Entries Tagged 'Forex Trading' ↓

I just want you all to know that I am putting further development of this Forex training site on hold for at least a few weeks. I am working on a project to help my local community financially so the Town vision can actually be attained.

Since Forex trading system management is very definitely not for everyone, I am taking responsibility for some of the economic development of my little town: Meredith, NY. Apparently, I am the only person in the town who can do so! It’s quite amazing, but my help is needed.

So, while you have this little break, please take the time to learn the basics of chart reading that I have put up here for Forex Traders to become more consistently profitable. You might even have time to create your trading system from the little bit that is here!

That would really be great. So, until I have a better idea of how long this town project will take me, I’ll just leave this trading material online for you to study and use how you want.

Have a truly phenomenal trading month! I believe that the 4th quarter of 2008 will be unbelievable in the potential (so I will be moving as quickly as I can while also doing as well as I can to help)! Trade well.

Domination Wave Theory is not Elliot Wave Theory. Waves are counted on the smoothed or double-smoothed oscillating indicator rather than on the market. From peak to valley on the indicator’s waves constitute one leg.

The Beginning of Domination Waves

These waves and their respective legs are of definite value in predicting near-term future direction of a market.

Wave is a move up and down in an undulating motion. Wave is derived from the Middle English word waven, which means, to fluctuate.

The MACD, like any other smoothed, or double-smoothed, oscillating indicator, travels in waves, like the market.

In order to have another part of a wave pattern, another leg, the oscillating indicator must actually change direction from up to down, or from down to up on the close of a bar. Even if the change in direction is minute, the change in direction counts.

How to Determine the Start of a New Leg on a Wave

There are 4 ways to determine the start of a new leg on an oscillating indicator wave on a chart:

1. Weakness Divergence. (You have seen divergences already on this site.)

4. If a leg 2 moves beyond the beginning of a “leg 1”, it is automatically now the beginning of a new leg 1.

Necessary Characteristics of Domination Wave Patterns

These necessary characteristics are on the smoothed indicator, not on the market.

When the beginning of a new leg 1 on a chart is on the top side (market to move lower in price), then the end of leg 1/start of leg 2 must be lower than start of leg 1. The end of leg 2 / start of leg 3 must be higher than the end of leg 2 / start of leg 3 and lower than the beginning of the leg 1 on that chart. The end of leg 3 must be lower than the end of leg 1.

If the beginning of a new leg 1 on a chart is on the bottom side (market to move higher in price), then the end of leg 1 / start of leg 2 must be higher than the start of the leg. The end of leg 2 must be lower than the start of leg 2 and higher than the beginning of leg 1. The end of leg 3 must be higher than the end of leg 1.

Leg 1 is a move in a direction. (Thrust) (Strength in that direction)

Leg 2 is a re-alignment period (retracement of the move of Leg 1). (Weakness in that direction.)

Leg 3 is another move in the direction of Leg 1. More certain Thrust. (Confident Strength in that direction)

“Wave Mapping“, which will be covered in much more detail as this series of Domination Wave lessons progresses, is ONLY applying the above over and over on different time frames.

The smoothed oscillating indicator will either move straight to a signal pattern (fractal), or give three or more legs. When there is a new end of one leg / start of the next leg on a chart, two charts smaller will give you four parts 99% of the time. The one exception to this is with large, quick, vicious thrusts that produce a series of what are called “slide charts”, which you will learn more about in line-ups and time-synchs in the Inner Sanctum.

There is still a LOT more coming on Domination Wave Theory. I just want to lay down the groundwork before really digging in and explaining each concept on Domination Wave Theory given above.

If you have any questions or comments, please leave them. I will answer as soon as I can.

Have a phenomenal trading day, and prepare for some mind-blowing revelations on Domination Waves.

Parts 3 and 4 of the “on chart” lessons for reading the ADX. They go pretty quick and there’s some icky clicking, but I made them before I figured out how to really reduce the clicking. Anyway, it’s the PRINCIPLES of the ADX that matter here, and how to combine various patterns of strength and weakness. The ADX is one indicator that is great at showing strength and weakness.

This first video for today also has a little bit on the DMI/DI lines, in addition to showing the ADX principles on real charts. I don’t pay the directional movement indicator/index lines much attention because they really don’t deserve it, but there is a little bit. You could spend years studying those two lines and trying to figure out one significance after another. I don’t, however recommend that course of study.

