Bank Profits From Accounting Rules Masking Looming Loan Losses
By Yalman Onaran
June 5 (Bloomberg) -- Big banks in the U.S. say they’re on the mend. The five largest were profitable in the first quarter, rebounding from record losses for the industry in the fourth quarter. Share prices have jumped, with the KBW Bank Index doubling since March 6.
Treasury Secretary Timothy Geithner, after “stress testing” 19 banks on their ability to withstand a worsening economy, declared in early May that Americans can be confident in the banks’ stability and resilience. Wells Fargo & Co. and Morgan Stanley were among banks raising $43 billion in new capital since then through share sales.
“With our capital and assets, stressed as they have been, we can go back to focusing all our attention on managing our business and restoring value,” Citigroup Inc. Chief Executive Officer Vikram Pandit said after Geithner’s examinations were completed.
The revival may be short-lived. Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.
The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.
‘Bogus’ Profit
Citigroup’s $1.6 billion in first-quarter profit would vanish if accounting were more stringent, says Martin Weiss of Weiss Research Inc. in Jupiter, Florida. “The big banks’ profits were totally bogus,” says Weiss, whose 38-year-old firm rates financial companies. “The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.”
Further deterioration of loans will eventually force banks to recognize losses that their bookkeeping lets them ignore for now, says David Sherman, an accounting professor at Northeastern University in Boston. Janet Tavakoli, president of Tavakoli Structured Finance Inc. in Chicago, says the government stress scenarios underestimate how bad the economy may get.
The accounting rule changes that matter most for the banks came on April 2, when the Financial Accounting Standards Board gave companies greater latitude in how they establish the fair value of assets. Lawmakers, including Representative Paul Kanjorski, a member of the House Financial Services Committee, had complained that existing mark-to-market standards worsened the financial crisis.
Debt Valuation
Along with that change, FASB also let companies recognize losses on the value of some debt securities on their balance sheets without counting the writedowns against earnings. If banks plan to hold the debt until maturity, they can avoid hurting the bottom line.
At Citigroup, the recipient of $346 billion in fresh capital and asset guarantees from the government, about 25 percent of the quarterly net income came thanks to the debt securities rule change, the bank said.
Another $2.7 billion before taxes came from an accounting rule that lets a company record income when the value of its own debt falls. That reflects the possibility a company could buy back bonds at a discount, generating a profit. In reality, when a bank can’t fund such a transaction, the gain is an accounting quirk, Weiss says.
Citigroup also increased its loan loss reserves more slowly in the first quarter, adding $10 billion compared with $12 billion in the fourth quarter, even as more loans were going bad. Provisions for loan losses cut profits, so adding more to this reserve could have wiped out the quarterly earnings.
Wells Fargo
Without those accounting benefits, Citigroup would probably have posted a net loss of $2.5 billion in the quarter, Weiss estimates. In the five previous quarters, Citigroup lost more than $37 billion.
Wells Fargo also took advantage of the change in the mark- to-market rules. The new standards let Wells Fargo boost its capital $2.8 billion by reassessing the value of some $40 billion of bonds, the bank said in May. And the bank augmented net income by $334 million because of the effect of the rule on the value of debts held to maturity.
Wells Fargo spokeswoman Julia Tunis Bernard declined to comment, as did Citigroup’s Jon Diat.
The higher valuations Wells Fargo put on its securities probably won’t last, as defaults increase on home mortgages, credit cards and other consumer and corporate lending, Northeastern’s Sherman says.
Fed’s Optimism
“These changes will help the banks hide their losses or push them off to the future,” says Sherman, a former Securities and Exchange Commission researcher.
The Federal Reserve, which designed the stress tests, used a 21 percent to 28 percent loss rate for subprime mortgages as a worst-case assumption. Already, almost 40 percent of such loans are 30 days or more overdue, according to Tavakoli, who is the author of three primers on structured debt. Defaults might reach 55 percent, she predicts.
At the same time, the assumptions on how much banks can earn to offset their losses are inflated, partly because of the same accounting gimmicks employed in first-quarter profit reports, Weiss says.
“There’s a chance that it might work,” Columbia’s Stiglitz says of the government’s attempt to boost confidence. “If it does, then they’ll look like the brilliant general. But all these efforts also bank on the economy recovering and housing prices not falling too much further. Those are not safe assumptions.”
Indeed, while the government and accounting rule makers try to help the banks look their best, they may make the U.S. economy worse. As long as lenders are stuck with bad loans, they can’t provide new money to consumers or corporations to fuel a potential recovery. The banks may look pretty, but they’ll be zombies until they clean up their books.
Bloomberg.com
Sunday, June 7, 2009
Saturday, May 9, 2009
Cancer Killer - Ginger and Barley
Cancer Killer - Ginger and Barley
>
> another remedy for you.
> Cancer Killer in the Kitchen - Ginger
> The powerful healing effects of ginger have been well
> documented. It's a proven remedy for upset stomach.
> Reams of studies show that it inhibits inflammation. And
> there is substantial evidence that it fights cancer too.
>
> For instance, a recent University of Michigan study showed
> that when
> ginger was added to ovarian cancer cells in the laboratory,
> it caused
> the cancer cells to self-destruct (a process known as
> "apoptosis").. In a
> separate study at the University of Minnesota , researchers
> injected
> colon cancer cells into mice that were bred to have no
> immune system..
>
> Half of these mice were routinely fed gingerol, the main
> active
> component in ginger. The researchers found that the mice
> that were fed gingerol lived longer, their tumors were
> smaller, and the cancer did not
> spread as widely as in the control group.
>
> With all these health benefits, you should be using ginger
> as often as
> you can. The best way I've found to get a healthy
> serving of ginger is
> to juice it. (The brand of juicer I use is an Omega.) Two
> or three days
> a week, I juice an apple or two, some carrots, spinach,
> broccoli,
> cabbage, and a big piece of ginger root.
>
>
> The ginger gives the drink a great flavor and a powerful
> anti-cancer kick.
> I highly recommend that you try it.
>
>
> <>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>
>
>
> If you have enjoyed this article and know someone who would
> enjoy it, would you kindly share it with him or her?
>
> Healing and cleansing with barley
>
> High in fibre, barley is also a kidney cleanser. Better
> yet, regular intake of it helps prevent heart disease.
> BARLEY water was always a regular drink when we were still
> living at home. Whenever we had to go for a medical exam
> that included a urine test, my mum would make us drink
> barley water a day before it to make sure we got a positive
> result!
>
> My mother was a wise woman. I later found out from an
> Australian
> naturopath that barley is known to be a kidney cleanser,
> and he happily
> downed glasses of it at a meal we had in a coffee-shop
> here.
>
> Barley is good for your intestinal health too. Try to eat
> the barley
> grains you find in your drink or sweet broth with fu chook
> (beancurd skin) and ginkgo nuts.
>
> It's high in fibre which feeds the friendly bacteria in
> the colon and
> helps speed up the transit of fecal matter in it. In this
> way it helps
> prevent haemorrhoids and colon cancer.
>
> The propionic acid and beta glucan from barley's
> insoluble fibre also help lower cholesterol and prevent the
> formation of gallstones.
>
> Eating barley regularly is a preventive step against heart
> disease as,
> besides the fibre content, it is also high in niacin, a B
> vitamin good for
> lowering cholesterol.
>
> Diabetics should eat more barley as the fibre will
> prevent blood sugar
> levels from rising too high. It also provides relief from
> constipation or
> diarrhoea for those suffering from Irritable Bowel
> Syndrome.
