traders may have to adjust their sleepingschedules to take advantage of increased activity and volatility whentrading non-USD cross-rate currency pairs.
Appendix D: BasicThree-Wave Cycles
The nine three-wave bull cycles with channel lines are as shown inFigure D-1.
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204
Figure D-1 Basic Three-Wave Cycles.
Appendices
Appendix E:Resources
PERIODICALSActive Trader (TechInfo, Inc.): www.activetradermag.com.Futures (Futures Magazine, Inc.): www.futuresmag.com.Currency Trader: www.currencytradermag.com.EForex: www.eforex.net.Euromoney: www.euromoney.com.FX&MM: www.russellpublishing.com/FX&MM/index.html.FX Week: www.fxweek.com.Technical Analysis of Stocks & Commodities: www.traders.com.Traders Journal: www.traders-journal.com.
BOOKSArcher, Michael, and Bickford James, Getting Started in CurrencyTrading (New York: Wiley, 2004).DraKoln, Noble, Forex for Small Speculators (New York: Enlightened,2004).Henderson, Callum, Currency Strategy (New York: Wiley, 2002).Horner, Raghee, Forex Trading for Maximum Profit (New York: Wiley,2005).Klopfenstein, Gary, Trading Currency Cross Rates (New York: Wiley,1993).
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206
Appendices
Lien, Kathy, Day Trading the Currency Market (New York: Wiley,2004).Louw, G. N., Begin Forex (New York: FXTrader, 2003).Luca, Cornelius, Technical Analysis Applications in the Global CurrencyMarkets (Englewood Cliffs, NJ: Prentice-Hall, 2000).Luca, Cornelius, Trading in the Global Currency Markets (EnglewoodCliffs, NJ: Prentice-Hall, 2000).Murphy, John, Intermarket Financial Analysis (New York: Wiley,2000).Murphy, John, Technical Analysis of the Financial Markets (EnglewoodCliffs, NJ: Prentice-Hall, 1999).Reuters, Ltd., An Introduction to Foreign Exchange and Money Markets(New York: Reuters Financial Training, 1999).Rosenstreich, Peter, Forex Revolution (Englewood Cliffs, NJ:Prentice-Hall, 2004).Schlossberg, Boris, Technical Analysis of the Currency Market (NewYork: Wiley, 2006).Shamah, Shani, A Foreign Exchange Primer (New York: Wiley, 2003).Thousands of books have been written on the subject of technicalanalysis. Here are a few with possible topical interest to this volume:Aby, Carroll D, Jr., Point and Figure Charting (New York: TradersPress, 1996).Bigalow, Stephen, Profitable Candlestick Trading (New York: Wiley,2002).Bickford, James, Chart Plotting Techniques for Technical Analysts(Syzygy, 2002).Bulkowski, Thomas, Encyclopedia of Chart Patterns (New York: Wiley,2005).Dorsey, Thomas, Point and Figure Charting (New York: Wiley, 1995).Lindsay, Charles, Trident: A Trading Strategy (New York: Trident,1976).McGee, John, Technical Analysis of Stock Trends (New York: AmericanManagement Association, 2001).Nison, Steve, Japanese Candlestick Charting Techniques (New York:Hall, 2001).Nofri, Eugene, and Nofri-Steinberg, Jeanette, Success in Commodities(New York: Success, 1975).Ross, Joe, Trading by the Minute ( Joe Ross, 1991).
Appendix E: Resources
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Zieg, Kermit, Point and Figure (Greenville, SC: Traders Press),1997.A fine resource is www.traderspress.com.
INTERNETThe amount of information now on the Internet about currencytrading is enormous—a Google search finds over 2.2 millionentries for “Forex”; inclusion herein does not represent anendorsement of any kind. We suggest beginning with one of themajor Portals such as www.goforex.net.
