WOLFE WAVE - An Outlook

Q. What is the Wolfe Wave?

Ans. Simply put, the Wolfe Wave is a natural rhythm that exists in all markets. It is made up of waves of supply and demand that form their own equilibrium.The key to its accuracy is in properly identifying the 1, 2, 3, 4 & 5 points. These are what give it its proper balance of equilibrium. It is very important to identify the dominant Wave. It is somewhat like recognizing those 3-D pictures. After a while a smile comes to your face and you say: "WOW, I see it."


Q. How to find them these points?

Ans. There are rules for every point in both bullish and bearish formations.

Rules for bullish formation .


1 .The 2 point is a top.

2.The 3 point is the bottom of the first decline.

3. The 1 point is the bottom prior to point 2 (top), that 3 has surpassed.

4. The 4 point is the top of the rally after point 3.

5. The 5 point is the bottom after point 4 and is likely to exceed the
ended trend line of 1 to 3. This is the entry point for a ride to the
EPAline (1 to 4).

6. Estimated Price at Arrival (EPA) is trend line of 1 to 4 at apex of
extended trend line of 1 to 3 and extended trend line of 2 to 4.

7. Estimated Time of Arrival (ETA) is apex of extended trend line of 1 to 3
and 2 to 4.

8. The Time take b/w point 1 to 3 should be equal to that of point 3 to 5.

Robin(Visit this link to know more about wolfe wave)

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How You Could Have Seen Imclone's Implosion Coming

Warning: This will be an "I told you so" column. We're going to look at a recent horror story and see why you should have bailed out by now. If it hits too close to home, you might want to move on and read something a little more pleasant. We're taking no prisoners today.

The RealMoney staff love to flutter their wings about the latest blowups. But I have a confession to make. I think the companies we chatter about are extremely boring.

Enron? That's an extinct bird, isn't it? And although I think Halliburton is a beautiful actress, she doesn't look that good in asbestos.

My problem with companies like Enron and Halliburton is they don't have four letters. After all, the Nasdaq is where I spend most of my time. It's also where other traders hang out, because of the direct-access systems. So how about a little more gossip about OTC bloopers, screwups and nose dives?

Momentum favorite ImClone Systems is a good place to start. It's fallen over 50% in the last three weeks and may not stop until it hits ground. In fact, every time knife-catchers step in to call a bottom, they wake up the next morning with long blades planted firmly in their backs.

It's easy enough to see where the five-month ImClone rally ended. After all, that's why they call it a broken trend line. Now this routine event isn't the end of the world. Broken rallies often lead to sideways markets, not death spirals. But sideways isn't nearly as good as up, so we'll mark the breakdown as Warning No. 1.

Warning No. 2 comes just two bars later, when the stock breaks the 50-day moving average on strong volume. Definitely not good news if you own the stock. In fact, it gives investors a very good reason to sell. The stock then waves another red flag. Price bounces back to the 50-day moving average from below but fails to break it for four sessions. Hear that ominous sound? Warning No. 3 just rang a very loud bell.

OK, this is getting serious. The selloff expands out of the failed test and closes at the low -- right at the 100% retracement of the last rally. This level should provide strong support and stop the selloff. So how come day-traders didn't step in and bounce the stock before the close? Members of the jury, I give you Warning No. 4.

Armageddon strikes the next day. Price rips a 19% gap on high volume and breaks the 200-day moving average. Enter Warnings No. 5 and No. 6. I wish that was the end of the story, but it isn't. While the gap does great technical damage on the daily chart, watch what happens when we zoom out and look at the long-term chart.

Warning No. 7 nails the coffin shut. The gap triggers the failure of a multiyear channel breakout. This opens the door for a trip all the way back to the lower $20s.

via-tradingday.com

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Bilateral Trade Setups

When it comes to trade setups, it's not always an either-or situation. In fact, you can double your fun with bilateral trade setups.

Start by overcoming directional bias when you look at a price pattern. Although you may see it in your mind as a long or a short, chances are it will work in either direction. The trick is to let the price action tell you which way to go.

Let's back up a step and see how this works. Many patterns exhibit well-defined support and resistance. Bilateral setups use both levels for trade execution. A long entry is signaled if price breaks resistance to the upside. Conversely, a short sale is signaled if price breaks support to the downside. But you still have more work to do before taking a bilateral trade. After all, making money is the whole point of the exercise.

