Virtual Trading Tips & Advice for the Virtual Trader
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There are of course exceptions to trading rules related to swing trading with higher swing-highs and lower swing-lows. At certain times, you will come across a price bar which makes neither a higher-high or lower-low. This is called an Inside Bar. These trade patterns must be handled differently and require waiting for the following bars before continuing your line.
Sometimes you will come across a price bar making both a higher high and lower low. This is called an Outside Trading Bar. There, two swings are forming in short order. Usually, the swing has occurred first during the forming of the bar before the outside bar. But this will not be obvious looking at the price chart because the bar before the outside bar will not have a lower low or higher high than the outside bar itself. The trick here is to note the intra-day pattern to determine if the outside-bar formed its top or bottom first.
For example, say price bars are making a series of lower swing highs and lower swing lows. We then see a price bar which makes both a higher high and lower low. Do we draw our line to the lower low first, then up to the new higher high? Or do we draw our line from the low of the price bar before the outside bar to the high of the outside bar, and then back down to the low? It all depends on which way price actually went from the close of the previous price bar, does it not?
However, by looking at intra-day prices for both price bars, you can quickly and easily tell where actual swings occurred and whether the outside high or low formed first. Then you can continue your line from there. One quick way is to simply note which way price moves after the outside price bar. If the next bar makes a higher high, it is likely that the outside bar’s low formed first with the high last. If the next bar makes a lower low instead, you then can assume the outside bar’s high formed first, then it’s low.
Now, once you have constructed your swing chart, and can see swing-bottoms and swing-tops which you did not know existed before, you are ready to apply some of those price methods mentioned earlier to these swing tops and bottoms. Ratios can be applied using the large as well as the small ranges created by these swing tops and bottoms. You are on your way in getting more information out of your price charts vs you may have previously.
Finding where the smart money is can be similar to a shell game, so how can you find where the smart money is going to strike next? The answer is simple: You find the top trending futures and stocks! Trending markets tend to have major volume, a clear direction, and lots of liquidity - A.K.A where the smart money is. Wouldn't it be nice to find a list of current strong trending stocks? Now you can! Trading Tip-of-the-Day
What Are the Top Performing Forex Pairs? Forex is the largest market in the world and trades 24-hours a day. Which currency pair is trending the strongest and where the market is going? Study the financial markets and use the webtrading traders search engine to find out more about trading futures and FX markets.
Stacking the Odds in Your Favor
Being profitable in the high-risk (high profit potential) business of virtual online commodity trading which requires hard work. So many trader websites advertise their trading services as a simple way to make lots of money, which marketing has proven to be the downfall of many new traders and trading careers.
There exists a few (actually very few) financial trading systems sold on the market which instruct you exactly when to enter and exit a market position, with good annual percentage gains on investment. They require a large initial capital base and will also often experience large account equity drawdown from time-to-time.
Most new futures markets traders do not fit the requirements necessary to trade the commodities, stock or futures markets this way. Thus, they must learn to make their own trading decisions in the hopes of increasing their small market position.
These traders are referred to as "discretionary" or "independent" traders.” Many traders desire to trade this way even if they have the capital funding to trade using a commodity trading system. Because independent futures trading requires the financial markets trader to make all entry and exit decisions, work must be done to reap the rewards from this type of trading approach.
A sound trading plan is a good start for any discretionary trader. Trading plans are very important for Forex market traders, where profit & loss potential is high, as is leverage and trading account margin! FX Forex traders need to follow a set of personal trading rules so each trade is not merely some act of chance. Trading based on luck is no better than casino gambling, which futures trading is certainly not meant to be.
Success at profitable stock market trading or profitable forex futures and commodity futures trading is not a mere roll of the dice based mostly on luck, where you have a 50/50 or even less chance of success in a casino gambling game. It's more like a clothing store owner making fashion decisions each quarter, and if his insight into the market is a good one, profits will be made by the sales of his inventory.
However, it's a bad business decision and he is left with a rack filled with clothing nobody wants and a financial loss. His success depends on properly analyzing the market environment and acting accordingly. Trading is the same.
As a discretionary trader, the task is to stack the odds in your favor for any given trade consideration. The power to do this is in every trader’s hands. Do the job well, and you will be rewarded. Try to take shortcuts due to time restraints or laziness, and the outcome may be very disappointing. So how might a discretionary trader stack the odds in his or her favor? That is what we will now discuss.
See The Overall Market Picture
Many new futures traders simply want to trade quickly and often. The desire to make quick money plagues many who enter this arena for the first time. In addition, they find little time to evaluate their approach to trading before jumping from one method to another.
The sad thing is they may have come across a trading method which has helped many traders before, but they were passing through at the speed of light and did not get the gist of it all before moving on to something worthless and costly. I have seen this happen far too often.
Discretionary traders need to understand that time and study is very important if to ever achieve a good trading approach based on sound trading principles. So many common sense approaches are ignored for the quick and dollar.
One good approach is simply to see the big market picture. This author has written several articles relating to this very subject, and for good reason. It is not only a smart thing to do; it is also something most forget or are too lazy to do.
Market patterns and trends go beyond the simple daily price charts. They exist on weekly, monthly and yearly price charts as well. An up trend on a daily chart may exist only as a one-bar rally but a weekly chart shows a strong downward direction!
And this weekly move may exist only as a bull trend pullback on a monthly chart. If you only focus on a daily price chart to base your trading decision on, you could be entering a market trending strong against your position.
Therefore, the wise thing to do regardless of the method you choose to use in trading is to start with the larger time frame (such as using a long-term monthly price chart) and progressively working down to the weekly, daily or intra-day time frames (for daytrading use).
A good example of this is the use of a daily time reversal date. If a trader simply looks to enter a trade based on a daily reversal date, it may end up as a quick blip on the daily price charts in favor of the stronger longer-term market trend direction.
Trading small reversal up-move, down-moves, or blips are certainly not the way to go, unless you are a scalper, a forex markets day trader, or involved in euros day-trading. To stack the profitable trading odds in your favor, you will want to discern first the long-term direction (i.e., Monthly chart), then note the medium-term direction (i.e. Weekly chart), and if both are in agreement in direction, look to the daily price chart to time an entry in the same direction as your long and medium-term trends.
Keep in mind the long-term trend will often have more power vs the medium-term trend, just as the medium & long-term trend will carry more weight than the short-term or daily price trend. As a trader looking to stack the odds in your favor, you want to get the heavy-weights on your side before getting into the ring.
The quick way for those with limited time on their hands to determine the likely market trend is to use a trendline. Draw it under major swing bottoms or across major swing tops on the monthly, weekly and daily price charts to see the dominant trend direction.
For those who wisely take more time at doing this, it's best to look closely at the different time frame charts and note whether it shows higher swing bottoms (for an up-trend), or lower swing tops and bottoms for a down-trend. Learn to draw swing charts (one book on this subject is called “Pattern, Price and Time” by J. A. Hyerczyk), which immediately gives you a birds eye view of the trend direction.
If your monthly bar-chart trend is up, plus your weekly trend is up, then when you come across a daily swing-bottom forming (especially on an expected reversal date and support level) higher than the previous daily swing bottom, you have a very powerful buy signal to go long and looking for an up-trending bullish market to start real soon.