Affären är stängd när en av indikatorerna slutar ge en köpsignal. Med andra ord, vilket ljud som inte nödvändigtvis betyder en förändring i trenden kan slå dig ur marknaden. Det är därför som den här strategin inte tillåter dig att ta mer än femton till tjugofem procent av trenden. Trots det är strategin pålitlig och opretentiös om den används korrekt. Äldste säger också att det är nödvändigt att filtrera signaler i enlighet med triple-screen-systemet, som diskuterats i en tidigare video. Således blir det möjligt att öppna affären först efter att ha identifierat riktning av trenden på en större tidsram. Impulshandeln kräver vård vid öppnandet av positionerna, och man måste stänga positionerna snabbt. Ett sådant professionellt tillvägagångssätt för handel är helt motsatt stilen hos en icke-professionell. Nybörjaren kommer vanligtvis att öppna erbjudanden utan grundlig analys och oavbrutet skjuta upp dem i hopp om att marknaden kommer att vända sig mot en gynnsam riktning. Resultaten av sådan handel är uppenbara. Det bör också noteras att metoder för Alexander äldste inte bara är ett mekaniskt tillvägagångssätt, men är mer sannolikt handelsmetoden på utbytet. Det här är som om man försöker hitta öar i ordning i ett kaos hav. Stunderna när folkmängden som är oorganiserad för det mesta faller under påverkan av en kraftfull trend, kommer alla att hoppa i en riktning. Impulshandeln kräver en hög självdisciplin, eftersom det inte är lätt att ge en instruktion till mäklaren när marknaden redan är igång. Det är ännu svårare att stänga en lönsam position utan att vänta på en trendomvandling. Känn aldrig ledsen att du har stängt affärerna innan trenden nått sitt slut. Använd aldrig detta system om du brukar visa brist på självdisciplin. Alexander Elder Uppdaterad: 07 mars 2013 kl. 09:29 Alexander Elder, MD är en inhemsk ryskare som försvann till Förenta staterna vid en anbuds ålder av 23 år. Han har sedan dess arbetat som en New York City-psykiater, Columbia University professor och expertstocksman. Dr Elder var mycket framgångsrik på grund av sin psykiatriska bakgrund och var så framgångsrik att han är författare till ett antal insiderböcker för aktiehandel, och också en mycket högtalare och tränare. Det är lite känt att han började sin aktiehandel erfarenhet genom att köpa ett lager: KinderCare. Alexander äldste är en gåta i världen av aktiehandlare han förstår inte bara detaljerna i transaktionerna utan också tankarna hos de handlare innan, under och efter affärsavtalet. Ännu viktigare har han framgångsrikt överfört denna kunskap till det gemensamma marknadsbeteendet, vilket gör honom till näringsidkaren med en kant som de som äter Dr. Elders seminarier ivrigt försöker efterlikna. Enligt Alexander Elder finns det tre steg att handla: 1. Den näringsidkare som är tekniskt välkänd men saknar förståelse med avseende på den mänskliga komponenten. 2. Den näringsidkare som inser att trots tekniskt kunnande finns det ingen garanti för framgång. Som sådan kommer han att försöka återskapa tankesättet och besluten han fattat under framgångsrika aktiehandel, och undvika de som han gjorde under misslyckade satsningar. Dr Elder kallar detta för uppvaknande av en psykologisk förståelse med avseende på aktiehandel. 3. Denna näringsidkare förstår att framgångsrik aktiehandel kräver kontroll och penninghantering. I stället för att låta statistik och positioner flytta honom är det förvaltningen av pengarna och kontrollen av det som får honom att förutse framtida positioner. Det är intressant att notera att till skillnad från så många andra handlare vände sig författaren Alexander Elder fritt med att medan handel för levande verkligen är en fungerande livsstil, kräver det en omfattande disciplin och en betydande bit av arbete innan den första handeln ens görs . Detta gör det till ett olämpligt mål för en hel del aktiehandlare som försöker gå på egen hand. Faktum är att när äldste lär ut ett seminarium, erkänner han fritt att majoriteten av deltagarna sannolikt kommer att misslyckas. Han ser sin roll som en mentor till de aktiehandlare som har rätt personlighet att fortsätta att handla. Dr Elder påminner om hans epiphany med avseende på handel i sin bok "Trading for a Living. Han kommer ihåg att efter att ha läst hur man köpte aktier var det det slutgiltiga ögonblicket när han insåg att det fanns en hel värld av pengar där ute, som han hittills inte kände till. Dessutom minns Alexander Elder att trots att han inte visste något om aktiehandel, började han långsamt, med ett lager i KinderCare. Med tiden studerar han marknadens uppgångar och nedgångar, lärde sig om handelshandelens invecklingar och äntligen förskjutit karriärfokus till handelslagret samt alternativ. Dr Elder bestämde sig slutligen på handelsterminer som fordonet som nettar honom mest inkomst. Han bestämde sig för att träna psykiatri deltid, vanligtvis efter att marknaderna har stängts för dagen. Alexander äldste är anmärkningsvärt för att tydligt förespråka att det inte finns någon hemlighet för framgång när det gäller handel. Tidigare känd näringsidkare Jack Schwager Lite Riskutlåtande: Valutakurshandel på margin har hög risk och kan inte vara lämplig för alla investerare. Det finns möjlighet att du kan förlora mer än din första insättning. Den höga grad av hävstång kan fungera mot dig såväl som för dig. Tredje skärmstrategin - Dr Alexander Elder Kommersiell Medlem Anställd Maj 2012 3 332 Inlägg Det här är en Trendstrategi som använder en del av den kvartade strategiska strategin för Dr Alexander Elder. Först finner jag i ett D1-diagram den globala trenden med hjälp av MACD-indikatorn. När den övergripande trenden är klar använder jag H1-tidsramen för att fungera i samma trend med Williams-procentindikatorn. När positionerna öppnas klarar jag ekonomiska nyheter och grundläggande analyser för att stänga positionen om jag tror att trenden är på väg att vända på D1-diagrammet. Ovan nämnda Trendstrategi används i samverkan med pris Action Support Resistance (PASR). Större områden av stöd och motstånd finns med hjälp av veckovisa och månadsvisa diagram. Det är viktigt att observera prisåtgärder (ljusformning) vid dessa signifikanta SampR-nivåer före handel. Tredje skärmstrategi EA Denna speciella EA är speciellt utformad kring denna strategi. D1 MACD amp H1 Williams ENDAST. Inga EMAs används för denna strategi. Om du har några frågor angående denna EA hänvisas till FAQ-dokumentet längst ner i det här inlägget. FIRST Om du inte kan hitta det du letar efter vänligen läs igenom hela denna tråd FIRST. Om du fortfarande inte kan hitta svar på dina frågor då är du välkommen att fråga. Jag lovar dig att du kommer att lära dig mycket om denna strategi och kommer att stöta på massor av levande exempel som kommer att innehålla diagram som stöder denna strategi. Jag letar inte efter att sked mata någon här, vi är förhoppningsvis alla ansvariga vuxna. Om du inte kan läsa då har du ingen affärsverksamhet Foreign Currency Khaled, gentlemannen som har programmerat denna strategi till en expertrådgivare, har spenderat mycket tid på att göra denna strategi så enkel att använda som möjligt. Som om jag sa ovan, om du har några frågor angående denna EA eller strategin i allmänhet, läs igenom hela tråden först Stop Loss amp tar vinstparametrar (klicka på den här länken för att hitta rekommenderad stoppförlust förstärkare tar vinstparametrar) Alla frågor i Hälsningar till den tredje skärmstrategin EA kan ställas och besvaras i tråden för tredje skärmstödsstöd. Detta hjälper oss att hålla denna tråd dedikerad till att handla denna strategi och inte bli distraherad med frågor och svar från MT4 Expert Advisor. En detaljerad beskrivning av denna handelsstrategi Ljude mer som ett medicinskt diagnostiskt test. Trippelskärmshandelssystemet utvecklades av Dr. Alexander Elder tillbaka 1985. Den medicinska allusionen är ingen olycka: Dr. Elder arbetade i många år som psykiater i New York innan han deltar i finansiell handel. Sedan dess har han skrivit dussintals artiklar och böcker, inklusive 8220Trading For A Living8221 (1993). Han har också talat vid flera stora konferenser. Många handlare adopterar en enda skärm eller indikator som de gäller för varje handel. I princip finns det inget fel med att anta och följa en enda indikator för beslutsfattande. Faktum är att disciplinen involverad i att behålla fokus på en enda åtgärd är relaterad till den personliga disciplinen är kanske en av de viktigaste faktorerna för att uppnå framgång som en näringsidkare. Vad händer om din valda indikator är fundamentalt defekt Vad händer om villkoren på marknaden förändras så att din enda skärm inte längre kan redovisa alla de händelser som fungerar utanför mätningen Poängen är, eftersom marknaden är väldigt komplex, även de mest avancerade indikatorerna kan inte fungera hela tiden och under alla marknadsförutsättningar. I en marknadsutveckling ökar t ex trend-följande indikatorer och utfärdar 8220buy8221 signaler medan oscillatorer tyder på att marknaden överköptes och utfärdar 8220sell8221 signaler. I nedåtgående tendenser föreslår trendföljande indikatorer att försäljningen är kort, men oscillatorer blir överlämnade och utfärdar signaler för att köpa. I en marknad som rör sig starkt högre eller lägre är trend-efter-indikatorer idealiska, men de är benägna att snabbt och plötsligt förändras när marknaderna handlar inom olika områden. Inom affärsområden är oscillatorer det bästa valet, men när marknaderna börjar följa en trend, kommer oscillatorer att utfärda tidiga signaler. (För mer om oscillatorer, se Lär känna oscillatorer - Del 1, Del 2, Del 3 och Del 4). För att bestämma en balans i indikatorutlåtandet har vissa handlare försökt att genomsnittsa köp - och säljsignalerna utgivna av olika indikatorer. Men det finns en inneboende fel i denna övning. Om det vid beräkningen av antalet trendföljande indikatorer är större än antalet använda oscillatorer, blir resultatet naturligtvis skevt mot ett trendföljande resultat och vice versa. Dr. Elder utvecklat ett system för att bekämpa problemen med enkel medelvärde samtidigt som man utnyttjar det bästa av både trend-följa och oscillatortekniker. Eldersystem är avsett att motverka bristerna i enskilda indikatorer samtidigt som det tjänar till att upptäcka marknadernas inneboende komplexitet. Trippelskärmshandelssystemet tillämpar, precis som en trippelskärmmarkering inom medicinsk vetenskap, inte en, inte två, men tre unika tester, eller skärmar, för varje handelsbeslut, som utgör en kombination av trend-följande indikatorer och oscillatorer. (För mer om indikatorer, se Ekonomiska indikatorer för att känna till och handla psykologiska och tekniska indikatorer.) Problemet med tidsramar Det finns dock ett annat problem med populära trend-indikatorer som måste strykas ut innan de kan användas. Samma trendföljande indikator kan utgöra motstridiga signaler när den tillämpas på olika tidsramar. Till exempel kan samma indikator peka på en uptrend i ett dagligt diagram och utfärda en säljsignal och peka på en downtrend i ett veckovis diagram. Problemet förstoras ytterligare med intradagskartor. På dessa kortfristiga diagram kan trend-följande indikatorer fluktuera mellan köp - och säljsignaler på en timme eller ännu mer frekvent. För att bekämpa detta problem är det bra att dela tidsramar i enheter om fem. Vid delning av månatliga diagram i veckotabeller finns det 4,5 veckor i månaden. Flytta från veckovisa diagram till dagliga diagram, det finns exakt fem handelsdagar per vecka. Vidareutveckling av en nivå, från dag till timme, finns mellan fem och sex timmar på en handelsdag. För daghandlare kan timkartor reduceras till 10-minuters diagram (nämnare av sex) och slutligen från 10-minuters diagram till två minuters diagram (nämnare av fem). Kärnpunkten i denna faktor med fem koncept är att handelsbeslut bör analyseras inom ramen för minst två tidsramar. Om du föredrar att analysera dina handelsbeslut med hjälp av veckovisa diagram, bör du också använda månadsvisa diagram. Om du handlar med 10-minuters diagram bör du först analysera timmarschema. När näringsidkaren har bestämt sig för tidsramen för användning under trippelskärmen, markerar han eller hon den här tidsramen som mellanliggande tidsram. Den långsiktiga tidsramen är en order av fem längre och den kortsiktiga tidsramen är en storleksordning kortare. Handlare som bär sina affärer i flera dagar eller veckor kommer att använda dagliga diagram som sina mellanliggande tidsramar. Deras långsiktiga tidsramar kommer att vara veckovisa diagram per timmars diagram är deras kortsiktiga tidsram. Daghandlare som håller sina positioner under mindre än en timme kommer att använda ett 10-minuters diagram som sin mellanliggande tidsram, ett timmarschema som sin långsiktiga tidsram och ett två-minuters diagram som en kortsiktig tidsram. Träskärmens handelssystem kräver att diagrammet för den långsiktiga trenden undersöks först. Detta säkerställer att handeln följer tiden för den långsiktiga trenden samtidigt som man tillåter ingång till affärer ibland när marknaden rör sig kort mot trenden. De bästa köpmöjligheterna uppstår när en stigande marknad gör en kortare nedgång De bästa korta möjligheterna anges när en fallande marknad samlas i korthet. När den månatliga trenden är uppåt representerar veckotidningar köpmöjligheter. Timmängder ger möjligheter att korta när den dagliga trenden är nedåt. Börsmarknaden är generellt tänkt att följa tre trender som marknadsanalytiker har identifierat genom historien och kan antas fortsätta i framtiden. Dessa trender är följande: den långsiktiga trenden i flera år, den mellanliggande trenden på flera månader och den mindre trenden som i allmänhet anses vara något mindre än flera