This post was written by Steve Sollheiser.

When trading futures or stocks it is important to know which patterns are worth trading, and which just waste your money and time. In this article we will describe several of the best chart patterns for maximum results.

Double Top
The Double Top is a very powerful chart pattern that reaches 73-78% win rate in most stocks and commodities, and it allows you pin-point stock reversals with ease on many charts. The idea is that price reaches a Resistance level twice, and bounces off it just to continue downwards. It shows an inability of buyers to push through the Resistance level and eventually indicates that price will fall downwards.
We usually enter these trades by selling when price breaks the neckline, or when price pulls back to the neckline after the breakout (higher accuracy trade).

Triangle Patterns
The triangle pattern is a family of continuation patterns that can generate very good signals, however we will only focus on one type of triangle: The Asymmetric triangle.
The symmetric triangle is not a reliable chart pattern and we will tend to ignore it.
The triangle consists of one horizontal trend line and one diagonal trend line that converge together, causing price to break the horizontal level and continue in the direction of the diagonal one:

This is one of the strongest chart patterns and we trade it by entering trades right on the diagonal trend line in the direction of the imminent breakout. We will also trade the breakout of the horizontal trendline and pull backs to this level once it is broken.

Channel Pattern
The Channel pattern is another effective set-up that can give us very good signals on many timeframes and charts: the idea is that price is bound between two parallel trend lines, and we trade when price hits the trend lines (only with the direction of the trend). This results in high win-rate trades when low risk and high reward.
We recommend also trading the breakout of the channel, when it breaks the direction opposite eto current trade, and we will also enter pullback trades as well.

In conclusion, those 3 patterns are very effective and generate profits for many trades consistently. Master them and you will see your profits rise significantly.

Steve Sollheiser is a writer and a stock trader. Visit his site www.StockChartPatterns.org for more articles about chart patterns.

Guest post contributed by Hayley Russell, a freelance forex currency trading writer, on behalf of sunbird cfd trading. All views and opinions expressed are those of the writer and do not necessarily represent Sunbird forex brokers.

It wasn’t that long ago that Europe agreed to bail out Greece. However, low interest rates, and a free-flowing monetary policy hasn’t stopped Europe from entering another financial ice age. Europe looks to be in another, new, recession, and there’s no one coming to the rescue.

America can’t save Europe. It has its own financial problems. Back in 2010, Fed Chairman Ben Bernanke set the U.S. up for its current financial woes by writing:

“Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. … And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

Surprisingly, his view hasn’t changed much since then. Benanke’s ongoing insistence that quantitative easing will lead to a “virtuous cycle” of growth and profits (and higher income) is lost on the marketplace, which is seeing the velocity of the M1 money supply fall precipitously. This means that the Federal Reserve is pushing more and more money into the banking system, but banks aren’t lending. If banks aren’t lending, none of Benanke’s predictions can come true.

What’s worse, China has started to contract and is focused on protecting domestic supplies of rare Earth minerals and other natural resources. Spain may be next in line for a bailout, since the country is about to be hit with a wave of mortgage defaults. Where does all of this leave futures traders? Right now, the markets are taking a beating. Natural gas has recently hit a 10-year low.

The Dow Jones Industrial Average futures are off by about 70 points, and S&P500 futures are down about 9 points. NASDAQ futures are down 14 points. Futures traders don’t have many options these days. Europe has to contract for the foreseeable future.

The Greek debt crisis is far from over, and other European countries are just starting to join Greece. With Italy’s high unemployment rate, Spain, Portugal, and Ireland’s financial problems, and Greece’s inability to repay its debts without being bailed out, the European union will not be a great place for investment going forward.

China has to contract too. It’s been growing at an unprecedented rate for the last 10 years. However, none of that growth has been accompanied by long-term earnings. Back in 2009, China urged its citizens to buy gold. Perhaps it suspected its reign was coming to an end. By buying gold, the Chinese markets would deflate. Perhaps the real estate market would also contract. Buying into precious metals would help stabilize the economy since money would be moved out of the yuan and into an asset that is not backed by debt.

It seems like a Chinese commitment to buy gold would help gold futures, but it’s not. Gold futures are down and the precious metals market, in general, has been taking a beating lately. India has recently placed a higher tax on gold bullion purchases, helping to depress the price of gold while gold futures have dropped to their lowest levels since mid-January.

Gold futures are expected to find support at $1,612 per oz, which might help investors. However, the precious yellow metal has been under pressure recently due to hedge funds and other institutional investors selling off long gold positions.

