EURUSD 1.1851 |
USDJPY 111.52 |
GBPUSD 1.3772 |
AUDUSD 0.7485 |
USDCAD 1.2406 |
GBPJPY 153.59 |
EURJPY 132.15 |
AUDJPY 83.48 |
CADJPY 89.86 |
Silver 26.23 |
Of Gold Extensions مقياس إمتدادات الذهب
Friday's $2431 high in gold consisted of a 21% rise from the Feb 14th low. Such percentage extensions from key lows or/and technical levels such as the 200-DMA, could flag crucial opportunities for partial/full profit-taking. Watch here.
Bitcoin versus Miners Performance
As many of you know 2023 was kind to members of our WhatsApp Broadcast Group who snapped up shares in bitcoin miners, while 2024 has so far been more superior to Bitcoin than most of the miners...
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In The Elliott Wave Principle — A Critical Appraisal, A. Hamilton Bolton made this opening statement:
As we have advanced through some of the most unpredictable economic climate imaginable, covering depression, major war, and postwar reconstruction and boom, I have noted how well Elliott’s Wave Principle has fitted into the facts of life as they have developed, and have accordingly gained more confidence that this Principle has a good quotient of basic value.
In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form but not necessarily in time or amplitude. Elliott isolated five such patterns, or "waves," that recur in market price data. He named, defined and illustrated these patterns and their variations. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns of the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.
Although it is the best Forex Signals tool in existence, the Wave Principle is not primarily a Forex Signals tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market’s position within the behavioral continuum and therefore about its probable ensuing path. The primary value of the Wave Principle is that it provides a context for market analysis and FREE Forex Signals . This context provides both a basis for disciplined thinking and a perspective on the market’s general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable. Many areas of mass human activity display the Wave Principle, but it is most popularly used in the stock market. Truly, however, the stock market is far more significant to the human condition than it appears to casual observers and even to those who make their living by it. The level of aggregate stock prices is a direct and immediate measure of the popular valuation of man’s total productive capability. That this valuation has form is a fact of profound implications that will ultimately revolutionize the social sciences. That, however, is a discussion for another time.
R.N. Elliott’s genius consisted of a wonderfully disciplined mental process, suited to studying charts of the Dow Jones Industrial Average and its predecessors with such thoroughness and precision that he could construct a network of principles that reflected all market action known to him up to the mid-1940s. At that time, with the Dow near 100, Elliott predicted a great bull market for the next several decades that would exceed all expectations at a time when most investors felt it impossible that the Dow could even better its 1929 peak. As we shall see, exceptional stock market forecasts, some of pinpoint accuracy years in advance, have accompanied the history of the application of the Elliott wave approach.
Elliott had theories regarding the origin and meaning of the patterns he discovered, which we will present and expand upon in Chapter 3. Until then, suffice it to say that the patterns described in Chapters 1 and 2 have stood the test of time.
Often one will hear several different interpretations of the market’s Elliott wave status, especially when cursory, offthe- cuff studies of the averages are made by latter-day experts. However, most uncertainties can be avoided by keeping charts on both arithmetic and semilogarithmic scale and by taking care to follow the rules and guidelines as laid down in this book. Welcome to the world of Elliott.
Leading Diagonal
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When diagonal triangles occur in the wave 5 or C position, they take the 3-3-3-3-3 shape that Elliott described. However, it has recently come to light that a variation on this pattern occasionally appears in the wave 1 position of impulses and in the wave A position of zigzags. The characteristic overlapping of waves 1 and 4 and the convergence of boundary lines into a wedge shape remain as in the ending diagonal triangle. However, the subdivisions are different, tracing out a 5-3-5-3-5 pattern. The structure of this formation (see Figure 1-20) fits the spirit of the Wave Principle in that the five-wave subdivisions in the direction of the larger trend communicate a "continuation" message as opposed to the "termination" implication of the three-wave subdivisions in the ending diagonal. Analysts must be aware of this pattern to avoid mistaking it for a far more common development, a series of first and second waves. The main key to recognizing this pattern is the decided slowing of price change in the fifth subwave relative to the third. By contrast, in developing first and second waves, short term speed typically increases, and breadth (i.e., the number of stocks or subindexes participating) often expands.
