Big Money is in Big Moves

That was the idea that famous speculator Jesse Livermore realized and the idea helped him to make millions in stocks and commodities trading both on the long and short (buying and selling) side. According to his own words when he day traded he failed to see the big picture and the prevailing trends in the market. When he realized that he should follow trend, he stopped losing money and started making it regularly.

The good news is that big moves happen almost every week. We call those swings. Trends are longer term moves that happen one or two times per year, while swings do happen every week, both as directional and correctional moves. If you look at the chart of gbp/usd below you can see that the pair has been in a range for some time, but within the range there were plenty of swings every week that you could play on the long and sort side. On the 25^th of January the pair was mostly in downward swings with some correctional swings. You would have made more money selling correctional rallies than buying dips in a downtrend. However as moves lasted from 5 to 10 business days with the help of trendlines, key price points, resistance points, key reversal days (Fridays and Mondays) you would have made money trading either direction.

My point is that you need to see bigger picture: from one to three months. Then you will be able to see those key resistance and support points where reversals typically take place and place buy or sell orders respectively. You may measure number of pips from one peak to another to calculate possible reversal point in a downtrend in order to take a position and number of pips from one bottom to another in order to guess a reversal point and initiate a buy order in an uptrend.

These weekly swings help you not to get lost in daily fluctuations and to see bigger picture more clearly. Seeing it you would probably trade less, but more profitably and on each trade make more money. Good luck.

Disclaimer: Your capital is at risk.

Further reading: 

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gbp/usd buying opportunities

It is obvious that gbp/usd has been in a long term trend (over a year) and the best type of playing the pair was buying of dips. It has been moving up in waves over a year and I believe we are going to see another cycle up. To tell the truth the first wave up in a bullish move is about to end. If you look at the chart you can see that the pair found its bottom on the first of March and made two strong moves up. I expect it to run some 50-100 pips more from a current level before reversing and a leg down next week.

I marked support and resistance levels on the chart. You can play both waves, but the trend is up now. I expect the pair to reach previous top of 1.4350 by the end of the month and possibly move higher later in the year, provided price action confirm bullish trend continuation pattern.

There is some chance of the pair going sideways and forming a narrowing range, but I favor the pair moving up in waves, the way it went down from the 25^th of January. So, there are hundreds of pips to be claimed and a lot of money earned. I have positions in gbp/usd and gbp/jpy opened expecting them to close tomorrow or Friday and wait for another opportunity to buy.

If you want to try trading currencies, gold and other commodities as well as securities eToro company is the best broker I know.

Disclaimer: All trading involves risk. Only risk capital you’re prepared to lose. Past performance is not an indication of future results. This content is for educational purposes only and is not investment advice.

Oil long trade opened

Oil has been in a modest uptrend for over a year and you may see that the best way to trade it was to buy on dips. In the end of January oil experienced a 9 dollar corrective move. However, it did bounce off 58 level and made another impulsive wave up. It then made another tumble down, but did stay above support forming two large candle pins on a daily chart at 60$.

This tells me that the commodity is going to revisit it’s this year high quite soon and I initiated a long trade at 61.20 level just when the oil slipped below short term support (today’s lows). I have take profit target at 65$ and stop 59.95. If my target is hit I would make three times more than I lose if price reverses and goes down below 59.95.

I am not going to open any buy (long) trades after that, but intend to watch the commodity carefully as trade wars, US shale market will have bearish consequences for oil and it may tumble some 20-30 dollars this year.

I do expect lots of huge moves this year in oil, gold and currencies with both trend continuations and reversals in mind.

If you want to trade for yourself I would recommend eToro broker, who is one of the best in the industry.

Disclaimer: Financial markets carry a high level of risk. Investor can lose all his money trading them. You should not invest money that you can’t afford to lose. Information on this blog is for information purposes and should not be regarded as an advice to invest.

Bitcoin in a downtrend, but the trend might change soon

Disclaimer: Cryptocurrencies can fluctuate widely in prices and are therefore not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.  

I know there are a lot of cryptocurrency lovers out there and I don’t mind analyzing and even trading it myself. It is obvious that Bitcoin and most other cryptos were in a downtrend mode since the middle of December. The move down was very dramatic erasing a lot of profits by correcting about 67 percent. It is quite a magic number as the move down represents the third level of Fibonacci retracement. In most cases securities resume their trends when the number is hit.

