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On more days than not, the market is being held hostage by crude oil
prices. These days you have to look at oil as a leading indicator, as
every gyration affects stocks. If you go back six months, the weekly
release of the Energy Information Administration's crude oil inventory
report was no big deal. Now, however, it's a potential market mover. This
is a normal (and quite frequent) occurrence in the markets, as cycles and
perceptions are in a constant state of flux. For this reason, traders must
stay abreast of these dynamic trends in perception. If they don't, they
will encounter bigger challenges than are already present in the daily
routine of a day trader.
The continuing meltdown of the financial sector was further exacerbated on
Tuesday. Goldman Sachs (one of the most respected firms on the street)
captured the spotlight, and essentially was the catalyst for the day.
First, they were ascribed with sending the market higher in early trading
by reporting better-than-expected earnings (this rally overshadowed bad
inflation numbers). Then, they followed that by being credited with
sending the market lower when their bank analyst downgraded, as well as
lowered his forecast, for a whole host of bank stocks. Incidentally, for
those of you looking for a bottom in these stocks, the bottom will be
found when everyone stops looking for it.
I've been alluding to these problems for the last two months now, and
despite these negatives, I've been generally positive on the market since
the middle of March. Why is this? Well, the primary reason is because the
market has been trending higher; hence being long has been the path of
least resistance. The only way to have maintained a long position - amid
all the seemingly bad economic data - is by looking at the market through
an OBJECTIVE eye. In other words, only trade on what the market is telling
you, not what you think it SHOULD do.
Objectivity also prevents traders from overstaying in profitable trades.
If the market is signaling the move's over, then it's time to take
profits. An aphorism I like to use that speaks to this issue is "now that
you own it, it owns you". Whenever I get into a slump, I always ask myself
if am I losing my objectivity. If the answer is yes, I have to work to
regain it since my trading survival depends on it.
This goal of these e-books is to introduce beginning traders to all the
essential aspects of foreign exchange in a practical manner and to be a
source of
best answers on the typical questions as why are currencies being traded,
who are
the traders, what currencies do they trade, what makes rates move, what
instruments are used for the trade, how a currency behavior can be
forecasted and
where the pertinent information may be obtained from. Mastering the
content of
an appropriate section the user will be able to make his/her own
decisions, test
them, and ultimately use recommended tools and approaches for his/her own
benefit. You see, many traders rely mostly on technical indicators to
trade... and maybe that's how you trade too...
But technical indicators only tell you what's roughly happening in the
market : For example -- whether the market is overbought or oversold, or
whether the market is on a general uptrend or downtrend...
These technical indicators can be helpful... but the problem is that they
can't pinpoint exactly when to enter a trade. They're also terribly poor
at telling you when to exit your trades...how many times have you seen an
'in-the-money' trade suddenly turn against you without any warning at all?
The reason why technical indicators often fail to help traders make
accurate trading decisions is because they all lag behind market prices.
The only true indicator of how the market is moving 'right now' is through
candlestick studies - it's the most up-to-date information you'll ever get
on the Forex market. Forex Candle Charting!
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