If you’re not yet trading with the trend, No worries, this video lesson will help.

It’s been proven that it doesn’t matter if you’re day, swing, or position trading the key is to trade with the trend. Trend trading has been utilized for many years by professionals, intermediates, and novice traders alike who follow the trend with success. But why do they trade the trend and how do they find the trend?

The hardest part…Finding the Trend! The easiest part…Trading the Trend! Take a few minutes and look at this streaming video lesson titled, “Why to Trade the Trend and How to Find the Trend” at the MarketClub Traders’ blog. If the video is not the first entry then scroll down a bit.

Behavioral Finance is a fascinating topic. Although it appears that most of the scholarly research in this field has been directed towards analyzing the behavior of mutual fund managers and other institutional investors (that’s where the research money comes from) we are looking for and do find, from time to time, cognitive research that may be useful for improving your trading skills.

The extract below is not one of them, but still an informative piece for getting a handle on what behavioral finance is all about.

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Nearly all decisions, conclusions and actions people make are formulated in the subconscious brain, Ervolini says. “We help managers understand whether those persistent decisions are taking them farther down the road toward good decisions, or if they lead them astray,” he said.

For investors, the seeds of personal growth are planted in the field of behavioral finance, a discipline that studies the effects of emotions on people’s investment choices. Cabot Research relies heavily on behavioral finance theory to spotlight managers’ foibles. These judgment errors include overconfidence, selling winners too early, and giving themselves too much credit.

Complete article at MarketWatch

With a more than a passing acknowledgment to the wisdom (or lack thereof) of ascribing generalized results to small samples I can say that all the people I know who I have observed to be successful sports gamblers and card players are lousy futures and options traders.

By lousy I mean lose everything in the account on one or two trades even when there may been one or more strings of previously successful trades.

I wondered why that was and if anything useful could be learned from their experience. One characteristic that seemed common was that the gamblers seem to overestimate the possibility of the gain from an option or futures trade while they tended to downplay or perhaps even ignore entirely the risk of loss.

I ascribed this behavior as a carryover from the gambling process. When you make a wager on a sporting event or call a poker hand you are in effect going for broke. So the usual process for the gambler is either win or lose everything every time, and it did not seem so strange that the same psychology would be applied to their options trading. Futures trading is a little different in that you can lose more than the value of your account but in practice your broker will sell you out and help avoid some pain.

That’s all probably interesting but not very informative. I think I may have gotten the insight while I was sorting through some books and picked up “Blink: The Power of Thinking without Thinking.”

Blink introduces us to the power of “thin-slicing.” Thin-slicing is a neat cognitive trick that involves taking a narrow slice of data, just what you can capture in the blink of an eye, or the data from very few scattered samples, and letting your intuition do the work for you.

Take the ‘Love Lab’ at Washington University, where psychologist John Gottman has been thin-slicing the way couples interact since the early 1980s. In no more than 15 minutes of mere observation, Gottman can predict with 90% accuracy whether a couple will be together in 15 years. Or consider how an art expert recently ‘thin-sliced’ a 2500 year-old Greek statue in the blink of an eye and was able to tell it was a fake after a bevy of experts had already confirmed its provenance. Or the retired soldier whose thin-slicing intuition can outwit the super-computers and staff officers of the US Armed Forces.

More appropriate to our example, in a series of drills professional card players “sensed” that a deck of cards was irregular long before they were able to specifically identify and vocalize the irregularity. The professional card players were also able to sense the irregularity significantly faster than other test subjects.

Blink draws from cognitive psychology to explain how our powers of thin-slicing intuition have nothing to do with the supernatural, and everything to do with our naturally evolved ‘adaptive unconsciousness’. Our conscious mind is just the tip of the cognitive iceberg and what we think of as intuition is really the result of unconscious rapid cognition, fast and frugal information processing that goes on subliminally. Thin-slicing harnesses this powerful adaptive unconsciousness, allowing us to make smart decisions based on minimal information and minimal deliberation.

What the gamblers were doing was applying the thin-slicing intuition they had acquired from their successful gambling experience to their futures and options trading. And that is why they got it all wrong.

How do you explain this? A man with a broken hand went to the doctor. The man asked the doctor if it was serious and if the doctor could fix his hand so that he could play the violin. The doctor replied that the damage could be easily repaired and that he could indeed play the violin after the surgery. To which the man replied, “That’s wonderful news because I could not play the violin before the accident.”

The learning experience is that you can indeed trust your trader’s intuition but only after you put in enough time with your trading method to have developed confidence with it. According to Blink that may take much less time than you think, but it also clear that actual, hands-on experience cannot be substituted.

