The sobbing course retailer

An upset online retailer of lies (secret course) sent a snotty email lecturing me that it is not nice to reveal the secrets of the market and put a single view point as the only way to trade. Well Mr. Retailer, if you took the time to check around you would see I never claimed to have the one or only way to trade.

And as for your secrets. Let me say this, nothing is secret in the markets and there are no hidden signals or special indicators. You are selling junk that does not work and I can prove it over and over again.  If you have a secret indicator I will be happy to poke holes in it. But the 497USD asking price tag wont be paid by me. If you are the developer of such a fantastic course, how come you dont trade with it and make a lot more money trading rather than looking for more victims, er I mean customers.

It is the season of giving and I found a little picture just for you. Replace the tree with your secret course.

Indicator nonsense

I could fill a library with the amount of effort and time I put into examining all sorts of indicators over the years. But in the interests of keeping my sanity and yours, I will give a brief demonstration of why the use of indicators will negatively effect your trading.

Excuse any typos and other errors, I have a wintery gift of a chesty bug. Doc has self prescribed Whisky for this.

A few charts of the EUR/JPY on the daily will suffice for demonstration purposes.

Here is a very common method used by both expensive online courses and so called 'secret' indicators. It is nothing more than two moving averages and the most common values are a 7/21 or 8/21 moving averages.

The people who they invented or discovered this clearly have not yet reached the age of reason or applied logical analysis to the approach. In fact the same approach has been used for many many years and in this age of electronic communication we see the same thing rehashed over and over again.

Cast your eye over the chart below and look for the three red up arrows to the right. The entire 'secret' of this method is that price gets support in the case of a bullish move off either of the moving averages. On the chart it looks plausible. As I have mentioned many times in the past, engage your logical brain and now remove said moving averages from the chart and has price still moved?

Of course it has, any moving average has a zero net effect on price and the fact of a line or lines plotted against price means price WILL and HAS moved long before the indicator paints the next part of its path. What about the rest of the chart. Can you pick out where price is either valid against a bullish pr bearish move inside the range, I cant.

In a trending market you could use a lucky rabbits foot, crystal ball or some voodoo doll and still be correct, because in trending markets everything will show it works. All indicators fail within ranges and all fail prior to a trend is established. The key is being in the market before the major move.

Lets move on to the next popular indicator, the MACD. Focus on the indicator and take note of the price swing and the indicator peaks on either side of the zero line. Note the over shoot and this is common to many other indicators too. Some use the MACD for what they like to call divergence. This is fantasy dressed up as reality. Price DOES NOT and CAN NOT diverge. It is the silly indicator that diverges from reality/truth. I tore apart the math in these indicators and I kept asking myself the same question, why does the programmer take it upon himself to more and decide some function must be made around price for his indicator to work. It makes no sense to manipulate price so that there is an error plotted in an indicator which distracts you from what you should look at, price itself.

Next up, Bollinger bands. Does anything escape?...nope!

On the above chart ignore the blue arrows, same here, these are for a later chart.

On this chart I am sure many of you will look at it and think, hmm this might work, each time price hit the lower band it showed a valid long entry until it hit the upper band. Ah, how great is life when viewed through rose tinted glasses. This is once again the trend nature of indicators which lull you into a false sense of security and you start to develop a dependency on one or more indicator that you feel has proven to work over time. Let me burst that bubble in the next chart which is also using Bollinger bands.

Lets see what different in this chart. Oh dear, the previous longs of the lower band no longer work. In fact trades taken off the upper band only work on a few occasions too. How can this be, who lied to you. The fact remains no indicator is infallible and all fall foul of reality. Ask the most basic question you can, if any indicator worked there would be no need to pay large salaries to institutional traders and computers could do it instead. Correct and also incorrect, if the market for driven purely by computers it would fail to work in a short period of time because too much logic comes into play and all the emotional driven trades and the failures of humans would no longer be there to allow all the clever tricks manipulate the market.

What?!.....you are telling us the financial markets are manipulated?...welcome to the real world!

Last chart is my own simplistic view of the market.

First up is the clear nature of the chart, although I have cluttered it with some arrows for your benefit. The red arrows are the moving average guys entries, the blue arrows are my entries and taken with the knowledge of supply/demand, support/resistance, price action and the patience to wait. Of course I would also have taken the red arrow entry (1 only) but for my style of trading they are icing on the cake and nothing more than further scaling into the position. The last two red arrows would not have been a valid entry due to price being too close to a higher time frame target and I want to be far away from that before I take a trade.

