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minmi wrote on Nov 25, '08 Mao Zedong (Wade-Giles: Mao Tse-tung) pronunciation (help·info) (December 26 [O.S. December 14] 1893 – September 9, 1976) was a Chinese military and political leader who led the Communist Party of China (CPC) to victory against the Kuomintang (KMT) in the Chinese Civil War, and was the leader of the People’s Republic of China (PRC) from its establishment in 1949 until his death in 1976. Regarded as one of the most important figures in modern world history,[1] and named by Time Magazine as one of the 100 most influential people of the 20th century,[2] Mao remains a controversial figure to this day. He is generally held in high regard in mainland China where he is often portrayed as a great revolutionary and strategist who eventually defeated Generalissimo Chiang Kai-shek in the Chinese Civil War and transformed the country into a major power through his policies. However, many of Mao's socio-political programs, such as the Great Leap Forward and the Cultural Revolution, are blamed by critics from both within and outside China for causing severe damage to the culture, society, economy, and foreign relations of China, as well as a probable death toll in the tens of millions.[3][4][5]
Although still officially venerated in China, his influence has been largely overshadowed by the political and economic reforms of Deng Xiaoping and other leaders since his death.[6][7] Mao is also recognized as a poet and calligrapher.[8]
Contents [hide]
1 Early life in China
2 Political ideas
3 War and Revolution
4 Leadership of China
4.1 Great Leap Forward
4.2 Cultural Revolution
5 Final days and death
6 Cult of Mao
7 Legacy
8 Genealogy
9 Writings and calligraphy
9.1 Literary figure
10 Figure in popular culture
11 See also
12 References
13 Further reading
14 External links
Early life in China
Mao's mother, Wen Chi-mei, was a very devout Buddhist. Due to his family's relative wealth, his father was able to send him to school and later to Changsha for more advanced schooling.
During the 1911 Revolution, Mao enlisted as a soldier in a local regiment in Hunan, which fought on the side of the revolutionaries. Once the Qing Dynasty had been effectively toppled, Mao left the army and returned to school.[9]
Names
Given name Style name
Trad. 毛澤東 潤之¹
Simp. 毛泽东 润之
Pinyin Máo Zédōng Rùnzhī
WG Mao Tse-tung Jun-chih
IPA /mau̯ː˧˥ tsɤ˧˥.tʊŋ˥/ /ʐuənː˥˩ tʂ̩˥/
Surname: Mao
Pseudonym: The Great Helmsman
¹Originally 詠芝(咏芝) then 润芝, in Xiangtan dialect
have the same pronunciation yùnzhī
After graduating from the First Provincial Normal School of Hunan in 1918, Mao traveled with Professor Yang Changji, his high school teacher and future father-in-law, to Beijing during the May Fourth Movement in 1919.
Professor Yang held a faculty position at Peking University. Because of Yang's recommendation, Mao worked as an assistant librarian at the University with Li Dazhao as curator. Mao registered as a part-time student at Beijing University and attended many lectures and seminars by famous intellectuals, such as Chen Duxiu, Hu Shi, and Qian Xuantong. During his stay in Beijing, he engaged himself as much as possible in reading, which introduced him to Communist theories. He married Yang Kaihui, Professor Yang's daughter and a fellow student, despite an existing marriage arranged by his father at home. Mao never acknowledged this marriage. In October 1930, the Kuomintang (KMT) captured Yang Kaihui as well as her son, Anying. The KMT imprisoned them both, and Anying was later sent to his relatives after the KMT killed his mother. At this time , Mao was living with He Zizhen, a co-worker and 17 year old girl from Yongxing, Jiangxi.[10] Mao turned down an opportunity to study in France because he firmly believed that China's problems could be studied and resolved only within China. Unlike his contemporaries, Mao concentrated on studying the peasant majority of China's population.
On 23 July 1921, Mao, age 27, attended the first session of the National Congress of the Communist Party of China in Shanghai. Two years later, he was elected as one of the five commissars of the Central Committee of the Party during the third Congress session. Later that year, Mao returned to Hunan at the instruction of the CPC Central Committee and the Kuomintang Central Committee to organize the Hunan branch of the Kuomintang.[11] In 1924, he was a delegate to the first National Conference of the Kuomintang, where he was elected an Alternate Executive of the Central Committee. In 1924, he became an Executive of the Shanghai branch of the Kuomintang and Secretary of the Organization Department.
For a while, Mao remained in Shanghai, an important city that the CPC emphasized for the Revolution. However, the Party encountered major difficulties organizing labor union movements and building a relationship with its nationalist ally, the Kuomintang (KMT). The Party had become poor, and Mao became disillusioned with the revolution and moved back to Shaoshan. During his stay at home, Mao's interest in the revolution was rekindled after hearing of the 1925 uprisings in Shanghai and Guangzhou. His political ambitions returned, and he then went to Guangdong, the base of the Kuomintang, to take part in the preparations for the second session of the National Congress of Kuomintang. In October 1925, Mao became acting Propaganda Director of the Kuomintang.[11]
In early 1927, Mao returned to Hunan where, in an urgent meeting held by the Communist Party, he made a report based on his investigations of the peasant uprisings in the wake of the Northern Expedition. This is considered the initial and decisive step towards the successful application of Mao's revolutionary theories.[12]
Political ideas
Main article: Maoism
Mao as a young man.Mao had a great interest in the political system, encouraged by his father. His two most famous essays, both from 1937, 'On Contradiction' and 'On Practice', are concerned with the practical strategies of a revolutionary movement and stress the importance of practical, grassroots knowledge, obtained through experience. Both essays reflect the guerrilla roots of Maoism in the need to build up support in the countryside against a Japanese occupying force and emphasise the need to win over 'hearts and minds' through 'education'. The essays, reproduced later as part of the 'Red Book', warn against the behaviour of the blindfolded man trying to catch sparrows, and the 'Imperial envoy' descending from his carriage to 'spout opinions'.
In addition to his limited formal education, Mao spent six months studying independently. Mao was first introduced to communism while working at Peking University, and in 1921 he co-founded the Communist Party of China (or CPC) He first encountered Marxism while he worked as a library assistant at Peking University.
Other important influences on Mao were the Russian revolution and, according to some scholars, the Chinese literary works: Outlaws of the Marsh and Romance of the Three Kingdoms. Mao sought to subvert the alliance of imperialism and feudalism in China. He thought the Nationalists to be both economically and politically vulnerable and thus that the revolution could not be steered by Nationalists.
Throughout the 1920s, Mao led several labour struggles based upon his studies of the propagation and organization of the contemporary labour movements.[13] However, these struggles were successfully subdued by the government, and Mao fled from Changsha after he was labeled a radical activist. He pondered these failures and finally realized that industrial workers were unable to lead the revolution because they made up only a small portion of China's population, and unarmed labour struggles could not resolve the problems of imperial and feudal suppression.
Mao began to depend on Chinese peasants who later became staunch supporters of his theory of violent revolution. This dependence on the rural rather than the urban proletariat to instigate violent revolution distinguished Mao from his predecessors and contemporaries. Mao himself was from a peasant family, and thus he cultivated his reputation among the farmers and peasants and introduced them to Marxism.[12][14]
War and Revolution
Mao in 1927In 1927, Mao conducted the famous Autumn Harvest Uprising in Changsha, Hunan, as commander-in-chief. Mao led an army, called the "Revolutionary Army of Workers and Peasants", which was defeated and scattered after fierce battles. Afterwards, the exhausted troops were forced to leave Hunan for Sanwan, Jiangxi, where Mao re-organized the scattered soldiers, rearranging the military division into smaller regiments. Mao also ordered that each company must have a party branch office with a commissar as its leader who would give political instructions based upon superior mandates. This military rearrangement in Sanwan, Jiangxi initiated the CPC's absolute control over its military force and has been considered to have the most fundamental and profound impact upon the Chinese revolution. Later, they moved to the Jinggang Mountains, Jiangxi.
In the Jinggang Mountains, Mao persuaded two local insurgent leaders to pledge their allegiance to him. There, Mao joined his army with that of Zhu De, creating the Workers' and Peasants' Red Army of China, Red Army in short. (the Fourth Front of Workers' and Peasants' Red Army of China).
From 1931 to 1934, Mao helped establish the Soviet Republic of China and was elected Chairman of this small republic in the mountainous areas in Jiangxi. Here, Mao was married to He Zizhen. His previous wife, Yang Kaihui, had been arrested and executed in 1930, just three years after their departure.
Mao in 1931In Jiangxi, Mao's authoritative domination, especially that of the military force, was challenged by the Jiangxi branch of the CPC and military officers. Mao's opponents, among whom the most prominent was Li Wenlin, the founder of the CPC's branch and Red Army in Jiangxi, were against Mao's land policies and proposals to reform the local party branch and army leadership. Mao reacted first by accusing the opponents of opportunism and kulakism and then set off a series of systematic suppressions of them.[15] It is reported that horrible forms of torture and killing took place. Jung Chang and Jon Halliday claim that victims were subjected to a red-hot gun-rod being rammed into the anus, and that there were many cases of cutting open the stomach and scooping out the heart.[16] The estimated number of the victims amounted to several thousands and could be as high as 186,000.[17] Critics accuse Mao's authority in Jiangxi of being secured and reassured through the revolutionary terrorism, or red terrorism.
Mao, with the help of Zhu De, built a modest but effective army, undertook experiments in rural reform and government, and provided refuge for Communists fleeing the rightist purges in the cities. Mao's methods are normally referred to as Guerrilla warfare; but he himself made a distinction between guerrilla warfare (youji zhan) and Mobile Warfare (yundong zhan).
Mao's Guerrilla Warfare and Mobile Warfare was based upon the fact of the poor armament and military training of the red army which consisted mainly of impoverished peasants, who, however, were all encouraged by revolutionary passions and aspiring after a communist utopia.
Around 1930, there had been more than ten regions, usually entitled "soviet areas," under control of the CPC.[18] The prosperity of "soviet areas" startled and worried Chiang Kai-shek, chairman of the Kuomintang government, who waged five waves of besieging campaigns against the "central soviet area." More than one million Kuomintang soldiers were involved in these five campaigns, four of which were defeated by the red army led by Mao. By June 1932 (the height of its power), the Red Army had no less than 45,000 soldiers, with a further 200,000 local militia acting as a subsidiary force.[19]
Under increasing pressures from the KMT encirclement campaigns, there was a struggle for power within the Communist leadership. Mao was removed from his important positions and replaced by individuals (including Zhou Enlai) who appeared loyal to the orthodox line advocated by Moscow and represented within the CPC by a group known as the 28 Bolsheviks.
Mao in 1935Chiang Kai-shek, who had earlier assumed nominal control of China due in part to the Northern Expedition, was determined to eliminate the Communists. By October 1934, he had them surrounded, prompting them to engage in the "Long March," a retreat from Jiangxi in the southeast to Shaanxi in the northwest of China. It was during this 9,600 kilometer (5,965 mile), year-long journey that Mao emerged as the top Communist leader, aided by the Zunyi Conference and the defection of Zhou Enlai to Mao's side. At this Conference, Mao entered the Standing Committee of the Politburo of the Communist Party of China.
According to the standard Chinese Communist Party line, from his base in Yan'an, Mao led the Communist resistance against the Japanese in the Second Sino-Japanese War (1937-1945).[citation needed] However, Mao further consolidated power over the Communist Party in 1942 by launching the Zheng Feng, or "Rectification" campaign against rival CPC members such as Wang Ming, Wang Shiwei, and Ding Ling. Also while in Yan'an, Mao divorced He Zizhen and married the actress Lan Ping, who would become known as Jiang Qing.
Mao in 1938, writing On Protracted War [20]During the Sino-Japanese War, Mao Zedong's strategies were opposed by both Chiang Kai-shek and the United States. The US regarded Chiang as an important ally, able to help shorten the war by engaging the Japanese occupiers in China. Chiang, in contrast, sought to build the ROC army for the certain conflict with Mao's communist forces after the end of World War II. This fact was not understood well in the US, and precious lend-lease armaments continued to be allocated to the Kuomintang. In turn, Mao spent part of the war (as to whether it was most or only a little is disputed) fighting the Kuomintang for control of certain parts of China. Both the Communists and Nationalists have been criticised for fighting amongst themselves rather than allying against the Japanese Imperial Army. However the Nationalists were better equipped and did most of the fighting against the Japanese army in China.[21]
In 1944, the Americans sent a special diplomatic envoy, called the Dixie Mission, to the Communist Party of China. According to Edwin Moise, in Modern China: A History 2nd Edition:
Most of the Americans were favorably impressed. The CPC seemed less corrupt, more unified, and more vigorous in its resistance to Japan than the Guomindang. United States fliers shot down over North China...confirmed to their superiors that the CPC was both strong and popular over a broad area. In the end, the contacts with the USA developed with the CPC led to very little.
Then again, modern commentators have disputed such claims. Amongst others, Willy Lam stated that during the war with Japan:
The great majority of casualties sustained by Chinese soldiers were borne by KMT, not Communist divisions. Mao and other guerrilla leaders decided at the time to conserve their strength for the "larger struggle" of taking over all of China once the Japanese Imperial Army was decimated by the U.S.-led Allied Forces.[21]
Mao in 1946 in Yan'anAfter the end of World War II, the U.S. continued to support Chiang Kai-shek, now openly against the Communist Red Army (led by Mao Zedong) in the civil war for control of China. The U.S. support was part of its view to contain and defeat world communism. Likewise, the Soviet Union gave quasi-covert support to Mao (acting as a concerned neighbor more than a military ally, to avoid open conflict with the U.S.) and gave large supplies of arms to the Communist Party of China, although newer Chinese records indicate the Soviet "supplies" were not as large as previously believed, and consistently fell short of the promised amount of aid.
On 21 January 1949, Kuomintang forces suffered massive losses against Mao's Red Army. In the early morning of 10 December 1949, Red Army troops laid siege to Chengdu, the last KMT-occupied city in mainland China, and Chiang Kai-shek evacuated from the mainland to Taiwan (Formosa) that same day.
Leadership of China
Joseph Stalin and Mao depicted on a Chinese postage stampThe People's Republic of China was established on 1 October 1949. It was the culmination of over two decades of civil and international war. From 1954 to 1959, Mao was the Chairman of the PRC. During this period, Mao was called Chairman Mao (毛主席) or the Great Leader Chairman Mao (伟大领袖毛主席). The Communist Party assumed control of all media in the country and used it to promote the image of Mao and the Party. The Nationalists under General Chiang Kai-Shek were vilified as were countries such as the United States of America and Japan. The Chinese people were exhorted to devote themselves to build and strengthen their country. In his speech declaring the foundation of the PRC, Mao announced: "The Chinese people have stood up!"
Mao took up residence in Zhongnanhai, a compound next to the Forbidden City in Beijing, and there he ordered the construction of an indoor swimming pool and other buildings. Mao often did his work either in bed or by the side of the pool, preferring not to wear formal clothes unless absolutely necessary, according to Dr. Li Zhisui, his personal physician. (Li's book, The Private Life of Chairman Mao, is regarded as controversial, especially by those sympathetic to Mao.)
Along with land reform, there were also campaigns of mass repression and public executions targeting alleged counter-revolutionaries, such as former KMT officials, businessmen, former employees of Western companies, intellectuals whose loyalty was suspect, and significant numbers of rural gentry.[22] The U.S. State department in 1976 estimated that there may have been a million killed in the land reform, 800,000 killed in the counterrevolutionary campaign.[23] Mao himself claimed that a total of 700,000 people were executed during the years 1949–53.[24] However, because there was a policy to select "at least one landlord, and usually several, in virtually every village for public execution",[25] the number of deaths range between between 2 million and 5 million.[26][27] In addition, at least 1.5 million people were sent to "reform through labour" camps.[28] Mao’s personal role in ordering mass executions is undeniable.[29][30] He defended these killings as necessary for the securing of power.[31]
Following the consolidation of power, Mao launched the First Five-Year Plan (1953-8). The plan aimed to end Chinese dependence upon agriculture in order to become a world power. With the Soviet Union's assistance, new industrial plants were built and agricultural production eventually fell to a point where industry was beginning to produce enough capital that China no longer needed the USSR's support. The success of the First Five Year Plan was to encourage Mao to instigate the Second Five Year Plan, the Great Leap Forward, in 1958. Mao also launched a phase of rapid collectivization. The CPC introduced price controls as well as a Chinese character simplification aimed at increasing literacy. Land was taken from landlords and more wealthy peasants and given to poorer peasants. Large scale industrialization projects were also undertaken.
Programs pursued during this time include the Hundred Flowers Campaign, in which Mao indicated his supposed willingness to consider different opinions about how China should be governed. Given the freedom to express themselves, liberal and intellectual Chinese began opposing the Communist Party and questioning its leadership. This was initially tolerated and encouraged. After a few months, Mao's government reversed its policy and persecuted those, totalling perhaps 500,000, who criticized, and were merely alleged to have criticized, the Party in what is called the Anti-Rightist Movement. Authors such as Jung Chang have alleged that the Hundred Flowers Campaign was merely a ruse to root out "dangerous" thinking.[32] Others such as Dr Li Zhisui have suggested that Mao had initially seen the policy as a way of weakening those within his party who opposed him, but was surprised by the extent of criticism and the fact that it began to be directed at his own leadership.[citation needed] It was only then that he used it as a method of identifying and subsequently persecuting those critical of his government. The Hundred Flowers movement led to the condemnation, silencing, and death of many citizens, also linked to Mao's Anti-Rightist Movement, with death tolls possibly in the millions.
