How would you like a trading methodology that gives you predefined entry levels, reasonably tight stops, and precalculated profit objectives as soon as you enter the move? We’re not through. Add to that a very high percentage of winning trades. This is not only the promise but it can also be the reality of properly mixing high quality leading and lagging indicators in an overall trading methodology.

Almost every technical indicator is a lagging indicator. Moving averages, MACD, the RSI, Stochastics, you name it, we’re talking lagging indicators. First there’s a move in price, then sometime later in the game, the indicator signals buy or sell. That’s why lagging indicators are called lagging indicators. They lag behind market action. They give signals after the fact. Leading indicators, on the other hand, tell us ahead of time where the market is likely to find support or where the market is likely to find resistance. Most traders who have attempted to use leading indicators have looked toward some form of overbought or oversold oscillator. Most oscillators, however, are in the camp of coincident or lagging indicators. They may tell us when a market is at a resistant point or when a market is at a support level, but typically they do not give us useful information ahead of time.

Traders rightfully view the use of leading indicators as a dangerous enterprise because few traders understand how to place a true leading indicator in the proper context to achieve the desired results. The trick is to achieve the proper balance by mixing leading and lagging indicators across time frames. If we can accomplish this objective, we can come up with a trading approach which is far superior to using either of the two exclusively. Let’s look at the problem more closely. Traders, being rational human beings, prefer lagging indicators because they want the comfort level of seeing a market already in a move prior to their entry. Unfortunately, this kind of comfort comes at a price. Once the lagging indicator is firmly established in a given direction, everyone else sees the move and everyone else is getting in at about the same time. Those who provide the necessary liquidity to fill the orders of the lagging indicator traders need to make their profit, so now we’re ready for a retracement. This retracement is typically to the area where the lagging indicator players put their stop. The net result is the lagging indicator trader may be right on market direction, but is all too often stopped out before the market goes the way he knew it would all along. So how do we overcome this situation? Buy precalculated dips in an overall uptrend. Sell precalculated rallies in an overall downtrend. We determine the location of such dips and rallies with high quality leading indicators.

In my trading career I have found only two leading indicators that have the reliability necessary to justify employing them. The first is the Oscillator Predictor, a study I created in the early Eighties. It is a derivative of a detrended oscillator. It tells me a day ahead of time where the market will find support or resistance. It does not tell me that the market will get to those points, it only tells me that if the market gets to those points, there will be substantial support or resistance. The second leading indicator that I use, and have developed considerably, is derived from an advanced form of Fibonacci analysis that I refer to as DiNapoli Levels. By combining varieties of expansions and retracements in unique ways, a trader is able to determine ahead of time, very accurately, where the market is likely to find tradable support or tradable resistance in an ongoing move. It doesn’t matter whether they’re on a one minute chart or a monthly chart; these levels are consistent throughout. The problem, however, with this very accurate leading indicator, as with all leading indicators, is that it is of little value in buying support in a strong down move or in selling resistance in a strong up move unless you’re just looking to scalp the market for a very brief trade. That’s why you need a strong context for the trade. Here’s how it works.

First, determine the context for the trade using lagging indicators. Then establish the entry level using a high quality leading indicator. Continue to use the leading indicator to find a stop placement point. In the case of an uptrend, this would be below a substantial support level. In the case of a downtrend, the stop would be above a substantial resistance level. Notice I don’t use money stops. If the stop is too large for money management criteria, simply don’t take the trade. Since the stop placement point is known ahead of time, it’s easy to make that calculation. Once the stop and entry are in place, it is now possible to calculate an expansion level (leading indicator) to take profits. The closing order is placed in the market immediately upon making this calculation. Do not wait for the market to get there and see what happens.

