The Theory Of "Strong Trend"

The strength, as well as energy, without the support fades, the one who will be able to use the potential force, will come in inexhaustible delight.

Alexander M. Mazurkevich

In this research I would like to consider another very interesting phenomenon in the market - volotilnost. Day Trader, and just a short-term traders in the period of time are always looking for volotilnye markets, ie markets in which you can earn, because when changing volatility traders suffered losses and have large profits. Some professionals feel the impending volotilnost, and even predict this phenomenon is very, very difficult. Rather, virtually impossible.
Assuming a normal situation, the trader or merchant, trading in their own homes via the internet, put up a few orders for the purchase of any currency, for a dollar. The likelihood that he catch a strong trend, and instantly removes the profit would be around 0.2. This is even without taking into account the fact that the market can teach him to "surprise" and turn and then a trader would be in a situation of loss, which in turn can also significantly affect its deposit. We can assume that every trader is looking for reasonable times to enter, which would be most similar to volotilnoe movement. But the course does stop, or unfolding, and that then happens - he loses money, and loss of money, as you know, the worst that could be in the trade, so as to lose the opportunity - it does not lose anything to lose money - a lot to lose, continue to , focusing on a more powerful argument - and lose time, lose all. Based on this we will strive for the effectiveness of our trade with volotilnom moving through the above information.
What is volotilnost for trade and how we seek it, as we found it at work in the market, as with the use of our knowledge into practice and get a positive result. All these issues are the object of our scientific article, no, we will not refer to some statements and theories of other successful traders, we would like to share with you exclusive information, we investigated if the work in the financial markets and to tell you about new methods of conducting trade in the market and applying these methods to enter the market.
Volotilnosti The phenomenon can be interpreted in different ways. Each trader can express their views on this phenomenon and to what extent he is right, would say only his bank account, which is replenished when the work or reduced accordingly. This is due to the fact that every person has its own point of view, and each trader, speculator or just a trader, kidaya to look at the market, sees it quite differently than its competitors. We will try to teach you to see the market correct and in accordance with this orientation in the trade. The task is not simple, because this will work, and only persistent traders cope with a task and be able to obtain significant results.
It is believed that financial markets are highly liquid and volatile, which in turn significantly affect the risk of financial products on the market. Of course, introducing the risk of a transaction, minimizing their losses through the knowledge acquired during work in the market, you can receive a stable profit, even with such highly liquid and volatile markets like Forex, Stocks, Futures and Options. While equity markets take much volotilnymi at a constant interval of time does not occur. Sometimes happens that this very volotilnosti have to wait for a few days, but all the same, it is effective, I suggest always to take into account volotilnosti market force at work on it.
The very phenomenon of volatility can be interpreted as the ability to price volatility in the market, that is not a quiet equilibrium, namely, a strong movement for a given direction. Volotilnost can be seen in several directions:

1. Global volotilnost on the market. See Figure 1

Figure 1 The study of global volotilnosti market Forex (EURUSD), a one-week period, 2001-2002.

As seen in Figure 1, for the analysis of the global market volotilnost can bind to the indicator as a volume that is the number of transactions in a given period of time. As we explore the global volotilnost can be assumed that the period of the study will focus on longer periods of time: weeks, months or even years, changes in price.

2. Reduced volotilnost, volotilnost, which force may be much weaker global volotilnosti, as actually happens volotilnosti global expansion force at a smaller time intervals, which, in turn, and leads directly to reduce the volume of transactions in this period of time. For a volotilnosti period of time may be during the day, a few days but not more than a week. See Figure 2:

Figure 2. Reduced volotilnost market EURUSD daily time interval.

Pay attention to the area between the two vertical lines, this area presents to us a higher interest, as well as the volume of transactions during this period was more than the previous one. Therefore, to see how to move the price of currency. And make appropriate conclusions. Below we will talk in detail about this, but right now I would like to make you reflect on this phenomenon, perhaps you have some interesting thoughts, but please let us know about them, and we will hold a series of studies in this direction to see the truth of your speech and suggestions.

3. And last, the most interesting variety volotilnosti: stable volotilnost. You may certainly ask, but why is stable, not weak or light or anything else indicating that the force volotilnosti even more diminished. That's right, the issue is very topical and has a strong basis to ask him. The point is that a stable volotilnost derived from the fact that usually at very short intervals of time by force of transactions is low, all right, but the name we picked up not by the strength volotilnosti, but by way of its perception in the market. That is, given two versions proposed by us earlier, we can say that each of these two types of volotilnostey has a strong energy for the movement of the market respectively. See Figure 1 for a period of weeks and months. By all accounts it was the largest volotilnost as the number of transactions was the highest according to the period and at the same time as the impact each of the transaction at a price we do not take into account, as if the candle is ultimately for the week of the session closed with the minimum bid, then all operations led to a reduction in prices, although volotilnost was strong. At this period, always have to take into account such factors as the fact that price is not just slowed down a few more days varied within certain limits is rising then descending, which, in turn, led of course to commit transactions, and improve volotilnosti during this period. The same can be said about the reduction volotilnost only during the work will be much smaller than the global, but the principle is the same. Here is a stable volotilnost is quite different volotilnost, namely the principal purpose and significance. Here, emphasis is placed not directly on the period and number of transactions, although this is an important factor, but on such a factor, as in "stable volotilnosti" analysis of research aims to study less than day-time, put on an hour for four. See Figure 3:

Figure 3 Investigation of stable volotilnosti grafikEURUSD hour interval.

The above Figure 3 shows how the price varies according to the greatness of force volotilnosti. But now we wish to focus your attention, as shown Figure 3, focuses on one of the shorter time periods, but no more than hour of the day. This is the secret, the fact is that at these intervals, ie intervals of time, volotilnost very often will be directed to the immediate stability of descending or ascending the short, intermediate trend time trend. According to this we gave the name of a stable volotilnosti, as well as with increasing volume and identify a clear direction of trends can be argued that the rising volume will lead to a stable volotilnosti by price change tool in one of directions. That is, increase or decrease. See Figure 3.

