US Stock Market Futures Tank... Trump Says How Low Unemployment Is, Contradicting His pre-Presidency Claim

While, stock market futures where tanking, Trump maintained how strong the jobs are in America.. However, he forgot to tell people, how he calculates unemployment personally, verses how it's really calculated officially..

In 2015, Trump made the statement, "Don't believe those phony numbers when you hear 4.9 and 5.0% unemployment."  What he was referring to is, the 'official unemployment' verses the 'real unemployment'.  In 1994, Bill Clinton changed how unemployment was calculated, to give the illusion that employment was good, even though job seekers who had given up, due to ruff economic conditions, would be eliminated from the calculation.  His fuzzy economics produced the illusion that more people were employed than really were. It changed how historic economic figures were calcuated in terms of unemployment, thus changing economics itself.

Historic economics is used to gauge current economics by comparing past statistics to the current ones.  Markets rely on statistics. However, economics itself was reset in 1994, making for a new age of economics.  Unemployment now seemed low and much lower than it actually was.  In the great depression unemployment reached as high as 24.9% using pre-1994 unemployment, 'official unemployment' up to 1994 before Bill Clinton decided to eliminate a great portion of the would be working class, if the economy truly was what was touted.

reference article: http://www.sjsu.edu/faculty/watkins/dep1929.htm

Using the old calculation, many refer to it as "real unemployment," including good economist who still uphold true statistic calculations.  Real unemployment (official back then), climbed to over 20% by 1931, but quickly dropped from its peak of 24.9% in 1933, down to  21.7 in 1934, down to 20.1 in 1934, and from thereafter (post-1935) it continued to drop lower throughout the rest of depression.

(reference article: https://www.thebalance.com/unemployment-rate-by-year-3305506)

In the modern area, we can compare unemployment of the great depression to now by using "real unemployment".  Real unemployment is still tracked by some economist to get a historical picture. It can be tracked through:  http://www.shadowstats.com. 

reference article: http://www.shadowstats.com/alternate_data/unemployment-charts

When Bill Clinton changed how unemployment was calculated, it the real unemployment was under 20%. I view anything over 20% as a strong depression.  The blue line depicted in the image above is the real unemployment rate. Unemployment stayed in check until the 2008 crisis, so Bill Clinton's phony economics was not fully seen until the 2008 Housing Market Crash.  If you look at the image above it stays well above 20% since then and to this day.  Real unemployment, (formally official) above 20% at a longer period of time when compared to the great depression.  21.3% was the most current unemployment rate give by shadowstates.com, for November 2018.  Which means unemployment has been over 20% during Trump's presidency and  over 20% for 10 years vs 5 years during The Great Depression.

Essentially, we have been at +20% unemployment rate for twice as long as The Great Depression.

Trump went on to say in reference to unemployment back in 2015, "the numbers are probably 28, 29, as high as 35, in fact, I recently heard 42%".  Trump before getting in office, acknowledged that official unemployment was a farce.  So he knows, but while in office, he states that unemployment, is at a record low and boast how he saved the economy, even while full knowing these now official statistics are not the true unemployment rate. 

As stock market futures continued to ramp down in foreign trade, Trump made the claim again how unemployment was at a record low.  This was while, Apple cut back it forecast and tumbled 9% in foreign market trading.

reference article: Apple lives up to Wall Street’s fears with massive revenue shortfall

While Trump stated unemployment was 42%, CNN called official unemployment, "real unemployment" and under 5% to promote Obama and bash Trump.  I don't agree with either for the record. The unemployment has been depressionary through Obama and Trump administrations and there has been no catalyst to life the economy out of the turmoil that unfolded in 2008.

When all the leaders lie, it effects the real situation, and solutions cannot be found as a result. The leader lies to promote his rein.  Obama did it, Trump is doing the same.  The two look grossly different, but economically nothing has changed.  America has a debt problem that got out of hand in the 80's.  Various economic bubbles where created to give the illusion the American economy is strong.  The truth is it is strong in capacity, because of America's prominence based on past strength and control of global resources, but it is now severely damaged due to fake economics and debt bubbles.  



Trump went on to talk about the wall and the government shut down to get the funding.  He seems to put forth the illusion the economy is fixed.  If it is fixed what did Trump do to magically fix it?  He went from claiming unemployment is 42% to it's 5% or less.  If that is true what did Trump do to drop unemployment from +37% according to his own claims?

Funding for a wall will not fix the economy, it will not fix the housing market, it will provide only temporary jobs to build a wall and the further illusion that America doesn't have an economic problem.  People cannot live in a wall, it will not produce consumer products, it will not contribute to the real economy, it does not build society infrastructure such as factories, roads, or bridges.  A wall will only expand the current failing police state, that currently houses the most prisoners in the world.  Many of which are in prison over the current drug war and are created by the lack of real sustainable jobs and trades.  The police may be dedicated and patriotic American's, but they have no understanding of the real economy.  They may like the extra pay and attention, but it only further desensitizes the real situation. 

America's debt problems are immense and it extends into education and healthcare. Many students buy into the illusion the economy is strong, they get into debt, and can never pay it off.  American's who get sick face a similar situation, they cannot afford the care, so they get into perpetual debt to doctors, nurses, the hospital, and the pharmaceutical companies. They are legalized drug dealers.   The same struggling students decide to become part of the system of debt, because like within the police state there are many jobs for SS and camp workers, there are many jobs for the Medical Mafia to pimp legal drugs to people in dire need, due to health issues.

Capitalism just very well may be a disease.  A piece of paper the mechanism to pass it.       

Make America Honest. 

---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

American Greed Through The Medical Mafia, Border Walls, Prison System, and Military Industrial Complex -- Is America A Fascist Country?

 Is the US a fascist country? 

 "Fascism is a form of radical authoritarian ultranationalism, characterized by dictatorial power, forcible suppression of opposition and control of industry and commerce...."

So when you have the state in control of an industry or commerce which forces you to use a product such as vaccinations..  Though the school system children are being discriminated against who do not vaccinate, because their parents, through intelligent research have decided vaccines do more harm that good.

For example, forced vaccination is being considered or is done through making children be kicked from school. This is the state pushing corporate products onto people.

Is the US a fascist country? 

I say it is.. Not to the degree of Nazi Germany, not just yet, but if not stopped that's what comes next.. We shouldn't have to experience it, to know fascism is wrong or that force is wrong to handle most situations. I don't need to be hit by a car, to know being hit by a car will fuck me up.. It's 1,000's of lbs and moves very fast. So therefore, I don't need to experience being hit by a car, to know it's not a good idea to be hit by a car.. So I look both ways before crossing and cross at safe spots.