>
> Barley is rich in selenium which prevents cancer and
> relieves symptoms of asthma and arthritis. It is a good
> source of manganese, copper and phosphorous.
>
> Malt sugar comes from sprouted barley which, when
> fermented, is an ingredient in beer and other alcoholic
> beverages.
>
> Barley, whose Latin name is " hordeum vulgare" ,
> has been cultivated for more than 10,000 years.
> Since ancient times, barley has been used for healing
> purposes and has
> been known to the Chinese, Egyptians, Greeks and Romans.
> Athletes in
> Greece and Rome in those days were known to eat barley
> bread to give them strength.
>
> Besides the usual things we do with barley, I enjoy having
> it in a western soup. The larger pearl barley is used and I
> love the sticky bite of it.
> Here's a recipe for barley soup:
>
> Barley soup with roasted garlic
>
> 1 cup pearl barley
> 5 cloves whole garlic, roasted
> 2 litres chicken stock, steeped from 1 chicken breast
> simmered in three litres water
> 2 tbsps vegetable oil
> 2 large onions, diced
> 2 carrots, diced
> 2 stalks celery, diced
> 150g turkey ham, cut up
> 1 tsp ground white pepper
> 1 tsps sea salt or to taste
> 1 tbsp chopped parsley
> Method
> 1. Wash barley and soak it in a bowl of water for three
> hours. Drain.
>
> 2. Heat oil in pan and fry onions. Add carrots and celery,
> then the barley and fry for three minutes.
>
> 3. Add chicken stock, pepper and roasted garlic and simmer
> over low heat for at least an hour, or until barley is soft.
>
> 4. Add salt to taste and serve the soup garnished with
> chopped parsley .
> < http://www.wretch/ > . cc/blog/sharingp ath
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
> _____
> check out the rest of the Windows Live™. More than
> mail–Windows Live™ goes way beyond your inbox. More than
> messages
> _____
> See all the ways you can stay connected to friends and
> family
>
>
> ==============================
> Information in this message is confidential. It is intended
> solely for the person or the entity to whom it is addressed.
> If you are not the intended recipient, you are not to
> disseminate, distribute or copy this communication. Please
> notify the sender and delete the message and any other
> record of it from your system immediately.
> ==============================
>
> DISCLAIMER:- This email is confidential and intended only
> for the use of the individual or entity named above and may
> contain information that is privileged. If you are not the
> intended recipient, you are notified that any dissemination,
> distribution or copying of this email is strictly
> prohibited. If you have received this email in error, please
> notify us immediately by return email or telephone and
> destroy the original message. Thank you.
>
> ******************* PLEASE NOTE *******************
> This message, along with any attachments, may be
> confidential or legally privileged. It is intended only for
> the named person(s), who is/are the only authorized
> recipients. If this message has reached you in error, kindly
> destroy it without review and notify the sender immediately.
> Thank you for your help.
> **********************************************************
>
>
>
>
> Disclaimer:
> "The message and any files attached is intended solely
> for the use of the
> person to whom it is addressed and may contain information
> that is
> confidential and privileged under applicable laws. If you
> are not the i
> ntended recipient, you are hereby notified that any use,
> review,
> disclosure, copying, printing, distribution or
> dissemination of this
> message is prohibited. We take no responsibility of any
> reliance that
> you may place on this message and we further take no
> responsibility for
> any viruses or other damaging elements that may be
> contained in this email
> together with any of its attachments. If you have received
> this message in
> error, please notify us by return email and arrangements
> will be made to
> retrieve the same from you."
>
>
>
>
> another remedy for you.
> Cancer Killer in the Kitchen - Ginger
> The powerful healing effects of ginger have been well
> documented. It's a proven remedy for upset stomach.
> Reams of studies show that it inhibits inflammation. And
> there is substantial evidence that it fights cancer too.
>
> For instance, a recent University of Michigan study showed
> that when
> ginger was added to ovarian cancer cells in the laboratory,
> it caused
> the cancer cells to self-destruct (a process known as
> "apoptosis").. In a
> separate study at the University of Minnesota , researchers
> injected
> colon cancer cells into mice that were bred to have no
> immune system..
>
> Half of these mice were routinely fed gingerol, the main
> active
> component in ginger. The researchers found that the mice
> that were fed gingerol lived longer, their tumors were
> smaller, and the cancer did not
> spread as widely as in the control group.
>
> With all these health benefits, you should be using ginger
> as often as
> you can. The best way I've found to get a healthy
> serving of ginger is
> to juice it. (The brand of juicer I use is an Omega.) Two
> or three days
> a week, I juice an apple or two, some carrots, spinach,
> broccoli,
> cabbage, and a big piece of ginger root.
>
>
> The ginger gives the drink a great flavor and a powerful
> anti-cancer kick.
> I highly recommend that you try it.
>
>
> <>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>~<>
>
>
> If you have enjoyed this article and know someone who would
> enjoy it, would you kindly share it with him or her?
>
> Healing and cleansing with barley
>
> High in fibre, barley is also a kidney cleanser. Better
> yet, regular intake of it helps prevent heart disease.
> BARLEY water was always a regular drink when we were still
> living at home. Whenever we had to go for a medical exam
> that included a urine test, my mum would make us drink
> barley water a day before it to make sure we got a positive
> result!
>
> My mother was a wise woman. I later found out from an
> Australian
> naturopath that barley is known to be a kidney cleanser,
> and he happily
> downed glasses of it at a meal we had in a coffee-shop
> here.
>
> Barley is good for your intestinal health too. Try to eat
> the barley
> grains you find in your drink or sweet broth with fu chook
> (beancurd skin) and ginkgo nuts.
>
> It's high in fibre which feeds the friendly bacteria in
> the colon and
> helps speed up the transit of fecal matter in it. In this
> way it helps
> prevent haemorrhoids and colon cancer.
>
> The propionic acid and beta glucan from barley's
> insoluble fibre also help lower cholesterol and prevent the
> formation of gallstones.
>
> Eating barley regularly is a preventive step against heart
> disease as,
> besides the fibre content, it is also high in niacin, a B
> vitamin good for
> lowering cholesterol.
>
> Diabetics should eat more barley as the fibre will
> prevent blood sugar
> levels from rising too high. It also provides relief from
> constipation or
> diarrhoea for those suffering from Irritable Bowel
> Syndrome.
>
> Barley is rich in selenium which prevents cancer and
> relieves symptoms of asthma and arthritis. It is a good
> source of manganese, copper and phosphorous.
>
> Malt sugar comes from sprouted barley which, when
> fermented, is an ingredient in beer and other alcoholic
> beverages.
>
> Barley, whose Latin name is " hordeum vulgare" ,
> has been cultivated for more than 10,000 years.
> Since ancient times, barley has been used for healing
> purposes and has
> been known to the Chinese, Egyptians, Greeks and Romans.
> Athletes in
> Greece and Rome in those days were known to eat barley
> bread to give them strength.
>
> Besides the usual things we do with barley, I enjoy having
> it in a western soup. The larger pearl barley is used and I
> love the sticky bite of it.
> Here's a recipe for barley soup:
>
> Barley soup with roasted garlic
>
> 1 cup pearl barley
> 5 cloves whole garlic, roasted
> 2 litres chicken stock, steeped from 1 chicken breast
> simmered in three litres water
> 2 tbsps vegetable oil
> 2 large onions, diced
> 2 carrots, diced
> 2 stalks celery, diced
> 150g turkey ham, cut up
> 1 tsp ground white pepper
> 1 tsps sea salt or to taste
> 1 tbsp chopped parsley
> Method
> 1. Wash barley and soak it in a bowl of water for three
> hours. Drain.
