Moving average is one of the most widely used indicators for trading all types of financial instruments, especially forex currencies. It is simple and is easy to interpret and can be used in any style of trading. But there are many factors which are to be considered when you using moving average for trading instruments.

1. Market data used: most often closing price of a day is used for moving average calculation, but you can also use daily highs or lows, opening prices or medians to calculate moving averages.
2. Time periods used: 30 day and 50 day moving averages help position traders and investors to finding enter and exit points, and also stop losses. But day traders and similar active traders should use intraday (1 hour, 30 minutes, etc) moving averages.
3. Market trends: Most trading strategies based on moving averages work well when market is on a move (either upward or downward). They are less effective in sidewise moving markets. Also in a sidewise market trading systems often generate too much wrong signals.
4. Your Trading Objective: Are you an aggressive trader having high risk tolerance? Or you are a conservative trader looking for preserve your capital? You should find buy and sell signals and stop-loss points based on your objective.
5. High volatility: Traders using short-term moving averages to enter a trade before a large move often get wrong signals when prices are rapidly going up and down.
6. Lagging indicator: moving average respond to current and past trends and can not be used widely to predict trends. Many times a trader following moving average enter a trade when the opportunity diminishes.

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Certificated stocks or certified stocks or deliverable stocks are (stored) stocks of commodities (do not misunderstand with stocks of companies) which are certified to meet the basis grade set by exchanges. The commodities are tested for both quality and quantity at a designated location and are used as delivery against futures contracts.

Certification of commodity is done by an authorized representative of futures trading exchange; after that only the product is considered as acceptable for delivery. The process is widely used for agricultural and food products especially grains, where certified stock is known as ‘stocks in deliverable position’.

In futures trading, there are many advantages of this certification process.

• The quality and quantity of underlying commodity is assured.
• Sellers get a clear idea about what they are selling and buyers will be clear about what they are buying.
• Trading of commodities which do not meet the requirements is reduced.
• Helps in developing a warm relationship among the producer, the market and the buyer; and assures smooth functioning of market.
• Create competition among producers to produce more quality products; today there are many producers who easily exceed the standards set by different markets.

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As the name suggest tri-star pattern is a rare candlestick pattern, which is composed of three consecutive doji candlesticks. The pattern indicates market reversal when they are formed after a prolonged trend. There are both bullish and bearish doji tri-star candlestick patterns.

Bullish Doji Tri-Star: Indicate the end of a downtrend and beginning of uptrend. The requirements of this pattern include

• It should be formed after a significant downtrend.
• There should be three consecutive doji candlesticks.
• The second doji candlestick should be gapped below to other two candlesticks (not necessary in forex trading).

Bearish Doji Tri-Star: Indicate the end of a uptrend and beginning of downtrend. The requirements include,

• It should be formed after a significant uptrend.
• There should be three consecutive doji candlesticks.
• The middle doji candlestick should be gapped above to other two candlesticks (except in forex charts).

Both bullish and bearish doji tri-star patterns indicate high indecision in the market leading to the reversal of current trend. Usually the trading volume associated with this pattern is low. Tri-star pattern is a moderately reliable pattern and confirmation of trend reversal is strongly suggested, which can be a bullish (for bullish tri-star) or bearish (for bearish tri-star) candlestick on fourth day with increased trading volume. The reliability increases with increase in trading volume and the increase in gapping of second day candlestick against previous day close. The pattern is less reliable for stocks/currency pairs with reduced trading volume.

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Bellwether or Barometer stocks are stocks which are considered as the indicators of overall market or market sector. These are stocks of big companies which are the leaders of particular industries, and ups and downs of which produce corresponding changes on that and related industries. Some very good examples of bellwether stocks include General Motors – automobile industry, Microsoft – software sector, Wal-Mart – retail sector, etc.

Bellwether is a term which denotes the sheep with a bell which leads rest of the flock. Finding and keeping track with bellwethers is vital from an investment point of view as most other stocks of the industry tend to follow them; whenever bellwether go upward, others too go up and vice versa. Most of the barometer stocks are blue-chip stocks with high market capitalization and investing in them offer high-return and low-risk; and is a major tactics followed by growth investors and CANSLIM investors.

Bellwether stocks also produce a profound effect of a nation’s economy. For example any news which related to General Motors not only influence automobile industry but also steel and other metal industries, financial sector, oil and energy industries, retail industry and so on; there for the saying “What good for GM, is good for America”. There can be more than one barometer stock available for one industry/sector; and also it is not necessary that trends of all other stocks of the industry follow that of the barometer stock of its industry.

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The Week Ahead: With unemployment numbers up ten consecutive months, momentum appears to be gaining as August and September figures were revised upward. Markets will key in on President Elect Barrack Obama's choices for economic positions in his administration. Bond markets are closed Tuesday for Veterans Day. Watch for further increases in the jobless claims numbers on Thursday as well as the trade balance. An important retail sales report for October is due Friday along with business inventories.

Stocks to Watch: Fluor Corp. (FLR) surprised traders by nearly doubling earnings for Q3 and beating estimates. The stock could be near resistance. The CEO of Autonation, Inc. (AN) is showing confidence in his business making more space for foreign vehicles, cutting debt, and meeting loan covenants. OSI Pharmaceuticals (OSI) had a late stage trial of Tarceva improve the survival rate in lung cancer patients as the stock gapped up from a recent low. Delta Petroleum (DPTR) declined significantly after Tracinda Corp. withdrew its tender offer.

Special Note: Dividend yields on many blue chip stocks have recently become more attractive relative to the recent past. The Dow Industrials and S&P 500 were down as much as 45% from their 2007 highs and reached a 3.7% dividend yield. This appears to be a good yield, but historically this level was considered low during most of the 1900's and near market tops. Since 1995 though yields reached the low 1% area indicating an extreme overvaluation in stocks. The average bear market bottom on the DJIA historically yields 6.5%.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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If the difference between forward exchange rate and spot exchange rate of one currency is a positive value, it is known as forward premium and if it is a negative value it is known as forward discount. In other words if the spot ‘futures exchange rate’ is higher than the spot exchange rate then it is known as forward premium and if it is lower than spot exchange rate then it is known as forward discount.

Forward exchange rate of domestic currency (DC) with regard to a foreign currency (FC) for one year is derived by the formula,

Forward Rate = Spot Rate of FC x

(1 + Interest Rate of FC) (1+ Interest Rate of DC)

If the sport rate of Canadian dollar (CAD) is 0.7870, one year interest rate of Canada is 3.5% and that of US is 3% then the forward rate of USD with regard to CAD will be,
1 USD = 0.7870 x (1 + 3.5) / (1 + 3) = 0.8853
Which is 0.0983 (98.3 swap points) higher than the current spot price of CAD, thus USD trades at a forward premium against CAD and CAD trades at a forward discount against USD.

If the exchange rate after one year is still at or around 0.7870 in the above example, a trader can benefit from the arbitrate opportunity of converting low interest rate currency to high interest rate currency and depositing it for one year, and simultaneously buying an one year forward contract for low interest rate currency to hedge risk.

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Exchange traded funds (ETFs) are considered among most liquid trading instruments, especially when compared against mutual funds. But different ETFs have different levels of liquidity. Below are some factors that affect the liquidity of these funds.

1. Underlying Asset: ETFs which have less liquid equities as there underlying assets are usually less liquid than those have liquid equities as underlying asset.
2. Diversification: ETFs which invest in broad diversified market indexes are usually more liquid than which invest in specific sectors.
3. Market Capitalization: ETFs which invest in large-cap stocks are usually more liquid than mid-cap and small-cap tracking ETFs.
4. Fixed Income Securities: ETFs which have fixed income securities like treasury bonds, corporate bonds, etc as underlying instruments are more volatile and is also less risky.
5. Economy: ETFs which track indexes of emerging world economies are usually considered less liquid than that of developed world economies. Also ETFs investing in domestic securities are more liquid than foreign ones.
6. Trade Volume: Although not a major factor, increase in trading volume of ETF positively contributes to the liquidity of it.
7. Trading volume of underlying stocks: The more the underlying stocks are traded the higher the liquidity of ETF.
8. Time, News and Market Forces: These ever changing factors affect the liquidity of all the traded instruments including ETFs.

