a demo to chart. When demo expires just make a new demo account.

Purchasing information

Includes mt4 indicator used in chart. Triangles were manually drawn to points that the indicator projected by the lines you see. Projections were figured manually as well from areas on confluence. Indicator will be sent as an attachment - you get both the .exe and the .mt4 file. Only works in Metatrader 4.0 at this time. All sales are final- no refunds after indicator is emailed to you. As stated it is a modified indicator which means I made coding modifications which in this case were huge modifications.

That call on gold was nearly 100 full points - not pips! It would be nearly 1000 pips! Any doubts in technical analysis? I didn't read any news what so ever. The call was 100% technical.

Thursday, November 17, 2011

Gold heads towards lower projection

Only modification is I manually drew in lower projection 2 on the chart - the price action speaks for itself.

Saturday, November 12, 2011

Part 1 Wolfwave Trading Strategy

Think of patterns or waves if you will as sound octaves for a moment if you will. If you study a sound wave the sound of particular octaves will peak out at some point in the wave and at which point begins the end of the wave. Wolfwaves are a 5 wave strategy (5th wave peak) that work on the principle that after a 5 count wave is complete there is a chance of a sizable reversal.

As aspiring as these patterns seem they can be dangerous because take in mind unlike a predefined musical sound a market trend is an unknown wave until it's finished and a strategy like this is a reversal strategy that can either get you in a good reversal trade but if you're wrong you end up fighting the trend. For those reasons it's important to get confirmation after the 5th wave has set up because you can get destroyed by fighting a trend that has not ended. But with risk comes rewards too - so if you play your cards right - there's great profit potential.

In the wolf wave ideally 1,3,5 wave points are established with timing intervals between moves. The 4th wave should revisit the price range established by waves 1,2. Wave 5 is often (but not always) a false breakout move beyond the 5 wave pattern which is sometimes compared to a rising or falling wedge. The great thing about the wolfwave is you don't have to have a complex understanding of technical analysis.

The principle of the wolfwave is not subjective - in otherwords if done correctly it would be impossible for different traders to come to different conclusions unlike many elliot wave strategies that work from hindsight. When there is a wolfwave signal it is a mathematically valid signal but take in mind you may be fighting a trend (which could be a greater force) and despite theory it may not always work as intended.

There is a variation that is called the 3 indians setup.

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Friday, November 11, 2011

Bad news out of Italy

May require a bailout and contagion fears have escalated (see video)

Stocks were rocked this week by Italian bond market yields that rose above 7%. Fears were subdued later in the week but many feel Italy is too big to fail.

Tuesday, November 1, 2011

Fundamental Analysis vs Technical Analysis vs News Traders

Survey of trading methods-

The key differences:
Financial Statistics vs Price Data vs Reaction to an event

Technical Trading:

A true Chartist will look for technical breeches in a pattern before going long or short on a trading instrument that is based primarily on price data. By technical breaches I mean breakouts of a pattern, a support or resistance level, or a moving average cross for example. True technical traders see no reason to analyze the news or fundamental event because the chart will reflect the value the market has set. With proper trade management strict Technical Analysis can be very profitable method of managing a trading account.

The real objective in Technical Analysis is not to predict the future direction but to detect a change in the current direction.

One of the greatest errors of traders of any kind is to try to pick a perfect top or bottom which is a guess. A correct diagnosis of the technicals is meant to eliminate the error of top or bottom picking by looking for break-outs of patterns or indicators. Without a breakout nothing has changed.

Another technique that has evolved is by combing several strategies and looking for areas of confluence or where 2 or more indicators agree with each other at a specific point. It isn't very meaningful if there's just one indicator making a change but when several "agree" it can indicate a powerful move. The power of math of confirming a result and it works for traders in the form of finding proper confluence.

You will often here the term holy grail by technical traders. In other words experienced traders are most often trying to convey to other traders that their is no holy grail in technical trading and therefor proper money management has to be employed for technical analysis to work.

