Last week was exciting as investments rocketed higher or tank… We saw Gold and the US Dollar pop while oil and equities dropped sharply with heavy volume.

Just to recap, Wednesday the market went into free-fall mode sending traders and investors running for the door. This was obvious from looking at the large percent drop coupled with heavy selling. That day the NYSE showed panic selling with 37 shares sold for every 1 share purchased meaning pure panic. In my Wednesday night report “How to Take Advantage of Panic Selling for SP500 and Gold ” I explained how to read these extreme market conditions and what to expect the following sessions.

Currently the price of gold, oil, spx are trading somewhat at the opposite extremes seen last week. Below are a few charts explaining the situations:

GLD – Gold ETF Trading Signals

This 60 minute chart shows gold getting hit hard on Wednesday morning. Investors and traders around the globe were closing out positions and moving to cash. This high volume dumping of positions pulled virtually all investments lower and was the first tip-off that the market was in panic mode.

One the dust settled and investor’s regrouped we saw money surge back into gold creating a nice pop the following day. Problem I see is that gold is now trading at a key resistance level when reviewing the daily chart. And if you take a look at the 60 minute chart below you can see the price of gold sold down in the morning on August 13th and drifted up into the close on Friday forming a bearish wedge. Also there was some very strong selling just before the market closed which is also a concern.

USO – Oil Traded Fund

Both times oil has fallen we have seen the price pierce key support levels where the bulls would have the majority of their stops placed. The intraday pierce causes the stops to be triggered washing the market of long positions while the smart money loads up accumulating everyone’s sell orders . This is something which happens with virtually every type of investment and the main reason traders get shaken out just before the market goes in their direction. Anyways, running of the stops is something I will cover in a future report.

Looking at the chart below you can see oil trading at trendline support. Each time the key support levels (blue arrows) have been pierced the market has rocketed higher. Just from looking at the chart from August 9th forward you can see that this move down is overextended and visually looks ready for a pause or bounce in the coming days.

*Trading Tidbit - When trading trendlines it is important to try and play the third test. Reason being is that the first two pullbacks create the trendline and the third test is when active traders generally jump on board causing a sizable bounce. Each test of a trendline it becomes weaker and the probability of a breakdown is more likely.*

SPY – SP500 ETF Trading Fund

The SP500 chart shows last week’s breakdown on the 5th test of the trendline. The market is oversold here and ready for a bounce which I hope we get this week. My concern is that the downward momentum is to strong and a bounce will be negated.

US Dollar Index

US dollar put in a huge bounce last week after testing is 61.8% Fib retracement level from the 2009 December low. The strong bounce has pushed the dollar up to a key resistance level which happens to be 38.2% Fib retracement level from both the December up trend and the recent sell off. I figure this will hold the dollar down for a few days easing the pressure on oil and equities.

Weekend Gold, Oil, SPX and Dollar Trading Conclusion:

In short, I feel there will be a relief bounce in oil and equities while the dollar and gold will have some profit taking and trade sideways or down at the beginning of the week. After that it looks as though stocks and oil will head lower while the dollar and gold rally.

If you would like to receive my Trading Analysis and Signals Complete with Entry, Targets and Protective Stops please visit my website at: www.TheGoldAndOilGuy.com

Chris Vermeulen

- About the Author: Chris Vermeulen is Founder of the popular trading site http://www.thegoldandoilguy.com. There he shares his highly successful, low-risk trading method. Since 2001 Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets. Subscribers to his service depend on Chris’ uniquely consistent investment opportunities that carry exceptionally low risk and high return. Reach Chris at: Chris[at]theGoildAndOilGuy[dot]com Article Source

Traders all over the globe have been battling over the proper way to day trade. Trading Price action or price action trading as it’s called is taking precedence when compared to following Indicators on a chart. What’s better? What works?  What makes the most profit? Let’s compare the two methods of trading and come to a conclusion to which trading style comes out on top. Let us digest the question that most serious trades come to realize.  Which method works better, price action or indicators.