Figure 1-21 shows a real life example of a leading diagonal triangle. This pattern was not originally discovered by R.N. Elliott but has appeared enough times and over a long enough period that we are convinced of its validity.
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Every wave serves one of two functions: action or reaction. Specifically, a wave may either advance the cause of the wave of one larger degree or interrupt it. The function of a wave is determined by its relative direction. An actionary or trend wave is any wave that trends in the same direction as the wave of one larger degree of which it is a part. A reactionary or countertrend wave is any wave that trends in the direction opposite to that of the wave of one larger degree of which it is part. Actionary waves are labeled with odd numbers and letters. Reactionary waves are labeled with even numbers and letters.
All reactionary waves develop in corrective mode. If all actionary waves developed in motive mode, then there would be no need for different terms. Indeed, most actionary waves do subdivide into five waves. However, as the following sections reveal, a few actionary waves develop in corrective mode, i.e., they subdivide into three waves or a variation thereof. A detailed knowledge of pattern construction is required before one can draw the distinction between actionary function and motive mode, which in the underlying model introduced so far are indistinct. A thorough understanding of the forms detailed in the next five lessons will clarify why we have introduced these terms to the Elliott Wave lexicon.
Lesson 4: Motive Waves
Motive waves subdivide into five waves with certain characteristics and always move in the same direction as the trend of one larger degree. They are straightforward and relatively easy to recognize and interpret.
Within motive waves, wave 2 never retraces more than 100% of wave 1, and wave 4 never retraces more than 100% of wave 3. Wave 3, moreover, always travels beyond the end of wave 1. The goal of a motive wave is to make progress, and these rules of formation assure that it will.
Elliott further discovered that in price terms, wave 3 is often the longest and never the shortest among the three actionary waves (1, 3 and 5) of a motive wave. As long as wave 3 undergoes a greater percentage movement than either wave 1 or 5, this rule is satisfied. It almost always holds on an arithmetic basis as well. There are two types of motive waves: impulses and diagonal triangles
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Overreliance on software
Most people use some form of technology to assist their trading.
For example, you might study chart patterns or use automated alerts and algorithms as prompts to trade.
But, as useful as all of these tools are, it is important to remember that they are only tools, and must be employed wisely.
Just as your satnav can occasionally direct you to drive into a deep torrent of water because it doesn't know the river has flooded, trading technology isn't something to follow blindly. You still need to keep your eyes open and react intelligently to the signs you see.
Car
So when using technology, such as charting software or other analysis tools, it's important that you understand the underlying concepts and the reasons behind what the charts are telling you. This will allow you to see the bigger picture and avoid unnecessary mistakes.
Lack of record keeping
Do you remember your first trade? What about the third, or the fifth?
If you're new to trading, the details may still be clear in your memory. But in a few months' time will you still be able to describe each step and decision in detail?
Unless you keep a trading log or diary, the chances are that this information will be lost. And if you can't remember what you did right, how can you replicate it? Similarly, if you don't know where you went wrong you could easily make the same mistakes again.
Your trading diary will let you look back at your experiences with the value of hindsight and learn from them. So what should you record in it?
Question
Which of the following is NOT worth putting in your trading diary?
A
Why you decided to trade
B
What you were wearing at the time
C
Where you placed your stops or limits
D
How you felt at the time you opened and closed the trade
Reveal answer
Bad timing
Timing is not only the art of good comedy - it's also central to good trading.
In the same way that a stand-up artist needs to deliver the punchline at exactly the right moment, you need to time your entry and exit from a market perfectly to maximise any profit or minimise any loss.
