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  • Economic News And Market Gravity

    Have you ever had a long position during an economic news release and the news was bullish? Remember how excited you were that this news was going to help you make more money? And as the news filtered out to global traders everywhere, price did go higher. Then suddenly, price began to fall quickly. Within seconds all your profits evaporated, and suddenly you were underwater and sinking fast. How did this happen?

    You hear the expression "buy the rumour, sell the news." Well, that works some of the time. As with most trading analysis, some of the time, isn't a valid strategy. If we dig deeper with the right tools, we find that there is a market structure that explains these counter intuitive price movements that surround economic news.

    The real truth is that many times, the path of price is already mapped out before trading starts. The map is heavily influenced by relationships of institutional order activity. Unfortunately, the map is invisible to most analysis. The good news is that Market Gravity is the tool we can use to illuminate and read this map.

    Market Gravity will predict if price will trend or trade in a range. For example, if the forecast is for a trend higher, then we expect that if an economic report brings bearish news, the initial selling for this bearish news will be overwhelmed by the need to trend higher.

    In our notes for EUR/USD homework (London session) applied to Wednesday May 8, 2013, Market Gravity forecast a strong up trend. We said:

    "...Use trending indicators to stay long. There's a medium importance economic release at 6 AM Eastern it's the German industrial production number of previous -1.8% expected -3.8%. Any bearish news should be faded and provide a good buying opportunity. Any bullish news should add fuel to the rally."

    The news was bullish and price did move higher. The high of the session traded in the closing minutes. In this case, the news and the price move made "sense" to most traders because they associate bullish news with rising prices. To Market Gravity watchers, the price move made sense because price needed to trend higher whether the German industrial production news was bullish or bearish.

    In our notes for EUR/USD homework (London session) applied to Friday April 26, 2013, Market Gravity forecast a strong down trend. We said:

    "The US GDP number arrives late in the London session. This will play into the trading. It is impossible to know where price will be just before the release. However, if news is bullish, sell the rally..."

    The US GDP news was bullish and the short rally that followed set the high for the rest of the London session. In this case, most traders rationalized that the news was "already priced in." In contrast, Market Gravity watchers expected that price would trend lower; selling the brief rally after the news release made sense in the context of a down trend.

    You can learn more about this revolutionary objective trading tool absolutely Free by following this link: click here.

    Alan Gunn, M.Sc., CFA, CIM, DMS, FCSI has over 30 years experience in investment management and derivatives trading including Chief Investment Officer of an algorithmic hedge fund engaged in forex trading.

    Most people lose money in forex trading for 15 reasons. I am here to help.

    Get my Free Forex Trading Dossier at:

    http://www.forextradingdossier.com/free-dossier.html

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 17 1:25 AM | Link | Comment!
  • Trend Or Range? Market Gravity Predicts

    Market Gravity predicts both trends and trading ranges. This tool is of great benefit to traders because they can combine the context of an expected trend with an indicator that works well with trends, like an exponential moving average. But the benefit doesn't stop there. Traders can also use momentum indicators or oscillators to pick the tops and bottoms of trading ranges when the Market Gravity context predicts a trading range.

    Most traditional technical indicators have become more and more intricate. Layer upon layer of complexity has been added to try to account for the fact that no one really knew how to objectively identify whether a market was going to trade in a range or trend over the time frame for the trade. This increased complexity has resulted in compromise readings which tend to signal entries later in the price move and exits longer after the extreme price has been traded. Bottom line, you get a little better risk management, but a lot less trading profit.

    Market Gravity is the invisible force that moves price and sometimes keeps price from moving. If you are aware that this force exists this will dramatically change your perspective of price movement. Things begin to make much more sense. Price movement is much more predictable and if price doesn't move the way it's supposed to this is also a big heads up or red flag. However, if you are unaware, then price will sometimes move according to your technical studies and sometimes the movement appears completely random. Your momentum study gets overbought. You sell and without explanation, price continues higher. Or price comes down to a supporting moving average. You buy, and price slices right through the support. Why does this happen?