We developed the theory of the strong trend to be a very good tool when working in the market, it must be fully used in addition to all the theories described earlier, because by itself in isolation, it is not a lot of chances to claim uniqueness. As argued earlier, the thrust of this theory focuses directly on the study volotilnosti and your behavior when you use any methods of trade at the entrance to the market. Consider Figure 4:

Figure 4 volotilnosti study on the impact of trade EURUSD

According to figure 4, set out our theory of "strong volotilnosti:
1. If you are in the market, and in particular the decision to commit the transaction after you have examined all the factors influencing the market, pay attention to the volume of transactions before.
2. I propose to move to a short period of time in order to determine the level of volotilnosti, ie the volume of transactions in the market before you are about to enter, also return for a few days ago and pronablyudayte volotilnost what the market was before, so history usually repeats itself.
4. Once you have submitted to the picture, try to make the average value of transactions per month, with time, leave as a time or four hours, observed that the interval of a high probability of a qualitative analysis of the saturation of transactions. See Figure 5:

Figure 5 Determination of the average volume of transactions to detect subsequent growth, schedule EURUSD time interval.

Singling out the average value of transactions can be pronablyudat that once, in most cases, the number of transactions to handle for the middle, it means that volotilnost aimed at trend will intensify. At least several hours. During this time, as seen from the figure there is an essential change in the price, which is just a matter of cut can spread your broker.

Given the theory of "strong trend" can protect themselves when entering the market or using a different methodology. Proposed to use this theory in combination with other theories of the entrance, because it is very difficult to increase the likelihood of success based solely on volotilnost market, because volotilnost very changeable and can be both at the hands of you, and against. Derivation of one, be more careful in the analysis of transactions.

And you good trend!

President and Managing the international hedge fund
AlMaz Hedge Fund Management
Alexander M. Mazurkevich

Trading strategies based on GEPe. Part 1

Trading on GEPe - a simple and disciplined approach to buying and selling shares. In fact, everyone can find stocks that have a price from the previous closing of GEO and watch the first hour of bidding to determine the trading range. Increase above this range signals to buy and padanie below it signals to sell.

What is the GEO (Gap) GEO - the change of prices between the closing and opening of two consecutive days. While most guides to technical analysis identifies four types of models GEPa as usual, the breakaway, continuation and exhaustion, these designations are applicable, after a sample schedule. That is the difference between all types of GEPa apparent only after the event continues to grow, or decline certain way. Although these classifications are useful for long-term understanding of how a certain action or sector to respond, they provide little useful for trading.

For trading purposes, we define four basic types GEPov follows:

Full GEO up occurs when the opening price is higher than yesterday's maximum.
The graph below for "Cisco", the opening price on June 2, showed a small dash on the left of the second bar in June (green arrow) is higher than the closing of the previous day, showed a small dash on the right side of the bar on June 1.

Full GEO down occurs when the opening price below yesterday's level.
The schedule for "Lycos" below shows the complete GEO-up 16 May (green arrow) and the complete GEO-down the next day (red arrow).

partial GEO-up occurs when today's opening price is higher than yesterday's close, but not higher than yesterday's peak.
The next schedule for "Earthlink" represents partial GEO-up June 1 (red arrow) and the complete GEO-up on 2 June (green arrow).

Partial GEO-down occurs when the opening price below yesterday's closing, but not lower than yesterday's minimum.
The red arrow on the graph for "Offshore Logistics" below shows where the event was opened below the previous closing, but not below the previous minimum.

Why use trade rules?
In order to successfully trade in the shares of GEPom must use a clear set of rules of entry and exit for the trade and minimize risk. In addition, the trading strategy based on GEPah can be applied to the weekly, daily or intraday GEPam. For long-term investors, it is important to understand the mechanism GEPov because the signals are for sale can be used as a signal output, to sell existing shares.

Trading strategies based on GEPe
Each of the four types has GEPa signals for buying and selling, with eight trading strategies at GEPe. The basic principle of trade on GEPe be allowed after one hour after the opening of the market set the price range of shares. Modified Trading Method, which will be discussed later, can be used with any of the eight primary strategies to trade up to the first hour, although it carries a greater risk. Once the position is open, you calculate and set the 8% slide stop - an order to exit the long position (buying) and 4% rolling stop - an order for a short position (selling). Sliding stop - the warrant was merely a threshold of entry, which follows the rising costs or falling prices in the case of short positions.
Example for purchase: you buy a stock for $ 100. Vyustanavlivaete yield no more than 8% below that level, or $ 92. If the price rises to $ 120, you raise the stop - the order of 11 $ 0.375, which is approximately 8% below $ 120. Stop - the order continues to rise until the rate of stock increases. In this case, you follow the appreciation of the shares, or with real or with mental stop - Warrant, which will be when the price trend finally changed.
Example for sale: You sell stock for $ 100. You install a warrant for the purchase of $ 104, so that a return of 4% would have forced you to get out of position. If the price falls to $ 90, you re-calculates the stop - the order of 4% above that mark, or $ 93 for buying to close the position.

The eight primary strategies are

Full up GEO: Buy
If the stock price at the opening of more than yesterday's high, look at 1-minute schedule after 10:30 and then a warrant for the purchase of two tikami above the maximum achieved in the first hour of bidding. (Note: The "tick" is defined as the difference between the purchase and sale (spread), usually from 1 / 8 to 1 / 4 point, depending on stock)

Full up GEO: Sale
If a GEO in the price of shares up, but do not have enough momentum to sustain growth rate of shares level off or fall below the opening price with GEPom. Traders can set similar to a warrant for the sale as follows:
If the opening stock price more than yesterday's high, look at the 1-minute schedule after 10:30 and then a warrant for the sale of two tikami below the minimum achieved in the first hour of bidding.

Full GEO Down: Buy
Low incomes, bad news, organizational changes and market forces can make the stock price decline is not typical. Full GEO down occurs when the opening price is not only below the previous closing day, but also to minimize the previous day. The action, the cost of which opens with a full GEPom down, then starts to climb immediately, is called the "Leap dead cat."
If the price of shares is less than yesterday's opening level, set the order for the purchase of two tikami above yesterday's level.

