Easy false divergence

There are three main false warnings' areas.  These are the first "Elliott wave", the third Elliott wave and the fifth Elliott wave.

The first wave.

According to the market patterns (not price pattern), "the market" moves up or down then pauses before resuming another move.  The market patterns are trend, consolidation and trend.  Besides these, the first impulse is the move that breaks out of the consolidation region.  Before the breakout, no one knows for sure, where the financial asset will be heading.  The first thrust is usually a surprise move and a powerful one.  Many momentum indicators at this stage lag.  Most will fail to catch up with the price's surge.  This omission creates false warnings or distorts many indicators.  "MACD", "RSI", "CCI", ROC, and the slow "stochastic" will fail to reflect the sudden surge in momentum and volatility.  

This lagging phenomenon is the cause of many false disparities during the first move.  The price displays the first higher low or lower high, but these indicators indicate false bullish or bearish disparity at the beginning of a new trend. The rapid momentum and volatility's transformation, and break out move engender visible distortions and false advices. Traders who trade indicators instead of the price itself may lose because of these false indications.

The third wave.

The third wave is an impulse move or a trending phase.  It is essential to understand that a false divergence is the result of lagging indicators.  The price is the number one "indicator". Traders should keep their eyes on the price.  Indicators are useful, but they only give warnings.  There are three things, traders should learn to understand:

1/ the warning,

2/ the signal (given by the price itself),

3/ and the entry point (entry time frame).

Similarly to the first thrust, unconfirmed and unfunded warnings take place in the third "Elliott" stage. The two main reasons are distorted and lagging indicators, missing the point or failing to act in tandem with the financial asset.  Equally, many traders do not understand these indicators therefore, misinterpret their indications.  Trading "tools" do reset themselves after a wild departure from their fair value or after failing to display an earlier price's motion.  During the third impulse, the velocity is immensely strong as the price is trending.  This vertical or diagonal move leads to incorrect readings if one is "trading" the "trading tools" instead of the price.  

The third impulse is a trending period so; traders should apply trending trading systems.  MACD which is a trending "indicator" delivers excellent confirmations during the third phase.

The fifth impulsive action.

Though strong "divergence" does often take place in the fifth phase, false warnings do exist also. Apart from the already stated causes in the first and third wave, there is another phenomenon. It is the fifth wave extension.  It is not possible in this article to analyse the perfect wave extensions ideas.  However, one should remember that, due to the fifth impulse's extension, many momentum indicators usually fail to confirm the extension, thus giving wrong signals.  At the end of the fifth wave, "the market" is considered overbought or oversold, but one should wait for a strong signal after the market is truly overbought or oversold.  Whatever trading "tool", one is using one should confirm all disparity signals by the price itself without rushing or cutting corners.

False signals are repeated in the first and third wave.  However, they are less frequent in the fifth wave. The understanding of the market patterns, the price patterns and the meaning of an up trend or downtrend can help traders in avoiding this unpleasant trading.  It is quite difficult to escape the "Elliott wave" theory; on the contrary, its consideration will allow traders to discern patently erroneous divergences.  In all cases, one must use the five per cent money management rules without neglecting basic "trading" rules.  This article is for educational purposes only.

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A Brief Overview on Foreign Exchange Trading

Investing in the stock exchange has become popular among masses from any parts of the world. The scenario of stock market might have changed with investors ranging from very rich to a middle-class common man, but still today a great percentage of them starts investing without proper knowledge of the entire process and hence incur loss. Common man has become much aware of the trends in the trading market and number of people interested in foreign exchange trading has increased drastically. To know about forex trading strategies one needs years of practice and considerable knowledge about the trading patterns.

There was a time when share market was a familiar term or rather place for only the rich and the famous. The generalized concept that used to prevail was that only those who had enough money in terms of business or property could afford to buy or sell stocks. But even they were unaware of any stock market opportunities and had little or no knowledge how to convert their investments into profits. In those days they did not have the share tips or information to ascertain or predict the movement of the stock market in the future years. Hence the occurrence of profits and losses through investments in the stock markets were considered merely as matter of chances.

In recent times, however we are on the threshold of a new era where the technological progress has immensely affected almost each and every aspects of our day to day life processes, and the changes in the stock markets trading are also quite perceptible. The concept of forex trading online or online trading platform is only introduced recently and investors have been greatly benefited by such innovation in the fields of stock market trading. Better understanding of the trading trends is possible these days with computerized methods and a lot of genuinely updated real time data have helped the process of stock market trading a lot. Investors from any paradigm can now afford to use online forex trading platform to see results that are much more predictable than earlier.

These days forex trading guide is available to guide you through the entire process of foreign exchange trade or how to how to invest in gold. But on a long term perspective, in order to know the entire trading process so as to avoid incurring losses, it is advised to get in touch with a professional broker or doing a technical analysis forex beforehand. With various software and applications, common man can keep a track of the share market changes on a regular basis through currency trading platform. Such software and applications are developed by expert technologists keeping into perspective how the real time information could reach people so that they can take decision on their will whether to buy or sell a particular stock. 

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Want To Learn More About Forex? Read These Tips!

If you're thinking about getting into forex but are feeling intimidated by what you need to do then look no further. When it comes to forex you have to learn as much as you can and apply that knowledge to the best of your ability, knowledge like that here in this article.

Having a written plan that allows you the freedom to take advantage of every opportunity to improve your results in forex trading is an important goal for every trader. Clearly outline your goals with a definite timeline and you will be less likely to just take a shot without thinking things through.

One of the best ways to understand Forex is to understand how well world currencies do against one another. Pay attention to the financial news of different countries and learn exactly how well your particular currency is doing against another. With the right focus and knowledge, you'll learn to spot a win.

Pick one of the big markets when you start trading with Forex. New York, London, Tokyo, Singapore and Germany are all big players in the Foreign Exchange Market. Try to avoid the really small markets. The smallest you should deal with is a market like Hong Kong, holding roughly 4% of the market.
Study the market and learn the basics. There are a lot of people that don't really know what they are doing. Educate yourself by doing some research. Read books by the most successful people in the trading business. Learn how they earned that title. Practice what you learn and customize your plan.

The forex market is not a casino. Do not gamble on long-shot trades. When one is first starting in forex trading, the natural impulse is to make little bets on potentially lucrative but unlikely trades. Having fun by gambling this way rarely pays off and it takes up time that the experienced trader would better use for planning and well-researched trades.

Have take-profit and stop-loss orders in place when you are trading. You must have some kind of exit strategy in place if you plan to be successful in Forex trading. Do not just let things go and hope for the best. You must use these tools as a part of your trading strategy, in order to be successful.

When you decide to Forex trade stick with the trend. To maximize your chances of success, trade with the current trend. If you decide to trade against the trend, it won't hurt you, but it does require more nerves, attention and sharp skills. For best results make your trading decisions based on the current trend.

Know your own tolerance for risk. There is no fool-proof method for successful Forex trading, so it is important that your capital not exceed what you can afford to lose. At the same time, if you have a good cushion for loss, not investing as much as you are able can cost you in profits.

Now that you have a good idea of what you need to do to be successful with forex you should already be thinking of strategies you want to apply towards your goals. With forex you have to take a chance and start somewhere, the only way you're going to see success is if you do just that.

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