Or that wars will kill you. I don't need to experience a war to know it's a bad idea to have a war. But for some reason Americans seem to want to experience what we should already know is wrong. But for some reason the US continues to be at war with  nearly everyone or in major opposition of most countries, while having the most powerful military on Earth.  Some think this is a good position, but it's a recipe for disaster if Nazi Germany or the Romans come to mind.

Most countries now view the US as an oppressive country or one that is leaning towards fascism. Many actually think we are already fascist, and condider that the US is responsible for millions of deaths after World War II through continued war and policies.

Yes you heard that right, our global image is only typically liked by nationalist and other extremist.
A wall around a country is probably not going to solve the immigrant crisis, but more or less expand the country into more of a police state, while the US already leads the world in prison population.. Many are non-violent law breakers that didn't harm anyone physically or cause them financial losses by being a user.. A wall might very well expand this system. Intelligent legalization along with intelligent labor laws would solve the crisis, which is one of labor abuses and laws regarding what a person consumes.

These billions of dollars spent could be spent on helping those countries directly. The real problem is the drug war and reliance on cheap labor. Issues that could be solved if the US wasn't such a greedy country that took advantage of those put in unfavorable positions, to be pimped out for labor or exploited in other ways, such as be run through the prison industrial complex.   As if the military industrial complex isn't bad enough.  

---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

The Dow Jones Industrial is up in Pre-Market "Post Christmas Rally?", after Pre-Trump Christmas doom

American Stocks are up in European session following a huge pre-Christmas slump that was the ugliest plunge ever according to Marketwatch.com.. (reference link)
The previous record dates back to 1933, during The Great Depression.

I personally think that the geopolitical landscape for stocks is causing investors to be nervous.   Trump causes a lot of market volatility with his aggressive behavior, which is anything but smooth..

Looking at charts it looks like stocks may have reached a bottom.. I'm personally looking for longs in Alibaba (BABA), American Express (AXP), Citigroup (C), ConocoPhillips (COP), CVS Health Corp (CVS), Delta Air lines (DAL),  Walt Disney (DIS), Duke Energy (DUK), EOG Resources (EOG), Ford Motor Company (F), FedEx (FDX).

The above for mentioned stocks have room to run to the upside on any positive news, because they are very oversold according to my hourly charts and make good candidates for swing trades and potential entry points should the longer term market correct..   I am looking to initialize a small position, 1/4, and continue to buy at a later date should the rebound not occur her.. I think the market is oversold and excessively gloomy.. Time will tell.

TraderNeal

My systems are available on eBay.

I can also be followed in the currency world here: Meta Trader Robot.



---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

Peter Schiff Wrong About the Economy, Housing Market, Trump Outright Lies

 Housing Market is not dead because of rates, it's because the 2008 Housing Bubble never recovered, since we are in an outright depression since then.  Real unemployment is over 20%. The peak unemployment in the 1929 Great Depression was 25% in 1933.  In 1934 that level dropped from its peak to 21.7%.  There were approximately 4.5 years of unemployment above 20% in the Great Depression.  After 1935, the unemployment dropped below 20%.

Using the old way to calculate unemployment---the same as in the Great depression, our unemployment as of October 2018, it is 21.2%.  You can look this up at ShadowStats.com under Real Unemployment data.

The unemployment since the 2008 housing crisis, has been over 20% nearly 10 years, which makes this new depression worse than the old one.. The reason you don't see the food lines is because of EBT credit cards for food and other modern measure, but people cannot live on the low wages that they get or live without some form of government assistance..

It doesn't help the matter when Donald Trump tells us the unemployment is under 5% and at record lows.. He has even stated in 2015 that the unemployment figures are fake and using his own method unemployment if over 40%. Since getting in power, he now uses the official statistics.

Instead, Trump and his followers will have you believe, that he fixed the economy.  Obama also went along with the economic falsity of low unemployment and they both have  fixed the economy.  Even though unemployment and low wages are clearly an issue for most Americans, who can't keep up with the cost of living.

---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

2018... The US is in a Prolonged Depression, that Started in 2008. Trump is a liar. Unemployment is soaring!

Why are we in a global depression? It is caused by the United States, because the US is the global reserve currency and that's how it works.. We are the international banker.
But Trump says: we have the lowest unemployment, since 1973? Then why are we in a depression, you may shockingly think?

Well if you pay attention to the real unemployment, which includes people that have given up looking---the real unemployment is approximately 21%.  That alone makes this a depression, along with other factors.. We are at greater prolonged unemployment levels than the 1929 Great Depression.. It all started when Bill Clinton changed the economic statistics in 1994, to apparently prepare for this day, for the markets he crashed in 2008 by his policies of deregulated housing and banks.. All in the name to help the poor---who apparently still support the Clinton's. But the Republicans did not call them on this... When it comes to big money they are the same family. They lie together on certain issues to keep them in the club. 

Obama and Trump maintained the lie about Clinton's new unemployment calculations.  Neither one have questioned the accuracy of post 2008 / post 1994 unemployment statistics and why should they? It makes them look good. You see when you compare historical data you have to use the same methods.. Otherwise you cannot claim that your unemployment is a record low, or gauge the past economy to present, and claim miraculous recovery. When you change economic statistics, it's not longer economics, it's just an outright sham. 

The peak unemployment level of The Great Depression equaled 25%. It was the peak in 1933. Using the same calculations as they did back then, we are currently at 21%.. Remember 25% was peak in 29'-39', but it didn't stay at 25% for very long.. In the following year of 1934, unemployment dropped to 21.7% during The Great Depression. We are currently at 21.2%, calculating unemployment the same way as they did back then. We have been over 20% since 2008.. The peak unemployment rate for this crisis using the traditional unemployment methods is 23% which occurred in 2015.  That's over 10 years of depression, with a peak unemployment only 2% different than The Great Depression. It is basically the same as the historic depression, but we have more electronic coverup.. People don't take to the streets like back then and you don't see soup lines with EBT cards. Most who work at Walmart are in the digital soup line.  There are many articles on the internet about how the government subsidizes companies like Walmart who underpay their employees..

Also, there's underemployment, people who don't get enough hours to make the ends meet or not enough pay, and people having to have more than one job to keep up with the cost of living and high rents.. Then factor in the average savings rate and the fact that the housing market is still hurting.  Which is another subject altogether, because there is a rental crisis of people who cannot aford their rent or to own a house. You can safely say that there was no recovery and yes this is a depression with a record number of people in prison, which in my opinion, is do to poverty and corruption..

Trump is a liar. There's no doubt about that---He is part of a corrupt global elite family---- See 'The 3 Stooges' together making a mockery of America and the world:

Attributions:
Shadowstats---Real Unemployment Figures
Unemployment---During The Great Depression
Walmart Employees, Many Qualify For Food Stamps
USA Gulag Prison System, Most Prisoners In The World
The US Could Be The Most Corrupt Country
As Of 2016, The Top 1% Have More Wealth Than 99%


---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

New Trading System For Trading Forex, Commodities, Stocks, Options

This is glimpse of a system that I use that I will make available  for the public.