Full GEO Down: Sales
If the opening stock price is less than yesterday's level, look at 1-minute schedule after 10:30 and then a warrant for the sale of two tikami below the minimum achieved in the first hour of bidding.

Partial GEPy
The difference between full and partial GEPami is the risk and potential profits. Generally, the action opened with GEPom completely above the previous peak of the day is a significant change in the market to buy or sell it. The demand is large enough to induce marketmeykerov or brokers to make a significant change in room prices to accommodate the outstanding orders. Shares with full GEPom generally have a greater tendency to move in one direction than stocks with partial GEPom. However, less demand may only require that the traders on the floor moved a price above or below the previous closing to ensure that the purchase or sale of warrants. Generally there is a significant opportunity for profit in a few days in the shares with full GEPom.
If there is a lack of interest in the sale or purchase of shares as soon as the initial order, the action quickly returned to its trading range. Entrance to the trade in shares with a partial GEPom in the general case requires a greater emphasis on, or closer to stop moving - orders about 5-6%.

Partial GEO-up: Buying
If the opening stock price of more than yesterday's close, but less than yesterday's peak, the situation is considered a partial GEPom up. The process to enter the long position is the same as for complete GEPov in which the visible 1-minute schedule after 10:30, and placed an order for the purchase of two tikami higher maximum achieved in the first hour of bidding.

Partial GEO-up: Sale
The process of trade in the short position in partial GEPe up the same as for Full GEPov in which the visible 1-minute schedule after 10:30 and placed an order for sale on two teak below the minimum achieved in the first hour of bidding.

Partial GEO Down: Buy
If the opening stock price is less than yesterday's closing-opening, 1-minute look at the schedule after 10:30 and then a warrant for the purchase of two teak above the maximum achieved in the first hour of bidding.

Partial GEO Down: Sales
The process of trade in the short position in partial GEPe down the same as for the full GEPa down, where the visible 1-minute schedule after 10:30 and placed an order for sale on two teak below the minimum achieved in the first hour of bidding.
If the claim amount is not met, then the safest way to play the part GEPe is to wait until the price has not overcome the previous maximum (as a long trade) or minimum (when the short sale).

Scott McCormick
www.stockcharts.com

Indicators. MACD, part 1

MACD

The composite oscillator

Designed by Gerald Appel, the indicator of convergence / divergence of moving averages (MACD) is one of the easiest and most reliable indicators. MACD uses moving averages, which are indicators of delay, and includes some of the specifications for the trend. These indicators become retarded pulse oscillator by subtracting the longer moving average from the shorter moving average. The final schedule for forming a line that fluctuates above and below zero, without any restrictions from above and below. MACD is the central oscillators, it applied the basic rules for the central oscillator.

MACD Formula
The most popular formula for the "standard" MACD is the difference between the 26-day and 12-day exponential moving averages. This form mule used in many popular programs for technical analysis, including SharpCharts, and indicated the majority of books on technical analysis. Appel and others transformed this initial installation to include MACD, that would better fit faster or slower market-based instruments. Using shorter moving averages will provide a faster, more sensitive indicator, while using longer moving averages will produce slower indicator, less prone to rapid spread. For the purposes of this article, will be used in explaining the traditional 12/26 MACD. Later, in a number of indicators, we turn to the use of different moving averages in calculating MACD.

Of the two moving averages that make up the MACD, the 12-day EMA (exponential moving average) is more rapid, a 26-day EMA slower. To form the moving averages of closing prices are used. Usually, the 9-day EMA MACD is constructed separately for use as a pulse line. Byche crossing occurs when MACD moves above its 9-day EMA and Medvezhye crossing occurs when MACD moves below its 9-day EMA. The graph below shows the Merrill Lynch 12-day EMA (thin green line) with a 26-day EMA (thin blue line), applied to the price schedule. MACD is shown in the box below in the form of a thick black line along with his 9-day EMA, depicted a thin blue line. The histogram represents the difference between MACD and its 9-day EMA. The histogram is positive when MACD is above its 9-day EMA and negative when MACD below its 9-day EMA.

What does MACD?
MACD measures the difference between two moving averages. A positive MACD indicates that the 12-day EMA is traded above 26-day EMA. A negative MACD indicates that the 12-day EMA is traded below the 26-day EMA. If MACD is positive and rising, the gap between the 12-day EMA and 26-day EMA is widening. This shows that the degree of change faster moving average is higher than the degree of change over the slow moving average. Positive momentum is increasing and is considered to be bovine indicator. If MACD is negative and declining further, then the negative gap between the faster moving average (green) and the slower moving average (blue) is expanding. Descending momentum is accelerating and it is regarded as a bearish indicator. Crossing the center line of MACD happens when fast moving average crosses the slower moving average.

The graph Merrill Lynch MACD shows a solid black line, and his 9-day EMA thin blue line. Even though moving averages are indicators of delay, it should be noted that MACD moves faster than the moving averages. In this example, with Merrill Lynch, MACD has also provided a few good trading signals.

1. In March and April, MACD turned down before both moving averages and has formed a negative divergence to the price peak.

2. In May and June, MACD began to grow and showed a higher low, while both moving averages continue to show lower minimums.

3. And finally, MACD in October formed a positive divergence, while both moving averages have shown the new minimums.

Bychi signals MACD
MACD gives bychi signals in three main ways:
1. Positive divergence
2. Byche crossing of moving averages
3. Byche crossing the center line

Positive divergence
Positive divergence occurs when MACD begins to rise, and market-based instruments is still in a descending trend and creates a lower minimum. MACD can form as a series of higher minimum and second minimum, which is higher than the previous one. The positive divergence - the least frequent of these three signals, but usually the most reliable and leads to the largest movements.

