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Fibonacci Tools Used In the Technical Analysis of Futures Markets

Fibonacci retracements, arcs and fans are forms of technical analysis based on the Fibonacci series that was discovered by Leonardo Bonacci and detailed in his 1202 book, Liber Abaci. Although, the series was also described about 1500 years earlier by Indian mathematician Pingala, it is commonly known by the Fibonacci name. The Fibonacci series is expressed as:

FN = FN-1 + FN-2

The beginning of the Fibonacci series is as follows:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, …

Dividing each of these numbers by the number that follows moves more and more closely to 0.618; what is also known as the Golden Ratio. This Golden Ratio has a seeming unlimited number of natural occurrences. The opposing spirals of a sunflower’s seeds are determined by this ratio. The

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How Fear and Greed affects your Trading and the Seven steps you can take to overcome them.

Every trader knows fear and greed and the negative impact it has on trading. Most traders treat the problem as a personal issue – A preexisting psychological attribute that eventually permeates into our trading habits. The reality is that almost everyone, regardless of their individual personalities, fall prey to the same psychological triggers that cause them to deviate from their trading method.

For example, if you are long on crude oil futures (or Emini S&P or gold) and you are up $5,000 on your positions, it is only natural to imagine how much higher you can go. $7,000? $8,000? At this point, our mind starts to overwork and elements such as

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Bollinger Bands ®: What They Are and How to Use Them

Bollinger Bands® are a tool used for the technical analysis of securities created by John Bollinger in the early 1980s. They are comprised of a moving average of period N (simple and exponential moving averages are popular choices) and an “envelope” created by an upper and lower band, which are each K times an N-period standard deviation away from the moving average.

This indicator is popular with traders because it automatically adjusts to volatility currently being experienced in a particular market. Rather than “forcing” the width of an envelope on a market, Bollinger Bands® “listen” to the market, self-adjust and allow traders to plan their trades accordingly. They may be used on intra-day, daily,

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The Importance of Backtesting Futures Trading Systems

In this article we will discuss one of the most overlooked steps in building a futures trading system – regardless of the kind of market it is developed for.

Backtesting is the process of simulating trades that are triggered by rules defined in a trading system on past (historical) data. The process of developing a trading system is based on the suggestion that if it consistently worked in the past, then it will continue to work in the future. Thus, backtesting is a reliable way of confirming the trading system’s profitability – or rejecting it.

Many traders – especially novice traders – tend to ignore backtesting or underestimate its importance. This opinion is usually based on books or articles on learning technical trading where some ready-to-use “rules” are usually published. From reading

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Black Swan is part of Trading. Why Traders Should Always Treat the “Unexpected” as Part of Trading.

Last week the National Bank of Switzerland (SNB) announced that it will remove its peg to the Euro currency. As a result of this decision, the Swiss Franc currency soared 30%, and wiped out many retail traders, brokerages, and even sophisticated traders from various hedge funds. The focus of bloggers, journalists, and many news outlets has quickly turned to the impact of the SNB’s decision on many institutions who have relevance to the Swiss Franc, but little emphasis has been placed on the topic of leverage or the concentration of positions which has been one of the primary causes of trading losses during this unprecedented news event.

Currency Futures Swiss Frank Chart Currency Futures Swiss

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Trading Losses: an Honest Discussion in Trading Psychology

When thinking realistically, most new traders will acknowledge the fact that they will encounter losses, and that not every trade will be a winner. So why is it that many go into shock, devastation, and disbelief when they encounter losses? Lesson in Trading Psychology.

There are many factors involved, but these emotions generally present themselves when there is a single, cataclysmic day where losses are tallied to amounts that were imagined or expected. These losses usually are not tied to any significant market movements, but due to excessive trading, trade reversals, and the desire to overcome and erase losses that have already been realized. This narrative has become an all too often occurrence in traders who are just starting out. Many may even consider it a right

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Identifying Directional Reversals Instead of Picking Tops and Bottoms

Traders looking for new market opportunities are continuously looking for price tops and bottoms in an attempt to enter the market at the most optimal time. Tops and bottoms are often perceived from news hits with announcements of new highs or lows where traders may start to study the market more closely.

As prices continue to climb or descend, depending on the direction of the trend, traders line up to short a potential top or buy into a potential rally after a dip in price. Most of the time, however, this is done not by hard statistics or metrics, but based on feel or ‘intuition.’ While this strategy may work temporarily, out of sheer luck, the long-term implications of such a strategy tend to be much more erratic as traders place

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Why You Shouldn’t Drop Technical Analysis Even if You are a Day-Trader

The combination of volatile markets in 2008 and the rapid advancement of trading technology opened up new possibilities and an emphasis on the ‘day trader.’ Many amateur traders were drawn in to day trading after hearing unrealistic, although popular, promotional phrases such as ‘daily income’ and ‘don’t wake to disasters.’ However, day trading is not less challenging than the traditional long term strategies, and in fact requires deep analytical skills along with a deep mental focus to translate and filter market noise. Market noise can be thought of as institutional interest that is not related to speculation.

Interestingly enough, the most disturbing trend has been the neglect for traditional technical analysis that has been exercised for over 100 years, and also the general acceptance that traditional technical analysis does not work.

When

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How to stay focused on your method and stop overtrading

What most traders do not realize is that their mistakes are not unique. Rather, the mistakes can be summarized by two factors: Neglecting one’s methodology and trading based on intuition. This leads to overtrading. 

Focused on Trading Futures

 

In this article, we will examine why traders neglect their method and how to exercise more discipline and avoid intuition based trading.

  •  Avoid taking any trades that are outside your method. Trying to earn that “extra” based on your gut feel is nothing but baseless trading and could potentially lead to the loss of initial gains (if any).
  • Don’t trade large quantities during lower volume time periods such as lunch time. Quite often during these periods markets can experience choppiness in which traders can get stuck in

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