This second video on the ADX is more of the same, but goes into some other aspects of ADX reading that aren’t covered in other videos. Again, these are from real time charts…

That’s about the extent of the information on the ADX that I’ll be giving out here on the blog. There will be more on the inside, coming in August.

The principles of the ADX and the conditions are given in previous posts.

So if you have any comments or questions, please leave them below. And while you’re at it, sign up for the email stuff above (and to the right). You give me your name and email address, and I’ll give you free silver membership into the “Inner Sanctum” when it opens up in August.

And let me know what kind of stuff you want to see in the Inner Sactum. I’ll do what I can to make it happen. Have a truly phenomenal trading day!

When you’re trading Forex, strength and weakness agreements have a tendency to come in handy. One of my favorite indicators for tracking strength and weakness patterns is the ADX. Today, we’ll cover ADX trends and their respective strengths and weaknesses, and an example of ADX weakness in time, on consecutive charts.

That’s some of what’s on today’s video on ADX Trends:

So the first thing you need to have a trend showing on the ADX is for there to be strength showing on a move. If the market moves lower and the ADX increases, that’s a stong move down, and the first step needed to have an ADX trend.

The second component needed is for the market to retrace some of the strong move, and have the ADX decrease, saying that there’s weakness in the counter-strength direction. So if the market moves lower and the ADX increases showing strength, then the market moves higher with the ADX decreasing, that’s the second part of having an ADX trend.

The third and final component is for the market to move farther in the direction of the prior strength.
Then there is an ADX trend on that chart, and that trend is either strong or weak.

In a strong trend, the ADX moves higher than it was at the end of the strong move in the same direction. In a weak trend, the ADX does not move higher than it was at the end of the strong move in the same direction.

Example: The market moves down, the ADX increases - shows strength in moving lower.
The market then moves higher, and the ADX decreases - shows weakness in moving higher.
The market then moves farther down than it was before the retracement up began.

That’s an ADX trend, and it is either strong (if the ADX is also higher than it was as the market moved farther), or weak (if the ADX does not move higher than it was as the market moved farther).

That’s it on the ADX trends. If you have any questions or comments, please leave them and I will get back to you as soon as I can. Have a tremendously successful trading day!

When you’re trading Forex markets, depending on your trading system, you might have to be able to track strength and weakness situations. The ADX, Average Directional Index, is a great indicator for tracking that strength and weakness on one chart.

Here is a video on ADX Moves in a forex market…

When the market you’re watching is moving higher, and the ADX is rising to the upward motion, that upward motion is strong. If the ADX is falling, then that upward motion is weak.

When the market you’re watching is moving lower, and the ADX is rising to the downward motion, that downward motion is strong. If the ADX is falling, then that downward motion is weak.

You’ll see on the next video how to use the ADX to track trend direction on a chart.

If you have any questions or comments, please leave them. I’ll answer or respond as quickly as I can.

Have a fantastic trading day!

Just want to wish all my friends in the forex groups on Facebook a wonderful weekend! I won’t be here because we’ve got a great weekend planned, and I won’t be putting up any videos or posts until either Sunday night or Monday (New York Time).

I’ll be celebrating the 4th in an even more remote location than our home!

Back to Forex talk then.
Stay great!

Below is a video that shows a couple more ADX principles and shows how to look at them on a chart, including the theory behind the ADX. I’ll review a bit after the video…

So you see the difference between the strength and the weakness in trends? While the market moves farther in a direction, the ADX either moves higher than it was, or it doesn’t.

When the ADX moves higher as the market moves farther up or down, (after strength shown in that direction) then that’s strength.

When the ADX does not move higher as the market moves farther (after the ADX has already show strength in that direction), then that’s a weak move at the time.

XOW - ADX Outta Whack

Also shown on the video is the XOW, or “ADX Outta Whack“. The market moves with the ADX showing strength in a direction, then the market corrects a bit, then retraces part of the correction. As the market is retracing part of the correction, the ADX moves higher than it was before the correction (after a weak move registered in the opposite direction).

What the ADX is saying is completely out of what is visible in the market action and says basically that even though the market did not move farther in the direction of strength, the new motion in that direction is stronger than when the market was farther in that direction. For Forex Traders this XOW setup is a fantastic trading opportunity that doesn’t show itself very frequently.

It’s shown in the video so you can see it. AND, coming next week will be more ADX training videos, but with real charts instead of me hanging out at home with my white board.