The upper blue line is higher time frame interest which has been broken and may yet act as support. Clearly is has been broken in grand style, but note the latest price action, it is slowing down and all the other indicators on the various charts are way over cooked and in cuckoo land.

If you use anything that takes price and performs some action on it that results in a new way to view price, all you do is remove yourself further and further from a key part of trading. When I trade I have nothing at all on my charts and the lines and arrows you see here are all for your benefit. The only tool I use in the cross hair to let me check if price is getting close to a price range that has peaked my interest long before price has even moved toward the price range.

In closing out the year, I wish you all seasons greetings and better trading for 2014.

Doc

Gold, alternative intel collection

Gold on the monthly.

Not much new you say, correct. For the moment just keep an eye on the lines. Note price has not broken the most recent low and as I mentioned before, this I believe is weak support and I cannot see buyers coming in.

Gold on the monthly.

I know what you are saying, why two Gold monthly charts Doc, too much Christmas cheer?

Not at all, this is a monthly Gold chart but traded in Euro and not US Dollar. Now take note of the same lines and see how price has comfortably pushed through what was weak support and no buyers came in. Given the month is not yet finished there is the possibility of the monthly candle closing with a long tail. Until I see it I cant forecast any further, however on the balance of probability I think it is unlikely it will close above the line.

Gold has always been a risk haven and given the US Fed has not had a negative impact on the US markets with the taper program and the Europeans same day announcement of a new banking fix for the future...which of course was a pure fluke both news releases came on the same day (insert much eye rolling here) the effect on US and EU markets was not negative, in fact positive.

The sky is no longer falling and the once poisonous banks are again attracting stock buyers and some property companies loading up on bricks and mortar. A sign pro money from the practical world feel its time to invest again.

With that kind of outlook Gold then looks less attractive when there are better opportunities around the corner and faster ways to make money. Also the tool of using more than one financial outlook on any market comes in useful for hints at whats in store. Like always, make your own decisions and use all the tools you can and all the info you can get, once it comes from valid sources.

The falling Gold price will likely send the AUD lower and the CAD will also be one to watch. The good Canucks may see a boom time if their eneregy reserves can be sent to the US via practical means. In plain english, get that pipeline in place and it will be great for Canada. And while on the energy track, there will be interesting times for US companies involved with shale gas exports. Russia will then become more competitive with their pricing and the 100USD a barrel for oil suddenly becomes less of a problem like it has always been. Politics, dont you just love to hate it.

US Oil

A reminder to watch US Oil for near term direction.

Weekly chart showing 100USD with a blue line. This is an area that needs careful attention to see where the pro's will take it.

4hr chart.

Note to real sluggish price action and the last major push resulted in sellers coming into the market and the last buyers still unable to break the most recent high. The bulls have yet to show their interest in higher prices and the second last candle shows indecision.

replies to queries

Q. Can you tell what price I should enter a trade from the charts you post.

A. No, I do not give financial advice and the point of this blog is to give you information on how you can do it yourself. Hire a signal service or managed fund if you want the easy route.


Q. How long does it take to learn to make money at trading?

A. Impossible to say, some people make it within a few years, others spend many many years and others will never make it. On average 15% of retail traders do make it. But most media reports are of the massive failures, because bad news sells better than good news.


Q. I notice price takes less time to fall than it does rise. Why is this?

A. Humans are generally negative in their outlook and when something as important as your money is being lost in a falling market, people will close the position and not take a hit. Market timing of entries and exits would eliminate much of that problem, which is how pro money make money.


Q. Can I trade with x amount?

A. You can trade with one penny if you wish, but it will never amount to anything. You need a few thousand USD or Euro to even scrape a living from trading. Not all trades will win and managing money on small accounts is critical, there simply is such little margin for losses that climbing back up from losses will be tough.


Q. Why dont you use indicators?

A. I have no desire to trade like the 85% of retail traders and loose. Price is the only indicator I need and plotted against time as a candle suits me just fine. All indicators have price somewhere in their make up as a variable and a math function built around that. Why manipulate price into a nonsensical distracting indicator and pretend it is a confirming signal when there are more accurate ways to see price shown as a candle?


Q. What time frame should I trade?

A. One that is suitable to your funds and risk appetite. You cannot trade high time frames with low funded accounts and you wont be able to take draw down either. If you work during the day you cannot trade anything less than a daily chart, unless your boss has no problem with you using company time to trade.


Q. Are there times in the market when it is risky?

A. The market is always a risky place and anything can happen. But the announced ahead of time news releases are common times around which not to place trades. Price can swing wildly on news releases and you can chose to close open trades, tighten stops or take profits and adjust position size.