ONLINE BROKERS AND DEALERSwww.abwatley.com/forex/www.ac-markets.com/www.admisi.comwww.advancedfinancialworldwideinc.comwww.akmos.com/www.alphaonetrading.comwww.ancofutures.comwww.apexforex.comwww.alipes.netwww.arcadiavest.comwww.axistrader.comwww.cbfx.comwww.charterfx.comwww.choicefx.comwww.cmc-forex.comwww.cms-forex.comwww.coesfx.comwww.csfb.comwww.currencyconnect.net/www.currencytradingusa.comwww.currencyuk.co.uk/www.currenex.comwww.cytradefutures.comwww.dfgforex.com
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www.directfx.comwww.dukascopy.comwww.eminilocal.comwww.enetspeculation.com/pub/en/defaut.aspwww.etradeprofessional.co.ukwww.fibo-forex.itwww.finanza.saav.bizwww.FlashForex.comwww.forex.comwww.forex.ukrsotsbank.comwww.forexcapital.comwww.forex-arabia.comwww.forex-day-trading.comwww.forexforyou.comwww.forex-mg.comwww.forex-millenium.comwww.forexsolutions.comwww.forextradingusa.comwww.forextradingdirect.comwww.forexsystembroker.comwww.fxadvantage.comwww.fxall.comwww.fxcm.comwww.fxdd.comwww.fxonline.co.jpwww.fxpremier.comwww.fxsol.comwww.fxtrader.netwww.fxtrading.comwww.gaincapital.comwww.gcitrading.comwww.gfsbroker.comwww.gftforex.comwww.ggmk.comwww.gnitouch.comwww.goldbergforex.comwww.guardianfx.comwww.hawaii4x.comwww.hotspotfx.com
Appendices
Appendix E: Resources
www.ifxmarkets.comwww.interactivebrokers.comwww.interbankfx.comwww.invest2forex.comwww.kshitij.com/www.mvpglobalforex.comwww.oio.comwww.pfgbest.comwww.powerforex.comwww.proedgefx.comwww.propfx.comwww.rcgtrader.comwww.realtimeforex.comwww.realtrade.lvwww.refcofx.com/www.rjobrien.comwww.saxobank.com/www.socofinance.comwww.sncinvestment.comwww.spencerfx.comwww.strategybroker.comhttp://www.strikefx.comwww.superfutures.comwww.swissnetbroker.comwww.synthesisbank.comwww.titanfingroup.comwww.tradeamerican.comwww.tradestation.comwww.x-trade.bizwww.zaner.comData
www.ozforex.tradesecuring.com/misc/ozchart.aspwww.csidata.comwww.forexcapital.com/database.htmwww.olsendata.comwww.disktrading.is99.com/disktradingwww.cqg.com/products/datafactory.cfmwww.datastream.com
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210
www.tenfore.comwww.dukascopy.comwww.netdania.comwww.pctrader.comwww.csidata.comwww.ebs.com/products/market-data.aspwww.infotecnet.comwww.comstock-interactivedata.com/index.shtmlCharts
www.fxtrek.comwww.esignal.comwww.forex-markets.com/www.forexcharts.com/www.moneytec.comwww.global-view.com/betawww.fxstreet.comwww.forexdirectory.netwww.forex-markets.comPortals, Link Pages, and Forums
www.moneytec.comwww.goforex.comwww.forexsites.comwww.investorsresource.infowww.global-view.com/betawww.fxstreet.comwww.forexdirectory.netwww.forexvision.comwww.currencypro.comwww.forexcentral.netwww.forexpoint.comwww.piptrader.comwww.forex-registry.com
Appendices
Appendix E: Resources
Software Development
www.snapdragon.co.ukwww.fxpraxis.comPerformance Evaluation
www.parkerglobal.comwww.marhedge.comwww.barclaygrp.comProfessional and Regulatory
www.aima.orgwww.cftc.govwww.nfa.futures.orgwww.mfainfo.orgwww.fiafii.org
