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"What does your system say about this Wall Street trade Timon?"

by , 27 February 2019

Q. “Thank you Timon for introducing us to the new contributor to Trading Tips, Barry Dumas. I see he focuses more on indicators and news events when he analyses the Wallstreet index. Could you please give us your analysis on how Wall Street is looking when it comes to your chart patterns and trends. I'd like to know what your opinion is?”

A. I will break this answer into two parts, Trend and Pattern, using the Wallstreet 30 daily chart.


 
1. Trend
 
The Wallstreet chart shows that since August 2018 until February 2019, it’s been in a strong downtrend (Red Arrow). Prices have been making lower highs and lower lows.
  
On 5 February 2019, price broke out of the downtrend line, and has now entered into an official uptrend (Green Arrow). Wallstreet will stay in this uptrend, unless it crashes below 25,000 again.
 
2. Pattern
 
This is a rare but powerful pattern. It’s called the Valley-Shape (aka V-Shape), which has formed between 3 December 2018 and 17 February 2019. It’s called a V-Shape as it has the shape of the letter V (Black Line).
 
The next target I expect it to hit is at 30,252 using the Top-Down formula. The Top-Down formula is an easy formula which only needs two prices to calculate the next price target.
 
Price #1: Top of the V shape = 25,969
 
Price #2: Bottom of the V shape = 21,686
 
Here is the calculation.
 
Target = (High price of the V – Low price of the V) + High price of the V
           = (25,969 – 21,686) + 25,969
 
           = 30,252
             
My next target I expect Wallstreet to hit is at 30,252. I see Barry Dumas’s first target is at 26,337 which coincides very nicely with my trend and pattern analysis. If you’d like to see his reasoning, click here to catch up.
 
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Q. “I’m worried that I’ll receive a Margin Call where my losing trade will close out due to insufficient funds. Could you please tell me how the margin requirements work with MetaTrader 4, so I know whether to deposit more funds or not?”
 
A. Each broker has different margin requirements when it comes to the Margin Call. With MetaTrader 4, you’ll only need three numbers.
 
Equity: Your current portfolio value
 
Margin: Amount of money you used to enter into your trade (think of it as collateral)
 
Percentage: 20%
 
The formula for MT4 is as follows: Equity / Margin = < 20%
 
Let’s use an example to explain this better.
 
Example #1: No Margin Call
 
Let’s say your current portfolio is sitting at R10,000
 
And the money you needed to take a trading position is at R1,500.
 
This means, you still have 666% ((R10,000 / R1,500) X 100) more money than what is required to keep the trade open. You will not be receiving a margin call any time soon.
 
Example #2: Margin Call
 
Let’s say your current portfolio is sitting at R1,000
 
And the margin deposit (money you need to open a trading position) is at R5,100.  
 
Unfortunately, you only have 19% ((R1,000 / R5,100) X 100) of the funds in your account. This means, you will receive an automatic Margin Call where you’ll need to deposit more money into your account or the trade will close out.
 
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Q. “I’ve heard of safe haven commodities and stocks such as, gold and Blue Chips. But the other day I was reading an article on how investors and traders are moving to safe haven currencies. What are these currencies that new traders are trading?”
 
A. I’ve noticed that the world is, finally, becoming more intelligent and more risk-averse when it comes to trading and investing in different markets.
 
Safe haven currencies include the big six of the most traded (low spreads and low risks) currencies in the world. The euro, US dollar, Japanese yen, Swiss Frank, Pound and the Canadian dollar.
 
I also believe that traders will be calling the main Crypto Currencies safe havens very soon such as, Bitcoin, Lite Coin, Etherium, Ripple and Stellar.
 
“Wisdom yields Wealth”
Timon Rossolimos,
Analyst, Pick Pocket Trader


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