Elliott Waves Can Be Your Crystal Ball In Forex Trading

If you have been trading for a while, you must have heard about the Elliott Waves. Elliott Wave Analysis originated in the stock market but it applies to the forex market really well too. Elliott Waves are a sort of a crystal ball that can help you understand the coming turning points in the market with surgical principle.

Elliott Waves have their origin the stock market but they apply to the forex market really well. No matter what your style of trading, you can use this principle in your trading. Whether you are a day trader, swim trader or a position trader, you can apply the Wave Principle in your trading with surgical precision.

An Elliott Wave Cycle from a bullish to a bearish market or from a bearish to a bullish market will always comprise of eight waves. Impulse waves are the ones that move with the main trend. They are five in numbers. Corrective waves move counter to the main trend and are three in numbers. This pattern has been found to be repeated in the stock market as well as all the other markets repeatedly over and over again making the Wave Principle a Universal Law of the Nature.

It is important for you to understand that there can be patterns within patterns. A wave pattern might be sub patterns of a larger wave patter while at the same time contain its own sub wave patterns. But the most important thing to understand is that all these patterns follow the 5/3 rule meaning each pattern comprises five impulse waves and three corrective waves.

Wave one is the shortest impulse wave. Wave two is a corrective wave that should never reach the start of the wave one.

Wave Three is the strongest and the largest impulse wave. Traders are now more willing to start thinking about the new trend and if it is an uptrend, massive buying starts pushing the wave up and up. Of course, if it is a downtrend, massive selling will start pushing Wave Three down and down. Wave Four is corrective and Wave Five is the peak of the bullish or bearish sentiment in the market.

It is important for you to understand that Elliott Wave Principle can be applied on all time frames whether you trade intraday or longer term.

Mr. Ahmad Hassam has done Masters from Harvard University. Get these 3 Swing Trading Systems FREE. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide.

5 Most Important Hours In The Forex Market

Do you know what is the prime time in forex trading? Prime time is the five hours that are very important for forex traders.

Now, prime time in the forex market is considered to be these five hours when European Trading Session and the US Trading Session Overlap from 7 AM EST to 1 PM EST. The reason this five hours are the most important is due to the fact that all the major six currency pairs EURUSD, GBPUSD, USDAUD, USDCHF, USDCAD and USDJPY get heavily traded during these five hours. NY being the currency center of the US is active during these five hours. This means any economic report released on the US economy during this time can affect the USD. You might have observed that USD is present in all the above six currency pairs either as a base currency or a counter currency. So, any news that affects USD will affect all these pairs.

What type of data affects the USD during these five hours, you might ask. The most important economic news releases like the FOMC Meeting Minutes, The NFP Report, the COT Report and other important reports are released around 8:30 AM EST as well as 10 AM EST.

Looking at the data released by the International Bank of Settlement, more than 90% of the trading volume in the currency markets involves these six currency pairs. This makes these five hours the most volatile five hours in the forex market 24 hour day.

After 8 AM EST, things start to gear up with more traders becoming active. If there is a news release around 8:30 AM EST or at 10 AM EST, watch out! Market can get highly volatile around these times. If you are not a news trader, you might like to stay out of the market around these times. You need to keep an eye on the FED statements.

What you need to do is to have the international economic news calendar that gives you the times and dates of the important economic news releases that are scheduled by the European Central Bank (ECB), the Bank of England (BOE) or the Bank of Japan (BOJ).

You must be aware of this fact that the US Dollar and the Gold Prices are negatively correlated. So, when one moves up, the other moves down. Right now, gold is moving up so USD is expected to move down.

You need to understand how these markets affect each other. Currency markets in a way encompass all other markets that includes the stock market and the commodities market.

Mr. Ahmad Hassam has done Masters from Harvard University. Get this highly profitable Magic Breakout Forex Strategy by Tim Trush and Julie Lavrin FREE. Get these Correlation Trading Cheatsheets FREE.

Short Selling And Short Interest Ratios Shocking Secret

Everyone wants to ride the rising tide in the stock market by buying stocks and later on selling them at a higher price to make a capital gain. However, can you make money when the tide in the stock market is going down? Yes, you can with short selling. In short selling, yo borrow a stock from your broker and sell it. Later on you buy it back at a much lower price and return it your broker making a good capital gain.