Timing mistakes are common among new traders. So how can you avoid them? Although getting your timing right isn't an exact science, there are a few tools that will help you to act at the right moment:
Chart analysis will help you forecast potential scenarios by revealing market patterns
A trading plan will help you to define your strategy, meaning you're more likely to avoid impulsive actions
Stops and limits will allow you to go about your business without having to monitor the markets constantly
summary
Remember the limitations of software and use it intelligently
Keep a trading diary and reflect on the strategies that have worked well (or not so well)
Use tools such as charts, stops and limits to help you get your timing right when opening and closing positions
The Rounding Bottom is a long-term reversal pattern that is best suited for weekly charts. It is also referred to as a saucer bottom, and represents a long consolidation period that turns from a bearish bias to a bullish bias.
Prior Trend: In order to be a reversal pattern, there must be a prior trend to reverse. Ideally, the low of a rounding bottom will mark a new low or reaction low. In practice, there are occasions when the low is recorded many months earlier and the security trades flat before forming the pattern. When the rounding bottom does finally form, its low may not be the lowest low of the last few months.
Decline: The first portion of the rounding bottom is the decline that leads to the low of the pattern. This decline can take on different forms: some are quite jagged with a number of reaction highs and lows, while others trade lower in a more linear fashion.
Low: The low of the rounding bottom can resemble a “V” bottom, but should not be too sharp and should take a few weeks to form. Because prices are in a long-term decline, the possibility of a selling climax exists that could create a lower spike.
Advance: The advance off of the lows forms the right half of the pattern and should take about the same amount of time as the prior decline. If the advance is too sharp, then the validity of a rounding bottom may be in question.
Breakout: Bullish confirmation comes when the pattern breaks above the reaction high that marked the beginning of the decline at the start of the pattern. As with most resistance breakouts, this level can become support. However, rounding bottoms represent long-term reversal and this new support level may not be that significant.
Volume: In an ideal pattern, volume levels will track the shape of the rounding bottom: high at the beginning of the decline, low at the end of the decline and rising during the advance. Volume levels are not too important on the decline, but there should be an increase in volume on the advance and preferably on the breakout.
A rounding bottom could be thought of as a head and shoulders bottom without readily identifiable shoulders. The head represents the low and is fairly central to the pattern. The volume levels throughout the pattern mimic those of the head and shoulders bottom; confirmation comes with a resistance breakout. While symmetry is preferable on the rounding bottom, the left and right side do not have to be equal in time or slope. The important thing is to capture the essence of the pattern.
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The Rising Wedge is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows. In contrast to symmetrical triangles, which have no definitive slope and no bullish or bearish bias, rising wedges definitely slope up and have a bearish bias.
While though this article will focus on the rising wedge as a reversal pattern, the pattern can also fit into the continuation category. As a continuation pattern, the rising wedge will still slope up, but the slope will be against the prevailing downtrend. As a reversal pattern, the rising wedge will slope up and with the prevailing trend. Regardless of the type (reversal or continuation), rising wedges are bearish.
Prior Trend: In order to qualify as a reversal pattern, there must be a prior trend to reverse. The rising wedge usually forms over a 3-6 month period and can mark an intermediate or long-term trend reversal. Sometimes the current trend is totally contained within the rising wedge; other times the pattern will form after an extended advance.
Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be higher than the previous high.
Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be higher than the previous low.
Contraction: The upper resistance line and lower support line converge as the pattern matures. The advances from the reaction lows (lower support line) become shorter and shorter, which makes the rallies unconvincing. This creates an upper resistance line that fails to keep pace with the slope of the lower support line and indicates a supply overhang as prices increase.
Support Break: Bearish confirmation of the pattern does not come until the support line is broken in a convincing fashion. It is sometimes prudent to wait for a break of the previous reaction low. Once support is broken, there can sometimes be a reaction rally to test the newfound resistance level.
Volume: Ideally, volume will decline as prices rise and the wedge evolves. An expansion of volume on the support line break can be taken as bearish confirmation.
The rising wedge can be one of the most difficult chart patterns to accurately recognize and trade. While it is a consolidation formation, the loss of upside momentum on each successive high gives the pattern its bearish bias. However, the series of higher highs and higher lows keeps the trend inherently bullish. The final break of support indicates that the forces of supply have finally won out and lower prices are likely. There are no measuring techniques to estimate the decline – other aspects of technical analysis should be employed to forecast price targets.