>
> 2. Heat oil in pan and fry onions. Add carrots and celery,
> then the barley and fry for three minutes.
>
> 3. Add chicken stock, pepper and roasted garlic and simmer
> over low heat for at least an hour, or until barley is soft.
>
> 4. Add salt to taste and serve the soup garnished with
> chopped parsley .
> < http://www.wretch/ > . cc/blog/sharingp ath
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
> _____
> check out the rest of the Windows Live™. More than
> mail–Windows Live™ goes way beyond your inbox. More than
> messages
> _____
> See all the ways you can stay connected to friends and
> family
>
>
> ==============================
> Information in this message is confidential. It is intended
> solely for the person or the entity to whom it is addressed.
> If you are not the intended recipient, you are not to
> disseminate, distribute or copy this communication. Please
> notify the sender and delete the message and any other
> record of it from your system immediately.
> ==============================
>
> DISCLAIMER:- This email is confidential and intended only
> for the use of the individual or entity named above and may
> contain information that is privileged. If you are not the
> intended recipient, you are notified that any dissemination,
> distribution or copying of this email is strictly
> prohibited. If you have received this email in error, please
> notify us immediately by return email or telephone and
> destroy the original message. Thank you.
>
> ******************* PLEASE NOTE *******************
> This message, along with any attachments, may be
> confidential or legally privileged. It is intended only for
> the named person(s), who is/are the only authorized
> recipients. If this message has reached you in error, kindly
> destroy it without review and notify the sender immediately.
> Thank you for your help.
> **********************************************************
>
>
>
>
> Disclaimer:
> "The message and any files attached is intended solely
> for the use of the
> person to whom it is addressed and may contain information
> that is
> confidential and privileged under applicable laws. If you
> are not the i
> ntended recipient, you are hereby notified that any use,
> review,
> disclosure, copying, printing, distribution or
> dissemination of this
> message is prohibited. We take no responsibility of any
> reliance that
> you may place on this message and we further take no
> responsibility for
> any viruses or other damaging elements that may be
> contained in this email
> together with any of its attachments. If you have received
> this message in
> error, please notify us by return email and arrangements
> will be made to
> retrieve the same from you."
>
>
>
Selamat Hari Ibu
Orang kata aku lahir dari perut mak..
>
> (bukan org kata...memang betul)
>
>
>
> Bila dahaga, yang susukan aku....mak
> Bila lapar, yang suapkan aku....mak
> Bila keseorangan, yang sentiasa di sampingku.. ..mak
> Kata mak, perkataan pertama yang aku sebut....Mak
> Bila bangun tidur, aku cari....mak
> Bila nangis, orang pertama yang datang ....mak
> Bila nak bermanja, aku dekati....mak
> Bila nak bergesel, aku duduk sebelah....mak
> Bila sedih, yang boleh memujukku hanya....mak
> Bila nakal, yang memarahi aku....mak
> Bila merajuk, yang memujukku cuma....mak
> Bila melakukan kesalahan, yang paling cepat marah....mak
> Bila takut, yang tenangkan aku....mak
> Bila nak peluk, yang aku suka peluk....mak
> Aku selalu teringatkan ....mak
> Bila sedih, aku mesti talipon....mak
> Bila seronok, orang pertama aku nak beritahu.....mak
> Bila bengang.. aku suka luah pada..mak
> Bila takut, aku selalu panggil... "mmaaakkkk! "
> Bila sakit, orang paling risau adalah....mak
> Bila nak exam, orang paling sibuk juga....mak
> Bila buat hal, yang marah aku dulu....mak
> Bila ada masalah, yang paling risau.... mak
> Yang masih peluk dan cium aku sampai hari ni.. mak
> Yang selalu masak makanan kegemaranku....mak
> kalau balik ke kampung, yang selalu bekalkan ulam &
> lauk pauk.....mak
> Yang selalu simpan dan kemaskan barang-barang aku....mak
> Yang selalu berleter kat aku...mak
> Yang selalu puji aku....mak
> Yang selalu nasihat aku....mak
> Bila nak kahwin..Orang pertama aku tunjuk dan rujuk.....mak
>
>
> Aku ada pasangan hidup sendiri....
>
>
> Bila seronok, aku cari.......pasanganku
> Bila sedih, aku cari......mak
>
>
> Bila berjaya, aku ceritakan pada....pasanganku
> Bila gagal, aku ceritakan pada....mak
>
>
> Bila bahagia, aku peluk erat....pasanganku
> Bila berduka, aku peluk erat....emakku
>
>
> Bila nak bercuti, aku bawa....pasanganku
> Bila sibuk, aku hantar anak ke rumah.....mak
>
>
> Bila sambut valentine... Aku bagi hadiah pada pasanganku
> Bila sambut hari ibu...aku cuma dapat ucapkan "Selamat
> Hari Ibu"
>
>
> Selalu.. aku ingat pasanganku
>
> Selalu.. mak ingat kat aku
>
>
> Bila-bila... aku akan talipon pasanganku
> Entah bila... aku nak talipon mak
>
>
> Selalu....aku belikan hadiah untuk pasanganku
> Entah bila... aku nak belikan hadiah untuk emak
>
>
> Renungkan:
>
> "Kalau kau sudah habis belajar dan berkerja...
> bolehkah kau kirim wang untuk mak?
> mak bukan nak banyak... lima puluh ringgit sebulan pun
> cukuplah"...
> Berderai air mata jika kita mendengarnya........
>
>
> Tapi kalau mak sudah tiada..........
>
> MAKKKKK...RINDU MAK..... RINDU SANGAT....
>
> (bukan org kata...memang betul)
>
>
>
> Bila dahaga, yang susukan aku....mak
> Bila lapar, yang suapkan aku....mak
> Bila keseorangan, yang sentiasa di sampingku.. ..mak
> Kata mak, perkataan pertama yang aku sebut....Mak
> Bila bangun tidur, aku cari....mak
> Bila nangis, orang pertama yang datang ....mak
> Bila nak bermanja, aku dekati....mak
> Bila nak bergesel, aku duduk sebelah....mak
> Bila sedih, yang boleh memujukku hanya....mak
> Bila nakal, yang memarahi aku....mak
> Bila merajuk, yang memujukku cuma....mak
> Bila melakukan kesalahan, yang paling cepat marah....mak
> Bila takut, yang tenangkan aku....mak
> Bila nak peluk, yang aku suka peluk....mak
> Aku selalu teringatkan ....mak
> Bila sedih, aku mesti talipon....mak
> Bila seronok, orang pertama aku nak beritahu.....mak
> Bila bengang.. aku suka luah pada..mak
> Bila takut, aku selalu panggil... "mmaaakkkk! "
> Bila sakit, orang paling risau adalah....mak
> Bila nak exam, orang paling sibuk juga....mak
> Bila buat hal, yang marah aku dulu....mak
> Bila ada masalah, yang paling risau.... mak
> Yang masih peluk dan cium aku sampai hari ni.. mak
> Yang selalu masak makanan kegemaranku....mak
> kalau balik ke kampung, yang selalu bekalkan ulam &
> lauk pauk.....mak
> Yang selalu simpan dan kemaskan barang-barang aku....mak
> Yang selalu berleter kat aku...mak
> Yang selalu puji aku....mak
> Yang selalu nasihat aku....mak
> Bila nak kahwin..Orang pertama aku tunjuk dan rujuk.....mak
>
>
> Aku ada pasangan hidup sendiri....