Now, when you go short and the market suddenly turns against you in the sense that it goes in the wrong direction, you are in trouble. You want to buy back the stock but the price is continously going up. The harder it becomes to buy back the required number of shares, the more desperate you will become and the higher the prices can go before you are able to buy back the required number of shares and return them to your broker. So in a way, short selling is tricky and must only be practiced by the experienced traders. Now for short selling to work, the stock price should go down otherwize, you will make a hefty loss in case the stock price starts to go up. Since, you are trading with a borrowed stock, you have to return that stock to your broker. In case the stock price goes up, you will have to buy it back at a much higher price with a loss.

In case of futures or options, you don’t need to borrow the security; you simply agree to sell the contract when you go short. Why do investors take a short position? The most obvious reason is that they are expecting the price to go down further. Short selling is also used for hedging purposes.

There is something very important that you need to keep an eye on when you go short selling. It is known as Short Interest Ratios. New York Stock Exchange (NYSE) and NASDAQ, both report the short interest in stocks listed on them,however, this is done on a monthly basis as brokers need sometime to collect the data of shares that they have lended to their clients for shorting. This will help you monitor the rate of short selling in the market. If the rate is too high, it means that too many investors are taking short positions and you need to avoid it.

Too much short selling can only drive the stock price down. Short Interest Ratio is very important for short sellers. Short Interest Ratio can give you important clues about other short sellers in the market.

So what is the Short Interest Ratio? Short Interest Ratio is the number of shares of a particular stock that has been shorted in the market. Plus the average daily volume for that stock in the same month and also the number of days of trading at the average volume that it would require the market to cover the short positions in that stock. It also reports the percentage change in the short positions from the previous month.

A high short interest ratio should make you nervous if you have taken a short position in that stock as most of the investors who are short will soon become desperate to dump that stock in the market and cover their short positions. The problem with Short Interest Ratio is that it is not calculated frequently. It is calculated on monthly basis. So, the trader cannot use it to gauge the short positions in the market on a daily or weekly basis. However, it can give you the general trend in the market.

Mr. Ahmad Hassam has done masters from Harvard University. Read this 49 page Quantum Swing Trading FREE Report. Get your FREE COPIES of the HVMM Ultimate Day Trading System and the Universal Risk & Money Management Tool.

Master Limited Partnership (Part I)

Many analysts are of the opinion that commodity investing maybe the best investments in the early part of the 21st century. Take the name of oil, oil is the most heavily traded commodity in the world right now. Gold is another commodity that is reaching record price levels. Gold prices for the first time have breached the unheard of $1000 per ounce barrier. Investing in commodities may be the something that investors thought of boring and dull only a few decades back but not anymore now. If you are interested in investing in companies that are involved in the production, transformation and distribution of commodities, than one of the best ways to do so is through investing in the Master Limited Partnership (MLP).

So how do you go about investing in an MLP? The shares that an MLP issues are called Units and the investors who own them are known as Unit Holders. MLPs are public entities that trade on public exchanges. An MLP issues shares that trade on an exchange just like a company stocks that trades on an exchange. You can invest in an MLP by buying its shares on an exchange. You can instruct your broker to buy the units of an MLP that you are interested in investing.

Now most of the MLPs trade on the New York Stock Exchange. A few MLPs also trade on the NASDAQ and the AMEX. When you invest in an MLP, you are essentially investing in public partnership. There are tax advantages to investing in MLP. Unlike regular corporations, an MLP is only taxed once. Because of Congressional Legislation, any MLP that derives 90% or more of its income from the production, distribution and transformation of commodities qualifies for this tax exempt scheme. You must be curious how this tax advantage works out.

Suppose you invest $1 in the stocks of a regular corporation and you are in the 35% tax bracket. Corporate tax is 30% of it’s before tax income. This means that for each dollar that you invest you need to get at least $1/ (1-0.35) =$1.54 just in order to breakeven. So the corporation will have to generate $1.54/ (1-0.3) =$2.2 for each dollar that you invest in order to return you $1 after tax profit. Since an MLP has got the tax exempt status it will only have to generate only $1.54 for each dollar that you invest in it.

This tax advantage gives an MLP competitive advantage as compared to other corporations when competing for assets. This means a huge advantage for an MLP. Now an MLP is run by a General Partner (GP). In most cases, the majority of these GPs in MLPs are other corporate entities setup with the specific purpose of running an MLP.

Now you must know as a limited partner in an MLP, you have limited voting rights. This means when you invest in an MLP, you are giving away the keys of ownership to the GP. This means you are out of the decision making in an MLP. However, most GPs do a good job of running the MLP as it is in their financial interests.

An MLP is obligated to distribute all available cash back to its unit holders on a quarterly basis, so you will be getting a quarterly income from your units. Secondly as the MLP expands and grows overtime, its units may give you capital gain as well. Investing in MLP units can give you quarterly cash flows as well as appreciation of the unit price.

