Index

A

Appel, George, 87

Arithmetic scaling, 155–157

Ascending triangle, 128, 130–131

Aspray, Thomas, 87

AUD/JPY pair, 37, 38–39

AUD/USD pair, 35, 36

Average Directional Index (ADX)/Directional Movement Index (DMI), 71–72

B

Bar charts, 41–43

Base currency, 7

Bear flags, 123–127

Bearish candles chart, 44

Bearish engulfing patterns, 45–46

Bid/ask spread, 8–10

Bollinger bands, 72–77

scalping to trend with, 172–173

trend detection/exhaustion with, 162–164

trend trading with, 164–167, 170–172

volatility stop with, 167–170

Breakout patterns, in candlestick charts, 45–46

Buffett, Warren, 35

Bull flags, 123–128

Bullish candle chart, 44

Bullish engulfing patterns, 45–46

C

CAD/JPY pair, 37

Candlestick charts, 43–58

breakout patterns, 45–46

indecision patterns, 46–49

reversal patterns, 50–56

Carry trades, 13–15

Central banks, as FX traders, 5–6

CHF/JPY pair, 39

Cohen, Steve, 158

Commodity Channel Index (CCI), 91–96

Commodity currencies, 35–36

Confidence, in trading, 184

Corporations, as FX traders, 5

Countercurrency, 7

Crosses, 37–38

Currencies:

commodity, 35–36

major, 32–35

D

Dark Cloud Cover pattern, 49–50

Data display, 41–58

bar charts, 41–43

candlestick charts, 43–58

line charts, 41, 42

Dealer intervention, 9

Decentralization, of FX markets, 6–7

Demonstration trading accounts, evaluating of, 19–24

Dennis, Richard, 153

Descending triangle, 131–132

Diamond patterns, 135–137

Doji candles, 46–48

Double top and double bottom patterns, 114–117. See also Triple top and bottom patterns

Dragonfly doji candle, 48

E

Economic growth, as trading fundamental, 17

Economic news, as trading fundamental, 15–19

EUR/CHF pair, 37–39

EUR/GBP pair, 37

EUR/JPY pair, 37, 39

EUR/USD pair, 32, 33–35

Evening star/morning star candlestick, 53–54, 55

Exponential moving average (EMA), 65–66

F

Falling wedge, 132, 133, 134

Fibonacci sequence, 99–112

background, 99–102

pros and cons of, 102–108

trading with, 108–112

Flag and pennant patterns, 123–128

Foreign exchange markets, see FX markets

FX markets. See also Trade management

bid-ask spread and dealer-based market, 8–10

decentralization and, 6–7

demonstration trading accounts, 19–24

fundamentals of trading and, 15–19

leverage and, 10–15

market structure and, 4–6

quotation conventions, 7–8

rules and regulations of, 3–4

traders on, 5

trading volume on, 1–2

G

Gallacher, William, 64

Gartman, Dennis, 106, 153

GBP/CHF pair, 39

GBP/JPY pair, 37, 39

GBP/USD pair, 32

Geometric scaling, 156–157

Ghost patterns, in CCI, 94–95

Gravestone doji candle, 47

H

Hammer/hanging man candlestick, 51–53

Harami candlestick, 50–51, 52

Head and shoulder patterns, 137–138

Hedge funds, as FX traders, 5

I

Indecision patterns, in candlestick charts, 46–49

“Inside day,” 50

Interest on account, debits and credits for, 15, 20

Interest rates:

carry trades and, 13–15

range trading and, 38–40

as trading fundamental, 17–18

J

Japan, regulation in, 3

K

Kovner, Bruce, 16

L

Lambert, Donald, 91

Lane, Dr. George C., 79–81

Leverage, 10–11

carry trades and, 13–15

margin calls and, 11–13

Line charts, 41, 42

Long-legged doji candle, 47

Lucas, Edouardo, 100

Lucas sequence, 100

Lukeman, John, 110, 112

M

Major currencies, 32–35

Margin, on stock trades, 10

Margin call, in FX market, 11–13

Market Maker's Edge, The (Lukeman), 110, 112

Market Wizards (Schwager), 16, 143

Morning star/evening star candlestick, 53–54, 55

Moving average convergence/divergence (MACD), 87–91

in setup example, 173–176

Moving averages, 64–71

exponential moving average, 65–66

moving average crossover, 66–69

simple moving average (SMA), 64–65

three SMA filter, 69–71

N

National Futures Association (NFA), 3–4

Nisson, Steve, 43

NZD/USD pair, 35

O

Observation, randomness theory and, 25–27

Oscillators, 79–97

Commodity Channel Index (CCI), 91–96

moving average

convergence/divergence (MACD), 87–91, 173–176

Relative Strength Index (RSI), 82–86, 176–179

stochastics, 79–81

P

Patterns and antipatterns, 113–141

diamonds, 135–137

double tops and double bottoms, 114–117

flags and pennants, 123–128

head and shoulders, 137–138

reverse head and shoulders, 138–141

triangles, 128–132

triple tops and bottoms and the antipattern, 117–123

wedges, 132–135

%D, 80

%K, 80

Percentage in point (pip), 7–8

“Phi,” 100, 102. See also Fibonacci sequence

Pickers, 9

Pip (percentage in point), 7–8

Political stability, as trading fundamental, 18–19

Pressing the trade, 152–155

Price channels, trend lines and, 60–63

Price data, randomness of, 25–27

Q

Quotation conventions, 7–8

R

Randomness, 25–27

Range trading, 30–32, 79–97

Commodity Channel Index (CCI), 91–96

crosses and, 37–38

interest rates and, 38–40

moving average

convergence/divergence (MACD), 87–91, 173–176

Relative Strength Index (RSI), 82–86, 176–179

stochastics, 79–81

Relative Strength Index (RSI), 82–86

in setup example, 176–179

Reversal patterns, in candlestick charts, 50–56

Reverse head and shoulders patterns, 138–141

Rising wedge, 133–135

Rosen, Adam, 83

S

Sarnoff, Tom, 183

Scaling, 155–157

Scalping, 9

Scalping to trend, in setup example, 172–173

Schwager, Jack D., 16, 143, 158

Science Askew (Simanek), 100–102

Self-knowledge evaluation, 143–150

Setup examples, 161–184

MACD turn, 173–176

Relative Strength Index, 176–179

scalping to trend, 172–173

trading pure trend with Bollinger bands, 170–172

trend detection/exhaustion with Bollinger bands, 162–164

trend detection with three simple moving averages, 180–181, 182

trend trading with Bollinger bands, 164–167

volatility stop, 167–170

Shooting star/reverse hammer candlestick, 51–53

Simanek, Donald, 100–102

Simple moving average (SMA), 64–65. See also Three simple moving average (SMA) filter

STC Capital, 158

Stochastics, 79–81

Stock Market Wizards (Schwager), 158

Swiss franc, 32, 33

Symmetrical triangle, 128–129

T

10 percent solution, 157–159

Three Advancing White Soldiers candlestick, 54–56

Three Black Crows candlestick, 54–56, 57

Three simple moving average (SMA) filter, 33–35, 69–71

in setup example, 180–181, 182

Trade balance, as trading fundamental, 18

Trade management, 143–160. See also FX markets; Setup examples

arithmetic scaling, 155–157

pressing the trade, 152–155

self-knowledge and, 143–150

success factors and, 181–184

10 percent solution, 157–159

2:1 reward/risk ratio, 150–152

Trading houses, as FX traders, 5

Trend line break patterns, in CCI, 95

Trend trading, 29–30, 59–78

Average Directional

Index/Directional

Movement Index, 71–72

basic questions of, 74–76

Bollinger bands, 72–77

Bollinger bands, in setup examples, 164–167, 170–172

currencies for, 32–36

moving averages, 64–71

trend lines, 60–64

Triangle patterns, 128–132

Triple top and bottom patterns, 117–123

2:1 reward/risk ratio, 150–152

U

United Kingdom:

pound of, 32–33

regulation in, 3

United States, regulation in, 3

USD/CAD pair, 35, 36

USD/CHF pair, 32

USD/JPY pair, 32, 39

V

Volatility stop, in setup example, 167–170

W

Wedge patterns, 132–135

Wilder, J. Welles, 71, 82

Winner Take All (Gallacher), 64

Wood, Ken, 91, 93–95

Z

Zero line reject patterns, in CCI, 95–96