>
>
> Bila seronok, aku cari.......pasanganku
> Bila sedih, aku cari......mak
>
>
> Bila berjaya, aku ceritakan pada....pasanganku
> Bila gagal, aku ceritakan pada....mak
>
>
> Bila bahagia, aku peluk erat....pasanganku
> Bila berduka, aku peluk erat....emakku
>
>
> Bila nak bercuti, aku bawa....pasanganku
> Bila sibuk, aku hantar anak ke rumah.....mak
>
>
> Bila sambut valentine... Aku bagi hadiah pada pasanganku
> Bila sambut hari ibu...aku cuma dapat ucapkan "Selamat
> Hari Ibu"
>
>
> Selalu.. aku ingat pasanganku
>
> Selalu.. mak ingat kat aku
>
>
> Bila-bila... aku akan talipon pasanganku
> Entah bila... aku nak talipon mak
>
>
> Selalu....aku belikan hadiah untuk pasanganku
> Entah bila... aku nak belikan hadiah untuk emak
>
>
> Renungkan:
>
> "Kalau kau sudah habis belajar dan berkerja...
> bolehkah kau kirim wang untuk mak?
> mak bukan nak banyak... lima puluh ringgit sebulan pun
> cukuplah"...
> Berderai air mata jika kita mendengarnya........
>
>
> Tapi kalau mak sudah tiada..........
>
> MAKKKKK...RINDU MAK..... RINDU SANGAT....
Wednesday, May 6, 2009
klik iklan je dapat duit...
http://numenmail.com/pages/index.php?refid=langitsalju
http://numenmail.com/pages/index.php?refid=langitsalju
Subject: SETIAP EMAIL BERHARGA $80 SERTA BONUS PERCUMA SELEPAS ANDA
SIGNUP !!! x nak ke??? — Free SIGNUP
DASYAAAAAAAAAAAAAAA AAT!! CAM TAK PERCAYA PULAK
Ini percuma tapi kena rajin la klik iklan... Nak duit Rajin2 lah sikit klik
iklannya. Ini percuma tak payah bayar......1 sen pun.Firstly, saya nak
kenalkan ngan satu website yang membolehkan korang sumer dapat extra Money..
x kire la korang student ker, dah keja ker (a) mganggur...sume bleh dpt.
BARU SIGN UP je dah dapat BONUS USD800.. ni dlm nilai USDollar, kalau dlm
Ringgit M\'sia dah RM2000 lebih..cube la korg bygkan sdiri....byk giler!
(Tak perlu keluar MODAL 1 sen pun, TAKKAN RUGI, SIGNUP FREE, dapat BONUS
$800 lagi direct ke account lepas sign up)Korang sumer hanya perlu SIGN
UP!!Kitorg buat ni pon smbil2 je....nak cr duit lebih2 sket dan surf punyer
surf jumpe la website ni Lps sign up, kitorg try2 la tgk account tu..punyela
tkejut beruk.....dlm smggu je dlm account kitorg tetibe dah ade USD$1000
iaitu RM4000..
Korang ikut steps yg kitorg dah translatekan dlm bhs mlayu bg
menyenangkan korg. sbb bhs diorg guna tu bebelit sket..pdahal steps die
mudah je. okeh! X nak buang mase lg.. tgk dulu steps die k..
CARA-CARA NAK DAFTAR?.Steps dia mudah jer...
1. Korg klik dekat link kat bawah ni atau copy dan paste kat browser
korang...
http://numenmail.com/pages/index.php?refid=langitsalju
2. Klik kat \'Sign Up.\' (Sebelah kiri website tu).
3. Taip alamat email korg.. Nnt diorg akan send kt email korang utk sahkan.
4. Tutup (Close) laman tu.
5.. Pastu..pergi tgk kat email korang. akan ade perkataan ni. \'
numenmail.com. sign up URL\'.. then, \'Click\'.
6. Kat ctu ade 2 link. korg klik je kat link yg pertama tu.
http://numenmail.com/pages/index.php?refid=langitsalju
7. Lepas tu, akan keluar laman . numenmail.com yang mula2 korang taip alamat
email korang tu.
8. Klik dkt \'Sign Up\'..
9. Isi borang dia bagi..HARUS INGAT !!! Jangan padam nama upline anda di
bahagian Referrer. Jika korang padam kemungkinan korang boleh di ban oleh
pihak numen mail. so, biarkan je k..
10. Sampai dkt cara nak bayar..korg pilih je melalui \'Check\'.
11. Lepas isi..klik kat \'Sign In\'.
12. Masukkan Username ngan Password yg korang tulis dlm borang td.
13. Kat situ korg akan nmpk account korang dlm tu ade $800...haaa, betulkan
kitorg ckp td?
14. Then, klik dkt \'paid2click\ ' .
15.. Kat situ akan ade 7 banner (a) lebih. Stiap 1 banner korg klik, account
korg akan btambah $10.00 (a) RM40.00... utk klik banner ke 2 tggu smpai dia
abis surf (lbh kurang dlm 30 saat.
16. Klik smpai abis.
17. Klik kat \'Earnings stats\'?
18. Tengoklah berape korang dpt dgn hanya klik kat banner.SENANG KAN ??!!
19. Utk tambah duit korg dlm account tu..korang just invite mmber dgn 1st
step korg msk td? Just TYPE /SENT kat member nyer email address
20. Setiap hari pastikan korang klik dan baca iklan yg dia hantar ke email
korang atau pun buka terus akaun korang yg dah berdaftar dgn
numenmail.comdan utk buka akaun, klik kat \"member sign in\" dan masukkan
username dan password korang sebelum ni..Kemudian klik kat \"Your Inbox\"
dan klik setiap iklan yg tersenarai kat situ. Setiap satu iklan/email tu
mengambil masa kira-kira 200saat atau lbh kurang 3-4 minit. Lps tu baru
close dan buka iklan yg lain.Setiap iklan/email tu bernilai US$200 Dollar
atau lbh kurang RM700.00 duit Malaysia ..tak nak ker???...
21.. Utk tahu jumlah duit korang yg terkumpul, klik kat\"Earning Stats\".
faham btol2 yer. numenmail.com. AKAN BYR KORG.Setelah jumlah duit yg
terkumpul sampai had payout *8888, *Kite akan dapat bayaran melalui CHECK
(a) dlm bahasa melayu nyer CEK. Sbb kitorg tau msti korg akan alami prob x
tau nak pilih cara pembyrnkan.. .korg just klik kat \'CHECK\' je mase kat
sign up dan pastikan alamat korg tu betol sbab cek tu akan smpai kat DEPAN
PINTU UMAHKORANG.
http://numenmail.com/pages/index.php?refid=langitsalju
SELAMAT MENCUBA!!
Monday, March 2, 2009
FOREX ...........Why Have a Trading Plan ?
Reason 1: It keeps you in the right direction
Consistency is very important to have in your trading routine because it allows you to truly measure how successful you are as a trader. If you have a sound trading system but always break your rules, how can you ever really know how good your system really is? Your trading plan will keep you on target. Read it every day and stick to it.
Reason 2: Trading is a business and successful businesses ALWAYS have plans
I have never seen a successful business not start out with a plan. Do you honestly think Walmart was just created on a whim and then magically became successful? Or what about McDonalds? I’m sure almost anyone can make a better hamburger than McDonalds, but the difference between them and the individual is that they have a successful business plan that guides them to success.