If you are using high quality leading indicators, the advantages of this type of trading are substantial. You can achieve an extremely high percentage of winning trades. In addition, your orders will be filled with a minimum of slippage, because you are buying a dip when the market is coming at you and you’re selling a rally when the market is advancing. If you’re trading size, this can be a huge advantage as compared with initiating a trade with buy stops or sell stops. If you’re trading a two lot, this approach can be significantly beneficial on your execution as well, but more on that later. Is there a downside? Obviously! It takes some experience to learn just how to employ the techniques. Let’s say the market approach you’re using to determine the direction has indicated a strong upmove. You’re buying a dip within that upmove but you placed your entry order too conservatively, on a support point that is not reached. The market takes off without you. If you do this repeatedly and you’re right eight out of 10 times about the overall market direction, you’re oing to be filled only on the two times you’re wrong! This can be frustrating to say the least and underlines the need for the accurate use and thorough knowledge of high quality leading indicators to make the methodology work. Another problem arises when you’re taking profit objectives. You come to a clear point of resistance, you clear your trade, and the market keeps going. If you’re not a disciplined trader, you may end up getting right back in “at the market”, just as the market is about to have a serious correction. If you’re managing money, you may have some explaining to do. This problem can be mitigated if you trade multiple contracts. You can always hold some. I have tried this approach over the years, and I’ve found that exiting all positions at predetermined logical profit objectives is always better for my bottom line.

Another method you can use to accommodate runaway bull moves is to reenter the market on pullbacks against support points on lower time frames. Let’s say you may have exited a daily position on Tuesday and you reenter it on a half-hour chart on Thursday. What’s interesting about this approach is that even if you reenter the market at a higher price, you may be at a safer level. That means that statistically you would be less vulnerable to adverse volatility that could hit your stops and force you to take a loss. This approach allows you to control risk without raising your stops to areas likely to be hit!

Typically, I look for my lagging indicator or coincident indicators on a higher time frame. Then I combine that indicator with my leading indicators on a lower time frame. For example, let’s say a daily pattern that I use as a setup to go long has just occurred. I’ll look at an hourly (or less) chart to calculate the precise entry and stop placement points. Depending upon the nature of the lagging indicator that provided the context for the trade, I determine the strength of the market. I will then use precalculated profit objectives on either the hourly or the daily chart as my exit point. The approach works equally well using a half-hour chart as a setup and dropping to a five minute chart for your leading indicator analysis. If you’re a monthly-based mutual fund trader you can consult daily analysis to determine your entry, exit, and profit objectives.

The lagging and coincident indicators I use to establish market trend or direction are displaced moving averages, a combination of the MACD and Stochastic, as well as a series of 9 price patterns. The only leading indicators I use are, as I said, a price-predicting oscillator as well as a specialized, advanced form of Fibonacci analysis. The more accurate your lagging indicators are the better your results. The more accurate your leading indicators are the better your results.

Now let’s examine different types of traders to see who would be best suited to this approach and who might not be well served by this type of trading methodology. Let’s take a fund manager with over five million under management. Such an individual can afford to diversify over a wide variety of markets and hedge his trading over a variety of different systems. He has the equity to take the market drawdowns that a much smaller trader couldn’t afford and he can hire help to be there when he wants a day off. Maybe he doesn’t need this approach. On the other hand, let’s take a trader with a $25,000 to $50,000 dollar account. This trader is often an individual who is attempting to make a living out of the market. He is often a one-man shop and needs income from which he can pay his bills. He may also need the support of his friends and family to continue this enterprise. It is very difficult for your wife to understand your explanation of a 30% win ratio and substantial losses for two months, even if the gain on the third month outweighs the losses. A high accuracy trading plan that shows consistent winnings avoids this issue and entices this type of an individual back to the computer. It fosters his ability to interact with the market in a very positive way.