It will be 4sale on eBay.. Stay tuned!  

---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

Hello, followers..
It looks like I dropped some rank on ZuluTrade.. There was an issue with NordFX my previous broker, who apperently had issues with ZuluTrade or vice versa.. I don't know the full story, but as a result I had to close the NordFX and switch to AAAfx, which is a prefered broker of ZuluTrade.. So as a result of the broker drop from ZuluTrade and transition there was some losses and a drop in rank. But the 3 bad trades were followed up by 10 good trades.. I don't see this happening again in the future.  

Heads up on this week.. The economic calendar is very busy this week...

Full calendar: DailyFX.comDailyFX---Forex Economic Calendar
---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

+ 4k USD in 24 weeks---- trading two currencies. See Stats:

More good trading news to start the week out right for my Meta Trader Robot system---automated trading system found on ZuluTrade. Since currencies trade worldwide 24/6 with very few holidays, 'Meta Trader Robot' was able to close a few trades in the green, while the common flock where out partying for the US labor (less) day. lol

The 83rd trade has closed with a +35.3 pips ($66.6 USD). Live money followers who have followed from the beginning could have made 3,825.6 pips ($4,217.99 USD), in only 24 weeks.  The two primary currencies trader are AUD/JPY, USD/JPY

The good news is you can follow at anytime! The results cannot be legally guaranteed (warning trading has risk including complete financial loss), but this system has proven to be fairly consistent as can be seen by the statistics. It has a very high Return On Investment (ROI), which has equated to high return in a relatively short period of time. The system has consistently held and ROI of +300%, which is phenomenal.

The system may be followed here:

https://www.zulutrade.com/trader/369775/trading

 ***The 83rd trade of Meta Trader Robot started in a loss as can be seen below, but ended up in a win as an be seen in above closing trade on 9-4-18 European time. The system have a +80% win rate; a +300% ROI...

---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

Are You Looking For Automated Trading Money Manager?

 Allow me to introduce myself.  Although I'm a new signal provider on Zulu Trade, I am no newcomer to the game.. In my earlier career I blew up many accounts through manual trading.. After bankrupting my trading account I did not want to give up because the knowledge I learned was invaluable.

I designed a trading system that could stand the test of time and work the market without worrying what happens while I'm not at the computer or asleep..

You can take advantage of this system by signing up to Zulu Trade and become my follower.  I am Meta Trader Robot. 

Click this link: Meta Trader Robot


---------------------- By Neal Vanderstelt Forex Trader, Market Analyst, Trading System Designer Please rate, recommend, and comment below:

My Golden Trading Rules

This is my strategy for success as a professional trader. As a professional there is nothing more important than acting like a professional. Here are my rules:

Rule:	Pledge:
goal #1	not to break trading plan under any circumstance. This is the golden rule of trading.
goal #2	learn to deal with losses that happen do to the law of averages. In other-words you can't win every trade.
goal #3	exercise extreme discipline.
goal #4	exercise extreme patience.
goal #5	participation! participate in the market either by real trading or demo. This yields experience.
goal #6	lock in profit, repeat formula, increase trade size as account gets larger.
goal #7	reward myself for doing my job

Under no circumstance should a trader break the trading plan. If you as a trader can't master the trading plan; the other rules become useless. If the trading plan doesn't work it means that the trading plan needs work and there's no reason to have any other rules. For that reason "trading plan" is goal number #1.

When goal 1 is achieved the other goals became easier.

There are going to be times when no matter what---losses will occur.

Goal 2 is a reflection of goal 1 - stick to your plan as long as it works on average but accept the losses when it doesn't. There's no trading plan that will work 100% of the time so those are the times to stick to the trading plan which includes stop losses and learn to deal with the law of averages or market randomness if you will. Sometimes it's just wise to stay out of the market which leads to another rule of patience.

Since there is no holly grail you have to accept losses! or even random gains but when they occur take the stop loss or the target point without question.

Also losses are like failures; Anyone who has ever tried to achieve something learns that failing is part of learning, as long as you learn from the failure and the failures are not too great. So learn to minimize a failure and learn why it did not work; essentially stop losses minimize failures.

Goal 3 is a reflection of 1 and 2. You must do what is required without question. If you write out a plan but don't stick to it, there's no point in having a plan. The main reason traders fail is because they don't have discipline required to look for good setups and get caught up in their emotions after placing bad trades.

Another way to put it is stick to your plan while being in control of your emotions at all times - that is discipline in trading. The law of averages might beat you here and there but if the plan is good enough it will equal out to profitability in the long run.

There are times when discipline is not enough so:
goal 4 is like goal 3 but you have to just wait it out sometimes. Discipline works when there are opportunities so a more refined quality is patience . In other-words wait until the opportunities are there such as when the indicators line up and avoid what I call "big emotion days" when there are major financial or political decisions being made that can cause major unpredictable volatility. With all that said don't confuse patience  with going to the beach and wasting time when you should be participating and keeping skills sharp. **Patience in trading is the discipline not to pull the trigger and wait for a better opportunity; you still watch the market and take notes.

Goal 5 Participate! The only way to gain experience is to participate. This does not mean to overtrade! Overtrading is avoided with patience but that doesn't mean to soak up rays on the beach when there's work to be done. A dull knife won't cut a path to success! While exercising patience  waiting for a trade - participate in sharpening up trading skills by reading, practicing in demo, ect..

Professional sports players spend most of their time practicing for competition. This shouldn't be an exception for any other profession that has a lot of competition. Trading is more competitive mentally than professional sports. Movie Quote "Nothing can prepare you for the unbridled carnage you are about to witness" Dan Aykroyd in Trading Places. That quote couldn't be more accurate. He goes on to say the Super Bowl and other sports finals are nothing in comparison. Everyday of trading is harder mentally than a Superbowl.

Goal 6 If the chips are falling into place and when all those things come together through exhaustive work and with proven success through repetition of the formula it is time to expand and increase the size of trades if there's leverage/capital to do so. **Don't increase lots if trading account is under-capitalized; this is surely a recipe for bankruptcy / blown account.

Goal 7 If you make it this far! Enjoy the profits! Take time off and enjoy relaxing vacations at the beach! Hey why have goals without rewards? I didn't say don't have fun - just don't do it when there's money to be made. Another golden rule is work before play.

Everyone thinks trading is easy - believe me if it were everyone would quit their job and become traders. When it comes to money people will lie, cheat, steal, and act poorly. Don't believe me - put $1000 bucks on the table with a group of people and ask them what they would do for it? On a second thought maybe don't - they might end up killing each other.

Trading requires one not to get emotional and follow mathematical rules without question. Even those don't always work but it's a learning process.

You may have even made money easy in the past but to hold on to a fortune requires that you follow rules if you are to trade with real money. For most of us, we have to follow many rules to work our way up into profitability.

Violating trading rules can lead to bad habits that could also lead to serious financial losses. In fact breaking rules of the trade is why many people don't succeed as traders. Personally, I've often looked back after a big loss to see I've broke a trading rule or a combination of them (eg violating trading plan, stop loss, patience, discipline).

Conversely, my profitable trades are usually when I followed the rules but there's always going to be losses do to the law of averages.

Rules must be followed to a T to take the emotion out of trading. It's the emotion that causes failure.

These rules sound easy on the surface but in live trading these rules are like life and death.

----------------------
By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer
Please rate, recommend, and comment below:

MACD calculation

MACD (Moving Average Convergence Divergence) Calculation

MACD Line: (12-day EMA - 26-day EMA)

Signal Line: 9-day EMA of MACD Line

MACD Histogram: MACD Line - Signal Line

The MACD Line is the 12-day Exponential Moving Average (EMA) less the 26-day EMA. Closing prices are used for these moving averages. A 9-day EMA of the MACD Line is plotted with the indicator to act as a signal line and identify turns. The MACD Histogram represents the difference between MACD and its 9-day EMA, the Signal line. The histogram is positive when the MACD Line is above its Signal line and negative when the MACD Line is below its Signal line.

The values of 12, 26 and 9 are the typical setting used with the MACD, however other values can be substituted depending on your trading style.

Where to get MACD for metarader
Macd is a free tool in Metatrader and is found through the navigator in indicators. Simple drag and drop on the chart.

History
Historically, the MACD was invented by Gerald Appel in the 1970s. Later, Thomas Aspray added a histogram to the MACD in 1986, as a means to anticipate MACD crossovers, an indicator of important moves in the underlying security.

Today, MACD is a common indicator in Metatrader and other trading platforms. MACD is often the basis of other advanced indicators and trading systems.

Indicator Components


The graph above shows a stock with a MACD indicator underneath it. The indicator shows a blue line, a red line, and a histogram or bar chart which calculates the difference between the two lines. Values are calculated from the price of the stock in the main part of the graph.

The period for the moving averages on which an MACD is based can vary, but the most commonly used parameters involve a faster EMA of 12 days, a slower EMA of 26 days, and the signal line as a 9 day EMA of the difference between the two. It is written in the form, MACD (faster, slower, signal) or in this case, MACD(12,26,9).

Standard Interpretation
Exponential moving averages highlight recent changes in a stock's price. By comparing EMAs of different lengths, the MACD line gauges changes in the trend of a stock. By then comparing differences in the change of that line to an average, an analyst can identify subtle shifts in the strength and direction of a stock's trend.


Traders recognize three meaningful signals generated by the MACD indicator.

When:
**the MACD line crosses the signal line
**the MACD line crosses zero
**there is a divergence between the MACD line and the price of the stock or between the histogram and the price of the stock


Graphically this corresponds to:
the blue line crossing the red line
the blue line crossing the x-axis (the straight black line in the middle of the indicator)
higher highs (lower lows) on the price graph but not on the blue line, or higher highs (lower lows) on the price graph but not on the bar graph


Signal–line crossover
Signal–line crossovers are the primary cues provided by the MACD. The standard interpretation is to buy when the MACD line crosses up through the signal line, or sell when it crosses down through the signal line.

The upwards move is called a bullish crossover and the downwards move a bearish crossover. Respectively, they indicate that the trend in the stock is about to accelerate in the direction of the crossover.

The histogram shows when a crossing occurs. Since the histogram is the difference between the MACD line and the signal line, when they cross there is no difference between them.

The histogram can also help in visualizing when the two lines are approaching a crossover. Though it may show a difference, the changing size of the difference can indicate the acceleration of a trend. A narrowing histogram suggests a crossover may be approaching, and a widening histogram suggests that an ongoing trend is likely to get even stronger.

While it is theoretically possible for a trend to increase indefinitely, under normal circumstances, even stocks moving drastically will eventually slow down, lest they go up to infinity or down to nothing.


Zero crossover
A crossing of the MACD line through zero happens when there is no difference between the fast and slow EMAs. A move from positive to negative is bearish and from negative to positive, bullish. Zero crossovers provide evidence of a change in the direction of a trend but less confirmation of its momentum than a signal line crossover.


Divergence
The third cue, divergence, refers to a discrepancy between the MACD line and the graph of the stock price. Positive divergence between the MACD and price arises when price hits a new low, but the MACD doesn't. This is interpreted as bullish, suggesting the downtrend may be nearly over. Negative divergence is when the stock price hits a new high but the MACD does not. This is interpreted as bearish, suggesting that recent price increases will not continue.

Divergence may also occur between the stock price and the histogram. If new high price levels are not confirmed by new high histogram levels, it is considered bearish; alternatively, if new low price levels are not confirmed by new low histogram levels, it is considered bullish.

Longer and sharper divergences—distinct peaks or troughs—are regarded as more significant than small, shallow patterns.


Timing
The MACD is only as useful as the context in which it is applied. An analyst might apply the MACD to a weekly scale before looking at a daily scale, in order to avoid making short term trades against the direction of the intermediate trend. Analysts will also vary the parameters of the MACD to track trends of varying duration. One popular short-term set-up, for example, is the (5,35,5).

False signals
Like any indicator, the MACD can generate false signals. A false positive, for example, would be a bullish crossover followed by a sudden decline in a stock. A false negative would be a situation where there was no bullish crossover, yet the stock accelerated suddenly upwards.

A filter can be applied to the signal line crossovers to ensure that they will hold. An example of a price filter would be to buy if the MACD line breaks above the signal line and then remains above it for three days. As with any filtering strategy, this reduces the probability of false signals but increases the frequency of missed profit.

Analysts use a variety of approaches to filter out false signals and confirm true ones.

----------------------
By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer
Please rate, recommend, and comment below:

Forex Basics - Forex Trading Basics Part 2 Forex Trading For Absolute Newbie

FOREX Basics Part II

click here for part I

---FOREX Transactions---



There are 2 basic transactions in FOREX: BUY or SELL. Unlike selling something you already own a Sell means to go SHORT the currency expecting it to fall. A Buy means to LONG the currency expecting the price to fall. You simply close a position to exit it weather it's a buy or sell.

As previously stated in Part 1, one standard lot in FOREX is equal to 100,000 units of the base currency, 10,000 units if it's a mini, or 1,000 units if it's a micro. Some dealers offer the ability to trade in any unit size, down to as little as 1 unit.




So in essence when the trader buy a standard lot is controlling 100,000 units of the base currency.



---What are pips?---


Profit and loss is reflected in Pips in currency trading. A pip is the smallest price increment a currency can make. Also known as points. For example, 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.