Great Leap Forward
Main article: Great Leap Forward
In January 1958, Mao Zedong launched the second Five-Year Plan known as the Great Leap Forward, a plan intended as an alternative model for economic growth to the Soviet model focusing on heavy industry that was advocated by others in the party. Under this economic program, the relatively small agricultural collectives which had been formed to date were rapidly merged into far larger people's communes, and many of the peasants ordered to work on massive infrastructure projects and the small-scale production of iron and steel. All private food production was banned; livestock and farm implements were brought under collective ownership.
Under the Great Leap Forward, Mao and other party leaders ordered the implementation of a variety of unproven and unscientific new agricultural techniques by the new communes. Combined with the diversion of labor to steel production and infrastructure projects and the reduced personal incentives under a commune system this led to an approximately 15% drop in grain production in 1959 followed by further 10% reduction in 1960 and no recovery in 1961. In an effort to win favor with their superiors and avoid being purged, each layer in the party hierarchy exaggerated the amount of grain produced under them and based on the fabricated success, party cadres were ordered to requisition a disproportionately high amount of the true harvest for state use primarily in the cities and urban areas but also for export. The net result, which was compounded in some areas by drought and in others by floods, was that the rural peasants were not left enough to eat and many millions starved to death in what is thought to be the largest famine in human history. This famine was a direct cause of the death of tens of millions of Chinese peasants between 1959 and 1962. Further, many children who became emaciated and malnourished during years of hardship and struggle for survival, died shortly after the Great Leap Forward came to an end in 1962 (Spence, 553).
The extent of Mao's knowledge as to the severity of the situation has been disputed. According to some, most notably Dr. Li Zhisui, Mao was not aware of anything more than a mild food and general supply shortage until late 1959.
"But I do not think that when he spoke on 2 July 1959, he knew how bad the disaster had become, and he believed the party was doing everything it could to manage the situation"
Jung Chang and Jon Halliday, in Mao: the Unknown Story, alleged that Mao knew of the vast suffering and that he was dismissive of it, blaming bad weather or other officials for the famine.
"Although slaughter was not his purpose with the Leap, he was more than ready for myriad deaths to result, and hinted to his top echelon that they should not be too shocked if they happened (438-439)."
Whatever the case, the Great Leap Forward led to millions of deaths in China. Mao lost esteem among many of the top party cadres and was eventually forced to abandon the policy in 1962, also losing some political power to moderate leaders, notably Liu Shaoqi and Deng Xiaoping. However, Mao and national propaganda claimed that he was only partly to blame. As a result, he was able to remain Chairman of the Communist Party, with the Presidency transferred to Liu Shaoqi.
The Great Leap Forward was a disaster for China. Although the steel quotas were officially reached, almost all of it made in the countryside was useless lumps of iron, as it had been made from assorted scrap metal in home made furnaces with no reliable source of fuel such as coal. According to Zhang Rongmei, a geometry teacher in rural Shanghai during the Great Leap Forward:
We took all the furniture, pots, and pans we had in our house, and all our neighbors did likewise. We put all everything in a big fire and melted down all the metal.
Moreover, most of the dams, canals and other infrastructure projects, which millions of peasants and prisoners had been forced to toil on and in many cases die for, proved useless as they had been built without the input of trained engineers, whom Mao had rejected on ideological grounds.
Mao, shown here with Henry Kissinger and Zhou Enlai; Beijing, 1972.In the Party Congress at Lushan in July/August 1959, several leaders expressed concern that the Great Leap Forward was not as successful as planned. The most direct of these was Minister of Defence and Korean War General Peng Dehuai. Mao, fearing loss of his position, orchestrated a purge of Peng and his supporters, stifling criticism of the Great Leap policies.
There is a great deal of controversy over the number of deaths by starvation during the Great Leap Forward. Until the mid 1980s, when official census figures were finally published by the Chinese Government, little was known about the scale of the disaster in the Chinese countryside, as the handful of Western observers allowed access during this time had been restricted to model villages where they were deceived into believing that Great Leap Forward had been a great success. There was also an assumption that the flow of individual reports of starvation that had been reaching the West, primarily through Hong Kong and Taiwan, must be localized or exaggerated as China was continuing to claim record harvests and was a net exporter of grain through the period. Censuses were carried out in China in 1953, 1964 and 1982. The first attempt to analyse this data in order to estimate the number of famine deaths was carried out by American demographer Dr Judith Banister and published in 1984. Given the lengthy gaps between the censuses and doubts over the reliability of the data, an accurate figure is difficult to ascertain. Nevertheless, Banister concluded that the official data implied that around 15 million excess deaths incurred in China during 1958-61 and that based on her modelling of Chinese demographics during the period and taking account of assumed underreporting during the famine years, the figure was around 30 million. The official statistic is 20 million deaths, as given by Hu Yaobang.[3] Various other sources have put the figure between 20 and 72 million.[33]
On the international front, the period was dominated by the further isolation of China, due to start of the Sino-Soviet split which resulted in Khrushchev withdrawing all Soviet technical experts and aid from the country. The split was triggered by border disputes, and arguments over the control and direction of world communism, and other disputes pertaining to foreign policy. Most of the problems regarding communist unity resulted from the death of Stalin and his replacement by Khrushchev. Stalin had established himself as the successor of "correct" Marxist thought well before Mao controlled the Communist Party of China, and therefore Mao never challenged the suitability of any Stalinist doctrine (at least while Stalin was alive). Upon the death of Stalin, Mao believed (perhaps because of seniority) that the leadership of the "correct" Marxist doctrine would fall to him. The resulting tension between Khrushchev (at the head of a politically/militarily superior government), and Mao (believing he had a superior understanding of Marxist ideology) eroded the previous patron-client relationship between the CPSU and CPC. In China, the formerly favourable Soviets were now denounced as "revisionists" and listed alongside "American imperialism" as movements to oppose.
Che Guevara being received in China by Mao, at an official ceremony in the Government palace, November 1960Partly-surrounded by hostile American military bases (reaching from South Korea, Japan, Okinawa, and Taiwan), China was now confronted with a new Soviet threat from the north and west. Both the internal crisis and the external threat called for extraordinary statesmanship from Mao, but as China entered the new decade the statesmen of the People's Republic were in hostile confrontation with each other.
At a large Communist Party conference in Beijing in January 1962, called the "Conference of the Seven Thousand," State President Liu Shaoqi denounced the Great Leap Forward as responsible for widespread famine.[34] The overwhelming majority of delegates expressed agreement, but Defense Minister Lin Biao staunchly defended Mao.[34] A brief period of liberalization followed while Mao and Lin plotted a comeback.[34] Liu and Deng Xiaoping rescued the economy by disbanding the people's communes, introducing elements of private control of peasant smallholdings and importing grain from Canada and Australia to mitigate the worst effects of famine.
Cultural Revolution
Main article: Cultural Revolution
Liu Shaoqi and Deng Xiaoping's prominence gradually became a challenge to Mao's position of power. Liu and Deng, then the State President and General Secretary, respectively, had favored the idea that Mao should be removed from actual power but maintain his ceremonial and symbolic role, and the party will uphold all of his positive contributions to the revolution. They attempted to marginalize Mao by taking control of economic policy and asserting themselves politically as well.
Facing the prospect of losing his place on the political stage, Mao responded to Liu and Deng's movements by launching the Cultural Revolution in 1966. Under the pretext that certain liberal "bourgeois" elements of society, labeled as class enemies, continue to threaten the socialist framework under the existing dictatorship of the proletariat, the idea that a Cultural Revolution must continue after armed struggle allowed Mao to circumvent the Communist hierarchy by giving power directly to the Red Guards, groups of young people, often teenagers, who set up their own tribunals. Chaos reigned over the country, and millions were prosecuted, including a famous philosopher, Chen Yuen. During the Cultural Revolution, Mao closed the schools in China and the young intellectuals living in cities were ordered to the countryside. They were forced to manufacture weapons for the Red Army. The Revolution led to the destruction of much of China's cultural heritage and the imprisonment of a huge number of Chinese citizens, as well as creating general economic and social chaos in the country. Millions of lives were ruined during this period, as the Cultural Revolution pierced into every part of Chinese life, depicted by such Chinese films as To Live, The Blue Kite and Farewell My Concubine. It is estimated that hundreds of thousands, perhaps millions, perished in the violence of the Cultural Revolution.[33] When Mao was informed of such losses, particularly that people had been driven to suicide, he blithely commented: "People who try to commit suicide — don't attempt to save them! . . . China is such a populous nation, it is not as if we cannot do without a few people."[35]
Mao greets United States President Richard Nixon during his visit to China in 1972It was during this period that Mao chose Lin Biao, who seemed to echo all of Mao's ideas, to become his successor. Mao and Lin Biao formed an alliance leading up to the Cultural Revolution in order for the purges to succeed. Mao needed Lin's clout for his plan to work. In return, Lin was made Mao's successor. By 1971, however, because of Lin's grip over the military and Mao's own paranoia, a divide between the two men became clear, and it was unclear whether Lin was planning a military coup or an assassination attempt. Lin Biao died trying to flee China, probably anticipating his arrest, in a suspicious plane crash over Mongolia. It was declared that Lin was planning to depose Mao, and he was posthumously expelled from the CPC. At this time, Mao lost trust in many of the top CPC figures. The highest-ranking Soviet Bloc intelligence defector, Lt. Gen. Ion Mihai Pacepa described his conversation with Nicolae Ceauşescu who told him about a plot to kill Mao Zedong with the help of Lin Biao organized by KGB.[36]
In 1969, Mao declared the Cultural Revolution to be over, although the official history of the People's Republic of China marks the end of the Cultural Revolution in 1976 with Mao's death. In the last years of his life, Mao was faced with declining health due to either Parkinson's disease or, according to Li Zhisui, motor neurone disease, as well as lung ailments due to smoking and heart trouble. Mao remained passive as various factions within the Communist Party mobilized for the power struggle anticipated after his death.
Final days and death
At five o'clock in the afternoon of 2 September 1976, Mao suffered a heart attack, far more severe than his previous two and affecting a much larger area of his heart. The personal doctors group began emergency treatment immediately. X rays indicated that his lung infection had worsened, and his urine output dropped to less than 300 cc a day. Mao was awake and alert throughout the crisis and asked several times whether he was in danger. His condition continued to fluctuate and his life hung in the balance. Three days later, on 5 September Mao's condition was still critical, and Hua Guofeng called Jiang Qing back from her trip. She spent only a few moments in Building 202 (where Mao was staying) before returning to her own residence in the Spring Lotus Chamber. On the afternoon of 7 September, Mao took a turn for the worse. Jiang Qing came to Building 202 where she learned the bad news. Mao had just fallen asleep and needed the rest, but she insisted on rubbing his back and moving his limbs, and she sprinkled powder on his body. The medical team protested that the dust from the powder was not good for his lungs, but she instructed the nurses on duty to follow her example later. The next morning, 8 September, she came again. She wanted the medical staff to change Mao's sleeping position, claiming that he had been lying too long on his left side. The doctor on duty objected, knowing that he could breathe only on his left side, but she had him moved nonetheless. Mao's breathing stopped and his face turned blue. Jiang Qing left the room while the medical staff put him on a respirator and performed emergency cardiopulmonary resuscitation. Mao barely revived, and Hua Guofeng urged Jiang Qing not to interfere further with the doctor's work, as her actions were detrimental to Mao's health & death. Mao's organs were failing and he was taken off life support few minutes after midnight. September 9 was chosen because it was an easy day to remember. Mao had been in poor health for several years and had declined visibly for some months prior to his death. His body lay in state at the Great Hall of the People. A memorial service was held in Tiananmen Square on 18 September 1976. There was a three minute silence observed during this service. His body was later placed into the Mausoleum of Mao Zedong, although he wished to be cremated and had been one of the first high-ranking officials to sign the "Proposal that all Central Leaders be Cremated after Death" in November 1956.[37]
Cult of Mao
Mao's figure is largely symbolic both in China and in the global communist movement as a whole. During the Cultural Revolution, Mao's already glorified image manifested into a personality cult that influenced every aspect of Chinese life. Mao presented himself as an enemy to landowners, businessmen, and Western and American imperialism, as well as an ally of impoverished peasants, farmers and workers.
At the 1958 Party congress in Chengdu, Mao expressed support for the idea of personality cults if they venerated figures who were genuinely worthy of adulation:
“ There are two kinds of personality cults. One is a healthy personality cult, that is, to worship men like Marx, Engels, Lenin, and Stalin. Because they hold the truth in their hands. The other is a false personality cult, i.e. not analyzed and blind worship.[38] ”
In 1962, Mao proposed the Socialist Education Movement (SEM) in an attempt to educate the peasants to resist the temptations of feudalism and the sprouts of capitalism that he saw re-emerging in the countryside from Liu's economic reforms. Large quantities of politicized art were produced and circulated — with Mao at the centre. Numerous posters and musical compositions referred to Mao as "A red sun in the centre of our hearts" (我们心中的红太阳) and a "Savior of the people" (人民的大救星).[citation needed]
The Cult of Mao proved vital in starting the Cultural Revolution. China's youth had generally been raised during the Communist era, which had taught them to idolize Mao. The youth also did not remember the immense starvation and suffering caused by Mao's Great Leap Forward, and thus their thoughts of Mao were generally positive. Thus, they were his greatest supporters. Their feelings for him were of such strength that many followed his urge to challenge all established authority.
In October 1966, Mao's Quotations From Chairman Mao Tse-Tung, which was known as the Little Red Book was published. Party members were encouraged to carry a copy with them and possession was almost mandatory as a criterion for membership. Over the years, Mao's image became displayed almost everywhere, present in homes, offices and shops. His quotations were typographically emphasized by putting them in boldface or red type in even the most obscure writings. Music from the period emphasized Mao's stature, as did childrens' rhymes. The phrase Long Live Chairman Mao for ten thousand years was commonly heard during the era, which was traditionally a phrase reserved for the reigning Emperor.
Even after the Cultural Revolution, there remain people who still worship Mao in family altars or even temples for Mao.[39]
Legacy
As anticipated after Mao’s death, there was a power struggle for control of China. On one side was the left wing led by the Gang of Four, who wanted to continue the policy of revolutionary mass mobilization. On the other side was the right wing opposing these policies. Among the latter group, the restorationists, led by Chairman Hua Guofeng, advocated a return to central planning along the Soviet model, whereas the reformers, led by Deng Xiaoping, wanted to overhaul the Chinese economy based on market-oriented policies and to de-emphasize the role of Maoist ideology in determining economic and political policy. Eventually, the reformers won control of the government. Deng Xiaoping, with clear seniority over Hua Guofeng, defeated Hua in a bloodless power struggle a few years later.
Mao's legacy has produced a large amount of controversy. Many historians and academics are critical of Mao, especially his many campaigns to suppress political enemies and gain international renown, some comparing him to Hitler and Stalin.[40][41]
Supporters of Mao credit him with advancing the social and economic development of Chinese society. They point out that before 1949, for instance, the illiteracy rate in Mainland China was 80%, and life expectancy was a meager 35 years. At his death, illiteracy had declined to less than seven percent, and average life expectancy had increased to more than 70 years (alternative statistics also quote improvements, though not nearly as dramatic). In addition to these increases, the total population of China increased 57% to 700 million, from the constant 400 million mark during the span between the Opium War and the Chinese Civil War. Supporters also state that, under Mao's government, China ended its "Century of Humiliation" from Western and Japanese imperialism and regained its status as a major world power. They also state their belief that Mao also industrialized China to a considerable extent and ensured China's sovereignty during his rule. Many, including some of Mao's supporters, view the Kuomintang, which Mao drove off the mainland, as having been corrupt.
They also argue that the Maoist era improved women's rights by abolishing prostitution, a phenomenon that was to return after Deng Xiaoping and post-Maoist CPC leaders increased liberalization of the economy. Indeed, Mao once famously remarked that "Women hold up half the heavens". A popular slogan during the Cultural Revolution was, "Break the chains, unleash the fury of women as a mighty force for revolution!"
Skeptics observe that similar gains in literacy and life expectancy occurred after 1949 on the small neighboring island of Taiwan, which was ruled by Mao's opponents, namely Chiang Kai-Shek and the Kuomintang, even though they themselves perpetrated substantial repression in their own right. The government that continued to rule Taiwan was composed of the same people ruling the Mainland for over 20 years when life expectancy was so low, yet life expectancy there also increased. A counterpoint, however, is that the United States helped Taiwan with aid, along with Japan and other countries, until the early 1960s when Taiwan asked that the aid cease. The mainland was under economic sanctions from the same countries for many years. The mainland also broke with the USSR after disputes, which had been aiding it.
Another comparison has been between India and China. Noam Chomsky commented on a study by the Indian economist Amartya Sen.
He observes that India and China had "similarities that were quite striking" when development planning began 50 years ago, including death rates. "But there is little doubt that as far as morbidity, mortality and longevity are concerned, China has a large and decisive lead over India" (in education and other social indicators as well). In both cases, the outcomes have to do with the "ideological predispositions" of the political systems: for China, relatively equitable distribution of medical resources, including rural health services and public distribution of food, all lacking in India.[42]
The United States placed a trade embargo on China as a result of its involvement in the Korean War, lasting until Richard Nixon decided that developing relations with China would be useful in also dealing with the Soviet Union.
Mao's military writings continue to have a large amount of influence both among those who seek to create an insurgency and those who seek to crush one, especially in manners of guerrilla warfare, at which Mao is popularly regarded as a genius. As an example, the Communist Party of Nepal (Maoist) followed Mao's examples of guerrilla warfare.