Fundamental Trading:
Fundamental analysis is on the most part a long term approach where analysis is done on financial statistics to gauge a big fundamental change such as increasing factory orders or lower GDP.

Another such strategy in Forex is to look for changes in
the currencies benchmark rate cycle. The trader would look to go long when the interest rates enter a series of rate hikes and short when the interest rates start a series of cuts.

Wouldn't it have been nice to short the dollar when rates where first cut from 5.25%? Problem is the dollar didn't go down right away - at least not vs the Euro but it did drop pretty good vs the Yen.

Federal Funds Target Rate Historical Chart

Most analysis for Wall Street is on the fundamental side. In fact I was not allowed to write for the website Seeking Alpha because they said my articles are "too technical". I was considered but they continually told me to make my articles more fundamentally based. I have nothing against them - personally I just couldn't do it. You'll find most trading sites are very much on the fundamental side. I study the fundamentals but I believe all trades should be technically based - fundamental traders are just the opposite.

There is some merit to fundamentals even for one that relies on price data. It is clearly beneficial to know the direction of the rate cycle and if the economy is expanding or contracting. By analyzing fundamental data the economic theme can be gauged to some degree of accuracy but nothing involving money is ever perfect in a world of greed and fear.

News Trading:
A News Trader is different than a fundamental trader although some think both are the same - they are not.

A News Trader will trade a reaction to a piece of data - at least a smart one will wait until after it is released. The news in question might be earnings releases, Non-Farm-Payrolls, Employment Data, or perhaps the GDP.

The gauge is the reaction to the data not weather it was to be perceived as bullish or bearish - this involves some charting so it's not strictly fundamental and some will even combine technical strategies to see if a turning point has occured.

If the reaction to the news is bearish at the time of release the trader will short and inversely go long if the reaction is bullish at the time of release. Some wait a set amount of time like 5 minutes to be sure the market got it right and to filter out any knee-jerk reactions.

So the difference to fundamentals is a fundamentalist will develop an economic theme based on data whereas a news trader "reacts" to how the market perceives the data which many times can go against the long term fundamental picture. The news trader therfore is for fast moves in gerneral.


Put another way - Fundamental Analysis is political in nature, advanced Technical Analysis is purely mathematical in nature, and News trading is based on perception. All of them can make you money if they are understood thoroughly.

Since Fundamental Analysis is meant for long term strategies it is most effective for large traders and it is political since any policy change is going to effect the fundamental nature of the market. Policies are what control the financial markets. Technical Analysis is very mathematical in nature and is one that is based on mathematical skill rather than economic knowledge. Technical Analysis can be implemented by smaller traders with tight stop losses - it allows someone with enough skill to work their way up the ladder if they are good enough. News is perception based and trading it is meant for fast traders.

In any case it is at least good to understand the different methods markets are gauged and how to apply them before one makes any kind of financial decision.

Sunday, October 30, 2011

Japan Intervenes to Weaken Yen

Yetsenga Says Yen Intervention Effect Will Be Limited
Fink Says Yen Intervention Move to Shore Up Sentiment

Since September 2010, Japan has now intervened three times on its own and once jointly with other G7 nations to weaken the yen.

Friday, October 28, 2011

Peter Schiff Debates With Wall Street Occupiers

In an attempt to reason with Wallstreet protestors a notable economist that predicted the financial crisis tries to redirect their angry at policy makers.

Did Economist Peter Schiff Make More Sense Than The WallStreet Protestor?

CrossTalk: Euro Haircut

3 weeks ago a date was set by French Prime Minister Nicolas Sarkozy to sort out Greek debt resolutions. After 3days of marathon talks Greek debt was slashed by 50% (equivalent of €100 billion) and debt-to-gdp is to be reduced to 120% by 2020. A debt-to-gdp ratio over 100% is a clear sign a country's economy is not working so a reduction to 120% is not exactly a goal for a stable nation that has an upper hand on the situation. Current Greek debt-to-gdp is ruffly 160%. Greece has also adopted a number of austerity packages since 2010 which have resulted in protest including physical clashes.