månader. Robert Rhea, en av marknadens första tekniska analytiker, märkte dessa trender som tidvatten (långsiktiga trender), vågor (mellantidsutvecklingar) och krusningar (kortsiktiga trender). Handel i riktning mot marknadsvattnet är i allmänhet den bästa strategin. Vågor erbjuder möjligheter att komma in eller ut ur affärer, och krusningar borde vanligtvis ignoreras. Medan handelsmiljön blivit mer komplicerad eftersom dessa förenklade begrepp formulerades under första hälften av det tjugonde århundradet, fortsätter deras grundläggande grund. Handlare kan fortsätta att handla på grundval av tidvatten, vågor och krusningar, men tidsramarna som dessa illustrationer gäller bör förfinas. (För att läsa mer, kolla in kort-, mellanliggande och långsiktiga trender.) Under handelssystemet för trippelskärmen är tidsramen som den näringsidkare vill rikta in, märkt mellan tidsramen. Den långsiktiga tidsramen är en storleksordning längre medan näringsidkare kortsiktiga tidsramar är en storleksordning kortare. Om din komfortzon eller din mellanliggande tidsram kräver att du håller en position i flera dagar eller veckor, kommer du att ta hand om de dagliga diagrammen. Din långsiktiga tidsram kommer att vara en storleksordning längre, och du kommer att använda de veckovisa diagrammen för att börja analysen. Din kortsiktiga tidsram kommer att definieras av timkartorna. Om du är en daghandlare som har en position i några minuter eller timmar, kan du använda samma principer. Den mellanliggande tidsramen kan vara ett tio minuters diagram ett timmarschema motsvarar den långsiktiga tidsramen, och ett två-minuters diagram är den kortsiktiga tidsramen. (För ytterligare läsning, se Dagshandel: En introduktion.) Första skärmen på det tredubbla skärmhandelssystemet: Marknadsvatten Det tredubla handelssystemet identifierar det långsiktiga diagrammet eller marknadsvattnet som underlag för att göra handelsbeslut. Traders måste börja med att analysera deras långsiktiga diagram, vilket är en storleksordning större än den tidsram som handlaren planerar att handla. Om du normalt skulle börja analysera de dagliga diagrammen, försök att anpassa ditt tänkande till en tidsram förstorad med fem, och börja med din handelsanalys genom att granska de veckovisa diagrammen istället. Med hjälp av trend-indikatorer kan du sedan identifiera långsiktiga trender. Den långsiktiga trenden (marknadsvattnet) indikeras av höjden av det veckovisa glidande konvergensdivisionen (MACD) histogrammet eller förhållandet mellan de två senaste staplarna på diagrammet. När höjden av MACD-histogrammet är uppåt är tjurarna i kontroll och det bästa handelsbeslutet är att gå in i en lång position. När lutningen är nere är björnarna i kontroll, och du borde tänka på kortslutning. (För mer information, se Trading MACD Divergence, Moving Average Convergence Divergence - Del 1 och Del 2). En eventuell trend-indikator som näringsidkaren föredrar kan realistiskt användas som första skärm i trippelsystemets handelssystem. Traders har ofta använt riktningssystemet eftersom den första skärmen eller till och med en mindre komplex indikator, såsom höjden av ett 13-veckors exponentiellt rörligt medelvärde, kan användas. Oavsett vilken trendföljande indikator du väljer att börja med är principerna desamma: se till att du analyserar trenden med de veckovisa diagrammen först och letar efter fästingar i de dagliga diagrammen som går i samma riktning som den veckovisa trenden . (För mer information, se Direktionell rörelse - DMI och grunderna för rörliga medelvärden.) Avgörande betydelse för att utnyttja marknadsvattnet utvecklar din förmåga att identifiera förändringen av en trend. En enda uppblåsning eller en nedgång i diagrammet (som i exemplet ovan, ett enda uppslag eller en nedgång i det veckovisa MACD-histogrammet) skulle vara ditt sätt att identifiera en långsiktig trendbyte. När indikatorn dyker upp under sin mittlinje ges de bästa marknadsvattenköpssignalerna. När indikatorn kommer ner från dess mittlinje utges de bästa säljsignalerna. Modellen av årstider för att illustrera marknadspriserna följer ett koncept som utvecklats av Martin Pring. Prings modell kommer från en tid då den ekonomiska verksamheten var baserad på jordbruk: frön såddes på våren, skörden ägde rum på sommaren och hösten användes för att förbereda sig för den kalla stavningen på vintern. I Pring8217s modell använder handlare dessa paralleller genom att förbereda sig för att köpa på våren, sälja på sommaren, korta lager under hösten och täcka korta positioner på vintern. Prings modell är tillämplig vid användning av tekniska indikatorer. Indikator quotseasonsquot kan du bestämma exakt var du befinner dig i marknadscykeln och köpa när priserna är låga och korta när de går högre. Den exakta säsongen för någon indikator definieras av dess lutning och dess position över eller under mittlinjen. När MACD-histogrammet stiger under dess mittlinje är det våren. När den stiger över sin mittlinje är det sommar. När den faller från ovanför sin mittlinje är det höst. När det faller under sin mittlinje är det vinter. Våren är säsongen för handel lång, och hösten är den bästa säsongen för att sälja kort. Oavsett om du föredrar att illustrera din första skärm av trippelsystemets handelssystem genom att använda havsmetafören eller analogi med årstidsförändringarna, förblir de underliggande principerna desamma. Ett handlare diagram är det främsta tekniska verktyget för att göra handelsbeslut med det tredubbla handelssystemet. Till exempel använder handlarna vanligen vanliga konvergensdivergens (MACD) veckovisa konvergensdivergenser för att fastställa deras långsiktiga intresseutveckling. Besluta vilka lager att handla dagligen, den näringsidkare letar efter en enda uppblåsning eller en nedgång som uppstår på veckotabellen för att identifiera en långsiktig förändring av trenden. När en uppblåsning uppstår och indikatorn dyker upp under dess mittlinje ges de bästa marknadsvattensinköpssignalerna. När indikatorn kommer ner från dess mittlinje utges de bästa säljsignalerna. Genom att använda de havsmetapor som Robert Rhea utvecklade (se Triple Screen Trading System - Del 2), skulle vi märka den dagliga marknadsaktiviteten som en våg som går emot den långsiktiga veckotiden. När den veckovisa trenden är uppe (uptick på det veckovisa diagrammet), sänker det dagliga köpmöjligheterna dagligen. När den veckovisa trenden är nere (nackdelen i veckotabellen), indikerar dagliga rallyar korta möjligheter. Andra skärmen 8211 Market Wave Dagliga avvikelser från den långsiktiga veckotrenden indikeras inte av trendföljande indikatorer (som MACD-histogrammet) utan av oscillatorer. Oscillatorer utfärdar i sin tur köpsignaler när marknaderna är i nedgång och säljer signaler när marknaderna stiger. Skönheten i det tredubbla handelssystemet är att det gör det möjligt för handlare att koncentrera sig endast på de dagliga signalerna som pekar i riktning mot den veckovisa trenden. (För vidare läsning, se Lär känna oscillatorer - Del 1, Del 2 och Del 3). När den veckovisa trenden är upptagen, handlar det om att handeln med trippelskärm endast gäller köpsignaler från dagliga oscillatorer och eliminerar säljsignaler från oscillatorerna . När den veckovisa trenden är nere, ignorerar trippelskärmen alla köpssignaler från oscillatorer och visar endast kortslutningssignaler. Fyra möjliga oscillatorer som lätt kan införlivas i detta system är kraftindex, Elder-Ray-index, stokastiskt och Williams R. (För mer detaljer, se Upptäck kraftindexet - Del 1 och Del 2 och Elder Ray Indikator: Att se in i Market.) Force Index Ett tvådagars exponentiellt glidande medelvärde (EMA) av kraftindex kan användas i samband med det veckovisa MACD-histogrammet. Faktum är att känsligheten för två-dagars EMA av kraftindex gör det mest lämpligt att kombinera med andra indikatorer, såsom MACD-histogrammet. Specifikt, när tvådagars EMA av kraftindex sveper över sin mittlinje, visar det att tjurar är starkare än björnar. När två-dagars EMA av kraftindex faller under dess mittlinje visar denna indikator att björnarna är starkare. (För ytterligare läsning, se Grävning djupare på tjur - och bärmarknader.) Närmare bestämt bör handlare köpa när en två-dagars EMA av kraftindex blir negativ under en uptrend. När det veckovisa MACD-histogrammet indikerar en uppåtgående trend är den bästa tiden att köpa under en kortvarig återställning, indikerad av en negativ vridning av två-dagars EMA av kraftindex. När ett två-dagars EMA av kraftindex blir negativt under en veckovis uppåtgående trend (som anges på det veckovisa MACD-histogrammet) bör du placera en köporder över det höga priset på den aktuella dagen. Om upptrenden bekräftas och priserna stämmer får du en stopporder på långsidan. Om priserna sjunker i stället kommer din beställning inte att utföras, men du kan då sänka din köporder så att den ligger inom ett fält av högsta av den senaste fältet. När den kortsiktiga trenden tillbaka och ditt köpstopp utlöses kan du ytterligare skydda dig själv med ett annat stopp under lågt under handelsdagen eller föregående dag, beroende på vilken låg som är lägre. I en stark uppträngning kommer din skyddsåtgärd inte att utlösas, men din handel kommer att lämnas tidigt om trenden visar sig vara svag. Samma principer gäller omvänd under en veckovis nedåtgående trend. Traders bör sälja kort när en två-dagars EMA of Force Index blir positiv under veckovisa nedåtgående trend. Du kan då placera din order för att sälja kort under den låga av den senaste prisfältet. Liknande i naturen till den långa positionen som beskrivs ovan, med den korta positionen kan du använda skyddsstopp för att skydda dina vinster och undvika onödiga förluster. Om två-dagars EMA of Force Index fortsätter att rallya efter placeringen av din försäljningsorder, kan du höja din säljorder dagligen så det ligger inom ett enda fält av de senaste låtarna. När din korta position slutligen upprättas av fallande priser, kan du sedan placera ett skyddstopp strax över den högsta av den senaste prisfältet eller föregående stapel om det är högre. (För ytterligare läsning, se Stop-stoppordern - Se till att du använder den.) Om dina långa eller korta positioner ännu inte måste stängas, kan du använda ett två-dagars EMA-kraftindex för att lägga till dina positioner. Vid en veckovis uptrend fortsätt att lägga till långa längder när kraftindexet blir negativt, fortsätt att lägga till shorts i nedåtgående trender när kraftindexet blir positivt. Vidare indikerar två-dagars EMA of Force Index den bästa tiden för att stänga en position. När handel sker på grundval av en långsiktig veckotendens (som anges i det veckovisa MACD-histogrammet), bör näringsidkaren endast lämna en position när den veckotrendiska förändringen ändras eller om det finns en skillnad mellan två-dagars EMA för kraftindex och trenden. När skillnaden mellan två dagar EMA av kraftindex och pris är hausseffekt, utges en stark köpsignal. På grundval av detta uppstår en bullish divergens när priserna träffar en ny låg men kraftindexet gör en grundare botten. Sälj signaler ges av baissevikelser mellan två dagar EMA av kraftindex och pris. En baisse divergens uppnås när priserna samlas till en ny hög medan kraftindexet träffar en sekundär topp. Marknadsvågan är den andra skärmen i det tredubbla handelssystemet, och den andra skärmen är snyggt illustrerad med kraftindex, men andra som Elder-Ray, Stochastic och Williams R kan också användas som oscillatorer för marknadsvågskärmen. Affärssystemet för trippelskärm baseras på att använda det bästa av både trend-följande indikatorer och oscillatorer för att göra handelsbeslut. Traders är huvudsakligen oroade över eventuella realiserade avvikelser mellan avläsningarna av en långsiktig trendföljande indikator, såsom ett hämtogram för konvergensdivergens (MACD) per vecka och den relativt kortvariga avläsningen från en oscillator, såsom kraftindex, äldste-Ray , stokastisk eller Williams R. Den fjärde delen av denna serie kommer att undersöka hurmed en näringsidkare skulle använda äldstrålsoscillatorn som marknadsvåg, som är den andra skärmen av det tredubbla skärmsystemet för handlare. (För ytterligare läsning, se Triple Screen Trading System - Del 3 och Elder Ray Indicator: Se på marknaden.) Second Screen - Elder-Ray Elder-Ray, utformad av Dr. Alexander Elder, bygger på begreppen tjurkraft och bära makt, den relativa styrkan hos tjurar och björnar på marknaden. Bull power mäter marknadstjurarnas förmåga att driva priserna över genomsnittlig konsensus om värde, vilket är det faktiska priset som ett visst lager råkar vara handel för en given tidpunkt. Bear power är björnen förmåga att köra priser lägre än nuvarande priser, eller den nuvarande genomsnittliga konsensus om värde. (Se handelspsykologi och tekniska indikatorer.) Genom att använda en långsiktig trendindikator, kanske ett veckovis MACD-histogram, kan handlare identifiera riktningen för den långsiktiga trenden. Bull power och björnkraft används sedan för att hitta affärer på de dagliga diagrammen som går i samma riktning som veckotrenden. Trippelskärmen tjänar sin quotscreeningquot-etikett eftersom den eliminerar alla signaler, men de i riktning mot trenden: Om veckotrenden är upp kommer endast köpssignaler tillbaka från Elder-Ray. Om den veckovisa trenden är nere, övervägas endast Elder-Ray-säljsignaler. Köp signaler Det finns två absolut nödvändiga förutsättningar som måste vara på plats för att handlare ska överväga att köpa: 1) veckotrenden ska vara uppe, och 2) bära makt, som representerad av äldre-Ray, bör vara negativ men stiga. Det andra villkoret - negativ björnkraft - är värt att utforska. Det motsatta tillståndet, i vilket bärkraft är positivt, uppstår i en löpande