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Bearish evening Doji star pattern is one of the most reliable Japanese candlestick patterns which indicate a possible trend reversal. This candlestick pattern includes three candlesticks; often formed at the top of an uptrend and indicate a possible downtrend. Evening Doji star pattern is widely followed by all types of traders trading all types of financial instruments.

The requirements of a bearish evening doji star pattern include,

• It should be formed after a significant uptrend.
• First day is should be bullish characterized by a long white (colorless/bullish) candlestick.
• Second day is the day of uncertainty which result in formation of a doji star (where opening and closing prices are almost equal).
• Third day should be bearish characterized by a black (colored/bearish) candlestick, ideally which closes below the mid-point of first day candlestick.

Bearish evening doji star formation occurs when instruments are at their overbought positions. Bulls dominate the first day; on second day the market opens at a gap but the increasing uncertainty lowers the confidence of bulls; on third day bears start to dominate.

With evening doji star pattern, there is always chance of formation of more than one doji star candlestick. Even though it is a highly reliable pattern, confirmation is still suggested which can be a bearish candlestick or gap on fourth day. The gapping of doji candlestick is not a necessary requirement, especially for forex traders as the market is continuous.

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Related Trade Orders, sometimes known as Contingent Trade Orders, are complex trading orders which are created by combining two or more orders. They comes handy when trader want to execute or not to execute the orders (the second or third order) when a specific condition is met. There are mainly three types of related trade orders.

1. IF DONE Orders: Also known as slave orders. These are orders in which the second order or slave becomes only active when the first order is executed. Eg: first order to buy a stock on reaching a price level and the slave order to sell it on reaching another price level.
2. OCO (One Cancels Other) Orders: These are related trade orders in which execution of one order automatically cancels the other. Usually an OCO order contains both stop loss and limit order, only one of which is executed.
3. 3-Way Related Orders: This is the combination of IF DONE and OCO orders. The first order is a slave order, execution of which automatically triggers the execution of second order, which is an OCO order.

Related trade orders save trading time and allow traders to practice complex trading strategies; and are also helpful when the trader is not sure about market direction. Not all brokers allow related trade orders and the fees involved are usually higher than other orders.

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The Week Ahead: A continuation of the see-saw action in stock prices is likely as November trading begins. One positive for consumers despite record low sentiment numbers is the rapid decline in oil prices and therefore gasoline at the pump. All eyes are on Election Day this Tuesday. Any surprises will only help to create more up and down volatility. Factory orders will also be out on Tuesday. On Thursday chain store sales will hint at any consumer vitality. Finally, by Friday, another potentially problematic employment report is released.

Stocks to Watch: Wynn Resorts Ltd. (WYNN) beat earnings estimates for Q3 even though they were lower than a year ago, but the stock has already more than doubled its recent low from just 5 days ago. Carnival Corp. (CCL) cut its 2009 dividend in order to build up cash reserves so that it would not have to tap the weak capital markets. Jm Smucker (SJM) will close on the spin-off of Folgers from Procter and Gamble on Wednesday after which its stock will be added to the S&P 500 Index.

Special Note: As this weeks Presidential Election unfolds, a triangle or flag pattern appears to be developing on the Dow Industrials and S&P 500 Index. The entire trading range since the October 10 low and October 14 high has been between these two price points. With each successive lower high and higher low the market makes from here the triangle will reach its pinnacle point. The direction from there is usually the final move of the trend that preceded it which in this case is down to new lows. A move above 9795 on the DOW or 1045 on the S&P 500 would negate this pattern.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Like Non-Deliverable Forward (NDF), Non-Deliverable Swap (NDS) is cash settled contracts which do not involve delivery of underlying instrument. The only difference is that the cash settlement is done through a major (fully convertible) currency like U.S. Dollar. Similar to NDF, NDS also involves two currencies, usually one major currency and one restricted currency.

Non-deliverable swaps allow emerging market companies operating with minor currencies to hedge against currency risks. In NDS, the interest rate of the restricted currency is fixed at that of the other is kept fixed or floating. Interest rate payments are done on quarterly, semi-annual or annual basis and principal amount is paid on maturity of the contract. Any payments which include the restricted currency are done through major currency based on prevailing sport exchange rate.