"when is a deal really a deal?"
"who's going to pay for the bailout: "
"It's about as voluntary as sticking a gun to someone's head and making them agree to it"
"it is a terrible program"
"this is like an Irish marriage where the preist tells the couple to stick it out no matter how bad it gets"
"wouldn't it be better to just have Greece leave the Eurozone"
"as for Greece or any other country leaving the Euro - I don't think this would be a good idea... for a simple reason none of the long term benefits for being in the Euro are null and void"
"It's as though we have a case of gangrene in the head of a patient and the cure is to decapitate him"
"we have a system where growth has been halted - how are we going to make these gdp target projections"
"where is the growth to pay for these future debts!"
"proponents of austerity say you can not spend your way our of a debt crisis... well one thing is you can't cut your way out of a debt crisis. You have to generate growth and growth requires investment."

"we need real banking reform"
"the moral hazard argument is obviously there - if they're wrong the tax payer has to pick up the bill"
"if your being honest not much has been reformed in the past 3 yrs"
"The fear is if Germany is going to become the United States of Europe"
"frankly I don't think the American model is the right one"

Henning Meyer
Jeffery Sommers
Marshall Auerback

Will Greek Haircut (50% debt reduction) be enough to save Greece from a future default on debt?

Thursday, October 27, 2011

Eurozone Debt Issues Overshadow Technicals

This video was way off the mark but I'll post it for analysis because there is still some valid points.

"technical outlook is still for a bearish euro"
"the market has been in a range and is going to have to breakout in one way or the other"
"alot of central bankers are in recession mode / forecasting recession, growth is still anemic"
"QE1 or QE2 Did not work it was the bazooka for the US and was massive compared to EFSF"
"US situation was different, primarily to avoid deflation and to stimulate employment vs the Eurozone trying to prevent default and reduce debt but it seems like their just throwing money away"
"the price of the Euro by year end will highly depend if there is QE3 in the US"

The next FOMC meeting is scheduled for Nov. 1-2

Will there be a QE3 before the FOMC benchmark rates are raised?

If Greece Default.... Is US Next?

Edward Harrison (founder of Credit Writedowns) says a default would be good for the US if there's no contagion.

"bailout fund is not credible (the EFSF)"
"If there is a Greek default what will the impact be: creditors of Greece - primarily banks / Greek banks - insurance companies mostly throughout Europe especially France and Germany"
"Greece would actually have more fiscal space if they defaulted because they have to take on massive austerity to make ends meet. A default would mean less austerity."
"Can Obama Really Change the US economy with an Executive Order: What you really need to see is credit write downs - Really were sort of stuck here - there's no systemic solution the problem"

Final Attempt To Save Euro Concluded?

Greek 50% haircut of debt but has it solved the Euro problem? Johann Van Overtveldt says it's just buying time and a similar action will have to happen to Portugal. Under the agreement Greece will be allowed to hold debt-to-gdp well above 100% (target is 120% from the current 160%) with a deadline of 2020 which is not a major achievement by any means.

Van Overtveldt said the recession will likely deepen for Greece because they will have to cut expenditures to increase taxes and Greece will be back on the Euro negotiation tables within 6 months.

"not a structural resolution"
"they are afraid to bite the bullet"
"there is only 1 solution for Greece - to leave the Eurozone"
"there is a huge problem brewing in Portugal"

Johan Van Overtveldt is in charge of Belgium's leading financial magazine and concidered a distinguished Belgian economist.

Will Europe's 'big bazooka' hit its target? Post-game analysis for Euro summit:

ISDA's Geen Says Greek Accord Unlikely to Trigger CDS

Wednesday, October 26, 2011

Obama is a cockroach!!!

This protest has been going on forever and he has done nothing to quell the situation in a diplomatic way. Not that the protestors are taking hostages but this is similar to when Jimmy Carter was president and hostages were held for over a year (444 days.) while Carter road it out. To add insult to injury the hostages were released the day Reagan was inaugurated.

