Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
This Invisible Tech Stock Threatens Amazon with 800,000+ Online Stores - 21st Nov 19
Crude Oil Price Begins To Move Lower - 21st Nov 19
Cracks Spread in the Precious Metals Bullion Banks’ Price Management System - 21st Nov 19
Why Record-High Stock Prices Mean You Should Buy More - 20th Nov 19
This Invisible Company Powers Almost the Entire Finance Industry - 20th Nov 19
Zig-Zagging Gold Is Not Necessarily Bearish Gold - 20th Nov 19
Legal Status of Cannabis Seeds in the UK - 20th Nov 19
The Next Gold Rush Could Be About To Happen Here - 20th Nov 19
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

How to Find and "Hook" Potential Trade Setups

InvestorEducation / Learn to Trade Jul 12, 2011 - 12:14 PM GMT

By: EWI

InvestorEducation

Best Financial Markets Analysis ArticleTrading using technical indicators -- such as the MACD, for example, Moving Average Convergence-Divergence -- can do one of two things: help you or hinder you.

Using them as a forecasting method alone can be about as predictable as flipping a coin. But when you combine them with other forms of technical analysis (i.e. the Wave Principle), the same MACD can be your new best friend.


Technical indicators are meant to do exactly what the name implies: "indicate" that a buy or sell signal may be in place. (Don't confuse "indicate" with "guarantee": They are not called "technical guarantors" for a reason.)

Elliott Wave International's Futures Junctures editor Jeffrey Kennedy shows you how he uses technical indicators to his advantage in his FREE eBook, The Commodity Trader's Classroom:

"Rather than using technical indicators as a means to gauge momentum or pick tops and bottoms, I use them to identify potential trade setups."

Jeffrey goes on to describe his favorite indicator, the MACD:

"Out of the hundreds of technical indicators I have worked with over the years, my favorite study is the MACD [which] uses two exponential moving averages (12-period and 26-period). The difference between these two moving averages is the MACD line. The trigger or Signal line is a 9-period exponential moving average of the MACD line."

Figure 10-1 gives you an example of the MACD indicator in Coffee futures.

One of the signals of a potential trade setup that the MACD often introduces is what Jeffrey refers to as the Hook. Here's another quote from the free eBook:

"A Hook occurs when the MACD line penetrates, or attempts to penetrate, the Signal line and then reverses at the last moment. In addition to identifying potential trade setups, you can also use Hooks as confirmation. Rather than entering a position on a cross-over between the MACD line and Signal line, wait for a Hook to occur to provide confirmation that a trend change has indeed occurred. Doing so increases your confidence in the signal, because now you have two pieces of information in agreement."

Figure 10-4 gives you an example of the Hook at work in live cattle futures. 

"A Hook should really just be a big red flag, saying that the larger trend may be ready to resume. It’s not a trading system that I follow blindly. All I'm looking for is a heads-up that the larger trend is possibly resuming."

Learn more about other technical indicators that you can use to your advantage, as well as the other important lessons in the FREE 32-page eBook, The Commodity Trader's Classroom. It is filled with actionable lessons you can apply to your trading strategy. Download it right now, instantly, when you create your free Club EWI profile.

This article was syndicated by Elliott Wave International and was originally published under the headline How to Find and "Hook" Potential Trade Setups. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private around the world.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules