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If you are interested in learning how people are building a wealthy live style over time then let me explain to you exactly how they are doing it. Making money is one thing. But there are those of us out there that are living the dream making millions.

Most people think the only way to get rich and make millions is marry into it or hit the lottery. Sure those will work but not everyone is just that lucky. So we must find another way to make our money.

Investing is where the money is at waiting for us to come take our share. When you invest money you wont see the pay off over night or even in a month or so. Investing takes time years. If you invest your money at the right time and in the correct spots you can easily make a huge amount of profits in just a few short years time.

However with any investment there are risks involved. You never know just how your investment is going to go. One month it might make money one month it might lose. It?s a numbers game, and those that know how to play it will win big.

I myself research on the Internet looking for my next big investment each and every Read more…

Yesterday I sent out to my free newsletter subscribers a lesson I had written a couple years ago dealing with what I call the PAUSE formation. The reason for this was that a market that I had been sharing future cycle turn dates on had formed the early warning sign for a PAUSE formation and may present an opportunity for a trade. At the very least, it should help those looking to learn more about cycle turns, swings, pivots and other associated phenomena to cycles. The more you understand a tool or indicator the better you can exploit it.

The PAUSE formation is very simple to identify. But what I want to discuss first is what to look for in order to determine a POTENTIAL PAUSE formation. Unless you have some advanced warning, who cares what the formation is after-the-fact?

Let’s start from the basics. In dealing with market cycles, it has to be understood that market patterns are the result of the cumulative effect of several cycles. But to make it really simple, let’s just call each time frame a single cycle that has its own frequency and magnitude. Yes, this is extremely simplified, but should help those new to cycles altogether.

If you look on a MONTHLY price chart, that being a price chart where each price bar represents a complete month of trading, you are looking at a LONG-TERM view of the market in question. We’ll call the market GOLD.

If we look at the MONTHLY chart of GOLD, you can see that prices have just been moving higher each month. So you could say the LONG-TERM cycle is moving up right now. Simple to view, right?

If we look at the WEEKLY chart of GOLD, where each price bar represents a complete week of trading, we can see that each week is making new highs. So let’s say the INTERMEDIATE-TERM cycle is moving up also.

On the DAILY chart, where each price bar represents a single day of trading, we can see that price has been pulling back (down) from the recent top high on 1/20/06. A very small pullback, mind you, but the direction is still down. So we could say that the SHORT-TERM cycle is going through a down swing.

Can you visualize this? It really helps if you can.

Now consider that the LONG-TERM cycle has more power than the INTERMEDIATE-TERM cycle. And the INTERMEDIATE-TERM cycle has more power than the SHORT-TERM cycle. And all of these are working and doing their thing at the SAME TIME.

If the LONG-TERM cycle happens to be moving up, and the INTERMEDIATE-TERM cycle is moving up, what chance do you think the SHORT-TERM cycle is going to have when it wants to start down again? Quick answer: Just take a look at your daily chart of Gold and look at the 12/29/05, 1/5/06, 1/18/06 price bars. Each of these made a new daily low and then were quickly overruled by the stronger upward moving cycles. Now we see 1/24/06 making a lower low than 1/23/06. What are the odds it can continue in this direction for several days? It has longer-term cycles working against it.

Now cycles are more complex than this. But hopefully you can get an idea as to what I’m trying to get across. Cycles can support or oppose each other. If you can visualize the monthly chart making new highs, but currently the weekly chart is making a new lower weekly price bar low, what you have is an intermediate-term cycle in its downward swing (cycles swing up and then down and start over again) while the longer-term cycle is still in its up swing. You have opposing powers that will tend to cancel each other out at various points in time. And riding on these is the short-term cycle that as far as the longer-term cycles are concern is just noise. Yet, when the larger cycles are canceling each other out, the ‘noise’ or short-term cycle will become more visible and you will see nice swings as the market is moving more sideways on the lower time-frame charts.

It is during strong trends either up or down that have a washout effect on short-term cycle turns. As you can see with the daily chart of Gold, the swings are there but start and conclude quickly in order to continue in the strong upward trending direction.

Now that you have a better understanding of cycles, we can now cover the PAUSE formation in a clearer light.

While long-term and intermediate-term cycles help those of us who analyze charts for such cycles to determine the longer-term direction of prices, it is the short-term daily chart and lower-time frames that are used to ‘fine-tune’ our trade entry. The idea is to keep risk low and catch a new move as early as possible.

With GOLD, for example, we can see the long-term and intermediate-term direction has been up. So the power behind higher prices on the lower time-frame daily prices is strong. This suggests that as we determine where the daily turns are likely to occur using daily cycle turn dates (based on short-term cycles), Read more…

One of your department heads looks at you and asks ?Ishiwhat?? ?You know,? you reply, ?a fishbone diagram.? Still blank stares. ?Cause and effect?? you say as you scribble out a trout carcass on your white board. Still nothing. You?re starting to think the elevator doesn?t go all the way to the top. You?ve got your work cut out for you. So you decide to punt. ?Ok, let?s just start with the Pareto charts,? you concede. ?Sir, what is a potato chart?? asks another supervisor. ?Let?s take a five minute stretch break and then meet back in here so that I can welcome you to the world of Pareto charts.