uptrend, en farlig marknadsmiljö för handel trots den uppenbara styrkan i trenden. Problemet med att köpa i en löpande uptrend är att du satsar på den större idiotteorin som säger att din vinst kommer att realiseras endast genom att så småningom sälja till någon villig att betala ett ännu högre pris. När bärkraft är negativ men stigande, visar björnar lite styrka men börjar glida igen. Genom att placera en köporder över högst de senaste två dagarna kommer din stopporder endast att fyllas om rallyet fortsätter. När du har gått länge kan du skydda din position med ett stopp under den senaste mindre låga. Bullish skillnader mellan björnkraft och pris (genomsnittlig konsensus om värde) utgör de starkaste köpsignalerna. Om priserna faller till en ny låg men bärkraft visar en högre botten faller priserna och björnar blir svagare. När björnkraft går upp från den andra botten kan du bekvämt köpa ett större antal aktier än vad du vanligtvis skulle ha i din vanliga position. (Se Bekräftelse med Momentumstrategin och Momentumhandel med Disciplin.) Du kan också använda Elder-Ray för att bestämma den bästa tiden att sälja din position. Genom att spåra mönstret av toppar och dalar i tjurkraft kan du kontrollera tjurens kraft. Genom att stapla topparna i verkligt pris mot topparna i tjurkraft kan du bestämma styrkan på uppåtriktningen. Om varje ny topp i pris kommer med en ny topp i tjurkraft är upptrenden säker. När priserna når en ny hög men tjurstyrkan når en lägre topp än den för sin tidigare rally, tappar tappar deras kraft och en säljsignal utges. (För mer information, se Peak-And-Trough Analysis.) Shorting Elder-Ray som den andra skärmen i trippelsystemets handelssystem kan också användas för att bestämma villkoren för vilken kortslutning som är lämplig. De två väsentliga förutsättningarna för kortslutning är 1) trenden är nere och 2) tjurkraft är positiv men fallande. (För vidare läsning, kolla in kortsäljande handledning.) Om tjurkraft är redan negativ, säljer kort är olämpligt eftersom björnar har kontroll över marknadstjurarna. Om du säljer kort i detta tillstånd satsar du effektivt på att björnar har tillräcklig styrka för att driva tjurar ännu längre under vatten. Dessutom, som i det ovan beskrivna fallet, där näringsidkaren håller en lång position under positiv björnkraft satsar du på den större idiotteorin. När tjurstyrkan är positiv men faller har tjurarna lyckats få lite styrka men börjar sjunka igen. Om du lägger en kort order under låga de senaste två dagarna får du endast ett orderutförande om nedgången fortsätter. Du kan sedan placera ett skyddsstopp över den senaste mindre höga. Bearish skillnader mellan tjurkraft och priser (genomsnittlig konsensus om värde) ger de starkaste kortslutssignalerna. Om priserna träffar en ny hög, men tjurkraften träffar en lägre topp, är tjurarna svagare än tidigare, och upptrenden kanske inte fortsätter. När tjurens kraft inches ner från en nedre topp kan du säkert sälja kort en större än vanlig position. Du kan också bestämma när du ska täcka dina korta positioner på grundval av en läsning av äldste-strålen. När din långsiktiga trend är nere kommer björnen att indikera om björnar blir starkare eller svagare. Om ett nytt lågt pris inträffar samtidigt med en ny låg björnkraft är den aktuella nedåtgående trenden relativt säker. En hausse divergens ger en signal för att täcka dina shorts och förbereda sig för att gå in i en lång position. Bullish divergenser uppstår när priserna träffar en ny låg och björnkraft träffar en jämn grundare botten, när björnar förlorar sin fart och priserna faller långsamt. För både långa och korta positioner indikerar skillnaderna mellan tjurkraft, bärkraft och priser de bästa handelsmöjligheterna. I samband med den långsiktiga trenden som indikeras av vår första marknadskärm identifierar äldste-Ray det ögonblick då marknadens dominerande grupp faller under trendens yta. För den andra skärmen av trippelskärmshandelssystemet rekommenderar Dr. Alexander Elder användningen av sofistikerade och moderna oscillatorer som kraftindex och Elder-Ray. Däremot bör handlare inte känna sig begränsad till någon av dessa två oscillatorer - din favoritoscillator kommer antagligen att fungera lika bra, så du bör ersätta oscillatorn som du känner dig mest bekväm med. Två andra oscillatorer som lätt kan användas som andra skärm är de stokastiska och Williams R-oscillatorerna. Stokastisk Stokastisk är för närvarande en av de mer populära oscillatorerna och ingår i många allmänt tillgängliga program som används både av enskilda handlare och professionella. Särskilt handlare som använder strikta datoriserade system för att utföra sina affärer finner att stokastiska oscillatorer har många goda egenskaper. Stokastiska har till exempel en utmärkt banbrytning när det gäller att dämpa dåliga signaler. Mer specifikt använder stokastiska steg flera steg för det uttryckliga syftet att filtrera bort marknadsljud, vilken typ av ultra kortvariga rörelser som inte hänför sig till den aktuella intressantens intresse. På samma sätt som äldste-Ray identifierar stokastiska det exakta ögonblicket när tjurar eller björnar blir starkare eller svagare. Självklart är handlare bäst att hoppa ombord på det starkaste tåget och handla med vinnarna samtidigt som de slår sig direkt mot förlorarna. De tre typerna av signaler som är viktiga för handlare som använder stokastiska är skillnader, nivån på de stokastiska linjerna och riktningen av de stokastiska linjerna. (För närmare detaljer, se Lär känna oscillatorer - Del 3: Stokastik och Vad är skillnaden mellan snabb och långsam stokastik i teknisk analys) Skillnader En bullish divergens uppstår när priserna träffar en ny låg men stokastisk spår högre än den gjorde i den tidigare nedgången. Det innebär att björnarna förlorar sitt grepp på marknaden och enkel tröghet driver priserna lägre. En mycket stark köpsignal utfärdas så snart stokastiska dyker upp från sin andra botten. Handlare rekommenderas att gå in i en lång position och placera ett skyddande stopp under den senaste låga marknaden. De starkaste köpsignalerna visas när de stokastiska linjerna första botten placeras under den nedre referenslinjen och den andra botten ovanför den. Omvänt motsvarar en baisse divergens den omständighet där priserna samlas till en ny hög men stokastisk når en lägre topp än som helst under sin tidigare rally. Tjurar blir då svagare och priserna stiger trögt. Den avgörande försäljningssignalen utfärdas när stokastiska faller ner från sin andra topp. Handlare bör gå in i en kort position och placera ett skyddstopp över det senaste priset högt. The best signals to sell short occur when the first top is above the upper reference line and the second is below it, the opposite of the best signals to go long. (To learn more, check out Divergences, Momentum And Rate Of Change and Moving Average Convergence Divergence - Part 1 and Part 2.) Level of Stochastic Lines The level attained by the stochastic lines represents distinct overbought or oversold conditions. When stochastic rallies above the upper reference line, the market is said to be overbought and is ready to turn downwards. By contrast, the oversold condition, in which the market is ready to turn up, is represented by the stochastic falling below its lower reference line. Traders should, however, be careful in interpreting overbought and oversold conditions using stochastic: during a longer-term trend, stochastic may issue contrary signals. In strong uptrends - as may be indicated by the traders first market screen - the moving average convergence divergence (MACD) histogram, stochastic becomes overbought and issues erroneous sell signals while the market rallies. In downtrends, stochastic quickly becomes oversold and gives buy signals earlier than warranted. Although interpreting overbought and oversold conditions with stochastics can be problematic, when using the MACD histogram as the first screen of the triple screen trading system, traders can easily eliminate these incorrect signals. Traders should take buy signals from the daily stochastic only when the weekly MACD histogram shows an upward trend. When the trend is down, only sell signals from the daily stochastic should be heeded. Using your weekly chart to identify an uptrend, wait for daily stochastic lines to cross below their lower reference line before buying. Immediately place your buy order above the high of the latest price bar. You can then protect your position with a protective stop placed below the low of the trade day or the low of the previous day, whichever is lower. To add a further level of detail to this analysis, how the shape of stochastics bottom can indicate the relative strength of the rally should be discussed. If the bottom is narrow and shallow, the bears are weak and the rally is likely to be strong. If the bottom is deep and wide, the bears are strong and the rally could very well be weak. When you identify a downtrend on your weekly chart, do not enter your trade until daily stochastic lines rally above their upper reference line. You can then immediately place an order to sell short below the low of the latest price bar. Do not, however, wait for a crossover on the stochastic lines as the market will then already likely be in a free fall. To protect your short position, place a protective stop above the high of that particular trading day or the previous day, whichever is higher. The shape of stochastics top can also indicate the relative steepness or sluggishness of the markets decline. A narrow top in the stochastic line shows the weakness of bulls and the likelihood of a severe decline. A high and wide stochastic top demonstrates the strength of bulls, and short positions should consequently be avoided. In summary, the means by which traders can filter out most bad trades involves an intimate knowledge of overbought and oversold conditions. When stochastic is overbought, do not buy. When stochastic is oversold, do not sell short. Stochastic Line Direction Quite simply, when both of the stochastic lines are moving in the same direction, the short-term trend is confirmed. When prices rise along with both stochastic lines, the uptrend is most likely to continue. When prices slide along while both stochastic lines are falling, the short-term downtrend will likely continue. When employed correctly, stochastic can be an extremely effective and useful oscillator as part of your triple screen trading system. In Part 6 of this article, well examine the fourth oscillator of interest, Williams R. In previous parts to this series on Dr. Alexander Elders triple screen trading system, various oscillators have been discussed in relation to the second screen of the system. Two excellent oscillators that work extremely well within the system are force index and Elder-Ray however, any other oscillators may also be employed. Part 5 of this series described stochastic in relation to the powerful signals formed by divergences between the power of bulls and bears in the market. In this section, we8217ll discuss one final oscillator that can be used as the second screen in the triple screen trading system: Williams R. Williams R The final oscillator that needs consideration in relation to its use as the second screen of the triple screen trading system is Williams R, which is actually interpreted in similar fashion to that of stochastic. Williams R, or WmR, measures the capacity of bulls and bears to close the days stock prices at or near the edge of the recent range. WmR confirms the strength of trends and warns of possible upcoming reversals. The actual calculation of WmR will not be dissected in detail in this space, as its current value can be obtained through top trading software packages that are widely available today. In its calculation, WmR measures the placement of the latest closing price in relation to a recent high-low range. It is important to note that WmR requires at least a four - to five-day range of prices to work effectively with the triple screen trading system. WmR expresses the distance from the highest high within its range to the lowest low in relation to a 100 scale. The distance from the latest closing price to the top of the range is expressed as a percentage of the total range. When WmR is equal to 0 on the 100 scale, the bulls reach the peak of their power and prices should close at the top of the range. In other words, a zero reading, plotted at the top of the chart, indicates maximum bull power. When WmR reads 100, the bears are at the peak of their power and they are able to close prices at the bottom of the recent range. The high of the range is a precise measure of the maximum power of bulls during the period in question. The low of the range relates to the maximum power of bears during the period. Closing prices are especially significant in calculating WmR, as the daily settlement of trading accounts depends on the days (or weeks, or months) close. WmR provides a precise assessment of the balance of power between bulls and bears at the market close, the most crucial time for a true feel for the relative bullishness or bearishness of the market. If we extrapolate this concept one level further, we see that WmR shows which group is able to close the market in its favor. If the bulls cannot quite close the market at or near the top during a market rally, the bulls are proven to be somewhat weaker than they appear. If bears cannot close the market near the lows during a bear market, they are weaker than they would appear on the surface. This situation presents a buying opportunity. If reference lines are drawn horizontally at 10 and 90 levels, this further refines the WmR