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Welcome to "VT"
VT'S on a Mission adding to Your Success and Knowledge starting today with the VT.ORG Knowledge and "Vu Tube" pointing at misc interesting subjects, including Magic Word to assist a virtual-trader succeed in both life, investing and trading the markets like futures, stocks and options, and to study The Magic Word... Yes, it's Possible to Achieve Success trading Stocks, Options, Forex Markets, Mutual Funds or Trading Commodities Futures markets from your home PC, trading in real-time or over-night trades, making money trading-for-a-living, trading from the comfort of your home or office.
There are of course exceptions to trading rules regarding swing-trading with higher swing-highs and lower swing-lows. At certain times, you will come across a price bar which makes neither a higher-high or lower-low. This is called an Inside Bar. These trade patterns must be handled differently and require waiting for next bars before continuing your trades.
From time-to-time you will come across a price bar making both a higher high and a lower low. This is called an Outside Trading Bar. There, two swings are forming in short order. Usually, the swing has occurred first during the forming of the bar before the outside bar. But this will not be obvious looking at the price chart because the bar before the outside bar will not have a lower low or higher high than the outside bar itself. The trick here is to note the intra-day pattern to determine if the outside-bar formed its top or bottom first.
For example, say price bars are now making a series of lower swing highs and lower swing lows. We then see a price bar which makes both a higher high and lower low. Do we draw our line to the lower low first, then up to the new higher high? Or do we draw our line from the low of the price bar before the outside bar to the high of the outside bar, and then back down to the low? It all depends on which way price actually went from the close of the previous price bar, does it not?
However, by looking at intra-day prices for both price bars, you can quickly tell where the actual swing occurred and whether the outside high or low formed first. Then you can continue your line from there. One quick way is to simply note which way price moves after the outside price bar. If the next bar makes a higher high, it is likely that the outside bar’s low formed first with the high last. If the next bar makes a lower low instead, you then can assume the outside bar’s high formed first, then it’s low.
Upon constructing your swing chart, and can see swing-bottoms and swing-tops which you did not know existed before, you are ready to apply some of those price methods mentioned earlier to these swing tops and bottoms. Ratios can be applied using the large as well as the small ranges created by these swing tops and bottoms. You are on your way getting more info from your price charts than before.
Finding where the smart money is can be similar to a shell game, so how can you find where the smart money is going to strike next? The answer is simple: You find the top trending futures and stocks! Trending markets tend to have major volume, a clear direction, and lots of liquidity - A.K.A where the smart money is. Wouldn't it be nice to find a list of current strong trending stocks? Now you can! Trading Tip-of-the-Day
What Are the Top Performing Forex Pairs? Forex is the largest market in the world and trades 24-hours a day. Which currency pair is trending the strongest and where the market is going? Study the financial markets and use the webtrading traders search engine to learn more about trading futures and FX markets.
Stacking the Odds in Your Favor
Being profitable in the high-risk (high profit potential) business of virtual online commodity trading which requires hard work. So many trader websites advertise their trading services as a simple way to make lots of money, which marketing has proven to be the downfall of many new traders and trading careers.
There's a few (actually very few) financial trading systems sold on the market which instruct you exactly when to enter and exit a market position, with good annual percentage gains on investment. They need large initial capital base and will also often experience large account equity draw-down from time-to-time.
Most new futures markets traders do not fit the requirements necessary to trade the commodities, stock or futures markets this way. Thus, they must learn to make their own trading decisions in the hopes of increasing their small market position.
These traders are referred to as "discretionary" or "independent" traders.” Many traders desire to trade this way even if they have the capital funding to trade using a good commodity trading system>. Because independent futures trading requires the financial markets trader to make all entry and exit decisions, work must be done to reap the rewards from this type of trading approach.
Trading plans are quite important for futures and fx traders, where profit & loss potential is high, as is leverage and trading account margin! FX Forex traders need to follow a set of personal trading rules so each trade is not merely some act of chance. Trading based on luck is no better than casino gambling, which futures trading is certainly not meant to be.
Success at profitable stock market or forex futures and commodity futures trading is not a mere roll of the dice based mostly on luck, where you have a 50/50 or even less chance of success in a casino gambling game. It's more like a merchant of a clothing store that must make fashion decisions each quarter, and if his insight into the market is a good one, profits will be made by the sales of his inventory.
However, it's a bad business decision and he is left with a rack filled with clothing nobody wants and a financial loss. His success depends on properly analyzing the market environment and acting accordingly. Trading is the same.
As a discretionary trader, the task is to stack the odds in your favor for any given trade consideration. The power to do this is in every trader’s hands. Do the job well, and you will be rewarded. Try to take shortcuts due to time restraints or laziness, and the outcome may be very disappointing. So how might a discretionary trader stack the odds in his or her favor? That is what we will now discuss.
See The Overall Market Picture
Many new futures traders simply want to trade quickly and often. The
desire to make quick money plagues many who enter this arena
for the first time. In addition, they find little time to evaluate
their approach to trading before jumping from one method to
Discretionary traders need to understand that time and study is very important if to ever achieve a good trading approach based on sound trading principles. So many common sense approaches are ignored for the quick and dollar.
One good approach is simply to see the big market picture. This author has written several articles relating to this very subject, and for good reason. It is not only a smart thing to do; it is also something most forget or are too lazy to do.
Market patterns and trends go beyond the simple daily price charts. They exist on weekly, monthly and yearly price charts as well. An up trend on a daily chart may exist only as a one-bar rally but a weekly chart shows a strong downward direction! The weekly move may exist only as a bull-trend pullback on a monthly chart. If you only focus on a daily price chart to base your trading you could be entering a market trending against you.
Therefore, the wise thing to do regardless of the method you choose to use in trading a market is to start with a larger time frame (such as using a long-range monthly price chart) and work your way down to the weekly, daily or intra-day time frames (for day trading use).
A good example of this is the use of a daily time reversal date. If a trader simply looks to enter a trade based on a daily reversal date, it may end up as a quick blip on the daily price charts in favor of the stronger longer-term market trend direction.
Trading small reversal up-move, down-moves, or blips are certainly not the way to go, unless you are a scalper, a forex markets day-trader, or involved in euros day-trading. To stack the profitable trading odds in your favor, you will want to discern first the long-term direction (i.e., Monthly chart), then note the medium-term direction (i.e. Weekly chart), and if both are in agreement in direction, look to the daily price chart to time an entry in the same direction as your long and medium-term trends.
Keep in mind the long-term trend will often have more power vs the medium-term trend, just as the medium & long-term trend will carry more weight than the short-term or daily price trend. As a trader looking to stack the odds in your favor, you want to get the heavy-weights on your side before getting into the ring.
The quick way for those with limited time on their hands to determine the likely market trend is to use a trend-line. Draw it under major swing bottoms or across major swing tops on the monthly, weekly and daily price charts to see the dominant trend direction.
For those who wisely take more time at doing this, it's best to look closely at the different time frame charts and note whether it shows higher swing bottoms (for an up-trend), or lower swing tops and bottoms for a down-trend. Learn to draw swing charts which immediately gives a birds-eye view of the trend.
If your monthly bar-chart trend is up, plus your weekly trend is up, then when you come across a daily swing-bottom forming (especially on an expected reversal date and support level) higher than the previous daily swing bottom, you have a very powerful buy signal to go long and looking for an up-trend bullish market to start soon.