For example, two companies enter into a non-deliverable currency swap for $1 million, which involve exchange of USD and a restricted currency (eg: South Korean Won, KRW). If after 3 months the one company has to pay KRW worth 1,000,000 to the other company, and the prevailing spot exchange rate is 1300 KRW for $1, then the company pays $769.23 (1,000,000/1,300).

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Indicative Net Asset Value or iNAV or simply indicative value is the measure of net asset value of a fund or instrument according to the change in price of underlying instrument. iNAV is a powerful trading indicator especially for ETF traders and investors, as it indicate almost the price at which the ETF is trading. By definition, it is the intraday measure of per share value of an instrument based on the asset it holding and the liabilities it has.

Indicative net asset value is a more useful trading tool than Net Asset Value or NAV. With NAV or book value, the per share value of a fund is calculated based on the closing price of the underlying instrument, and it is published on morning of next trading day. But indicative value is published in more real-time, updated usually with every 15 seconds based on last transacted price of underlying instrument.

The trading price of exchange traded funds (ETFs) usually falls close to iNAV (often within a 2% range in either direction). Indicative net asset value is not so suitable indicator for mutual fund traders as there are many other costs involved in active mutual fund management.

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Bullish morning doji start pattern is one of the most reliable market reversal candlestick patterns which indicate a possible upward trend. The pattern is widely followed by all types of traders trading all financial instruments. Morning doji star formation is a three candlestick pattern, usually found at bottom of a downtrend.

The requirements of a bullish morning doji star pattern include,

• The pattern should be formed after a significant downtrend.
• The first day is a bearish day characterized by a long bearish (colored or black) candlestick.
• The second day is a doji, ideally gapped away from previous day’s candlestick.
• The third day is a bullish day characterized by a bullish (colorless or white) candlestick, ideally closing above the midpoint of first day candlestick.

Bullish morning doji star candlesticks are formed when the prices of instruments are at their lowest (oversold) positions. The bears are still in control and thus the bearish candlestick of first day. At second day there is high uncertainty in the market resulting in less trading volume and the formation of a doji candlestick. On third day bulls get the control and the market reverses for an upward trend. Although morning doji star pattern is a highly reliable one, confirmation is still suggested; which can be a bullish candlestick on fourth trading day. With this pattern, there is also a chance of formation of more than one doji stars.

Note: The gapping of doji candlestick is not a necessary requirement, especially for forex traders; as the forex market is continuous, the chance for gap formation is very rare.

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Matching systems are alternative trading systems which automatically match bids and offers to execute trades. They are widely owned by institutional traders, market makers, banks, money managers and other financial firms to create an alternative trading environment. Instead of continuous order execution, as in major exchanges, matching systems often follow periodic execution sessions.

Most matching systems allow traders to place their orders anonymously through specific protocols. The system will evaluate the order and route that to appropriate cross-matching engine, which handle order executions of specific symbols. If matching counterpart order is there, the orders are executed instantaneously. If no matching order, then the ask/bid order is displayed to all traders involved to place matching orders. Orders are usually executed on a time-priority basis.

Matching systems are often less susceptible for price manipulations 1) as trades are done anonymously and 2) as trades are done purely in a quote-driven environment. All trades are done electronically usually without broker involvement. Usually there will be minimum order size requirements (eg: 10,000 shares). Most matching systems derive ask and bid prices passively from NBBO (National Best Bid and Offer).

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The Week Ahead: U.S. stock markets are at 5 year lows coming into this week and experiencing one of the worst months on record. Buying is still on low volume suggesting that rallies are bear market traps. The Federal Reserve meets this week on Tuesday and Wednesday with a 1/2 point rate cut expected. A 3/4 point cut may help turn markets around. Other reports include: new home sales on Monday, consumer confidence on Tuesday, a widely anticipated Q3 advanced GDP number on Thursday, and personal income and spending on Friday.

Stocks to Watch: Sony Corp. (SNE) cut its full year profit guidance from $2.9 to $1.5 billion as the stock reached a 15 year low and continues in oversold territory. Timken Co. (TKR) maker of power transmission and friction management products fell to 7 year lows despite beating earnings estimates because it expects a significant drop in earnings for Q4. Hartford Financial Services Group (HIG) moved up on hopes insurance companies may be included in the $700 billion rescue plan and could be forming a double bottom.

