Let us review a moment here Wednesday, January 19, Dollar Weakness Persists, British Pound At Risk For Reversal By David Song, Currency Analyst 19 January Housing Starts Slump, Building Permits Surge Higher The U. In turn, the euro-dollar may consolidate going into the end of the week, and the pair may trend sideways ahead of the EU Summit in February as investors weigh the prospects for future policy. Nevertheless, Portugal auctioned EUR B in month bills yielding 4. However, as the region faces an uneven recovery, the uncertainties surrounding the economic outlook may continue to bear down on the exchange, and the European Central Bank could be forced to delay its exit strategy further as it aims to encourage a sustainable recovery. As European policy makers maintain a lackadaisical approach in addressing the sovereign debt crisis, the euro remains at risk of facing additional headwinds over the coming months, The British Pound advanced to a high of 1. Claims for unemployment benefits unexpectedly slipped 4. As growth and inflation accelerates, the British Pound may continue to retrace the decline from back in November, and the Bank of England may see scope to start normalizing monetary policy later this year as interest rate expectations gather pace. However, the recent rally may taper off over the coming days as the relative strength index approaches overbought territory, and we should see a small reversal in the exchange rate as long as the RSI holds below As market participants diversify away from the greenback, the U. As the region copes with a depressed housing market, the Fed is widely expected to support the real economy over the medium-term, and the central bank may see scope to expand monetary policy further as growth and inflation remains subdued. Posted by jang at 9: Sunday, January 13, Most com occupations have a learning curve. Doctors, lawyers, criminals, etc. Novice traders often believe they are immune to such time intensive studies. Don't fall prey to such ignorance - study the markets, put in serious chart time, read and learn from those that are winning. Your system has a 30 pip stop loss. The maximum you should risk on any one trade is a dollar per pip. The market will forgive a lot of things - bad trades, bad days even bad weeks but without the capital to withstand the drawdown your trading career with be short lived. Additionally - these systems are only known by a hand full of successful traders. Your system should do just the opposite. I use pivot points, psychological levels and trend line breaks because large institutions follow these levels. As a retail trader your goal should be to pick up the pennies in front of the steam rollers. Keep Occam in mind when adopting any trading system. Leave the over complicated systems to the guys at Long Term Capital. It's open 24 hours a day 5 days a week. This is great for trend analysis but not for trading. Don't let these extended hours fool you. Only the biggest players trade during the prime hours That's where the retail trader lives. Since we only trade the EURUSD we only trade between 2: This time period covers the European open and close, the open of the US session and the overlap between the US session and the European session. Hope isn't a strategy. Once you adopt a trading strategy that fits your trading style stick to it. Leave your ego at the door when you begin your trading day. This is one of the most difficult things to overcome. The old adage plan your trade and trade your plan is very important. When you trade outside your plan you will lose. When you can double your demo account you are ready to trade real capital. Additionally - after your double your demo account trade the first few months of you real capital using micro-lots where each pip equals a small dollar amount. This will help ease the emotional impact of trading real capital. These exist for a reason. Use long term trend analysis to determine market direction. When you trade with the trend your chances of success are greatly enhanced. While this may seem like a relatively small goal very few traders can achieve this month after month. Did you follow your trading plan? Was your analysis accurate? At the end of the week spend some quality time looking over the trades you placed during the previous week. How many trades did you take? Are you over trading? Many traders find it advantageous to keep a journal of their trades and their thought process for taking or not taking the trade. In a very short time you will see patterns emerge that will aide you in fine tuning your trading. Intra-day traders usually use a pip stop. After you've adopted a system and spent hours watching the chart you will know where your stop should be. Once you've settled in on a stop never move it. One more time - never move your stop! Remember that capital accumulation is secondary to capital preservation. On the other side of the equation set profit targets prior to entering your trade. Utilizing pivot points will always provide you with realistic profit targets. Posted by jang at The 5 Steps to becoming a trader Step One: This is the first step you take when starting to look into trading. Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be? Price either moves up or down - what's the big secret to that then - lets get cracking! Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. You take lots of trades and lots of risks. When you enter a trade it turns against you so you reverse and it turns again. You may have initial success, and thats even worse - cos it tells your brain that this really is simple and you start to risk more money. You try to turn around your losses by doubling up every time you trade. Sometimes you'll get away with it but more often than not you will come away scathed and bruised You are totally oblivious to your incompetence at trading. This step can last for a week or two of trading but the market is usually swift and you move onth the next stage. Step Two - Conscious Incompetence Step two is where you realise that there is more work involved in trading and that you might actually have to work a few things out. You consciously realise that com are an incompetent trader - you don't have the skills or the insight to turn a regular profit. You now set about buying systems and e-books galore, read websites based everywhere from USA to the Ukraine. During this time you will be a system nomad - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator you'll be ecstatic that this is the one that will make all the difference. You'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them because you are so sure you are right. You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount because you've studied and you don't make that, you know as much as they do and they must be lying. But they're in there day after day and their account just grows whilst yours falls. You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and overtrade your account even though everyone says you are mad to - but you know better. You'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either. You might even approach a 'guru' like Rob Booker or someone on a chat board who promises to make you into a trader usually for a fee of course. Whether the guru is good or not you wont win because there is no replacement for screen time and you still think you know best. This step can last ages and ages - in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer 3 years. This is also the step when you are most likely to give up through sheer frustration. By the way - they are real figures, not just some ive picked out of my head - forex when you get to 3 years in the game dont think its plain sailing from there. Sure i guess there will be exceptions to the rle - but i havent met any yet. Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now its in your blood One day - im a split second moment you will enter stage 3. Step 3 - The Eureka Moment Towards the end of stage two you begin to realise that it's not the system that is making the difference. You realise that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right You start to read books on the psychology of trading and identify with the characters portrayed in those books and finally comes the eureka moment. The eureka moment causes a new connection to be made in your brain. You suddenly realise that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins. Because of this revelation you stop taking any notice of what anyone thinks - what this news item will do, and what that event will do to the markets. You become an individual with your own method of trading You start to work just one system that you mould to your own way of trading, you're starting to get happy and you define your risk threshold. You start to take every trade that your 'edge' shows has a good probability of winning with. When the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realise that the trade is bad you close it. The next trade or the one after it or the one after that will have higher odds of success because you know your system works. You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures knowing that one bad trade does not a poor system make. You have realised in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what as you know the probabilities stack in your favour. You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile. You weren't ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market. Step 4 - Conscious Competence You are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it looses and when you're on a loser you close it swiftly with little pain to your account You are now at a point where you break even most of the time - day in day out, you will have weeks where you make pips and weeks where you lose pips - generally you are breaking even and not losing money. You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently. You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 forex next and so on. You are running on autopilot. You start to pick the really big trades and getting pips in a day doesnt make you any more excited that getting 1 pips. You see the newbies in the forum shouting 'go dollar go' as if they are urging on a horse to win in the grand national and you see yourself - but many years ago now. This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account. You're a star in the trading chat room and people listen to what you say. You recognise yourself in their questions from about two years ago. You pass on your advice but you know most of it is futile because they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two, but a few will. Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that. Finally you grow out of the chat rooms and forex a few choice people who you converse with about the markets without being influenced at all. All the time you are honing your methods to extract the maximum profit from the market without increasing risk. Your method of trading doesnt change - it just gets better - you now have what women call 'intuition' You can now say with your head held high "I'm a currency trader" but to be honest you dont even bother telling anyone - it's a job like any other. I hope youve enjoyed reading this journey into a traders mind and that hopefully youve identified with some points in here. The losers are those who wanted to 'get rich quick' but approached the market and within 6 months put on a pair of blinkers so they couldnt see the obvious - a kind of "this is the way i see it and thats that" scenario - refusing to assimilate new information that changes that perception. Im happy to tell you that the reason i started trading was because of the 'get rich quick' mindset. Just that now i see it as 'get rich slow' If youre thinking about giving up i have one piece of advice for you Ask yourself the question "how many years would you go www college if you knew for a