http://www.tradeourway.com TradeOurWay.com - your trading and investing nest Thu, 04 Feb 2010 02:25:21 +0000 http://wordpress.org/?v=2.9.1 en hourly 1 TradeOurWay.com Podcast - Technical Analysis Patterns - ABC-DOWN formations. Mentor Mala no Mentor Mala iamblu@gmail.com iamblu@gmail.com (Mentor Mala) Copyright © TradeOurWay.com 2010 TradeOurWay.com - your trading and investing nest http://asp.tradeourway.com/wp-content/uploads/powerpress/logo.gif http://www.tradeourway.com http://www.tradeourway.com/index.php/2010/02/03/double-bottom-formation/ http://www.tradeourway.com/index.php/2010/02/03/double-bottom-formation/#comments Thu, 04 Feb 2010 02:23:25 +0000 Mentor http://asp.tradeourway.com/?p=62 http://www.tradeourway.com/index.php/2010/02/03/double-bottom-formation/feed/ 0 http://www.tradeourway.com/index.php/2010/02/01/53/ http://www.tradeourway.com/index.php/2010/02/01/53/#comments Tue, 02 Feb 2010 00:01:54 +0000 Mentor http://asp.tradeourway.com/?p=53 http://www.tradeourway.com/index.php/2010/02/01/53/feed/ 1 http://www.tradeourway.com/index.php/2010/02/01/technical-analysis-explained/ http://www.tradeourway.com/index.php/2010/02/01/technical-analysis-explained/#comments Mon, 01 Feb 2010 21:10:53 +0000 Mentor http://asp.tradeourway.com/?p=46 http://www.tradeourway.com/index.php/2010/02/01/technical-analysis-explained/feed/ 0 Technical Analysis As far as I am concerned, the most important aspect of technical analysis is that it pays absolutely NO attention as to why the price is moving. What is technical analysis? It is a term often misunderstood by many. I have heard arguments that go as far as calling technical analysis as a mystical art which compares to tea leaf reading. Nothing annoys me more, honestly then when I see the two being compared side by side. With that said, let me explain in a very simple way what Technical Analysis really is. In its very simple definition Technical Analysis is the study of the security's past price and volume performance in an attempt to predict the future performance. Technical analysis ignores all the fundamental information such as earnings, revenue growth etc., and puts a great deal of importance in price elements such as open, high, low and close, and volume. [wp_campaign_2] If you are wondering why you should use technical analysis, let me explain in a bit more detail. Technical analysis, when used correctly, can dramatically increase your returns while minimizing risks. [wp_campaign_1] We all know that the biggest enemy of your trading/investing is your emotions (Fear and Greed). By using technical analysis you eliminate the emotion, by mechanizing your trading. If you get signals to buy/or sell a stock, you execute the trade accordingly. According to wikipedia Technical analysis were derived from observation of financial markets over hundreds of years. The oldest form or a branch of technical analysis, and now one of the most widely used form of technical analysis is Candlestick charting. It is also believed that "Honno, the God of the markets," a very successful rice trader in early Japan, is said to have invented technical analysis. As far as I am concerned, the most important aspect of technical analysis is that it pays absolutely NO attention as to why the price is moving. It simply looks for trends. Since we know that history repeats itself, chances are great that based on the past performance, similar patterns will appear in the future. [wp_campaign_3] Additionally, please read the Stock Support and Resistance if you want to read more about technical analysis and how to use it successfully. :) Mentor Mala no 6:22 http://www.tradeourway.com/index.php/2010/01/01/abc-down-formation/ http://www.tradeourway.com/index.php/2010/01/01/abc-down-formation/#comments Fri, 01 Jan 2010 23:04:30 +0000 Mentor http://asp.tradeourway.com/?p=8 http://www.tradeourway.com/index.php/2010/01/01/abc-down-formation/feed/ 0 ABC-Down formation is used to determine an entry point to short a security, as well as to help us determine potential targets for that security. - Knowing stop loss and potential targets helps us understand risk/reward ratio better. ABC Down Formation is a technical analysis formation used not only to predict entry and exit points on a trade, but also to determine potential targets. Knowing stock target helps us determine risk/reward ratio. One can not determine risk/reward ratio without knowing, or having some idea where the targets are. We could know the risk based on where we plan on establishing the stop, but how much is our reward? [wp_campaign_2] In this article we will discuss ABC Down formation. I first heard about this formation from Tom O'Brien, of Tiger Financial News Network (http://www.tfnn.com). Now I am not saying he is the inventor of this technical analysis pattern, or the very first one to ever use it. All I am saying that I have heard him explain it first. [wp_campaign_1] OK now, let's get into discussing the Abc Down Formation. You take a chart of any security you'd like. Be it forex, index, etf, futures chart, and find a point where the stock started declining and has declined for a period of at least 3 bars. You are looking for the "bounce." The first point in that chart will be the "A" point. The low point, just before the bounce, is your B point. You take Fibonacci retracement tool on your stock charting program, and you drag the Fibonacci retracement to the "B" point on your chart. This will draw 23.6%, 38.2%, 50%, and 61.8% retracement levels on the chart (Retracement levels drawn can vary depending on your stock charting software). During the bounce, the high point, before the stock starts to decline again, is your "C" point. That "C" point should not be higher than 50%. Ideally, we are looking for this to be between the 38.2% and 50%. We call this area "Confluence Level." if the retracement level is between 38.2% and 50% the chances of the last leg of this formation being equal to the first leg of the formation (C-D will equal the A-B), are greater than 70%.  Here is a chart of what I am suggesting... [wp_campaign_3] One Important part you have to pay really close attention to is the Volume. While the stock is going down, we need to see heavy volume, as highlighted on the first portion of the chart (Red/Pink). As the stock is bouncing, (the green highlighted area), the volume is decreasing, and then the third part, as the stock breaks the "B" point on the chart, the volume is increasing. The volume is extremely important in this technical analysis pattern. Without proper volume confirmation, we can not consider this to be a valid formation, and thus should not be trusted to trade. I am not suggesting that t the stock will not complete an ABC-Down formation even if the pattern is not confirmed with volume. Noone can predict what can happen with 100% accuracy, but in order for this pattern to be confirmed, it has to be confirmed by the volume as well. Mentor Mala no 8:43