Byche crossing of moving averages
Byche crossing moving averages occurs when MACD moves above its 9-day EMA, or pulse line. Byche crossing of moving averages is probably the most common sign, but also the least reliable. If he is not used in combination entry for other technical analysis tools, the crossing may lead to a quick turn and the set of false alarms. Intersection of moving averages are sometimes used to confirm a positive divergence. The second or bottom of a higher low positive divergence can be considered valid if it is accompanied by bovine crossing moving averages. Sometimes wisely use the price filter to the crossing of moving averages in order to guarantee the solvency of that. An example of a filter for the purchase price will be the situation when the MACD proryvaetsyavyshe 9-day EMA and remains above it for three days. Purchase tone then begin at the end of the third day.

Byche crossing the center line
Byche crossing the center line occurs when MACD moves above the zero line in the positive territory. This is a clear indication that momentum has changed from negative to positive, or bullish for the Bear. After a positive divergence and bovine crossing moving averages, crossing the center line can act as a confirming signal. Of these three signals, crossing the center line is probably the second occurrence frequency signal.






Using a combination of signals
Even though some traders may use only one of these signals to form signals the purchase or sale, using the combination may provide more reliable signals. In the case of Halliburton All three bull signal, and the action moved a further 20%. The action at the end of February, has formed a lower minimum, while the MACD formed a higher low, thus creating a potential positive divergence. MACD then formed byche crossing, advanced above its 9-day EMA. And finally, MACD traded above zero to form byche crossing the center line. During the bovine crossing the center line, the action is traded at around 321 / 4, and immediately after that went above 40. In August, the share traded above 50.

















In Part 2 will be considered bear signals MACD.

Arthur Hill

W. D. Gann. The greatest of men

W. D. Gann. The greatest of men, there are ever on Wall Street

W. D. Gann went down in history forever, because he was one of the greatest men of his time, which led to the thinking and insisted on the study. His methods are still used by successful traders in the world. Without a doubt, the name Hanna is legendary in the exchange world.

Biography

William Delbert Gann, better known worldwide as VD Gann is a legend in the world of stock trading. He was one of the most successful ever lived, the market traders.

W. D. Gann was born June 6, 1878 on a farm about seven miles from Lafkina in Texas. He was the first of 11 children of Sam Houston, Hanna and Susan Gunn. Hanna family lived in a small house with no sophistications. They were poor, young Willie walked for seven miles in Lafkin over three years to attend school. His father was a farmer in Angelina Country. They are worried about the price that will bring their cotton. If you asked a young Willy, like whether he will be when older, also treat the soil in the eastern part of Texas, he is likely to say "no", he did not think so - he wanted to be a businessman.

But the work that he could perform on the farm was more important for the family, so that William had never finished elementary or secondary school. As for the eldest son, to him leaving las special responsibility, and those years of work on the farm, perhaps the beginning of his habit of hard work.

A few years later, William worked in the brokerage office in Teksarkane and in the evening attended a business school. In 1903. William made a fateful move to New York at age 25. Gann began trading on the commodity and stock exchange. In 1908. he opened his own brokerage office "WDGann and Co.", at the corner of 18th Street and Broadway.

During the First World War, William Gann predicted the November 9, 1918., Kaiser abdication and the end of the war. W. D. Gann, whose traders are known today, appeared in the "roaring twenties."

Significant predictions and Trade Record
Using your own style of technical analysis, Gann earned more than $ 50 million profit on the stock market! In today's market it is up to about 500 million dollars! After many decades of incredible success, Gann moved to Miami, Florida, where he continued his research until his death on 14 June 1955.

Gann based his methods of trading on the "time" rather than "price", like many of today's systems. This allowed Gannu to determine not only when to change the trend, but also the best price to enter or exit the market. Methods Hanna were so accurate that in the presence of the core financial audience, he made a 286 transactions during the 25 trading days, as long as well as the short positions. Of these, 264 transactions were profitable! In 1933. Gann 479 undertook a transaction during the year. 422 were profitable and 57 were loss making. Revenue at its capital amounted to about 4000%. In most cases, Gann provided in advance the exact prices at which certain stocks and commodities will be sold, together with prices close to the then prevailing values, which were not affected.

During his career, Gunn continually repeating these incredible sales gains, giving the surprising forecast for multiple markets for the year ahead. Gann used the law of nature, and geometric proportions, based on the circle, square and triangle, which is as effective today in the stock and commodity exchanges, as well as 50 years ago. His methods work in any market and time interval. His methods seem to be many traders a bit unusual, even mystical, but in the last century have confirmed themselves again and again.

His instructions were supernatural

In D. Gann was a "scientist of Wall Street." He could predict the peak year for bovine market. One of its remarkable achievements was the forecast for shares in 1922., Released in December 1921. The forecast indicated the first peak of bull wave vaprele, the second peak in August and the last peak and the end of bovine Market October 8-15, and not as strange, the average price of twenty industrial stocks reached their highest levels on 14 October and declined by 10 points in thirty days from the that date. Gann predicted a large decline during the month of November. He said in the forecast: "10-14 November panic fall. During this period, a serious decline in the shares will take place, many will fall by 10 points or more in four days, and 14 November have been achieved the lowest average price for 1,500,000 shares, traded on the New York Stock Exchange.

People were struck by the remarkable results of Hanna predictions based on pure science and mathematical calculations.

His expertise lies in his own words
"During the past ten years, I have all his time and attention devoted to speculative markets. Like many others, I have lost thousands of dollars and experienced the usual ups and downs of a newbie, which is in the market without prior knowledge of the subject. Soon I began to understand that all Successful people, whether they are lawyers, doctors or scientists to spend years learning and study of their profession or occupation before you earn on this money. "

These words of Hanna will go down in history forever, because he was a great man of his time, which stimulated the thinking and research. History repeats itself. Greed and the desire big profits do not change. They are inherent elements of human nature, and these elements affect the average person and lead to losses in its investment or speculation. This is one of the valuable lessons that we learned from Hanna. Without a doubt, the name B. D. Hanna is indeed a legend in world trade.