Q. Do robots work?

A. Ask me again on April 1st.


Q. How does high frequency trading work.

A. They are very expensive trading robots costing one million+ dollars and the algorithms are trade secrets. The hint is the secret part.


Q. What is the best pair to trade?

A. Pick one and learn how it works, all pairs have a character and get to grips with it over time. The spread of the pair can also be a factor such as non majors where the cost in trading them in the spread alone is expensive.


Q. I keep getting into trades which work for a short time, then reverse and stop me out. What am I doing wrong?

A. The obvious answer is the most logical one. You entered in the wrong direction and at the wrong time. Your chart reading skills need work. The right thing you done was having a hard stop set.


Q. Sometimes I sit watching the charts and waiting for an entry, when suddenly the market takes off without me and I cant get an entry.

A. New guy alert!......you should know well in advance which direction you want to go and a narrow price range where you will place the trade. If you dont do this you will ultimately loose your funds. When price moves suddenly and keeps on going, it is likely it is from higher time frame cycles. All is not lost once you can find where the next probable area is for price to react, and wait for a pull back before that. If price moved in the direction opposite to where you thought it was going to go, its time for more chart reading time and find out the reason why you picked the wrong direction.


Q. I get bored waiting for big moves and want to scalp on the 1 and 5 minute charts and pull even a few pips out of the market.

A. Good luck with that and if you can make money doing it, you will be only the third guy ever that I know of who managed to pull it off. Given the broker spread and the narrow ranges involved it is a tough way to trade and what is helpful is having a healthy heart and be mentally stable. Because soon into scalping you may develop problems in either of those areas!

And to be correct the term I use in Points. Percentage in point (pip). Forex traders really destroy the meaning of what is already defined.

Gold

Monthly chart of Gold.

The once great metal has become the metal nobody wants and how clear it is from the 10 mile view. Given the media pimping it is not surprising it got so high given it was made out to be a safe haven. A break down of where all this nonsense started.

Within the grey box is where professional money became highly active and two candles termed cross swords can be seen near the left end of the box. You will see this formation is common to all time frames and has several useful effects/results that pro money want. It gets new traders long, the reverse stops them out, it gets more traders short and also stops them out. Each time those stops are taken, it is a cheap way for lots of money to enter the market because they get the best price without showing their intentions in the clear.

Only after price has left the area in the direction of the original break do we see strong buying that is clear for anyone to see, if this were a lower time frame and you were stopped out and later saw price move in your direction it would be both an emotional high for getting the direction correct, but also an emotional low for not waiting for the right time to enter. And I will bet you still would have chased price after it broke, because you were right all along. C'mon own up, you all have done this.

The various lines are targets from price to react off on the way down. Any of them could bring a bounce and new buyers, but for how long and what are they buying into?...this is clearly a bears market.

Note the middle line, that is 1000USD and a price of great interest to see can it hold.

Weekly chart.

The green line entitles WB is the Warren Buffet line. So named for his comments on bailing out of Gold at 1500USD. It is up to you to believe it, but the chart later had us heading to 1900USD before ultimate failure. And do take note of the fact that the move from 1500USD to the top was pure parabolic and NONE of those moves are sustainable. It was nothing more than milking what was left in it and also take note of the time taken, a matter of weeks.

There was a deep pullback into the origin to get more long orders, but the move away was not showing promise and yet with the all the media talk price still moved up to the area where price broke the top and failed again. At this point the game was up and pro money had to distribute all they had and prepare for the inevitable. The black line shows where they had filtered out most of their longs.

The two arrows show attempts to go long from fresh touches into old demand. Given the weight of pro money bears above, would you have taken that long?

Daily chart.

Not a lot I can add on here other than the two lines showing what is a large range play. We are close to the bottom line and an obvious target and so any shorts would be for small gains. Do take note that a single line is in reality an area and not a single pixel target to the penny. Use the extend of the candle body for price reaction. i,e in this instance the bullish candle tail and lower end of the real body in June....look to the left of the chart.

 The Doctor's trading room

After a dismal service from another hosting company I shall try again to find a reliable place to call home. I will see how this place works out over time.

The contents of this blog are fully the ownership of the author and no reproduction in any format is allowed. The copyright is owned by the author and all information on this website is for educational use only. Any trades taken from the information here is your own sole responsibility.

You are welcome to posts comments here and do exercise courtesy to others and refrain from foul language, personal attacks and commercials.