1 pip of a standard lot of EUR/USD represents approximately $10 USD. 1 pip of a mini lot represents approximately $1 USD. 1 pip in a micro represents approximately $0.10 (although this can vary depending on the actually size of the micro lot).


So if a trader places a long trade of the EUR/USD and the current price is 1.0700 and the price goes to 1.0815 what is the profit? The profit is ruffly $1150.00 (per standard lot), $115 (per mini lot), or $15 (per micro lot). Of course this is minus the spread.


---What is the spread?---



The spread is the premium the broker gets for the transaction and the difference between the sell quote and the buy quote. Usually for the EUR/USD the going rate is 3 pips or $30 USD per standard lot, $3 per mini lot but it depends on the broker and the currency pair.


More exotic pairs require a higher premium for various reasons such as liquidity and how fast the price moves. So basically your in the hole as a trader from the second you place your trade and don't forget market slippage.



---What is Slippage?---



The difference between the order price and the executed price, measured in pips. Slippage often occurs in fast moving and volatile markets, or where there is manual execution of trades. So just because you click buy or sell it does not mean that your order will get filled at exactly that price.




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By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer
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Forex Basics - Forex Trading Basics Part 1 What is forex?

Part 1 - What is forex?
To describe Forex we must have at least a basic understanding of other markets.
Everyone in the world knows what trading stocks is but not everyone knows what trading forex is. Everyone knows that when you buy a stock you are buying a share of a corporation. Some even know what buying an option is.

Options Contracts - Similarities to Forex
An option represents the right to buy(long contract called a call) or sell(short contract called a put) a certain amount of shares of the traded instrument in question. In essence these are future contracts with expiration dates as to what the future price is speculated to be. Unlike actual commodity futures, options contracts do not require physical delivery of any goods.

Since no actual goods are exchanged options contracts are strictly speculative contracts. However an options trader can earn a huge reward if the trader gets the market right. With great reward often comes risk so if the futures trader gets it wrong it results in massive financial loss.

In an options trade a single options contract controls a much larger size of the asset in question (eg stock or commodity). For example 1 stock option controls 100 shares of the underlying asset. The cost of the options contract is called the premium based on what the going rate for that option is. The option will also have a strike price which is based on the actual price of the stock.

Origin of Futures
Aristotle described the story of Thales, a poor philosopher from Miletus who developed a "financial device, which involves a principle of universal application". Thales used his skill in forecasting and predicted that the olive harvest would be exceptionally good the next autumn. Confident in his prediction, he made agreements with local olive press owners to deposit his money with them to guarantee him exclusive use of their olive presses when the harvest was ready. Thales successfully negotiated low prices because the harvest was in the future and no one knew whether the harvest would be plentiful or poor and because the olive press owners were willing to hedge against the possibility of a poor yield. When the harvest time came, and many presses were wanted concurrently and suddenly, he let them out at any rate he pleased, and made a large quantity of money.

The first futures exchange market was the Dōjima Rice Exchange in Japan in the 1730s, to meet the needs of samurai who—being paid in rice, and after a series of bad harvests—needed a stable conversion to coin.

The Chicago Board of Trade (CBOT) listed the first ever standardized 'exchange traded' forward contracts in 1864, which were called futures contracts. This contract was based on grain trading and started a trend that saw contracts created on a number of different commodities as well as a number of futures exchanges set up in countries around the world. By 1875 cotton futures were being traded in Mumbai in India and within a few years this had expanded to futures on edible oilseeds complex, raw jute and jute goods and bullion.

FOREX!!!
Forex trading is much like the highly speculative futures markets. The major difference is it involves currencies and it is what the exchange rate is based on. A currency can be traded like a future in which case it would be a single currency as in the USD (US dollar) or the EUR (EURO).

But usually they are trading in pairs which represent the exchange rate between the 2 countries. A pair looks like this AUD/USD (this is the Australian US Dollar Pair. I can trade FOREX without a broker. I can simply buy Australian dollars and hold on to them for a certain length of time and then turn them in at a bank that allows the exchange of foreign money. There is no mystery to FOREX - it is just an exchange rate based on various valuations of a currency that are mostly based on the current economic conditions of the perspective country and future expectations.

FOREX LOTs
1 standard lot is equal to 100,000 units of the base currency, 10,000 units if it's a mini, or 1,000 units if it's a micro. The exception is the contracts don't expire unless the trade is closed. In that aspect (although the risk is still high) it is safer than an options contract that loses value based on time.

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By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer
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The Death Cross: What is it and how to use it!

At first glance this sounds like a very complicated trading idea but actually it is not. However it can be a powerful signal if used properly.

The Death Cross is when a short term moving average breaks below a long term moving average. Example 15ema crosses below a 50ema on a 1hr chart.

Conversly the Golden Cross is when a short term average breaks above a long term moving average. Example 15ema crosses above a 50ema on a 1hr chart.



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By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer
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The Art of War (Trading)

The legend of Sun Tzu and a walk down Traders Lane
The legendary Sun Tzu wrote The Art of War more than 2500 years ago - in many ways it actually applies to trading:

---Sun Tzu War Quotes As Applied to Trading---

All warfare (--trading--) is based on deception.

According as circumstances (--market conditions--) are favorable,one should modify one's plans (--trading strategy--).

He will win who knows when to fight (--place a trade--) and when not to fight (--place a trade--).

If you know the enemy (--market--) and know yourself,you need not fear the result of 100 battles (--100 trades--). If you know yourself but not the enemy (--market--),for every victory (--target price--) gained you will also suffer a defeat.
If you know neither the enemy nor yourself,you will succumb in every battle (--trade--)



The consummate leader (--trader--) strictly adheres to method and discipline,thus it is in his power to control success (--financial gain--).



In respect of military method (--one's trading method--), we have, firstly, Measurement; secondly, Estimation of quantity; thirdly, Calculation; fourthly, Balancing of chances; fifthly, Victory!!



Ponder and deliberate before you make a move (--a trade decision--).



Do not linger in dangerously isolated positions.




Who Was Sun Tzu?
Sun Tzu (Sūn Wǔ)) was a legendary ancient Chinese military general, strategist, and philosopher.


More Sun Tzu quotes/excerpts without the trading translations but translations from ancient Japanese literature (not necessarily exactly as written or in the same order).:



The art of war is of vital importance to the State. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected. The art of war, then, is governed by five constant factors, to be taken into account in one's deliberations, when seeking to determine the conditions obtaining in the field. These are: (1) The Moral Law; (2) Heaven; (3) Earth; (4) The Commander; (5) Method and discipline.



All warfare is based on deception. Hence, when able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.

Hold out baits to entice the enemy. Feign disorder, and crush him. If he is secure at all points, be prepared for him. If he is in superior strength, evade him. If your opponent is of choleric temper, seek to irritate him. Pretend to be weak, that he may grow arrogant.