So if you have any questions, please ask. Any comments? Leave ‘em. I’ll get to your question or comment pretty quickly. And if you want a LOT more useful info, I’ll have a secret area of this site available only to you if you leave your name and email address. Inside will be even more killer, more structured info and non-youtube videos, audios, and training ability. (There will definitely be a free section of the “Inner Sanctum” of DominationTrading.com - but that won’t be up until into August, 2008.

Let me know what you want more of so I can give it to you. Please, dear Forex Traders, let me know what you want to know and I’ll be more than happy to provide it if I can. Trade with greatness.

Here’s a video on the ADX principles and ideas, part 1:

There will be another ADX video covering some of what was not in this video. The next one will also cover weak trends, and the killer XOW and how to use it in your forex trading.

Don’t worry, there will also be a video or two (or more depending on your questions) of applying the ADX on real currency charts. You know the kind, the screen capture.

Quick review of the ADX video above: Covered strong moves (ADX increasing), weak moves (ADX decreasing) - there’s more to them, so watch the video above to get more. Trend basics were covered briefly, and I alluded to the “double-high” ADX, a special kind of strength that is AWESOME to trade with when you see it in the right place!

If you have any questions, or if I was unclear on anything, please let me know - and feel free to leave any comments you have, questions or whatever. I’ll definitely get to it as soon as I can.

And in August, I’ll be creating a special “members only” section of this site that will only be available to you if you enter your name and email in the form above and to the right. It’ll be free, with other options to be added later. So enter your name and email above so you can learn even more about how to trade your favorite forex currency pairs.

Take care and have a truly phenomenal trading day!

Money is an idea backed with confidence. Trading Forex currency pairs is the idea. The confidence part is the standard following of the conditions and combinations in actually trading. All the knowingness you will ever have is already there, and it is summed up in be. (BE a highly successful trader. That’s unfortunately the entire secret to trading successfully.)

The Foundation: The Trading Rules, and Risk and Money Management

While following the four trading rules and proper money management techniques, we cannot ever lose money in the long run. The foundation of everything we do is tied to the four trading rules, and risk and money management. Everything else is built around that super strong foundation that is on super strong land. Everything else adds certainty or much higher probabilities on market movement direction.

Strength or Weakness Divergeneces are There or Not There

Signals are either there or not there. It’s not ever “close”. It’s not ever “almost there”. It’s not ever “forming”. There is no such thing as “maybe”. It is either there, or it is not there. If it is not clearly there, you’re on the wrong chart. There are no shades of grey. It’s yes, or it’s no. (I’m not always all “Aristotelian” in my logic, but it’s necessary here.)

We find that by locating specific patterns of discrepancies in waves in time, starting with future strength on a bigger chart, combined with agreement in past weakness on charts below the future strength, all agreeing on which way the market will move, we can accurately predict market direction, at least for a while.

We continually combine conditions and patterns of strength and weakness in temporal agreement on direction. In other words, for example, if we have strength to move up, we want to see weakness in downward motion on smaller charts. Strength on bigger charts combined with counter-directional weakness on smaller charts is what we want. We trade strength. We trade “Strengthenings”.

Every signal, every motion on the indicators and market, every wave have their respective aspects of strength and weakness. Combining these aspects in real time to get agreement on direction is what we do in predicting market action. It’s all about discrepancies in comparable waves in time.

Higher probabilities are still less certain than certainties. Thus, if we are trading the higher probabilities, we must be tighter on our stops. When we are trading our certainties, we can be looser on our stops. The certainties are the line-ups from a next chart in time that can push the market farther in a direction. The higher probability trades are given to us solely in the form of weakness with no larger chart future strength.

The answer to the question, “Is the market done moving in the direction it is currently moving (at least for now)?” is the exact same answer as the question, “Do we have a line-up from a next chart that can push the market right now?” Line-ups show our future strength(s) and our past weakness(es) to give us certainty that the market will move in the direction we say it will move.

We only ever work from the last larger line-up (and determine where we are in that line-up, as given by time) and now. We project into the future by determining what must happen to give us the conditions we must have to have a trade, or to continue in a trade.

When to ignore signals and/or line-ups is equally as important as when to heed them. The answer of when to ignore is found in TIME.

Time is nothing more than advanced wave theory (not ever to be covered on this blog, but in the coming membership site here (with a free option, too), and properly read, time has no more meaning than waves.

There is no such thing as the market behaving improperly. There is only reading the charts properly or improperly. The market is never wrong in what it is doing because it is doing it and you agree to it.

If you have any comments or questions, please ask or leave them. I’ll get to you as soon as I possibly can. Stay great and trade your favorite currency pair well!