One of the last publicly displayed portraits of Mao Zedong at the Tiananmen gate.The ideology of Maoism has influenced many communists around the world, including Third World revolutionary movements such as Cambodia's Khmer Rouge,[43] The Communist Party of Peru, and the revolutionary movement in Nepal. The Revolutionary Communist Party, USA also claims Marxism-Leninism-Maoism as its ideology, as do other Communist Parties around the world which are part of the Revolutionary Internationalist Movement. China itself has moved sharply away from Maoism since Mao's death, and most people outside of China who describe themselves as Maoist regard the Deng Xiaoping reforms to be a betrayal of Maoism, in line with Mao's view of "Capitalist roaders" within the Communist Party.
As the Chinese government instituted free market economic reforms starting in the late 1970s and as later Chinese leaders took power, less recognition was given to the status of Mao. This accompanied a decline in state recognition of Mao in later years in contrast to previous years when the state organized numerous events and seminars commemorating Mao's 100th birthday. Nevertheless, the Chinese government has never officially repudiated the tactics of Mao.
In the mid-1990s, Mao Zedong's picture began to appear on all new renminbi currency from the People’s Republic of China. This was officially instituted as an anti-counterfeiting measure as Mao's face is widely recognized in contrast to the generic figures that appear in older currency.[citation needed] On 13 March 2006, a story in the People's Daily reported that a proposal had been made to print the portraits of Sun Yat-sen and Deng Xiaoping.[44]
In 2006, the government in Shanghai issued a new set of high school history textbooks which omit Mao, with the exception of a single mention in a section on etiquette. Students in Shanghai now only learn about Mao in junior high school.[45]
Mao lived in the government complex in Zhongnanhai, Beijing.
Genealogy
Mao Zedong had several wives which contributed to a large family. These were:
Luo Yixiu (罗一秀, 1889-1910) of Shaoshan: married 1907 to 1910
Yang Kaihui (杨开慧, 1901-1930) of Changsha: married 1921 to 1927, executed by the KMT in 1930
He Zizhen (贺子珍, 1910-1984) of Jiangxi: married May 1928 to 1939
Jiang Qing: (江青, 1914-1991), married 1939 to Mao's death
From left to right: Mao Zetan, Mao Zemin, Wen Qimei and Mao Zedong at Changsha, 1919.His ancestors were:
Wen Qimei (文七妹, 1867-1919), mother. She was illiterate and a devout Buddhist.
Mao Yichang (毛贻昌, 1870-1920), father, courtesy name Mao Shunsheng (毛顺生) or also known as Mao Jen-sheng
Mao Enpu (毛恩普), paternal grandfather
Mao Zuren (毛祖人), paternal great-grandfather
He had several siblings:
Mao Zemin (毛泽民, 1895-1943), younger brother
Mao Zetan (毛泽覃, 1905-1935), younger brother
Mao Zejian (毛泽建, 1905-1929), adopted sister, executed by the KMT
Mao Zedong's parents altogether had six sons and two daughters. Two of the sons and both daughters died young, leaving the three brothers Mao Zedong, Mao Zemin, and Mao Zetan. Like all three of Mao Zedong's wives, Mao Zemin and Mao Zetan were communists. Like Yang Kaihui, both Zemin and Zetan were killed in warfare during Mao Zedong's lifetime.
Note that the character ze (泽) appears in all of the siblings' given names. This is a common Chinese naming convention.
From the next generation, Zemin's son, Mao Yuanxin, was raised by Mao Zedong's family. He became Mao Zedong's liaison with the Politburo in 1975. Sources like Li Zhisui (The Private Life of Chairman Mao) say that he played a role in the final power-struggles.[46]
Mao Zedong had several children:
Mao Anying (毛岸英): son to Yang, married to Liu Siqi (刘思齐), who was born Liu Songlin (刘松林), killed in action during the Korean War
Mao Anqing (1923-2007): son to Yang, married to Shao Hua (邵华), son Mao Xinyu (毛新宇), grandson Mao Dongdong (last surviving known male line of Mao).
Li Min (李敏): daughter to He, married to Kong Linghua (孔令华), son Kong Ji'ning (孔继宁), daughter Kong Dongmei (孔冬梅)
Li Na (Chinese:李讷; Pinyin: Lĭ Nà): daughter to Jiang (whose birth given name was Li, a name also used by Mao while evading the KMT), married to Wang Jingqing (王景清), son Wang Xiaozhi (王效芝)
Sources suggest that Mao did have other children during his revolutionary days; in most of these cases the children were left with peasant families because it was difficult to take care of the children while focusing on revolution. Two English researchers who retraced the entire Long March route in 2002-2003[47] located a woman who they believe might well be a missing child abandoned by Mao to peasants in 1935. Ed Jocelyn and Andrew McEwen hope a member of the Mao family will respond to requests for a DNA test.[48]
Writings and calligraphy
Mao was a prolific writer of political and philosophical literature.[49] Mao is the attributed author of Quotations From Chairman Mao Tse-Tung, known in the West as the "Little Red Book" and in Cultural-revolution China as the "Red Treasure Book" (红宝书): this is a collection of short extracts from his speeches and articles, edited by Lin Biao and ordered topically. Mao wrote several other philosophical treatises, both before and after he assumed power. These include:
On Practice (《实践论》); 1937
On Contradiction (《矛盾论》); 1937
On Protracted War (《论持久战》); 1938
In Memory of Norman Bethune (《纪念白求恩》); 1939
On New Democracy (《新民主主义论》); 1940
Talks at the Yan'an Forum on Literature and Art (《在延安文艺座谈会上的讲话》); 1942
Serve the People (《为人民服务》); 1944
On the Correct Handling of the Contradictions Among the People (《正确处理人民内部矛盾问题》); 1957
The Foolish Old Man Who Removed the Mountains (《愚公移山》); 1957
Mao was also a skilled calligrapher with a highly personal style. In China, Mao was considered a master calligrapher during his lifetime.[50] His calligraphy can be seen today throughout mainland China.[51] His work gave rise to a new form of Chinese calligraphy called "Mao-style" or Maoti, which has gained increasing popularity since his death. There currently exist various competitions specializing in Mao-style calligraphy.[52]
Literary figure
Politics aside, Mao is considered one of modern China's most influential literary figures, and was an avid poet, mainly in the classical ci and shi forms. His poems are all in the traditional Chinese verse style.
As did most Chinese intellectuals of his generation, Mao received rigorous education in Chinese classical literature. His style was deeply influenced by the great Tang Dynasty poets Li Bai and Li He. He is considered to be a romantic poet, in contrast to the realist poets represented by Du Fu.
Many of Mao's poems are still popular in China and a few are taught as a mandatory part of the elementary school curriculum. Some of his most well-known poems are: Changsha (1925), The Double Ninth (1929.10), Loushan Pass (1935), The Long March (1935), Snow (1936.02), The PLA Captures Nanjing (1949.04), Reply to Li Shuyi (1957.05.11), and Ode to the Plum Blossom (1961.12).
Figure in popular culture
The face of Mao Zedong, arguably still one of the most recognizable in the modern world, continues to appear on t-shirts and other merchandise. The Beatles song Revolution has a reference to Mao with the lines, "but if you go carrying pictures of chairman Mao/You ain't going to make it with anyone anyhow". Mao is also featured in the Little Feat song Apolitical Blues. In a Simpsons episode when the family goes to China, Homer visits Mao's mausoleum and talks to Mao's embalmed body. Protest The Hero make a reference to Mao in their song These Colours Don't Run in the lines The double standard of the ways of Mao Ze Dong killing for crimes against country.
|
 | hi, u reali got a nice n exciting profile |
 | want to learn forex
“Learn how to trade EUR/USD, USD/CAD, GBP/USD or
any other major currency pair by mastering a system
that combines top level mathematics with the
fundamental principles of human behavior - simplified
in such a way that even a high school dropout can
quickly start profiting from it...”
by Quantum Globe Inc.
A “crack team” consisting of a top level PhD
mathematician, a computer wizard and a behavioral
psychologist is put together by a street smart trading
professional to produce...
“A lethal “knee to the groin, thumb to the eye” Forex
Trading Strategy that transforms any average person into
a ruthless money making predator that makes even the
most hardened trading sharks spin their heads in
disbelief... ”
Copyright © 2005 All rights reserved
First Edition 2005. ISBN 0-0997773-04
1
Table Of Contents
Chapter 1 Introduction ________________________________ 3
1.1. Why should you trade forex market?........................................................4
1.2. Which strategy should you use?................................................................ 5
1.3. The ICWR phenomenon............................................................................ 6
1.4. Simplified trading example ....................................................................... 8
Chapter 2 Scientific Research _________________________ 19
2.1. Market signals based on the ICWR phenomenon .................................. 21
2.2. The proper long-term filter......................................................................26
2.3. Consistency checks..................................................................................29
2.4. Why is our entry strategy so profitable? ................................................. 34
2.5. Why is our exit strategy so profitable? ................................................... 35
Chapter 3 The Intraday ICWR Trading Rules ___________ 41
3.1. Market signalsgenerated by ICWR........................................................42
3.2. When to enter a trade...............................................................................55
3.3. When to exit a trade.................................................................................56
Chapter 4 Intraday EUR/USD Trading Example _________ 58
Chapter 5 Intraday CAD /USD Trading Example _________ 75
Chapter 6 The Long-Term ICWR Trading Rules _________ 89
6.1. When to enter a trade...............................................................................90
6.2. When to exit a trade.................................................................................90
Chapter 7 Long-Term EUR/USD Trading Example _______ 91
Chapter 8 Long-Term GBP/USD Trading Example ______ 113
2
Chapter 1
Introduction
Two completely opposite “schools of thought” dominate today’s public opinion when it
comes to financial markets. One school of thought is advocated by academic types,
mostly economics, finance and mathematics professors. They will tell you that “markets
are efficient” and that there is a zero chance for an individual to outperform any liquid
financial market in the long run. Well, of course the guys with cushy university jobs,
without any real world or business experience, will tell you that you don’t stand a chance
to succeed. You should continue to work your little day job so that they have someone to
make their sandwich or to change oil in their cars. People who subscribe to this theory
usually choose to stay out of financial markets and keep their cash stashed in their
mattresses.
Another school of thought is advocated by financial TV and radio stations, investment
firms, brokerages etc… “Surprisingly” they are all trying to portray financial markets as
an idyllic place where happy Moms, Dads and Grandpas use sophisticated software to
place winning trades from their laptops while vacationing on sandy Caribbean beaches…
Countless “talking heads” are enjoying their daily parade on TV channels such as CNBC
or CNN supplying mostly worthless advice to general public. Their “analysts” change
their opinion every day in a fashion that even George Orwell would find hard to
comprehend. And everything they say always seems to “make sense” at the moment when
they are saying it. Next day, when it turns out that they were totally wrong, they are
telling you an entirely different story as if yesterday never happened. And if you noticed,
the hosts never, ever bring that up. Why? Well, “the show must go on”. They have to
show you that every day you are missing on countless trading opportunities; you just need
to watch their shows, subscribe to fancy software that they sell you and you are on your
way to early retirement.
3
I do agree with the statement that financial markets are efficient. They are very
efficient in one thing - transferring money from bad and naive traders/investors to
the pockets of those that know what are they doing. You are now probably asking
yourself “What am I doing in this field? Do I have any chance to succeed?” The
answer is “Yes, you do.”. The system that we are about to reveal to you is a fail
proof entry and exit strategy that will put you on equal level with big investment
firms and with experienced professional traders.
A question that I hear the most from aspiring traders is “Which market should I trade? -
Stocks, Futures, Commodities...?” Well, with the right attitude and dedication there is
money to be made in every market. However, there is one market that is still largely
neglected by smaller traders even though it offers great profit potential and numerous
trading opportunities. It is Forex or Foreign Exchange market.
1.1. Why should you trade forex market?
Simply said, no other trading instrument comes even closely to forex market when it
comes to liquidity, 24hr market environment and last but not the least, profit potential.
Forex (currency) market is the largest (most liquid) financial market in the world, with an
average daily volume of more than US$ 1.5 trillion, which is more than all of the global
equity markets combined.
Forex trading day starts in Wellington, New Zealand followed by Sydney, Australia,
Hong Kong and Singapore. Three hours later trading day begins in Dubai (UAE) and
other Middle Eastern countries. In couple of hours they are followed by Frankfurt, Zurich,
Paris, Rome… London is the last one to open in Europe and five hours later it is followed
by New York, Chicago and finally the West Coast. The busiest hours are early European
mornings because at that time major Asian exchanges are still open and European
afternoons because at that time major US markets are open at the same time as Europe.
Therefore, wherever you live and whatever your work hours are you can always find
4
some time to participate in forex trading as opposed to stock market where you are
usually limited to the regular business hours.
Another property of forex market that makes it an excellent trading instrument is use of
leverage. Many beginning traders don’t fully understand the concept of leverage.
Basically, if you have a start up capital of $5,000 and if you trade on a 1:50 margin you
can effectively control a capital of $250,000. However, a two percent move against you
and your capital is completely wiped out. If you are a beginning trader you should not use
more than 1:20 margin until you get comfortable and profitable and then and only then
you can attempt to use higher margins. What does 1:20 margin mean? It means that with
your $5,000 you will control a capital of $100,000. Let’s say you are trading EUR/USD
and by using our entry strategy you have decided to enter the trade on a long side. That
means that you are betting that USD will depreciate against Euro. Let’s say current
EUR/USD rate is 1.305. Again, if your trading capital is $5,000 and you are using 1:20
leverage you will effectively be exchanging $100,000 to Euros. If the current rate is 1.305
you will receive 100,000/1.305 = 76,628 Euros. If the trade goes in your direction the
margin will work in your favour and 1% decline in USD will mean 20% increase in your
start up capital. So if EUR/USD rate moves from 1.305 to 1.318 you will be able to
exchange your 76,628 Euros back to $101,000 for a profit of $1,000. Since your start up
capital was $5,000 it is effectively a 20% increase in your account. However, if the trade
went against you and USD appreciated 1% vs. Euro your account would be reduced to
$4,000. That would not have happened as our strategy has built in hard stops to prevent
such outcome.
And the third and equally important property of forex market is the fact that trends in
forex market last longer and are more clearly defined than in any other trading instrument.
1.2. Which strategy should you use?
Another question that is often asked by aspiring traders is “What kind of trading approach
should I use – day trading, swing trading, position trading? How many indicators should I
use? Should I follow the TV news channels?...”
5
If you are facing similar dilemmas let me try to make an analogy. If you were attacked in
a dark alley and you felt that your life was in real danger what kind of defence technique
would you attempt to use. Would you attempt to kick your assailant with some fancy
kung fu move that you saw in a movie? Or would you use some basic but brutally
effective “knee to the groin”, “thumb to the eye” technique that is easy to implement and
that you are 100% certain will have an effect? When you have your hard earned money
riding on your trades maybe your life is not at stake but your and your family’s livelihood
is. The goal of all the other traders in the market is to take your money. And if you are
going to play around with some fancy tools and indicators that you don’t even understand
you can be assured that your hard earned money will be paying someone’s BMW lease
payments.
If you want to get to the top of the forex market “food chain” you have come to
the right place. The strategy that we are about to reveal to you is a completely
new, efficient and reliable trading strategy that comes as the result of years of
forex market research using sophisticated mathematical methods and is based on
a fundamental property of financial markets.
1.3. The ICWR phenomenon
Regardless of how strong a long-term market trend is, the market never moves only in the
direction of the long-term trend – there are always minor movements against the long-
term market trend. These deviations usually don’t last very long and after them the market
moves again in the direction of the long-term trend.
The major market movements in the direction of the long-term market trend are called
impulsive waves and the minor market movements against the long-term market trend
are called corrective waves.
The picture below (Figure 1.1) shows a snapshot of a EUR/USD candlestick chart.
Although the market shows both upward and downward market movements it can be
easily recognized that the long-term market trend is clearly bearish as between 07:00 AM
6
and 11:00 AM the price failed around 140 pips (from 1.3500 at 07:00 AM to 1.3360 at
11:00 AM, that is 1.3500 - 1.3360 = 0.0140 = 140 pips). The waves (1), (3) and (5) are
the impulsive waves; the waves (2) and (4) are the corrective ones.
Figure 1.1.
Our main observation, until now disregarded by all traders in their trading strategies,
is that when putting into relationship the height of a corrective wave and the height of
the prior impulsive wave, the corrective wave tends to retrace the prior impulsive
wave in Fibonacci ratios. Frequent relationships are 25%, 38%, 50%, 61% and 75%. Up
to now we will refer to this effect as the Impulsive/Corrective Wave Retracement
(ICWR) phenomenon. For example in the picture below (Figure 1.2) the corrective wave
(2) retraces the impulsive wave (1) in the Fibonacci ratio of 0.382.
7
Figure 1.2.
The ICWR phenomenon is a typical self-similarity effect of a complex system. For all
kind of complex systems in nature as social, chemical or physical systems such self-
similarity effects can be found. Self-similarity is a fundamental property of self-organized
complex systems and is a matter of recent intense investigation by physicists and
mathematicians.
We have used the phenomenon described above as a starting point to develop a
completely original and until now unpublished trading strategy that combines
basic principles of Elliot Wave theory together with well-known properties of
Fibonacci ratios. The result is amazing, as you will soon find out. We have named
the strategy “Impulsive/Corrective Wave Retracement (ICWR) Trading Rules”.
1.4. Simplified trading example
Before going into the details of our strategy we will introduce it to you by showing you a
simplified, shortened version and in the later chapters you will be shown how to put it to
use and immediately start taking advantage of it. Our strategy gives the best possible entry
as well as exit moment. In the example below we will show you only the part that is
usually neglected by most of the trading strategies currently in use – how to find out the
8
best moment to exit the trade. For the purpose of making the example easier to follow
we will assume that we have already found the best moment to enter the trade.