Forex Magazine

Dow Theory. Part 3

Alerts
Out of Dow and Hamilton, Ray has provided 4 separate theorems, which are aimed at determining the trend, buying and selling signals, volume, and trading ranges. The first two are the most important and used to determine the primary trend as bullish or bearish. The latter two theorems, dealing with the volume and trading range, not treated Hamilton as a means of identifying the main trend. The volume was seen as supporting statistics and trading range for determining the periods of accumulation and distribution.

Determination of trend
The first step in identifying the main trend is to identify individual trends in the Dow Jones Industrial (DJIA) and Dow Jones Transportation Index (DJTA). Hamilton used the analysis of peak and decline to set the identity of the trend. Rising trend is determined by prices, which form a series of increasing peaks and increasing recession (higher maximum and higher minimum). On the contrary, the descending trend set prices, which form a series of declining peaks and declining recessions (lower maximums and lower minimums).

Once a trend is identified, he acknowledged the current, until proven otherwise. Top-down trend is valid, yet are lower minimums, and following the restoration does not exceed previous highs. The following is a schedule Dow Jones Transportation Index in 1992. Even though Hamilton and Dow are not made specific reference to the trend line, the line was carried out to emphasize the downward trajectory of the trend. Since the peak in February, a number of lower minimums and lower peaks formed a descending trend. It was the second move in April and May (green circle), but March has not been exceeded maximum.

Transport Dow Jones continued down until the recession of the day with a lot of (red arrow). As described in Part 2 of this article, the days with large amounts of signal that the planned change effort. Day of the recession with a large volume in itself is not a signal to buy, but rather indicates the need to monitor price activity slightly closer. After that day, with a large volume index fell again and then moved above 1250, a higher minimum (green arrow). Even after the formation of a higher level, is still too early to recognize the change in trend. Changing the trend is not confirmed until the previous maximum recovery has not been exceeded (blue arrow).

In contrast, bottom-up trend is considered to be valid until the peaks are higher and the subsequent decline is higher than the previous minima. The following is a schedule of prices for the closing Dow Jones Industrial index. Ascending trend began with the minimum of October 1998. and the index for the following 11 months has formed a series of higher highs and higher recessions. Twice in December 1998. (red circle) and June 1999. (blue arrows), enhances the reliability of trend has been called into question, but the rising trend prevailed until the end of September (the movement of prices in December 1998. will be considered below).

Were lower peaks in June 1999. But has never been lower downs to confirm these lower peaks and the support stand. Those bears, who sold in June, had to wait two more historical peak in July and August. Changing trend occurred on 23 September, when the June minima have been overcome. Some traders may have decided that the trend has changed, when it was violated at least the end of August. This may indeed occur, but is worth noting that the reduction in June, representing a compelling area of support. Keep in mind that the Dow Theory is not science, and Hamilton has stressed this many times. Dow Theory is intended to provide an understanding of the principles and EY to begin a careful study of market price movements and activity.

Looking at the line graph above (DJIA 1998/1999 daily index closing at the semi-log scale), it can be difficult to distinguish real change in trend and a simple correction. For example: Is it guaranteed to change the trend, at least when the December overcame November? (red circle). After the November peak was formed by a lower maximum in December, and then the November decline was overcome. To eliminate false signals, Hamilton proposed a motion to exclude less than 3%. This is not a hard rule, but the idea is worth noting. With the increased mobility of today's markets there is a need to smooth daily fluctuations and to avoid false alarms.

Hamilton and Dow were interested in high traffic and they have tended to use weekly charts to determine the correction of maxima and minima. However, in today's markets vysokopodvizhnyh, weekly charts can not display all the details required by investors. One possible solution is to apply a short moving average price for the piece. Although not mentioned Hamilton and Dow, a 5-day moving average can be used to smooth the price series and to allow to take into account the details. The graph below (DJIA 1998/1999 index closing 5 day EMA) used 5-day exponential moving average to smooth out price segment. Note that the bottom of the November correction now seems quite irrelevant. Also, the September peak correction (red arrow) is still visible.

Average must confirm
When the Dow Theory was developed in the change of the century, railroads were vital communication links in the economy. Hamilton is often argued that the activity of transport index starts before the Industrial Index. He attributed this fact that, before to start economic activities, raw materials must be moved from suppliers to manufacturers. Before General Motors would be able to increase production, must be transported more than steel. Therefore, the increase in activity among the rail stocks presaged an increase in business for industrial shares.

Why Transportation?
There is no doubt that today's economy is very different, and the structure of transport index has changed in favor of airlines. However, there is still some reliability in the use of transport index to confirm the movement of the industrial index. Transportation stocks are much more dependent on the macroeconomic environment than the average stock and are likely to anticipate growth.
- Business aviation is a cyclical, highly sensitive and revenue to economic developments.
- Airlines generally have above-average debt levels and are more vulnerable to changes protsentnoystavki.
- Form a major part of energy costs and labor costs.

To reflect these risks, airline stocks have traditionally sold substantially below market indicators. If the attitude of the price / income for the S & P 500 is 28, the average for the airline only 8-10.
Even though we may be entering a "new economy", most businesses would be one way or another affected by changes in economic activity, interest rates, energy and labor costs. Airlines, carrying a greater burden is still likely to act as a leading indicator of overall economic environment.
However, one remark should be added. Perhaps the greatest concern for the airlines is that people will stop flying in airplanes. Business travel constitutes a large portion of airline revenues, particularly revenues from high profit. With the development of Internet and communications networks, the need for business trips in the future may be significantly reduced. "Federal Express" is already reducing the number of outgoing business correspondence. This could ultimately affect the airline industry.