Mr. Ahmad Hassam has done Masters from Harvard University. Trade Dow Futures . Learn Commodity Trading ! Don’t reprint this exact article. Instead, reprint a free unique content version of this same article.

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Commodity ETFs

Commodity investing may become the hottest investment in the first decades of the 21st century. Right now gold prices have broken the $1000 per ounce barrier for the first time in history. It is predicted that this upward trend in gold prices will continue for the foreseeable future. Oil prices have also started reaching $80 per barrel and it is expected that oil price will soon be above the $100 per barrel mark. It may eventually reach the $200 per barrel barrier. If you are interested in investing in commodities than you can invest in a commodity mutual fund! Many people are not aware that commodities as an asset class has a lot of potential especially in the 21st century. It is being predicted that the 21st century belongs to the commodities.

This is the simplest way for you to get involved in investing in commodities as the mutual fund portfolio management will be done by a professional manager and you have to do nothing. Just buy the shares of the commodity mutual fund and let its NAV appreciate before you can sell for a capital gain.

Now, you must have heard about the Exchange Traded Funds (ETFs). ETFs are really hot investments these days. ETFs started off some three decades back but became highly popular as investment vehicles in such a short time.

Driven by the growing demand of commodities by the investors many financial institutions are now offering Commodity ETFs. Now the good thing about investing in ETFs is that they give you the diversification benefits of a mutual fund with very low fees something like 0.7% as compared to 2-4% of the mutual fund.

So unlike a mutual fund whose net asset value is calculated at the end of the day and the shares of mutual fund cannot be traded during the day, you can go both long or short on ETFs all the time. Something you cannot do with a mutual fund! ETFs have the added benefit of being able to trade like stocks giving you the powerful combination of diversification and liquidity.

Now, you can find thousands of ETFs in the market on different market sectors, stock indexes, currencies, commodities and so on. This diversification plus liquidity benefit makes an ETF a better investment tool as compared to the mutual fund and the stocks.

The Deutsche Bank Commodity Index Tracking Fund is listed on AMEX and tracks the Deutsche Bank Liquid Commodity Index. This index is based on a basket of six commodities: light sweet crude oil, heating oil, gold, aluminum, corn and wheat. The first Commodity ETF in US was launched by Deutsche Bank in the start of 2006.

This ETF invests directly in the commodity futures contract. Now one of the downsides of investing in this Commodity ETFs is that it can be fairly volatile as it is based on commodity futures contracts that get rolled monthly. Another downside to this Commodity ETF is that it is based on a basket of six commodities only. Now, every month a new ETF gets launched. There are a number of Commodity ETFs that track individual commodities like crude oil, gold and silver. Do your research on Commodity ETFs, you may find a good investment.

Mr. Ahmad Hassam is a Harvard University Graduate. Trade Dow Futures . Learn Commodity Trading ! Grab a totally unique version of this article from the Uber Article Directory

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Defining The Primary Trend

Trading would be almost impossible without charts and technical analysis. Trading is all about anticipating and predicating rather than forecasting. Technical analysis is the best tool a trader can have. A picture is worth more than a thousand words.

Always remember, trend is your friend. Trading in the direction of the trend is the best trading strategy. Never try to trade against the trend. So determining the primary direction of the trend is highly importanct for you. Primary trend is the direction of the market that offers the least resistance forward making money. When you follow a primary trend in a bull market you look for strong stocks and in a bear market you look for stocks showing weaknesses. The most important thing that you should in a market is its primary trend. In order to determine the primary direction of the trend, you need to draw correct trendlines. This is an art that traders learn with experience. A wrong trendline means lost trades. You use the following tools to determine the primary trend! Knowing the primary trend and trading in its direction increases your chances of making money. So how do you find the primary trend and what tools you need to determine the primary trend?

Trendlines: You don’t have to worry much about how to correctly draw the trendline as most of the trading platforms have the function to help you draw the trendline. You can let the software draw the trendline for you or you can do it yourself. It is up to you. To correctly draw a rising trendline on the chart, start with the lowest low on the chart and connect it to the lowest low preceding the highest high in the chart without bothering about the prices between the two points. Knowing how to draw and use trendlines gives you an excellent start on any trade. Similarly to draw the down trendline, draw a line connecting the highest high on the chart to the highest high preceding the lowest low of the chart without passing through the prices between the two prices. Now why trendlines are important? Trendline show you the direction in which the markets are moving. If the trendline slopes up, it means that the market is in an uptrend. Prices are gradually going up. Now there might be minor trends in the primary trend but these minor trends are just like the ebb and flow of the waves in an ocean. Two more concepts that you need to learn is the key support and key resistance. Key support is the area above which the prices have held for sometimes. Key resistance is the area above which the prices have not been able to rise for sometimes. A market breaking above the key resistance or below the key support is a signals a new trend.