Every trade setup generates a unique reward/risk profile. In other words, it tells you how much you stand to win or lose should you decide to take a position. Each side of a bilateral setup carries a different reward/risk ratio. Most of the time, one side shows more profit potential than the other side. This can be frustrating because the calculation is independent of the odds that either outcome will actually take place. So you may have a great, high-odds setup with little or no reward, or a lousy, low-odds setup that would earn a fortune if it ever happens.

The price trigger complicates bilateral trade entry. Trading signals come in all varieties. The best ones ring very loud bells within very narrow price levels. One classic example is a high-volume breakout through a major moving average. Bilateral strategies force you to locate trigger prices on both sides of the pattern. Many times one side will bark much louder than the other when price hits the associated trigger.

Bilateral setups work best when they fit into larger cycles that encourage price movement in either direction. For example, a stock drops off a broad rally into an extended correction. Smaller patterns within this correction may trigger short-term rallies or selloffs. Bilateral strategy lets the trader take advantage of the mixed environment and execute price swings in both directions.

Let's review the signposts of this two-way trading street. We need well-defined support-resistance levels, a defined reward/risk ratio on both sides of the equation, clean price triggers and a big picture that lets us execute in either direction. Sounds simple enough, and it is.

The difficulty lies in our ability to control bias and to let the market tell us which way to go. Very often the best trade is in the opposite direction from the most obvious outcome for that pattern. In other words, the majority piles in one way, but the profit comes from trading it the other way.

The good news about these fascinating patterns is they may tell you when the move is about to happen. Congestion often narrows toward a trigger point. We see this in triangle patterns where two trendlines converge in price and time. Bilateral setups may show this convergence through simple lines, or sometimes through more complicated volatility cycles.

Volatility drops off through the formation of most bilateral patterns. It tends to reach a definable low, and then trigger a sharp price expansion. Traders examine narrow range price bars near support or resistance levels in order to predict impending price triggers. They also study classic volatility indicators to locate these turning points in developing patterns.

Swing traders go long or short, depending on the opportunity. Bilateral setups cut their workloads by presenting two possible trades in a single pattern. So always look at both sides of the equation when examining a price chart. Then leave your bias at the door, and take whatever the market gives you.

via-tradingday.com

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MY BEST DAYTRADING SETUP

Day trading is not a cup of tea for every other trader in the market. Many think that trading is gambling or kind of luck infected game. But in reality it is a pure mental game which involves well defined strategies.

Over the years you would have observed that my trade levels are much sharper and almost perfect. The credit goes to the trading plan that I adopt. Now I would like to offer one of my well tested and successful day trading setup which guides you to make a definite daily income .Through this setup learn how to Make a Killing in the market, no matter it goes up or down, trade with confidence.

Those who are interested in this offer may mail me to get more details.

panguvanihan@gmail.com

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Price Action Trading Method

Swing Highs and Lows The first thing that we need to recognise is what is a Swing High and Swing Low. This is probably the easiest part of price action and bar counting although the whole process gets easier with practice.