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The Dow dropped 367 points on Friday with all 30 Dow Jones Industrial stocks closing down – a fitting salute to Black Monday 20 years ago. Where were you on October 19, 1987, when the Dow crashed 508 points, losing more than 22% of its value? I was editor of a weekly business journal in Washington, D.C., and I remember reading many financial news stories about a technical analyst named Robert Prechter who had predicted the crash. It was my first inkling that something called Elliott wave analysis could help to forecast market moves.

Pop quiz: At what level did the Dow begin that fateful day? (Hint: A far cry from the recent 14,000+ high, which made this Friday’s drop only 2.6% of its value.)

Answer: On Black Monday, the Dow began the day at 2247 and ended the day at 1739 to record its largest one-day percentage decline.

Bob is still at it, just having released his most recent Elliott Wave Theorist after the markets closed this Friday with an insightful analysis of stocks, oil and inflation. Learn more about how to read his latest analysis in the new Theorist here.

Wanted: Prime Suspect of Housing Market Murder
By Susan C. Walker, Elliott Wave International

Helen Mirren accepted her Emmy award for best actress in the mini-series, “Prime Suspect” with elegance and grace. Just the opposite of the tough detective superintendent character she plays who tracks down murder suspects in England. Who would Jane Tennison pick out as the prime suspect for the murder of the U.S. housing market and the resulting gruesome credit crunch?

Suspect No. 1 – Phil Spector
No – sorry, wrong case, wrong suspect. Spector has been on trial for the murder of a guest at his home (the judge declared a mistrial this week), but Spector has nothing to do with the subprime mortgage fallout and ensuing credit crunch. O.J. Simpson, who stands accused of trying to “recover” his sports memorabilia, is not the prime suspect either. If the crime doesn’t fit, you must acquit.

Suspect No. 2 – Alan Greenspan
Says that he didn’t catch on for a few years that subprime mortgages could create a problem for the economy. As chairman of the Federal Reserve, he let easy credit ride, which facilitated the housing bubble and the subsequent implosion. Could liken his behavior to supplying the gun to a rampaging murderer. Guilty of aiding and abetting, but he’s not necessarily the prime suspect.

Suspect No. 3 – Angelo Mozilo
Angelo Mozilo, CEO of Countrywide Financial (largest mortgage company in the United States), says he kept his staff writing subprime mortgages day and night, because if they didn’t, then home purchasers would just find someone else to give them a low-quality mortgage. Company went from writing 4.6% of its overall mortgages as subprimes and low-documentation loans in 2004 to 8.7% in 2006. Guilty of greed and a poor business plan but not murder.

Suspect No. 4 – S. & P. and Moody’s
Oh, whoops, say these rating agencies, we thought that once you sliced up a BBB security thinly enough and packaged it with other more desirable collateralized debt obligations that we could call it AAA. Did we mislead anybody? Again, aiding and abetting but not a prime suspect.

Suspect No. 5 – Goldman Sachs and other investment banks
Says that their investors wanted higher returns and that collateralized debt obligations spiced up with subprime mortgages served the purpose. And besides, they say, the rating agencies gave them an excellent rating. Guilty of acting like a fence but not the prime murder suspect.

The True Prime Suspect
All of these are worth a look as suspects, but the true prime suspect has neither a first name nor a last. It’s known as “social mood,” and its m.o. is “herding behavior.” That’s our real murderer, the one that quashed the hopes and dreams of those who believed that house prices would always go up. Social mood changed, and with it changed the idea of what were smart financing moves to purchase a house. Suddenly, as house prices began to fall and subprime mortgagees began to default on their loans, the stick house built on low-quality mortgages seemed like a really bad idea.

Who knew? When social mood was positive, mortgage writers pushed people who couldn’t really afford a mortgage into believing they could. Then they sold the mortgages to eager investment bankers who sliced them up into small packages of risk and re-packaged them with less risky securities. Then the ratings agencies gave their stamp of approval: AA? Why not AAA? And eager investors who wanted higher returns bought them up.

But now the game is up. When social mood turns from positive to negative, fear replaces greed, and people begin to see the riskiness for what it is. When social mood changes from positive to negative, markets turn from bullish to bearish. And no one can stop it – not even the Fed.

This is how Bob Prechter, president of Elliott Wave International, describes the phenomenon:

“Like credit inflation, credit deflation is in fact an intricate, interwoven process, whose initial impetus is a change in social mood from optimism toward pessimism. If you are still on the fence about this idea, ask yourself: What changed in the so-called “fundamentals” between June and August? The answer is: absolutely nothing. Interest rates did not budge; there were no indications of recession; there were no changes in bank lending policies; there were no chilling government edicts.