As indexes confirm
Hamilton and Dow stressed that for the main trend signals the purchase or sale was valid, and industrial and transportation indexes must confirm each other. If a new index shows the new maximum or minimum, then another, for the signal to Dow theory, should soon follow him in order to be valid.
Combining the basic principles established for determining the trend with the theorem of confirmation now possible to classify the primary trend of the market. Chart above shows the set of signals that have emerged during the 7-month period and in 1998.
1. In April, industrial and transportation indexes showed new unknown peaks (blue line). The main trend was the bovine, but it reinforces the reliability of confirmation of bovine trend.
2. In July, the problems began to appear when the transport index does not confirm the new maximum set by the industrial index. This serves as a warning signal, but did not change the trend. Remember, the trend is valid until proven otherwise.
3. July 31, Transport index showed a new level. Two days later, the industrial index has shown a new minimum, and confirmed the change of trend from bearish to bovine (red line). After this signal, both indices continue to show the new minimum.
4. In October, the Industrial Index has formed a higher value in the recession, while the transport index has shown a new level. This was non-other, and serve as a warning to be alert for a possible change of trend.
5. After a high-recession, the Industrial Index later in the month showed a higher maksimum.Eto actually changed with the downward trend of the Index on rising.
6. This is not confirmed until early November, when the transport index was higher than its previous corrective maximum. However, at the same time the industrial index also moved higher, and EY trend has changed from bullish to Bear.

Volume
The importance of the amount mentioned in the 2 parts of the graph, showing the bottom for the DJIA Index in April 1997. Rey marks that, while Hamilton analyzed the statistics of the volume, price activity is the final determining factor. The volume is more important in the affirmation and strength of movements and can also help identify potential turn.

Confirmation of the amount
Hamilton thought that the volume should grow in the direction of the main trend. In most bull markets, the volume should be more on promotion than during recessions. Not only the volume should decrease with the downturn, but the involvement of the participants should also decrease. As Hamilton suggested, the market should become "despondent and narrow" for a correction, "narrow" means that the number of cuts should not be incredibly expanded. for the primary Bear Market is a true opposite. Volume should increase on the reduction and decrease during recovery. Rehabilitation motion must also be narrow and reflect the low involvement of a broader market. Analyzing the recovery and correction, it is possible to estimate the force of the main trend.

Size and Facing
Hamilton noted that the high volume levels can be indicators of an impending turn. After a day sbolshim volume, long promotion may signal that the trend is going to change soon, or could be formed rehabilitative peak. In his comments on 25 June 1999. at StockCharts.com, Rex Takazugi discusses the correlation between the peaks and the market. Even though his analysis shows the time delay between the peaks of the volume and the market turns, the link is still there. Takazugi analysis shows that with the 1900g. was 14 cycles, and the volume reaches a maximum at an average of 5.6 months ahead of the market. He also drew attention that the latest volume of the peak was reached in April 1999.

Trading ranges
In his comments, Hamilton many times over the years turned to "lines." "Lines" are called horizontal lines that form trading ranges. Trading ranges are formed when the indexes are in the lateral movement during a period of time and allow for a horizontal line connecting the tops and bases. These trading ranges indicate, or the accumulation or distribution, but in fact it is impossible to say when a breakthrough top or bottom side. If the breakthrough was the top hand, the trading range would be considered savings. If there was a breakthrough bottom side, the trading range would be considered distribution. Hamilton considered neutral trading range, until a breakthrough occurred. He also warned against trying to anticipate a breakthrough.

Application of Dow Theory
Mark Halbert of the New York Times September 6, 1998. noted a study that was published in the Finance magazine Stephen Brown of New York University and William Gotsmanom and Alok Kumar of Yale University. They developed a neural network, which includes the right to determine the main trend. Dow theory system was compared with the strategy of "buy - and - hold" for the period from 1929g. to September 1998. When the system determines the main trend as bullish, in a hypothetical index fund open long positions. When the system is reported to bear the main trend, the shares were sold and the money placed in instruments with fixed income. When withdrawal of money from the stock after the bear signal, portfolio volatility risk is greatly diminished. This is a very important aspect of Dow theory and portfolio management. Over the past few years, the concept of risk in the shares fell, but the fact that equities have a higher risk than bonds remains.
During the 70-year period, Dow theory system was profitable strategy "to buy - and - hold" for about 2% per year. In addition, the portfolio carried significantly less risk. If we compare this figure as income in relation to risk, the superiority of the system would increase even more. Over the past 18 years, the Dow theory was less efficient by about 2.6% per year. However, if you calculate the income relative to risk, the system theory of Dow for the past 18 years proved to be an effective strategy to buy - and - hold. " Keep in mind that 18 years is not a long period in the history of the market. Dow theory system was less effective in the bull market and a more favorable during the Bear market.

Criticism of Dow Theory
First, criticism of Dow theory is that it really is not a theory. Neither Doe nor Hamilton would have written the relevant academic papers, highlighting the theory and test the theorem. The ideas put forward by Dow and Hamilton through their articles in the "Wall StreetJournal". Robert Rey connects with the theory, detailed examination of these articles.
Secondly, the Dow theory is criticized for too late signals. The trend does not change with the Bear on bullish until the previous maximum recovery would not be overcome. Many traders feel that this is simply too late and miss most of the movement. Dow and Hamilton tried to catch the heart of the movement and join the second wave. Even if it is the position where the majority of movement occurs, it will still be missing the first wave and part of the second wave. And if you want to wait for confirmation from other indices, it will be even later.
And third, because the indexes used and the DJIA DJTA, Dow theory is criticized as outdated and no longer accurately reflects the economy. It may be fair comment, but as mentioned above, the index DJTA is one of the most economically sensitive indices. Stock Exchange is seen as a barometer of economic growth. To at least keep the industrial action at a level to the index were added to "Home Depot", "Intel", "Microsoft" and "SBC Corp", replacing the 1 November 1999. "Chevron", "Goodyear", "Sears and Union Carbide".