Another consideration is the type of brokerage operation that may be available to him. The influential connections that a larger trader is able to cultivate may not be feasible for the smaller trader. We all know a one lot in the S&P is treated differently from a 10 or a 50 lot. It may be particularly attractive to a one or a two lot trader to have price orders in the market at predetermined levels prior to the market getting there. He avoids the necessity for handpicked filling brokers doing his “bidding.” In between the 50,000 and five million dollar million account there’s a lot of elbow room. Where you fit in can be dictated by many factors. For hedging purposes this approach can be a godsend. You eliminate all need for context since you know already that you have to own a couple of million dollars of, say, Swiss francs or Deutschemarks . What you do at that point is simple. Look at where you are in relation to your leading indicators. Act or wait as the numbers dictate.

Typically, mixing leading and lagging indicators is not suited to strict non-judgmental trading systems. It is perfectly suited, however, to traders who allow for some level of judgment in their trading operations. System traders have to be there day in and day out taking their signals so that when the big move comes, it will bail out their losses. This is very difficult on a one-man shop. However, an approach that yields a high percentage of winning trades and that is judgmental in nature can be picked up and traded at will, at almost any time of the year. This allows for a lot of down time for other activities. After all, isn’t that why most of us got into trading in the first place?

 Joe DiNapoli

http://www.fibnodes.com/index.asp

Even traders with limited experience start to realize that we are not trying to capture every market move. We want to improve our odds and reduce our frustration by filtering, for high-probability trades.

The combination of trend and Fibonacci techniques can provide powerful signals for higher probability trading. We already know that trend-lines have some validity, and so do Fibonacci levels. Combine the two, to improve your chances.

The following charts are the USD/British Pound GBP. First, the daily chart as of October 5th 2005. I have drawn a red down-sloping trend-line joining the two recent swing highs.

Click for chart in new window.

The chart has moved down since early September , making a down-trend of consecutive “waves” with lower swing highs and lower swing lows. There were several opportunities to take advantage of the down-move. In this tutorial we will focus on the October 6th opportunity.

In a down-trend we want to short those swing highs, and take profits on swing lows. We don’t want to short every time we **think** we have a swing high. If you have tried that, you know about whipsaw and fake-outs already haha. We only want the best trades, those which are more likely to succeed. So how do we choose an optimum entry point?

Our odds are improved if we have a swing high near a down-sloping trend-line (in red on the chart). Markets tend to reverse at Fibonacci levels. So if we have a significant resistance level near a trend-line we have an even better chance of success.

The next chart shows the GBP with Fibonacci resistance levels. Notice the “SK Resistance” level. This represents an area of significant resistance, with a higher probability of a reversal.

If you are new to Fibonacci, those studies look like a confusing series of colored lines. Learning how to use these Fibonacci studies, and which of them are stronger (higher probability), is really easy! I have made two video seminars that explain this. Click for details

Click for chart in new window.

That “SK Resistance” level, coinciding with a trend-line is an optimum shorting zone. If the market reaches that area (we can’t be sure it will), and if the market resists there, we want to take a short position. Once the resistance materializes, it will be difficult for the market to move against us.

Most of us are not trading the daily chart, but we can use the longer-term charts to find **powerful** trends and Fibonacci levels. The next chart is a 60-minute chart. I choose 60-minutes because it clearly shows when resistance has materialized. You may prefer a 30 minute of 5 minute chart.

The following 60-minute chart shows how the Pound rallied to the SK resistance level, and the trend-line. It rallied over those, tested them briefly, then retreated. There are several ways to determine whether resistance has materialized. I have some very powerful techniques for that purpose. However we want this tutorial to focus on some basics. So for now we will use the obvious breaking of the rising trend as our trigger.

Click for chart in new window.

During that rally upward, the 60-minute chart has a series of higher swing highs and higher swing lows. Once we broke the highest swing low (see the last bar on the above chart), we know that up-trend has expired. So we want to start shorting rallies and take profits on dips as shown on the next chart (60-minute chart).

Click for chart in new window.