“The only thing that changed was people’s minds. One day sub-prime mortgages were a fine investment, and the next day they were toxic waste. There was no external cause of the change.… According to socionomic theory, the stock market is a sensitive indicator of such changes in mood. This is why The Elliott Wave Theorist has continually said that the financial structure will hold up as long as the stock market rises. A downturn occurred in mid-July, and its consequences in terms of negative social mood are becoming swiftly evident. Remember, C waves (see Elliott Wave Principle, Chapter 2) are when optimistic illusions finally disappear and fear takes over. Sounds like now.” [Elliott Wave Theorist, September 2007]

How To Protect Yourself from the Prime Suspect Who is Still on the Loose

Social mood has turned ugly and is likely to continue its murderous rampage, leaving the policymakers helpless. As analysts Steve Hochberg and Pete Kendall write in The Elliott Wave Financial Forecast: “The Fed does not “inject” liquidity; it only offers it. If nobody wants it, the inflation game is over. The determinant of that matter is the market. When bull markets turn to bear, confidence turns to fear, and a fearful people do not lend or borrow at the same rates as confident ones. The ultimate drivers of inflation and deflation are human mental states that the Fed cannot manipulate.”

What should you do to protect yourself in this time of falling home prices, a powerless Fed and a contracting economy? Bob Prechter wrote one of the best how-to books. It’s his business best-seller, titled, Conquer the Crash, How To Survive and Prosper in a Deflationary Depression. You might want to start there.

Editor’s Note: You can read a FREE 9-page chapter from Conquer the Crash –
You will learn the implications of the massive credit expansion, what triggers the change from boom times to recession, and more.

Susan C. Walker writes for Elliott Wave International, a market forecasting and technical analysis company. She has been an associate editor with Inc. magazine, a newspaper writer and editor, an investor relations executive and a speechwriter for the Federal Reserve Bank of Atlanta. Her columns also appear regularly on FoxNews.com.

First starting in 2003, and repeated thereafter, the NFA issued another Investor Alert discussing the risks of trading in the retail off-exchange foreign currency (forex) market. Since that time, participation in forex trading by retail investors has increased dramatically. There are current 37 active Forex Dealer Members registered with NFA. These 37 firms hold over $800 million in customer funds.

Unfortunately, the amount of forex fraud has also increased dramatically. Since 2001, the Commodity Futures Trading Commission (CFTC) has filed 93 enforcement actions in federal court against hundreds of firms, owners and employees for defrauding over 25,000 customers who lost over $395 million in forex schemes. In addition, NFA has taken enforcement actions against a number of its Forex Dealer Members.

It is critical, therefore, that individuals who are considering participating in the forex market understand the risks associated with this product and conduct due diligence before making any investment decisions.

* Although forex dealers must be regulated, firms and individuals can solicit retail accounts for forex dealers and manage those accounts without being subject to any regulatory requirements. There are currently more than 2,000 such firms and individuals. If you are contacted by one of them, either through a telephone call, an e-mail message or a Web site, find out if they are regulated. If they are not, you may be exposed to additional risks.

* Be aware of investment schemes that promise significant returns with little risk. Be very cautious and closely monitor any investment you do make.

* Because the forex market is volatile, fluctuations in the foreign exchange rate between the time you place the trade and the time you attempt to liquidate it will affect the price of your forex contract and the potential profit and losses relating to it.

* Only a relatively small amount of money can enable you to hold a forex position for much more than the account value. This is referred to as leverage or gearing. If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire initial deposit and the liability for additional losses. For more on forex gearing see our article How To Prosper At Forex Trading - Leverage & The K-Factor

* Forex transactions are not traded on an exchange. Therefore, under the U.S. Bankruptcy Code, your funds may not receive the same protections as funds used to margin or guarantee exchange-traded futures and options contracts, which receive a priority in bankruptcy.

For additional information on retail forex trading, you should visit the National Futures Association (NFA) website.

Lizzie Norton, 53, who runs the Kensington travel agency Ski  Solutions, is an avid collector of vintage ski posters.

So far as we know the actual steps to take to apply the price and time forecasting technique that we fully disclose in our Hurst Trading ebook is not available from any other source, including Hurst’s original work.

You will become a Fibonacci trading expert with what you get from our Fibonacci ebook, because:

* we show you exactly how to apply the three Fibonacci ratio techniques
* we show you the variations on each technique and how and where to apply them
* we show you which ratios are important for each technique
* we show you which pivot points and swings to measure from with each technique
* we show you a secret and amazing technique to know instantly which Fibonacci clusters will become important in the future