fact that there was a million dollars a year job at the end of it? Take care and good trading to you all. Sunday, December 30, Weak New Homes Sales Pushes the US Dollar Lower By dailyFX The U. Dollar continued to lose ground in the currency market as it fell against nearly all of the majors following data New Home sales which fell to its lowest in more that 12 years. The only currency that did not appreciate against the US dollar was the New Zealand dollar which climbed into the 0. The release of the New Home Sales data by the Commerce Department had a crushing effect as sales unexpectedly fell by 9 percent hitting a 12 year low, indicating that the worse of the credit and housing crisis is yet to be over. The release shed light on the continuing weakness of the housing market as inventory of new homes continue to accumulate with prices on a steady decline, causing growth prospects to be lowered for New Home Sales have decline by Amid the disappointing New Home Sales figures, the Chicago Purchasing Managers Index told a different story as it rose above expectation, showing significant accumulation of strength within the manufacturing sector. As a result, we anticipate the housing market to continually deteriorate until it hits rock bottom, and do not expect to see any signs of improvement for the housing industry until then. The stock markets showed minor gains through a volatile trading session amid negative housing data, with 14 out of the 30 DJIA components declining, led by General Motors Corp losing 3 percent, followed by Citigroup which saw prices decline by 1. US Treasuries enjoyed a second day of gains as new housing data sent yields plummeting and prices soaring. The past two days of negative data has sent risk adverse investors to seek shelter behind risk free assets as political unrest along with sluggish growth prospects deferred investors from jumping into riskier investments. The confusion and potential danger of the current economic and political situation has caused many to speculate that the Federal Reserve will lean towards another rate cut in January, further helping to increase the demand for US Treasuries. Due to the current economic situation along with the volatile securities market, many investors are moving their funds into the safe haven of US Treasuries, and we expect the trend to linger into the beginning of the Posted by jang at 7: Tuesday, December 25, Key Themes for - What do Economists Expect for the New Year? With significant variance in the range of forecasts on offer and fast changing perceptions of risk, financial markets could be in for a prolonged period of volatility. Key themes for include, have central banks averted a massive rise in corporate defaults or will further cash injections be required as losses continue to be disclosed? Will the US housing market recover? Will the UK housing market collapse? Is the UK retail sector in for a tough period? Will commodity markets and emerging market equities come off the boil? Are markets too complacent about inflation risk, so will bond yields rise in the major economies? Central Banks Likely to Succeed Bold Action: Central Banks Likely to Succeed Coordinated central bank actions to ease liquidity strains in money markets in our view will ultimately have significant positive implications for financial markets and the economy. Yet financial markets have yawned at the moves. Liquidity pressures emerged here and in Europe from two sources. One is the overhang of uncertainty about the value of collateral and the economic outlook. A second is the reintermediation of the banking system, which still has further to go. Banks and securities firms have become risk averse, hoarding cash and demanding a premium to lend in the interbank market. At the beginning of this week, that premium was running about bp. It is still the clash between relatively strong economic figures and the long shadow of the credit crisis that is affecting business confidence. While actual economic numbers have been fine, albeit with a few exceptions, the credit crisis intensified in November and December, and it is probably this development that has pulled confidence a little further down. The general picture of business confidence is that growth is around or a little above trend. Full Story Key Themes for Trevor Williams, Chief Economist at Lloyds TSB Financial Markets promises to be another interesting year. Full Story a Year to be Remembered: In this edition of the Weekly Bottom Line, we take a look back at a year that was — to say the least — memorable. The outbreak of the so-called credit crunch this past summer has prompted investors to look at risk through a new lens with enormous implications for the trajectory of prices of bond, equity, commodities and foreign exchange. Full Story Eight Things to Watch in John E. Chief Economist, Wachovia As this tumultuous year draws to a close we thought it appropriate to outline some key themes we see for the coming year. Much of this draws from our Annual Outlook, which is available on our web site. This year is ending with lots of talk about the possibility of recession. The R word first made its way back into the economic discussion back in www February, when Alan Greenspan addressed a group of investors in Japan and stated that he saw a one in three chance of the U. By the end of the year, he had upped his odds to a chance of a recession in the next year. Full Story Other Pre-screened Independent Contributors J-Chart J-Chart is an innovative charting and bias-neutral market analysis tool. Based on its proprietary theoretical concept and display of market price action, J-Chart provides a much clearer and unique insight into the market than conventional charting methods. This innovative charting and market analysis tool is designed to visualize market price action that constructs unique price patterns called "Equilibriums". Based on its "non-fixed time frame" concept and "Kinetic