Obama's budget plan is also just do nothing. Obama should go down as the worst president in the history of the United States and I am shocked that he actually has the nerve to say he is going to run for a 2nd term.

Oakland has a very thick black community that is strongly against police violence yet Obama has said nothing about the misuse of force against the protestors. Yet Obama made the claims about foreign governments in Egypt regarding police abuses so you would think he would be steaming angry about this being from his "own" country. The Oakland police severely injured at least one protestor that was a 2 time Iraq war vet and seriously injured many others. His skull is fractured and was admitted to the hospital in critical condition. The vet was shot not once but twice. While he was laying on the ground other protestors ran back to drag him out of danger and they shot him again with flash granades which severely injured him.

Like a cockroach on every issue Obama just stays in the shadows out of sight and out of mind doing nothing while crisis erupts.

Breaking News: NY police begin arresting protesters

New York police officers started arresting Occupy Wall Street demonstrators who took to the streets Wednesday to decry a crackdown against fellow protesters in Oakland, California, RT correspondents reported.

­Protesters are taking to side streets, throwing construction barricades and trash bags into the street to slow down the police in pursuit.

Economist Yanis Varoufakis: "Greek banks already bankrupt"

war-crimes by Oakland Police - 3rd world tactics

Police use cowardly tactics on unarmed protestors. There were allegedly some bottle thrown in today's protest by in the previous night Oakland police assaulted peaceful protestor ripping down tents and declaring their protest as an "illegal protest". When I heard the comment I was shocked because it comes right out of the movie 1984.

The Oakland police didn't go after the so called bottle throwers instead they bombarded peaceful protestors that did not have anything to do with the rebel rousers. Caught on video was a group being flash grenaded while trying to carry off an injured protestor which was a woman. This reminded me of a war crime like act.

The Oakland police also attacked a person in a wheelchair and severely injured many peaceful protestors. I never tought I would live to see the day my government would stoop this low.

Monday, October 24, 2011

Sunday, October 23, 2011

There Will Be A 2nd EFSF Meeting on Wednesday

And will bring all 27 members back into the picture to finalize a response to the debt crisis.

EU leaders concluded on Sunday agreeing on plans to boost the firepower of the eurozone rescue fund - the European Financial Stability Facility (EFSF) - and backed plans to recapitalize banks who would be hit by a massive writedown of Greek debt.

Gold Day Chart:

Gold has been struggling to stay in an uptrend. It still is in an uptrend but it looks heavy to me. Last time I said that it rocketed higher and blew through resistance. I will be watching gold pattern closely this week and look for any confirmations of weakness.

Friday, October 21, 2011

free mt4 indicators

Looking for a few free indicators. Here's a couple I highly recommend. It's an alternative Ichimoku system and bar trend. It can be a good primer for a trading system. You can use the standard Ichimoku that comes with metatrader but this is much more appealing than the standard Ichimoku Kinko Hyo and there is a different and I feel more accurate signals. By the way it works if you put both the standard and the modified together on chart - try it for comparison.

Download mt4 indicators ichimoku & bar trend
click "slow download" to download for free and follow instructions.

Euro trying to break out of range on "optimism"

EFSF bailout fund has been a major topic of concern. Germany and France continue to discuss ways to handle the European debt situations with a summit on Sunday and possibly another one on Wednesday. ECB has also talked about the possibility of slashing rates last meeting do to double-dip recession.

h1 EUR-USD chart:

Euro breaks above 1598 ema (fibonacci moving average) in a jagged thrust higher.

Saturday, October 15, 2011

Are the Bulls Really in control of the market?

It's a tough question right now especially with all the news reporting how strong stocks suddenly are - it's hard to develop a bearish theme on the news. We will have to watch the charts closely in the coming weeks to see if technical support holds and what reaction the markets have to technical resistance should they continue to march forward.

