Understanding Fibonacci Trading (Part I)

By Ahmad Hassam

What is Fibonacci trading? Fibonacci trading is based on the famous Fibonacci number series. Whether you trade stocks, futures, commodities or currencies, you will find Fibonacci trading techniques highly useful. The good thing about learning the Fibonacci trading techniques is that once you master it in one market you can use it in other markets as well. Did you see the movie, The DaVinci Code? You will find a scene in the movie where the characters talk about the Fibonacci number as part of a clue or code of some sort.

Fibonacci trading techniques are based on a series that was discovered in the 13th century by an Italian Leonardo de Pisa. Over the years many interesting characteristics have been discovered on a few ratios derived from this series. The Fibonacci series starts with 0 and 1 and goes out to infinity with the next number in the series being derived by adding the prior two. What are Fibonacci numbers? For example, 0+1=1, 1+1=2, 1+2=3, 2+3=5, 3+5=8, 5+8=13, 8+13=21, 13+21=34, 21+34=55, 34+55=89, 55+89=144, 89+144=233, 144+233=377.

So the Fibonacci series is like this; 0,1,1,2,3,5,8,13,21,34,55,89,144,233,377,610, 987..to infinity. What is so fascinating about this series is that there is a constant found within the series as it progresses to infinity. This constant is known as the Golden Ratio, Golden Mean or Divine Proportion.

You will find the Golden Mean by dividing the higher number with the lower number by taking any two consecutive numbers in the series after the first few. For example, 89/55=1.618, 144/89=1.618, 233/144=1.618, 377/233=1.618, 610/377=1.618, 987/610=1.618 and so on. The inverse of 1.618 is 0.618.

Identifying support and resistance is very important in forex trading or for that matter any other trading. How do you identify support and resistance? Fibonacci ratios are usually used by traders to identify support and resistance. What is most important to forex traders is that applying these ratios can help identify key support and resistance zone in the market and therefore determine key trading opportunities or setups. The Golden Ratio can also be found in many places in nature like flowers, shells, fossils etc.

Why use Fibonacci ratios in your trading? The application of Fibonacci ratios can give you the edge as a forex trader if you use the Fibonacci trading technique properly. We have already discussed the Golden Ration 1.618 and its inverse 0.618. The main ratios used in everyday analysis are 0.382, 0.50, 0.618, 0.786, 1.000, 1.272 and 1.618.

Since you are trying to look into a type of technical analysis, it is assumed that you have a computer, a market data source such as quote.com and a technical analysis program to manipulate that data. You should be proficient with the technical analysis program.

There are three types of Fibonacci price relationship namely, retracements, extensions and price projections (sometimes also called price objectives). We will look into Fibonacci Price Retracements, Fibonacci Price Extensions and Fibonacci Price Projections individually as well. The Fibonacci price analysis calculations can be done by hand as well but they are time consuming and tedious. So depending on a good trading software program is a good thing.

The definition of a support is the price area below the current market where you will look for a possible termination of the decline and where you would consider to becoming a buyer of whatever currency pair you are trading. Each of these Fibonacci price relationships will be setting up potential support or potential resistance in the chart that you are analyzing.

Similarly resistance is price area above the current market where you would look for the possible termination of a rally and consider being a buyer. - 23199

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Know Forex Rebellion!

The Forex Advisor - A Guide For Beginners

By John Eather

When I was searching for a Forex advisor, I just got completely confused, I already don't know anything about the trading methods used on the FOREX.

I know little to nothing when it comes to Forex and trading online but I want to learn about making money using this system. I've heard a lot about it lately on tv and in my spam folder and even the mailman brought me a piece of information on how to automate trading with a robot.

First I had to find out what Forex stands for, it is the foreign exchange (money) market also abbreviated FX. Large banks and giant conglomerates facilitate the buying and selling (exchange of) foreign currencies.

The Foreign exchange is where trading and investing is facilitated and the big reason the foreign exchange market is necessary is because of the varied types of currency in the world; the Pound Sterling, Euro, the US Dollar etc., and big international companies need for trading in these various currencies.

In order for you (if you're like me) to obtain easy, simplified forex information is to just go to a few good sites, like I did, forex-guide.net, was really set up nicely for reading and there was loads of information for free. There is also a lot of web links that will want your fees upfront for them to give out their good knowledge on Forex.

I wanted to learn for free, so I went to the forex-trader.com/fx-resources.htm, site where I signed up for free and they provide informative pages and great resources through email. My friend advised me to try YouTube, oh my goodness, I was not disappointed.

I got a little over overwhelmed at first but then I did the search in the YouTube site for Forex where menu appears with great options, pick the Forex Training and start watching videos. My common sense told me to watch the films that were highly rated and had over 20-30 minutes of footage. I got a lot out of the longer videos. Well, I hope you enjoy educating yourself and hope you start making money on the Forex. - 23199

About the Author:

Learn more about forex advisor. Stop by John Eather's site where you can find out all about forex trading systems and what it can do for you.

Technical Stock Market Analysis

By Michael Swanson

There are many techniques in forecasting trends these days for stock trading; one that has been around for a number of years is technical analysis. This works by analyzing certain trends; including time period and volume, though mainly focuses on pricing in reference to these. A very complex process in many respects, it tends to center around charts, graphs and dot references.