Looking at current price action you might see that after the crypto hit 5860 level it bounced really hard indicating there is some strong buying in the area and possibly indicating that the downtrend can be over. Therefore, I assume a move up may resume any time soon and Bitcoin will revisit 20 000 level sooner rather than later, possibly by the end of this year.

Disclaimer: Cryptocurrencies can fluctuate widely in prices and are therefore not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. 

Technically speaking I expect a move up in a zig zag way (wave up, wave down with higher highs and lower lows). There will probably be a bottoming process now till the crypto stand firmly on both feet, so to speak and we may see it revisiting 5900 level again, before making another rally. Any move down is probably a good opportunity to buy and buying on dips will be a good strategy.

So, to sum up, I expect Bitcoin to resume its trend and excellent opportunities might be ahead of us soon.

Oil and Gold to form intermediate top

Both oil and gold have been in a mild uptrend for over a year now moving up and down in waves. It has been a time where you would have made more money by buying the commodities than selling them. However, if you are intermediate or short term trader you might see that playing on both sides would have been a good choice. Looking purely technically you can spot waves on both commodities. Taking that into account I will state that we will probably see gold and oil turn around in August and start trending down. I expect oil to top at around 50.00 this week and gold possibly too at 1270-1275 level.

If you look at gold chart below you can see three finished peaks. However, the second and the third peak are at about the same price level (the third is some 30 cents higher). Then you will spot a lower low formed and a rally right after it. I assume we will now see another leg down, that will take us lower to 1195-1180 level. I expect the fourth peak to be finished this week. I have intentions to short gold when I see strong selling on my short term hourly charts.

TRADE GOLD AND OIL ON eToro

Disclaimer: All trading involves risk. Only risk capital you’re prepared to lose. Past performance is not an indication of future results. This content is for educational purposes only and is not investment advice. 

The same is true with oil. Oil chart actually more resembles head and shoulders pattern. You can spot around 5 technical peaks in the chart, with the last two peaks being lower than previous two ones. This leads me to a conclusion that another peak in oil is due any time soon. I actually think 50 level is the mark and oil may form its first leg down this week. Again, I intend to be a seller when I see strong selling coming on hourly charts.

At some point both commodities will pick up and start trending up, because the world geopolitical and economical situation does not look rosy at all, but for the time being, technical analysis tells me to be on the short side.

Importance of day trading plan

Whether you want it or not you do need at least a few rules in your life. There are things that you tell yourself you ‘should’ do, but there must be a few things which you ‘must do’. If you label everything under should you will hardly achieve anything in life. “I should lose weight, stop smoking, sleep less, work more and etc.) It does not work. Have a few ‘musts’. The same can be said about day trading. You need a few rules and you must have a trading plan to be a successful day trader. I want to talk a little about it in the post. 

Read my other posts on the subject:

Day trading strategies and rules for dummies

10 top day trading rules

Tips for short term trading

Long term or intraday trading

eur/usd quick trade

If you do not have a plan you will be ruled by emotional impulses and illogical behavior. You cannot trade on the hunch all the time. Occasional trade is ok, but not regular. Do you get what I mean? I hope you do. Trading rules help you to shape and filter your trading system and keep you from making spontaneous trades. I would say that a bad plan is much better than no plan at all. No army general would go to battle without a strategy and a plan. The same can be said about successful traders. Trading is battle for money. Somebody is after your money and you are after somebody’s. Cruel truth, but truth! 

Before you ever consider of opening a trade you need to look through your plan and see if a possible trade meets your criteria for a ‘good trade’.

Some of the points you might ask yourself:

Is there some technical pattern that indicates a reversal or continuation? I wrote a number of posts on the topic and the series is not finished yet, but as I wanted to make a short break I decided to write on day trading. Be sure to check my series on chart patterns. 

Is price near support or resistance level? It is very important as it indicates a reversal level if you a security is in a range. 

Is the price close to a trend line (upward or downward)? When price comes to a rising trend line (especially on daily charts) it is very usual for price to find support and jump off the trend line as strong demand comes to market. See how gbp/jpy pair bounced off its’ daily trend line when price hit it on the 13^th of June 2013.

Do you see long bullish or bearish candles indicating that support/resistance is strong and you may trade in the direction of the tendency? These candle patterns indicate strong supply and demand areas (or accumulation/distribution zones). I haven’t written on candle patterns yet, but intend to do it after I finish chart pattern series. 