Oil, another favorite of the futures market, is also down. Copper, grains, soybeans, and even coffee futures all slid this week. It may be time to for investors to give up the futures market for now and retreat to higher ground. Until or unless global economies recover from their financial problems, there’s not going to be much of a future to invest in.

by Anna Lipton

Futures are seen by more conservative investors as a wild and speculative way to invest money. Subject to wild fluctuations in potential profit or loss they are difficult to understand at first and nearly impossible to master. Those who do master them, however, enjoy superstar status. Those who fail are the rogue traders of the future. In the current maelstrom of opportunity that is the future market there is still a traceable path to history. The early futures contracts enabled greater productivity and stability boosting the economy whilst allowing some the opportunity to make huge profits on their trades.

Financial Markets Are Born To Serve A Purpose

The early railroads would not have been easily funded with debt alone. Calculating the return on a new line was tough enough in England where the distances were short and the population density high let alone when trying to calculate the possible future profit of the almost impossible to construct Canadian Western Railroad routes through the Rocky Mountains.

Train companies issued stock to speculators. Those who had cash and were looking for the extraordinary returns only possible through taking a chance on the huge potential future profits of the railroads. Thanks to the financial markets and the huge sums of money unleashed people, goods and cargo were moved swiftly across previously impossible distances.

A Tale Of The Price Of Grain

By the mid 1800’s, American farming had progressed beyond subsistence farming and basic plantations to developments that could produce significant amounts of grain. This came with significant planting, harvesting and labour costs. Add to that the cost of transporting the grain to market and farmers suddenly were developing complex business issues which could be seriously derailed by price fluctuations.

Some of their problems were solved by local commodities exchanges. These provided systems for the grading, classification and trading of commodities such as grain. There was a need for stocks in storage to be fungible – any part of an equal size would be equally suitable to use in discharging an obligation. This led to homogeneous units of grain which could be accurately priced and traded.

On top of the complex costs farmers were starting to endure they often would not have sufficient capital to develop their land. Unlike the stock investing railroad speculators we discussed earlier, the banks were keen to see that upon development on the land the resultant crops would repay the loan (much as modern credit card companies making balance transfer offers look to calculate their likelihood of repayment and future profit from interest after the initial period).

A forward contact for the delivery of that grain would significantly enhance a farmer’s chance of securing finance. On top of that, a forward contract would significantly aid the planning of a farmers business. No longer would it be mere guesswork as to what price the grain would be sold in the future – he would know exactly how much he could expend on stock, labour, finance and transport in order to return a profit at a known future price.

From Forwards To Futures

Even in these early times there developed a secondary market for forward contracts – speculators hoped to make a greater profit by taking on an obligation. There were a number of issues with these early arrangements – not least the settlement of obligations on the contract completion date. It is easy to find gamblers willing to take a bet, it’s sometimes not so easy to find a losing gambler to pay up and take delivery of the grain.

The other issue for speculation is the physical transportation or obligation to provide an amount of grain on a future date. I may feel that the market has priced forward delivery contracts on grain incorrectly but if I have no use for the tonnes of super cheap grain I obtain by making that guess it’s not ideal. Futures contracts enabled the sophisticated settling of these transactions in cash without the need for actual delivery of the underlying asset.

If grain had moved above the price specified the farmer would owe money – thus ensuring he would receive the specified price for the grain. If the grain price fell, the farmer would receive a lower price for grain but a profit on the futures contract leading again to the receipt of the specified price for the grain. This cash settlement of futures contracts offered a huge advantage over actual settlement of forward contracts when it came to speculation. By 1891 the Minneapolis Grain Exchange had put in place the kind of formal clearing and offset arrangements we see in modern futures clearing houses.

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(A guest post)

Stocks Go Higher as Dollar Declines

There’s been a lot of bad news for people recently, with tsunamis in Japan and the United States gross domestic product (GDP) performing poorly last month. It’s hard for anyone to score a decent pay day, but apparently the slate of bad news does not seem to be affecting the stock market as much as Bernanke’s policies. Investors in the stock market are pushing the Dow Jones to fresh multi-year heights, despite all the bad news.

Dollar Declines

Where you see some of the real impact of the bad news is in the dropping value of the dollar. New jobless claims that rose and poor GDP performance has some people favoring other currencies versus the dollar. However, there is still some good news for people who are pinning their hopes on an economic recovery: March showed a 5.1 percent increase in pending home sales. For this sluggish economy that has seen the house market in the toilet for years, that’s very welcome news.

Companies Sitting on Cash Holdings

With stock prices going up, there are plenty of companies sitting on large reserves of cash that they can use now to spur economic growth. Even with the decline in the value of the dollar, once the economic engine is flushed with money, it will be only a little bit of time before more good news follows. While it can seem odd to have poor economic indicators ignored by stock market investors while the dollar declines in value, it’s probably because overall the economic picture for the United States is improving. Even with higher gas prices, more people are getting jobs, fewer people are in default of loans, and the stock market continues to be strong. Even the Japanese tsunami can have a silver lining for American car companies that will have a larger share of the worldwide market for small cars as Japan struggles to maintain production.