If he is taking his ease, give him no rest. If his forces are united, separate them. Attack him where he is unprepared, appear where you are not expected. These military devices, leading to victory, must not be divulged beforehand.

When you engage in actual fighting, if victory is long in coming, then men's weapons will grow dull and their ardor will be damped. If you lay siege to a town, you will exhaust your strength.

There is no instance of a country having benefited from prolonged warfare.



Hence to fight and conquer in all your battles is not supreme excellence; supreme excellence consists in breaking the enemy's resistance without fighting.

The good fighters of old first put themselves beyond the possibility of defeat, and then waited for an opportunity of defeating the enemy. To secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself.

Understand that the other people you are trading with are not really your friends. They may joke with you in chat rooms or forums and you may even share advice however they actually are your direct competition - unless they are your actual trading partner using the same money to trade. Many times in these forums you are talking to a representative of a large hedgefund that wants you to lose and lose badly (unless you actually know them in real life). Believe me I've been walked on many times by people I thought were my "friends". When it comes to money you will find your true friends are few.

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By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer
Please rate, recommend, and comment below:

FOREX Metatrader Brokers MT4-MT5

Link List: xx = very bad reviews, A - Top Rated, Mix = Mixed Rating, N/A = not enough info
metaquotes.net - mt4 download demo
metaquotes.net mt5 download demo
Alpari UK mt4 & mt5 -- reviews Mix
Alpari Russian -- reviews A
Broco Trader mt4 & mt5 -- reviews xx
Ava FX -- reviews xx
GCI Financial -- reviews xx
Admiral Markets -- reviews N/A
ActivTrades -- reviews Mix
Dukascopy -- reviews Mix
AM Financials -- reviews N/A
MB Trading -- reviews Mix
FastBrokers -- reviews A
Compass FX -- reviews A
GFT -- reviews Mix
FiboGroup -- reviews Mix
GainScope -- reviews A
Oanda -- reviews Mix

(for the small fish) List of Metatrader brokers with Micro Account (minimum lot size 0.01):

Name ~ minimum starting ~ P=Paypal ~ M=Moneybookers
1lotstp $100 M
1pipfix $100
4XDG $50 P
AAAECN $100
AAAFx $300 M
AccentForex $10 M
ACFX $50 M
ACM Gold $250 P reviews
ActivTrades €250
Admiral Markets $1 M
AFX Capital $200
Alpari UK $200
Alpari US $1 P
Arab Financial Brokers (K.S.C.C) $50 M
AstaForex $1 M
AVS Carter $500
Axiory $500
Broco $25
Bulbrokers $50
CMS Forex $500
Deltastock $100
DF Markets $1
ECNPROFX $50 M
EES FX $500 0.01
EFX - England Foreign Exchange $500
eToro $50 M
EuroBroker $10 P
EXNESS $100 M
FalcoFX $100
FastBrokers $500 P
FBS $5 M
Finexo $100
FinOdds $25 M
Forex Club $200
Forex Control $500 M
FOREX.com $500
Forex4you $1
ForexCent $1
Forex FS $500
ForexYard $100
ForexWebTrader $25 M
FX|Clearing $1 P M
FX Choice $10 M
FX Financial Group $300
FX Solutions $250 P reviews
FXcast $10 M
FXCENTRAL $500 M
FXCM Micro $50
FXD24 - FX direct S.A. $10
FXDD $250 P
FXDealer $250 P
FXM Financial Group $100 P M
FXOpen $1
FXOptimax $10 M
FXPrice $250 P
FXPRIMUS $250 M
FXSalt $250 M
Gallant Capital Markets (GCMFX) $100 M
Go Markets $1 M
Grand Capital $1
Hirose Financial UK $20
HotForex $5 M
IamFX $100 M
IBFX - Interbank FX $1
IFC Markets $1
InovaTrade $500 P
InstaForex $1 M
Intel FX $10 M
InvestTechFX $100 M
IronFX $500 M
LEADER FOREX $100 M
LiteForex $10
Loyal Forex $50
Lucror FX $500 M
Marketiva $1
Markets.com $100
Masterforex $1
MB Trading $400
NordFX $5 M
OANDA $1 P
One Financial Markets $250
Pacific Financial Derivatives (PFD) $200 M
PaxForex $5 P
Pepperstone $200 M
PFG FX - Pro Finance Group $10
PipFixed $100 P reviews N/A
Proedge FX $250 P reviews N/A
Profiforex $1 M
RBS - Royal Bank of Scotland £1
Real Trade Group $20
RoboForex $10 M
SmartTradeFX $100
Solidity Brokers $100 M
Sunbird $100 M
Synergy FX $500 M
ThinkForex $500 M
Trader's Way $1 M
TradersChoiceFX $250 P
Tradeview Forex $100 M
Trading Point $5 M
UpFX $250 Paypal
UPME Group $1 M
UWC - United World Capital $5 M
Vantage FX $500 M
Vantage FX UK £350 M
Windsor Brokers $100
WSBrokers $10 M
XForex $100
XoomForex $100 M
YouTradeFX $100

Mt5 Broker List:
4XP
ActivTrades
Admiral Markets
Alpari UK
Alpari US
Broco
EXNESS
FIBO Group
Forex4you
FxCompany
FXDD
GO Markets
Grand Capital
IBFX
IC Markets

IGTFX Demo
InstaForex
LiteForex
Masterforex
MIG BANK
NordFX Live
N2 Capital Markets
Pepperstone
Roboforex
Sunbird
TraderChoiceFX
Tradeview Forex
UWC - United World Capital
Vantage FX
Windsor Brokers

*As you can see there are alot of FOREX brokers. Chose a broker that is well capitalized, has a good reputation, is available by phone and able to answer questions, and lastly verify they are currently regulated. If they are well capitalized they will usually brag about that in their about company page. Don't just go by look or features - those are 2ndary options when trading real money.

Difference between account types in pips:
Standard Account $10 a pip for EUR/USD *lot size = 1 lot
Mini Account $1 a pip for EUR/USD *lot size = .1 lots
Micro Account $.1 a pip for EUR/USD *lot size = .01 lots (some brokers even lower)

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Trading Topic: Placing Orders In Metatrader

This article covers how to set a stop loss in metatrader, how to set a target price, how to set buy limit, and how to set a sell limit.

This is an often overlooked topic. The brokers are quick to sign you up to trade FOREX but they often won't teach you how to correctly place an automated order. It's easy to click buy or sell from the trading terminal but what if you want to place a stop loss or target price that triggers at a specific price? It sounds simple at first glance but choosing the wrong order type can yield undesirable results.

You wouldn't want to make any type of mistake with real money involved so learn the difference between order types.

Orders that occur at a different price are called Pending Orders.