Special Note: The lock limit down on the futures market for the Dow Industrials and S&P 500 on Friday, the first since 1997, are hinting that the major averages are preparing to break the lows set earlier this month as the Nasdaq Composite already has. Also, the Dow has yet to reach the 20 year moving average near 7700 while the S&P 500 and Nasdaq already have. A final capitulation in selling pressure that many traders desire along with lower lows probably into November could be lower than most expect. A move below 7197 on the Dow set in 2002 would mean a continuation of the bear market earlier this decade.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Interest rate parity is one of the major applications of the Law of One Price and plays a major role in forex trading markets. It links the short-term interest rates, spot exchange rates and forward exchange rates of two or more different currencies. It is a non arbitrage condition according to which the returns obtained from borrowing in a particular currency, exchanging that currency for another and investing in interest-carrying instruments in the second currency, and at the same time buying futures contracts to convert the currency back by the end of the investment period, will be equal to the returns one gets by buying and holding similar interest bearing instruments of the first currency. Whenever the theory is violated, an arbitrage opportunity is created.

There are two versions of interest rate parity known as covered interest rate parity and uncovered interest rate parity.

Covered Interest Rate Parity is also known as Interest Parity Condition. It assumes that the ‘interest rate return from different currencies will be the same if one covers against currency changes.’ That is, the returns will be the same when you invest USD in US deposits and the same dollar amount in a foreign currency, and protect that investment using a forward on the foreign currency.

Uncovered Interest Rate Parity is a condition that assumes that ‘the difference between the interest rate of two currencies will be equal to the expected depreciation of a currency.’ That is, a 10% depreciation of the USD against any foreign currency is to be compensated by a 10% rise in the interest rate of the dollar.

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There are many advantages of trading futures spreads over trading naked futures (taking simple long or short futures positions).

1. More profit opportunities and flexibility – trading futures spreads offer more opportunities as they are less volatile (compared to simple contracts), predictable and usually they follow trends.
2. Less risk – As spread trading involves taking both long and short positions, traders have almost hedged their downside risk.
3. Lower margin requirements – Most brokers offer reduced margin requirements for trading futures spreads. This allows futures traders to open larger positions with smaller accounts.
4. There are many commodities (mostly agricultural commodities) which exhibit well defined seasonal trends. Futures spread trading offer better opportunity to profit from these trends.
5. Low time requirements – As you are trading spreads, there is less requirement of following market in real-time. Spreads are better traded with end-of-the-day data.
6. Offer better opportunities to limiting risks.
7. Suitable for both experienced and novice traders.

But like trading any other financial instrument, futures spread trading involves sufficient risk and the trader should be well informed of his margin requirements, risk tolerance and his limitations; and also should be aware of various position sizing and risk minimizing strategies.

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Stars are one of the most trusted market reversal patterns. Candlesticks stars are colored (dark or bearish) or clear (white or bullish) candlesticks which fulfill following requirements.

• They have small real bodies.
• They are preceded by long bodied bullish or bearish candlesticks.
• They gap away from previous candlesticks.
• Their real-body does not over lap the previous candlesticks’ real-body.
  

There are different types of star candlesticks, which are named according to the position at which they are formed and the real-body length.

1. Morning Star candlestick: It is bearish in nature indicating an upward trend reversal. Morning star is formed at the end of a downtrend having a long bearish (colored) candle preceding and a long bullish (colorless) candle following it.
2. Evening Star candlestick: It is bullish in nature indicating a downward trend reversal. Evening star candlestick is formed at the end of an uptrend having a long bullish candle preceding and a long bearish candle following it.
3. Doji Star candlestick: It is a star candlestick that lack real-body. They can be bullish (evening doji star) or bearish (morning doji star). They are considered as one of the most reliable and easily recognizable candlestick formations.

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Call and auction markets are trading markets, where trades are carried out based on ask and bid prices. Auction markets are common markets where continuous trading of instruments is carried out by matching ask and bid prices. But call markets lack continuity and trading of instruments is carried out at pre-determined intervals (eg: at market opening, noon and market close) on ask and bid prices specified by the market.