While going through the trading example below you will realize that the part of
our strategy related with the exit signal follows the fundamental trading rule “cut
the losses short and let the profits run” - in a way that was never accomplished
before.
And, why is this fundamental trading rule so important?
Because not letting the profits run will make your trading unprofitable in the long
run: two losses of 50 pips followed by a win of 80 pips results in a net loss of 20
pips. In contrast two losses of 50 pips followed by a win of 250 pips, reachable with
our strategy, results in a net win of 150 pips! I’m sure you get the point.
Here is an example of a GBP/USD trade exit by using our strategy.
Note: All of the elements of the strategy are clearly explained in the later chapters. The
purpose of the example below is to give you a glimpse into the exit part of the strategy.
Suppose we entered the market short at point A (07:00 AM, 01/04/05) buying 10,000
USD at the entry price of 1.9075 (see Figure 1.3).
9
Figure 1.3.
For the first moment (see Figure 1.4) the market moved into our direction and reached the
point B. At that point the market reached a value of 1.9028. That means 48 pips in our
direction. So far, so good.
Figure 1.4.
However, after the point B (see Figure 1.5) the market starts an upward movement. What
to do now? Inexperienced trader would close the position as a scared rabbit, happy to take
10
even small profit from the trade. But this would be the wrong decision. Why? Remember,
we have to “let the profits run”, if we want to make trading profitable in the long run.
Figure 1.5.
So what do we do?
The essential question is:
When do we decide that our trade has run out of steam and should be exited?
This is where our strategy comes into play. By using the “Impulsive/Corrective Wave
Retracement Trading Rules” we will find the best possible time to exit the trade and
extract maximum profit from each trade.
In order to apply our trading strategy the following trading setup has to be done.
First of all the highest and the lowest value of the downward movement are determined.
For this purpose we draw a line connecting both extreme values. In our case the extreme
values of the downward movement are point A (around 07:00) and point B (around
08:00). We will connect them with the thick blue line (see Figure 1.6).
11
Figure 1.6.
Further on we draw the Fibonacci levels using the lowest value of the downward
movement (point B) as the starting point (level 0.000) and the highest value of the
downward movement (point A) as the ending point (level 1.000). As we are only
interested in the 0.000, 0.250, 0.382, 0.618, 0.750 and 1.000 levels, only these levels will
be drawn (see Figure 1.7).
We are going to exit the position only in the case that the price goes beyond the 0.750
level, i.e. if it happens that a whole candlestick is above the 0.750 Fibonacci level.
12
Figure 1.7.
The upward movement retraced at the 0.618 Fibonacci level approximately at the point C
at 08:50 AM. As the price didn’t move beyond the 0.750 Fibonacci level we remain in the
trade. Ok, let’s look what happens next. After point C the market moves again downwards
in our direction until it reaches a low point around 11:10 at the point D. After that the
price starts to rise again (see Figure 1.8). Nevertheless letting the profit run did pay off, as
the distance to our entry point is already around 100 pips (at point B the distance was only
around 50 pips).
Figure 1.8.
13
Again it is the “Impulsive/Corrective Wave Retracement Trading Rules”, which are
helping us decide whether to remain in the trade or not. Again the trading setup is done: a
line is drawn connecting the extreme values (C-D) of the downward movement and based
on this line the Fibonacci levels are drawn (see Figure 1.9). And again: we are only going
to exit the position if the price goes beyond the 0.750 Fibonacci level.
Figure 1.9.
The upward movement retraced at the 0.618 Fibonacci level approximately at point E at
12:25 AM. As the price didn’t move beyond the 0.750 Fibonacci level we remain in the
market. Let’s look what happens next. After point E the market moves again downwards
in our direction until it reaches a low point around 14:25 at the point F. After that, again
the price starts to rise (see Figure 1.10). The distance to our entry point is now around 120
pips.
Again we set our trading setup: a line is drawn connecting the extreme values (E-F) of the
downward movement and based on this line the Fibonacci levels are drawn. Remember,
we are only going to exit the position if the price goes beyond the 0.750 Fibonacci level.
14
Figure 1.10.
The upward movement retraced at the 0.750 Fibonacci level approximately at point G at
14:40. As the price didn’t move beyond the 0.750 Fibonacci level we remain in the
market. Let’s look what happens next. After point G the market moves again downwards
in our direction until it reaches a minimum around 17:30 at the point H. After that, again
the price starts to rise (see Figure 1.11). The distance to our entry point is now around 200
pips.
Again we set our trading setup: a line is drawn connecting the extreme values (G-H) of
the downward movement and based on this line the Fibonacci levels are drawn.
Remember, we are only going to exit the position if the price goes beyond the 0.750
Fibonacci level.
Figure 1.11.
The upward movement retraced at the 0.250 Fibonacci level approximately at point I at
20:25. As the price didn’t move beyond the 0.750 Fibonacci level we stayed in the
market. Ok, let’s look what happens next. After point I the market moves again
15
downwards in our direction till it reaches a minimum around 20:40 at the point J. After
that, again the price starts to rise (see Figure 1.12). The distance to our entry point is now
around 270 pips.
Again we set our trading setup: a line is drawn connecting the extreme values (I-J) of the
downward movement and based on this line the Fibonacci levels are drawn. Exit signal
occurs if the price breaks the 0.750 level.
Figure 1.12.
After 21:00 the market trend starts to turn bullish. As of 01:15 the price has gone beyond
the 0.750 level (the whole candlestick is above the 0.750 level at point K) we exit the
trade selling 10,000 USD at the price of 1.8838 (see Figure 1.13).
Figure 1.13.
16
For this trade a profit of 1.9075 - 1.8838 = 0.0237= 237 pips was realized. Using a
leverage of 1:20 it means a profit of 10,000 x 0.0237 x 20 = 4,740 USD.
That means a profit of 4,740 USD after one trading day!
Figure 1.14.
As you can see from the Figure 1.14 above our exit strategy was able to determine the
best possible time to exit the trade and extract maximum profit from it.
In order to show you how efficient our strategy actually is, we will compare the result we
achieved with the result we would have achieved if we had used a trailing stop instead.
17
Figure 1.15.
As you can observe from the Figure 1.15 above after entering the position the market was
clearly going in our direction (at the point D a profit spread of almost 150 pips was
already reached). However, the trailing stop doesn’t give the trade enough space to run.
If we would have used a trailing stop to exit the trade we would have achieved a
profit of only 90 pips and our trade would have finished too early. Instead, using
our strategy a profit of 237 pips – almost three times more – is achieved!
18
Chapter 2
Scientific Research
Note: We have included this chapter in our manual in order to give our reader a glimpse
into the making of a profitable trading system. Some of the technical language that is
included may be new to some of our readers. However the understanding of this chapter
is not necessary for the successful implementation of our strategy (which is fully
explained in the latter chapters).
In our quest to find the most profitable and at the same time for a “small” trader feasible
trading system we have tested and analysed many different trading strategies. The
strategies that we have tested were ranging from simple combinations of TA indicators to
more complex trading systems that were utilizing support/resistance levels, pivot points,
chart patterns etc… However in order to reduce the number of systems that were later
scrutinized more closely, we have developed our own system selection criteria. Basically
the system that we were after had to have following properties: Simplicity, Efficiency and
Consistency.
Simplicity
As we all know forex trading strategies are becoming more and more complex and
sophisticated. What does it mean for our average independent trader? It means that our
simplicity factor when developing a trading strategy gains in importance. What usage
could an average person make from a strategy that requires or presumes a profound
knowledge in mathematics at a PhD level and a computing power beyond that of the
newest personal home computer? A type of highly complex strategies commonly used by
19
investment companies are neural networks1. A neural network is, in short, a model of
interconnected neurons (also known as nodes) that is inspired by the logical neurons in
human nerve system. Like the human brain a neural network can acquire, store and utilize
experiential knowledge in order to improve its performance day by day. Regrettably, to
consistently use a strategy based on neural networks one requires the complex knowledge
of how to feed a neural network with history data as well as excessively high computing
power not affordable to our average forex trader. Therefore we have set ourselves with a
goal of finding a trading strategy that is comparable in it’s profit potential to the most
complex professional trading system and at the same time is feasible and understandable
to our average trader.
Efficiency
Efficiency of a trading strategy is basically a measure of profit that is realized using the
strategy during specified period of time. When comparing different trading strategies,
those strategies that show more profit during specified period of time are said to be more
efficient.
Consistency
Once we have found a system that is efficient and simple to use our next most important
selection criteria becomes consistency. What does it mean for a strategy to be consistent?
It means that when the financial market behaviour changes slightly or even drastically, as
often happens in times of political and financial crisis, the strategy is still able to make
profit.
It means that a strategy with high efficiency and high consistency is a much better and
safer strategy than a strategy with high efficiency but lower consistency. It is the
consistency of a strategy that permits traders to plan for capital draw downs and potential
profit build up.
A consistent strategy shows the following properties:
1 V.V.Kondratenko and Yu. A Kuperin, “Using Recurrent Neural Networks To Forecasting of Forex”,
Condensed Matter, (2003)
20
•
The strategy is profitable even in turbulent times, as for example directly after
September 11.
•
The strategy retains positive efficiency if the financial market behaviour changes
slightly. This can be simulated changing slightly the parameters of the strategy. For
example if a strategy has worked well in the past with a hard stop order of 50 pips it
should also perform well if the stop order is changed to for example 55 pips, or 45
pips…
•
The probability of losing all the trading capital during specified period of time needs
to be extremely small, that is almost non existent. I don’t think that the importance of
this property needs to be explained any further. •
We came to the result that our new developed strategy based on the ICWR phenomenon
was the most powerful trading strategy, as it was the most efficient and most consistent
strategy from all the tested strategies and at the same time feasible and understandable for
our average trader. We had to put a lot of effort and time into forex market research to
come to this conclusion. In the following we want to give you only a short look into our
long way to our strategy.
First of all we will show you some of the milestones of the strategy development. That is
how to define reliable and consistent market signals based on the ICWR phenomenon (see
chapter 2.1.) and how to find the proper long-term filter for enhancing the performance of
our strategy (see chapter 2.2.).
Finally we will give you some remarks regarding the high consistency (see chapter 2.3.)
and high efficiency (see chapters 2.4. and 2.5.) of our strategy.
2.1. Market signals based on the ICWR phenomenon
Well, as told in the introduction (see chapter 1.3.), our strategy bases on the observation
that when putting into relationship the height of a corrective wave to the height of the
prior impulsive wave, the corrective wave tends to retrace the prior impulsive wave in
Fibonacci ratios. Frequent relationships are 25%, 38%, 50%, 68% and 75%.
21
Our task was to define consistent and efficient rules for generating bearish and bullish
signals based on the ICWR effect.
The open points were the following:
1. To find out the proper Fibonacci levels to be used.
2. To find out the proper triggers for identifying an impulsive or a corrective retracement.
As you can imagine there exist really a lot of possibilities of defining rules for generating
signals based on the ICWR phenomenon. The problem of making the rules too simple is
that they don’t cover all of the possibilities that may arise when markets behave
unusually.
Such an unusual behaviour is for example a candlestick being greater 3 times or more
than its immediate neighbours. That means that there is a huge difference between the
highest and the lowest value of that period. Such a candlestick represents a highly volatile
time period. For example in the Figure 2.1. below, such a volatile time period at 08:00 on
the 02/07/05 is recognized with the candlestick having a height around 60 pips, while
around it, the other candlesticks have a height of 10-15 pips.
Ok, suppose that the rule for recognizing a bullish signal in the case of an upward
movement is the recognition of the price bouncing off any Fibonacci level (0.750, 0.618,
0.500, 0.318 or 0.250). After the upward movement starting at 06:10 and ending at 07:35
we could (following the former simple rule) make around 08:00 following market
reading: around 08:00 we see the price clearly above the Fibonacci levels after having
bounced off at the 0.382 Fibonacci level (around 07:50) and in consequence this would
represent a bullish signal (see Figure 2.1).
But such a bullish signal makes no sense, as such an isolated and highly volatile
candlestick has nothing to do with the impact of the ICWR phenomenon into the market.
22
Figure 2.1. Figure 2.1.
Another factor that we had to take into account is a sideways market, which can very
easily generate false signals. For example in the Figure 2.2. below, after 17:00 the market
doesn’t show any clear trend.
Ok, suppose the used rule for recognizing a bearish signal in the case of an downward
movement is again the recognition of the price bouncing off any Fibonacci level (0.750,
0.618, 0.500, 0.318 or 0.250). After the downward movement starting at 11:00 and ending
at 16:00 we could (following the supposed simple rule) make around 18:00 the following
market reading: the price is below the 0.250 Fibonacci level after having bounced off it
around 17:00 and in consequence this would represent a bearish signal.
However it would make no sense, as such a sideways market has again nothing to do
with the impact of the ICWR phenomenon into the market..
23
Figure 2.2.
Because of that, the main effort had to be put into finding efficient and at the same
time reliable rules (that is immune to the other effects of the market) for
generating market signals based on the ICWR phenomenon. You will find these
rules to be defined in detail in the chapter 3. “Intraday ICWR Trading Rules”.
For the sake of completeness let us just remark that in the shown examples (Figures 2.1
and 2.2) we get the right market signals when using our ICWR Trading Rules.
24
Figure 2.3.
In the example with the high volatile candlestick at 08:00 in Figure 2.3 no signal is
generated when using our ICWR Trading Rules for two reasons. First, because the whole
candlestick is not above the upper confirmation level (0.750). And second, no retracement
channel is entered; even if the whole candlestick at 08:00 was above the 0.750 level no
bullish signal would have been generated. Not only a false bullish signal is avoided, but
also later the ICWR Trading Rules generate a correct bearish signal corresponding to the
real market trend.
Figure 2.4.
25
In the example of a sideways market in Figure 2.4 no signal is generated, as no whole
candlestick is below the lower confirmation level (0.250).
2.2. The proper long-term filter
When developing a trading strategy, it makes sense to search for a proper long-term
indicator in order to filter out the entry signals from the short-term scale. The reason is
that such long-term filters make the strategy considerably more powerful (meaning more
efficient and more consistent). In our case the short-term time period for intraday trading
is five minutes candlestick and for long-term trading time period is four hours candlestick.
Why do long-term filters make a strategy more efficient? The reason is quite
simple. Suppose we are doing intraday trading. As we want to let our profits run,
we are going to stay in the market typically for a couple of hours and sometimes
even for a couple of days. Basically long-term filters are filtering out those entry
signals that are not in the concordance with the long-term market behaviour.
2.2.1. Enhancing the Intraday Strategy
In order to enhance the intraday strategy based on the ICWR phenomenon the following
TA indicators and rules were tested:
MA(x): The 20-period simple moving average from the x-period candlestick chart is used.
The long-term signal is bullish if the actual value of the moving average is above the
actual price. The long-term signal is bearish if the actual value of the moving average is
below the actual price. X represents 30 minutes, 1 hour, 4 hours and 1 day. For example
MA(1h) stays for the 20-period simple moving average from a one hour candlestick chart.
RSI(x; 50/50): The x-period Relative Strength Index (RSI) is used (calculated using the
last 14 values). The long-term signal is bullish if the actual value of the RSI is above 50.
The long-term signal is bearish if the actual value of the RSI is below 50. X represents 30
26
minutes, 1 hour, 4 hours and 1 day. For example RSI(4h; 50/50) represents the 14-period
Relative Strength Index from a four hours candlestick chart.
RSI(x; 60/40): The x-period Relative Strength Index (RSI) is used (calculated using the
last 14 values). The long-term signal is bullish if the actual value of the RSI is above 60.
The long-term signal is bearish if the actual value of the RSI is below 40. X represents 30
minutes, 1 hour, 4 hours and 1 day.
CCI(x; 0/0): The x-period Commodity Channel Index (CCI) is used (calculated using the
last 20 values). The long-term signal is bullish if the actual value of the CCI is above 0.
The long-term signal is bearish if the actual value of the CCI is below 0. X represents 30
minutes, 1 hour, 4 hours and 1 day.
CCI(x; 50/-50): The x-period Commodity Channel Index (CCI) is used (calculated using
the last 20 values). The long-term signal is bullish if the actual value of the CCI is above
50. The long-term signal is bearish if the actual value of the CCI is below -50. X
represents 30 minutes, 1 hour, 4 hours and 1 day.
In the Figure 2.5 shown below you can see the result2 of using the different long-term
filters. The red thick line represents the result of the trading without a long-term filter
(around 2700 pips of net profit).
2 The net result shown in the pictures is the average net profit, when trading five months in parallel the
currencies EUR/USD, GBP/USD and CAD/USD using the ICWR Trading Rules. The average is calculated
based on two years historical back-testing.
27
Analysis of different TA indicators for filtering 5 min ICWR signals
0
50 0
10 00
15 00
20 00
25 00
30 00
35 00
40 00
N e t R e s u l t [p i p s ]
Used Long-Term Filter
Figure 2.5.
As you can observe from the red line shown on the Figure 2.5 above our strategy is
already highly profitable even without long-term filter, however when combined with
some of the long term filters it becomes even more profitable. For example, when using
the RSI(1 day; 50/50) long-term filter a profit of around 3900 pips is achieved which is
56% more profit than without this filter!
The proper long-term filter was found to be the RSI(1 d; 50/50) as it was the one with the
highest efficiency.
2.2.2. Enhancing the Long-Term Strategy
In order to enhance the long-term strategy based on ICWR phenomenon the long-term
filters MA(1d), RSI(1d; 50/50), RSI(1d; 60/40), CCI(1d; 0/0) and CCI(1d; 50/-50) were
tested.