Notice how the market broke down, and never looked back! That is what happens when you combine trend-lines with Fibonacci techniques. The best trades go your way and keep on going. That is a characteristic of higher-probability trading.

If this tutorial makes sense, you are ready for my Fibonacci Trading videos! My two introductory videos are inexpensive, and they receive glowing reviews almost daily. You can take your trading to the next level, bring these powerful techniques to your trading just by watching my video seminars. Click for details

Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer.

Click for more details.

So much time is spent on entering a trade. Today I want to focus on some exit strategies. This is not a full Fibonacci course, so if you don’t understand the basics I suggest that you visit my website for help with those aspects.

Human nature makes trading very challenging. Sometimes you want to exit a trade too quickly when it goes against you, and to cling on to a winner too long. Too often a winning trade will reverse, taking back most of your profits, or even going into a loss. On the other hand if you exit too soon, you risk missing some big profits. You may find that you’re sitting on the sidelines while the market continues well beyond your exit.

In this lesson I’ll show you how to bank those profits before they turn against you.

First look at this FOREX chart (JPY hourly chart). Click for chart in new window.

Let’s imagine that you were clever (or lucky) enough to enter long near point “A”. You’re feeling pretty good when price reaches “B”. So good that you don’t want to exit, because the up-thrust just before “B” give the impression that this market wants to go further.

Before you know it, the market reverses and heads towards “C”. Right at “C” you get scared and bail out with a little profit. Not much profit compared to exiting at point “D” or even at “F”.

You exit near “C”, and feel relieved until you see the market heading (thrusting) up to point “D”. You stop kicking yourself long enough to enter when it breaks above “B”, just a little before the high at “D”.

Soon after your entry near “D”, the market retraces to “E”, and on the way breaks below the high of “B”. Breaking below the high of “B” feels scary because you’re thinking this chart could be back at “A” in a flash. So you exit at “E” licking your wounds with a loss in this trade.

You start to notice more frustration now, when you enter somewhere between “E” and “F”. You’re feeling good near “F”, but then the chart dives to “G” and you’re stunned! This is a losing day for your account, and it’s beginning to hurt.

By this time you feel like the whole market is watching your trades, and they’re doing exactly the opposite of what you are doing. You start thinking that they wait for you to enter before they slam you and empty your account..

You have wasted your emotional capital, you don’t want to trade any more. You don’t have the stomach to consider shorting the rally after “G” to take profits at “H”.

There must be a better way!

Banking those profits.

You should seriously consider using profit targets to improve your trading performance. There are several ways to do this, my preference is to use Fibonacci techniques.

On the following chart, I have added a Fibonacci expansion using points “A, B, C”. This provides us with three profit targets. They are at 116.52, 116.93, and 117.59, see the blue arrows. Click for chart in new window.

If I add another Fibonacci expansion using points “C, D, E”, then two more profit targets are added, at 116.87 and at 117.22 . I have not added those studies to the chart, in order to keep things simple for now. You will notice the 116.87 target is quite close to the profit target at 116.93 in the above paragraph. And the 117.22 target is remarkably close to the swing high at 117.32 which is between E and F. We’ll ignore those for simplicity, just remember that Fibonacci is excellent at predicting probable turning points.

The trick with Fibonacci is that the market sometimes blows right through a profit target. So what do you do then? Simple – you stay in the trade! But sometimes the market reverses shortly after a profit target.

Sometimes the market respects a certain Fibonacci level, sometimes not. Some Fibonacci levels are “stronger” than others. Advanced Fibonacci techniques are able to help determine which have more validity, but that is beyond the scope of this lesson. What mechanism could you use to exit the trade?

One practical method of timing a trade is to use an oscillator. Another is to use a moving average. When an oscillator shows a decline of momentum, or when price crosses a moving average, you could exit the trade. Let’s explore the “oscillator” option in the following chart. Click for chart in new window.

