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The price at which a trade takes place is the price at which a bull and bear agree to do business. As you continue tossing the coin you decide to keep a record of how many times heads or tails comes up.

When finally prices violate the third fan line it invariably means the trend so monitored has finished and a reversal of the trend is underway. I shall simplify it slightly, as we have not covered some of the terms yet.

Regardless of the indicator you use what you are really studying is the science of human behavior. It can only come down heads or tails.

One way trader’s look to make sense from this seemingly unpredictable sea is moving averages. Market price that has declined too steeply or too fast.

The Breakout Method This is a very common method of trading called the breakout method. For the purpose of this book we shall concentrate on technical analysis.

As you can see from the charts above. In up trends, every time price drops to the up trend line and then resume their advance, the trend line has acted as support to the price up trend.

Stop loss order, which follows the price in a prevailing trend. The rest of the time prices will trade more or less in a side ways range.

Consequently when a trend line of long duration, which has been successfully tested many times, has been violated then an important reversal of trend has likely occurred. Similar to support, a "resistance" level is the point at which sellers take control of prices and prevent them from rising higher.

Different markets, different market cycles and different investor goals will determine the most appropriate time period for which to calculate the moving average. It is essential that trend lines be drawn correctly.

If each day in the market were in fact an independent event then it would be impossible for you to make money from it consistently. If you are in tune with the market sentiment then you can trade this knowledge effectively.

Normally when you look at your charts you only see one price and that price is the bid price. Three Different Trading Methods In this section of the course I want to introduce you to three simple trading tactics.

The opposite is true for the long side. If at S1 the market continues back down to the breakout area then I do nothing.

Regardless of the indicator you use what you are really studying is the science of human behavior. Retracement of prices often reverse when they reach the moving average level.

If you are a very short term trader, then a moving average of as little as three days may be appropriate. Some commonly used ones are Major primary trend monitored by a 40-week (200-day) moving average.

Chasing a market up or down can also offer the potential for greater risk and less return (see below). They illustrate the decaying rate of progress of the trend.

A 200-day moving average eliminates the presence of daily price fluctuations for periods below 200 days. It is also wise to talk with your broker about how they execute your stop.

As you can clearly see from the diagram, the trend line can change slope as the trend may move at different rates and it is mandatory to adjust the trend as necessary. This is my preferred method of trading.

If you are long a security you will sell it in order to close it. One can, but I do not usually, trade the retracement.

You can also at anytime during the trade close the trade by calling your broker or executing the trade on your dealing station. To this end the concept of moving averages is a very useful tool to understand.

The probability of the coin landing heads or tails is exactly 50%. You repeat this simple calculation with each new piece of data.

The bulls think prices will move higher and the bears think prices will move lower. Trend is the easiest and the most difficult thing to understand.

Some brokers execute stops differently. This can confuse new traders as once they are all set up to go with there dealing station and place their first trade they wonder to themselves why did I get filled at a different price from what I saw on my computer screen.

Moving averages are generally calculated using the closing price. As you can see from the diagram below, the trend is moving up.

Different markets, different market cycles and different investor goals will determine the most appropriate time period for which to calculate the moving average. A moving average (MA) is a way to try and eliminate or minimize the fluctuations of the numerical value of price fluctuations we are observing.

Normally when you look at your charts you only see one price and that price is the bid price. One way trader’s look to make sense from this seemingly unpredictable sea is moving averages.

Have a look at the two charts below. However you approach the stop price, it is a level beyond which you are not prepared to give up profit, or where a position slips back to evens or a small loss.

The forex market can have leverage of 1% with some brokerages. Because detailed retrospective studies of their use has shown that the simple moving average statistically outperforms or equals the use of these newer, biased moving averages.

Mathematical procedure to smooth data fluctuations and to assist in determining when to buy and sell. Exiting a Losing Trade The stop loss means that if a security trades a certain amount below or above where you entered the market an order is executed to close your position.

Our job is to recognize trends early, as they emerge from non-trends or as reversals of prior trends. About 30% of the time a security will be in a definite trend.

Trend is the easiest and the most difficult thing to understand. Technical analysis is the study of market action, mainly through the use of charts and indicators to forecast the future price of a security.

Successful investing depends on recognizing the short, medium or long-term trend and their correction (Rallies and Dips) inside the larger trend. Some times the price will just keep going through support and resistance and sometimes it will come back to test its previous support or resistance line.

If you are a very short term trader, then a moving average of as little as three days may be appropriate. Stop below the current price if you are long.

Successful investing depends on recognizing the short, medium or long-term trend and their correction (Rallies and Dips) inside the larger trend. Let’s take a simple example.

In an up trend, as prices come back to the trend line, new increased buying comes into the market and overwhelms the sellers. So when you buy something you pay the offer price.

The longer the trend line has been in effect and the more times it has been successfully tested the more important the trend line becomes. It may diverge for a time but eventually it will come back in line with the main river.

There are three main points that a technical analyst applies. The difference between the bid and offer is called the spread.

The difference between the bid and offer is called the spread. Mathematical procedure to smooth data fluctuations and to assist in determining when to buy and sell.