Equilibrium" application, J-Chart users are able to forecast markets' future movements with high accuracy. Posted by jang at 8: Over the past 6 years, the financial markets have become irrationally exuberant. Record low volatilities in the foreign exchange market sparked a vigorous appetite for risk, one that caused money market and state funds, which are suppose to be extremely conservative to be exposed to subprime risk. The hunt for yield and the belief that the good times would continue tempted many managers to look to increase their returns by investing in mortgage backed securities. The availability of cheap and easy money also led many mangers to leverage their bets which escalated their risk. Unfortunately the problems in the subprime sector blew up in and everyone learned the consequences of taking excess risk, the hard way. The lesson that money managers and investors learned in is to be more selective with their investments, be less exposed to risky assets and more conservative with leverage. For the foreign exchange market, this will have a direct impact on carry trades. The primary reason why carry trades have thrived over the past few years is because volatility fell to a record low. They have now doubled from their June levels which means that carry trades will no longer be easy one way bets. The multi-decade highs that we have grown accustomed to will be much more difficult to achieve as everyone becomes more careful with their investments and strive not to repeat the mistakes made in Also, with the US dollar falling to a record low against the Euro, currencies have become water cooler talk. The general public has become much more aware of how currencies can affect their daily way of life and this is a lesson that will remain with them for the foreseeable future. Countries around the world and the financial markets have become much more intertwined, or in other words globalization has also been taken to another level this past year. Sovereign wealth funds have become a force to be reckoned with. Saudi Arabia also just announced that they are setting up their fund which is a big reason why we expect this trend to continue. As many of these government funds invest in US financial firms, it will help the US dollar and bring the world much closer together. The FX market is closed on Tuesday and Wednesday. Although there are some housing and manufacturing numbers on Wednesday, there are no major US reports until Thursday. He has never wavered to political pressure and has always tried to prepare the markets months in advance for any potential change to interest rates. As the ripple effects of the US subprime problems caused a major liquidity crisis in the credit markets, the ECB was the first central bank to respond with a massive liquidity injection. According to the FT, for a central bank that is not yet 10 years old, the ultimate compliment was paid when the venerable US Federal Reserve and Bank of England followed suit. This morning, he continued to remind the markets that the ECB will be focusing on inflation and their desire to contain it will not be distracted by the interest rates cuts from the US and Federal Reserve. Visit the Euro Currency Room for resources dedicated specifically to the Euro. British Pound Falls to Record Low Against the Euro In the fifth consecutive day of weakness, the British pound fell to a record low against the Euro and a 4 month low against the US dollar. With most traders out for the holidays, the trends that began last week have continued well into this week. No one is willing to stick their hand out and start picking a bottom in the British pound this late in the year. Instead many traders are probably happy to end the breakeven and will take this opportunity to collect themselves before start over again in January. As UK economic data continues to show signs of weakness, there are no buyers left in the market. This morning, Hometrack reported 0. They also predict that the number of closings will fall by 17 percent and that prices will rise by just 1 percent next year. The housing market has been the back bone of UK growth for many years and now that this sector of the economy is crumbling, growth could suffer greatly in Visit the British Pound Currency Room for resources dedicated specifically to the Euro. Rally in Stocks Drives the Yen Lower and Australian, New Zealand and Canadian Dollars Higher Since Friday, the Dow has rallied points and that strength has helped to take the Australian, New Zealand and Canadian dollars higher against both the Japanese Yen and US Dollar. Commodity prices are basically unchanged on the day which indicates that the fluctuations of these currency pairs are largely driven by risk appetite. Of course that too is distorted given the lack of liquidity across the financial markets today. Either way, the Dow and USDJPY are breaking their day SMA which suggests that these gains should continue for the remainder of the week. There are Japanese data scheduled for release Monday and Tuesday night. These reports which include the BSI manufacturing index, the corporate service price index and supermarket sales will not be market moving. Also, the BoJ minutes will simply reinforce what the market knows already, which is that interest rates in Japan will remain low for a very long time. Visit the Japanese Yen Currency Room for resources dedicated specifically to the Euro. Tell us what you think on the Canadian dollar Forum. Posted by jang at 1: Sunday, November 04, GFT Daily Market Commentary Forex Market Commentary for November 5, by Cornelius LucaGFT Daily Market Commentary The dollar fell across the board on Friday despite an exceptional, if unsustainably strong, non-farm payrolls report. The dollar is out of control, so stay short with a tight stop. However, it should first enjoy a temporary reprieve. The pair is very overbought, but stay with it until there is some proof it will go down. Immediate resistance is seen at 1. Above