Call markets aggregate ask and bid orders, determines ask and bid prices, and carries out all transactions at once so that the market is clear after the orders are filled. As all orders are executed at one time, call markets have increased liquidity and decreased transaction costs. Call markets exist where there is less trading volume, where only few equities available for trading and where there is lesser number of participants. Traders trading in call markets may have to wait long for get filled and this can increase the risk.

In auction market the prices are set based up on demand and supply; i.e. by buyers and sellers. The process is continuous and thus traders can get their orders filled in quick time. Many auction markets determine their opening and closing prices based on call market mechanism; all other trades are based on continuous mechanism.

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Non-deliverable forwards or NDFs are forward contracts on financial instruments (usually on foreign currencies) which are cash settled and do not involve the delivery of underlying instrument. NDFs are widely traded for non-convertible or thinly traded or futures trading banned foreign currencies. NDFs are traded over-the-counter and are usually settled in US dollars.

Non-deliverable forward is settled by taking the difference between the agreed upon exchange rate and the spot exchange rate at settlement time. NDFs have fixing date and settlement date. Fixing date is the date at which the price difference between the forward and spot exchange rate is calculated. Settlement or delivery date is the date at which the difference is paid to the receiver; settlement date falls usually 1 or 2 business days after fixing date. Usually NDF trading is done at offshore financial centers.

Non-deliverable forwards are usually used by companies which operate in nations of which currencies are not internationally traded. NDFs can be quoted for periods which range from one month to 1 or 2 years. Most NDF currencies are of emerging counties, and include Indian Rupee (INR), Philippine Peso (PHP), Korean Won (KRW) and Taiwan Dollars (TWD).

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The Week Ahead: Markets will try to build on last weeks rebound which was the best in 5 years. The credit freeze thawed somewhat as bank to bank lending rates eased but are still well above normal. With consumer sentiment having its steepest one month drop ever, barrowing demand by consumers may be experiencing a freeze of it own. Ben Bernanke will give his annual testimony to Congress on Monday, and the leading economic indicators are released. Realty Trac's Foreclosure Report is due Thursday and existing home sales on Friday.

Stocks to Watch: ING Group (ING) forecasts its first quarterly loss ever in Q3 as the stock hit a multi-year low. Also concerns that a cash infusion from a Dutch company will dilute earnings, but a bounce in the stock price seems due. Buying has pushed shares of Comstock Resources (CRK) up ahead of its addition to the Mid Cap 400 Index on Tuesday. Same goes for Nasdaq Omx Group (NDAQ) which will be added to the S&P 500 replacing Dillards (DDS). Leggett & Platt (LEG) sees sales falling in 08' for its residential furnishings as Q3 came in weak.

Special Note: The Dow Jones Industrial's 1900 point move off of last week's low or 24.2% was its biggest bounce of the bear market to date and fell right into the resistance pocket of 9600-10,000. For it to move through this range would likely take real fundamental improvement in the economy and renewed buying interest by investors. Problem is analysts have consistently been behind the curve in S&P 500 earnings expectations as the past 5 quarters declined 38% while expectations were seen flat or rising most of the time.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Exchange Traded Funds (ETFs) are still considered as new comers of financial market, and new types of ETFs, with different underlying indexes and instruments, are coming up. Now there is more than 600 ETFs available for trading and all of them is not suitable for all traders. Traders should select them according to their profit expectations, trading knowledge and trading preferences. Here are some factors which help in evaluation of ETFs.

1. Underlying asset or index: This varies considerably, many ETFs track major indices, some track foreign exchange indices and some others track specific sector/industry. Generally it is good to trade ETFs that track major, known and broad index.
2. Asset level: Evaluate the total value of the underlying asset that the ETF holding. It is better to avoid ETFs which falls below a certain asset level (eg: $10 million). ETFs having lower asset value are not so preferred by traders and thus have low liquidity.
3. Liquidity: This can be measured from daily trading volume. There are many ETFs which have daily activity of millions of shares and there are also many ETFs which are rarely traded. It is better to choose an ETF with fair/higher amount of liquidity and tight ask and bid spreads.
4. Tracking Error: Is the measurement of how closely the underlying index is tracked. ETFs which minimal tracking errors are considered better.
5. Market Leader: Usually ETFs which are first of that section/market have better chance of being the market leader as traders generally prefer them over ETFs which are imitations of the first.