interpretation. When Wm closes above its upper reference line, the bulls are strong, but the market is said to be overbought. When WmR closes below the lower reference line, the bears are strong but the market is oversold. (For additional insight, see Market Reversals And How To Spot Them and Price Patterns - Part 1.) Overbought and Oversold In an overbought condition, WmR rises above its upper reference line and prices close near the upper edge of their range. This may indicate a market top, and the WmR issues a sell signal. In an oversold condition, WmR falls below its lower reference line and prices close near the bottom of their range. This may indicate a market bottom, and the WmR issues a buy signal. During flat trading ranges, overbought and oversold signals work very well. However, when the market enters a trend, using overbought and oversold signals may be dangerous. WmR can remain near the top of its range for a week or longer during a strong rally. This overbought reading may actually represent market strength rather than the erroneous shorting signal that WmR would issue in this circumstance. Conversely, in a strong downtrend, WmR can remain in oversold territory for a long period of time, thereby demonstrating weakness rather than a buying opportunity. For these reasons, overbought and oversold readings of WmR should be used only after you have identified the major trend. This is where the first screen in the triple screen trading system is absolutely essential. You must use that first screen to ascertain whether you are currently embroiled in a longer-term bull or a bear market. (For refresher on the first screen, check out Triple Screen Trading System - Part 1.) If your longer-term chart shows a bull market, take buy signals only from your shorter-term WmR, and do not enter a short position when it gives a sell signal. If your weekly chart indicates a bear market, sell short only when WmR gives you a sell signal, but do not go long when WmR becomes oversold. Failure Swings When WmR fails to rise above its upper reference line during a rally and turns down in the middle of that rally, a failure swing occurs: bulls are especially weak, and a sell signal is issued. When WmR stops falling in the middle of the decline, failing to reach the lower reference line and turning up instead, the opposite failure swing occurs: the bears are very weak and a buy signal is issued. (For further insight, see The Dead Cat Bounce: A Bear In Bull8217s Clothing and Short-, Intermediate - and Long-Term Trends and Relative Strength Index And Its Failure-Swing Points.) Divergences The final important situation in reading WmR relates to divergences between prices and WmR. Divergences rarely occur, but they identify the absolute best trading opportunities. A bearish divergence occurs when WmR rises above its upper reference line, then falls and cannot rise above the upper line during the next rally. This shows that bulls are losing their power, that the market is likely to fall and that you should sell short and place a protective stop above the recent price high. By contrast, a bullish divergence occurs when WmR falls below its lower reference line, then moves up (rallies), and cannot decline below that particular line when prices slide the next time around. In a bullish divergence, traders should go long and place a protective stop below the recent price low. (To learn more, see The Stop-Loss Order - Make Sure You Use It and A Look At Exit Strategies.) At long last, the next part of this series on the triple screen trading system will provide a discussion of the third screen in the system. The first screen of the system identifies a market tide the second screen (the oscillator) identifies a wave that goes against the tide. The third and final screen of the triple screen system identifies the ripples in the direction of the tide. These are intraday price movements that pinpoint entry points for your buy or sell orders. The triple screen trading system can be nicely illustrated with an ocean metaphor. The first screen of the triple screen trading system takes a longer-term perspective and illustrates the market tide. The second screen, represented by an oscillator, identifies the medium-term wave that goes against the tide. The third screen refines the system to its shortest-term measure, identifying the ripples that move in the direction of the tide. These are the short-term intraday price movements that pinpoint entry points for your buy or sell orders during the trading day. (If you need a refresher, check out Triple Screen Trading System - Part 1, Part 2 and Part 3.) Fortunately, for those of us who have become weary of interpreting charts or technical indicators in the first and second screen, the third screen does not require any additional technical talent. Instead, the third screen provides us with a technique for placing stop orders, either buy stop orders or sell stop orders, depending on whether the first and second screens direct you to buy or to sell short. More specifically, the third screen is called a trailing buy stop technique in uptrends and a trailing sell stop technique in downtrends. When the weekly trend is up (identified by the first screen) and the daily trend is down (identified by the second screen, or oscillator), placing a trailing buy stop will catch upside breakouts. When the weekly trend is down and the daily trend is up, trailing sell stops catch downside breakouts. Each situation deserves further examination. Trailing Buy Stop Technique When you have identified that a longer-term (weekly) trend is moving up and your medium-term (daily) oscillator declines, the triple screen trading system activates a trailing buy stop technique. To instigate the trailing buy stop technique, place a buy order one tick above the high of the previous day. Then, if prices rally, you will be stopped into a long position automatically at the time that the rally exceeds the previous days high. If, however, prices continue to decline, your buy stop order will not be touched. This technique allows you to be stopped into your order if the shortest-term ripples have sufficient momentum to power the wave into the greater tide. The buy stop is therefore most closely related to what most traders would label as momentum investing. However, the use of all three screens within the triple screen trading system provides a much more detailed and refined picture of the market than the simple concept of momentum generally provides. (For further reading, see Momentum Trading With Discipline and Introduction To Types Of Trading: Momentum Traders.) If you want to further refine the trailing buy stop technique, you can lower your buy order the next day to the level one tick above the latest price bar. Keep lowering your buy stop each day until stopped out (filling your order at the very best time) or until your long-term (weekly) indicator reverses and cancels its buy signal (saving you from a loss). The reason that the buy stop technique is prefaced by the trailing qualification relates to this fluid nature of the buy stop order. You must, however, remain vigilant in monitoring the markets momentum, and you must be diligent in continually moving your buy stop to one tick above the latest price bar. The process can be laborious, but it will ensure that you either fill your order at the very best price or avoid a poor trade altogether if the market fails to move your way. (To read more, check out Trailing Stop Techniques and The Stop-Loss Order - Make Sure You Use It.) Trailing Sell Stop Technique The opposite situation occurs when your long-term (weekly) trend is down, at which time you would wait for a rally in your medium-term indicator (oscillator) to activate a trailing sell stop technique. In the trailing sell stop technique, you place an order to sell short one tick below the latest bars low. When the market turns down, you will automatically be stopped into your short trade. If, however, the market continues to rally, you can continue to raise your sell order on a daily basis. Opposite to the trailing buy stop technique, the trailing sell stop technique is meant to catch an intraday downside breakout from a daily uptrend. As you can see, the intraday downside breakout moves in the direction of the market tide, which in this case is a weekly downtrend. The trailing buy stop and trailing sell stop techniques are the ultimate refinements to what is already an extremely powerful trading system within the first two screens of the three screens. Using a less developed indicator, many beginning traders will engage in a system of trailing stopped orders when they attempt to gauge market momentum. By employing a longer-term chart and a medium-term oscillator first, you can capitalize on the short-term market ripples as you make the best trades that this intraday allows. The next section of this series will bring the triple screen trading system to a close. The journey through all three screens has been long, but the result is most definitely worthwhile. If you are able successfully to implement the triple screen trading system to its fullest, you are on your way to being ahead many other trader with whom you are competing for profits At long last, we have reached the end of this series describing all facets of the triple screen trading system. You will recall that the third screen in the system, the trailing buy or sell stop system, allows for the ultimate level of precision in your buy orders or, if you are selling short, your sell orders. By identifying the ripples moving in the direction of the market tide, you will best be able to capitalize on the short-term (usually intraday) price movements that pinpoint the exact points at which you should enter your position. (To brush up on previous sections, see Triple Screen Trading System - Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7.) Stop loss Technique But we have yet to discuss how the triple screen trading system assists a trader, once in a position, to secure a profit and avoid significant losses. As is the case in all levels of trading, and investing at large, the decision to exit your position, whether long or short, is just as important as your decision to enter a position. The triple screen trading system ensures that you make use of the tightest stops, both in entering and in exiting your position. Immediately after executing your purchase order for a long position, you place a stop loss order one tick below the low of the trade day or the previous day, whichever is lower. The same principle applies to a short sale. As soon as you have sold short, place a protective stop loss one tick above the high of the trade day or the previous day, whichever is highest. In order to protect against the potential for losses, move your stop to a breakeven level as soon as the market moves in your favor. Assuming that the market continues to move you into a position of profits, you must then place another protective stop at your desired level of profits. Under this system, a 50 profit level is a valid rule of thumb for your targeted profitability. The Importance of Stop Loss The stop loss orders used in exiting a position are very tight under this system because of the fundamental tide of the market. If you enter into a position using the analysis tools contained in the triple screen trading system only to see the market immediately move against you, the market has likely undergone a fundamental shift in tide. Even when identifying the markets probable long-term trend in the first screen, you can still be unlucky enough to enter your trade, for which you use the third screen, at the very moment at which the long-term trend is changing. Although the triple screen system can never identify this condition organically, the trader can prevent losses by keeping his or her stop loss extremely tight. (For further reading, see The Stop-Loss Order - Make Sure You Use It, A Look At Exit Strategies and Can a stop-loss order be used to protect a short sale transaction) Even if your position enters into the red, it is always better to exit early and take your loss sooner rather than later. Realize your small loss, then sit back, and observe what is happening in the market. You will likely be able to learn something from the experience: if the market truly has shifted its long-term direction, you might better be able to identify the situation should it happen again in the future. Conservative and Aggressive Exit Strategies The above discussion has outlined a relatively conservative strategy for risk-averse traders. By maintaining the tightest stop loss orders possible, conservative traders can easily go long or short on the first strong signal from the triple screen trading system and stay with that position for as long as the major trend lasts. Once the trend reverses, the profits will already be locked in. If the market reverses prematurely, the trader will be stopped out of major losses. A possibility for more aggressive, active traders is to continue watching the market after entering into a long or short position. While the longest-term trend is still valid, active traders can use each new signal from the second screen (the daily oscillator) to supplement the original position. This approach allows for a greater level of gross profit while still allowing the stop loss approach to protect the entire position. Adding to the original position while the trend continues is often referred to as pyramiding the original position. Another type of trading is practiced by the position trader, who should try to go long or short on the very first signal issued by the