In the Figure 2.6 shown below you can see the results of using the different long-term
filters.
28
Analysis of different TA indicators for filtering 4h ICWR signals
1500
1700
1900
2100
2300
2500
2700
MA (1 d) RSI (1 d; 50/50) RSI (1 d; 60/40) CCI (1 d; 0/0) CCI (1 d; 50/-50)
Used Long-Term Filter
Net Resu lt [pips]
Figure 2.6.
Analysis of different TA indicators for filtering 4h ICWR signals
1500
1700
1900
2100
2300
2500
2700
MA (1 d) RSI (1 d; 50/50) RSI (1 d; 60/40) CCI (1 d; 0/0) CCI (1 d; 50/-50)
Used Long-Term Filter
Net Resu lt [pips]
Figure 2.6.
The red thick line represents the result of our strategy without a long-term filter (around
2450 pips of net profit). Again, as in the intraday trading the ICWR strategy is already
highly profitable however when combined with long term filters it becomes even more
profitable. For example when using the RSI(1 day; 50/50) long-term filter a profit of
around 2625 pips is achieved (before only around 2450).
For our trading rules the RSI(1 day; 50/50) was chosen as the long-term filter, as it was
the one with the highest efficiency.
2.3. Consistency checks
Earlier in this chapter we have mentioned how important it is for a strategy to be
consistent. In the long run it is the consistency of a strategy more than its efficiency that
will make you successful in the trading business.
29
The strategy presented in this book is highly consistent. Showing you all the
analysis done in order for us being able to make this statement would go clearly
beyond the scope of this chapter, as we would be forced to bore you with pages
and pages full of complicated statistical stuff. As this is not relevant for your
trading we decided to show you only an extract from our analysis. That is the
graphs showing that our strategy is immune to small changes in the given
parameters – which simulates a slight change in the forex market behaviour.
The parameters of our strategy are:
•
The minimum height of a movement to be considered as an active wave (used is 40
pips for intraday, 150 pips for long-term trading)
•
The distance between the entry price and the hard stop order (used is 40 pips for
intraday, 100 pips for long-term trading)
•
The minimum RSI value for the market considered bullish (used is 50 both for
intraday and long-term trading)
•
The maximum RSI value for the market considered bearish (used is 50 both for
intraday and long-term trading)
These parameters are part of our trading rules, which are defined latter in detail in the
chapter 3. “Intraday ICWR Trading Rules”.
As you can see from the Figures shown below (Figures 2.7 till 2.12), our strategy
performs equally well when parameters are slightly changed. Both for the Intraday ICWR
and the Long-Term ICWR Trading Rules.
30
Figure 2.7.: Net result [pips] in dependence of the minimum height of the active wave for
the intraday ICWR trading rules
Consistency Analysis of the Long-Term ICWR Trading Rules / Minimum
Height of Active Wave
0
500
1000
1500
2000
2500
3000
100 125 150 175 200
Minimum Height of Active Wave [pips]
Net Result [pips]
Consistency Analysis of the Intraday ICWR Trading Rules
Minimum Height of Active Wave
0
500
1000
1500
2000
2500
3000
3500
4000
4500
30 35 40 45 50
Minimum Height of Active Wave [pips]
Net Result [pips]
Figure 2.8.: Net result [pips] in dependence of the minimum height of the active wave for
the long-term ICWR trading rules
31
Consistency Analysis of the Intraday ICWR Trading Rules
Distance of Hard Stop Order from Entry Price
0
500
1000
1500
2000
2500
3000
3500
4000
4500
40 45 50 55 60
Distance of Hard Stop Order from Entry Price [pips]
Net Result [pips]
Consistency Analysis of the Intraday ICWR Trading Rules
Distance of Hard Stop Order from Entry Price
0
500
1000
1500
2000
2500
3000
3500
4000
4500
40 45 50 55 60
Distance of Hard Stop Order from Entry Price [pips]
Net Result [pips]
Figure 2.9.: Net result [pips] in dependence of the distance of the stop order from the
entry price for the intraday ICWR trading rules
Consistency Analysis of the Long-Term ICWR Trading Rules / Distance of
Hard Stop Order from Entry Price
0
500
1000
1500
2000
2500
3000
50 75 100 125 150
Distance of Hard Stop Order from Entry Price [pips]
Net Result [pips]
Figure 2.10.: Net result [pips] in dependence of the distance of the stop order from the
entry price for the long-term ICWR trading rules
32
Consistency Analysis of the Intraday ICWR Trading Rules
Mimimum RSI for Bullish / Maximum RSI for Bearish
0
500
1000
1500
2000
2500
3000
3500
4000
4500
60/40 50/50 40/60
Mimimum RSI Value for Bullish Signal / Maximum RSI Value for Bearish Signal
Net Result [pips]
Consistency Analysis of the Intraday ICWR Trading Rules
Mimimum RSI for Bullish / Maximum RSI for Bearish
0
500
1000
1500
2000
2500
3000
3500
4000
4500
60/40 50/50 40/60
Mimimum RSI Value for Bullish Signal / Maximum RSI Value for Bearish Signal
Net Result [pips]
Figure 2.11.: Net result [pips] in dependence of the minimum/maximum RSI value for the
market considered bullish/bearish for the intraday ICWR trading rules
Consistency Analysis of the Long-Term ICWR Trading Rules / Mimimum RSI
for Bullish / Maximum RSI for Bearish
0
500
1000
1500
2000
2500
3000
60/40 50/50 40/60
Mimimum RSI Value for Bullish Signal / Maximum RSI Value for Bearish Signal
Net Result [pips]
Figure 2.12.: Net result [pips] in dependence of the minimum/maximum RSI value for the
market considered bullish/bearish for the long-term ICWR trading rules
33
2.4. Why is our entry strategy so profitable?
If you look at the entry signals that our strategy produces in Figure 2.13 you can see that
our entry signals are able to predict the main direction that the market will take. This
enables us to catch up a long-term intra-day wave after entering the market and therefore
pick up a considerable number of pips.
Figure 2.13.
Instead, if you look at the entry signals that would for example have been generated by a
commonly used entry strategy, that is the crossing of the 20-period moving average with
the 5-period moving average, one recognizes that a lot of the entry signals generated by
MA crossings are of really poor quality, as they are not able to predict what will be the
main market trend (see Figure 2.14).
34
Figure 2.14.
2.5. Why is our exit strategy so profitable?
Most traders make a mistake by thinking that entering the trade is more important than
exiting the trade, and if they have found an entry strategy with positive expectations, “the
job is done”. Nothing could be further away from the truth. Exit strategy is equally if not
more important than entry. In majority of strategies that are used by average traders a
trailing stop is used. A trailing stop is definitely better than a hard stop, however our
strategy goes way beyond regular trailing stops when determining the place of exit.
Before we go on, for the ones not knowing the meaning of a trailing stop, we will show
you what a trailing stop is and how it works.
A trailing stop order with a moving rate of 30 pips works as follows: suppose you are
entering long a position at the closing price of 1.2456 at 10:10 AM (see Table 2.1). Using
the above defined exit strategy you will then put your stop order at 1.2426 (30 pips below
1.2456). If the next closing price is at least 30 pips greater than the last stop order, the
new stop order will be the new closing price minus 30 pips. For example at 10:15 AM the
closing price of 1.2490 is 64 pips greater than the last trailing stop. Because of that the
new trailing stop is set to be 1.2460 = 1.2490 – 0.0030. Also at 10:25 AM the closing
price of 1.2495 is 35 pips greater than the last trailing stop. The new trailing stop is set to
35
be 1.2465 = 1.2495 – 0.0030. In this example the position is exited at 10:30, because the
low of that period of 1.259 is below the stop order of 1.2465.
Time Low Close Old stop order New stop order Comment
10:10:00 1.2446 1.2456 -1.2426 Entry position /
Stop order at 1.2426
10:15:00 1.2464 1.2490 1.2426 1.2460 Stop order changed
to 1.2460
10:20:00 1.2462 1.2483 1.2460 -
10:25:00 1.2478 1.2495 1.2460 1.2465 Stop order changed
to 1.2465
10:30:00 1.2459 1.2479 1.2465 -Exit position /
Low below 1.2465
Table 2.1.: Trailing stop with a moving rate of 30 pips
So what is the problem with the exit strategy shown above that uses a trailing stop?
The problem with an exit strategy using a trailing stop is that it works against the
basic fundamental trading rule “cut the losses short and let the profits run”.
And if you use a strategy that doesn’t let your profits run you are in real trouble.
And why does an exit strategy using a trailing stop work against this rule? Because very
often such a strategy fails unnecessarily, it gets you out just at the moment when your
trade needed just a little more space…Why? Every market trend, regardless of how strong
it is, also shows movements against the long-term market trend. These deviations usually
don’t last very long and after them the market moves again in the direction of the long-
term market trend.
We will now give you an example that will show you why a trailing stop is not the best
exit strategy. This example is based on the same EUR/USD long-term trade example from
chapter 7. Let’s have a look at Figures 2.15 to 2.18. Suppose we entered the market long
36
at 16:00 on the 10/15/04 at the price of 1.2461 (see Figure 2.15) and also that we will be
using a 150 pips trailing stop, which is an appropriate moving rate for long-term trading.
Figure 2.15.
At 04:00 on the 10/26/04 the closing price reached the price of 1.2802 (see Figure 2.16).
That means according to the rules of a trailing stop, the new stop order is placed 150 pips
below. That means at 1.2652 = 1.2802 - 0.0150.
Figure 2.16.
37
At 12:00 on the 10/28/04 the candlestick touches the stop order and the position is exited
at the price of 1.2652 (see Figure 2.17).
Figure 2.17.
The total profit of the trade using the 150 pips trailing stop was 1.2461 - 1.2652 = 191
pips. Although we exited the position with profit (191 pips), we lost the chance of picking
up the amount of pips that were possible in that trade.
How much profit was actually possible in that trade? As we will show you explicitly in
chapter 7 we made in this trade a profit of 723 pips, when using our exit trading rules. In
Figure 2.18 you can see both the profit gained by the 150 pips trailing stop (191 pips) and
by our exit trading rules (723 pips), which are almost four times higher. Using a simple
trailing stop is not only a pity for the lost pips (532 pips), but it is making trading in the
long run unprofitable: two losses of 150 pips followed by a win of 191 pips result in net
loss of 109 pips. In contrast two losses of 150 pips followed by a win of 723 pips result in
a net win of 423 pips! Do you get the point?
38
Figure 2.18.
The basic error of the strategy with the trailing stop was, that although the market was
clearly going in the direction of the trade (on the 10/26/04 a profit spread of almost 400
pips was already reached) the trailing stop didn’t give the trade enough space to run. In
particular if a profit spread of 400 pips was already reached it makes sense to risk, let’s
say 200 pips to give the trade a bigger chance to double or even triple the profit (at the
end 723 pips were reached!).
Basically the greater the profit spread is the more pips we can risk, in order to
gain even more. Again, one should not forget, that not every position will make
profit and in order not only to come even with the losses but also to make
considerable profit, one needs to milk every possible cent out of every profitable
trade. This is where our strategy comes into play.
39
We hope you could get some impression of the research done behind our trading
strategy. We understand that this chapter was complicated and maybe sometimes
a little bit boring; however we had made it as short and concise as possible. If we
had included all of the tests and calculations that were needed to produce the
ICWR strategy we would had needed at least several hundred pages… In the next
chapter you will be shown every aspect of ICWR strategy that you need to know
in order to be able to implement it successfully. Thank you for your patience. •
40
Chapter 3
The Intraday ICWR
Trading Rules
For the purpose of explaining our trading strategy we will be using Esignal charting
software. Which software and which trading platform you will be using is entirely up to
you, however our setup will give you a general idea of what capabilities should your
software have. Our examples will deal with EUR/USD, USD/CAD and GBP/USD.
Basically if you live in Canada we would encourage you to trade USD/CAD, if you live
in Australia you should trade USD/AUD, if you live in East Asia you should trade
USD/JPY, if you live in UK you should trade either USD/GBP or EUR/GBP, if you live
in European Union you are best off trading EUR/USD and finally if you live in the United
States you should trade USD against the currency that you are most familiar with. (EUR,
JPY, GBP, CAD, SFR). Trading the currency that you are familiar with has lots of
advantages vs. trading currencies that you have never used. For example, a person who
lives in Canada remembers approximate range of CAD vs. USD during past ten years or
more and has much better understanding of those currencies than average person from
Japan. Principles and rules that are explained in this strategy can be used to trade any of
the above currencies.
The Intraday ICWR Trading Rules are composed of:
•
entry signals generated by impulsive/corrective wave retracement breakouts using a
five minutes candlestick chart
•
entry confirmation filters generated by a 1-day based 14-period Relative Strength
Index (RSI) momentum indicator in order to confirm the bullish or bearish entry
signal from the five minutes candlestick chart
41
•
exit signals generated by impulsive/corrective wave retracement breakouts using a
five minutes candlestick chart or by a hard stop order of 50 pips using a five minutes
candlestick chart
As you can see our strategy places equal importance on entry and exit signals and this is
where it greatly differs from most of the strategies out there. First of all we will show you
how to recognize the market signals generated by impulsive/corrective wave retracements
(see chapter 3.1). Then we will show you when to enter a trade using the market signals
generated by impulsive/corrective wave retracements filtered with the 1-day based 14period
RSI momentum indicator (see chapter 3.2). Finally we will show you when to exit
a trade due to either an exit signal generated by an impulsive/corrective wave retracement
or by a hard stop order of 50 pips (see chapter 3.3).
3.1. Market signals generated by ICWR
Before starting to apply the Intraday ICWR Trading Rules, the first thing to do is to
recognize from the candlestick chart the actual candidate for being an impulsive or a
corrective wave. This candidate we will call from now on the active wave. How to
recognize the active wave from the candlestick chart is shown in chapter 3.1.1.
After having recognized the active wave we apply the Intraday ICWR Trading Rules.
Based on these rules our strategy generates bullish or bearish signals that can be used for
entering as well as exiting the trade either on a long or a short side. How to apply the
Intraday ICWR Trading Rules once an active wave is recognized is shown in chapter
3.1.2.
3.1.1. Recognition of the active wave
The active wave is the nearest market movement to the actual time of our trading with a
height greater than 40 pips. In order to find the active wave from the candlestick chart
the following steps are to be done:
First identify all possible upward and downward waves that seem to be close to or greater
than 40 pips on the candlestick chart as shown in Figure 3.1.
42
Figure 3.1.
Then draw the waves, connecting the extreme values of the starting and the ending point
as shown in Figure 3.2. If the wave goes downwards we are going to connect the high
value of the starting point with the low value of the ending point. Else if the wave goes
upwards we are going to connect the low value of the starting point with the high value of
the ending point.
Figure 3.2.
Enumerate the waves starting with the nearest wave to the actual time as shown in Figure
3.3. Please notice that the actual time is always at the right of the candlestick chart.
43
Figure 3.3.
Afterwards read the extreme values of each wave and calculate its height.
Wave 1:
High = 1.3493; Low = 1.3439;
Height = High – Low = 1.3493– 1.3439= 0.0054 = 54 pips
Wave 2:
High = 1.3495; Low = 1.3448;
Height = High – Low = 1. 3495– 1. 3448= 0.0047 = 47 pips
Wave 3:
High = 1.3499; Low = 1.3450;
Height = High – Low = 1. 3499– 1. 3450= 0.0049 = 49 pips
Finally identify the nearest movement to the actual time position with a height equal or
greater than 40 pips. In this example it is the wave 1. This is now the active wave (see
Figure 3.4).
44
Figure 3.4.
If none of the waves has a height greater than 40 pips you have to go further in the past
until the active wave is found.
As the time goes on a new movement with a height greater than 40 pips will occur. In that
case the previous active wave gets inactive, and we get the new active wave (see Figure
3.5).
Figure 3.5.
45
3.1.2. Applying the Intraday ICWR Trading Rules to an active wave
Every time a new active wave is recognized the Fibonacci levels are to be drawn (see
Figure 3.6). We will draw only the 0.000, 0.250, 0.382, 0.618, 0.750 and 1.000 levels.
The level 0.000 is defined by the lower extreme value, the level 1.000 by the higher
extreme value. The Fibonacci levels start at the ending points of the wave. Most of the
software packages will do this automatically for you, however if your software doesn’t
have such a feature you can do it manually. In the example below you would subtract the
low value from the high value (1.3317 – 1.3257) and you would get a height of 0.006 or
60 pips. You would then use the following formulas to get the Fibonacci levels.
0.25 Level = Low Value + 0.25 * Height
0.25 Level = 1.3257 + 0.25 * 0.0060 = 1.3272
0.382 Level = Low Value + 0.382 * Height
0.618 Level = Low Value + 0.618 * Height
0.75 Level = Low Value + 0.75 * Height
Figure 3.6.
46
The level 0.382 defines the lower retracement level, the level 0.618 the upper
retracement level. The retracement channel is the channel between the upper and the
lower retracement levels:
Figure 3.7.
The level 0.250 defines the lower confirmation level, the level 0.750 defines the upper
confirmation level:
Figure 3.8.
47
The levels 0.000 and 1.000 have no trading relevance. They are only drawn for
confirming that the Fibonacci levels are drawn properly.
The Intraday ICWR Trading settings are done, now we need to see what the market is
telling us. First we will concentrate only on the retracement channel. We wait until the
retracement channel is triggered. Only then we can use the confirmation levels.
The retracement channel is triggered when the closing price of a candlestick is inside
of the retracement channel.
Figure 3.9.