A Pareto chart looks similar to a bar chart. It has columns and it also has a line graph. Generally number of occurrences (frequency) is listed on the left side and percentage on the right. This type of chart is used to graphically summarize and display the relative importance of the differences between groups of data. For example, perhaps you have determined, or at least speculate that your widgets are being rejected due to ? improper fittings, defective sorting machine, too large or too small, or other. If you look at the reports or studies and gather data on each of these reasons for failure, you can then plug the numbers into a chart. You may have assumed the reason for rejection was because the widgets were too large to fit through the tunnel. However your numbers may actually show (the data will validate) that indeed there was nothing wrong with the size of the widget, but rather the sorter was bent, thereby causing the good pieces to bounce into the reject bin.

Typically you isolate five categories to measure. A Pareto chart can be constructed by separating the data into categories. Let?s look at another example. If your business was investigating the delay associated with processing mortgage applications, you could group the data into the following categories: No signature, address not valid, illegible handwriting, existing customer and other.

The left-side vertical axis of the Pareto chart is labeled Frequency (the number of counts for each category), the right-side vertical axis of the Pareto chart is the cumulative percentage, and the horizontal axis of the Read more…

As you ponder how to balance your forex portfolio, it is important to map out sure-fire strategies beforehand.

With your plan, you optimize your reward with respect to the expected risk, and tweak probabilities to your favor. Forex strategies must be disciplined and limit risk; simultaneously, it positions you at the most favorable advantage in the market.

A beginner?s strategy is the fundamental Moving Away Average, which is draws predictions from technical study over 12 periods, with each period 15 minutes in length. Trading decisions based on the MAA technique considers historical data to arrive at relatively safe predictions.

We use a simple algorithm for MAA. When currency price crosses above the twelfth period, simply move away it is a signal to stop and reverse. In this way a long position will be liquidated and a short position will be established, both using market orders. This system keeps trades constantly active in the market, with either a short position or a long position after the first signal. Risk is minimized.

Intermediate level strategy calls for analysis of support and resistance levels. The market likes to trade above support levels and trade below resistance levels. If either a support or a resistance level is broken, then the market follows through in the direction given. These breakpoints can be determined by analysis of the chart and assessment of where the chart has encountered unbroken support or resistance in times past. Identify these critical points and you can ascertain periods when you plan to open or close a position.

An advanced tactic that many consider exotic is the balloon strategy. The Balloon is an option that balloons, or increases in size when triggers are breached. Take the case of an investor who predicts that the dollar will gain strength against the Euro in the near future and is currently trading at one hundred, the investor will see one hundred ten as having strong resistance, but he also believes it will be broken.

Now, rather than buying straight US dollars at one hundred for the next six months the investor will purchase at ?at the money? balloon call with a One Hundred Ten trigger and multiple of two. The investor then acquires a One Hundred Ten call in USD110mm. However if the dollar and Euro ever trade at or above one hundred ten, the 110 call will double to USD 20mm.

A day trader at heart? The Double Bottom is definitely for you. Significant to the short term trader, the double bottoms indicate a possible major change in currency sentiment and indicates a shifting trend. The pattern is used on all times frames, and many compelling intraday and long term bull markets are identified Read more…

There are many people have been making millions for years. Many people believe that it is due to the fact that they are lucky. However, the main point is everyone can make money, it simply depends on how hard you want to try and by which means to do so. Investing in stock has been the trends for years, and people are making a lot and also losing lots. Therefore, in order to make a profit, you need to have good decision making and know what you are doing. Do not follow the peers or you are bound to crash.

Actually, investing in stocks is no longer a big mystery anymore. The knowledge is everywhere and all you need to do is to obtain it. Similar to many things in our life, stock investing is of no exception, there are many different ways to work with. You simply need to find the ways which suit you the most and you can be lucky enough to get some great ones.

There are a several reasons why many investors fail in investing stock. One of the most common one is that the investor did not really want to invest in the first place. They always hear people say huge amount of money can be made in the stock market, and they did not want miss the gold mine. So the investor jumps in with little knowledge immediately and expect to get some great return. Many individuals also do not have sense to cut their losses. They rather choose to sell too early and try to get out as they lost alot of money and can’t afford to lose anymore. Most are not willing to pay for Read more…

How did the whole futures market begin? It all started with agricultural produce in the last century. Farmers began to contract with buyers to sell their produce at a future date and there was a kind of stabilization of demand and supply through the year. This is why it was called ‘futures’. Today, however, the term encompasses a lot more than that. Today, futures refer to all kinds of commodities. This could range from agricultural goods to manufactured products to bonds and currencies. All a futures contract does is to say what will be paid for a product at a particular future date. What is even more complex is that a futures contract can be traded too! Once speculation began using futures contracts, it went beyond the demand and supply of actual goods. What the market is playing with is the value of the goods and what it is worth from day to day.

