Articles

When technical tools are used judiciously, their value cannot be overstated. And every time you apply a tool of technical analysis, you are calculating a consensus of bullishness or bearishness among all market participants. For example, the moving average convergence-divergence (MACD) is simply a tool that measures shifts in consensus from bullishness to bearishness, and vice versa. Extending the basic MACD to a deeper level, we find the MACD-histogram, which is actually a tool for determining the difference between long-term and short-term consensus of value. The measure tracks the difference between the fast MACD line (short-term consensus) and the slow signal line (longer-term consensus). The principles of market psychology...

Consistent low risk profits from trading and investing is a challenge many millions of people take on, yet only a select few are ever able to attain. The objective and mechanical rules for consistent low risk profits are very simple, yet the layers of illusion keep most from ever seeing what is real in trading and investing. The two main forms of analysis in trading and investing are technical and fundamental analysis, and they are very real. However, thinking that mastering these two forms of "conventional" analysis will lead to consistent low risk trading and investing profits is an illusion second to none. The more an individual attempts to master these types of analysis, the more they may be layering complex, subjective illusions...

In part 1 of this article, I looked at some of the basic elements of trading, including chart reading and money management. In this second part, I will consider some other essential issues, such as the need for discipline in trading and the importance of practice and planning. The Importance of Discipline I have previously mentioned why it is important that you DON'T move a stop-loss to increase risk, and I wanted to go through the "what if" scenario of letting a stop run. We'll take this example from Barclays from January 2003. Here we have a nice double (or even triple) bottom on support, and a clean bounce up. You take this long entry with a tight manual stop at 360. This is what happens over the days to come... Brilliant...