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The Falling Wedge is a bullish pattern that begins wide at the top and contracts as prices move lower. This price action forms a cone that slopes down as the reaction highs and reaction lows converge. In contrast to symmetrical triangles, which have no definitive slope and no bias, falling wedges definitely slope down and have a bullish bias. However, this bullish bias cannot be realized until a resistance breakout occurs.
While this article will focus on the falling wedge as a reversal pattern, it can also fit into the continuation category. As a continuation pattern, the falling wedge will still slope down, but the slope will be against the prevailing uptrend. As a reversal pattern, the falling wedge slopes down and with the prevailing trend. Regardless of the type (reversal or continuation), falling wedges are regarded as bullish patterns.
Prior Trend: To qualify as a reversal pattern, there must be a prior trend to reverse. Ideally, the falling wedge will form after an extended downtrend and mark the final low. The pattern usually forms over a 3-6 month period and the preceding downtrend should be at least 3 months old.
Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be lower than the previous highs.
Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be lower than the previous lows.
Contraction: The upper resistance line and lower support line converge to form a cone as the pattern matures. The reaction lows still penetrate the previous lows, but this penetration becomes shallower. Shallower lows indicate a decrease in selling pressure and create a lower support line with less negative slope than the upper resistance line.
Resistance Break: Bullish confirmation of the pattern does not come until the resistance line is broken in convincing fashion. It is sometimes prudent to wait for a break above the previous reaction high for further confirmation. Once resistance is broken, there can sometimes be a correction to test the newfound support level.
Volume: While volume is not particularly important on rising wedges, it is an essential ingredient to confirm a falling wedge breakout. Without an expansion of volume, the breakout will lack conviction and be vulnerable to failure.
As with rising wedges, the falling wedge can be one of the most difficult chart patterns to accurately recognize and trade. When lower highs and lower lows form, as in a falling wedge, a security remains in a downtrend. The falling wedge is designed to spot a decrease in downside momentum and alert technicians to a potential trend reversal. Even though selling pressure may be diminishing, demand does not win out until resistance is broken. As with most patterns, it is important to wait for a breakout and combine other aspects of technical analysis to confirm signals.
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Head and Shoulders Top
A Head and Shoulders reversal pattern forms after an uptrend, and its completion marks a trend reversal. The pattern contains three successive peaks, with the middle peak (head) being the highest and the two outside peaks (shoulders) being low and roughly equal. The reaction lows of each peak can be connected to form support, or a neckline.
As its name implies, the Head and Shoulders reversal pattern is made up of a left shoulder, a head, a right shoulder, and a neckline. Other parts playing a role in the pattern are volume, the breakout, price target and support turned resistance. We will look at each part individually, and then put them together with some examples.
Prior Trend: It is important to establish the existence of a prior uptrend for this to be a reversal pattern. Without a prior uptrend to reverse, there cannot be a Head and Shoulders reversal pattern (or any reversal pattern for that matter).
Left Shoulder: While in an uptrend, the left shoulder forms a peak that marks the high point of the current trend. After making this peak, a decline ensues to complete the formation of the shoulder (1). The low of the decline usually remains above the trend line, keeping the uptrend intact.
Head: From the low of the left shoulder, an advance begins that exceeds the previous high and marks the top of the head. After peaking, the low of the subsequent decline marks the second point of the neckline (2). The low of the decline usually breaks the uptrend line, putting the uptrend in jeopardy.
Right Shoulder: The advance from the low of the head forms the right shoulder. This peak is lower than the head (a lower high) and usually in line with the high of the left shoulder. While symmetry is preferred, sometimes the shoulders can be out of whack. The decline from the peak of the right shoulder should break the neckline.