Is the move I see is in the direction of the trend or is it a counter trend rally? Day traders can capitalize on both, but most successful traders trade only in the direction of prevailing tendency. Buying on dips in an uptrend and selling rallies in a downtrend should be a common practice for any day trader.

These are just some of the things that should be on your trading plan. I hope to add more stuff on the subject in my future posts. 

I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. 

If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of eToro. Initial deposits are as low as 200 hundred bucks. The best dealer I have heard of so far!

Disclaimer: All trading involves risk. Only risk capital you’re prepared to lose. Past performance is not an indication of future results. This content is for educational purposes only and is not investment advice.

Double top reversal chart pattern

This is continuation of my article series on chart patterns. Last time I discussed bullish reversal pattern: double bottom. What could I do today if not discuss bearish reversal pattern: double top? Like any other technical structure it can be found of various time frames and all of them can be both valid and fake. Everything depends on whether the pattern is broken in the direction it should break. A reversal pattern should change a current trend and continuation pattern should be broken in the direction of a current trend after consolidation period is over. As double top is a bearish pattern it means that an upward trend is about to end and bears will show their strength soon. Let us look at some necessary conditions that have to be that we might state that the picture we see is a valid double top pattern.

Key components in double bottom pattern

As it is a reversal pattern the first thing that there has to be is a previous uptrend. The security had to go up for some time in order for the pattern we are discussing to be formed. Depending on the structure the uptrend could have been from a few days (weeks, months) to a year and even more. 

There has to be the first sharp rise that marks the first spot in the top or peak. It is known as the highest point in the current uptrend. At this point we cannot say whether the tendency has changed or not as there still isn’t any indication of a reversal and increase in supply.

The first sharp fall! Reaching the first top the price of the security crashes. It indicates that smart money is distributing the security and it is good time to sell it short and so selling starts. After some time (hours, days or even weeks) the first bottom (or important support) is formed. 

Back to the top! At some point inertia of the bulls kicks in and they continue buying assuming that the uptrend is not over yet. So, the price of the security soars to the first spot of resistance (top) and this time the spot becomes the second spot of a double top pattern. 

The second sharp fall! After hitting the first resistance (top) the security starts collapsing, which indicates that there really is serious distribution of the security taking place at current prices. In most cases the prices will reach the first spot in support. Likewise, in most cases the price after hitting the support will go up (rally) a little. 

Break of the support. The two points of support that were made as the security fell sharply after reaching the top is finally broken. That is the point where the double top pattern becomes a valid one. 

Resistance becomes support. That is a classical rule of technical analysis. It is not a necessity, but a security sometimes comes back to test previous support (that is now resistance) and if the break was not fake the resistance will hold. 

Traditional target for the exit of your short trade is the distance from the break point to the highest point of the pattern added to the breakout point. That is the smallest distance that the price is expected to travel. It may go further, or it may fail to reach the expected target. However, if you need some guidelines where to exit this could be one of those. Additionally, you can move your stop above clusters of hourly or daily candles (depending on the strength of reversal). 

US dollar index example

US dollar index has been in a clear uptrend for a prolonged period of time. On the 22^nd of May it may a strong rally upwards and on the 23^rd of May it fell sharply. So we can say that the rally on the 22^nd of May formed the first peak (resistance) in the pattern at 10 876 level. The fall formed the first point of support at 10 766. 

It then made an attempt to come back to the peak and break it, but the attempts were futile and after failing to make new highs US dollar collapsed to previous support (just a little lower). It then consolidated for a few days. Then the security broke down again jumped back to test previous support, which is now resistance and failing to break that it collapsed. 

Watch the video to see for yourselves.

Ok, I will finish now. Be sure to read related articles to learn more on technical analysis. I promise to expand on this in my future posts. 

I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. 

Vytas.

Related posts:

Double bottom formation

Inverted head and shoulders

Pennants

Flags

Wedge technical structure

How to do technical chart analysis

Six key elements of technical analysis

Triangle pattern

Head and shoulders

Ifyou want to see and experience what real investing in financial markets such asForex, stocks and commodities is all about I recommend trying innovative socialinvestment platform of Etoro. Initial deposits are as low as a few hundredbucks. The best dealer I have heard of so far!

Disclaimer

Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.