triple screen system. Then he or she should stay with that position until the trend reverses. Finally, a short-term trader may take profits using signals from the second screen. You may recall that the second screen identifies the medium-term wave that goes against the larger tide. Using the very same second screen indicator that is used prior to entering the trade, the short-term trader can use intraday occurrences of market reversals to exit the trade. If, for example, the short-term trader uses stochastic as his or her second screen oscillator, he or she may sell the entire position and take the profits when stochastic rises to 70. The trader can then revisit the first screen of the system, reconfirm the market tide and continue to drill down to the second and third screens in order to identify another buying (or selling) opportunity. Conclusion The length of this eight-part series demonstrates that Dr. Alexander Elders triple screen trading system is not the simplest means of identifying buying and selling opportunities on the markets. The system is, however, one of the most powerful means of combining a series of useful individual indicators into one comprehensive whole. The time that you spend reading these articles and familiarizing yourself with the individual components of the system will undoubtedly pay dividends to your trading success. MACD3SS. ex4 3 KB 1,654 download Uploaded Jul 9, 2013 3:05am by Jack Crooks Saturday, September 1, 2012 at 7:30am I realize its never easy and rarely simple. But today Im going to help you understand why global money-flow drives key markets and how that flow could be reversing. If I am right, it is good news for long-term dollar bulls like me, bad news for China bulls, and terrible news if you are still riding on the Peak Oil bandwagon expecting oil to hit 200 barrel soon. Three major realities lead me to those conclusions: Reality 18212 Foreign exchange reserves and growth is falling in China Some experts estimate that up to 50 billion a month is exiting China. Keep in mind, when money leaves China, it leaves as dollars for the most part. Investors exchange yuan for dollars inside China, or Hong Kong, then move those dollars to safe haven areas, such as U. S. Treasuries, U. S. farmland, or Vancouver apartment buildings. Reality 28212 Demand for oil is falling along with global growth, and the U. S. is leading the way Chinas crude oil imports fell 3 percent in July from a month ago to a nine-month low. The slowdown in growth is hitting oil demand hard in the country that has driven the increase in global fuel consumption for a decade. In fact, the International Energy Agency slashed its forecast for Chinese oil demand growth in 2012 by a third to 240,000 barrels per day (bpd) in its August monthly report. Just a month earlier, the agency had forecast growth of 360,000 bpd. If demand is already low and appears to be heading lower, I think it is time to mark down oil prices. And in the U. S. according to Reuters, oil demand in July fell to its lowest level in nearly four years. The chart below shows oil hit a brick wall of resistance at around 98 per barrel that happens to be a key retracement level. Plus, the price oscillators are turning down from an quotoverboughtquot level. This price action seems to be confirming bearish fundamental news. Reality 38212 The dollar is the worlds monetary standard The demand for dollars is poised to rise as the supply falls. I say that because: Dollar-based funding (supply) for trade finance and other credit lines is falling as European banks reduce the percentage of debt on their balance sheets. As I explained above, dollars are leaving China. And I expect Chinas foreign exchange reserve hoard to continue to decline. Falling oil prices are dollar bullish, as countries that buy oil on world markets 8212 priced in dollars 8212 can reduce their dollar credit lines, which reduces the potential of a new supply of dollars from coming on the market. If a global credit crunch similar to the credit crunch of 2007 materializes, demand for dollars and dollar-safe havens will soar. Now, take a look at the chart below, which shows how all of these global money-flow factors discussed above relate to each other. Chinese foreign exchange reserve growth (red line) oil prices (black line) and the U. S. dollar index (blue line) There is a lagging correlation between Chinese FX reserve growth and oil prices, with Chinese FX growth leading. There is a tight negative correlation between oil prices and the dollar i. e. as oil prices rise the dollar tends to fall and vice versa. If these macro trends continue to play out as I expect, your decision is easy: Sell oil, buy the dollar, and hold those positions until the trend changes. Have a safe and happy Labor Day weekend, Japan: An Accident Waiting to Happen The worlds largest debt bomb isnt Greece or Spain. Its Japan, where government debt now approaches 220 of gross domestic product. That level of spending makes profligate congressmen in America look downright parsimonious with taxpayer cash. Servicing Japans debt now consumes some 43 of government revenue, up from about 4 in the early 1970s. Its a situation thats clearly not sustainable. In theory, that much debt and all the money the Bank of Japan keeps printing to keep the country afloat should have destroyed the yen by now. Yet, it hasnt. And the reason it hasnt comes down to the countrys savings pattern. Japan is able to run huge deficits and sustain such high debt-to-GDP because it has used its vast savings over the last 50 years to fund government spending. I recently talked to my colleague, Evaldo Albuquerque, to get his thoughts. Evaldo is one of the smartest analysts I know. He made a name for himself in foreign currencies, but were teaming up to find unique, safe income plays. Heres his take: The yen hasnt collapsed yet because Japanese financial institutions hold 93 of government debt. In other words, domestic investors have financed the governments spending for the past two decades. The problem is Japan has the worlds fastest-growing population of seniors aged 65 years and older. Once all these seniors retire, they will no longer be saving. Instead, they will be cashing out their retirement accounts. The Japanese government will have to find other investors to buy their bonds. Who will buy Japanese bonds paying less than 1 International investors will certainly require a higher rate, increasing interest expenses. The government simply cant afford that. In other words, the countrys savings rate will soon go negative. And thats going to be the tipping point for the currency. For years now, Japan has been printing money and buying government debt to keep interest rates from skyrocketing. But once the savings rate turns negative, Japans government will no longer have domestic cash to rely on. So, theyll do what every government does when faced with making impossibly hard decisions theyll turn on the printing presses and crank out boatloads of yen. And the yen will finally crack. If its a managed devaluation of the yen, as I expect, Japans export-dependent companies will be big, big beneficiaries. Thats because the sales that Japanese companies accumulate in dollars, euros, pounds and yuan will translate into more and more yen as the Japanese currency weakens. Thats essentially free profits because, aside from some tax obligations, currency gains have no associated costs on a corporate income statement. What about China The answer is important because China affects so much of the world economy, especially as it relates to commodity prices and your commodity stocks A friend of mine forwarded me a story where a certain strategist said it was time to quotstart adding Chinese exposure. quot He said, quotWhere else can you buy an economy with 7-8 growth prospects at less than 10 times estimated earningsquot To believe his statement, you have to take two things at face value: 1. Chinas GDP numbers are, at least, roughly accurate. 2. Chinas earnings are, at least, roughly equivalent to earnings of other markets. I dont buy either statement. The 7-8 growth rate assumption comes from Chinas own GDP statistics. GDP, which stands for quotgross domestic product, quot is a widely accepted rough guess of economic growth. For an investor, it is almost useless, and I usually ignore it. Thats because as an investor, youre not buying quotthe economy. quot Youre buying individual securities. The characteristics of those securities should be your focus. Stick to the basics and whats in front of you. Dont get lost in abstractions like quotGDP. quot But lets play ball for a bit. If you want to rely on Chinese GDP figures to frame some kind of investment thesis, then you should know there is a lot of room to doubt their veracity. So officially, Chinas government says its economy is growing 8. Lots of people dont believe it. Charles Dumas, of Lombard Street Research, is one. He says: quotWe dont believe official data. We think GDP slowed to a 1 rate in the first quarter. quot I dont believe official data either, and I certainly dont make investment decisions based on it. Two other quick points about relying on GDP: GDP figures are backward-looking. They tell you nothing about the future. Even if you think they do, then you have to say the trend is not good. Chinas first-quarter GDP was at a three-year low. GDP as a concept is absurd. Government spending is counted as a positive. So a government that spends money digging holes and refilling them is adding to its countrys GDP. Who knows at what rate Chinas economy is really growing Frankly, I think it is an unknowable. Chinas economy is a huge, complex thing. It has many parts going in all kinds of directions. To boil all that down to a single number always strikes me as silly. The second point up top is on Chinas corporate earnings. There is a good case that such earnings deserve heavy discounting. Maybe 10 times earnings is the right number in todays environment. As Ivy Pan, an analyst with ABN AMRO, said recently, quotForecasts of company earnings have been continuously revised downward since the beginning of the year. quot Besides, there is the issue of earnings quality and trustworthiness. This is a matter of debate, too. So there is a lot of guesswork. There are also things we do know. The strategist up top cites healthy increases in imports of coal, iron ore, and copper as a plank to his bullish thesis on China. He says the increase is consistent with an economy growing 7-8. Again, we have to question how the figures come about. I think it is safe to say that Chinese government-mandated investment drives these figures. And I tend to think of that as more of a bad thing, not a good thing. Will it prop up commodity markets to some extent Of course. Its not a game I care to play, though. Anyway, it seems an odd thing to cite these commodities. Despite decent Chinese import figures, iron ore prices recently hit 2.5-year lows. Iron ore prices are down 17 since mid-June. Coking coal is down 23 since the start of July. Copper prices are down more than 20 from a year ago. Chinese steel mills are hurting. The China Iron and Steel Association said recently that the Chinese steel industrys profits fell 96 in the first half of the year compared with last year. Thats not a typo: down 96. These anecdotes dont square with the image of a booming economy. I dont know what will happen, but I find the whole thing fascinating. Ive been bearish on China in the last year, but I think some of the air has already come out of Chinas boom. (Take a look at housing prices, for instance. Chinese housing prices registered nine months of decline, and they just had an uptick.) And there are definitely China themes Id own andor will continue to own those that play on Chinas need for water and food, for instance. These are very good long-term investment themes, regardless of what happens in China in the near term. But what about commodities Now we turn to the other piece of the puzzle. Most people wouldnt care a whit about Chinas economy. They care because China is such a big user of commodities and has such an impact on world prices. A growing China is a key to the commodity bull market. But the commodity bull market is long in the tooth. It started in roughly 2000. (Jim Rogers and others date it from 1998.) So the bull market is at least 12 years old. The average lasts about 17 years, according to Jim Rogers book Hot Commodities. However, this one may already be beyond whats normal. A reader sent me this chart on commodity prices from BCA Research and Allan Gray: What this chart shows is that the long boom in commodity prices over the last dozen years has pushed commodity prices more than two standard deviations above their long-term trend line. In other words, were in outlier territory. As you can see, not too many past bull markets have pushed much beyond where we are now. There is another important point about that chart. Commodities, despite what you hear, are a poor way to preserve wealth over a long period of time. As Ian Liddle of Allan Gray notes: Importantly, the long-term trend line is down. This is a testament to human ingenuity. Over the last two centuries, we have constantly found new and more-efficient ways to produce and use commodities, and this has driven prices down over time. The new technologies to access Americas considerable shale gas reserves are the latest example of this. We believe it would be a mistake to simply extrapolate the strong rise in commodity prices over the last decade far into the future. I dont think this dynamic is somehow suspended in our own times. Commodities will