it, strong resistance is seen at 1. Next resistance is at 1. Distant Immediate support is at 1. Only a break below 1. Mixed to slightly higher MEDIUM-TERM: Expect mixed trading to persist. Initial support comes at There is a distant pivot low at The pair is severely overbought, but hold long positions with a tight stop. Initial resistance is at 2. The next level is 2. Immediate support is seen at 2. Next level is at 2. Hold short positions in this oversold pair until there is a confirmed bottom. Initial resistance is at 1. Mixed with more downside risk MEDIUM-TERM: Posted by jang at 6: Friday, November 02, US Dollar Rebounds, Dow Falls Points: How are Traders Positioned for Payrolls? Once again, bond traders got it right. Yesterday, even though bond yields increased the stock market rallied and the US dollar sold off. The reaction in the equity and currency markets suggested that traders thought the Fed was more dovish than hawkish while the reaction in bonds suggested otherwise. Today, the equity and currency markets have finally caught up with the bond market, with the Dow down over points and the US dollar up across the board. Economists beg to differ however and Fed fund futures indicate that there is still a greater than 50 percent chance for a December rate cut. In the immediate future, equity and currency traders are both positioned for a strong payrolls report. With the market so divided, NFPs could decide not only who is right, but also whether the US dollar has hit a bottom. The market is currently looking for 82k jobs to have been created in the month of October. However following the sharp increase in the ADP report and the drop in layoffs according to Challenger, the whisper number is far higher k. If job growth is anywhere near k, expect a sharp dollar rally, but if it is below 90k, speculation of a December rate cut will return. The arguments in favor of strong payroll growth far outweigh the arguments supporting weak growth. Not only did private sector payrolls increase materially last month and layoffs dropped, but the Hudson Employment index, Monster. We do not get the service sector ISM report until Monday, which is after payrolls, but the employment component of the manufacturing ISM report hit the highest level since April. The only reasons why payrolls could be weak is the rise in jobless claims and fall in consumer confidence. If the labor market is really recovering, confidence would not be the weakest in 2 years. There are still a lot skeptics out there who do not believe that the US economy has seen its worst and it all boils down to what non-farm payrolls will mean for interest rates. If there is a reason for traders to believe that the Fed will continue to lower interest rates, then the current recovery in the US dollar will turn on a dime. Nothing is certain until we see payrolls and even then we need to watch how the market tsd to it. Is the Swiss Tsd Bank Endorsing Carry Trades? The liquidation of carry trades has sent the Swiss franc higher against the US dollar, Euro and British pound, but carry trade related flow may not be the only reason why the Swissie is stronger. After falling to a 21 month low, Swiss manufacturing activity rebounded last month. It is now at Tomorrow, consumer prices are due for release and we expect the weakness of the Swiss franc to drive CPI higher, but that may not be enough to prompt the Swiss National Bank to raise interest rates. SNB board member Thomas Jordan said today that even though they remain vigilant on franc weakness, they do not see any signs of the franc com inflation and rate differential still favors carry trades. Is Jordan telling the markets that it is ok to keep selling francs for carry trade purposes? Perhaps, but when it comes to central bankers, they have been trained to give as little information in as many words as possible. There was no Eurozone data released this morning, but manufacturing PMI will be due for release tomorrow. We will be using PMI as a leading indicator for German factory orders next week. A ustralian, New Zealand and Canadian Dollars All Hit By Carry Trade Liquidation The Australian, New Zealand and Canadian dollars were hit by US www strength, carry trade liquidation and softer commodity prices. The sell-offs have been strong and if non-farm payrolls are as good as we expect, there could be continuation. There will be better opportunities to buy these currencies once they have stabilized. Economic data from Australia was better than expected; retail sales and manufacturing PMI both increased significantly. The trade deficit however widened, but that should take backseat to the other data. Canadian employment will be released tomorrow. After the sharp rise in September, employment growth is expected to slow. British Pound Hit By Dollar Weakness Not Softer Economic Data Although it would be easy to say that the weakness in the British pound today was attributed to the softer manufacturing PMI and CBI Distributive Trades report, that is not the case. The pound actually rallied after the numbers even though manufacturing conditions were the slowest in a year and distributive trade, which is a reflection of retail sales dropped from 12 to 10 last month. Construction sector PMI is due for release tomorrow and that is expected to be weak as well, but the price action of the British pound will be determined by US non-farm payrolls and not UK economic data. Dow Meltdown Leads to Carry Trade Liquidation With the US stock market falling points, it would be surprising if the Japanese Yen crosses did not melt down today. The correlation between these assets remains strong and we expect further weakness in the Dow to lead to further weakness for carry trades. Tuesday, September 18, Using stock market data for the Dow Jones Industrial Average DJIA as his main research tool, Elliott discovered that the ever-changing path of stock market prices reveals a structural design that in turn reflects a basic