Once the retracement channel is entered we will forget about it and concentrate only on
the confirmation levels. The following four cases are now possible:
Case 1. “Downward impulsive wave”
If the active wave goes downwards and the whole candlestick goes below the lower
confirmation level (0.250) we identify that wave as an impulsive wave. According to the
chapter 1 the impulsive waves go in the direction of the market trend. As the trend of the
wave is bearish (as it goes downwards) it is giving us the information that the actual
market trend is also bearish. This is a bearish signal. Such a bearish signal is shown in the
Figure 3.10. below.
48
Figure 3.10.
Please remember that when we say that the candlestick is below the lower confirmation
level, we actually mean that the whole candlestick is below the lower confirmation level.
This is shown in the Figure 3.11. below.
Figure 3.11.
Case 2 “Upwards impulsive wave”
If the active wave goes upwards and the whole candlestick goes above the upper
confirmation level (0.750) we identify that wave again as an impulsive wave. According
to the chapter 1 the impulsive waves go in the direction of the market trend. As in this
49
case the trend of the wave is bullish (as it goes upwards) it is giving us the information
that the actual market trend is also bullish. This is a bullish signal.
Figure 3.12.
Case 3 “Downwards corrective wave”
If the active wave goes downwards and the whole candlestick goes above the upper
confirmation level (0.750) the active wave is a corrective wave. According to the chapter
1 the corrective waves go against the direction of the market trend. As in this case the
trend of the wave is bearish (as it goes downwards) it is giving us the information that the
actual market trend is opposite to the trend of the active wave and therefore bullish. This
is a bullish signal. Such a bullish signal is shown in the Figure 3.13. below.
50
Figure 3.13.
Case 4 “Upwards corrective wave”
If the active wave goes upwards and the whole candlestick goes below the lower
confirmation level (0.250) the active wave is a corrective wave. According to the chapter
1 the corrective waves go against the direction of the market trend. As in this case the
trend of the wave is bullish (as it goes upwards) it is giving us the information that the
actual market trend is opposite to the trend of the active wave and therefore bearish. This
is a bearish signal.
Figure 3.14.
51
Ok, we know this stuff is a little bit complicated. But don’t be discouraged! Things,
will become more clear for you now. We will now explain to you again in the most
simplest manner the rules for recognizing bearish or bullish signals. That means, what
in the end you have really to understand for trading.
In our strategy there are two different bullish signal scenarios and two bearish signal
scenarios.
A bullish signal occurs if the active wave is recognized as a downward corrective
wave (see Figure 3.15. below). That means the active wave was downward and the
whole candlestick was found above the upper confirmation level (0.750).
A bullish signal also occurs if the active wave is recognized as an upward impulsive
wave (see Figure 3.15. below). That means the active wave was upward and the whole
candlestick was found above the upper confirmation level (0.750).
A bearish signal occurs if the active wave is recognized as a downward impulsive
wave (see Figure 3.15. below). That means the active wave was downward and the
whole candlestick was found below the lower confirmation level (0.250).
A bearish signal also occurs if the active wave is recognized as an upward corrective
wave (see Figure 3.15. below). That means the active wave was upward and the whole
candlestick was found below the lower confirmation level (0.250).
Please note that each time we need to make sure that the retracement channel has been
entered. This is quite obvious for the corrective waves but not for the impulsive waves.
So please pay attention to it.
52
Figure 3.15.
53
Please note as shown in the Figure 3.16. below that, when a new active wave is
recognized, the new Fibonacci levels are drawn and the existent Fibonacci levels of the
previous active wave are deleted.
Figure 3.16.
In the Figure 3.17. shown below you can observe how the market is constantly providing
us with different trading signals.
Figure 3.17.
54
3.2. When to enter a trade
In short, we are going to enter a trade, when a signal generated by an impulsive/corrective
wave retracement (as shown in chapter 3.1) is confirmed by the 1-day 14-period Relative
Strength Index.
If the signal generated by an impulsive/corrective wave retracement is bullish we
ask for the RSI to be greater than 50.
If the signal generated by an impulsive/corrective wave retracement is bearish we
ask for the RSI to be lower than 50.
In the Figure 3.18. below we can see the two screen set up. On the left side there is a 5
minutes candlestick chart. On the right side there is 1-day candlestick chart with the RSI
signal below. At 11:30 on the 11/23/04 the candlestick is above the upper confirmation
level (Fibonacci level 0.750). Since the active wave had a downward movement and the
candlestick is above the upper confirmation level we identify the active wave as a
downward corrective wave. As explained before this is an ICWR bullish signal. This
bullish signal must be confirmed with the Relative Strength Index (RSI). As the RSI (blue
line in Figure 3.18) is above the 50 centerline (black line) we enter long the market.
Figure 3.18.
55
3.3. When to exit a trade
Our main exit strategy is to look for an opposite market signal (opposite to our entry
signal) based on impulsive/corrective wave retracements (in the same manner as for the
entry warning signal). Additionally (only for the sake of security) after entering a
position we place a stop order of 50 pips, because we do not want to lose more than 50
pips in one trade.
If the market was entered long a position will be exited either because a bearish
signal is generated by an impulsive/corrective wave retracement (as shown in
chapter 3.1) or because of the hard stop order of 50 pips below the entry price.
If the market was entered short a position will be exited either because a bullish
signal is generated by an impulsive/corrective wave retracement (as shown in
chapter 3.1) or because of the hard stop order of 50 pips above the entry price.
In the Figure 3.19. below the market was entered short as both the signals generated by
an impulsive/corrective wave retracement (ICWR) and the RSI were bearish. The position
was entered at 08:20 on the 09/29/04 at the price of 1.8091. Immediately after entering the
position a hard stop order of 50 pips above the entry price (in this case at 1.8091 + 0.0050
= 1.8141) is placed. In this trade the stop order is not triggered. The position is exited
because a bullish signal is generated by an impulsive/corrective wave retracement
(ICWR) at 13:45 on the 09/30/04.
56
Figure 3.19.
In this chapter you were introduced to our “Intraday ICWR Trading Rules”. Now
it’s time to go step by step through real trading examples using our strategy so
that you can see our “Intraday ICWR Trading Rules” in action.
57
Chapter 4
Intraday EUR/USD
Trading Example
In this example we are going to trade EUR/USD.
Ok, before we start our trading day we need to set up our screens (see Figure 4.1). On the
left screen we are going to place a five minutes candlestick chart and on the right screen a
one day candlestick chart together with the 14-period RSI (thick blue line). The charting
software usually pictures the RSI automatically together with the 30 and 70 lines (below
30 represents oversold, above 70 overbought). In our case we are not looking for oversold
or overbought signals. We are looking for the market being bullish or bearish. This is
represented by RSI being above 50 (bullish) or below 50 (bearish). So we only need to
draw the 50 centerline (black line).
Figure 4.1.
Now we are ready to start. Suppose you started your trading day on the 11/23/04 at 08:00.
At that time the price was 1.2995. As you can see from the right screen the RSI is above
50 and therefore bullish. So we are looking for a bullish signal for entering long the
market.
58
Figure 4.2.
Next thing to do is to recognize the active wave. For that, we are going to look for the
nearest market movement to our starting position with a height greater than 40 pips.
Ok, in order to find the active wave the following steps are to be done:
First all possible waves (black lines) are drawn connecting the high value of the starting
point with the low value of the ending point and then the waves are enumerated starting
with the nearest wave to the actual time (see Figure 4.3).
59
Figure 4.3.
Second read the extreme values of each wave and calculate its height.
Wave 1:
High = 1.3005; Low = 1.2986;
Height = High – Low = 1.3005 – 1.2986= 0.0019 = 19 pips
Wave 2:
High = 1.3002; Low = 1.2986;
Height = High – Low = 1.3002 – 1.2986= 0.0016 = 16 pips
Wave 3:
High = 1.3002; Low = 1.2971;
Height = High – Low = 1.3002 – 1.2971= 0.0031 = 31 pips
Wave 4:
High = 1.3039; Low = 1.2971;
Height = High – Low = 1.3039 – 1.2971= 0.0068 = 68 pips
The nearest movement to our starting position with a height greater than 40 pips is the
wave 4. So that’s our active wave now. The other movements had all a height below 40
pips and therefore are not taken into consideration (throughout our trading we are not
going to pay attention to such movements).
60
The wave 4 is now our current active wave (see blue line in Figure 4.4).
Figure 4.4.
The task is now to apply the Intraday ICWR Trading Rules.
That means, first the Fibonacci levels 0.000, 0.250, 0.382, 0.682, 0.750 and 1.000 are
inserted using the low as the starting point (level 0.000) and the high as the ending point
(level 1.000). The levels between 0.382 and 0.618 define the retracement channel. The
levels 0.250 and 0.750 define the confirmation levels. See Figure 4.5.
61
Figure 4.5.
Ok, the Fibonacci levels are placed, now it’s about to see what the market is telling us
At 11:30 on the 11/23/04 the candlestick is above the upper confirmation level (Fibonacci
level 0.750). Since the active wave had a downward movement and the candlestick is
above the upper confirmation level we identify the active wave as a downward corrective
wave. As explained in the chapter 3. “Intraday ICWR Trading Rules” this is a bullish
signal. See Figure 4.6.
Figure 4.6.
62
This bullish signal must be confirmed with the Relative Strength Index (RSI). If the RSI
is greater than 50, it’s bullish and we enter the market. If RSI is less than 50, it’s bearish,
so it’s opposite and we do not enter the market. The RSI (blue line in Figure 4.7) is above
the 50 centerline (black line) and therefore bullish.
Figure 4.7.
As both signals are bullish we enter the trade at 11:30 on the 11/23/04 at the price of
1.3032 (see Figure 4.8). For example we sell 10,000 USD for the price of 1.3032.
Figure 4.8.
Ok, now it’s about to find how far we will let the market move before we exit our
position.
63
First of all we place a stop order 50 pips below the entry price. That means at 1.3032 0.0050
= 1.2982. It’s represented by the thick red horizontal line in the picture below
(Figure 4.9). Please notice, as said before, that the hard stop order is only for the sake of
security, because we do not want to lose more than 50 pips in one trade.
Figure 4.9.
In fact, our main exit strategy is to look for an opposite signal generated by an
impulsive/corrective wave retracement (in the same manner as for the entry warning
signal).
In this example we are looking for a bearish signal as we entered long the market. The
task is to look for a whole candlestick being below the lower confirmation level (after
having entered the retracement channel in the case of an impulsive wave). If this happens
we exit the position. Every time a new wave is recognized, new Fibonacci levels are
drawn and the old Fibonacci levels get inactive. This procedure is repeated until an exit
signal occurs.
Ok, let’s look to our opened position at 11:30. Between 11:30 and 13:00 no bearish signal
occurs. So, we don’t exit the trade.
Remember the bearish signal is in this example the exit signal.
64
Around 13:00 we recognize a new active wave represented by the upward movement
starting at 10:55 and ending at 12:00 on the 11/23/04. The beginning and the end of the
new active wave are marked with red arrows in Figure 4.10.
Figure 4.10.
New Fibonacci levels are drawn . The old ones are now inactive (see Figure 4.11).
Figure 4.11.
65
For this active wave no exit signal occurs. Instead around 14:00 we recognize a new
active wave represented by the upward movement starting at 13:05 and ending at 13:40
on the 11/23/04. See Figure 4.12.
Figure 4.12.
New Fibonacci levels are drawn and the old ones removed (see Figure 4.13). Now we are
again looking for a candlestick going below the lower confirmation level.
Figure 4.13.
66
Once again around 12:00 on the 11/24/04 a new active has been recognized before an exit
signal occurs. The new active wave is represented by the upward movement starting at
08:20 and ending at 11:35 on the 11/24/04. See Figure 4.14.
Figure 4.14.
New Fibonacci levels are drawn and the old ones removed (see Figure 4.15).
Figure 4.15.
This happens now several times.
Around 13:00 on the day 11/25/04 a new active wave has been recognized before an exit
signal occurs. The new active wave is represented by the upward movement starting at
11:10 and ending at 12:35 on the 11/25/04. See Figure 4.16.
Figure 4.16.
67
New Fibonacci levels are drawn and the old ones removed (see Figure 4.17).
Figure 4.17.
Again around 18:00 on the day 11/25/04 a new active wave has been recognized before
an exit signal occurs. The new active wave is represented by the upward movement
starting at 15:00 and ending at 16:50 on the 11/25/04. See Figure 4.18.
Figure 4.18.
New Fibonacci levels are drawn and old ones removed (see Figure 4.19).
68
Figure 4.19.
Once again around 00:00 on the day 11/26/04 a new wave has been recognized before an
exit signal occurs. The new active wave is represented by the upward movement starting
at 20:00 and ending at 22:55 on the 11/25/04. See Figure 4.20.
Figure 4.20.
New Fibonacci levels are drawn and old ones removed (see Figure 4.21).
69
Figure 4.21.
Again around 07:30 on the day 11/26/04 a new wave has been recognized before an exit
signal occurs. The new active wave is represented by the upward movement starting at
02:40 and ending at 07:15 on the 11/26/04. See Figure 4.22.
Figure 4.22.
New Fibonacci levels are drawn and the old ones removed (see Figure 4.23).
70
Figure 4.23.
Again around 08:15 on the day 11/26/04 a new wave has been recognized before an exit
signal occurs. The new active wave is represented by the upward movement starting at
07:20 and ending at 08:05 on the 11/26/04. See Figure 4.24.
Figure 4.24.
New Fibonacci levels are drawn and the old ones removed (see Figure 4.25).
71
Figure 4.25.
Around 08:30 the market trend starts to reverse (see Figure 4.26.). At 09:00 on the
11/26/04 the candlestick is below the lower confirmation level (Fibonacci level 0.250).
Since the active wave had a downward movement and the candlestick is below the lower
confirmation level we identify the active wave as a downward impulsive wave. As
explained in the chapter 3. “Intraday ICWR Trading Rules” this is a bearish signal.
Please, notice that for the recognition of an impulsive wave it’s important that the
retracement channel is crossed. This occurred at 08:30 as the closing price was then inside
of the retracement channel.
72
Figure 4.26.
Because of the bearish signal the position is exited at 09:00 on the11/26/04 buying 10,000
USD for the price of 1.3280.
At the end using the Intraday ICWR Trading Rules a profit of
248 pips= (1.3280 – 1.3032) = 0.0248
was achieved (see Figure 4.27).
Using a 1:20 leverage this means
10,000 USD x (0.0248 pips) x 20 leverage = 4,960 USD!
A profit of 4,960 USD for three trading days using the Intraday ICWR Trading
Rules!
73
Figure 4.27.
74
Chapter 5
Intraday CAD /USD
Trading Example
In this example we are going to trade CAD/USD.
Ok, before we start our trading day we need to set up our screens (see Figure 5.1). On the
left screen we are going to place a five minutes candlestick chart and on the right screen a
one day candlestick chart together with the 14-period RSI (thick blue line). The charting
software usually pictures the RSI automatically together with the 30 and 70 lines (below
30 represents oversold, above 70 overbought). In our case we are not looking for oversold
or overbought signals. We are looking for the market being bullish or bearish. This is
represented by RSI being above 50 (bullish) or below 50 (bearish). So we only need to
draw the 50 centerline (black line).
Figure 5.1.
Now we are ready to start. Suppose you started your trading day on the 11/03/04 at 08:00.
At that time the price was 1.2247. As you can see from the right screen the RSI is below
50 and therefore bearish. So we are looking for a bearish signal for entering short the
market.
75
Figure 5.2.
Next thing to do is to recognize the active wave. For that, we are going to look for the
nearest market movement to our starting position with a height greater than 40 pips.
Ok, in order to find the active wave the following steps are to be done:
First all possible waves (black lines) are drawn connecting the high value of the starting
point with the low value of the ending point and then the waves are enumerated starting
with the nearest wave to the actual time (see Figure 5.3).
76
Figure 5.3.
Second read the extreme values of each wave and calculate its height.
Wave 1:
High = 1.2282; Low = 1.2239;
Height = High – Low = 1.2282– 1.2239= 0.0043 = 43 pips
Wave 2:
High = 1.2282; Low = 1.2241;
Height = High – Low = 1.2282– 1.2241= 0.0041 = 41 pips
Wave 3:
High = 1.2273; Low = 1.2236;
Height = High – Low = 1.2273– 1.2236= 0.0037 = 37 pips
Wave 4:
High = 1.2271; Low = 1.2244;
Height = High – Low = 1.2271– 1.2244= 0.0027 = 27 pips
The nearest movement to our starting position with a height greater than 40 pips is the
wave 1. So that’s our active wave now. Throughout our trading we are not going to pay
attention to movements with a height below 40 pips.
77
The wave 1 is now our current active wave (see blue line in Figure 5.4).
Figure 5.4.
The task is now to apply the Intraday ICWR Trading Rules.
That means, first the Fibonacci levels 0.000, 0.250, 0.382, 0.682, 0.750 and 1.000 are
inserted using the low as the starting point (level 0.000) and the high as the ending point
(level 1.000). The levels between 0.382 and 0.618 define the retracement channel. The
levels 0.250 and 0.750 define the confirmation levels. See Figure 5.5.
78
Figure 5.5.
Ok, the Fibonacci levels are placed, now it’s about to see what the market is telling us
At 11:10 on the 11/03/04 the candlestick is below the lower confirmation level (Fibonacci
level 0.250). Before, the retracement channel was entered at 08:30. Since the active wave
had a downward movement and the candlestick is below the lower confirmation level we
identify the active wave as a downward impulsive wave. As explained in the chapter 3
“Intraday ICWR Trading Rules” this is a bearish signal. See Figure 5.6.
Figure 5.6.