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IndexAccumulation phase, 64Activity oscillator, 166Analysis of Time Series: An Introduction(Chatfield), 26Analytical Theory of Heat (Fourier), 61Archer, Michael D., 95ARIMA model, 25Ascending triangle, 20Ask, 6Ask price, 6Autoregression, 25–26Autoregressive integrated moving average(ARIMA) time series model, 25Banking hours, global, 201–202Base currency, 4Basis MA index, 28Bat pattern, 91–92Bear connector, 131Bear cycle, 105–106, 115Bear impulse, 131Beta, 62Beveridge, W. H., 76Beyond Candlesticks: More Japanese ChartingTechniques Revealed (Nison), 47Bid, 5Bid/ask spread, 6Bid price, 5Big-figure quote, 6Bollinger, John, 34Bollinger bands, 34–36Bollinger on Bollinger Bands, 34Box, George, 25Brokers and dealers, 207–209Brown, Stephen, 66Bull contracting symmetrical triangle, 131Bull cycle, 105, 115Bull impulse, 131, 178Bull rectangle, 178Butterfly pattern, 91
Cancellation, 101Carnegie, Andrew, 41Carney, Scott, 90–92Carryover, 101Channel lines, 175–176, 177Channeling, 175Chimera cycle, 156–157Collapsing bull cycles, 178Collapsing cycles, 176–179Collapsing modes, 179, 180Collins, Charles, 79Commodity futures, 11Compensation, 100Composite swing charts, 56, 57Congestion phase, 96, 97Congestion Phase System, The (Nofri), 96Connector, 120Continuation patterns, 16–17, 19–21Continuous multiwave cycle collapsing,179, 180Contracting ascending triangle, 117, 178Contracting descending triangle, 117Contracting symmetrical triangle, 118Corrective pattern, 81Cowles, Alfred, 66Crab pattern, 92–93Crossover trading systems, 27–36Bollinger bands, 34–36MACD, 28–29moving averages (MAs), 27–29other systems, 36relative strength index (RSI), 29–31stochastic oscillators, 32–34Currency code, 191–195Currency futures, 9–12Currency marketscurrency futures, 9–12spot currencies, 3–7Currency pair, 4, 191–195
213Copyright © 2007 by The McGraw-Hill Companies. Click here for terms of use.
Index
Cycle, 37, 50, 105Cycle collapsing, 176%D stochastic, 32Data operations, 165–172interval data, 166–172streaming data, 165, 166tick data, 165, 166Descending triangle, 20Direction oscillator, 166Discrete Fourier transform, 61Disk Trading, 165Distribution phase, 64DJIA, 62–64Double bottom, 17Double top, 17Double wave extrapolation, 160Double wave forecasting, 159–162Dow, Charles, 61–63, 67, 86Dow Jones & Company, 62Dow Jones Industrial Average (DJIA),62–64Dow theory, 63–66Econometric models, 23–26ARIMA, 25autoregression, 25–26Fourier transform, 24–25GARCH, 26Holt-Winters model, 26simple sinusoidal model, 24Economic cycles, 76–77Elliott, R. N., 49Elliott Wave Principle: Key to Market Behavior(Prechter/Frost), 87Elliott wave theory, 79–87caveat, 87herd psychology, 81–82rules/guidelines, 86–87trading timeline, 82–84usage, 87wave patterns, 80–81waves within a wave, 84–86Exchange rate, 197–199Expanding ascending triangle, 118, 178Expanding descending triangle, 119Expanding symmetrical triangle, 119Extended contracting triangle,145–146Extended expanding triangle, 146–147Extended impulse cycle, 143, 153–154, 155Fast Fourier transform, 24
214
Five-wave cycles, 137–147extended contracting triangle, 145–146extended expanding triangle, 146–147extended impulse cycle, 143forecasting the fifth wave, 143–147frequencies, 140potential head and shoulders, 144–145primary cycles, 139, 140properties, 139–141pruning, 139–140secondary cycles, 139, 140Flag, 19Foreign exchange, 3Foreign exchange market (Forex), 3Foreign exchange rate, 197–199Forex Charting Companion(Archer/Bickford), 95Forex Chartist’s Companion(Archer/Bickford), 44Forwards, 6Four-wave bear cycle, 132Four-wave cycles, 127–136forecasting the fourth wave, 133–134frequencies, 133naming convention, 131–132overlapping waves, 129–130properties, 133–136Fourier, Joseph, 61Fourier Analysis (Spiegel), 25Fourier transform, 24–25Fractal geometry, 86Fractal levels, 173, 188Fractality, 67Fundamental analysis, 15Futures contract, 9–12Gann, W. D., 69Gann angles, 69–74angles, listed, 71assumptions, 70geometric angles, 70how constructed, 741  1 angle, 71support/resistance levels, 74GARCH, 26Gartley, H. M., 89Gartley patterns, 89–93additional information, 93bat pattern, 91–92butterfly pattern, 91crab pattern, 92–93