Neckline: The neckline forms by connecting low points 1 and 2. Low point 1 marks the end of the left shoulder and the beginning of the head. Low point 2 marks the end of the head and the beginning of the right shoulder. Depending on the relationship between the two low points, the neckline can slope up, slope down or be horizontal. The slope of the neckline will affect the pattern's degree of bearishness—a downward slope is more bearish than an upward slope. In some cases, multiple low points can be used to form the neckline.
Volume: As the Head and Shoulders pattern unfolds, volume plays an important role in confirmation. Volume can be measured as an indicator (OBV, Chaikin Money Flow) or simply by analyzing volume levels. Ideally, but not always, volume during the advance of the left shoulder should be higher than during the advance of the head. Together, the decrease in volume and the new high of the head serve as a warning sign. The next warning sign comes when volume increases on the decline from the peak of the head, then decreases during the advance of the right shoulder. Final confirmation comes when volume further increases during the decline of the right shoulder.
Neckline Break: The head and shoulders pattern is not complete and the uptrend is not reversed until neckline support is broken. Ideally, this should also occur in a convincing manner, with an expansion in volume.
Support Turned Resistance: Once support is broken, it is common for this same support level to turn into resistance. Sometimes, but certainly not always, the price will return to the support break, and offer a second chance to sell.
Price Target: After breaking neckline support, the projected price decline is found by measuring the distance from the neckline to the top of the head. This distance is then subtracted from the neckline to reach a price target. Any price target should serve as a rough guide, and other factors should be considered as well. These factors might include previous support levels, Fibonacci retracements, or long-term moving averages.
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The Double Bottom Reversal is a bullish reversal pattern typically found on bar charts, line charts, and candlestick charts. As its name implies, the pattern is made up of two consecutive troughs that are roughly equal, with a moderate peak in-between.
Note that a Double Bottom Reversal on a bar or line chart is completely different from Double Bottom Breakdown on a P&F chart. Namely, Double Bottom Breakdowns on P&F charts are bearish patterns that mark a downside support break.
United Technologies Corp. (UTX) Double Bottom Reversal example chart from StockCharts.com
Although there can be variations, the classic Double Bottom Reversal usually marks an intermediate or long-term change in trend. Many potential Double Bottom Reversals can form during a downtrend, but until key resistance is broken, a reversal cannot be confirmed. To help clarify, we will look at the key points in the formation and then walk through an example.
Prior Trend: With any reversal pattern, there must be an existing trend to reverse. In the case of the Double Bottom Reversal, a significant downtrend of several months should be in place.
First Trough: The first trough should mark the lowest point of the current trend. As such, the first trough is fairly normal in appearance and the downtrend remains firmly in place.
Peak: After the first trough, an advance takes place that typically ranges from 10 to 20%. Volume on the advance from the first trough is usually inconsequential, but an increase could signal early accumulation. The high of the peak is sometimes rounded or drawn out a bit from the hesitation to go back down. This hesitation indicates that demand is increasing, but still not strong enough for a breakout.
Second Trough: The decline off of the reaction high usually occurs with low volume and meets support from the previous low. Support from the previous low should be expected. Even after establishing support, only the possibility of a Double Bottom Reversal exists, and it still needs to be confirmed. The time period between troughs can vary from a few weeks to many months, with the norm being 1-3 months. While exact troughs are preferable, there is some room to maneuver; typically, a trough within 3% of its predecessor is considered valid.
Advance From Trough: Volume is more important for the Double Bottom Reversal than the double top. There should be clear evidence that volume and buying pressure are accelerating during the advance off of the second trough. An accelerated ascent, perhaps marked with a gap or two, also indicates a potential change in sentiment.
Resistance Break: Even after trading up to resistance, the double top and trend reversal are still not complete. Breaking resistance from the highest point between the troughs completes the Double Bottom Reversal. Like advances, these should occur with an increase in volume and/or an accelerated ascent.
Resistance Turned Support: Broken resistance becomes potential support and there is sometimes a test of this newfound support level with the first correction. Such a test can offer a second chance to close a short position or initiate a long.