In that chart, I have removed the Fibonacci studies (less clutter), leaving the blue arrows for profit targets. At the bottom I have added the default Stochastic per E*Signal charting software. I have added a red vertical line whenever the Stochastic “fast” blue line crosses the “slow” red line just after price rises above the Fibonacci target. If you exited when price reached those vertical red lines, you’d be a happy trader!

Already you can see the potential of using profit targets with an exit trigger.

You may want to research the following:

· Possibly exiting a partial position at each profit target.
· Consider entering long again on the dips, when the chart begins to rally again.
· Consider using multiple time-frames, perhaps Fibonacci studies on the hourly chart, and exit triggers on 5 minute charts.

If you would like to become an expert at trading with Fibonacci, see my trading seminars at my website.

-Neal. Hughes http://www.fibmaster.com

Copyright, Neal Hughes, Hughes Trading International Inc, 2006 – http://www.fibmaster.com – Reproducible in entirety with full credit.

Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer.

Neal has taught Fibonacci trading methods for many years to private clients and small groups.

Neal is well versed in all aspects of technical analysis. He is also an accomplished programmer and has written many market related software applications and custom indicators.

He is one of my favorite traders and is highly respected throughout the industry.

Introduction to Fibonacci trading techniques.

by Neal Hughes

First, a few words about Fibonacci himself…

Leonardo Pisano (nickname Fibonacci) was a mathematician, born in 1170, in Pisa (now Italy). His father was Guilielmo, of the Bonacci family. His father was a diplomat, as a result Fibonacci was educated in North Africa, where he learned “accounting” and “mathematics”.

Fibonacci also contributed to the science of numbers, and introduced the “Fibonacci sequence”

The Fibonacci sequence is the sequence 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, introduced in his work “Liber abaci” in a problem involving the growth of a population of rabbits.

Aside from this sequence of number where every next number is the sum of the proceeding two, 0, 1 (0+1), 2 (1+1), 3 (2+1), 5 (3+2), 8 (5+3), 13 (8+5), etc.

There are the “Fibonacci ratios”.. By comparing the relationship between each number, and each alternate number, and even each number to the one four places to the right, we arrive at some fairly consistent ratios.. The important ones are .236, 50, .382, .618, .764, 1.382, 1.618, 2.618, 4.236, and for good measure we include 1.00 ..

It turns out that the ratios are mathematical principles prevalent in nature around us, and is also in man-made objects. There are many interesting, entertaining, and poetic observations about Fibonacci numbers and ratios in the universe (see the reference section below). Fibonacci numbers appear in ancient buildings, in plants, planets, molecules, the dimensions of human bodies, and of course snails… But of what use is all that to the lowly trader?

What really interests you, the application of Fibonacci techniques in the trading environment..

Traders usually study charts! Fibonacci ratios may be applied to the Price scale, and also to the time scale of charts. I study the price scale. My focus here will be on the price scale for now, perhaps in the future I’ll add some time-scale studies.

Prices never move in a straight line. Look at any chart, you will see many wiggles, as price advances and retraces.. Stocks, Futures, Forex, all instruments which are liquid, will often retrace in Fibonacci proportions, and advance in Fibonacci proportions. Not always, and not precisely to the penny. But very often, and reasonably close! This happens often enough that profitable trades can result. I will show you some examples below.

I used Fibonacci ratios with a few simple indicators to help determine probable price turning points, optimum entry, exit and stop-loss levels. My complete techniques are available in on-line video seminars, and in-person seminars. For more details, see the following web page: Click for details.

The application of Fibonacci to trading can be very complex, and take much time and experience to perfect. Many traders enjoy making the process as difficult and as complex as they can tolerate.. I do the opposite, I try to simplify, try to bring clarity.

Fibonacci example – Microsoft Weekly chart.
This lesson demonstrates a very basic way to use Fibonacci levels. You just read about Fibonacci ratios. We will use just one of those ratios for now, the .382 Fibonacci ratio. In this chart MSFT made a high of (approximately) $59.97 in December of 1999. After that, it moved down to make a low of $30.19 in May of 2000.