Money Management
Risk to Reward
Another way you can increase your chances of profitability is to trade when you have the potential to make 3 times more than you are risking. If you give yourself a 3:1 reward/risk ratio, you have a significantly greater chance of ending up profitable in the long run. Take a look at this chart as an example:
In this example, you can see that even if you only won 50% of your trades, you would still make a profit of $10,000. Just remember that whenever you trade with a good risk to reward ratio, your chances of being profitable are much greater even if you have a lower win percentage.
Forex Market Hours
Market Hours
Before looking at the best times to trade, we must look at what a 24hr. day in the forex world looks like. The forex can be broken up into three major trading sessions: the Tokyo Session, the London Session, and the U.S. Session. Below is a table of the open and close times for each session:
| Time Zone | EST | GMT |
|---|---|---|
| Tokyo Open | 7 PM | 0:00 |
| Tokyo Close | 4 AM | 9:00 |
| London Open | 3 AM | 8:00 |
| London Close | 12 PM | 17:00 |
| U.S. Open | 8 AM | 13:00 |
| U.S. Close | 5 PM | 22:00 |
You can see that in between each session there is a period of time where two sessions are open at the same time. From 3-4 a.m. EST, both the Tokyo and London markets are open, and from 8-12 p.m. EST, both the London and U.S. markets are open. Naturally, these are the busiest times during the market because there is more volume when two markets are open at the same time.
| Session | EUR/USD | GBP/USD | USD/CHF | USD/JPY |
|---|---|---|---|---|
| Tokyo | 66 | 79 | 100 | 66 |
| London | 80 | 99 | 121 | 74 |
| U.S. | 67 | 78 | 101 | 60 |
Steps to Setting Up Your System
Step 1: Time Frame
The first thing you need to decide when creating your system is what kind of trader you are. Are you a day trader or a swing trader? Do you like looking at charts every day, every week, every month, or even every year? How long do you want to hold on to your positions?
This will help determine which time frame you will use to trade. Even though you will still look at multiple time frames (go back to 7th grade if you forgot), this will be the main time frame you will use when looking for a trade signal.
Step 2: Find indicators that help identify a new trend.
Since one of our goals is to identify trends as early as possible, we should use indicators that can accomplish this. Moving averages are one of the most popular indicators that traders use to help them identify a trend. Specifically, they will use 2 moving averages (one slow and one fast) and wait until the fast one crosses over or under the slow one. This is the basis for what’s known as a “moving average crossover” system.
In its simplest form, moving average crossovers are the fastest ways to identify new trends. It is also the easiest way to spot a new trend.
Of course there are many other ways traders’ spot trends, but moving averages are one of the easiest to use.
Step 3: Find indicators that help CONFIRM the trend.
Our second goal for our system is to have the ability to avoid whipsaws, meaning that we don’t want to be caught in a “false” trend. The way we do this is by making sure that when we see a signal for a new trend, we can confirm it by using other indicators.
There are many good indicators for confirming trends, but I really like MACD, Stochastics, and RSI. As you become more familiar with various indicators, you will find ones that you prefer over others, and can incorporate those into your system.
Step 4: Define Your Risk
When developing your system, it is very important that you define how much you are willing to lose on each trade. Not many people like to talk about losing, but in actuality, a good trader thinks about what they could potentially lose BEFORE thinking about how much they can win.
The amount you are willing to lose will be different than everyone else. You have to decide how much room is enough to give your trade some breathing space, but at the same time, not risk too much on one trade. You’ll learn more about money management in a later lesson. Money management plays a big role in how much you should risk in a single trade.
Step 5: Define Entries & Exits
Once you define how much you are willing to lose on a trade, your next step is to find out where you will enter and exit a trade in order to get the most profit.
Some people like to enter as soon as all of their indicators match up and give a good signal, even if the candle hasn’t closed. Others like to wait until the close of the candle.
In my experience, I have found that it is best to wait until a candle closes before entering. I have been in many situations where I will be in the middle of a candle and all my indicators match up, only to find that by the close of the candle, the trade has totally reversed on me!
It’s all really just a matter of trading style. Some people are more aggressive than others and you will eventually find out what kind of trader you are.
For exits, you have a few different options. One way is to trail your stop, meaning that if the price moves in your favor by ‘X’ amount, you move your stop by ‘X’ amount.
Another way to exit is to have a set target, and exit when the price hits that target. How you calculate your target is up to you. Some people choose support and resistance levels as their targets. Others just choose to go for the same amount of pips on every trade. However you decide to calculate your target, just make sure you stick with it. Never exit early no matter what happens. Stick to your system! After all, YOU developed it!
One more way you can exit is to have a set of criteria that, when met, would signal you to exit. For example, you could make it a rule that if your indicators happen to reverse to a certain level, you would then exit out of the trade.
Step 6: Write down your system rules and FOLLOW IT!
This is the most important step of creating your trading system. You MUST write your trading system rules down and ALWAYS follow it. Discipline is one of the most important characteristics a trader must have, so you must always remember to stick to your system! No system will ever work for you if you don’t stick to the rules, so remember to be disciplined. Oh yea, did I mention you should ALWAYS stick to your rules?
Goals of your trading system
When developing your system, you want to achieve 2 very important goals:
- Your system should be able to identify trends as early as possible.
- Your system should be able to avoid you from whipsaws.
If you can accomplish those two things with your trading system, we GUARANTEE you will be successful. The hard part about those goals is that they contradict each other. If you have a system in which its sole purpose is to catch trends early, then you will probably get faked out many times.
On the other hand, if you have a system in which its sole purpose is to avoid whipsaws, then you will be late on many trades and will also probably miss out on a lot of trades.
Your task, when developing your system, is to find a compromise between the two goals. Find a way to identify trends early, but also find ways that will help you distinguish the fake signals from the real ones.
Always remember these two goals when you create your system. They will make you a lot of money!
ABC Correction
ABC Correction
The 5-wave trends are then corrected and reversed by 3-wave countertrends. Letters are used instead of numbers to track the correction. Check out this example of smokin’ hot 3-wave corrective wave pattern!
Just because I’ve been using a bull market as my primary example doesn’t mean the Elliott Wave theory doesn’t work on bear markets. The same 5 – 3 wave pattern can look like this:
Waves within a Wave
The other important thing you have to know about the Elliot Wave Theory is that a wave is made of sub-waves? Huh? Let me show you another picture. Pictures are great aren't they? Yee-haw!
Do you see how Wave 1 is made up of a smaller 5-wave impulse pattern and Wave 2 is made up of smaller 3-wave corrective pattern? Each wave is always comprised of smaller wave patterns.
As you can see, waves aren’t shaped perfectly in real life. You’ll also learn its sometimes difficult to label waves. But the more you stare at charts the better you’ll get.
Okay, that’s all you need to know about the Elliott Wave Theory. Remember the market moves in waves. Now when you hear somebody say “Wave 2 is complete.” You’ll know what the heck he is talking about.
If you wish to become an Elliott Wave Theory guru, you can learn more about it at www.elliottwave.com.
Elliott Wave Theory
Elliott Wave Theory
Back in the old school days during the 1920-30s, there was this mad genius named Ralph Nelson Elliott. Elliott discovered that stock markets, thought to behave in a somewhat chaotic manner, actually, did not.