Market Phases There are only three ways the market can go; Up Down Sideways With the swing high/low definition now in mind we can start to build some layers on to the chart to identify these market phases and start to do a simple count of these swing highs and lows. In short The market is going up when price is making higher highs and higher lows The market is going down when price is making lower highs and lower lows The market is going sideways when price is not making higher highs and higher lows OR lower highs lower lows This may sound like child's play and a statement of the obvious but you will be surprised at how often people will forget these simple facts. One of the biggest questions I get asked is, which way is the market going? By doing a simple exercise you can see which way that price is going and decide on your trading plan and more importantly timing of a trade. What do I mean by timing? It may be that you are looking for a shorting opportunity as the overall trend is down but price on your entry time frame is still going up (making HH's & HL's). There is, at this stage, no point in trying to short a rising market until price action start to point down (making LH's & LL's. More on this shortly). Bias Changes A Short or Bearish Bias Change occurs when the following sequence develops. HH>HL>LH>LL>LH The bias change is confirmed when price moves below the las lower low made as highlighted on the chart. Another way of saying this is 123 reversal and you are trading the pullback as your entry trigger (Red Line). There are a few variations of this pattern but this is quite simply a price action bias change in its simplest form. A Long or Bullish Bias Change occurs when the following sequence develops. LL>LH>HL>HH>HL The bias change is confirmed when price moves above the last higher high made as highlighted on the chart. Another way of saying this is 123 reversal and you are trading the pullback as your entry trigger (Blue Line). There are a few variations of this pattern but this is quite simply a price action bias change in its simplest form. Trending Price Action After a bias change has been seen and confirmed, one of the phases that the market can then take is to start trending either up or down depending on the bias change previously. In the chart below we can see what price ideally looks like when price is trending up and trending down. Each phase shows price making HH's & HL's on its way up and LH's & LL's on its way down. Ranging Price action Now this is where the chart can become interesting. By using the price action counting of the swing highs and lows we can know at a very early stage IFprice is going to start to develop range bound activity. Price is not making new highs OR new lows I don't mean all time highs/lows or new day/week/month highs/lows... just simply a new chart swing high or low. Price will start to stall and not make a new swing high/low and typically will stay contained within the last swing high and low that was made on the chart. Isn't that a simple definition? Range rule definitions Price doesn't make a new high or low on the move If price stays contained within the last swing high and swing low to be made, price will remain range bound until it makes news move highs or lows. Price confirms the range when a lower high and a higher low is made within the previous swing high and low. In the chart below you can see that from the left side of the chart price is making LH's & LL's all the way to the first blue arrow which in real time would be the latest lowest low. Price then moves higher to make a HH. These two swing levels have been highlighted. At the point of the chart, in real time, price needs to either start moving higher past the last swing high (red Arrow) making a new high OR move lower past the last swing low (blue arrow) making a new low. Until either of those things happens price will most likely remain range bound. In this example that is what happened. Range considerations Some considerations for identifying ranges at an early stage in real time are; That price could be creating a pullback or bias change and as the chart unfolds for you a new high or low could be made voiding the potential range. There are several definitions of a range one of the more common ones is that you are looking for a double touch of support and resistance. For me this is a little too late in the game as price may not create the double touch as in the example above. With this price action method you can identify the possibility of a range developing VERY early without having to worry IF price does or does not give you the double touch. As you can see with that definition you would interpret that price is not range bound at all but, you can clearly see visually that price is moving sideways without any definition. Acronyms used HH - Higher High HL - Higher Low LH - Lower High LL - Lower Low By Philip Newton www.trading-strategies.info Philip Newton is a professional trader and teaches new and experienced traders the skills needed to trade for a living. His live chat room is amongst the best in the industry. Inside the members area traders can watch videos of his trades and receive support for any question they may have. The live trading room is the heart of the website where the real learning begins. www.trading-strategies.info

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The 9 Characteristics of Great Traders

What separates the 10% that make money from the 90% that don't?

1. 10,000 hours

In his recent book Outliers: The Story of Success, Malcolm Gladwell describes the 10,000-Hour Rule, claiming that the key to success in any cognitively complex field is, to a large extent, a matter of practicing a specific task for a total of around 10,000 hours. 10,000 hours equates to around 4hrs a day for 10 years. For some reason most people that 'try their hand' at trading view it as a get rich quick scheme. That in a very short space of time, they will be able to turn $500 into $1 million! It is precisely this mindset that has resulted in the current economic mess, a bunch of 20-somethings being handed the red phone for financial weapons of mass destruction. The greatest traders understand that trading much like being a doctor, engineer or any other focused and technical endeavor requires time to develop and hone the skill set. Now you wouldn't see a doctor performing open heart surgery after 3 months on a surgery simulator. Why would trading as a technical undertaking require less time?

Trading success, comes from screen time and experience, you have to put the hours in!

2. Education, education, education.

The old cliche touted by politicians when they can't think of anything clever to say to their audience. The importance of education to success in trading cannot be placed on a high enough pedestal. You have to learn to earn, the best traders work obsessively to refine their edge further to stay ahead of the curve.

3. Think for yourself.

"NO! NO! NO!"... "Bear Stearns is not in trouble"..."Don't move your money from Bear! That's just silly! Don't be silly!"

A quote from well known stock guru Jim Cramer aired on CNBC days before Bear Stearns lost 90% of its value. Many followed this call and felt the obvious pain as a result. As the old saying goes, too many cooks spoil the broth; it is very much the same in trading. Successful traders blinker themselves from the opinions of others; they focus on their own analysis of fundamental and technical information.

4. Adapt or Die.

Market conditions change and technology advances, thus the conditions for trading are always evolving, the rise in mechanical trading is testament to that. The very best traders through a process of education and adaptation are constantly staying ahead of the curve and creating ever new and ingenious methods to profit from the markets evolution.

5. Fail to plan, you plan to fail.

The best traders have a well documented plan; they know exactly what they are looking for and follow that plan to the letter. Their preparation for a trade starts long before the market open, it is this meticulous planning and importantly adherence to that plan that helps them avoid the biggest demons for any trader, over trading and revenge trading.

