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Forex Swing Trading System

1. The price/book ratio is a way of measuring the price of the company relative to its net assets. Mathematically, the exact calculation is as follows:

Market Capitalization / (Total Assets - Intangible Assets - Liabilities)

If a price/book ratio is below 1, it suggests the potential to buy a company and sell its assets right away for a profit. Low price/book ratios are generally desired by value investors. Of course, not every stock with a low price/book ratio is worth buying, as some may have assets that are overvalued on their books, may take a long time to sell (if at all), and may have negative earnings from operations.

2. There is some evidence that suggests stocks with a low price/book ratio outperform the market. Consider the chart below.

3. Some evidence suggests the price/book ratio becomes even more valuable when combined with other screens -- namely return on equity. The chart below illustrates the outperformance of stocks in the bottom 20% of price/book ratio and the top 33% based on return on equity; we can see they significantly outperform the market. Return on equity is essentially income divided by net assets; it is an attempt to measure how much income is earned relative to assets used to generate them. When stocks have a low price/book ratio, that suggests the company's assets are cheap; when stocks have a high return on equity, that suggests the company's assets are good at generating income. Many value investors appreciate the intuitive appeal of combining these screens to find the best companies worthy of investment.

The most important thing to realize is that when a full blown bear market starts virtually all stocks and commodities drop including gold, silver and oil. Knowing that, investors must be aware that when the stock market starts its bear market the fear will rise and investors will inevitably sell their holdings and this means we could see gold and oil continue to fall much further from these levels before a true bottom is in place.

Is this time different than the 2008/09 bear market? Yes, this time we have possible wars starting, oil pipelines overseas being cut off, counties and currencies failing and even negative bond yields in some parts of the world – it’s a mess to say the least. There are a lot of things unfolding, most seem to be negative for the economy.

The currency problems and possible war breakout will be bullish for gold and oil. So if a bear market starts in equities, and a war or currency fails gold and oil should rally while stocks fall.

But if we don’t have those sever crisis’ then if gold and oil break below their critical support level which is the red line on the charts and a bear market in stocks start you do not want to be long stocks or commodities.



the source

The series which covers how to use the Metatrader 4 platform to trade the forex market.

The next video in a series on how to trade forex using the metatrader platform. In this video we cover Metatrader templates

• What is price action trading?
• The basics of reading charts
• Support and resistance
• Basic set-ups and stop placement
• Two examples of trades from the forex market

What is Price Action?

Price action is a particular methodology employed by traders, based on the observation and interpretation of price action, usually through the use of candlestick or bar charts. The price action style of trading is usually characterized by clean charts, without indicators, with the explanation that indicators are themselves interpretations of the historical movements of price, which don't contain any information or predictive power that isn't available from the charts themselves.

Nonetheless, some traders include basic indicators, such as exponential moving averages or average true range to augment their charts or to provide confluence. The attitude of the price action trader is that the interpretation of price movements can provide an edge, a possibility of being more right than wrong in their predictions about the future behavior of price.

The basics of reading candles and charts

Since candlestick and bar charts are the fundamental interface of the price action trader, the most basic unit is the candle or bar itself. Candles sum up the price action over a set period of time: on a 5 minute chart, each candle represents 5 minutes of price behavior, whereas on a daily chart, only one candle is produced per day. The body of the candle constitutes the range between the open price and close price, whereas the wicks or shadows of the candle indicate the high and low over that period of trading. Various color schemes are used to determine whether the price movement represented by the candle is bullish (increasing in price) or bearish (decreasing in price); bullish candles are usually white, blue, or green, whereas bearish candles are usually black or red.

• Longer candle bodies demonstrate strong momentum and decisive market behavior in the movement from open to close; longer shadows, however, demonstrate increased volatility, since some prices were reached during the time period but ultimately excluded from the range between open and close.
• Smaller candles can indicate the market's indecision, disinterest, or a balance between bullish and bearish forces.

Support and resistance lines are typically horizontal, but when they are diagonal along a trend they are known as trend lines. The basic idea behind using support and resistance effectively in a trading range is to buy at the support level and sell at resistance in an uptrend, or to sell at resistance and buy at support in a downtrend; so, we're not necessarily hoping for a break-out through the established levels, because a break-out means that the market isn't behaving predictably enough to allow for safe bets on its future performance. Instead, the most conservative or reliable trades are those that occur as the market fluctuates between identifiable support and resistance levels, allowing you, in an uptrend, to buy when a retracement of bearish leg has brought prices down to a support level, and then sell when price returns to the resistance level, or, in a downtrend, to sell when price is maxed out at a reliable resistance level. The reason we are looking to buy in an uptrend and sell in a downtrend is that price action trading is all about playing the odds, so trading with the trend rather than against it is usually a better idea since a trend is statistically more likely to continue than to reverse.

Basic Set-ups and Stop Placement

Most price action traders place buy or sell stop orders with a pre-determined stop loss level, and a take profit or target level. The buy or sell stop sets the level that price much reach for the order to be filled; the stop loss level sets the margin of loss that a trader will accept before closing the position; the take profit level sets the level at which to automatically close a successful position. The buy or sell stop, or entry level, is typically set at a significant support or resistance level so that it will only be filled when price has broken definitively in the desired direction; by setting strategic entry levels in their orders, traders can ensure that they enter trades with the momentum of the market.



the source

• Trend: two successively higher tops and bottoms (uptrend)
• Trend: two successively lower tops and bottoms (downtrend)
• Other names for a positive trend: run up/bull run/rally
• Other names for a negative trend: run down/bear run/decline
• Trading range: the market moves up and down within a consistent range without establishing a definitive trend in one direction
• Consolidation: the range of price's movement constricts as the market becomes directionless
• Reversal: the market moves in the opposite direction from the previous trend, implying the end of that trend
• Retrace: the market moves some amount in the opposite direction from the previous trend before the trend is eventually reinstated
• 2 Attempts Rule: the idea that if the market attempts to do something twice and fails, the opposite will happen
• Break-out: the market breaks out of a trading range or a resistance level
• Clear-out: the market's break-out in one direction is quickly followed by its movement in the opposite direction
• Throwback: retracement after a break above
• Pullback: retracement after a break below