They traded in repetitive cycles, which he pointed out were the emotions of investors and traders caused by outside influences (ahem, CNBC) or the predominant psychology of the masses at the time.
Elliott explained that the upward and downward swings of the mass psychology always showed up in the same repetitive patterns, which were then divided into patterns he called "waves". He needed to claim this observation and so he came up with a super original name: The Elliott Wave Theory.
The 5 – 3 Wave Patterns
Mr. Elliott showed that a trending market moves in what he calls a 5-3 wave pattern. The first 5-wave pattern is called impulse waves and the last 3-wave pattern is called corrective waves.
Let’s first take a look at the 5-wave impulse pattern. It’s easier if you see it as a picture:
That still looks kind of confusing. Let’s splash some color on this bad boy.
Ah magnefico! Me likes colors. It’s so pretty! I’ve color-coded each wave along with its wave count.
Wave 1
The stock makes its initial move upwards. This is usually caused by a relatively small number of people that all of the sudden (for a variety of reasons real or imagined) feel that the price of the stock is cheap so it’s a perfect time to buy. This causes the price to rise.Wave 2
At this point enough people who were in the original wave consider the stock overvalued and take profits. This causes the stock to go down. However, the stock will not make it to its previous lows before the stock is considered a bargain again.Wave 3
This is usually the longest and strongest wave. The stock has caught the attention of the mass public. More people find out about the stock and want to buy it. This causes the stock’s price to go higher and higher. This wave usually exceeds the high created at the end of wave 1.Wave 4
People take profits because the stock is considered expensive again. This wave tends to be weak because there are usually more people that are still bullish on the stock and are waiting to “buy on the dips”.Wave 5
This is the point that most people get on the stock, and is most driven by hysteria. You usually start seeing the CEO of the company on the front page of major magazines as the Person of the Year. People start coming up with ridiculous reasons to buy the stock and try to choke you when you disagree with them. This is when the stock becomes the most overpriced. Contrarians start shorting the stock which starts the ABC pattern.
Long or Short?
Let’s play a quick game called “Long or Short”. The rules of the game are easy. You look at a chart and you decide whether to go long or short. Easy. Okay ready?
5 Minute Chart
Let’s a take a look at a EUR/USD 5-minute chart on 11/03/05 around 4 am EST. Oooh it’s so nice. It’s trading above its 100 simple moving average which is bullish and look! It just broke out and closed above it’s previous resistance! Perfect time to go long right? I’ll take that as a yes.
Oh! You are WRONG! Look what happens next! It’s goes up a little bit but then drops like rock. Oh too bad.
60 Minute Chart
Let’s look at the same exact chart on a higher time frame. It’s the same date, 11/03/05 and the same time, around 4 am EST.
Holy cow! The pair broke out of its down channel which is bullish. It’s trading above its 100 simple moving average which is bullish. The last candle broke and closed above its previous resistance which is bullish. Looks like a bull, smells like a bull. Nothing but up from here right? You say long.
OOOHHHHH! Zero for two! How do you like your steak cooked? Because from the looks of this chart…the bull got slaughtered. The pair even dropped back into its old down channel. Look at that last candle, it was dropping so much, it couldn’t even stay inside my chart! Amazing!
So what's the point?
All of the charts were showing the same date and time. They were just different time frames. Do you see now the importance of looking at multiple time frames?
We used to just trade off 15-minute charts and that was it. We could never understand why when everything looked good the market would suddenly stall or reverse. It never crossed our minds to take a look at a larger time frame to see what was happening. When the market did stall or reverse on my 15-minute chart, it was often because it had hit support or resistance on a larger time frame.
It took me a couple of hundred bucks to learn that the larger the time frame, the more important support and resistance levels were. Trading using multiple time frames has probably made us more money than any other one thing alone. It will allow you to stay in a trade longer because you’re able to identify where you are relative to the big picture.
Most beginners look at only one time frame. They grab a single time frame, apply their indicators and ignore other time frames. The problem is that a new trend, coming from another time frame, often hurts traders who don’t look at the big picture.
Take a broad look at what’s happening. Don’t try to get your face closer to the market, but push yourself further away.
Select your preferred time frame and then go up to the next higher time frame. There you make a strategic decision to go long or short based on the direction of the trend. You would then return to your preferred time frame to make tactical decisions about where to enter and exit (place stop and profit target). Adding the dimension of time to your analysis gives you an edge over the other tunnel vision traders who trade off on only one time frame.
There is obviously a limit to how many time frames you can study. You don’t want a screen full of charts telling you different things. Use at least two, but not more than three time frames because adding more will just confuse the geewillikers out of you and you’ll suffer from analysis paralysis and go crazy.
We like to use three time frames. The largest time frame we consider our main trend, the next time frame down as my medium trend and the smallest time frame as the short-term trend.
You can use any time frame you like as long as there is enough time difference between them to see a difference in their movement. You might use:
- 1 minute, 5 minute, and 30 minute
- 5 minute, 30 minute, and 4 hour
- 15 minute, 1 hour, and 4 hour
- 1 hour, 4 hour, and daily
- 4 hour, daily, and weekly and so on.
Time Frame Breakdowns
Time Frame Breakdowns
Which one is better?
It depends on your personality!
Let me give you a breakdown of the three to help you choose:
time frame | Description | Advantages | Disadvantages |
Long-term | Long-term traders will usually refer to daily and weekly charts. The weekly charts will establish the longer term perspective and assist in placing entries in the shorter term daily. Trades usually from a few weeks to many months, sometimes years. | Don’t have to watch markets intraday Fewer transactions means less paying of spreads
| Large swings which require large stops Usually 1 or 2 good trades a year so patience is required Bigger account needed to ride longer term swings Frequent losing months |
Short-term | Short-term traders use hourly time frames and hold trades for several hours to a week. | More opportunities for trades Less chance of losing months Less reliance on one or two trades a year to make money | Transaction costs will be higher (more spreads to pay) Overnight risk becomes a factor
|
Intraday | Intraday traders use minute charts such as 1-minute or 5-minute. Trades are held intraday and exited by market close. | Lots of trading opportunities Less chance of losing months No overnight risk | Transaction costs will be much higher (more spreads to pay) Mentally more difficult due to frequency of trading Profits are limited by needing to exit at the end of the day. |
Time Frame Should I Trade
One of the main reasons traders don’t do well as they should is because they’re usually trading the wrong time frame for their personality. New traders will want to learn how to get rich quick so they’ll start trading small time frames like the 1-minute or 5-minute charts. Then they end up getting frustrated when they trade because it’s the wrong time frame for their personality.
Finally after a long period of time frame unfaithfulness, we felt we were most comfortable trading the 1-hour charts. This time frame is longer, but not too long, and trade signals were fewer, but not too few. We now have more time to analyze the market and didn’t feel rushed anymore.
On the other hand, we have a friend who could never, ever, trade in a 1-hour time frame. It would be way too slow for him and he’d probably think he was going to rot and die before he could get in a trade. He prefers trading a 10-minute chart. It still gives him enough time (but not too much) to make decisions based on his trading plan.
Another buddy of ours can’t figure out how we can trade a 1-hour chart because he thinks it’s too fast! He trades only daily, weekly, and monthly charts. His name is Warren Buffet. You might know him.
Okay, so you’re probably asking what the right time frame is for you. Well, buddy, if you had been paying attention, it depends on your personality. You have to feel comfortable with the time frame you’re trading in.