Conclusion
The purpose of Dow and Hamilton was to determine the primary trend and catch the big traffic. They knew that the market is influenced by emotions and tend to over-correction as an up and down. Remembering this, they have focused on identifying and following: Identify the trend and then follow him. The trend is valid until the contrary is proved. Trend ends when it is proven.
Dow Theory helps investors identify facts and not make assumptions or predictions. It can be dangerous, when investors and traders are beginning to assume. Predicting the market is difficult if not impossible to play. Hamilton readily admitted that the Dow Theory is not faultless. At the same time, Dow Theory can help form the basis for analysis and is the starting point for investors and traders to develop the basic principles of analysis that will be comfortable and familiar to them.
Reading the market is an empirical science. Where would also meet exceptions to the theorem, put forward by Hamilton and Dow. They believed that success in the markets required serious study and analysis that has successes and failures. Success - a great thing, but should not be too smug. Failures, when they are sick, should be considered as a practice. Technical analysis is the art and the eye becomes more acute with the practice. Study the successes and failures in the future.

Arthur Hill
www.stockcharts.com

Education MQL II. Lesson 7

Hello dear readers! Today, as I promised, we will write expert. Letters came not so much the most interesting algorithm was Merab trader from the city of Kharkov.



7.1. Algorithm



The essence of an expert in increasing the size of the lot after the closure of unprofitable transaction. This method is called Martingel. After a loss to a new position with an increased number of lots, and the resulting profit to cut past losses. Our expert will be fairly simple, but the method can be developed indefinitely. Signaled to the action (for the first buying or selling in the absence of open positions) will turn the indicator MACD (fast MACD). Purchase is carried out at the opening of the next bar, while the negative MACD, formed the extreme, selling, by contrast, respectively. The signal to the first transaction has been chosen randomly, you can use any other. The game is scheduled for taymfreyme, M15 and nearby. Upon receipt of the loss (stoploss is triggered), a new position in the same direction, if the second time received a loss, the position opens again in the same direction, but the last time. Ie we have only 3 positions, which may occur in one direction, it is done in case of a large trend. If there is a strong and long-lasting trend, we get a big loss, but does not lose the deposit. Configures averaging periods MACD, all stoplossa 3, 3 teykprofita, and 3, the number of lots. The setting for an expert, I did not, it should be done under a specific tool and specific taymfreym. Do you need the expert, you decide. For me, these methods are very, not psychologically comfortable. But on Martingela been a large number of conversations in the forums, I am pleased that we are a little touched upon this topic. Perhaps someone from readers interested in them and would eventually be convinced of the contrary. In the expert setting is very important, you can also change the signal to the first step. If you, dear readers, have questions, be sure to write, I will try to help you.



In the next issue we will begin to write your own indicators.

7.2. Expert



/ * [[

Name: = Expert

7Author: = fxtest.ru

Link: = forextimes.ru

Lots: = 1.00

Stop Loss: = 0

Take Profit: = 0

Trailing Stop: = 0

]] * /

defines: MACDfast (12), MACDslow (26), MACDsignal (9), sl1 (30), sl2 (30), sl3 (30), tp1 (20), tp2 (20), tp3 (20), lot1 (1 ), lot2 (2), lot3 (7);



/ * Description of external variables, settings, MACD, the foot and the number of lots * /



var: macd1 (0), macd2 (0), macd3 (0), b1 (0), ss (0), sb (0), fb (0), fs (0);

/ *

macd1-macd3 - meaning fast MACD

b1-balance to open the last position

ss-number of open items for sale

sb-number of open positions for buying

fb-MACD signal to the first purchase

fs-MACD signal to the first sale

* /



if FreeMargin <1000 then exit; / / output in the lack of a free margin



if TotalTrades = 0 then (/ / if no open positions



if balance> b1 then (fb = 0; fs = 0; ss = 0; sb = 0;)

/ * If your balance has increased since the closure of the last transaction is set to zero all the variables * /



macd1 = iMACD (MACDfast, MACDslow, MACDsignal, MODE_MAIN, 1); / * calculation of fast MACD * /

macd2 = iMACD (MACDfast, MACDslow, MACDsignal, MODE_MAIN, 2);

macd3 = iMACD (MACDfast, MACDslow, MACDsignal, MODE_MAIN, 3);



if macd1 <0> macd2 andmacd3> macd2 and sb = 0 and ss = 0 then fb = 1;

if macd1> 0 and macd2> 0 and macd3> 0 and macd1


/ * extrema conditions * /



if fb = 1 and sb = 0 then / * if there was a signal to buy and this is the first order is to buy

signal to cancel the purchase equal to 1 meter of open positions in purchasing, fixed current balance * /

(fb = 0; sb = 1; b1 = Balance; SetOrder (op_buy, lot1, ask, 3, bid-sl1 * point, bid + tp1 * point, green); exit;);



if Balance


/ * If the balance has decreased, and was opened on 1 position, equating to a 2 meter open positions for buying and open 2 nd position * /



(sb = 2; b1 = Balance; SetOrder (op_buy, lot2, ask, 3, bid-sl2 * point, bid + tp2 * point, green); exit;);



if balance


/ * If the balance has decreased, and was opened on 2 nd position, equating to 0 count of open positions for buying and opening the 3rd position

0 is equivalent since This last entry in the series * /



(fb = 0; sb = 0; SetOrder (op_buy, lot3, ask, 3, bid-sl3 * point, bid + tp3 * point, green); exit;);



/ / Sales



if fs = 1 and ss = 0 then



/ * If there was a signal to sell, and this is the first order is to sell the signal to cancel the sale and equated to 1 meter of open positions in sales, recorded current balance * /



(fs = 0; ss = 1; b1 = Balance; SetOrder (op_sell, lot1, bid, 3, ask + sl1 * point, ask-tp1 * point, red); exit;);



if Balance


/ * If the balance declined to equate it to sell 2 of the count of open positions on the sale, recorded current balance * /



(ss = 2; b1 = Balance; SetOrder (op_sell, lot2, bid, 3, ask + sl2 * point, ask-tp2 * point, red); exit;);



if balance


/ * If the balance is reduced to sell for the last time * /



(ss = 0; SetOrder (op_sell, lot3, bid, 3, ask + sl3 * point, ask-tp3 * point, red); exit;);



);

Company «Fxtest»

Halhalyan Arthur

Technical support for traders

artur@fxtest.ru

Interview with trader Bennett Makdauellom

Jeff Neil, Optionetics.com
2/6/2004 10:15:00 AM

Founder and President of "Traders Coach.com" Bennett Makdauell began his financial career on Wall Street firm in the "JJ Kenny Co." in 1984. after the service officer at the U.S. Navy. Bennett also served as a specialist in pensions to "Equitable" in New York and also has experience in real estate investments. In addition, his degree of Bachelor of Economics, received in 1979. Siracusa in the university gives him the foundation for work in the financial sector.