Click to enlarge

The down move was $29.78 (59.97-30.19), quite a substantial amount.

Projecting from that low in May, and using a Fibonacci ratio, we can calculate 29.78*.382=$11.37 . So 38.2% of 29.78 is 11.37 . If MSFT were to rally 38.2% of the down-move it would reach $41.57 (11.37+30.20). I’m using rounded numbers in my calculations, the chart above calculates it to be $41.564, we don’t need that degree of accuracy!

Several weeks later, MSFT rallied and resisted right near that .382 Fibonacci level !!

So we were able to predict a future probable turning point (after the low of May 2000), using the Fibonacci ratio of .382!! If only it were always so easy.

The steps involved are:

Calculate the total value of a significant price-move (high to low, or vice-versa).
Calculate a Fibonacci retracement (in this case .382) of the prior move.
Look for price to confirm, by resisting (or support in an up-move) near that predicted retracement area.
Fibonacci example – Microsoft Daily chart.
This chart shows how a different Fibonacci level (61.8%) predicted resistance and a market turn.

Notice how the market behaved at the .382 level (30.80 area). Initially the market spiked through, then fell back to that level (late October). We cannot expect a chart to retrace at every Fib level. We can expect some support/resistance as buyers/sellers enter the market at these levels, but we can’t always predict whether the market will actually turn at any particular level. Fibonacci techniques are used to alert you to a possible trade, if that price level does cause support or resistance. These techniques are not used as a trigger for entry. Other indicators are used in conjunction with Fibonacci studies to provide higher-probability entries..

Click to enlarge

As mentioned before, there are several Fib levels, .236, 50, .382, .618, .764, 1.382, 1.618, 2.618, 4.236, and 1.00 .. So there are several places to look for a market turn. They can be calculated in advance, but trading blindly at a fib level can be dangerous, because you never know for certain (in advance) whether the market will turn at any particular Fib level. I use other indicators to help overcome that problem, click here to learn how to determine which Fib ratio is likely to be strong enough to turn the market.

Important notes from this lesson:

There are several Fib levels.
It takes some skill to determine which Fib level is likely to cause the market to turn.
There are some techniques to help you determine where a market is more likely to turn.
Do not blindly anticipate a market turn at a Fib level.
More Fibonacci examples.

QQQ Weekly chart with a deep retracement to .618 and a weak attempt to rally after that. However, consider the daily chart and intraday traders. they would have enjoyed the rally from $75 to $100, after going long from a support level that could have been predicted in March!

Click to enlarge

QQQ daily chart. Multiple Fib levels timing the market perfectly in 3 consecutive waves up!

Click to enlarge

Intraday chart, QQQ 30-minute. Notice the two market Fib retracements (there are others in this chart too).. The rally from 29.26 stopped at 31.10, then it supported **twice** at 30.39, for two good scalps. The next highlighted Fib support is at a retracement of .618 from the move up 30.47 to 32.49 .. Both of these support levels were predictable before the market supported there.. Hint:— See how the rally continued after the shallow retracement to 30.39 … See how the rally after the deeper retracement to .618 near 31.25 was a weaker rally.. This is common, a deeper retracement often foretells a weaker rally… See the next lesson in the table of contents for more on these advanced Fibonacci trading principles.

Click to enlarge

Another intraday chart, S&P 5-minute.. The first Fib retracement is on a bearish move, an opportunity to short. The second is bullish, with a long entry near 999.25 .. Note that popular charting software will calculate Fibonacci to rediculous precision, we don’t need anything closer than one tick! Actually, you should allow some room don’t expect precision every time. Allow the trade some room to develop, or you will be stopped out too often.