Price Action as explained and taught by DayTradeToWin is a method of trading where price is used as the primary tool for determining risk and reward in real-time.  In terms of online day trading, price action is the price movement displayed on the chart, and nothing more. The price as displayed and plotted on the chart real time can provide traders everything they need. The 5 minute chart seems to be the most popular.  Inherently, price action is a singular method of trading, requiring no external trading tools (like indicators), plugins, or other third-party software for charting purposes.  All that is required is an understanding of the market, and a set of rules for interacting with price and the ability to identify price behavior. Sounds simple enough, right?  Well not so fast.  The interpretation of the price is what makes or breaks price action trading. Without the proper understanding, education, and specific rules, the chart looks nothing more than random bars.  Having the key to decipher the code is what price action is all about. John Paul, founder of DayTradeToWin has in fact taught traders to decipher this code with outstanding results and testimonials.

Adversely, indicators are third-party extensions that summarize data, advising traders when and how to trade.  Indicators exist for nearly every aspect of day trading for nearly every software platform that supports them.  For example, NinjaTrader’s indicator list includes indicators ranging from Bollinger Bands to oscillators, moving averages, volume averages, stochastics, and everything in between.  Indicators that focus on price action do not exist for the most part, with the exception of those offered at DayTradeToWin.com.  This exception is a stretch, as software like the Atlas Line Indicator is really a price guide; indicating what type of trade to take (long or short) only if price confirms the action. In order for an indicator to be considered compatible with price action, the indicator must:

-          Operate and produce signals in real-time not after the fact.

-          Be compatible with price as it moves on the chart

-          Produce non-conflicting signals that whipsaw a trader

Indicators look pretty and have lots of colors. The question is do they really help, or do they create dependency for traders?  Let’s first understand what an indicator does.

A trading indicator needs price to first to make a move up or down.  Once this move is made the Indicator takes what just occurred and plots a point – line – bar – graph on the chart.  The indicator by definition is already late in providing information to a trader about a move up or down in the market which has already occurred.  Indicators also have another huge issue which John Paul at DayTradeToWin educates his traders on.  Which parameter is right for the market being traded?  What has worked in the past, will most likely not work in the future.  If the indicator in question has been optimized with historical data, then how will history relate to the forward looking performance when traded?  This becomes the issue at hand.

At the moment It seems price action has the advantage with the comparisons made. This is just “Round 1″ and the following articles will provide more info, but for now let’s understand what each contestant stands for and what each brings to the table.

Price action trading:

- Is free – a trader does not need to extra software.  Candles, bars, dots or any other chart price symbol will provide ample information for price action traders.

- Can be used on any market at any time under any circumstances (E-Mini S&P, Forex, stocks, other commodities, futures and currencies).

- Can be used with any trading software (NinjaTrader, TradeStation, MetaStock, etc.).

- Is fast – price lag is irrelevant, old data will not obstruct your trading.

- Is versatile – price action trading methods can be combined for a coherent trading system that is free of conflicting data.

- Must take time to learn, and understand how to trade it.  Education is needed to master the methods and practice is key.  The Cost is not cheap and is compared to a semester in college.

Indicator-based trading:

- Is not free – most indicators are commercial.

- Lags behind price – data based on the past is unlikely to be of assistance in the present and the future in an ever-changing market.  Until data can be transferred instantaneously across any distance, this will be a consistent outcome.

- Often produces conflicting signals and hesitation of when and how to perform trades.

- Compatibility is dependent upon the indicator’s programming; only certain markets and / or trading software may be supported.

- Subject to the law of overuse – the more traders that use an indicator, the more a market will adapt “in retaliation” to its overuse, thus rendering it ineffective.  Price action is free from such boundaries as it is based on watching the resulting changes in price.

- Easy to use, and follow.  A no brainer, nothing to think about and only following the signals is needed.

While Price Action trading may be free, it may take a trader quite a while of practice (and a few losses) to determine what works.  The logical next step in preventing losses is pursuing a form of day trading education.  Indicators are a dime a dozen and most focus on following the heard.  DayTradeToWin.com’s beginner to advanced educational program, also known as “Private Mentorship“, features one-on-one trading from an experienced price action trader.  The Program includes exact instructions on scalping methods, filtering trades, trading the news, and much more.  Six weeks of live tutoring at the student’s own pace is much more effective in creating a self-sufficient day trader than any combination of indicators. Let’s  see what happens in “Round 2″ of Price Action VS Indicators.

- About the Author: John Paul, Educator and founder of www.DayTradeToWin.com and www.TheTradeScalper.com has been trading Price Action and Education Traders on how to Day Trade the markets. Article Source