Forex and Stocks Trading: Baby Bird Capital

The Elliott wave theory was discovered by Ralph Nelson Elliott.  According to the Elliott wave principle, market prices follow some recurrent cycles called waves.  Waves are patterns of directional movement. Prices change their dynamics based on crowd behaviour. The Elliott wave principle is predictive in nature. It gives some insight about the probable future direction of the market.  Elliott suggests that there is a five wave pattern. This five wave pattern consists of impulse waves and corrective waves.  There are three impulse waves going alongside the major trend and two corrective waves going against the major trend. Elliott wave guidelines • Wave 1, wave 3 and wave 5 determine the direction of the market • Wave 2 and wave 4 are counter waves to wave 1, wave 3 and wave 5 • Wave two never retraces more than 100% of wave one. • Wave 3 is usually the largest and most powerful • Wave four does not overlap with the price territory of wave one.  Elli...

A motive wave is a price movement in the direction of the main trend.  Motive waves always subdivide into five smaller waves. Guidelines for identifying Motive waves correctly • Wave two never retraces more than 100% of wave one • Wave four never retraces more than 100% of wave three • Wave three is often the longest and most powerful wave • Wave three always travels beyond the end of wave one Sub waves of Motive waves are always denoted by numbers There are two types of motive waves: Impulse and Diagonal waves Impulse waves This is the most common type of motive wave and they are easy to identify In this type of wave, wave four never enters wave one`s price territory. The primary objective is to propel the market to move in a certain direction, hence, wave 1, 3 and 5 are the motive waves and sub wave 3 is specifically an impulse wave. Wave Extensions Most impulse waves contain Extensions An extension is usually present in only one of the three impulse waves 1, 3 and 5. Ex...

There are twenty one corrective a, b, c patterns. These patterns are made up of three formations: Zigzag formation, the Flat formation and the Triangle formation. The Zigzag formation A single zigzag pattern is a simple three wave pattern labelled A-B-C. The sub waves of a zigzag follow a 5-3-5 pattern Wave B never retraces more than 100% of wave Correction patterns can sometimes have wave extensions. When the Zigzag pattern is extended it can form a double zigzag or a triple zigzag.  These patterns are separated by a 3 wave pattern.  A zigzag pattern is usually found in wave two. The Flat formation The difference between a flat formation and a zigzag is that the sub wave sequence of a flat is 3-3-5. Wave B usually retraces up to the start of wave A and wave C does not move beyond the end of wave A.  Flats are more common in fourth waves. A flat wave extension may result in the formation of a double flat. Triangles Triangles contain 5 waves that are labelled a-b-c-d-e. T...

You're doing it alone Remember when you were in school? You had a teacher for every subject to learn from. Outside of classes, you had a coach (whether it’s football, basketball, and etc.) to provide feedback so you can improve your game. And even when you’re “chasing” the girl of your dreams, you have buddies (who are experts at the game), giving you advice, tips and tricks on how to win her over. Clearly, at every stage of your life, you had someone experienced to give you feedback, advice, and knowledge. But when it comes to your trading career you’re doing it alone. And by figuring things out yourself, you face questions like… “Does this trading strategy work? Do I have an edge in the markets? How do I know what works and what doesn’t?” Now, I’m not saying you can’t make it on your own. You can… with hard work, determination and paying HUGE fees to Mr Market. But imagine how much time, effort and money you’ll save if you have a mentor. In case you’r...

Peaks indicated times of intense speculation and troughs indicated times of low interest in the market, when speculation was not high on people's agenda.  ~John Bollinger.  What are Bollinger Bands? Bollinger bands are technical analysis indicators, developed by John Bollinger that are used to determine the trend and the momentum of a trade.  Technical analysis using this indicator is based on the fact that prices tend to stay within the upper and lower boundaries of a band. How to insert Bollinger bands indicator into MetaTrader5 Step 1 Go to Insert >> Indicators >> Trend >> Bollinger Bands Step 2 Customize the parameters of the Bollinger bands. Period The line in the middle of the Bollinger bands is usually a simple moving average set to a period of n days. The default setting is 20 days, however, that can be adjusted to suit an individual`s trading style. Deviations It measures the volatility of the price. Bollinger Bands  are plotted ...

Currency rates are constantly changing because the supply and demand on an asset are unstable as they change greatly due to a number of factors. Every trader`s main aim is to make profit from purchasing or selling an asset. Pattern analysis is a tool that helps traders determine the dominating trend at a certain time. There are two types of chart patterns and these are Reversal patterns and Continuation patterns. Reversal Patterns Reversal patterns act as a signal that the trend will change. The first signal of a trend reversal is the breaking of a major trend line. The bigger the pattern formed the more likely it is that there will be a more significant movement in the market. There are five types of trend reversal patterns and these are: Head and shoulders This chart pattern consists of three peaks that are known as the head and shoulders as shown in the image above. The head is always formed by a higher peak than both of the shoulders. The last price upward movement builds the nec...

This Japanese indicator is also known as the Ichimoku Kinko Hyo, which is translated to one look equilibrium chart. It is used to determine the potential support and resistance areas, determine the market trend, gauge momentum and identify entry levels.   The Ichimoku cloud consists of five plots: Tenkan-Sen (Turning line) On a daily chart, it is calculated based on the highest high and lowest low of the previous nine days. On the chart above, the turning line is the red line. It is the fastest and the most sensitive line.  Calculation: (9 period high + 9 period low)/2 2. Kijun-Sen (Standard line) This is calculated with the average of the highest high and lowest low of the previous 26 periods. On the chart above, the standard line is the blue line. Notice that it also follows the price action fairly close. Consider the relationship between the Turning Line and the Standard Line as a relationship similar to a 9 day moving average and a 26 day moving average.  Calculation...

What are Synthetic Indices? Synthetic Indices are markets that are simulated.  They behave like real monetary market however their behaviour is created from the use of randomly generated numbers.  These arbitrary numbers are produced through a computer program.  For transparency issues, brokers can't affect or foresee which numbers will be produced and henceforth can't swindle the market.  On which platform would you be able to trade Synthetic Indices?  Deriv.com which was fomerly known as Binary.com offers a MT5 Synthetic record, which can be created from the MetaTrader tab. MetaTrader is the most widely used platform for trading a wide variety of assets including indices, currencies, stocks  and  commodities. The software is licensed to foreign exchange brokers who provide the software to their clients.  What type of Synthetic indices can you trade? There are three sorts of Synthetic Indices accessible on MT5, namely: Volatility Indices Crash Bo...