continue to fall in real terms that is, adjusted for inflation over a long period of time. I think weve turned, or are turning, another corner. We should expect lower highs and lower lows on most commodities (in real terms) as the commodity bull market unwinds. It will affect everything from iron ore to oil. (I exclude the precious metals, on which I remain bullish.) If the bull market is, indeed, over, we have to change the way we look at investing in commodities. Commodity stocks have to clear different hurdles than in the last dozen years. We should not count on increases in commodity prices. Stocks should work at existing prices and lower. I would favor picks-and-shovels plays over producers. This is the way I plan to play it. Its the safe way to go. If Im wrong, Ill be wrong for a year or two as the commodity bull takes its last breaths. But then, so what There are plenty of other ideas to invest in. The truth is that the end of the commodity bull market is coming. It seems too risky to try to and call the exact top. Start playing it safe now. Start preparing today. Never before have I seen such a divergence between the quotfantasy landquot world central bankers and their faithful live in. and the real world the rest of us inhabit. In fantasy land, this was the big week investors were waiting for The European Central Bank (ECB) met yesterday and decided to buy more sovereign bonds in an attempt to bring down interest rates in troubled European countries. The program is essentially the same thing the ECB already tried earlier, to only limited results. But never mind rumors of the plan were enough for traders to throw a party in August and this week Meanwhile, in the real world, things just kept going from bad to worse, with the economic data deteriorating from one end of the globe to the other Bottom line: The divergences between whats going on in the real world and the puffed-up stock indices, which have been floating on an ocean of cheap money, are the biggest I have ever seen. The last time these divergences were this severe, was right before the stock market crashed in 2007-2008. and early 2000 before that. And THAT has major implications for your wealth What the Fed, ECB Are Doing and What It Means In his closely watched Jackson Hole, Wyoming speech last Friday, Federal Reserve Chairman Ben Bernanke tried to justify his nontraditional approach to monetary policy. He defended QE and pledged to keep interest rates low for longer periods of time, saying (in plain English) that they quotworked. quot I see an economy whose unemployment rate has remained above 8 percent for the longest stretch since the government began keeping track in the 1940s. I see an economy whose GDP is barely growing. I see an economy where confidence remains lackluster and manufacturing is shrinking again. And I see an economy where the only real beneficiaries of easy money are the commodity and stock market speculators who can make money off of it Never mind whether QE is a success or utter failure though. What is important for investors is that Bernanke did not go into detail about other FUTURE nontraditional policy options, such as nominal GDP targeting or unlimited, open ended QE. The fact he didnt mention those kinds of steps lead me to believe theyre less likely to be used. Bernanke also warned that quotthe hurdle for using nontraditional policies should be higher than for traditional policies. quot But most importantly . Bernanke himself admitted in the speech (subtly) that newer rounds of QE and Operation Twist were less effective than the first round. Thats as close to the emperor admitting hes wearing no clothes as you can get without coming out and saying so It fits precisely with what I have been saying for ages too Bottom line: The U. S. Fed will likely NOT engage in a massive new QE program. and even if it does, it could be sold aggressively by investors now that even Bernanke himself is admitting its almost completely ineffective. As for the ECB, President Mario Draghi unveiled plans to buy sovereign bonds with maturities of three years or less. So many leaks came out before the Thursday meeting that the actual news was almost anticlimactic. and now the question is whether or not investors will quotsell the news. quot Why should they Well, the bond purchases will be conditional meaning the ECB wont buy unless the targeted countries (think Spain here) agree to oversight and more supervision by fiscal authorities. The program wont seek to establish firm yield quotcaps, quot another disappointment. Most importantly, the purchases will be sterilized. That means this is not an all-in quotQEquot type strategy that balloons the size of the ECB balance sheet and results in runaway money printing. That is likely reflecting concern among the ECBs members in Germany and other more conservative countries. Global Economy Sinking Deeper into Recession So what about the quotreal worldquot There the news is going from bad to worse. Here in the U. S. the Institute for Supply Managements benchmark manufacturing index sank further to 49.6 in August. That was the third month in a row below 50, which is the dividing line between expansion and contraction in this key sector. Europes benchmark manufacturing index also slumped to 46.3 in August. That indicates the euro-zone economy is sliding deeper into recession, and that the recent rise in unemployment to a fresh euro-era record high is only the beginning As for the BRIC countries, Chinas services sector index just sank to its lowest in a year. Brazil is slowing so much, the central bank was just forced to cut its benchmark interest rate to a record low of 7.5 percent. And in India, GDP growth slowed to 5.5 percent in the June quarter. That was close to a three-year low, and well-below long-term growth targets in the 8 percent to 9 percent range. Now I want to update you on those incredible divergences I mentioned earlier. Virtually every indicator of the REAL economy is slumping or stagnating even as the broad stock market averages try to hold these elevated levels. In the top panel of the chart below, the black line is consumer confidence, the red line is the SampP 500, and the panel on the bottom shows the spread between the two. The last time there was a divergence as huge as it is now was in 2007-2008 right before the stock market crashed. The top panel in the next chart below shows the same comparison only using the ISM manufacturing index and the SampP 500. Youll see that the ISM index did NOT make a higher high along with stocks this year a key divergence. And in the bottom panel youll also see the last time they diverged this much was right before the 2007-2008 stock market crash. The time before that Right before the 2000 stock market crash Bottom line You have the real economy deteriorating sharply. You have key global players in sectors like technology and transportation warning that revenue and earnings growth is slowing rapidly. FedEx (FDX) was just the latest casualty this week, cutting its profit target for the second time since June. And yet, you have investors clinging to the hope that a few policymakers huddling in conference rooms on two sides of the Atlantic can somehow quotsave the world. quot Thats despite the fact the quotsavesquot they are talking about have already failed repeatedly. I think thats a real recipe for trouble. And thats why outside of a few select situations, stocks look very vulnerable to me. Until next time, Commercial Member Joined May 2012 3,332 Posts The ECB pledged to act forcefully to defend the EU and euro by potentially buying bonds to reduce crisis-hit euro-zone countries borrowing costs, which is a good thing. The market didnt price in the lofty summer rhetoric. But on balance, the announcement gives reason to be more bullish on the markets. still not a reason to run out and buy stocks with both hands. One of the most anticipated ECB meetings in history occurred last week, and with it the European crisis entered a new phase. Generally speaking ECB Chief Mario Draghi and the ECB met most of the markets lofty expectations, as evidenced by market action. Perhaps even more important, the ECB didnt disappoint by quotkicking the canquot down the road as European officials have done so many times over the past three years. I say that because. There are multiple risks to monitor over the next several weeks in Europe. Here are three of them:Last Weeks Signal Was NOT an quotAll Clearquot Risk 1 Markets will test the ECB First, you can expect markets to test the ECBs will at some point over the next few weeks by pushing Spanish or Italian yields higher just to see if the ECB was bluffing on its bond-buying promise. If I had to guess where, Id bet well see the first intervention in Spain before the end of October, as there remain multiple troubles brewing there. Risk 2 Spain and Italy have to ask for help before getting it One of the disappointments of the ECB meeting last week was that more strict conditions were placed on countries who need the ECB to buy their bonds than had been expected. Economists on the Street are referring to this as quotconditionality. quot In order for the ECB to buy bonds, Spain and Italy will have to formally request aid and submit to fiscal oversight by the ESMEFSF and the IMF. That implies some loss of sovereignty (psychologically, anyway), which will make Spanish and Italian politicians less likely to request aid until its absolutely necessary. As an outlier, theres a chance that both countries wont request aid. And then it becomes a game of chicken between those countries and the rest of Europe to see who blinks first. Dont think it cant happen either Greece has basically done it twice, and Europe blinked both times. What happens if Spain or Italy get the bailouts needed, but after a while stop adhering to the fiscal reforms mandated by the EFSF or ESM Risk 3 Will bailed-out nations comply The bottom line: If none of those risks mentioned above come to fruition, the ECB announcement last week was a game-changing event in Europe and a reason to think the crisis is nearing an end. But, if any of those risks actually materialize, the consequences are potentially catastrophic. And even if they dont fully materialize, if they appear to be gaining momentum, markets will fall and fall hard. The ECBs answer was very clear and another area of disappointment: If countries getting aid stop implementing necessary fiscal reforms, bond buying stops immediately meaning all this could be an enormous waste of time. One thing we do know from last weeks announcement is that the euro will be sacrificed to keep the EU together. By the ECB choosing to print euros to buy euro-country bonds, it means well see a lower euro over the long term, even though in the short term we could see the euro continue to rally as investors bet the crisis is solved. A big rally in the Euro over the next several weeks could provide a great opportunity to position yourself for the next big move in the currency, which is bound to be lower. Commercial Member Joined May 2012 3,332 Posts Now that the European Central Bank has saved the euro and our Federal Reserve has declared easy money as far as the eye can see, isnt the dollar going to get killed Well, on the surface that makes sense. But I think those concerns are short-term impacts. I still believe the dollar has entered a multi-year bull market, which began back in March 2008, when the U. S. dollar index bottomed. Now that the European Central Bank has quotsavedquot the euro and our Federal Reserve has declared easy money as far as the eye can see, isnt the dollar going to get killed And here are nine themes I see playing out that would ensure a bull market for the dollar: Theme 1Euro no longer a viable challenger against the dollar The euro is not saved yet, by any means. I expect another crisis to rear its ugly head within the next six months or sooner. But even assuming the euro is quotsaved, quot I would expect at least a decade of deflation and slow growth. As a result, the euro will fall of its own weight relative to the dollar and other major world currencies. Theme 2 Most of the monetary policy impact is behind us Each of the Feds new programs has been increasingly less effective in helping the real economy. Sooner or later the market will clear itself. And when it does the Fed will quickly take back all those excess reserves, which means U. S. dollar supply will fall. Therefore, fewer dollars will be out there as demand grows with recovery. Theme 3 Chinas reserves are falling, and hot money is fleeing I expect this trend to continue as Chinas economic growth slips further. This again goes to the point of a declining global supply of dollars, which will be good for the dollars price. Theme 4 U. S. real assets look cheap In a world increasingly looking for good long-term investment ideas, U. S. real assets, including real estate and natural resources, look very competitive. This should lead to strong foreign direct investment into the United States. Indeed, good for the dollar. Theme 5 The ramp up in U. S. domestic energy production helps the buck There are two ways this is bullish for the dollar: 1) Falling oil imports should help cut our trade deficit and 2) It leads to more international investment into the U. S. by investors wanting to position accordingly. Theme 6 Global rebalancing taking place in China and Germany As the global backdrop for export dependent countries changes, the top exporters China and Germany will have to increase domestic demand in order to grow. This will likely help U. S. exports and be the real beginning of the long awaited global