79
This bearish signal must be confirmed with the Relative Strength Index. If the RSI is
lower than 50, it’s bearish and we enter the market. If RSI is greater than 50, it’s bullish,
so it’s opposite and we do not enter the market. The RSI (blue line in Figure 5.7) is below
the 50 centerline (black line) and therefore bearish.
Figure 5.7.
As both signals are bearish we enter the trade at 11:10 on the 11/03/04 at the price of
1.2243. For example we buy 10,000 USD for the price of 1.2243. See Figure 5.8.
Figure 5.8.
Ok, now it’s about to find how far we will let the market move before we exit our
position.
80
First of all we place a stop order 50 pips below the entry price. That means at 1.2243 +
0.0050 = 1.2293. It’s represented by the thick red horizontal line in the picture below
(Figure 5.9). Please notice, as said before, that the hard stop order is only for the sake of
security, because we do not want to lose more than 50 pips in one trade.
Figure 5.9.
In fact, our main exit strategy is to look for an opposite signal generated by an
impulsive/corrective wave retracement (in the same manner as for the entry warning
signal).
In this example we are looking for a bullish signal as we entered short the market. The
task is to look for a whole candlestick being above the upper confirmation level (after
having entered the retracement channel in the case of an impulsive wave). If this happens
we exit the position. Every time a new wave is recognized, new Fibonacci levels are
drawn and the old Fibonacci levels get inactive. This procedure is repeated until an exit
signal occurs.
Ok, let’s look to our opened position at 11:10. Between 11:10 and 12:00 no bearish signal
occurs. So, we don’t exit the trade.
Remember the bullish signal is in this example the exit signal!
81
Around 12:00 we recognize a new active wave represented by the downward movement
starting at 10:05 and ending at 11:25 on the 11/03/04. The beginning and the end of the
new active wave are marked with red arrows in Figure 5.10.
Figure 5.10.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 5.11).
Figure 5.11.
82
For this active wave no exit signal occurs. Instead around 16:00 we recognize a new
active wave represented by the downward movement starting at 13:05 and ending at
15:30 on the 11/03/04. See Figure 5.12.
Figure 5.12.
New Fibonacci levels are drawn and the old ones removed (see Figure 5.13). Now we are
again looking for a candlestick going below the lower confirmation level.
Figure 5.13.
83
Once again around 17:30 on the 11/03/04 a new active wave has been recognized before
an exit signal occurs. The new active wave is represented by the downward movement
starting at 16:35 and ending at 17:00 on the 11/24/04. Please notice that the height of the
previous downward movement was too low to be considered as an active wave. See
Figure 5.14.
Figure 5.14.
New Fibonacci levels are drawn and the old ones removed (see Figure 5.15).
Figure 5.15.
84
This happens now several times.
Around 21:00 on the day 11/03/04 a new active wave has been recognized before an exit
signal occurs. The new active wave is represented by the downward movement starting at
19:00 and ending at 20:10 on the 11/03/04. See Figure 5.16.
Figure 5.16.
New Fibonacci levels are drawn and the old ones removed (see Figure 5.17).
Figure 5.17.
85
Again around 01:00 on the day 11/03/04 a new active wave has been recognized before
an exit signal occurs. The new active wave is represented by the downward movement
starting at 22:50 on the 11/03/04 and ending at 00:10 on the 11/04/04. See Figure 5.18.
Figure 5.18.
New Fibonacci levels are drawn and old ones removed (see Figure 5.19).
Figure 5.19.
86
Around 07:00 the market trend starts to reverse (see Figure 5.20). At 09:20 on the
11/04/04 the candlestick is above the upper confirmation level (Fibonacci level 0.750).
Since the active wave had a downward movement and the candlestick is above the upper
confirmation level we identify the active wave as an downward corrective wave. As
explained in the chapter “Intraday ICWR Trading Rules” this is a bullish signal.
Figure 5.20.
Please notice that the height of the previous downward movement (between 02:00 and
03:00) was too low to be considered as an active wave.
Because of the bullish signal the position is exited at 09:20 on the11/04/04 selling 10,000
USD for the price of 1.2088.
At the end using the Intraday ICWR Trading Rules a profit of
155 pips= (1.2243 – 1.2088) = 0.0155
was achieved (see Figure 5.21).
Using a 1:20 leverage this means
10,000 USD x (0.0155 pips) x 20 leverage = 3,100 USD!
A profit of 3,100 USD for two trading days using the Intraday ICWR Trading
Rules!
87
Figure 5.21.
88
Chapter 6
The Long-Term
ICWR Trading Rules
The Long-Term ICWR Trading Rules are very similar to the Intraday ICWR Trading
Rules (see chapter 3.), as only the values of some parameters are changed. Because of that
fact we will not repeat all the explanations as done before for the Intraday ICWR Trading
Rules. Basically, we are only going to repeat the basics of the strategy, pointing out the
main differences between the Long-Term and the Intraday ICWR Trading Rules.
The Long-Term ICWR Trading Rules are composed of:
•
Entry signals generated by impulsive/corrective wave retracements using a four
hours candlestick chart. The condition for an active wave is a height of 150 pips or
more.
•
Entry confirmation signals generated from a 1-day based 14-period Relative Strength
Index (RSI) momentum indicator in order to confirm the bullish or bearish entry
signal from the four hours candlestick chart (acting as a filter for entry signals)
•
Exit signals generated by impulsive/corrective wave retracements or by a hard stop
order of 100 pips using a four hours candlestick chart. The condition for an active
wave is a height of 150 pips or more.
Using the 4 hour candlestick chart doesn’t mean that you have to look every 4 hours at the
candlestick chart. It is enough that you check the chart once per day. For example, when
you return from work, or when you get up, or before you go to bed…
89
6.1. When to enter a trade
In short, we are going to enter a trade, when a signal generated by an impulsive/corrective
wave retracement is confirmed with the 1-day 14-period Relative Strength Index.
If the signal generated by an impulsive/corrective wave retracement is bullish we
ask for the RSI to be greater than 50.
If the signal generated by an impulsive/corrective wave retracement is bearish we
ask for the RSI to be lower than 50.
6.2. When to exit a trade
Our main exit strategy is to look for an opposite market signal (opposite to our entry
signal) based on impulsive/corrective wave retracements (in the same manner as for the
entry warning signal). Additionally (only for the sake of security) after entering a position
we place a stop order of 100 pips, because we do not want to lose more than 100 pips in
one trade.
If the market was entered long a position will be exited either because of a bearish
signal generated by an impulsive/corrective wave retracement or because of the
hard stop order 100 pips below the entry price.
If the market was entered short a position will be exited either because of a bullish
signal generated by an impulsive/corrective wave retracement or because of the
hard stop order 100 pips above the entry price.
90
Chapter 7
Long-Term EUR/USD
Trading Example
In this example we are going to trade EUR/USD.
Ok, before we start our trading day we need to set up our screens (see Figure 7.1). On the
left screen we are going to place a 4 hours candlestick chart and on the right screen a one
day candlestick chart together with the 14-period RSI (thick blue line). The charting
software usually pictures the RSI automatically together with the 30 and 70 lines (below
30 represents oversold, above 70 overbought). In our case we are not looking for oversold
or overbought signals. We are looking for the market being bullish or bearish. This is
represented by RSI being above 50 (bullish) or below 50 (bearish). So we only need to
draw the 50 centerline (black line).
Figure 7.1.
Now we are ready to start. Suppose you started your trading day on the 10/14/04 at 08:00.
At that time the price was 1.2363. As you can see from the right screen the RSI is above
50 and therefore bullish. So we are looking for a bullish signal for entering long the
market.
91
Figure 7.2.
Next thing to do is to recognize the active wave. For that, we are going to look for the
nearest market movement to our starting position with a height greater than 150 pips.
Ok, in order to find the active wave the following steps are to be done:
First all possible waves (black lines) are drawn connecting the high value of the starting
point with the low value of the ending point and then the waves are enumerated starting
with the nearest wave to the actual time (see Figure 7.3).
92
Figure 7.3.
Second read the extreme values of each wave and calculate its height.
Wave 1:
High = 1.2433; Low = 1.2223;
Height = High – Low = 1.2433 – 1.2223= 0.0210 = 210 pips
Wave 2:
High = 1.2433; Low = 1.2243;
Height = High – Low = 1.2433 – 1.2243= 0.0190 = 190 pips
The nearest movement to our starting position with a height greater than 150 pips is the
wave 1. So that’s our active wave now. Throughout our trading we are not going to pay
attention to movements with a height below 150 pips .
The wave 1 is now our current active wave (see blue line in Figure 7.4).
93
Figure 7.4.
The task is now to apply the Long-Term ICWR Trading Rules.
That means, first the Fibonacci levels 0.000, 0.250, 0.382, 0.682, 0.750 and 1.000 are
inserted using the low as the starting point (level 0.000) and the high as the ending point
(level 1.000). The levels between 0.382 and 0.618 define the retracement channel. The
levels 0.250 and 0.750 define the confirmation levels. See Figure 7.5.
Figure 7.5.
94
Ok, the Fibonacci levels are placed, now it’s about to see what the market is telling us.
At 16:00 on the 10/15/04 the candlestick is above the upper confirmation level (Fibonacci
level 0.750). Since the active wave had a downward movement and the candlestick is
above the upper confirmation level we identify the active wave as a downward corrective
wave. As explained in the chapter 3. “Intraday ICWR Trading Rules” this is a bullish
signal. See Figure 7.6.
Figure 7.6.
This bullish signal must be confirmed with the Relative Strength Index. If the RSI is
greater than 50, it’s bullish and we enter the market. If RSI is less than 50, it’s bearish, so
it’s opposite and we do not enter the market. The RSI (blue line in Figure 7.7) is above
the 50 centerline (black line) and therefore bullish.
95
Figure 7.7.
As both signals are bullish we enter the trade at 16:00 on the 10/15/04 at the price of
1.2461. For example we sell 10,000 USD for the price of 1.2461. See Figure 7.8.
Figure 7.8.
Ok, now it’s about to find how far we will let the market move before we exit our
position.
First of all we place a stop order 100 pips below the entry price. That means at 1.2461 0.0100
= 1.2361. It’s represented by the thick red horizontal line in the picture below (see
Figure 7.9). Please notice, as said before, that the hard stop order is only for the sake of
security, because we do not want to lose more than 100 pips in one trade.
96
Figure 7.9. Figure 7.9.
In fact, our main exit strategy is to look for an opposite signal generated by an
impulsive/corrective wave retracement (in the same manner as for the entry warning
signal).
In this example we are looking for a bearish signal as we entered long the market. The
task is to look for a whole candlestick being below the lower confirmation level (after
having entered the retracement channel in the case of an impulsive wave). If this happens
we exit the position. Every time a new wave is recognized, new Fibonacci levels are
drawn and the old Fibonacci levels get inactive. This procedure is repeated until an exit
signal occurs.
Ok, let’s look to our opened position. Between 10/15/04 and the 10/26/04 no bearish
signal occurs. So, we don’t exit the trade. Remember the bearish signal is in this example
the exit signal.
Around the 10/27/04 we recognize a new active wave represented by the upward
movement starting the 10/12/04 and ending the 10/26/04. The beginning and the end of
the new active wave are marked with red arrows in Figure 7.10.
97
Figure 7.10.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.11).
Figure 7.11.
For this active wave no exit signal occurrs. Instead around the 10/29/04 we recognize a
new active wave represented by the upward movement starting on the 10/26/04 and
ending on the 10/28/04. See Figure 7.12.
98
Figure 7.12.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.13).
Figure 7.13.
Around the 11/01/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 10/28/04
and ending on the 11/01/04. See Figure 7.14.
99
Figure 7.14.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.15).
Figure 7.15.
Around the 11/03/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 11/01/04
and ending on the 11/03/04. See Figure 7.16.
100
Figure 7.16.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.17).
Figure 7.17.
Around the 11/08/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 11/03/04
and ending on the 11/07/04. See Figure 7.18.
101
Figure 7.18.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.19).
Figure 7.19.
Around the 11/12/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 11/07/04
and ending on the 11/10/04. See Figure 7.20.
102
Figure 7.20.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.21).
Figure 7.21.
Around the 11/18/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 11/10/04
and ending on the 11/18/04. See Figure 7.22.
103
Figure 7.22.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.23).
Figure 7.23.
Around the 11/29/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 11/23/04
and ending on the 11/26/04. See Figure 7.24.
104
Please remember that movements with a height less than 150 pips are not taken into
account!
Figure 7.24.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.25).
Figure 7.25.
105
Around the 12/02/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 11/30/04
and ending on the 12/02/04. See Figure 7.26.
Figure 7.26.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.27).
Figure 7.27.
106
Around the 12/03/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 12/02/04
and ending on the 12/02/04. See Figure 7.28.
Figure 7.28.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.29).
Figure 7.29.
107
Around the 12/06/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 12/02/04
and ending on the 12/03/04. See Figure 7.30.
Figure 7.30.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.31).
Figure 7.31.
108
Around the 12/09/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 12/07/04
and ending on the 12/08/04. See Figure 7.32.
Figure 7.32.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.33).
Figure 7.33.
109
The same day a little bit later a new active wave has been recognized before an exit signal
occurs. The new active wave is represented by the upward movement starting on the
12/09/04 and ending on the 12/09/04. See Figure 7.34.
Figure 7.34.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 7.35).
Figure 7.35.
110
The market trend starts to reverse. At 12:00 on the 12/10/04 the candlestick is below the
lower confirmation level (Fibonacci level 0.250). Since the active wave had a upward
movement and the candlestick is below the lower confirmation level we identify the
active wave as an upward corrective wave. As explained in the chapter 3. “Intraday
ICWR Trading Rules” this is a bearish signal. See Figure 7.36.
Figure 7.36.
Because of the bearish signal the position is exited at 12:00 on the12/10/04 buying 10,000
USD for the price of 1.3184.
At the end using the Long-Term ICWR Trading Rules a profit of
723 pips= (1.3184 – 1.2461) = 0.0723
was achieved (see Figure 7.37).
Using a 1:20 leverage this means
10,000 USD x (0.0723 pips) x 20 leverage = 14,460 USD!
A profit of 14,460 USD after two months using the Long-Term ICWR Trading
Rules!
111
Figure 7.37.
112
Chapter 8
Long-Term GBP/USD
Trading Example
In this example we are going to trade GBP/USD.
Ok, before we start our trading day we need to set up our screens (see Figure 8.1). On the
left screen we are going to place a 4 hours candlestick chart and on the right screen a one
day candlestick chart together with the 14-period RSI (thick blue line). The charting
software usually pictures the RSI automatically together with the 30 and 70 lines (below
30 represents oversold, above 70 overbought). In our case we are not looking for oversold
or overbought signals. We are looking for the market being bullish or bearish. This is
represented by RSI being above 50 (bullish) or below 50 (bearish). So we only need to
draw the 50 centerline (black line).
Figure 8.1.
Now we are ready to start. Suppose you started your trading day on the 11/19/04 at 08:00.
At that time the price was 1.8490. As you can see from the right screen the RSI is above
50 and therefore bullish. So we are looking for a bullish signal for entering long the
market.
113
Figure 8.2.
Next thing to do is to recognize the active wave. For that, we are going to look for the
nearest market movement to our starting position with a height greater than 150 pips.
Ok, in order to find the active wave the following steps are to be done:
First all possible waves (black lines) are drawn connecting the high value of the starting
point with the low value of the ending point and then the waves are enumerated starting
with the nearest wave to the actual time (see Figure 8.3).
114
Figure 8.3.
Second read the extreme values of each wave and calculate its height.
Wave 1:
High = 1.8636; Low = 1.8464;
Height = High – Low = 1.8636– 1.8464= 0.0172 = 172 pips
Wave 2:
High = 1.8636; Low = 1.8435;
Height = High – Low = 1.8636– 1.8435= 0.0201 = 201 pips
Wave 3:
High = 1.8596; Low = 1.8435;
Height = High – Low = 1.8596– 1.8435= 0.0161 = 161 pips
Wave 4:
High = 1.8596; Low = 1.8372;
Height = High – Low = 1.8596– 1.8372= 0.0224 = 224 pips
The nearest movement to our starting position with a height greater than 150 pips is the
wave 1. So that’s our active wave now. Throughout our trading we are not going to pay
attention to movements with a height below 150 pips .
115
The wave 1 is now our current active wave (see blue line in Figure 8.4).
Figure 8.4.
The task is now to apply the Long-Term ICWR Trading Rules.
That means, first the Fibonacci levels 0.000, 0.250, 0.382, 0.682, 0.750 and 1.000 are
inserted using the low as the starting point (level 0.000) and the high as the ending point
(level 1.000). The levels between 0.382 and 0.618 define the retracement channel. The
levels 0.250 and 0.750 define the confirmation levels. See Figure 8.5.
116
Figure 8.5.
Ok, the Fibonacci levels are placed, now it’s about to see what the market is telling us
At 12:00 on the 11/23/04 the candlestick is above the upper confirmation level (Fibonacci
level 0.750). Since the active wave had a downward movement and the candlestick is
above the upper confirmation level we identify the active wave as an upward corrective
wave. As explained in the chapter 3. “Intraday ICWR Trading Rules” this is a bullish
signal. See Figure 8.6.
Figure 8.6.
117
This bullish signal must be confirmed with the Relative Strength Index. If the RSI is
greater than 50, it’s bullish and we enter the market. If RSI is less than 50, it’s bearish, so
it’s opposite and we do not enter the market. The RSI (see blue line in Figure 8.7) is
above the 50 centerline (black line) and therefore bullish.
Figure 8.7.