Types of Pending Orders:
Buy Limit - A buy limit is placed at a price that is lower than the current price. If that price is met an order will be sent at the market price.
Sell Limit - A sell limit is placed at a price that is higher than the current price. If that price is met an order will be sent at the market price.
Buy Stop - Buy Stops are used by momentum traders above the current price.
Sell Stop - Sell Stops are used by momentum traders below the current price.
Stop Loss - A stop loss is a price that is so many pips in the opposite direction of your trade if your trade fails to meet it's objective. Stop losses are meant to protect equity / further destruction of trading account. Traders that don't use them often blow up their accounts especially if their account is small.
Take Profit - A take profit is a price that is so many pips in the direction of your trade if the trade is successful.
Trailing Stop - A trailing stop price is adjusted as the price fluctuates to capture maximum profit if the trader gets in a good trend. Not useful in a range.

Example of trade in Metatrader (practice in demo):
1. Right click on chart and select "Trading" and "New Order".
2. Under "Type" the first choice is "Instant Execution". We want to change that
to "Pending Order".
3. Now Pending Order Will be under Type at the top and just below it will be a Pending Order section. There will also be a "Type" here with choices of Buy Limit, Sell Limit, Sell Stop, and Buy Stop.
4. Select a Buy limit below the current price by about 20 pips and select a Sell Limit of about 20 pips from current price by changing the "at price". The "at price" will have up and down arrows so for buy click 20 times down and 20 times up for sell. You will then see horizontal levels across the chart for each pending order you made once you click ok. There will be a ticket number to the left of the horizontal level and the type of order. eg some number like #3252646 sell limit. #434266 buy limit.
5. When the price goes to the sell limit or buy limit price a real order will be filled. While it says buy limit or sell limit it is still pending and no actual trade has been made. If the trade hasn't been triggered you can go into terminal (View/Terminal or Ctrl+t) select Trade in the terminal to make changes to the order. Right click on the trade and select "Modify or Delete Order" You change the price the same way you set it with the up down arrows where price is. To delete the order select "Delete". Practice deleting and changing orders a few times - in live markets this might save you some money if you had made a mistake and have to act fast before the trade is triggered.
6. Once the target prices of the pending orders have been filled "sell limit" horizontal line will change to "sell" and "buy limit" will change to "buy" meaning these orders are open.

That's basically it for buy and sell limits. Now what if you want to close those orders?

You can always manually right click on the order and choose close order. Or:

Exercise: Make pending orders for a stop loss and target price as 20 pips profit or loss:
1. right click order and select "Modify or Delete Order" again. The only choice will be to "Modify Order".

2. Select "Copy as" to change both Stop Loss and Take Profit and adjust the price accordingly (20pips difference) then click modify. If done properly red lines will show up on the chart for you stop loss and target. *Both these prices must differ by a specific amount from the current price - on my broker is 5 pips.

Correct Way To Properly Draw Fibonacci Retracements

This is almost never explained precisely or correctly so I will provide a precise howto that illustrates which end goes at the top and bottom of an uptrend and downtrend so that you draw the fib retracement in the right direction (not backwords) for meaningful technical analysis.

How to draw Fibonacci Levels in Metatrader:
(This is in Metatrader (mt4) but most other terminals are practically the same)
This part is as simple as pedaling a bike but don't worry it gets more complicated.

I personally use metatrader to do this so that will be our model. The tool should be part of the "line studies" toolbar in mt4 - if not you have to add it by clicking customize and insert. With your line studies toolbar is enabled, click on Fibonacci Retracement, and simply place it to the chart you are using. You may have to also double click it to stretch it.



Placement
The big idea is to find a big movement to measure which can be subjective to the traders eye but in general you want a pretty good chunk of data (a trend) that actually measures the correct starting point of the trend in question (the top of a downtrend or the bottom of an uptrend is the starting point). The end point might still be forming so that is the hard part. You basically use swing points (high to low or low to high) of the movement to draw your extensions.

If you are measuring a downtrend the top (swing high) will be the 100% and the bottom (swing low) will be 0%. If you are measuring a uptrend the bottom (swing low) is the 100% and the top (swing high) is 0%. In otherwords you are always chasing 0% in the direction of the trend and 100% is the starting point.

Finding a top or bottom
It takes participation to find a good retracement and this is subjective to every technician but I'll tell you my own method. You have to continually redraw the extension - because as mentioned you never know exactly where the top or bottom will actually occur unless you are a high profile fortune teller that sees in the future and thus wouldn't need technical analysis at all. So with that said - keep drawing extensions until there's a reaction to a retracement to the 1st Fibonacci level 23.6% and then interpret the pattern at that point with other confirmations (eg is volume picking up? ect).

Interpretation (add more detail)
The key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. These lines
are simply ratios between two extreme points of a high and a low. The 50% level actually does not have anything to do with Fibonacci, but traders use this level because of the tendency of reversals after retracing half of the previous move. The 50% was added by Dow Theory's. Basically the ratios act as either support or resistance levels.

The 61.8% is considered the golden ratio but my advice is to simply use all levels as support and resistance points to confirm with other indicators such as volume.

Example: If there is strong move but the move starts to loose it's steam. Lets say it's a downtrend and the sellers reduce their position so you draw a fibo extension from the swing high (100%) to the swing low (0%). There is a pullback to approximately the 38.2% and the sell off continues there with selling volume coming into play. What that means is the majority of sellers may have reduced their position by about 38% - the amount of the correction. Or perhaps it retraces to the 50% area and the sell off continues there because the sellers perhaps reduced half of their position (the amount of the bounce you see) and then new sellers came back in at the proximity of the "retracement level" if the trend is strong. If it breaks the 50% perhaps the sellers are not only reducing their position but the pattern may be reversing since resistance is not working.

Retracements are really not meant to be stand alone. They work well with other strategies combined (also called confluence see my article in blog archive). Many sophisticated traders will often combine Elliot Wave Theory, volume analysis, or other strategies with Fibo Retracements. It's just a way of finding weakness in a trading pattern of confirming it's strength instead of a stand alone magic trick. In live trading you need to confirm with other trading tricks especially when you have real money on the table.

In Action:

In an Uptrend:


Here a Fibonacci Retracement manually drawn between a low and a high in a short-term uptrend on a hourly chart for a currency pair. Price falls through the 23.6% and firms up at roughly the 38.2% providing a re-entry point for a long. Notice the candle pattern stays bearish here into the 38.2% - that is ideal. Then candles clearly firm up at the 38.2% which acts as strong support. The implication is that the trend will continue and perhaps set a new high.



Another clear example of a bounce that occurs at ruffly the 38.2% which acts as support because it's an uptrend. There is also some confluence with the 50ema which is considered a key moving average.

Did you notice something? Compare it to the example above. It is the same instrument at a different date. The previous bounce at 38.2% made a new high so this is actually a new fib retracement but it's still in an uptrend and the 38.2% once again turned out to be the buying point.