Double bottom

Today we continue analyzing various chart patterns and double bottom technical pattern is the topic of the post. You can find this structure on various time frames and it is pretty go indication that a trend is about to change. So, this particular pattern indicates a reversal. You probably remember that we either have continuation or reversal patterns. This is a bullish reversal pattern. It means that the bears will probably lose their fight soon and bulls will start reigning in a particular security double bottom is formed. Let us look at some necessary conditions that have to be that we might state that the picture we see is a valid double bottom pattern. 

When you finish this article I also highly recommend reading other posts on chart patters:

Inverted head and shoulders

Pennants

Flags

Wedge

How to do technical chart analysis

Six key elements of technical analysis

Triangle formation

Trading head and shoulders

Key components in double bottom pattern

As it is a reversal pattern the first thing that there has to be is a previous downtrend. The security had to go down for some time in order for the pattern we are discussing to be formed. Depending on the structure the downtrend could have been from a few days (weeks, months) to a year and more. 

There has to be the first sharp fall that marks the first spot in the bottom. It is known as the lowest point in the ongoing downtrend. At this point we cannot say whether the tendency has changed or not as there still isn’t any indication of a reversal and increase in demand.

The first rally! Reaching the first bottom the price of the security rallies upwards. It indicates that smart money assumes it is good time to accumulate the security and so buying ensues. After some time (hours, days or even weeks) the first top (or important resistance) is formed. 

Back to the bottom! At some point inertia of the bears kicks in and they continue selling assuming that the downtrend is not over. So, the price of the security collapses to the first spot of support (bottom) and this time the spot becomes the second spot of a double bottom pattern. 

The second rally! After hitting the first support (bottom) the security starts rallying, which indicates that there really is serious demand for the security at current prices. In most cases the prices will reach the first spot in resistance. In most cases the price after hitting the resistance will retrace a little. 

Break of the resistance. The two points of resistance that were made as the security rallied after reaching the bottom is finally broken. That is the point where the double bottom pattern becomes a valid one. 

Support becomes resistance. That is a classical rule of technical analysis. It is not a necessity, but a security sometimes comes back to test previous resistance (that is now support) and if the break was not fake the support will hold. 

Traditional target for the exit of your long trade is the distance from the break point to the lowest point of the pattern added to the breakout point. That is the smallest distance that the price is expected to travel. It may go further, or it may fail to reach the expected target. However, if you need some guidelines where to exit this could be one of those. Additionally, you can move your stop below clusters of hourly or daily candles (depending on the strength of reversal). 

Time frames

As I said, you can find the pattern on all time frames. The longer the time frames the more valid it becomes. There have been a few of those patterns (on smaller time frames) in various currencies. Let us look an example that happened on a small time frame.

gbp/usd example

After a prolonged move upwards gbp/usd pair started collapsing on the 9^th of May (2013). The downward move continued for about two weeks till the sharp move down ended on the 23^rd of May (2013) with a strong rally upwards. The rally continued for four days and formed the first peak or resistance on the 27^th of May at 1.5156 level.  

The pair then retraced to its’ previous bottom and failed to break it. On the 29^th of May the second point in the double bottom pattern was formed. On the same day it rallied to previous resistance and formed second high (resistance) at 1.5145. It then retraced and consolidated for a few sessions before breaking the resistance and rallying to 1.5240 on the next day. One had to place a buy stop above the resistance (1.5156) with a stop loss below the bounce after second rally’s high (at 1.5098) and take profit order around 1.5300 level. 

According to our rules the exit target should be around 1.5300 level, so it has not been reached yet. The pair came to visit previous resistance (now support) and support held. The pair bounced from 1.5140 level.

This week will show whether gbp/usd will reach our target or not. Looking at technical price action we can see clear demand coming at previous resistance. So, let us be patient and wait for confirmations during European session whether we could add to our position or let the pair go down. 

Conclusion

Double bottom pattern is a bullish reversal pattern that can be found on various time frames. The pattern can be found in various securities regularly. One should wait for a break of resistance to enter market with buy orders. 

Ok, I will finish now. Be sure to read related articles to learn more on technical analysis. I promise to expand on this in my future posts. 

I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. 

Vytas.

Ifyou want to see and experience what real investing in financial markets such asForex, stocks and commodities is all about I recommend trying innovative socialinvestment platform of Etoro. Initial deposits are as low as a few hundredbucks. The best dealer I have heard of so far!

Disclaimer

Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.