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defined, 90potential reversal zone, 90Generalized autoregressive conditionalheteroskedacity model(GARCH), 26Getting Started in Futures (Lofton), 11Gilmore, Bryce, 90, 91Global banking hours, 201–202Goetzmann, William, 66Golden ratio, 80Goodman, Charles B., 95Goodman swing count system (GSCS),95–101cardinal principles, 100–101caveat, 101ordinal principles, 95–100Great Wheat Secret, The (Pugh), 96GSCS, 95–101. See also Goodman swingcount system (GSCS)Hadady, Earl, 96Hamilton, William P., 63Head and shouldersfive-wave cycle, 144–145six-wave cycle, 154–156Head and shoulders bottom, 18Head and shoulders top, 18Head and shoulders with descendingneckline, 145Herd psychology, 81–82Holt-Winters model, 26IMM, 9–10Impulse cycle, 116Impulse pattern, 80International Monetary Market(IMM), 9–10Internet Web sites, 207–211Intersection, 101Interval data, 166–172ISO currency pairs, 191–195Japanese Candlestick Charting Techniques(Nison), 47Jenkins, Gwilym, 25Jones, Edward, 62Juglar’s cycle, 76%K stochastic, 32K-wave, 76Kaufman, Perry, 87Keene, James R., 41–42Kitchin’s short-wave cycle, 76Kondratiev, Nikolai, 75–76, 77
Index
Kondratiev cycle, 76Kondratiev wave, 75–77Kondratiev’s long-wave cycle, 76Kumar, Alok, 66Kuznet’s medium-wave cycle, 76Lane, George C., 32Lateral congestion, 116Long position, 9MACD, 28–29Market tug of war, 100MAs, 27–29Matrices, 100Measured move, 95–96, 100Moving average convergence/divergence(MACD), 28–29Moving average convergence/divergence(MACD) histogram, 28Moving average index, 27Moving averages (MAs), 27–29“My System” (Goodman), 95Naming convention, 131–132Nature’s Law: The Secret of the Universe(Elliott), 80New Concepts in Technical Trading(Wilder), 30Nine-box reversal, 55Offer price, 6OHLC, 1661  1 angle, 71Online brokers and dealers, 207–209Oscillating MA index, 28Overbought, 31Overlapping waves, 129–130Oversold, 31Pattern recognition, 15–21Peak, 49Pennant, 19Pip, 4Pip currency, 4Pivot charts, 174–175Point and figure chartsanatomy, 42–43box size, 43–44history, 41–42reference book, 44reversal amount, 44Points, 4Potential five-wave Elliott impulse cycle, 144Potential head and shoulders, 144–145Potential reversal zone, 90
216
Practical studies, 181–188Primary cycles, 139, 140Profits in the Stock Market (Gartley), 89Public participation phase, 64Quote currency, 4Reah, Charles, 63Rectangle, 21, 116Relative strength index (RSI), 29–31Renko charts, 45–47Renko peak and valley chart, 46Residual-difference method, 27–29Resources, 205–211books, 205–207Internet, 207online brokers and dealers, 207–209periodicals, 205Web sites, 207–211Reversal amount, 51Reversal amounts vs. numberof swings, 188Reversal chartsdefined, 41point and figure charts, 41–44renko charts, 45–47swing charts, 49–58. See also Swing chartsReversal patterns, 16, 17–18Round turn, 6RSI, 29–31Schaefer, E. George, 63Schumpeter, J., 77Secondary cycles, 139, 140Short position, 9Simple sinusoidal model, 24Single three-wave cycle collapsing,179, 180Six-box reversal, 55Six-wave cycles, 149–161chimera cycle, 156–157double wave forecasting, 159–162extended impulse cycle, 153–154, 155forecasting the sixth wave, 153–157frequencies, 151head and shoulders, 154–156properties, 151–152Spot currencies, 3–7Spot market, 3Spread, 6Stochastic oscillators, 32–34Streaming data, 165, 166Swaps, 7
