Market Rhythm:

Whatever instrument you trade, be it currencies, stocks, futures, or options, getting a feel for the market is vital to your success. Buying or selling on impulse is not trading. Head to Vegas if you have money to throw away. Understanding how a market moves and watching it play out in front of you on the charts is mandatory in order to close your position with a profit. Lesson 4 describes the Market Rhythm in detail according to the moving averages used with The Market Rhythm 4 Hour Strategy. To download the mp3 files and chart examples of Market Rhythm in .zip format click here.

Here we will show you how the Rhythm Strength is derived with some chart examples.

Determing the Bullish or Bearish Rhythm Strength:

The value, or strength of the rhythm is based on the closing price in relation to the 89 Simple Moving Average (89 SMA) and the 8 Exponential Moving Average (8 EMA). The following graphic describes how it is calculated:

Rhythm Strength Chart Examples:

The dashed line is the 89 SMA. The solid blue line is the 21 EMA. The solid gold line is the 8 EMA.

The dashed vetical bars are where the price close equals the 89 SMA. But, notice how the three moving averages are converging when the close is at or around the 89 SMA. When the close is around the 89 SMA by a few pips price can consolidate like it did here. This happens frequently as the market pauses and looks for direction. The Rhythm Strength can still have a value of +2 or -2 in this area but again, when the moving averages are consolidating it is best to wait before taking a position. "Be patient and let the market come to you."