While the markets march higher due to injections the real economy remains recessionary with high unemployment which currently under-reflects the real picture. While some banks are insolvent, low rates do not reflect the real market risk so banks that have money won't lend or are very selective about it. Low rates actually crimp credit after markets fundamentally crash.

What does insolvency mean?
Insolvency is when a business has insufficient assets to cover liabilities.

According to Wikipedia the definition of Recession: In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way. Production, as measured by gross domestic product (GDP), employment, investment spending, capacity utilization, household incomes, business profits, and inflation all fall, while bankruptcies and the unemployment rate rise.

Overall I think the current economic picture defines a recession and in looking at the banks many or insolvent or unwilling to loan money into a recessionary scenario where there are more risk. Banks in general are in the business to make money - although many are biting the bullet thanks to bank deregulation. However we can't get too caught up in fundamentals as traders or we won't make money or even survive if we get too caught up in the news, financial reports, or the fundamentals. Although it is wise to properly read the financial picture but also understand all the factors in play including artificial manipulation by the government and banks in the form of injections and unconventional monetary policies such as Operation Twist, Quantitative Easing, Bailouts of any nature, fraud, ect.

In fact the market makers use the news and fundamental picture to sway the emotions of competition - which is you if your a trader - in tougher markets this becomes more evident. Sometimes the fundamentals can not be fought but most of the time enough market manipulation will boost almost any market in the short term to medium term. So if your a small trader you will not be able to win that game.

Price action and technical analysis are our only friends in the game.

Dow Jones Industrial DJI30 H1 (1hr chart):

DJI30 Day Chart Part1:

DJI30 Day Chat Part2:

DJI30 Day Chat Part3:

Thursday, October 13, 2011

Europe Pledges To Fix Banks Not Good Enough

To keep the EUR-USD above 1.3800 and the market turned back to risk aversion in the European trading session. European Commission President laid out plans to "solve" the European Debt Crisis. Although several methods to deal with the debt burdens were laid out - financial analyst criticized the plan as being too vague and lacking detail.

Slovakia has still not gave the thumbs up on the expansion of the EFSF but said a final decision would likely happen on Friday. Without the vote the expansion plan to save the banks will fail.

I heard traders in chat rooms talk about the debt crisis being unsolvable in the long-term and some say the Euro banks involved are insolvent. Needless to say the Euro hasn't completely collapsed but is a dangerous game of cat and mouse (The "cat" is unable to secure a definitive victory over the "mouse", who despite not being able to defeat the cat, is able to avoid capture).

EUR-USD Trade Outlook: Position mildly bearish. Trade strategy: Short with stop loss at 1.3832 Target 1.3572. If stop loss triggered think will go to at least 1.4000.

Wednesday, October 12, 2011

Dow Jones Industrial (DJI30 - Big Cap Stocks)

In technical 1hr uptrend with higher lows and higher highs. Until this pattern is broken it would be logical to stay bullish even though fundamentally things seem bearish. At least until the pattern breaks. There's no way to define a perfect top in emotional markets.

X's mark where 1 hours lows are.

EUR-USD, Major Equities, Gold breakout

through previous short-term highs. Short-term Slovakia fears lifted? Short term surge although EFSF issue is not solved yet but there has been a huge sell off across the board of the USD.

EUR-USD H1 Chart:

DAX30 H1 Chart:

Gold H1 Chart:

DJI30 (dow jones industrial) H1 Chart:

AUD/USD H1 Chart:

USD/CAD H1 Chart:

Tuesday, October 11, 2011

Alcoa 3rd Quarter Earnings Disappointing

Alcoa is the 1st major US corporation to report 3rd Quarter Earnings. Profits were well below what Wallstreet expected. Alcoa blamed lower aluminum prices, weakness in Europe, and seasonal factors.

CEO Klaus Kleinfeld said "With the exemption of Europe, we saw growth in our end markets, though at a slower rate than in the first half, as confidence in the global recovery faded "

Analyst had lowered earnings forecast for Alcoa to 24 cents per share and sales of 6.23 billion due to falling aluminum prices. Revenue increased 21% from year-over-year to 6.42 billion but was lower than the 6.59 billion reported from the 2nd quarter prior to this report.