Jeff: Do you prefer short or dolgovremen-ing trade? And why?

Bennett: I enjoy all types of trading all time formats and actually prefer to diversify my time frame as far as trade market, which I traded. I traded in the day, from days to weeks, as well as on the weekly charts. Typically, this is a good idea for positional traders (the position of a few days to several weeks) does not monitor its position throughout the day, but instead to take their trading decisions every night. In this case, position traders are not subject to intra-day activity and the negative emotions that are associated with this. However, it is that I traded in a 30-minute intra-day charts with the intent to hold the position until the next day.

Jeff: What you are most attracted to trade?

Bennett: The freedom to choose the markets in which I want to sell, and compensation for risk, which makes the trade to the highest level of capitalism. In addition, this dream of an entrepreneur - I could live anywhere, where I have access to the Internet! Trade offers unlimited potential income. There are no difficult bosses, which must be fought, no office and no policy of discrimination in trade in the market. Also, I like to sell and enjoy the process of continuous improvement. Trade - my passion, and I am enjoying the process as fast as I enjoy the reward.

Jeff: How do you treat losses and recession?

Bennett: All systems and methods of trade are periods of recession. You never know when there is recession, so you should be prepared always. You should be able to trade during these difficult periods that will actually occur in the trade. If you stay within 2% of the first risk at each transaction, you will have a greater chance to escape the devastation. But if the loss is 2% five or six times by a number of scares you, then you should reduce your risk even more (less than 2%), yet you can not emotionally feel good.

Jeff: What are the key rules you consider most important for a trader?

Bennett: I think the most important rule before entering the trade is to calculate the correct "trade size" based on the amount of accounts, the entrance to the trade, output, and the percentage of risk, which really should never exceed 2%.

Jeff: Tell us about your most memorable transaction.

Bennett: I have had many unforgettable deals, and good and bad. But most of all I learned from the following transactions: When I was a newcomer and did not know very much about commerce and control of risk, I bought the stake, as my analysis showed at the beginning of bovine market. My analysis was wrong and the action started with the largest decline for many years, and I held my shares! A week later, I realized that I have a problem, then I dropped about $ 15,000. I could not believe this, but I continued to say that the market may not always fall! But it fell even lower! And then I felt like a deer caught in car headlamps, I "stopped" and did not know what to do. At this point my emotions identified by trade. I have lost all objectivity, and ultimately went with the loss of only $ 30,000 in two weeks! And, of course, I actually went to the turn! There were a lot of money for me at the time, and this is also me emotionally traumatic for a while. However, this trade has taught me the best lesson I will never let this happen again! I learned the importance of risk management!

Jeff: With all the existing different technical analysis tools, as a beginner can avoid information overload or "analysis paralysis"?

Bennett: That is a good question! Is interesting to note that with all the new technologies available today, the ratio of winning traders and play is almost the same as twenty and thirty years ago. Why? As a successful trade is from the inside and as we all sell our own beliefs, we all interpret information from different points of view and therefore respond to this information in different ways. In trade, it has profound significance, because it all comes down to how we interpret information and what we are to interpret. This is why I develop and use "Applied Trade validity" to trade in markets. Our approach eliminates the additional information that may confuse traders.

Jeff: What are the tools of technical and fundamental analysis are you using?

Bennett: I'm using your own trading approach that I developed called "Applied commercial reality," using our indicator of the validity of "Pyramid of the outlets." "Pyramid outlets" transforms the concept of trading "control points" and "fractals" in the next generation. And the amount and basis of "Pyramid outlets" are of great importance. Although all inputs and outputs are based on technical analysis, I do from time to time, using the fundamental information to confirm the technical picture. I also believe that the price and volume of the "truth" and that most market indicators distort market realities, because they are derivatives of price and volume.

Jeff: How would you describe your approach would be to trade?

Bennett: My approach to trade based on our own signals with our own individuality, so everyone can develop their own trading system. When you can make your personality to your trading approach, this could become a powerful force in the market. Stop relying on commercial systems such as "black boxes" which you do not trust. We found that when traders are unfavorable periods in the systems that they have not developed for themselves, they usually leave the system and move to another.

I am convinced that no one is born a great trader, and that any of passion, commitment, proper education and venture capital has the potential to become a great trader. Trade - not the philosophy of rapid enrichment, a profession with which you need to cope, to make a profit. Through education, practice and commitment, you can potentially acquire the skills to trade the financial markets to survive. Trade must be happy, and if not, then you're doing it wrong!

I believe that the professional is not excitedly trading game, but some players use the markets to trade and to meet their exciting and destructive habit. A door that separates the trade of game is called risk management. Professional traders have a strict money management rules, which they follow, the approaches to trade, they have tested and included in the sale of a business. Their satisfaction is based on a good trade, but not on the sensations that are experienced players in the trade. Professional traders actively traded no more than 10% of their own capital and that the money they can afford to risk.

I am convinced that most traders incorrectly sees markets in terms of a simple "linear" approach, and instead should implement the "linear" approach to the markets because the markets themselves, "nonlinear".

Jeff: Do you think what the biggest misconception that people have on trade and investment?

Bennett: Most new traders believed that trading is easy and the only thing that is needed for this - this is money. In other words, money is a ticket for access to earning big money. They fail to understand that successful trading - is the ability to develop hard work, persistence, time and training. Most traders consider trading as a program of "quick riches".

Another misconception that people have had the fact that intra-day trade is just silly and excitable game. Stupid deal, not knowing what you are doing, and professional "inside day" traders are not players and are not stupid. On the contrary - they are highly skilled and talented professionals.

Stanislav Skrypnik
based on Yahoo.com