rebalancing. It will be dollar positive for sure Theme 7 Rising pool of U. S. domestic savings The credit crisis has triggered a palpable shift in U. S. consumer savingsconsumption patterns. I expect this to be secular in nature. As the U. S. pool of savings for domestic corporations increases, the dependence on international funding should fall. If the U. S. current account deficit improves dramatically, the dollar will benefit. Theme 8 Falling commodity prices As China decelerates, commodity prices should fall dramatically. This doesnt mean all commodities nor does it mean the secular rally is over. But over the next 1-2 years, this will put pressure on emerging markets and will likely mean U. S. investors keep more of their money onshore for local (U. S.) investment opportunities. That means more dollars staying home instead of being exchanged into other currencies. Once this mountain of cash is redeployed to fund technologies where U. S. companies have a commanding lead, such as in nanotechnology and 3-D printing, it could virtually trigger a U. S. renaissance and would be a magnet for foreign direct investments. That would be very dollar bullish. Theme 9 2 TRILLION in U. S. corporate cash on the sidelines Needless to say the ideas Ive listed above have implications for asset markets that go way beyond the U. S. dollar. Over the next several weeks I will pick up on each of these themes in greater detail to show you why I believe its way too soon to write off the dollar or make a long-term bet on the decline in America. Commercial Member Joined May 2012 3,332 Posts Why the yen could be todays best currency trade by Jack Crooks Saturday, June 9, 2012 at 7:30am The Japanese yen continues to defy its own economic fundamentals. It continues to move up and down in value, in correlation with quotrisk offquot (stocks and growth assets moving lower) or quotrisk onquot (stocks and growth assets moving higher). But the latest statistics and dynamics driving the Japanese economy into the future still tell me the yen will weaken in a very big way, sooner or later. If you are a long-term player who has some patience, I consider this the best single trade setup among the major foreign exchange pairs: A core long-term long position in USD (U. S. dollar)JPY (Japanese yen). In other words, bet that the yen will fall in relation to the dollar. Of late, the yen (relative value) is moving in tight, negative correlation with risk assets. Using the Dow Jones Industrial Average (DJIA) as a measure of risk assets, you can see that as the Dow falls, the value of the yen rises. On the chart below, the USDJPY falls as the yen gets stronger relative to the U. S. dollar. Whether you consider the yen correlation against the DJIA or the Nikkei 225 Index, it is effectively the same concern in global stock markets means the yen strengthens. The primary reason is simple repatriation. Japan is still a very wealthy country despite the economic calamity experienced since the bubble broke back in 1989. Its insurance and pension funds have vast amounts of investment capital. When things get ugly globally, measured by stock markets, these big pools of funds tend to rush back home to hide in local Japanese government bonds for safety. For example, consider the relationship between the DJIA and USDJPY going back to the credit crunch period beginning in mid-2007: DJIA down 15.2 percent from its peak USDJPY down 35.9 percent from its peak Dollaryen has fallen 35.9 percent, or put another way the yen has strengthened 35.9 percent against the U. S. dollar since the credit crunch (creating huge price pressure on Japanese exporters) while stocks rose. And when you consider that one of the major impacts of the credit crunch was the decline in global demand for goods from export-oriented countries, such as Japan and China, you can see why Japanese companies are screaming for relief from this double whammy of pain. Japans Soaring Government Debt Crisis The dangers of a declining trade surplus and strong yen pressures are put quite clearly into context when you understand that Japan will likely run a fiscal deficit of a whopping 10 percent of GDP. Meanwhile its debtGDP ratio could rise to the moon-launch level of 241 percent (roughly twice the level of Italy) this year, according to forecasts by the International Monetary Fund. Notice in the chart below how government debt has continued to ramp up after the bubble broke in 1989. And this fits the view gaining ground that after Mr. Market is done crushing the European bond market, it turns its guns on Japan. Now, what makes that picture even worse is the train-wreck scenario of Japan no longer being able to fund these huge debt needs internally as the pools of private and business savings are drying up. In other words, if Japanese interest rates rise from their incredibly low levels 0.89 percent on the 10-year Japanese Government Bond (see chart below) the cost of funding with 200 percent debtGDP could shoot up exponentially. If Japans bonds begin to reflect real or even potential funding risk, forcing interest rates higher, it means that local demand from Japanese institutions will fall even more, putting greater pressure on rates, while the slowdown in economic activity will further reduce Japans available pool of savings to fund this growing need. Japan is facing a very scary situation here. Sooner or later, the yen will begin to reflect these internal realities. I think it will be sooner. When it does, the value of the yen has a very long way to fall (USDJPY has a very long way to rise). The long-term profit potential I see here is enormous. Best wishes, Jack Thursday, October 25, 2012 at 7:30am China has been one of the worlds worst performing stock markets in 2012, down 14 percent from its March high. Persistent worries about the health of Chinas economy have dragged stocks lower. But over the past month, stocks in Shanghai have perked up a bit. And recent upbeat economic data has many investors asking if growth in China may finally be rebounding after a seven-quarter slowdown. The answer to this question could determine if emerging markets in general 8212 and especially in Asia 8212 may enjoy a reversal of fortune leading global stocks higher once again. One thing is for sure: Investor sentiment toward China has been pervasive in recent months. Confidence Is Returning As quarterly GDP growth fell steadily for the past seven straight quarters, confidence turned sour. And investors pulled capital out of China and U. S.-listed ETFs and mutual funds that invest in China. The financial media went from debating whether China would experience a hard - or soft-landing. to predictions of an imminent crash-landing. Chinas official economic data has always been considered suspect. As if U. S. data, often subjected to sizeable revisions after-the-fact, are any better. That said recent data out of China for September turned decidedly more upbeat: 8226 September retail sales expanded at a 13.2 percent clip 8212 the strongest pace this year 8212 indicating Chinese consumers are spending. 8226 Disposable income for Chinas city dwellers is growing nearly 10 percent. And rural disposable income jumped more than 12 percent so far this year. 8226 Fixed asset investment, a key indicator of overall capital investment, surged 20.2 percent year-over-year in September 8212 to the highest level since October 2011 Also, September industrial production grew at a 9.2 percent pace, while exports were up 9.9 percent, well ahead of estimates. Meanwhile, strong growth in capital investment is being led by a pickup in domestic infrastructure projects like highway, seaport, rail, and airport investments. These are key elements of Beijings economic stimulus announced earlier this year as leaders attempt to shift the focus of Chinas economy away from an export-led growth model to focus more on domestic consumption. But it isnt just the government providing growth. Capital spending by Chinese private sector firms has risen faster than state-owned enterprises for 30 of the past 31 months And consumption growth is likely to pick-up even more in the months ahead, not only because disposable incomes are rising at a fast pace, but also because inflation remains subdued. Follow the Money Chinas consumer price index moderated to 1.9 percent in September down from 2.2 percent in August. This gives the Peoples Bank of China more room to maneuver in further reducing interest rates and lowering bank reserve requirements to stimulate more lending growth. In fact, Chinas money supply growth has risen sharply this year, expanding at a 14.8 percent clip year-over-year in September, up from 12.4 percent at the end of January 2012. Thats a very bullish sign given the high correlation between money supply growth and Chinese stock prices. And following several months of outflows there are signs that money is flowing back into China again. What really caught my eye was a report that the Hong Kong Monetary Authority was forced to intervene in foreign-exchange markets this week for a second time to prevent the HK dollar from appreciating against the U. S. dollar. After another round of money-printing by the Fed, European Central Bank, and Bank of Japan, investment funds appear to be flowing into Hong Kong at a rapid pace, given its status as the main investment gateway into China. That puts upward pressure on the HK dollar which is pegged in a narrow range to the buck. This is important because its the first intervention since 2009. the first time since the financial crisis that capital flows into China have rebounded to such a significant level. Im a true believer in following the money in global markets. Tracking block money flows into and out of markets, ETFs, and individual stocks can provide important clues about where the big money is moving to take advantage of investment opportunities. Emerging market equity funds have posted six straight weeks of capital inflows through the week ended October 17, bringing inflows to more than 21 billion year to date. And China equity fund inflows recently hit a seven-week high. I track similar money flows into ETFs using Bloomberg market data. And sure enough I noticed significant flows into China-related funds over the past several months including: 8226 iShares FTSE China 25 Index ETF (FXI), with 136.2 million inflows. 8226 iShares MSCI Hong Kong Index ETF (EWH), with inflows of 82.3 million, and. 8226 Morgan Stanley China A Share Fund (CAF) with a 3.7 million inflow This sudden reversal of money flows isnt limited to China either, or just to these funds. Several others that track China and other emerging markets are seeing strong capital inflows too, which makes perfect sense when you think about it. China is the worlds largest consumer of many commodities these days. everything from aluminum to zinc. So a pickup in Chinas growth should mean better prospects ahead for markets like Australia, Canada, Brazil, and Chile. Meanwhile, about 80 percent of Chinas imports come from Japan, South Korea, and Taiwan, so stronger Chinese domestic growth and export growth should benefit these markets as well. Bottom line: It may be premature to call a bottom in the Chinese stock market. But a sustained turnaround in Chinas economy should lead to stronger performance in many other global markets too. Good investing, Mike Burnick Commercial Member Joined May 2012 3,332 Posts You may recall my Money and Markets column, Why the yen could be todays best currency trade. Today I want to give you an update on why I believe we are very close to a long-term peak in the value of the Japanese yen. Or to put it another way a major long-term multi-year bottom in the U. S. dollar. Lets first go back to the 1980s when Japan was poised for what many believed was inevitable economic domination. The country was in the midst of a huge credit bubble valuations were off the charts. For example, in 1989 the Tokyo Imperial Palace was said to be worth more than all the real estate in California The countrys trade balance was soaring against the world, especially the United States. Japanese companies were gobbling up real assets throughout the globe. Here in the U. S. the premiere properties acquired were Pebble Beach Golf Course and Rockefeller Center. Americans were concerned, very concerned about this foreign invasion. And Japan bashing was in vogue. During the early 1980s the U. S. dollar was in a major bull market. Despite the real value of the dollar and other fiat currency values inflating away, the dollar staged a rally of almost 50 percent from its low in 1980. Paul Volckers tough love administered by a massive hike in interest rates, was the catalyst of this multi-year rally. With Japan the big dog on the block and its trade surplus soaring, U. S. manufacturers and other trade groups began applying pressure for a dollar devaluation the dollar was too high. So the major global powers jumped into action to rectify this terrible wrong. The United States, the United Kingdom, France, West Germany, and Japan got together at the Plaza Hotel in New York and agreed that the dollar was too high. The Plaza Accord or Plaza Agreement was signed on September 22, 1985. In short, the countries agreed to allow their respective central banks to intervene in the foreign currency market through a coordinated effort to push the U. S. dollar down. Though at the time billed as a dollar problem, the implicit rationale for the Plaza Accord seemed a defense against Japans rising trade surplus. Thus it was more of a push up the value of the yen agreement. Many, rightfully, believed Japans aggressive export-dominated trade policy took advantage