Moving Averages: Support level is the price where the prices stop falling and the buyers step in overcoming the selling pressure. A break in the support level is an indication that more weakness may be ahead. Moving averages are sues to smooth out the market’s trend over a given period of time and serve as an important support and resistance levels.

A break above the resistance level is an indication that the market is going strong. Resistance level is the price where prices stop rising and the sellers overcome the buying pressure. You should always keep this rule in mind that you should be out of the market by selling as soon as the key support is broken. On the other hand you should buy into the market as soon as the key resistance is broken.

Oscillators: What is more important to know is the fact that oscillators produce useful mathematical data that can help you tell whether the market is overbought or oversold and whether the momentum of the primary trend in the market is still strong or there is a potential change in the primary trend ahead? Two important oscillators that you should be familiar with are RSI and MACD. Oscillators are graphic depictions of points derived from the mathematical formulas that are plotted below the price charts. Knowing these mathematical formulas is not important as a trader.

Bollinger Bands: Bollinger bands are also known as volatility bands or envelopes. Bollinger bands give you visual evidence when the market has travelled too far in any one direction. Bollinger bands are calculated by plotting points one or more standard deviations above and below the 20-day moving average. However, you can calculate Bollinger Bands with any moving average.

Mr. Ahmad Hassam is a Harvard University Graduate. Try these cash printing Forex Signals from heaven. First trade on your Forex Demo Account! This and other unique content ” articles are available with free reprint rights.

Determining The Primary Trend

If you are a trader and don’t know anything about technical analysis and how to draw the trendlines and support and resistance levels than you may as well stop trading before you learn and master these concepts. A picture is worth more than a thousand words. Trading would be almost impossible without charts and technical analysis. Trading is all about anticipating and predicating rather than forecasting. Technical analysis is the best tool a trader can have.

The most important thing that you should in a market is its primary trend. Primary trend is the direction of the market that offers the least resistance forward making money. When you follow a primary trend in a bull market you look for strong stocks and in a bear market you look for stocks showing weaknesses. Knowing the primary trend and trading in its direction increases your chances of making money. So how do you find the primary trend and what tools you need to determine the primary trend? You use the following tools to determine the primary trend:

Trendlines: To correctly draw a rising trendline on the chart, start with the lowest low on the chart and connect it to the lowest low preceding the highest high in the chart without bothering about the prices between the two points. Knowing how to draw and use trendlines gives you an excellent start on any trade. Similarly to draw the down trendline, draw a line connecting the highest high on the chart to the highest high preceding the lowest low of the chart without passing through the prices between the two prices. Key support is the area above which the prices have held for sometimes. Key resistance is the area above which the prices have not been able to rise for sometimes. A market breaking above the key resistance or below the key support is a signals a new trend.

Moving Averages: Moving averages are the most basic but the most widely used analytical tools in trading. Before you understand what a moving average is first try to grasp the concept of support and resistance. Support level is the price where the prices stop falling and the buyers step in overcoming the selling pressure. A break in the support level is an indication that more weakness may be ahead. Moving averages are used to smooth out the market’s trend over a given period of time and serve as an important support and resistance levels.

A break above the resistance level is an indication that the market is going strong. Resistance level is the price where prices stop rising and the sellers overcome the buying pressure.

Oscillators: Oscillators are technical tools whose movements up or below a certain level give you an important trading signal. What is more important to know is the fact that oscillators produce useful mathematical data that can help you tell whether the market is overbought or oversold and whether the momentum of the primary trend in the market is still strong or there is a potential change in the primary trend ahead? Two important oscillators that you should be familiar with are RSI and MACD. Oscillators are graphic depictions of points derived from the mathematical formulas that are plotted below the price charts. Knowing these mathematical formulas is not important as a trader. MACD is a highly popular technical indicator and is widely used by the traders in divergence trading.

Bollinger Bands: Bollinger bands are also known as volatility bands or envelopes. Bollinger bands give you visual evidence when the market has travelled too far in any one direction. Bollinger bands are calculated by plotting points one or more standard deviations above and below the 20-day moving average. However, you can calculate Bollinger Bands with any moving average.

Mr. Ahmad Hassam is a Harvard University Graduate. Try these cash printing Forex Signals from heaven. First trade on your Forex Demo Account! Grab a totally unique version of this article from the Uber Article Directory