Click to enlarge

More Advanced – Microsoft Daily chart.
By now you’re probably quite interested, perhaps applying all those Fibonacci ratios to many charts.. You should experiment with your own charts. As long as the instrument traded has a lot of liquidity (not a penny stock for example), you should start to see Fib support and resistance at work. You will start to notice that Fibonacci levels “work” sometimes and not others. Sometimes the trades are not profitable, or are less profitable than others. You need to develop the skills required to select better trades.
In this mini-lesson I want to show you how to evaluate price action based on which Fib levels it responds to, and how the market behaves immediately preceding the Fib support/resistance.

The chart below actually has many Fibonacci levels “performing well”, providing support or resistance to the market. I want you to focus on the two that I have identified, for the purposes of this lesson.

Click to enlarge

The first up-move that I have identified topped out at $26.90, and then retraced 61.8% before supporting at that Fib level. There was a pause at the .382 level, but it was not sufficient to hold the market. Now look at the rally from the support level near .618, it rallied but did not exceed the prior high of 26.90 … As a general rule, a retracement to .618 or below indicates that the preceding up-move is losing steam. A shallow retracement which supports at .382 is more likely to rally beyond the prior high than one which has a deep retracement beyond .50 all the way to .618 ..

The impressive thrust from 22.55 up to 26.90 was negated by a quick move back to .618 at about 24.20, so a trader should not be too optimistic about a continuation of the initial up-thrust.

Similarly, the move up in June, from 23.50 to almost 26.50 would also not inspire much optimism for a huge rally above the high of 26.50 … In general a shallow support at .382 would indicate a probable rally beyond the prior high. However, if the up-move preceding the retracement was sluggish rather than thrusting, you also should temper your enthusiasm.

If the second rally which only retraced to .382 had the thrust of the first rally, it would be a more attractive trade!

These are not firm rules, instead they are used as a guide, to help you filter for better trades. Every Fib level is not equal, some are more attractive than others.

Important notes from this lesson:

Not all Fib levels are alike.
No technical study is perfect, you must develop the skills to filter out bad trades, and improve the odds of finding better trades.
Price action just before a Fib retracement can tell you something about the future.
Which Fib level causes the end of a retracement also can give a hint to future price action.
No technical study is perfect, you must develop the skills to filter out bad trades, and improve the odds of finding better trades.
You can learn more about Neal and his video course by clicking here.
Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer.

Click for more details.

Let’s look at these forex myths and why they will guarantee you lose.

1. You Can Predict The Market

This is a common myth and the bulk of novice traders think they have to predict where prices are going to succeed – wrong.

In forex trading if you predict you are relying on hope or making an educated guess and the market will kill you.

Never predict!

Always look for price confirmation. If for example you think a level of support will hold, wait for price momentum to turn up above the level and confirm it has held – then trade.

Also don’t believe the scientific methods sold on the net they don’t work.

If markets were scientific, we would all know the answer in advance and there would be no market!

2. You Can Make Regular Income Day Trading

You can’t make money day trading full stop – yet more new forex traders fall for this myth than any other.

All volatility in short time frames is random and support and resistance levels are meaningless, so you can never win

If you don’t believe me, ask a forex day trader for a real time track record over the longer term and you won’t get one – period.

3. You Can Buy Success

Forget all the vendors trying to sell you methods that will make rich (all for a few hundred dollars!) most of these guys have never traded in their lives and rely on hyped exaggerated copy to sell their systems.

To succeed you need to have confidence and discipline and that comes from within no one else can give you success – it comes from within and your own understanding.

4. You Should Keep Stops Close To Reduce Risk

All you will do is get stopped out by normal volatility and the same goes if you try to trail a stop to close.

To make money you need to take a risk.

Most forex traders want to restrict risk so much they guarantee they will lose.

5. You Should Diversify To Reduce Risk

If you are trading over 100k maybe, but if you are a small trader diversification will simply mean you dilute profit potential – To win you have to bet meaningful amounts.

Monica Hendrix