Yes, Risk and Money Management is that important when you’re trading Forex.

The basic risk and money management model is quite simple: it’s just the “previous peak take-out point” type of strategy that, over a sufficient amount of time, has proven itself profitable. That profit is made in trending markets, where the market keeps moving in basically the same direction. The losses incurred using just the basic model can be disheartening and frustrating, incurring many losses in a row, and quite often unacceptable.

The big “but” here is that it is NOT the system, it is a very basic model that will be built upon. Like any other basic models that are intended to be built upon, like any other foundation in any building that is intended to be built upon, it is not the final structure.

Imagine for a moment that you pay someone to build a house for you and stop by one day and there’s only the foundation in place. You wouldn’t immediately assume that you’re going to be moving in as is because the rest of the house isn’t there yet.

This is the same type of thing: this very basic model is only a foundation, and the rest of the pieces to build the full “house” are not in place. Without a strong foundation, the house will not long stand. This foundation is prime to be built upon.

In getting started with the very basic model, you will notice on the chart below that there are no indicators on the chart. All that is there are the bars for one time frame.

The “bars” on the chart above are called “Open-High-Low-Close Bars” or “OHLC bars” because on each bar there is a point which represents each of the Open, High, Low, and Close. The tick on the left side of each bar is the opening price for that bar. The highest point on each bar is the highest price the market reached during the time period of that bar, so the highest point on a bar is the high. The lowest price level on a bar is the low for that bar. The tick on the right side of a bar is the closing price for that bar.

Each bar represents the market action during the time period of that bar. The above chart is from a 5-minute chart, so each bar represents the market action during a five-minute period.

There are other types of charts, but this type, the OHLC bar chart is, in my opinion, very good and very useful, and there is not necessarily any more information on any other type of chart.

What is important about this type of chart is that we can see what are called “peaks”. In order to understand what a peak is, we have to define the characteristics of peaks and see what they look like in their various forms.

A “peak” is defined as “a point or plateau which exceeds the previous and next bars’ same-side extreme.” You can get the idea from looking at your pen and holding the point so it is facing up. You can see that the high point in the middle is higher than the left and right sides. If you then hold the pen upside down, you will see that the point is lower than the left and right sides.

Below you can see a chart with all of the peaks marked except one (can you find it?):

The grayed-in areas show “plateau-type” peaks, where the market hit the same price point during two or more consecutive bars and that price point extends beyond the extreme of both the left and right sides of that plateau. (Can you find the one plateau-type peak which is not grayed? There is one.)

After studying the above chart for a few moments, you can really see what a peak is and what does not constitute a peak. If you do find what you think is a peak by definition, but it is not marked, look for yourself to determine why it is not a peak (except for the one that is not marked).

Also note that it is impossible to have a peak in present time. In other words, there can be no peak in real time, right now, because there is no “next” bar for the current bar to be more extreme than. So in real time, there is never a peak “right now”. That’s a very important point to know.

Now that you know what a peak is, what is a “previous peak take-out”? What we’re talking about here is a previous peak on the same side, and the current bar, the “now” bar in real time, moves at least one tick farther in price. If we’re on the top side of the chart, then we’re looking to see if the market moves higher in price than a previous peak. If we’re on the bottom side of the chart, then we’re looking to see if the market moves lower in price than the last peak on the bottom side, or lower on the chart than that previous peak.

As soon as a new peak forms on the same side, that new peak becomes the last peak, or the “revious”peak. That peak two peaks ago becomes a previous peak, but not the previous peak. Please note that distinction, because later on it will be crucial to your understanding the difference between when I write the previous peak, and a previous peak. The is more specific, and a is general.

Since this “foundation” is the previous peak take-out point, it is the specific form.

So in starting out the foundation with no indicators, we are only relying on previous market peaks on one chart, one time frame, to tell us what to do – in this basic model, which we will not be using as it is directly, but are using to build from – and the chart on the next page will show the previous peaks, and when the previous peak was taken out, at what price level.

[Note that there is version of this basic model that is a previous peak take out, and the basic difference is that any old peak on a side that the price extends beyond, you trade in that direction as long as the peak is wide open to the price. “Wide open to the price” means that from the peak in consideration to the current bar there are no price bars (or candlesticks if you’re using candlesticks) in the way if you were to draw a line from the past peak to the currrent price bar.]