Price Target: The distance from the resistance breakout to trough lows can be added on top of the resistance break to estimate a target. This would imply that the bigger the formation is, the larger the potential advance.
It is important to remember that the Double Bottom Reversal is an intermediate to long-term reversal pattern that will not form in a few days. Even though formation in a few weeks is possible, it is preferable to have at least 4 weeks between lows. Bottoms usually take longer to form than tops; patience can often be a virtue. Give the pattern time to develop and look for the proper clues. The advance off of the first trough should be 10-20%. The second trough should form a low within 3% of the previous low and volume on the ensuing advance should increase. Volume indicators such as Chaikin Money Flow, OBV and Accumulation/Distribution can be used to look for signs of buying pressure. Just as with the double top, it is paramount to wait for the resistance breakout. The formation is not complete until the previous reaction high is taken out.
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Sometimes there is a misconception that you need highly evolved market knowledge and years of trading experience to be successful. However, we often see that the more information we have the more difficult it is to create a clear plan. More information tends to create hesitation and doubt, which in turn allows emotions to creep in. This can prevent you from taking a step back and looking at a situation subjectively.
If you don’t know where you are going, any road will get you there. In trading, if you don’t set out a plan for your trades and develop strategies to follow you have no way to measure your success. The vast majority of people do not trade to a plan, so it’s not a mystery why they lose money. Trading with a plan is comparable to building a business. We are never going to be able to beat the market. In general it’s not about winning or losing, it’s about being profitable overall.
Why a trading plan is important
When trading, as in most endeavors, it’s important to start at the end and work backwards to create your plan and figure out what type of trader you should be. The most successful traders trade to a plan, and may even have several plans that work together. Always write things down. Why? Because it will help you stay focused on your trading objectives, and the less judgment we have to use the better. A plan helps you maintain discipline as a trader. It should help you trade consistently, manage your emotions, and even help to improve your trading strategy. It is also important to use your plan. Many people make the mistake of spending all their time creating a plan, then never implementing it.
Key components to develop a trading plan
Trading plan structure and monetary goals
Research and education
Strategy using fundamental and technical tools
Money and risk management
Timing
Trade mechanics, documentation, and testing
How to build a trading plan
Make sure you do your own research and build a plan according to your needs. Find confidence in what you know. The tools you have selected for your strategy are key, from the type of chart to the specific drawing tools to even the most elaborate of strategies. Test your plan in the beginning to make sure you are on the right track. After you have begun trading, continue testing it regularly. This allows you to measure your success by clearly seeing what works and what does not work. From there you can tweak elements that might be weaker and not contributing to your overall goal. Ask yourself the following questions (The answers to these will assist you in the foundation for your trading plan and should be referred back to regularly to insure that you are on track with your plan.)
Why am I trading?
If your immediate answer is, “to make money” you should stop right there. If the only goal is to make as much money as fast as we can, we are ultimately doomed, because it will never be enough. Managing your losses should be your primary goal. This will create an environment in which profits can be generated.
What is your motivation?
Solid retirement? New career? Spend more time with family and friends?
Ask yourself, “What are my strengths and weaknesses?”
How do I maximize my strengths to minimize my weaknesses?
An example of a weakness is a need to constantly watch one’s trades. Is your laptop on the pillow, waking you up in the middle of the night to monitor trades? It’s really difficult to make intelligent decisions when you’re half awake.
Is the amount of money I have to trade with sensible to achieve my goals?
Look at things in percentages; remember leverage is a double-edged sword. That is why risk and money management are key.
Deciding what type of trader you are can be tough; especially since the trader you want to be can be very different from the type of trader you should be based on your behaviors and characteristics. Once you have laid out your goals, risk appetite, strengths, and weaknesses it should become apparent which type of trading fits you best. You will notice three columns in the chart; they are labeled short, base and long. Base equals the timeframe charts you spend the majority of your time, if you are not sure, this is the timeframe chart that you keep going back to. Short and long are the timeframe charts that you refer to confirming or denying what is happening in the base timeframe chart. A common mistake traders make is jumping around randomly between chart timeframes.
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