    The short answer is that traditional technical studies do not predict. They simply present the past in a way that is more pattern friendly. So, let's take a step back and look at why price moves. The first thing you want to notice is that price doesn't change without market orders. As long as all the bids are lined up at or below the present bid and all the offers are lined up at or above the present offer, price will not change. You need a market order to hit the bid or lift the offer if price is going to change. For a price move higher in a range context, you need a preponderance of buyers over sellers. For price to move higher in a trend context, you need the buyers to buy and you need the sellers to buy.

    "Need the sellers to buy?!" Yip, you did read correctly. When price is trending higher, the reason is usually that the sellers are trapped in short positions and every time price dips a little, they (the sellers) are there to buy to cover their short positions, at break even or worse. When price is trending higher, everybody is on the buy side. Herein lies the first key to predicting whether price will trend tomorrow. We need a tool to tell us if buyers or sellers are trapped and underwater. Market Gravity is the objective tool that does exactly that.

    Keep checking back here for more information about Market Gravity and how it can work for you.

    Alan Gunn, M.Sc., CFA, CIM, DMS, FCSI has over 30 years experience in investment management and derivatives trading including Chief Investment Officer of an algorithmic hedge fund engaged in forex trading. Most people lose money in forex trading for 15 reasons. I am here to help. Get my Free Forex Trading Dossier at http://www.forextradingdossier.com/free-dossier.html

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 06 4:06 PM | Link | Comment!
  • Technical Studies Only Tell 1/2 The Story

    Wouldn't it be great to know in advance if a market session was going to trend or be in a trading range? Traditional technical studies are only backward looking, they do not predict.

    We have all had this experience. Your favorite oscillator is getting over bought. You wait for it to turn over and give you a sell signal. You sell. Minutes later, price makes a slight new high which coincides with a pivot resistance point or a larger moving average or both. Either way, the market looks overbought and is stalling at a resistance point. You are short and holding with a very small loss. Everything is fine. Price is sure to drop from here.

    You look away from your screen for just a second and when you look back, price has made another new small high. Your stop is getting closer, but there is another moving average resistance dropping into play. Price moves sideways and appears to be stalling, again. Your original oscillator is making a lower high and diverging. Excellent. You begin thinking you should add to your position.

    Price makes a small spike lower. Here comes the drop. "#*&%!, I knew I should have added to my short!" Price almost gets low enough to put your original position into profit. You are pretty convinced this trade is going to work. The original oscillator has diverged, and is moving lower. The resistance points clustered together are holding.

    Price goes up a little and because you are so convinced this trade will work based on everything you have seen, you add to your position.

    Price moves sideways and appears to not be able to move higher. Excellent. All the shorter time frame oscillators are overbought. Everything is ready for the plunge.

    Price breaks quickly to a new high. You see it, but you don't believe it. What about all that resistance clustering? What about all the overbought readings? What is going on???

    Within a minute your stop is hit. I can feel the frustration through your screen. Oh no, when you added to your position you forgot to enter a stop order for the new position. Price is steadily moving higher. Everything is overbought, price has to at least come down to break even. Price moves higher, and higher. Your loss is really getting out of control now, but there are a few down ticks and the move must be over. Right? Wrong.

    By the time it's over, you capitulate to the biggest loss in months. This creates a massive hole in your trading account. Not fun.

    Trading against a trending move is one of the most devastating experiences a trader can have. It is draining emotionally, physically and financially. All the technical studies were telling you price was about to turn lower, and you believed them.

    Imagine if there was a way to know in advance that price was very likely to trend. Wouldn't that be useful? You could have traded with the trend instead of fighting it. You could have used a trending technical study to get into the trend and ride it.

    Over the last 30 years I have been looking for an objective way to predict when price will trend and when it will trade in a range. I call it Market Gravity.

    Check back here for more posts about Market Gravity, how it works and how it can work for you.

    Alan Gunn, M.Sc., CFA, CIM, DMS, FCSI has over 30 years experience in investment management and derivatives trading including Chief Investment Officer of an algorithmic hedge fund engaged in forex trading. Most people lose money in forex trading for 15 reasons. I am here to help. Get my Free Forex Trading Dossier at http://www.forextradingdossier.com/free-dossier.html

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 02 8:46 AM | Link | Comment!
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