As both signals are bullish we enter the trade at 12:00 on the 11/23/04 at the price of
1.8698. For example we sell 10,000 USD for the price of 1.8698. See Figure 8.8.
Figure 8.8.
Ok, now it’s about to find how far we will let the market move before we exit our
position.
118
First of all we place a stop order 100 pips below the entry price. That means at 1.86980.0100
= 1.8598. It’s represented by the thick red horizontal line in the picture below (see
Figure 8.9). Please notice, as said before, that the hard stop order is only for the sake of
security, because we do not want to lose more than 100 pips in one trade.
Figure 8.9.
In fact, our main exit strategy is to look for an opposite signal generated by an
impulsive/corrective wave retracement (in the same manner as for the entry warning
signal).
In this example we are looking for a bearish signal as we entered long the market. The
task is to look for a whole candlestick being below the lower confirmation level (after
having entered the retracement channel in the case of an impulsive wave). If this happens
we exit the position. Every time a new wave is recognized, new Fibonacci levels are
drawn and the old Fibonacci levels get inactive. This procedure is repeated until an exit
signal occurs.
Ok, let’s look to our opened position. Between 10/15/04 and the 10/26/04 no bearish
signal occurs. So, we don’t exit the trade. Remember the bearish signal is in this example
the exit signal.
119
Around the 11/28/04 we recognize a new active wave represented by the upward
movement starting the 11/23/04 and ending the 11/26/04. The beginning and the end of
the new active wave are marked with red arrows in Figure 8.10.
Figure 8.10.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 8.11).
Figure 8.11.
120
For this active wave no exit signal occurrs. Instead around the 11/29/04 we recognize a
new active wave represented by the downward movement starting on the 11/26/04 and
ending on the 11/29/04. See Figure 8.12.
Figure 8.12.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 8.13).
Figure 8.13.
121
Around the 12/02/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 11/29/04
and ending on the 12/02/04. See Figure 8.14.
Figure 8.14.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 8.15).
Figure 8.15.
122
Around the 12/03/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the downward movement starting on the 12/01/04
and ending on the 12/03/04. See Figure 8.16.
Figure 8.16.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 8.17).
Figure 8.17.
123
Around the 12/06/04 a new active wave has been recognized before an exit signal occurs.
The new active wave is represented by the upward movement starting on the 12/03/04
and ending on the 12/03/04. See Figure 8.18.
Figure 8.18.
New Fibonacci levels are drawn. The old ones are now inactive (see Figure 8.19).
Figure 8.19.
124
The market trend starts to reverse (see Figure 8.20). At 08:00 on the 12/09/04 the
candlestick is below the lower confirmation level (Fibonacci level 0.250). Since the active
wave had a upward movement and the candlestick is below the lower confirmation level
we identify the active wave as an upward corrective wave. As explained in the chapter 3.
“Intraday ICWR Trading Rules” this is a bearish signal.
Figure 8.20.
Because of the bearish signal the position is exited at 12:00 on the12/09/04 buying 10,000
USD for the price of 1.9212.
At the end using the Long-Term ICWR Trading Rules a profit of
514 pips= (1.9212 – 1.8698) = 0.0514
was achieved (see Figure 8.21).
Using a 1:20 leverage this means
10,000 USD x (0.0514 pips) x 20 leverage = 10,280 USD!
A profit of 10,280 USD after 20 days using the Long-Term ICWR Trading Rules!
125
Figure 8.21. |
 | i found this cool article
The government hopes to be the first in the world to make its computer system "carbon neutral".
The Cabinet Office hopes measures like switching off computers at night and making sure servers do not stand idle will save 117,500 tonnes of carbon.
Computer systems generate up to 20% of all carbon produced by government.
The environmental audit committee has warned that the government is "lagging behind" its own emissions targets and IT systems are among factors to blame.
The British government says it wants to be the first in the world to make its computer system's energy output "carbon neutral" - through a combination of reducing energy use and offsetting schemes - such as buying carbon credits.
Switch off
It also aims to make the whole system - taking into account the manufacture and disposal of the machines - carbon neutral by 2020.
Cabinet Office minister Tom Watson will announce later 18 key steps which departments will be asked to take to vastly reduce their "carbon footprint" - the measure of their impact on the environment through greenhouse gases.
Merely switching off a computer at night may get a good headline for the Whitehall spin machine but isn't enough
Francis Maude
Conservatives
Switching off computers outside working hours could save up to 117,500 tonnes of carbon emissions a year - equivalent to taking 40,000 cars off the road, the government says.
Other measures include re-using as much computer equipment as possible - as making the equipment in the first place uses up a lot of energy - and auditing servers to make they are not standing idle.
Mr Watson said that worldwide, computers are responsible for as much carbon emissions as the airline industry.
'Lagging behind'
"That's why I'm so proud that we are the first government anywhere in the world to formally set out exactly what we're going to do to make our ICT systems carbon neutral within four years.
"We won't achieve this just by offsetting but by making serious changes to the way we do business."
The guidelines will be adopted by the Cabinet Office immediately and other departments will be asked to use the rules and report on progress.
In a report earlier this month, the Commons environmental audit committee accused the government of "lagging behind" its own targets to cut carbon emissions and said "rapid progress" needed to be made on cutting electricity use.
It also warned the government not to rely too heavily on carbon offsetting, but to look at reducing its own emissions.
Shadow Minister for the Cabinet Office, Francis Maude said the Conservatives welcomed the measures, but added: "The government's own environmental watchdog has savaged ministers for not doing enough to go green.
"Merely switching off a computer at night may get a good headline for the Whitehall spin machine but isn't enough."
Zimbabwe's main opposition party has said two days of power-sharing talks with the ruling Zanu-PF have ended without agreement.
Movement for Democratic Change (MDC) spokesman Nelson Chamisa told the BBC the balance of power was in dispute.
He said President Robert Mugabe wanted MDC leader Morgan Tsvangirai to become a titular prime minister without real authority, which was "unacceptable".
Mr Mugabe last week threatened to form a new government without the MDC.
"The MDC does not want to come in apparently," he said on Wednesday, a day after being booed and jeered by opposition MPs at the formal opening of parliament.
Following legislative elections in March, Mr Mugabe's Zanu-PF lost its majority in the House of Assembly for the first time since independence in 1980.
See the breakdown of parliamentary seats
Mr Tsvangirai also won the first round of the presidential election that month, before pulling out of the run-off in June citing a campaign of violence against his supporters.
MDC 'insolent'
The MDC said its negotiating teams had returned from South Africa on Sunday without having achieved a breakthrough in the talks on Zimbabwe's political crisis.
Nothing was achieved in the latest round of engagement in South Africa to break the deadlock
MDC spokesman Nelson Chamisa
Fuming Mugabe rattled by hecklers
Zimbabwe's speaker makes history
In pictures: Parliament opens
"Nothing was achieved in the latest round of engagement in South Africa to break the deadlock. We remain where we were," Mr Chamisa told the Reuters news agency.
Mr Chamisa later told the BBC that the MDC would not accept the current offer from Zanu-PF for the opposition leader to be only a titular prime minister.
Correspondents say both sides in the negotiations have agreed that there should be a national unity government, that Mr Mugabe should be president and Mr Tsvangirai prime minister.
But the MDC has insisted that the president should cede real executive power to Mr Tsvangirai and stay in office only as a ceremonial head of state.
Earlier, the state-owned Herald newspaper reported that the MDC had also proposed that the two leaders chair the cabinet jointly.
"The Zanu-PF dismissed the suggestion, not just as insolent, but also stunning ignorance on how government works," it quoted a government source as saying.
Meanwhile, Mr Chamisa welcomed the government's decision to lift the ban on aid agencies involved in providing food and other forms of assistance. He said the restriction had been an act of madness.
The government had accused some of the agencies of siding with the opposition in the run-up to the presidential election's second round.
OMG Mike totally proposed to me!!
Ok la, I was exaggerating.
What happened was that one day I had this conversation with Mike:
Me: "Why won't you marry me?!"
Mike: "We are as good as married."
Me: "No!"
Mike: "Why no? We are living together, seeing each other everyday... "
Me: "I wanna you to marry me!!!!"
Mike: "But we are as good as married! There is no difference."
Me: "Ok lor in that case I shall tell everyone we are engaged."
Mike, laughs: "You do that."
The first step nowadays to being engaged is to be facebook-engaged!!
Therefore, this morning when I was very bored, I logged onto his facebook account and.... totally proposed to myself.
I know... It is infinitely loserish but it is still damn shiok!! Those of you who have not been facebook engaged/married before should try it!!! AHAHAHA!!
Omg I got a relationship status request!! Got heart shape somemore!!
Mike totally wants me to add him as my fiance!!
I am touched beyond words!! Yes my love, I accept!!!!!!!!!!!!!!!
*sobs uncontrollably*
TADAH!!!!!!!!!!!!!
ENGAGED ENGAGED ENGAGED!!!!!!!!!!!!!!!!
*hops around the room showing off non-existent 2 carat Diamond ring to everyone*
I know!! He loves me so much!! I am so blessed!!
*wipes away tears*
OK... That was really fun, even though it is a self-directed love story/comedy.
On a sidenote ah, I was told that an engagement ring is the one with the big diamond, and the wedding ring is normally just a simple band.
Then, after being married, girls wear the wedding ring daily, and the expensive engagement ring is then safely kept in a box.
WTF???????????
If Mike spends $10k on my engagement ring and $3k on my wedding ring, then obviously I wanna wear the $10k shit everyday right? Why would I keep it in a bloody box?
That's just stupid man. It doesn't make sense.
I mean, it does make sense for most girls lah since they have to work and their rings can't be too bling anyway, blah blah... But whatever!
I want my wedding ring to be fucking ostentatious!!!
Please don't talk to me about how less is more hor!! That doesn't even make sense. More is more please! Duh!!!
Talk somemore I scratch your face with my humongous diamond ah!
So anyway, I have thus concluded that my engagement ring should be the simple one (I think maybe a row of smaller diamonds... ahem... for my more toned-down days) and the wedding ring shall be like...
Wait wait wait... I shall google!!
Ok!!
Here's my engagement ring:
In my process of googling for rings, I have decided that 3 rows of diamonds is infinitely better than just 1 row
Correct what... You compare!!
Kua kua... See? 3 rows of diamonds. Nice. Ahem. So much for toned down days.
So anyway, as for the wedding ring, I am inspired by this science teacher I used to have in River Valley. She's very pretty!!
And since I am so short and so talkative/naughty, I am inevitably placed in the front row of classroom seats.
In fact, I am not only in the front row, I am right in the middle, just beside the bloody OHP projector.
Everytime this teacher uses that contraption, her wedding ring REALLY sparkles underneath the intense light as she uses the hands to arrange her transparencies.
Bling bling bling... I spent hours getting distracted by her chioness ring!!
And her ring is a single humongous (or so it seemed to me at that time) solitaire diamond one.
Not 4 clasps:
Yuck
Not 6 clasps:
Boring
But the magical number of 5.
I don't know... I guess its a small detail, but to me it's quite important coz I really do think it's much chioer this way!
Hahahaha!! Talk so much, skarly nobody even wants to marry me lor!!
Wait, why is this one so chio?
Pink diamond leh!! Are real pink diamonds even purchasable in Singapore???
p/s: We are not really engaged. I'm just being boh liao.
9:17 AM | | 170 freaking comments!! | Direct Link
Wednesday, August 27, 2008
Problem solved!!
My blog is now virus-free again!!
Thanks to Roy who helped me. The file was was infected was my blogger.gif file... Kuakua... All I did was to delete it.
My blog readers are awesome!
12:55 PM | | 24 freaking comments!! | Direct Link
Help help help why like this?!
OK.... I HAVE NO IDEA WHAT TO DO ABOUT THE TROJAN!!!!
I already removed all links to awfulplasticsurgery!! What else can I do?
PLEASE, SOMEONE HELP ME!!!!!
P/s: Erm hello? I don't think some of you understand. It is not ME who has the virus, it is that my blog is spreading a trojan! What has scanning my computer got to do with it? I already did and my computer is A-ok!
All I know is that the trojan's name is giframe, and it is spreading itself through a file called blogger[1].gif, if I am not wrong.
Also, I probably got it coz I linked to awfulplasticsurgery.com, which is also spreading trojans. I removed the links but the trojan is still there.
This is fucking annoying!!
$100 to the first person to SUCCESSFULLY help me solve this problem!!! (Saying vague things like "try republishing your posts?" does not count.)
Please email me at xiaxue@gmail.com if you are some incredibly smart IT geek, thanks!!
UPDATE: Solved! I think! If you are still getting the trojan, please let me know.
12:06 AM | | 40 freaking comments!! | Direct Link
Tuesday, August 26, 2008
New vids again!!
OMG!
I am so busy!!
My freaking computer crashed AGAIN. I think I got some shitass virus, and I honestly can't be arsed to try and fix it so I just formatted it lor.
Gah! Can you believe my luck? This must be the, I dunno, umpteenth time this year. HATE! (Thank god I don't have any saucy chatlogs with male celebrities otherwise lost how? Just kidding... I've got not 1 but 2 portable hard drives!!! I am that Kiasu!!)
So anyway, I swear I'm coming up with the bestest blog entry ever!! But it is not done yet, so just wait for a bit yeah?
Meanwhile I have an advertorial to finish too, and Indulgz also invited me for round 4 of food tasting so I am very excited!! Woohoo!!
And hor, just to clarify, I DID NOT send Plastic's pictures to awfulplasticsurgery hor, thanks.
Just so happens that the day before her pictures were posted up, I also linked that website!! Got more suay or not you tell me?!?!?!
I swear I didn't know what the webmaster was going to post, ok! Sompah!
Or................................
Maybe I am a prophet? YOU THINK? I could be!! Ok, I predict tomorrow's weather will be rainy again. Let's see if I really have propheting skills.
WTF man... If I were the one sending in the pictures you can be certain those won't be my descriptive words! (Coz I certainly don't think she is prettier now...)
So anyway, new videos!!
XIAXUE'S GUIDE TO LIFE
Bff auditions round 2!
See the contestants in the flesh!
I love them all :D
CHICK VS DICK
The Quiz Challenge
Is KK or Paul smarter?
Paul displays his skill at naming planets.
CRACK COMEDY
Sleazy Aerobics
I'd love my gym teacher to be this amusing!!
Click to watch all!!
Btw, please do not insult the bff contestants in the comments, thanks. :)
Love!!
p/s: Is there some sort of virus on my blog?? GASP! How the hell do I remove it?! And how did I get it?!
p/p/s: I think it has to do with awfulplasticsurgery la!! My comp was saying it is an attack site and I still went to it... Nabeh then tio virus!!! I removed all links to that site already, so it shouldn't be a problem now. Please let me know if you know anything, or if the virus is still around!!
p/p/p/s: I am SO SORRY if you kena virus from my blog!! Remember to always back up your stuff and please don't install any weird files with weird extensions ok!!!
10:25 AM | | 54 freaking comments!! | Direct Link
Thursday, August 21, 2008
Good stuff
Thanks for the nice emails and comments you guys left. It's great. I didn't know so many people went through similar plights too!
The good thing is, now T's my friend again.
And some other good news!!
Tadah! Passed my advanced!
I was in a damn glum mood travelling there. When I reached, I paid money to the cabbie and said to myself, "Ok, I go take the test already..."
He turned around, smiled at me and told me good luck, so that really cheered me up. How come ah? It's so nice when strangers are nice to you.
I had about 5 or so questions I wasn't sure of, so I anyhowly ti-kum lor. And passed!!
It's so great... Now the tests are computerized so you will know your results immediately!
Yup yup!!
I booked my practical test too. It will be on the 5th of December!! If I pass it, I will be able to drive in USA (flying 10th of Dec)!! Excitedness!! Then I won't have to keep asking a reluctant Mike to drive me to the mall!!!!!! OMG!!
Here's my PDL
Too bad it ends on 11th of Nov. I guess I'd have to renew it.
Manual or Auto??
I booked for an auto test, coz I'm like pretty sure I'll fail the manual... But Mike drives a manual car so even if I pass the auto I can't drive his car!!!!!!
Decisions decisions!
Me driving!!!!!!!!!!!!!!! The image is fucking hilarious. I'm so short I expect I will have to sit on several tall cushions. Oei! Stop laughing hor!!
Also... also...
ZHNG-ed MY SIDEKICK!!!!!!!!!!!!!
Finally the little fucker works!!
My code arrived!!! I paid $92 for someone to unlock it on eBay! :(
The amount of money I spent on this phone........ Le sigh...
But it's worth it!!
It is as heavy as a brick and has zero functions - the camera sucks big time, the internet functions cannot be used, and the battery life is tragic (1 day)...
But... Everyone is still very impressed by the swivel screen! Plus it's designed by JUICY COUTURE, so no complains!
I know... You are waiting with baited breath......
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With flash...
I am so sorry the photos really cannot manage to capture the real chioness of it.
The crystals are not dark pink like that. And the colour I used for zhnging was Light Rose AB.
AB crystals are fucking chio la! It's like this iridescent coating on top of the crystals that make them sorta multi-coloured...
Without flash.
I guess this is the most accurate portrayal of the correct colour, but without flash you cannot see how sparkly it really is. Plus the pic is blur...
The phone is decorated with baby pink pearls and about 7 different sizes of light rose AB crystals.
With flash
Without...
The left side of the picture shows how it's like in real life.
I'm waiting for the a new batch of crystals to come from artbeads.com!! When they do, I'm gonna zhng the back of the phone too. Bling bling!!
Paul and Kaykay... I was there when they were filming their Singing Challenge. That's donkey years ago can?!
AND FINALLY..........
The photos you guys have been requesting for!!
Presenting......
My lip fillers!!
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