You’ll always feel some kind of pressure or sense of frustration when you’re in a trade because real money is involved. But you shouldn’t feel that the reason for the pressure is because things are happening so fast that you find it difficult to make decisions or so slowly that you get frustrated.
When we first started trading, we couldn’t stick to a time frame. We started with the 15-minute chart. Then the 5-minute chart. Then we tried the 1-hour chart, the daily chart, and 4-hour chart.
Trading time frames are usually categorized into three types:
- Long-term
- Short-term or swing
- Intraday or day-trading
Which one is better? It depends on....
Pivot Point Trading Tips
- If price at PP, watch for a move back to R1 or S1.
- If price is at R1, expect a move to R2 or back towards PP.
- If price is at S1, expect a move to S2 or back towards PP.
- If price is at R2, expect a move to R3 or back towards R1.
- If price is at S2, expect a move to S3 or back towards S1.
- If there is no significant news to influence the market, price will usually move from P to S1 or R1.
- If there is significant news to influence the market price may go straight through R1 or S1 and reach R2 or S2 and even R3 or S3.
- R3 and S3 are a good indication for the maximum range for extremely volatile days but can be exceeded occasionally.
- Pivot lines work well in sideways markets as prices will most likely range between the R1 and S1 lines.
- In a strong trend, price will blow through a pivot line and keep going.
Theoretically Perfect?
In theory, it sounds pretty simple huh? Dream on, pal!
In the real world, pivot points don’t work all the time. Price tends to hesitate around pivot lines and at times it’s just ridiculously hard to tell what it will do next.
Sometimes the price will stop just before reaching a pivot line and then reverse meaning your profit target doesn’t get reached. Other times, it looks like a pivot line is a strong support level so you go long only to see the price fall, stop you out, then reverse back into your direction.
You must be very selective and create a pivot point trading strategy that you intend to strictly follow.
Let’s go look at a chart to see just how difficult and easy pivot points might be.
Ooooh pretty colors! We like...
Look at the orange oval. Notice how the PP was a strong support but if you went long on PP, it never was able to rise up to R1.
Look at the first purple circle. The pair broke down through PP but failed to reach S1 before reversing back to PP. On the second break down though (second purple circle), the pair did manage to reach S1 before once again reversing back to PP.
Look at the pink oval. Again, PP acted as strong support but never was able to rise up to R1.
On the yellow circle, the pair broke out to the downside again, sliced right through S1, and managed to fall all the way down to S2.
If you ever attempted to go long on this chart, you would have been stopped out every single time.
Personally, we would have not even thought about buying this pair - Why not? Well we have a little secret. What we didn’t show you regarding this chart was that this pair was trending down for quite some time now.
Remember the trend is your friend. We don’t like to backstab our friends, so we try our best to never trade against the trend.Range-bound Trades
The strength of support and resistance at the different pivot levels is determined by the number of times the price bounces off the pivot level.
The more times a currency pair touches a pivot level then reverses, the stronger the level is. Pivoting simply means reaching a support or resistance level and then reversing. Hence, the word “pivot”.
If the pair is nearing an upper resistance level, you could sell the pair and place a tight protective stop just above the resistance level.
If the pair keeps moving higher and breaks out above the resistance level, this would be considered an upside “breakout”. You would also get stopped out of your short order but if you believe that the breakout has good follow-through buying strength, you can reenter with a long position. You would then place your protective stop just below the former resistance level that was just penetrated and is now acting as support.
If the pair is nearing a lower support level, you could buy the pair and place a stop below the support level.
Breakout Trades
The pivot point should be the first place you look at to enter a trade, since it is the primary support/resistance level. The biggest price movements usually occur at the price of the pivot point.
Only when price reaches the pivot point will you be able to determine whether to go long or short, and set your profit targets and stops. Generally, if prices are above the pivot it’s considered bullish, and if they are below it’s considered bearish.
Let’s say the price is hovering around the pivot point and closes below it so you decide to go short. Your stop loss would be above PP and your initial profit target would be at S1.
However, if you see prices continue to fall below S1, instead of cashing out at S1, you can move your existing stop-loss order just above S1 and watch carefully. Typically, S2 will be the expected lowest point of the trading day and should be your ultimate profit objective.
The converse applies during an uptrend. If price closed above PP, you would enter a long position, set a stop loss below PP and use the R1 and R2 levels as your profit objectives.
Calculate Pivot Points
The pivot point and associated support and resistance levels are calculated by using the last trading session’s open, high, low, and close. Since Forex is a 24-hour market, most traders use the New York closing time of 4:00pm EST as the previous day’s close.
The calculation for a pivot point is shown below:
Pivot point (PP) = (High + Low + Close) / 3
Support and resistance levels are then calculated off the pivot point like so:
First level support and resistance:
First support (S1) = (2*PP) – High
First resistance (R1) = (2*PP) – Low
Second level of support and resistance:
Second support (S2) = PP – (High – Low)
Second resistance (R2) = PP + (High - Low)
Don’t worry you don’t have to perform these calculations yourself. Your charting software will automatically do it for you and plot it on the chart.
Also keep in mind that some charting software also provides additional pivot point features such as a third support and resistance level and intermediate levels or mid-point levels (levels in between the main pivot point and support and resistance level).
These “extra levels” aren’t as significant as the main five but it doesn’t hurt to pay attention to them. Here’s an example:
Pivot Points
Professional traders and market makers use pivot points to identify important support and resistance levels. Simply put, a pivot point and its support/resistance levels are areas at which the direction of price movement can possibly change.
Pivot points are especially useful to short-term traders who are looking to take advantage of small price movements.
Pivot points can be used by both range-bound traders and breakout traders. Range-bound traders use pivot points to identify reversal points. Breakout traders use pivot points to recognize key levels that need to be broken for a move to be classified as a real deal breakout.
Here is an example of pivot points plotted on a 1-hour EUR/USD chart:
Reverse Head and Shoulders
Reverse Head and Shoulders
The name speaks for itself. It is basically a head and shoulders formation, except this time it’s in reverse. A valley is formed (shoulder), followed by an even lower valley (head), and then another higher valley (shoulder). These formations occur after extended downward movements.
Here you can see that this is just like a head and shoulders pattern, but it’s flipped upside down. With this formation, we would place a long entry order above the neckline. Our target is calculated just like the head and shoulders pattern. Measure the distance between the head and the neckline, and that is approximately the distance that the price will move after it breaks the neckline.
Head and Shoulders
Head and Shoulders
A head and shoulders pattern is also a trend reversal formation. It is formed by a peak (shoulder), followed by a higher peak (head), and then another lower peak (shoulder). A “neckline” is drawn by connecting the lowest points of the two troughs. The slope of this line can either be up or down. In my experience, when the slope is down, it produces a more reliable signal.
In this example, we can visibly see the head and shoulders pattern. The head is the 2nd peak and is the highest point in the pattern. The two shoulders also form peaks but do not exceed the height of the head.
You can see that once the price goes below the neckline it makes a move that is about the size of the distance between the head and the neckline.
Double Bottom
Double Bottom
Double bottoms are also trend reversal formations, but this time we are looking to go long instead of short. These formations occur after extended downtrends when two valleys or “bottoms” have been formed.
You can see from the chart above that after the previous downtrend, the price formed two valleys because it wasn’t able to go below a certain level. Notice how the 2nd bottom wasn’t able to significantly break the 1st bottom.
Would you look at that!
The price breaks the neckline and makes a nice move up. Remember, just like double tops, double bottoms are also trend reversal formations. You’ll want to look for these after a strong downtrend.