harmony found in nature. From this discovery, he developed a rational system of market analysis. Under the Wave Principle, every market decision is both produced by meaningful information and produces meaningful information. As the forms are repetitive, they have predictive value. He named, defined and illustrated the patterns. He then described how these structures link together to form larger versions of the same patterns, how those in turn are the building blocks for patterns of the next larger size, and so on. His descriptions constitute a set of empirically derived rules and guidelines for interpreting market action. The patterns that naturally occur under the Wave Principle are described below. The Five Wave Pattern In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4, as shown in Figure 1. The two interruptions are apparently a requisite for overall directional movement to occur. At any time, the market may be identified as being somewhere in the basic five wave pattern at the largest degree of trend. Because the five wave pattern is the overriding form of market progress, all other patterns are subsumed by it. Wave Mode There are two modes of wave development: Impulsive waves have a five wave structure, while corrective waves have a three wave structure or a variation thereof. Impulsive mode is employed by both the five wave pattern of Figure 1 and its same-directional components, i. Corrective mode is employed by all countertrend interruptions, which include waves 2 and 4 in Figure 1. Thus, the two modes are fundamentally different, both in their roles and in their construction, as will be detailed in an upcoming section. The Complete Cycle A five-wave impulse whose subwaves are denoted by numbers is followed by a three-wave correction whose subwaves are denoted by letters to form a complete cycle of eight waves. The concept of five waves up followed by three waves down is shown in Figure 2. The eight-wave cycle shown in Figure 2 is a component of a cycle of one degree larger, as shown in Figure 3. As Figure 3 illustrates, each same-direction component of an impulsive wave, and each full cycle component i. It is crucial to understand an essential point: Figure 3 not only illustrates a larger version of Figure 2, it also illustrates Figure 2 itself, in greater detail. Thus, waves of any degree in any series always subdivide and re-subdivide into waves of lesser degree and simultaneously are components of waves of higher degree. We can use Figure 3 to illustrate two waves, eight waves or thirty-four waves, depending upon the degree to which we are referring. The Essential Design Now observe that within the corrective pattern illustrated as wave in Figure 3, waves a and cwhich point downward, are composed of five waves: Similarly, wave bwhich points upward, is composed of three waves: This construction discloses a crucial point: The mode of a wave is greatly determined not by tsd absolute direction but by its relative direction. Aside from four specific exceptions, which will be discussed later in this booklet, waves divide in impulsive mode five waves when trending in the same direction as the wave of one larger degree of which it is a part, and in corrective mode three waves or a variation when trending in the opposite direction. Waves a and c are impulsive, trending in the same direction as wave. Wave b is corrective because it corrects wave a and is countertrend to wave. In summary, the essential underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, at all degrees of trend. Neither does Figure 3 imply finality. As before, the termination of yet another eight wave movement five up and three down completes a cycle that automatically becomes two subdivisions of the wave of next higher degree. As long as progress continues, the process of building to greater degrees continues. The reverse process of subdividing into lesser degrees apparently continues indefinitely as well. As far as we can determine, then, all waves both have and are component waves. Variations on the Basic Theme The Wave Principle would be simple to apply if the basic theme described above were the complete description of market behavior. However, the real world, fortunately or unfortunately, is not so simple. The rest of this chapter fills out the description of how the market behaves in reality. Wave Degree All waves may be categorized by relative size, or degree. Elliott discerned nine degrees of waves, from the smallest wiggle on an hourly chart to the largest wave he could assume existed from the data then available. He chose the names listed below to label these degrees, from largest to smallest: Grand Supercycle Supercycle Cycle Primary Intermediate Minor Minute Minuette Subminuette Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor and sub-Minor waves. It is important to understand that these labels refer to specifically identifiable degrees of waves. By using this nomenclature, the analyst can identify precisely the position of a wave in the overall progression of the market, much as longitude and latitude are used to identify a geographical location. Wave Degree 5s With the Trend 3s Against the Trend Supercycle I II III IV V A B C Cycle I II III IV V A B C Primary Intermediate 1 2 3 4 5 a b c Minor 1 2 3 4 5 A B C Minute i ii iii iv v a b c Minuette 1 2 3 4 5 a b c. Welcome to LiteForex… To register click http: The LiteForex project offers you the unique opportunity to enter the Forex market with just ONE DOLLAR. All transactions on LITE group accounts are effected in US cents, so you can trade by 0. INTEREST INCOME We also pay competitive interest income on the balance amount not invited in trading on a monthly basis. INSTANT EXECUTION For placing trade orders we employ Instant Execution technology. They just open and close positions at the price they see on the monitor. 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Paul Zanker, professor of art history, Scuola Normale Superiore, Pisa.