Index
Swing charts, 49–58composite swing charts, 56, 57definitions, 49–50minimum fluctuation unit, 50–51minimum reversal amount, 51–52practical examples, 54–57swing-reversal algorithm, 52–53time alignment, 53–54usage, 57–58Swing operations, 173–180channel lines, 175–176, 177collapsing cycles, 176–179collapsing modes, 179, 180fractal levels, 173pivot charts, 174–175Swing reversal algorithm, 52–53Symmetrical triangle, 19Technical analysiscontinuation patterns, 16–17, 19–21crossover trading systems, 27–36. See alsoCrossover trading systemseconometric models, 23–26other systems, 38pattern recognition, 15–21reversal patterns, 16, 17–18wave theory, 37–38. See also Wave theoryTechnical Analysis: Power Tools for ActiveInvestors (Appel), 29Third wave forecast, 111Three-box reversal, 54Three-box reversal method, 41Three-brick renko chart, 46Three-wave bull connector cycle, 135Three-wave cycles, 113–125bear-cycle conversion, 120, 121connector, 120contracting ascending triangle, 117contracting descending triangle, 117contracting symmetrical triangle, 118cycles with channel lines, 203–204expanding ascending triangle, 118expanding descending triangle, 119expanding symmetrical triangle, 119forecasting the third wave, 123–125frequencies, 120–122impulse cycle, 116rectangle, 116Tick, 4–5Tick data, 165, 166Time series analysis, 25–26
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Index
Time Series Analysis: Forecasting & Control(Box/Jenkins), 25Trading Rule That Can Make You Rich(Dobson), 96Transaction cost, 6Trident (Lindsay), 96Trough, 50Twelve-box reversal, 56Two-wave cycles, 103–112enhancing the forecast, 109–112first-tercile testing, 109–110frequencies, 106–107properties, 105–108use, 110–112Unwinding, 99U.S. Dollar Index, 10–12Valley, 50Wave, 49, 105Wave counting, 79
“Wave Principle, The” (Elliott), 79Wave theory, 37–38, 59–161. See alsoindividual subject headingsDow’s concept of waves, 67Elliott wave theory, 79–87five-wave cycles, 137–147four-wave cycles, 127–136Gann angles, 69–74Gartley patterns, 89–93Goodman swing count system(GSCS), 95–101historical overview, 61–67Kondratiev wave, 75–77six-wave cycles, 149–161three-wave cycles, 113–125, 203–204two-wave cycles, 103–112Waves within a wave, 84–86Web sites, 207–211Wilder, J. Welles, 29
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About the AuthorJames Bickford began trading commodity futures in the early1980s. Since 2001, he has focused his investment efforts solely ontrading spot currency pairs via online Forex dealers. His academicbackground is in computer science, applied mathematics, and statistics. By profession, he has been a software engineer for nearlythree decades. He has authored and coauthored several books ontechnical analysis and currency trading: Chart Plotting Algorithms forTechnical Analysts (Syzygy Publishing, 2001), Getting Started inCurrency Trading (Wiley, 2005), Forex Chartist’s Companion: A VisualApproach to Technical Analysis (Wiley, 2006), and Forex Trader’sCompanion: Focus on Major Currencies (Wiley, 2007).
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