6. "Be like Machine"

As human beings emotions pay a key role in our existence, for a trader emotions can be a source of great pain. Trading psychology and the management of your emotions in a trade play a key role in overall success. Fear and greed can cut your winners short and let your losers run. Dealing with emotions follows on from your plan; the more robust your plan the less likely you are to fall into the emotional mine field.

7. Know your tools

Every trader has a set of tools they use, DOM, Charts, News feeds etc. These tools are a trader's bread and butter; they are the most vital part of a trader's arsenal, without which it would be impossible to trade. The best traders have mastered their order entry methodology, they know all about the features they need from their charts. This mastery of their tools, allows the trader to get the very best out of the resources they have available to them and ensures perfect execution of their trading ideas.

8. Know Thyself

Behind all the egos and excess, the best traders know their limitations; they focus on what can go wrong in a trade, and expend a lot of energy in limiting and controlling their risk before thinking about profits. They have a heightened sense of self-awareness and focus on incremental self improvement.

9. Profit & Loss

The best traders focus on the trade itself rather than the P&L; they view each trade as a technical exercise and focus on getting the most out of the market in accordance with their plan. They do not think in terms grocery payment, the electric bill and the desire to make X amount to cover a mortgage payment. Focusing on the money behind a trade can cloud technical objectivity.

In Conclusion

The greatest traders work hard to get ahead and even harder to stay ahead. Through increased and niche knowledge they constantly adapt with the market and remain profitable in every environment. Drive, tenacity and the will to succeed is the greatest edge of every successful trader.

Aamar Shehzad is Chief Technical Analyst and Managing Director of Technical Analysis provider Pivotfarm.com. Prior to creating Pivotfarm.com, Aamar worked as an independent trader and analyst, he is a regular speaker at trading seminars and expos and is currently authoring a book on trading using Support & Resistance entitled 'Support & Persistance'.

via - http://www.tradingmarkets.com

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Andrew's Pitchfork

Andrew's Pitchfork, otherwise known as median line studies utilizes the concepts of support, resistance, and retracements (see: Support & Resistance). As is visually depicted below, Andrew's Pitchfork consists of:

• Handle
• Resistance Trendline "tine"
• Median Line
• Support Trendline "tine"

Steps to creating a Pitchfork

1. Find a significant pivot or retracement (in the chart above, the lower left corner)
2. Find the next significant pivot or retracement (the dotted blue line connects the first pivot to this second pivot)
3. Find the next retracement (in the chart above, the solid blue line starting from the left and going down to the right)

Charting software finishes the pitchfork by creating the upper resistance "tine", the lower support "tine", and the median line. Note: "tine" is the terminology used by the creator of Andrew's Pitchfork, Dr. Alan Andrews.

Interpreting Andrew's Pitchfork

The same rules for support and resistance apply to Andrew's Pitchfork. Look to buy at support and look to sell at resistance (see: Support & Resistance). Also, prices are thought to gravitate towards the median line as depicted in the chart above of the S&P 500 exchange traded fund. The chart above shows the long-term view (1 year 6 months) of the stock market; however, Andrew's Pitchfork can be used for shorter time frames.

via - http://www.onlinetradingconcepts.com

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Moving Average Crossovers

Let's talk about the Golden Cross and the Death Cross. No, we're not opening a deck of cards and telling your fortune. These colorful terms refer to patterns you probably use every day in your trading but don't refer to by these names. Along with its many cousins, they comprise a whole division of technical analysis. You might know them better as moving average crossovers.

Moving averages emit vital market data, but all of them exhibit one common limitation: They lag current events. By the time a 20-bar average curves upward to confirm a trend, the move is already underway and may even be over. While faster incarnations (such as exponential averages) will speed up signals, all of them ring the trading bell way too late.

Multiple moving averages overcome many flaws of the single variety. They're especially powerful when used in conjunction with price patterns. For example, pick out a long-term and a short-term average. Then watch price action when the averages turn toward each other and cross over. This event may trigger a good trading signal, especially when it converges with a key support or resistance level.

Averages display all the common characteristics of support/resistance. For example, one average will often bounce off another one on a first test, rather than break through right away. Then, like price bars, the odds shift toward a violation and crossover on the next test. Alternatively, when one average can't break through another average after several tries, it sets off a strong trend-reversal signal.

Different holding periods respond to different average settings. One-to-three-day swing trades work well with averages that maintain a 3x to 4x relationship between shorter and longer periods. This allows convergence/divergence between different trends to work in the trader's favor.

For example, the daily chart may show a strong uptrend, while the 60-minute chart begins a deep pullback. A 40-day average will stay pointed in the trend direction for a long time, but a 13-day average (3x13=39) will turn down quickly, and head straight for the longer average. The point where they intersect represents a major support level.