In fact if you zoom in on each example the only difference is the first Fibonacci retracement is drawn from January 13th 2012 to January 17th 2012 and the 2nd example is drawn from January 24th 2012 to January 26th 2012. That is the power of both a strong uptrend and Fibonacci. Does it work? What's it look like?

In a Downtrend:

Here a fib retracement is drawn from swing high to swing low because it's measuring a downtrend. The bounce occurs at ruffly the 38.2% and the 50ema. Again the fib levels are merely support and resistance points. In the case of a downtrend the 38.2% is resistance.

What can Fibonacci Retracements work on?
Everything that has price data: Bonds, Stocks (Google, Apple, IBM, Dow Jones Index), Currency Pairs/FOREX (aud/usd, gpy/jpy, usd/jpy, usd/chf), Options, Commodities(gold, silver, copper, wheat, sugar, coffee, crude oil), ect.


Historically
The history of Fibonacci dates back to when Leonardo Fibonacci (12th Century Italian Mathematician) was studying the construction of the pyramids and wrote about what he learned in a book called Liber Abaci (Book of Abacus or Book of Calculation).


The number pattern seemed to be found everywhere - even in nature.

Liber Abaci proposed and solved a problem involving the growth of a population of rabbits based on idealized assumptions. The solution, generation by generation, was a sequence of numbers later known as Fibonacci numbers. The number sequence was known to Indian mathematicians as early as the 6th century, but it was Fibonacci's Liber Abaci that introduced it to the West.

In the Fibonacci sequence of numbers, each number is the sum of the previous two numbers, starting with 0 and 1. This sequence begins 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987 ..

The higher up in the sequence, the closer two consecutive "Fibonacci numbers" of the sequence divided by each other will approach the golden ratio (approximately 1 : 1.618 or 0.618 : 1).

When used in technical analysis, the golden ratio is typically translated into three percentages: 38.2%, 50% and 61.8%. However, more multiples can be used when needed, such as 23.6%, 161.8%, 423% and so on.

The primary methods for applying the Fibonacci sequence to finance:
retracements / extensions
arcs
fans
time zones

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

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Candlesticks Overview and The Doji Pattern

The Doji is a good candlestick pattern for a beginner to recognize because it's very easy to spot so it will be emphasized it in this article.

Historically
Candlesticks were originally used by Japanese rice traders to do early technical analysis in the 1600's and was implemented by Charles Dow in the 1900's in the US. Steve Nison later made candlestick trading more popular in the US from his book "Japanese Candlestick Charting Techniques" published in 1991. Nison also translated early Japanese works.

Although candlesticks were first used in the 1600's they were not fully utilized until Munehisa Homna a prominent rice trader implemented them in the 1700's. With his research he developed a philosophy called "The Sakata Rules" which became the framework for Japanese investment. His research took into account historic price moves and weather conditions. Surprisingly, Japanese Candlestick analysis was never a hidden or secretive trading system.

In 1755, Munehisa Homna wrote "The fountain of Gold - The Three Monkey Record of Money", the first book on market psychology. He notes the psychological aspect of the market is critical to trading success. He is rumored to be the most successful market trader in history, generating over $100bn in profits at today's prices, some years earning over $10bn a year. He literally cornered the rice market and was made a financial adviser to the government. To some he is despised (many successful rice traders were) but to some (including myself) he is a Japanese hero of the time.

Homma named various patterns; Long days, Short days, White Marubozu , Black Marubozu, Spinning tops, Stars, Rain drops, Dark Cloud Cover, Evening Star, Doji's, Three Black Crows, Dragonfly Doji, Hanging Man and others.

Interpretation
The key to candlesticks was price action rather than news events that were unreliable than the actual mathematical representation of supply and demand or market emotion that could depicted in the form of a candlestick.

There are various patterns watched by candlestick traders that reflected emotion, supply and demand, or simply put points where the market may reverse do to previous interpretations. A Doji is one such pattern - it represents a decision point (some say a meeting of the minds) because the open and close are very close together (nearly equal).



To properly identify the Doji you must know what the candlestick parts mean. The first key part of a candlestick is the body. The body is the point between the open and close which makes up the width of the candle. I use a dark color (red or brown) to represent bear candlesticks and a bright color (lime or light blue) to represent bull candlesticks. A stick is bearish when the closing price is less than the opening price and bullish when the closing price is greater than the opening price.

The other key part of the candlestick is it's wick (also called shadows - a more confusing term) which is a very important piece of data but not as important as the open and close. The wick represents the high and low prices. Wicks represent where price action goes independent from the open and close so they don't have a body but reflect price extremes.

Don't get too complicated with candlestick parts - they are meant to be easy to read - interpreting patterns however is another subject entirely. The key pieces of a candle are: 1. The Body 2. The Upper Wick 3. The Lower Wick 4. The Opening Price 5. The Closing Price. How those various parts interact together make up what type of candlestick has formed - the wise rice traders watched these pieces of data like hawks. Also what the previous sticks have done and the following candlesticks after a pattern has formed are the key to learning and using the patterns. The previous candlesticks help identify patterns while the following (not yet formed) are used for confirmation of a pattern.

*Sometimes candles have no upper or lower wicks or no body (for example: when opening price equals closing price.

Doji Tutorial, Identification, Analysis



Above are variations of valid Doji's. Both variations represent a meeting of the minds - decision points (also called a tug-of-war between the buyers and sellers where the result is a standoff).

Bullish or Bearish action is based on preceding price action and future confirmation.
Therefore the previous trend is one of the keys to spotting a valid Doji Pattern. A Doji in a range is not as enticing as one that appears in a ascending or descending set of candles.

People get very technical in the identification of Doji Patterns but in general you are looking for a meeting of the minds (where open and close is nearly equal) after a preceding uptrend or downtrend. Preferable there's at least 5-10 bars in an uptrend or downtrend when the Doji occurs and not within a range.

(click to enlarge)

To me the above pattern is a valid Doji Pattern with all the essentials: 1. A prior trend 2. A long (of the previous direction) candle prior to the actual Doji. 3. A Meeting Of The Minds or Tug-of-war that ends in a standoff. 4. Confirmation / breakout of the Doji Pattern.

In my opinion you couldn't ask for more from the above pattern. The reward was also very impressive. It occurred in a daily timeframe so the profit was very generous.
Some might say that pattern was actually a spinning top (but the upper wick is not tall enough if you want to get technical - there are some grey areas to identification). I classify it as a Doji because I see a meeting of the minds and that's what were looking for - indecision after a prior trend.

Also the above pattern can be confused with a Hanging Man or Hammer but no look closely the lower wick is not long enough for either patterns to be valid.



A rarer variation is the Dragon Fly and Gravestone Doji. These patterns are times of high emotion and sometimes mark massive tops or bottoms.

Another variation is the Long Legged Doji.


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