I received an email yesterday asking about trading with Fibonaccis. While I’m familiar with fibos, they are not something I myself use. As such, I’m not comfortable entering into a discussion of them myself. Instead, I’ll offer up some potentially useful alternate sources on the subject. Here’ they are. Fibonacci Retracements Five Fibonacci Tricks Trading with Fibonacci Using Fibonacci Levels to Find Support/Resistance Fibonacci Trading Techniques These are just a few examples, of course. I don’t...

The question of whether the markets are efficient was broached again by a fellow blogger recently. The idea is that if the markets are efficient, then it’s not really worth attempting to trade them (meaning stock market investors should stick to index funds). This is all based on the Efficient Market Hypothesis (EMH). There’s a bit of confusion in the public about what market efficiency really means. It does not mean that the price in the market reflects the value of the asset in question (like a company in the case...

There was a post on the Trading Goddess blog  the other day which included “the four cardinal rules of trading”. They are listed as: Trade with the trend. Cut losses short. Let profits run. Manage risk. There’s some even better stuff in the post itself outside of the “rules”, and I encourage new traders especially to give it a read. I have couple of problems with this set of rules, however. I won’t argue against managing risk, though I would suggest that cutting losses short is part of...

The other day I asked the question “How have these markets impacted your trading?” (if you haven’t already left your thoughts, please feel free to do so). I was very interested to see the number of responses which were variations on the “I’ve kept to the sidelines” theme. It seems like the volatility of the markets has driven quite a few traders away. The question is whether that’s a temporary thing until the volatility drops back down, or whether it’s a more permanent development. From...

If you haven’t seen it already, there is a fantastic article by Michael Lewis entitled The End published by Portfolio.com recently. Lewis is someone you should know as the author of Liar’s Poker. If you haven’t read that book, I strongly recommend you do. It’s a fantastically written account of Lewis’ experience getting into the world of high finance back in the middle/latter 1980s when he worked for Solomon Brothers. He’s also very well known as the author of Moneyball. This new article is...

Yesterday I started answering an email from a reader, covering the part of what he was asking about regarding charting software. Today I’m going to tackle the second part of this relatively new trader’s question. This one speaks mainly to trade holding periods. Is it ok to leave a trade open more than one day and I ask that question with 100% confirmation with my broker.  Once a week, they upload in-depth analysis on a specific pair example:   GBP/ USD.  Does that make an intraday trader or swing trader.  Most...

It appears that the trend in trader questions landing in my inbox these days is to ask questions in multiple parts. Another one came in over the weekend from a trader who prefaced his questions by saying I have been trading(training) for one year now, hard work does pay off…I took a 15 hour in class forex course a year ago and since then I have been practicing, doing homework every single day, trying to understand everything and I am at the level where I know what I am doing, (99.99%)  I am taking forex very seriously...

I get a lot of questions from traders and I answer the vast majority of them here in one fashion or another. Now it’s my turn to ask a question of my own. How have you handled these markets? Or have they handled you? I can imagine the sorts of things individual traders have been going through, but because I’ve been so involved through my work in the more institutional sides of things I haven’t been able to spend as much time talking with the retail set as otherwise might have been the case. So I’m asking...

Have you seen a chart like this before? (click to enlarge) This style of chart is known my a number of different terms. Market Profile is one. TPO charting is another. Volume at price is a third. Although they are becoming more prevalent, I’d venture to say that most traders haven’t looked at charts like these before. The idea of these charts is to identify where the market is spending the most (and least) amount of time. Think of it like taking a bar chart and squeezing all the bars together. That gives you a distribution...

Analysis paralysis. We’ll all heard of it. Have we all experienced it? I know I have. My personal tendency in all aspects of life is to be very analytic. That has some nice advantages, but it also as some nasty drawbacks at times as well. I’ve been told on more than one occasion that I think too much, and while it was not normally meant to be a deragatory thing, it is indicative. I do think alot, and probably would be considered by many an intellectual – for better or worse. The “worse” part is...

Over the last two days I have been working through a multi-part query which came in from a trader over the weekend. Monday’s post was about mini stock index contracts. Tuesday’s was on the subject of long timeframe trading. Today the question focuses more on building positions. The idea I have in mind is to try to build a sizable position over time by regularly adding to a winning trade. Can it be done or should I be thinking differently? Would it be done by buying the pullbacks (uptrend) / selling the rallies (downtrend)?...