Alcoa did report higher than adjusted forecast but earnings fell short of expectations.

Alcoa stated aluminum prices were 5% below 2nd quarter prices. Earnings were released after Tuesdays US market close so it did not sway the US session but Alcoa traded lower in after hrs as did the equities.

Alcoa shares are down 33% this year making Alcoa the 3rd worse performing stock in the Dow Jones Industrial stock market index.

DJI H1 Chart:

The Dow Jones Industrial stayed in a 1-hour uptrend after dipping to 55-ema (a fibonacci based moving average). Markets stayed on edge in regards to the EFSF vote out of Slovakia that could shake the global markets.

Slovakia Rejects EFSF Bailout Fund

Slovakia the last of the 17-member bloc to vote rejected the EFSF expansion proposal but the finance minister said it will likely be approved later in the week in a 2nd voting. Slovakia is the 2nd poorest member and has the lowest average salaries in the Eurozone.

Richard Sulik (House Speaker, party leader, and opponent to the expansion) previously said "How am I supposed to explain to people that they are going to have to pay a higher value-added tax (VAT) so that Greeks can get pensions three times as high as the ones in Slovakia?"

Sulik also said "The EFSF is going to massively hurt Slovakia in favor of bailouts of foreign banks,".

US Dollar finds ground / short-term rally in Asia Session

But US Equity futures slipped. European stocks fell ahead of a key vote by Slovakia to expand the EFSF bailout fund. 3rd quarter Earnings releases will be the key focus in US session. Alcoa (AA) will be the 1st major US corporation to report earnings for Q3 on Tuesday. Expectations for Alcoa are down 15.7 percent from 3 months ago. Later in the week on Thursday Google will report.

Slovakia is the last of the 17-member bloc to vote on the EFSF expanision - if they say no it doesn't get approved so the markets are staying cautious which is EURO negative. Slovakia Prime Minister threatened to resign if an agreement isn't made today to expand the bailout fund. The vote is not due until the end of October.

Gold slipped due to risk aversion even with India's wedding festival which starts in late October and ends in December. This usually prompts a gold buying spree for the worshiped metal but in this case commodities were weak bringing down Gold as well from short-term highs. India is the #1 consumer of gold and accounts for 1/5 of gold demand overall.

Gold H1 Chart:

Gold hit resistance at the 377 ema - A fibonacci based moving average but was still holding on to higher lows.

Monday, October 10, 2011

Wallstreet Protestors - Occupy Wall Street have good reason to be angry

Wallstreet criminals pump markets to be dumped again - it won't be long before currency is worthless. It won't matter how much you make in this market (if you make anything) because it won't be worth anything in the near future - if they even make it through this year.

By all rights this market should be collapsing to allow for a natural correction. Stocks are way overvalued and the US dollar and Euro are doomed because of all the artificial manipulation. No amount of stimulus is going to solve the debt situation in the US or Europe. Creating more debt to fight debt that is already out of control never works.

I wrote about this over 2 yrs ago and everyday it is becoming more of a reality. The American dream has been destroyed and a new corporatism put in place with the complete destruction of the middle class and freedom that was once a staple of the United States.

There will be no housing market recovery without jobs. Since there's no hope of a job recovery because all the jobs were outsourced away there could not possibly be a recovery based on jobs. Why would people work when the government just creates more money so more cheap goods can be purchased from China, Mexico, or India (anywhere but here)... Eventually this situation comes to a biter end.

The construction industry which provided many jobs has also been destroyed. No reason to build new houses with no jobs and so many homes available that have been drastically reduced from once soaring values (some people actually think those days will come back). So basically the core of jobs has been destroyed - even jobs that have to be done here such as building a house are gone.

Unlike people that lost their job & homes corporations like Goldman Sachs or Pfizer get massive bail outs - and tax payers get the bill. Despite all these bailout no jobs have been created for civilians.