of relatively open markets in the West by producing increasingly high-value goods and morphing up the consumer value chain. But at the same time it continuously found a way to stop or delay Western goods from making it to Japanese consumers. As I said, the Plaza Accord worked in pushing up the value of the yen. But it did little to solve the trade balance problem. Japans trade surplus remained strong even as the yen soared. In the chart below I have compared Japans trade surplus on a monthly basis with the yens value from 1983 through June 2012. I noted the Plaza Accord and the official Credit Crunch start by the red vertical lines. Think of them as bookends on the massive rally in the yen. Here is where it starts to get interesting if, like me, you believe the USDJPY is close to a major long-term bottom The way I see it, the real trigger that changed the dynamics for Japans seemingly unending trade surplus was the Credit Crunch. Thats because the Credit Crunch brought an end to Japans long string of trade surpluses I also believe it triggered the beginning of the end of the Asian export model as we know it. I see three major reasons, which are interrelated and self-reinforcing: First . it marked the end of an era of unlimited global liquidity Second . it triggered a secular change in global consumption And third . more specifically Approximately 90 percent of Japanese debt is held by Japanese investors. Over the years, huge pools of savings and massive current account surpluses have provided plenty of money to fund the Japanese governments growing need for funds as tax revenues were increasingly scarce given Japans low growth deflationary economy. But now, Japan faces a daunting prospect thanks to the Credit Crunch. No longer is it generating the current account surplus it needs. Consumer demographics and low growth have pushed the consumer savings pool sharply lower heading toward zero. And companies domestically have been using their savings pools to recover from the Tsunami and plug the holes from falling demand for their exports. Therefore, the Japanese government is at risk of a funding shortage at least internally. And this is very dangerous. Heres why Japan has a government debt-to-GDP ratio of around 215 percent. The interest cost to fund this debt is huge. Plus the yearly funding needed to maintain government services is massive. Add them up and you get a mismatch between government revenues and spending. Its called a budget deficit, and here in the U. S. we know firsthand how that works. Next, take a look at the chart below. Presently the yield on the benchmark 20-year Japanese government bond (JGB) is 1.7 percent. In fact it has hovered around this level since 1998. 20-year Japanese Government Bond Yield vs. the USD-Japanese yen 1990-today If Japan does not have the internal funding available to handle its needs, it will have to look to international investors for this funding. So Japan is faced with a triple-whammy of pain: 1) Rising funding needs, 2) Falling internal sources of funding, 3) Rising funding costs because foreign investors will expect a much higher yield than 1.7 percent to account for the risk of holding Japanese debt. Because Japan is facing this triple-whammy with an already astronomical debt load, this mix of problems will likely lead to a vicious self-feeding spiral. Then higher interest rates will lead to higher funding costs and falling bond prices will lead to dumping of bonds, which leads to higher yields to entice new buyers. I believe we are seeing the outlines of what might eventually become a Japanese government bond default as the sovereign debt problem visits Tokyo. My suspicion is that once the markets are finished attaching the euro-zone bonds, they will train their guns on Japan. To sum it up, a change in the global economy and the outlines of a sovereign bond crisis in Japan suggest to me that we must be very close to a major trend change for the Japanese yen. Best wishes, Jack Commercial Member Joined May 2012 3,332 Posts The Land of the Rising Sun is Shining Brighter By Sean Hyman, Editor of Currency Cross Trader Sometimes in life it can seem like when something has been a certain way for a very long time that it will always be that way. It8217s like the brain has a tendency to get conditioned to a situation and decides it will always be that way. Well, investors get the same way about a stock or index that8217s been out of favor for a long time. They can never seem to imagine a day when it will come back. Take, for instance, Japan8217s Nikkei index. It8217s been down for over two years in a row, even as most other stock indices have rebounded. But actually, you can look further back to the larger trend and see that Japan8217s Nikkei was one of the first indexes to top out. The Nikkei topped out in early 2006, while most other stock indexes topped out at the end of 2007 or early 2008. So, the Nikkei has really been trading lower for about six-and-a-half years. Well, you can see where it would be easy to get sucked into the thinking that those stocks are never coming back. However, it8217s simply not true. There are a couple of things changing that are going to set up the Nikkei for its first real rally in years. A Change in Direction for the Yen The first thing is the change in the yen. You see, the Japanese yen has been strengthening in a big way ever since July of 2007, and it finally peaked in October of 2011 but traded somewhat sideways through January of this year. From that point, the yen has begun to descend. In fact, let8217s take a look at the Nikkei in the weekly, three-year chart below with the Japanese yen plotted below it. Why is the fall of the yen important Japan8217s Nikkei is filled with major exporters such as Toyota, Honda, Mazda and Sony. From the viewpoint of an exporter, you want a cheap currency. If your goods appear to be cheaper because a foreigner8217s money goes further, then they are more apt to buy more of your products. However, if your currency is stronger, your products will appear more expensive to foreigners and you8217ll sell fewer. So what the currency is doing is a big deal. It8217s one of the determinants of how well these companies will do. In other words, when dealing with a strong yen, they have the wind in their faces, and when they have a falling yen, these companies finally get the wind to their backs. If you8217ve ever ridden a bicycle in the wind, then you know it makes a big difference whether the wind is with you or against you. It8217s the same with these companies. With absolutely no other changes, their performance and results will vary widely depending upon the value of the yen. What Stimulus Means for the Yen The other thing that has changed in the favor of the Nikkei is that Japan has instituted an 8220asset purchase program.8221 A pretty sizable one at that 8230 to the tune of 80 trillion yen. Then, on Friday, Japan announced 750 billion yen (9.4 billion) of stimulus to boost growth. The measure was undertaken after bond dealers concerns over government spending raised fears of a disruption at a December debt sale. This will be good for Japan8217s stocks for now and bad for its currency. So between the stimulus programs and the change in the direction of the yen, Japanese stocks have a chance to reverse course for the first time in over six years. With that in mind, let8217s look at an ETF that tracks Japanese stocks. It8217s called the Wisdom Tree Japan Total Dividend ETF (DXJ). Let8217s check out its daily, two-year chart below. Declines in the Yen Can Be the Catalyst for Huge Moves in Japanese ETFs Going into 2012, the yen took a tumble and Japanese stocks got their first good shot in the arm they8217ve had in a long time. Now, the yen is beginning to fall off the map again and DXJ is breaking out of its triangular coiling consolidation. I believe this sets up DXJ to where it could head to 36 per share or higher over the next two to three months. This means the stock could move a whopping 11 within that very short time if the yen keeps falling as I believe it will. So check out DXJ. I believe it8217s primed for its next launch higher and it8217s going to catch the masses off guard. They8217re going to wonder where this rally came from. But you8217ll know that it8217s come from the new stimulus and from the change in the direction of the yen. Have a nice day Sean Hyman Editor, Currency Cross Trader Joined Oct 2012 Status: Member 4 Posts Many thanks for your description of the triple screen trading strategy. As a noob I began researching simple strategies that utilized only one indicator alongside EMA. They seemed to work okay but my dilemma was that I didnt have enough confidence entering the trade with analysis from just one indicator and a few supportresistance lines. It was when I began looking into trading systems that utilized a few indicators to reveal an overall meaningful picture, that I discovered Elders Triple Screen Strategy. The following link is a PDF to the section of Elders book, Trading For A Living, where he explains the strategy in detail, screen by screen: trading-nakedlibrary. ingsystem. pdf As of now Im using the FXCM web trading system, but hope to get metatrader4 very soon - just need to install windows on my mac As you may already know, this platform is limited in terms of customization and availability of indicators - between Williams R and Stochastic, Ive decided to use the latter for my oscillator so that I can focus on strong signals and avoid being swayed by market noise. Elder doesnt talk much about interpreting Stochastic here, so I appreciate your extended explanation about this. My three screens are as follows: large: 3 Hour (MACD EMAs (see below) intermediate: 30 min. (Stochastic) small: 5 min In my 3 hour chart Im also using 13EMA, 28EMA and 53EMA. Ive noticed that the size of the MACD histogram bars can give hints about the strength of 13EMA movement and its likelihood of crossing the other two EMAs and flipping the direction of the trend. As histogram bars get longer, the momentum of 13EMA seems to get stronger, which may signal a change in trend. Im just about ready to employ this system on my own for the first time. Looking forward to having a greater sense of confidence in my trade decisions Members must have at least 0 vouchers to post in this thread. 0 traders viewing now Forex Factoryreg is a registered trademark. TECHNICAL ANALYSIS Alexander Elder: The Force Index 091205 02:44:27 PM by Paolo Pezzutti The force index combines price and volume to provide you with the strength of bulls and bears both. Alexander Elder, in his well-regarded book Trading For A Living, introduced the force index. It is an oscillator that attempts to measure the force of bulls during uptrends and the force of bears in downtrends. It takes into account price and volume. In this way, the force of every move is defined by its direction, distance, and volume. The underlying concept is simple: - A positive close of prices will print a positive force, and a negative close of prices will print a negative force - The greater the volume, the greater the force, and - The greater the price change, the greater the force. The rule for its construction is: Force Index Volume (close-close of the previous day) Below is the TradeStation implementation of the indicator: inputs: Length1(2),Length2(13),ForceI(Volume (Close - Close1)) As you can see, the short-term force index is normally smoothed with a two-day exponential moving average (EMA) to help find entry points into the market. Smoothing is done because the raw indicator appears very jagged. In his book, Elder suggests that it pays to buy when the two-day EMA of the indicator is negative and sell when it is positive. A 13-day EMA of the force index helps to track longer-term changes in the force of markets participants. When it is positive, it means that bulls are in control. When it becomes negative, it means the bears have taken control. As with any oscillator, divergences could help identify turning points. The concept behind this indicator is that a big price change testifies the importance of the victory. At the same time, the volume provides you with the information related to the market commitment of the public to the move. In the author analysis, high-volume rallies and declines have more inertia and are likely to continue. Low volume indicates that the supply of new participants is low and the trend is near an end. The two-day EMA of the force index is used to pinpoint buying and selling opportunities. When a trend-following indicator identifies an uptrend, you will spot an entry point when the two-day EMA of the force index is negative, placing a buy order above the high of that day. The opposite is true during downtrends. If you are a short-term trader, you will exit your long trade--for example, when the two-day exponential moving average of the force index turns positive. As an alternative, you may want to add to your positions whenever the indicator gives signals in the direction of the trend. The 13-day exponential moving average of the force index is used to identify longer-term changes in the strength of market participants. Above the centerline, the trend is positive below it, bears are in control. A new peak indicates that a rally is likely to continue. Divergences can also give very good indications of turning points. Spikes of the indicator suggest that, in the long run, markets have reached a top or a bottom. FIGURE 1: THE QQQQ DAILY CHART AND THE FORCE INDEX INDICATOR. The indicator helps find entry points after pullbacks during a trend.
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