Double Top
Double Top
A double top is a reversal pattern that is formed after there is an extended move up. The “tops” are peaks which are formed when the price hits a certain level that can’t be broken. After hitting this level, the price will bounce off it slightly, but then return back to test the level again. If the price bounces off of that level again, then you have a DOUBLE top!
In the chart above you can see that two peaks or “tops” were formed after a strong move up. Notice how the 2nd top was not able to break the high of the 1st top. This is a strong sign that a reversal is going to occur because it is telling us that the buying pressure is just about finished.
With double tops, we would place our entry order below the neckline because we are anticipating a reversal of the uptrend.
Wow! We must be psychic or something because we always seem to be right! Looking at the chart you can see that the price breaks the neckline and makes a nice move down. Remember, double tops are a trend reversal formation. You’ll want to look for these after there is a strong uptrend.
Descending Triangles
Descending Triangles
As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!). In descending triangles, there is a string of lower highs which forms the upper line. The lower line is a support level in which the price cannot seem to break.
In the chart above, you can see that the price is gradually making lower highs which tell us that the sellers are starting to gain some ground against the buyers. Now most of the time, and we did say MOST - the price will eventually break the support line and continue to fall.
Ascending Triangles
Ascending Triangles
This type of formation occurs when there is a resistance level and a slope of higher lows. What happens during this time is that there is a certain level that the buyers cannot seem to exceed. However, they are gradually starting to push the price up as evident by the higher lows.
In the chart above, you can see that the buyers are starting to gain strength because they are making higher lows. They keep putting pressure on that resistance level and as a result, a breakout is bound to happen. Now the question is, “Which direction will it go? - Will the buyers be able to break that level or will the resistance be too strong?”
Many charting books will tell you that in most cases, the buyers will win this battle and the price will break out past the resistance. However, it has been my experience that this is not always the case. Sometimes the resistance level is too strong, and there is simply not enough buying power to push it through.
Most of the time the price will in fact go up. The point we are trying to make is that we do not care which direction the price goes, but we want to be ready for a movement in EITHER direction. In this case, we would set an entry order above the resistance line and below the slope of the higher lows.
In this scenario, the buyers won the battle and the price proceeded to skyrocket!
Triangles
triangles are chart formations where the slope of the price’s highs and the slope of the price’s lows converge together to a point where it looks like a triangle. What is happening during this formation is that the market is making lower highs and higher lows. This means that neither the buyers nor the sellers are pushing the price far enough to make a clear trend. If this was a battle between the buyers and sellers, then this would be a draw.
This type of activity is called consolidation.
In the chart above, we can see that neither the buyers nor the sellers could push the price in their direction. When this happens we get lower highs and higher lows. As these two slopes get closer to each other, it means that a breakout is getting near. We don’t know what direction the breakout will be, but we do know that the market will break out. Eventually, one side of the market will give in.
In this example, if we placed an entry order above the slope of the lower highs, we would’ve been taken along for a nice ride up. If you had placed another entry order below the slope of the higher lows, then you would cancel it as soon as the first order was hit.
Pattern
our whole goal is to spot big movements before they happen so that we can ride them out and rake in the cash! Chart formations will greatly help us spot conditions where the market is ready to break out.
Here's the list of patterns that we're going to cover:
All Together Technicals Anylisis
In a perfect world, we could take just one of these indicators and trade strictly by what that indicator told us. The problem is that we DON’T live in a perfect world, and each of these indicators has imperfections. That is why many traders combine different indicators together so that they can “screen” each other. They might have 3 different indicators and they won’t trade unless all 3 indicators give them the same answer.
As you continue your journey as a trader, you will discover what indicators work best for you. We can tell you that we like using MACD, Stochastics, and RSI, but you might have a different preference. Every trader out there has tried to find the “magic combination” of indicators that will always give them the right signals, but the truth is that there is no such thing.
Using RSI
Using RSI
RSI can be used just like stochastics. From the chart above you can see that when RSI dropped below 20, it correctly identified an oversold market. After the drop, the price quickly shot back up.
RSI is a very popular tool because it can also be used to confirm trend formations. If you think a trend is forming, take a quick look at the RSI and look at whether it is above or below 50. If you are looking at a possible uptrend, then make sure the RSI is above 50. If you are looking at a possible downtrend, then make sure the RSI is below 50.
In the beginning of the chart above, we can see that a possible uptrend was forming. To avoid fakeouts, we can wait for RSI to cross above 50 to confirm our trend. Sure enough, as RSI passes above 50, it is a good confirmation that an uptrend has actually formed. Okey dokey, we've covered a smorgasbord of indicators, let's see how we can put all of what you just learned together...
Relative Strength Index
Relative Strength Index
Relative Strength Index, or RSI, is similar to stochastics in that it identifies overbought and oversold conditions in the market. It is also scaled from 0 to 100. Typically, readings below 20 indicate oversold, while readings over 80 indicate overbought.
How to Apply Stochastics
Like I said earlier, stochastics tells us when the market is overbought or oversold. Stochastics are scaled from 0 to 100. When the stochastic lines are above 70 (the red dotted line in the chart above), then it means the market is overbought. When the stochastic lines are below 30 (the blue dotted line), then it means that the market is oversold. As a rule of thumb, we buy when the market is oversold, and we sell when the market is overbought.
Looking at the chart above, you can see that the stochastics has been showing overbought conditions for quite some time. Based upon this information, can you guess where the price might go?
If you said the price would drop, then you are absolutely correct! Because the market was overbought for such a long period of time, a reversal was bound to happen.
That is the basics of stochastics. Many traders use stochastics in different ways, but the main purpose of the indicator is to show us where the market is overbought and oversold. Over time, you will learn to use stochastics to fit your own personal trading style. Okay, let's move on to RSI.
Stochastics
Stochastics
Stochastics are another indicator that helps us determine where a trend might be ending. By definition, a stochastic is an oscillator that measures overbought and oversold conditions in the market. The 2 lines are similar to the MACD lines in the sense that one line is faster than the other.
Parabolic SAR
Up until now, we’ve looked at indicators that mainly focus on catching the beginning of new trends. And although it is important to be able to identify new trends, it is equally important to be able to identify where a trend ends. After all, what good is a well-timed entry without a well-timed exit?
One indicator that can help us determine where a trend might be ending is the Parabolic SAR (Stop And Reversal). A Parabolic SAR places dots, or points, on a chart that indicate potential reversals in price movement. From the chart above, you can see that the dots shift from being below the candles during the uptrend, to above the candles when the trend reverses into a downtrend.
MACD Crossover
MACD Crossover
Because there are two moving averages with different “speeds”, the faster one will obviously be quicker to react to price movement than the slower one. When a new trend occurs, the fast line will react first and eventually cross the slower line. When this “crossover” occurs, and the fast line starts to “diverge” or move away from the slower line, it often indicates that a new trend has formed.
From the chart above, you can see that the fast line crossed under the slow line and correctly identified a new downtrend. Notice that when the lines crossed, the histogram temporarily disappears. This is because the difference between the lines at the time of the cross is 0. As the downtrend begins and the fast line diverges away from the slow line, the histogram gets bigger, which is good indication of a strong trend.
There is one drawback to MACD. Naturally, moving averages tend to lag behind price. After all, it's just an average of historical prices. Since the MACD represents moving averages of other moving averages and is smoothed out by another moving average, you can imagine that there is quite a bit of lag. However, it is still one of the most favored tools by many traders.
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