The Federal Reserve Bank meanwhile spent approximately 16 trillion between 2007-2010 according to the Ron Paul audit. The sick thing is not only is this more than the combined national debt much of the money went to foreign countries. Yes that's right they spent more than the combined national debt in only 3yrs time. All Bernanke can say is I don't know where the money went - not good enough Ben! You are not only liable for that money - you are responsible for much of the destruction of the United States financial system.

Americans were promised hope and change after Bush left power but all Obama has brought is an extension of the Bush nightmare and new debt. No wonder young people are marching down the streets in anger. They have good reason to be angry when their own government sold them out. It will just get uglier though - the government will just enforce martial law and use this as an opportunity to expand the government more.

Law Enforcement doesn't care - they will just collect more overtime. Guess who gets the bill - the tax payer. Little do they know the money they make now will be valueless in the near future for the polices they are protecting. You might live high now - but you will come down - like everyone else that has gotten high off of this artificial stimulus and fraud. The clock is ticking and the pool is overflowing with debt.

Is it really the responsibility of the people when the government created the debt situation by repealing acts such as Glass Steagall Act and allowing the central bank to push rates so artificially low? The corrupt WallStreet controlled government knew exactly what it was doing all along and they never stepped in when things got out of hand.

Saturday, October 8, 2011

Will Greece Default? If So When? In October, Before The End Of The 2011, When The Euro Defaults. Video:

If Greece does default the question is when and what happens to the Euro afterwords? Investors are very nervous over this and many market strategist and economist feel Greece will default from between anytime now and then next 5yrs (or even longer) but they will default according to the consensus. Some even think Greece will default this month at the height of the situation but others feel they will be propped up before defaulting because it would be a bad time for it to happen while the economy is struggling or possibly it will be avoided at all cost - but I highly doubt Greece it that important - they are just important now do to the current global economic situation.

The ECB would like to avoid a default as it could cause a domino effect where other Euro members would follow suit. (The other "Pig States")Italy, Spain, Ireland, Portugal could follow Greece's lead and cause the Euro to cease to exist as a whole. The Pig State's all have their own sovereign debt issues so the matter is a serious one.

Italy and Spain were also downgraded by Fitch on Friday. On Sunday Germany and France disagreed about how to handle the situation but both seem to agree that a default would have catastrophic consequences for the Euro-zone.

France wants to tap into the EFSF rescue fund to recapitalize its own banks - Germany insisted that the fund should only be used a last resort when all national funds have been exhausted.

Needless to say there will be alot of topics to debate come the EU summit meeting on Oct.17-18 like how to kick the can, how far to kick the can - I'm being sarcastic but unfortunately that's all their doing.

Rumors have even popped up that Germany's Bundesbank will go back to a national currency (for example - the Deutschmark). Many German's have had a hard time accepting the Euro and would actually rather go back to a national currency which they believe would be more stable. Something that will likely not happen overnight despite the rumors and talk.

Despite all the negative news an IMF Official (Poul Thomsen) reported Greece is making good progress. "There has been good progress but there are still important issues to be discussed. We're not quite there yet. The review will hopefully conclude soon." Greek Finance Minister (Evangelos Venizelos) said the country had enough cash to make it to mid-November.

At the same time Greece is under fire so too is Bernanke. Bernanke makes bold statement that the "economy is faltering" and pressures congress to act. It would seem that everyone is begging for money from Athens to Washington, DC but the credit line is running dry.

Thursday, October 6, 2011

Crude Oil Threatens to go Back into The $80's

Because of a supply drop according to US Inventories.

Crude Oil H1 Chart:

Brent Crude H1 Chart:

Despite the gains some analyst remained bearish because of the overall economic outlook and the Greece Crisis. Nevertheless the market preemptively seen it as bullish that European finance ministers were examining ways to beef up the banks balance sheets.

Crude Oil was fast to rise on the news making gains of 5% while Brent was up by 3%.

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