Please pay close attention to the previous peak, and when it was taken out, or the price moved beyond the previous peak’s extreme point. Each sequence is in a different color, so it shouldn’t be too difficult to figure out which goes with which. So look on the next page now:

From each “Previous Peak Take-Out Point” there is marked “The Previous Peak”, and in real time, it was that way. Notice that there are more of “the previous peak”s that were also taken out, or where the price moved beyond that level, but I want you to understand the concept. You should feel free to mark up where “the” previous peak was taken out by a market move to help you better be able to apply the basic information.

Great, so now we have what a peak is, the difference between the previous peak and a previous peak, and what it look like when the previous peak was “taken out” and what it means to have the previous peak taken out. So, what do we do now? How do we use that?

We use the previous peak in this basic model to get us in the market in a direction – in this basic model only. We will not be actually using this exactly as stated, but we will be building upon this basic model, this basic foundation, to be building upon.

What we do in this basic model is to let the market form a range, a peak on both sides of a chart, like the 5-minute chart, then we let the market enter us in a trade by setting the stop orders on both sides of the range defined by the peaks.

So what we do when the market has shown us a high peak and a low peak is to then set a buy stop for one contract above the high peak, and a sell stop for one contract below the low peak. How far? One tick beyond each peak. The buy stop is placed one tick above the high peak, and the sell stop is placed one tick below the low peak.

The Market Open is marked with the green line. After that line, the first market peaks are formed. When both are formed, you place a buy stop one tick above the first high peak, and a sell stop one tick below the first low peak.

When a new peak is formed on the bottom side one bar after the first high peak was formed, you move your sell stop to one tick below the new low peak and cancel your first sell stop, which was not filled because the conditions were not met yet.

Notice the red dot above, which shows where your sell stop was triggered, where the conditions were satisfied for your order to sell at that point. What this means is that you have sold one contract, assuming you are trading a futures market, and that means that you are now one contract “short”. Short means that you sold first looking for the price to move lower so you can then buy at a better price, a lower price, later on. So you are now short one contract, and your buy stop is now one tick higher than the second high peak.

Right after the market filled your sell stop, you are in a short position, you now change your buy stop to 2 contracts instead of one contract. What that does is to take your stop loss (the buy stop above the market, where you say you are now going to stop taking a loss on the position) and when it is triggered, you will now be long one contract. Being long one contract means that you have purchased one contract thinking the market will move higher in price so you can then sell your contract for a profit.

So in this basic strategy, you are always in the market either long or short. You always have an open position until near the end of the day once your first position is filled. The major plus of this strategy is that you are always protected with a stop order. The major negative is that on wildly swinging days, there would be considerable losses incurred.

You continue to move your stop orders for two contracts as new peaks are formed throughout the day until you close your final position near the end of the day. When you close your final position near the end of the day, you will do so by placing a market order directly against your final position. So if you are long one contract, you will sell one contract. If you are short one contract, you will buy one contract. That closes out your open position near the end of the day.

Your first exercise for this basic strategy is to mark and write down what would have happened on this particular day. Would you have been profitable or not? (Answer: Profitable.)

While this basic strategy works well on trending days, on non-trending or wildly swinging (whipsaw) days, the wins will tend to turn to net losses for those days.

Your next exercise for this basic, foundation-only strategy is to actually paper trade it for a day or two on a 3- or 5-minute chart in the market of your choice. Once your first trade is filled for the day, you should always be in the market either long or short until very near the end of the trading day’s regular trading hours (on most markets), or most active times (if a 24-hour market, like the FOREX). You must be able to think with the basic mechanics of this basic system, even though it will not be used directly in the full model. You should understand the mechanics of the previous peak take-out model – regardless of whether or not it is profitable for the day(s) you are paper trading it – before you progress to incorporating the basic add-on model, which follows. That means that if you are relatively new to trading, you will not have any indicators on your chart(s). You will only have the market action with a 5-minute OHLC bar chart representing that action.

[If you’re already very familiar with the basics involved and can follow it without hardly thinking, you may feel free to move on to the basic add-on model.]

So, how can we take this basic model and make it so we can make even more on the trending days than we lose on the non-trending or wild days?

When we look at the trading rules, we see rule number three: Let your profits run and multiply as safely as possible. Without the multiplication aspect, we are only making linear profits and losses, zig-zagging on either side of net profit and loss, with a long-term, gradual increase in account size. That is an undesirable condition. I certainly don’t tolerate it, and this leads us to the basic add-on model. You might just like this one really, really well because over time it’s usually very profitable when sticking to the rules.