However, though it sounds a strong process, with clear ideals and visions; many are not impressed. They say it lacks structure and reasoning. To counter this, those supporting the technique argue that its links with behavioral finance function and proven results over the years are its justification.

Another objection to the technique rests upon how, if it is so sound a function, that automatic trading strategies should be a matter of course in its development; that this is yet to be the case is held up as proof is doesn't work.

However, other arguments exist of course; most commonly how to prove that technical analysis was the reason for success. Chartists counter this by providing back testing evidence, tough this is often dismissed as nothing more than conjuncture.

The basic argument for those supporting the technique, is that it just makes sense to study past performance, pricing trends, and any areas where upon a variant and a constant can be linked. Trends in the markets do occur regularly; this is just an accepted fact; understanding where these trends are going to recur is merely applying a technique.

Advocates of the system, and objectors to it, do seem to come together in some sort of agreement however. Whilst both have very differing views, both state that technical analysis should be used not as standalone technique, but more just one of several weapons to understand fluctuations in the market and apply strategy effectively. - 23199

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For more on using stock charts subscribe to our free technical analysis newsletter.

Learn To Select Trading Window Frames (Part II)

By Ahmad Hassam

The first step is to identify the type of trade into which we will enter. It all depends on your trading strategies. What matters most to a trader or an investor is how to create a positive cash flow.

Once we acknowledge what our goals and objective are than we can narrow our expectations. Is it a day trade? Is it a swing trade or is it a long term positions trade?

Suppose I am a day trader. I will be generally be able to identify what the average range for the day is and expect that if I miss 20% of the bottom and 20% of the top then I can expect to capture 60% of the average daily range. My expectations are for X amount of a given range.

First I will have to structure my computer and charts to a format that is conducive to day trading. So how do I start? How many pips you want to make in a specific time frame like eight to six bars from entry? 30 pips or 40 pips!

In day trading you should use two time frames; 5 minutes and 15 minutes time frames to look at the market! Use the 5 minute time frame to exit a position in day trading. Use the 5 minute time frame as a shorter time frame trigger to go with the 15 minute signal. Use the 15 minute time frame for the dominant trend if you trade Euro, Yen or Pound, then for day trading.

How do you make your entry and exit decisions in day trading. First look at the 15 minutes chart than take a look at the 5 minutes chart to make your trading decision. The key to remember is when the 15 minute time period is in the buy mode, take the 5 minute buy signals. Similarly when the 15 minute time period is in sell mode, take the 5 minute sell signals.

As a day trader you can watch the 60 minute time period, but if you are in a trade based on the 15 minute and the 5 minute time, these are the time frames you need to monitor for that specific trade.

Keep in mind your profit targets and where you are in the range. Keeping an eye on the 60 minute time period will help you identify the current trend and a potential change in the trend if a moving average crossover occurs.

If the Euro is already down 50 pips when a sell signal is triggered, the odds are that your profit potential is in the range of suppose 30 pips or less if the average true range (ATR) is 80 pips based on the past 14 trading days. How do you calculate these things?

Free forex charts do not go into very fine details that you need to look into when making your trading decisions. You will have to subscribe to a good forex charting service. Using good forex charting software will help you automatically calculate all the daily, weekly, monthly pivot points as well as the daily range, support and resistance, S-1, R-1 and other stuff.

You should learn how to calculate pivot points. Using pivot points in day trading can give you an edge. For day trading use the 60 minute time period for calculating the monthly pivot points, 15 minutes time frame for calculating the weekly pivot points and the 5 minute time frame for calculating the daily pivot points. - 23199

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!

Everyone Has Lost Money In This Economic Downturn

By Jesse Astolos

Anybody who has lost money this last year in the stock market may be unsettled. This has been a tough couple of years where almost everyone has come out a loser. The stock market is a place where anybody can look like a fool when it is going down and look like a hero when all stocks are going up.

Getting the confidence to put more money in the market after having it perform so poorly is something that does not come easily. After all, whos to say it wont just turn around and go back down again? Figuring out a good reentry point is something that seasoned investors would have a much better chance of figuring out than the beginner. However, we do know that at some point, it will be the correct time to start buying again.

Averaging down your better holdings is a good thing to do but it can be quite scary too. This is especially so in a market that is in an extended free fall. So, at this time we are really no closer to knowing whether right now is the right time to average down. It seemed a while ago that the stock market had taken a big fall and it might have been the right time to average down some of your better stocks. But then the market continued to fall even further so it would have not worked out if you had invested more.

Any expert in the stock market will preach about the importance of stock diversification when you do get back in. What that entails is spreading your bets around on a variety of stocks rather than putting all your eggs in one basket. This is important because you want to protect yourself from picking one really bad stock and then losing most or even all of your money.

If this terrible market environment we have had now though, even those who were properly diversified have lost. Nothing can protect you from losing when the market goes down as much as it has and that is something you must be aware of and accept. Investing in stocks is risky and you should never invest money that you cannot afford to lose. Shortly though, it will be time to get back in the market and those that have strong stomachs will be the ones who stand to profit. - 23199

About the Author:

Do you want to learn how to buy stock for beginners? If you would, please visit my site Stock Market For Dummies.