Silver

A look on the weekly Silver chart for those of you who trade Commodities.

Buyers stepped on the previous candle which is also in long term support. Any move lower would be incredibly difficult to retain as a bullish intention due to the unwind there has been and the power of professional money will show its face here real soon. The setup for plenty long action is slowly coming in and this is no more than a heads up for the moment.

I should point out the two lines are once again support and target with around 730 points of potential profit if patience is within you. At this point I have to also point out that the information given in all of this blog is for educational use only, any trading taken off this is your sole responsibility.

Ok, the legal guy has now left the building and its back to regular programming.

Even though there is in the region of 730 points available, there is likely to be more than 1000 points of profit once you get to grips with trading in the foot steps of pro money, dont forget there will be pull backs, fake moves and all sorts of tricks to get you out.

Lets move on to the daily.

Now we are into what most serious day traders look at, closed daily candles. And in case I have not mentioned this before, you only ever trade off a closed candle no matter what time frame you chose. Burn this into your brain and Do NOT ever take a chance because the last few seconds of a candle can rapidly change its meaning and intent, and in particular when it is forming in an interesting area.

The lower line is support where we saw buyers coming in. What else do you see, hint, use your eyes first and then engage logical brain. Do not make the move out to be what its not i.e what you think it is. Trade logically and trade reality. If I sound like my teachers hat is firmly in place today you would be correct dear Sir/Madam.

What I see is price has move away cleanly from support indicating a good quality of buying. The pull backs I see are small and no interest from the bears indicating pro shorts have not come in. I also see the most recent bearish sources being taken out/broken and more indication of a tiring overall bearish move.

The 4hr chart is up next.

This is pretty much as close as I get you into current price without loosing a lot of important detail. Going to the 1hr and lower means you need to send me 1000 bucks on Paypal for a signals service. I jest, you need to learn this stuff for yourself.

In keeping with simple charts and building analysis up in layers we now have a close up view of price action. A term new to some of you and yet another buzz word you need to become aware off. All it means is we look at how the candles form in respect of the intended direction, and in this instance it is bullish. And being kind to the new people viewing this, bullish means buying and bearish means selling.

On this 4hr chart does anything look interesting?...no?....look once again with your eyes and logical brain switched on. I find a reduction in the consumption of Whiskey/Brandy and lack of dancing girls really useful in aiding concentration of price charts.

What I see is the clearest sign yet of bearish moves being over taken and no further bears coming in, if there is no selling there has to be buying. If price is going up, there has to be buying. If there is no buying or selling price moves side ways in a successively smaller and tighter range.

Price does not move side ways, numerical value as shown as price is either up or down. Get this side ways nonsense out of your mind or it will drive you nuts. Use logic, use common sense, employ factual gathering of valid information that is proven to work. This you will learn over time.

Note the solitary red up arrow. A battle ensued here with both bulls and bears slugging it out. Why?...check the daily chart for the answer. If you can spot it, post in a comment. One other nice thing I like about this chart is the amount of clear air I have away from the bearish move down. I am far away from the mess and with everyone in bearish mode still, it is a good time for pro money to be positioning for what retail traders wont even think about for a long time yet. There is ample room even for modest profits up to the marked grey box. Or if less aggressive, to the arrow where they will be a reaction.

And with a gun planted firmly at ones temple, do you go long, short or stay out?

Yes I know its a dramatic statement but its done to capture your imagination, dont take it seriously, get used to my humor or be forever lost.

I would wait for a pull back to close to 20, we are close at the moment but there is no buying yet. Before price rises pro money must absorb all other bearish orders into which they hide their bullish orders and do it in such a way that you cannot see what they are doing. Yes, very smart.

US_OIL rejig

Zoomed out view on US_Oil on the weekly time frame to give us the big picture. Why look at the little bar on the extreme right egde of your screen with price ticking up and down, all it does is drive you nuts and place poorly thought out trades. Always start with the 10 mile view

Next chart is the daily. Two lines marked up, lower showing support/buyers and upper showing.....what?....there is a major reason why that upper line has more significance than usual. Comments invited.



And finally the 4hr chart. The last candle is not yet closed and is looking very bullish I am sure you will agree. Break out traders into the New York close may be well given a gift, but more logical traders will look way to the left and see......bears selling en mass. Given the time of day which is important to day trading and only US traders taking this, it would be unwise to take this for the long haul. Better wait for the break out, come back into the top of this area again and then see will professional money position for longs, or take it lower on these time frames. And of course by tomorrow the time frames will all have rolled around and into some pretty serious players taking an interest in taking this.