Crossovers mark important shifts in momentum and support/resistance regardless of holding period. Many traders can therefore just stick with the major averages and find out most of what they need to know. The most popular settings draw charts with a 20-day for the short-term trend, a 50-day for the intermediate trend and a 200-day for the big picture.

Long-term crossovers carry more weight than short-term events. The Golden Cross represents a major shift from the bears to the bulls. It triggers when the 50-day average breaks above the 200-day average. Conversely, the Death Cross restores bear power when the 50-day falls back beneath the 200-day. The 200-day average becomes major resistance after the 50-day average drops below it, and major support after breaking above it. When price gets trapped between the 50-day and 200-day averages, it can whipsaw repeatedly between their price extremes. This pinball action marks a zone of opportunity for swing trades.

Crossovers add horsepower to many types of trading strategies. But try to limit their use to trending markets. Moving averages emit false signals during the "negative feedback" of sideways markets. Keep in mind these common indicators measure directional momentum. They lose power in markets with little or no price change.

For years, technicians have tried to filter crossover systems through trend-recognition formulas in order to reduce whipsaws. You can try this for yourself, or just look for price patterns that tell you the crossovers are worthless.

Persistent rangebound markets limit the usefulness of all types of average information. All moving averages eventually converge toward a single price level in dead markets. This flatline behavior yields few clues about market direction. So stop using averages completely when this happens, and move to oscillators (such as Stochastics) to predict the next move.

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Five Fibonacci Tricks

Fibonacci jumped into the technical mainstream late in the bull market. Futures traders had it all to themselves until real-time software ported it over to the equity markets. Its popularity exploded as retail traders experimented with its arcane math and discovered its many virtues. Fibonacci ratios describe the interaction between trend and countertrend markets -- 38%, 50% and 62% retracements form the primary pullback levels. Apply these percentages after a trend in either direction to predict the extent of the countertrend swing. Stretch a grid over the most obvious up or down wave, and see how percentages cross key price levels. Convergence between pattern and retracement can point to excellent trading opportunities. Keep in mind that retracements work poorly in a vacuum. Always examine highs, lows and moving averages to confirm the importance of a specific level. Discord between retracement and the underlying pattern generates noise instead of profit. Move on to a new chart when nothing lines up correctly. This divergence generates most of the whipsaw in a price chart. Alternatively, strong phasing between Fibonacci and pattern exposes highly predictive reversals at narrow price levels. Let's look at five tricks to improve your Fibonacci skills. Add these twists and turns to your toolbox and apply them to your next trade. I promise they'll serve you very well in the years ahead. First Rise/First Failure First Rise/First Failure marks the first 100% retracement of a trend within your time frame of interest. It provides an early reversal warning after a new high or low. The 100% retracement violates the major price direction and terminates the trend it corrects. From this level, the old trend can reestablish itself if it breaks through the old 38% level. More often, traders will use that level to enter low-risk positions against the old trend. Parabola Hunt Parabolic movement tends to occur between the 0%-to-38% and 62%-to-100% Fibonacci levels in all trends. This tendency offers a great tool for finding the big moves when looking for trades. Watch for congestion to form at the 38% or 62% level. Then use a simple breakout or breakdown strategy when price moves past it. The next thrust can be dramatic, with price moving like a magnet back to an old high or low. Of course, the strategy only works when you can find these levels in advance. Continuation Gap Extensions You can often target the exact price a rally or selloff will end at by using the continuation gap as a Fibonacci extension tool. Identify the gap by its location at the dead center of a vertical price wave. Then start a Fib grid at the beginning of the trend and extend it so the gap sits under the 50% retracement level. The grid extension points to the terminating price for the rally or selloff. Overnight Grids Find an active stock and start a grid from the high (or low) of a session's last hour. Stretch the grid to the opposite end of the next morning's first hour low (or high). This defines a specific price wave traders can use to uncover intraday reversals, breakouts and breakdowns. The overnight grid also offers a way to trade morning gaps. The gap will often stretch across a key retracement level and target low-risk entry on a pullback. Second High/Low Many traders can't figure out where to start a Fib grid. Here's a trick to help you place it where it'll do the most good. The absolute high or low in a price wave isn't the best starting point for a grid most of the time. Instead, look for a small double bottom or double top within the congestion where the trend began. Swing one end of the grid over this second high (or low), instead of the first. This will capture a specific Elliott Wave that conforms to the trend you're trying to trade.

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Fibonacci

Fibonacci

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