Here’s how it works. A buying price is fixed, so is a selling price as well as a particular quantity. The buyer takes what is called the long position and the seller takes the short position. As the market prices fluctuate, so do the profits or losses that the buyer and seller make. When the contract period is over, the accounts are settled on the basis of the prevailing price on that particular day in the market. These kinds of contracts are based on speculation and the speculation is done based on market trends. How do speculators make their money? They try and buy short from the seller if they think that prices are going to fall and they buy long from the buyer Read more…

1. Implement a trading plan.

A trading plan is especially crucial in Forex trading to stay ?in-control? against the emotional stress in speculative situation. Often, your emotions will blind and lead you to the negative sides: greed causes you to over-ride on a win while fear causes you to cut short in your profits. Hence, a well organized operation has to be predetermined and strictly followed. Always remember: ?If you fail to plan, you plan to fail?.

2. Trade within your means

If you cannot afford to lose, you cannot afford to win. Losing is a not a must but it is the natural in any trading market. Trading should be always done using excess money in your savings. Before you start to trade in Forex, we suggest you to put aside some of your income to set up your own investment funds and trade only using that funds.

3. Trade along side with the majorities

Trade on popular currency pairs and avoid thin market in Forex. The lack of public participation will cause difficulties in liquidate your positions. If you are beginners, we suggest the big five: USD/EUR, USD/JPY, USD/GBD, USD/CHF, and EUR/JPY. Avoid trading in too many markets as you may end up confusing yourself by all sorts of currency studies. Go for the major currency pairs and drill down your research in it.

4. Avoid emotion trading

If you do not have a trading plan, make one. If you have a trading plan, follows it strictly! Never ever attempt to hold your weakened position and hope the market will turn back in your favor direction. You might end up losing all your capital if you keep holding. Move on, stay within your trading plan, and admit your mistakes if things do not turn as you want.

5. Love the trends

Trends are your friends. Although currency values fluctuate but from the big picture Read more…

No discussion of trading system evaluation would be complete without a discussion of drawdown. We must always look at the maximum drawdown of any trading system as it is very, very important.

The maximum drawdown of trading system is defined as the greatest peak-to-valley drawdown in a trading system?s equity. Let?s say for example that we have a trading system that reaches a particular equity peak of $100,000. Let?s further say that two weeks later, the trading system equity is at $80,000. In this example, let?s say that the $80,000 equity happens to be an equity valley. In that case, the peak-to-valley drawdown would be $100,000-$80,000 equals $20,000. This means that the maximum drawdown is $20,000.

So why is the maximum drawdown such an important measurement in our evaluation of a trading system? It?s because the maximum drawdown gives us a measure of the survivability of the trading system. A simple measure, but a measure nonetheless. Basically, when we look at the maximum drawdown we can say that this maximum drawdown can happen again at any time throughout the life of the trading system. This is particularly important when it comes to evaluating starting account size.

As an example, let?s say that you started to trade the system using an account funded with $10,000. Right off the bat, you can see that this would not be prudent, because as we can see Read more…

Forex trading is a great activity that can earn you lots of money. If you know what to do and have invested the time needed to understand how the currency markets behave you will surely have a profitable experience with forex trading.

The main problem any trader encounters when starting his trading career in the currency markets is how to predict what the market will do in a given future time period with good accuracy so that he can place the correct orders and pull a profit from a given market movement.

There are a number of techniques and indicator that can give the trader a pretty good hint of what the market will do next. One of those techniques used to predict the Forex market behavior is that based on what is known as Bollinger Bands.

Bollinger Bands are a technical trading tool used in the capital markets (including Forex) created by John Bollinger in the early 1980s. The way this indicator was formulated is based on the need for adaptive trading bands and the discovery that the volatility of the markets was a dynamic phenomena, not a static one as was widely believed at the time.

Bollinger Bands consist of a set of three curves drawn onto a forex chart in relation Read more…

In our last installment we discussed the super-important performance measure called maximum drawdown. Today I have another measure who?s importance may not be immediately obvious to you. That measure is the actual length of time over which the trading systems results were achieved. Some of you may identify this as the length of the trading system?s track record.

Why is this so important? The main reason that this is so important is that the shorter the track record of the trading system is the less significant the track record may be. A trading system with a short track record may be only cherry picking and displaying the best possible period of trading. Don?t be impressed by some wording like ?made 10% return this month??so what. In my personal best month of trading I made hundreds of times more than the above example of 10%…again, so what. In trading, as in life, there are many things that are a flash in the pan?trading systems, get-rich-quick traders, etc.

Fortunately, you and I realize that success in trading is a marathon and not a sprint as so many would love for it to be. Your trading system needs to be one that at least displays the ability to weather the long-term storm. As Read more…