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Doji are an important group of candlestick formations which carry important market information on their own and with preceding and following candlesticks. Doji candlesticks are characterized by very small body; formed as a result of very close (virtually equal) opening and closing prices. When taken singly doji are neutral candlestick patterns, but with adjoining candlesticks they indicate market reversal and bullish or bearish trends.

Doji candlestick formation can be of 4 types as common doji, long-legged doji, dragonfly doji and gravestone doji. Irrespective of the type, all doji formations are considered moderately reliable trading patterns which require confirmation.

1. Common Doji: The candlesticks look like a plus sign, cross or inverted cross. When they occur after a significant uptrend or downtrend, they indicate trend reversal.
2. Long-legged doji: This is a doji formation with long upper and lower wicks, and the body is ideally at the middle. They usually indicate high amount of indecision in market or high competition between buyers and sellers.
3. Dragonfly doji: They are doji formations which resemble English letter ‘T’. They are formed when sellers have dominated the trading session/day, but buyers have managed to bring the price back to opening level.
4. Gravestone doji: They are doji formations which resemble inverted ‘T’. They are formed when buyers have dominated the trading session/day, but sellers have managed to bring the price back to opening level.

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Directional and non-directional trading strategies are two broad classification of trading strategies. Directional trading strategies include any long-term or short-term trading strategies which include taking a long or short position in market. Non-directional trading strategies include trading strategies which include taking market-neutral positions.

Directional trading strategies are most widely followed trading strategies by both novice and experienced traders and investors; as they are easy to understand, can be used to trade all financial instruments, and need less automation and technical skills. These strategies usually follow some widely accepted trading policies such as taking net long position when market is predicted to go up, taking net short position when market is predicted to fall and using stop limits and other risk minimizing tools. Some common examples of directional trading strategies include trend-following trading strategies, break-out systems, pattern reorganization strategies and moving average crossover based strategies.

Non-directional or Market-Neutral trading strategies are complex strategies with loosely defined trading policies, which involve profiting from upward, downward and sidewise moving markets. These strategies are usually followed by very big traders like hedge-funds and institutional traders with the help of highly sophisticated and complex trading systems. Non-directional trading strategies involve careful matching of trading instruments, extreme money management and position sizing skills, and vast market knowledge. Some common examples include arbitrate strategies, sector/stock matching strategies, pairs trading strategies, etc.

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The Week Ahead: The rapidity of the stock markets decline last week left investors with the worst one week decline in its history. Banking leaders of the U.S., Europe, and Australia this weekend agreed to support financial firms to prevent failure. Initiatives such as buying bank securities are hoped to halt a financial crisis that none have seen before. The bond market will be closed Monday for Columbus Day. The Fed's Beige book, retail sales, and the Producer Price Index are released on Wednesday. The jobless claims and Consumer Price Index are due out on Thursday. September housing starts will be out by Friday.

Stocks to Watch: With the price of oil now below $80 a barrel, energy stocks had some of the biggest declines last week. Look for rebounds in companies like Anadarko Petroleum (APC), Conoco Phillips (COP), and Marathon Oil (MRO). With the dollar on the rebound, gold stocks were also leaders to the downside such as Agnico-Eagle Mines (AEM), Newmont Mining (NEM), and Goldcorp (GG). Morgan Stanley's (MS) debt rating was slashed this week as fear that a Mitsubishi investment of $9 billion would not hold the firm through the credit crisis.

Special Note: The breach of the 10 year moving average of 10,800 on the Dow Industrials and the pull of the 20 year moving average near the 7800 level mentioned here on September 22 was to great for the Dow Jones Industrials to withstand. It was hoped the internal trend line near the 9600 level which is drawn off the 1896 and 1903 low might hold, but will now act as resistance to future rally's. A yearly close beneath this trend line has occurred only four times in 112 years each with substantial declines. Therefore a close below 9600 for 2008 could make the coming year of 2009 one of the worst years for the DJIA and stock market as a whole.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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