Igor

The presence of a shooting star in an uptrend is an indication that the market will soon reverse to the downside, but the shooting star requires a confirmation in the form of bearish candle following it or some other form of technical confirmation to be used as a bearish trade signal.

Examples of sentiment indicators are the NYSE bullish percentage, the CBOE Volatility Index and the NYSE 50-day moving average.

Along with the Senkou Span A, the Senkou Span B is used to trade trend reversals. When the Senkou Span B is found below the Senkou Span A, the trend is said to be upward and when the Senkou Span B crosses over the Senkou Span A, the trend reverses to a downward trend.

The Senkou span A is used as a measure of the momentum of the asset and in support and resistance trading with the Kumo component of the Ichimoku. When the Senkou span A line is above the Senkou Span B, the asset is said to be in an upward trend. If the Senkou Span B is above the Senkou Span A, the trend is said to be downward. The Senkou span A thus serves as a trend reversal trade tool when it juxtaposes positions with the Senkou Span B.

A classic application of this strategy is when a trader has a bearish outlook on a news trade and does not want to get a volatility-induced bad fill on a short trade. In this scenario, the trader sells into any ongoing strength, knowing that when the asset turns bearish, he would already have been positioned to profit from the move.

Since the saucer is a long term chart pattern, it is best traced on the daily or weekly charts, and the trade is taken when the price breaks above the neckline (which is the line drawn across the two points that form the brim of the saucer, corresponding to the nearest resistance).

The presence of the three gap pattern is indicative of an imminent reversal. When the price moves in the opposite direction after the third gap has appeared so as to fill the gap, the market is said to have reversed. Further confirmation is needed to be able to use the Sanku pattern as a reversal pattern.

The price movement after runaway gaps have occurred contravenes the expected price behavior after a gap formation, which is to fill the missing portion. However when there has been a very strong bearish or bullish trend followed by a gap formation, it is then likely that prices will continue in this direction, making the gap in prices a runaway gap.

The rounding top is best traced on the daily or weekly charts to reflect the long term nature of the pattern, and is characterized by a previous uptrend, a high forming the peak of the inverted U shape, then a period of price decline and then a breakout from the price support which is accompanied by an increase in selling volume.

Rounding bottoms are best traced on long term charts such as daily or weekly charts. There has to be a prior trend (usually bearish), progressing to the U-shaped low, then a period of price advance, then an upside breakout of previous resistance which is accompanied by an increase in buying volume.

A rising bottom is a signal that the areas where prices find support are gradually increasing, which shows that buyers are gradually forcing prices higher. A chart pattern that features these gradually rising lows (the rising bottom) is usually a bullish reversal pattern, and traders can use this to trade bullish reversals.

First used by Robert Rhea in his 1932 publication “The Dow Theory”, the term “ripple” is the third component of price movements that occur in the financial markets, the other two being tides and waves (which mirror longer term price movements). Robert Rhea believed that trying to trade these small intraday fluctuations in price was a carelessly deleterious style of trading, but in modern day trading, trading the ripples has become the hallmark of scalpers and intraday traders who open and close positions in a matter of minutes or hours.

In charts that only track prices without representation of time, the price of an asset is displayed in columns, therefore a new price display has to be in the form of the display of a new column, which causes the trading platform to shift the chart to the right for the price to be viewed. The reversal amount is the amount of price change that has to cause this chart movement to occur.

A reversal can be a bullish reversal, in which case the candlesticks change from lower highs and lower lows, to higher highs and higher lows. A reversal can also be a bearish one, with candlesticks changing from higher highs and higher lows to lower highs and lower lows. Reversals can be predicted using chart patterns, candlestick patterns and technical indicators, and usually signal the trader to close any positions in the direction of the previous trend and possibly open new positions in the direction of the price reversal.

Retracements always occur in the market because traders who are offloading positions to take profits will create more supply of the asset than demand, leading to an asset becoming cheaper. When prices have become cheap enough, traders who missed the prior trend as well as traders who have taken profit and want to partake of another round of trading can enter the asset once more, causing the asset to resume the prior trend.

There are certain areas where the price of the asset finds it difficult to get above despite repeated attempts to do so. This is because traders generally tend to exit long positions in those areas and sellers of the asset take over. The more the asset attempts to get over these price areas and is resisted, the stronger the resistance level. Levels of resistance tend to occur at the resistance pivot points and at areas where prices end in 00s (psychological resistance).

“Renko” is a derivation from the Japanese word for “brick”, because the price information on a Renko chart is depicted as series of hollow or filled boxes that look like bricks, arranged in a diagonal fashion. Hollow bricks are placed on the charts when prices are rising while the filled bricks depict falling prices. A Renko chart is useful in spotting new trends and detecting the existing trend direction.

Used most often on the 14-day time frame, the RSI is calibrated from 0 to 100. The RSI measures the ratio of the number of times the asset has closed higher to the number of times the asset has closed lower; this is the momentum of the asset. Values that are above 80 show stronger buying momentum, while values below 20 show stronger selling momentum. Traders can now use this information to determine if it is safe to buy or sell an asset, based on its momentum values.

Support is rarely formed by a single price. It is more realistic to talk of a region of support or a zone of support, which is a price range which a downtrending price cannot get below. The zone of support exists because as the asset price goes down to that level, sellers exit their positions on the asset and buyers take over, stalling the continued downward move of that asset. These sellers do not all exit at the same price but rather within a tight range of prices, so the support area is a zone and not a single price level.

Some platforms that use coloured candlesticks on a white background (e.g. the ActForex platform or eToro’s platform) display bearish candlesticks as red candlesticks.

Mixed Lot are traded using the traditional full lot order, and then the partial order. In the previous example, this would mean the trader would be buying one standard lot (100 shares) and then the partial lot addition (of 10 shares).

As a general rule, traders will find the Middle Rate by taking the midpoint between the prices that are offered by market makers. For example, if the Bid quote is 0.8 and the Ask quote is 0.4, the Middle Rate would be 0.6 for that asset.

Micro-Hedging differs from traditional hedging in that the trader is not looking to balance risk for the entire invested portfolio. Instead, traders establish positions to oppose the possible losses that might be encountered in a single section of the larger investment portfolio.

Common examples of Measuring Principles include price patterns like the triangle, channel, or head-and-shoulders pattern. In each of these cases, market direction can be assessed to a certain probability level and then trades can be taken based on the price movements these patterns typically generate.

Trading forecasts generally involve positions that are structured with price entries, stop losses and profit targets. When Material Amounts are refuted, stop losses are triggered. When the Material Amount is confirmed, profit targets will be triggered.