一个笨蛋的股指交易记录-------地狱级炒手

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EURUSD – The EURUSD has held at former triangle resistance, which has now become support.  Price has yet to challenge fibo resistance, which begins at the 38.2% of 1.3296-1.2865 at 1.3029.  We maintain that the decline from 1.3296 is impulsive and the fact that we can count 5 waves from 1.1640 to 1.3367 strongly favors that a major turn has occurred.  A break below 1.2865 targets the next bearish target at 1.2708 (38.2% of 1.1640-1.3367).  The 12/18 low at 1.3051 is in-between the 38.2% and 50% fibos of 1.3296-1.2965 (1.3029-1.3080).  This area should be solid resistance.  
  
USDJPY – We still maintain our position regarding the longer term implications from the 13 month inverse head and shoulders pattern.  A measured objective is at 128.67 – which is where the advance from 108.96 would equal the advance from 101.67 to 121.38.  In the short term, the pair may be heading lower.  With 5 waves up from 117.97, a pullback towards fibo support is reasonable.  The 38.2% of 117.97-120.87 is at 119.76.  Daily RSI has declined below 70 as well.      
      
GBPUSD – We focused last week on how much more constructive Cable was compared to the EURUSD.  The pair has turned up in what looks like an extended 3rd of the 5th wave to complete the bullish sequence from 1.8515 (and the bullish sequence of one larger degree from 1.7046).  Thus, price is expected to exceed 1.9846 before a major correction takes place.  In the short term, the extended third wave is nearing resistance from a line drawn off of the 12/1 high (1.9846) and 1/3 high (1.9749).  Also, the extended 3rd wave will sport 5 waves of its own on a rally through 1.9702.  In short, downside risk appears to outweigh upside risk at this point.

USDCHF – The USDCHF has turned down from very close to where the 1.2110-1.2526 advance would equal the 1.1878-1.2271 advance.  Equal legs are indicative of corrections and the proximity of 1.2526 skews risk to the downside.  If 1.2526 is exceeded this week, then the impulsive numbered count would be preferred and focus would switch to the 138.2% and 161.8% extensions of 1.1878-1.2271 / 1.2110 at 1.2653/1.2746.  Initial support is at the 38.2% of 1.2110-1.2526 at 1.2369.  Daily CCI has rolled over from above 100 on the daily.  This often occurs prior to a decline.  

USDCAD – The USDCAD may have turned down last week from a wave 4 correction last week.  Thus, a wave 5 may have started which would ultimately serve to complete the long term downtrend.  Daily RSI has turned over from above 70 – which is a strong reversal signal.  The high last week at 1.1800 is critical for the immediate bearish case.  A rally through 1.1800 negates the immediate bearish outlook and gives scope to the 161.8% extension of 1.0927-1.1456 / 1.1028 at 1.1885.  1.1885 intersects with a bearish channel line.   

AUDUSD – Last week’s commentary still stands – “The AUDUSD closed below the all-important .7778 (12/15 low) but the break lower proved false as the pair has rallied today to take out the previous two day’s highs.  Bullish pivots to watch are .7878 (12/20) high, .7929 (12/8 high) and ultimately .7979 (01/03 high).  False breakouts often lead to dramatic reversals in the other direction, which is what we may see here.  .7759 (yesterday’s low) is critical support for the bullish case.”  The pair is also back above the 20 day SMA today.  A close above would bolster the bullish argument.   

NZDUSD – The Kiwi rally failing at the 50% fibo of .7096-.6840 at .6974 yesterday along with yesterday’s outside day favors an extension of weakness.  A break below .6840 shifts focus to .6718.  This is where the decline from .6974 would equal the .7096-.6840 decline.  Price action at that level would be telling of the larger trend.  If price falls through .6718 by a wide margin, then the likelihood that a major top is in place at .7096 increases.  A strong bounce from near .6718 gives scope to one more rally through .7096.

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EURUSD – Standing back and taking a look at the daily chart, it looks more and more like the decline from 1.3296 is a third wave in a 5 wave bearish sequence rather than a C wave in a 3 wave corrective sequence.  The point where the decline from 1.3296 would have equaled the 1.3367-1.3051 decline was 1.2980.  Yesterday’s low was 50 pips lower, thus an extended leg lower may be in the works.  If this is the case, then bearish targets are 1.2861 and 1.2787.  These points are where the decline from 1.3296 is 1.382 and 1.618 x the 1.3367-1.3051 decline.  This is also a previous congestion area.  If 1.2865 holds, then resistance comes in at the 12/22 low of 1.3051.

USDJPY – The USDJPY has broken above the neckline from the 13 month inverse head and shoulders pattern.  The door is now open for an assault on the 125.00 figure and ultimately a measured objective at 128.67 – which is where the advance from 108.96 would equal the advance from 101.67 to 121.38.  Daily RSI is in overbought so managing risk is key here for longs.  On the other hand, RSI just entering extreme territory could mark the beginning of a much stronger move.  Support is former resistance at 119.67.           

GBPUSD – We focused last week on how much more constructive Cable was compared to the EURUSD.  The pair has turned up in what looks like an extended 3rd of the 5th wave to complete the bullish sequence from 1.8515 (and the bullish sequence of one larger degree from 1.7046).  Thus, price is expected to exceed 1.9846 before a major correction takes place.   

USDCHF – The USDCHF has turned down from very close to where the 1.2110-1.2526 advance would equal the 1.1878-1.2271 advance.  Equal legs are indicative of corrections and the proximity of 1.2526 skews risk to the downside.  If 1.2526 is exceeded this week, then the impulsive numbered count would before preferred and focus would switch to the 138.2% and 161.8% extensions of 1.1878-1.2271 / 1.2110 at 1.2653/1.2746.  Initial support is at the 38.2% of 1.2110-1.2526 at 1.2369.  

USDCAD – The USDCAD may have turned down last week from a wave 4 correction last week.  Thus, a wave 5 may have started which would ultimately serve to complete the long term downtrend.  Daily RSI has turned over from above 70 – which is a strong reversal signal.  The high last week at 1.1800 is critical for the immediate bearish case.  A rally through 1.1800 negates the immediate bearish outlook.   

AUDUSD – Last week’s commentary still stands – “The AUDUSD closed below the all-important .7778 (12/15 low) but the break lower proved false as the pair has rallied today to take out the previous two day’s highs.  Bullish pivots to watch are .7878 (12/20) high, .7929 (12/8 high) and ultimately .7979 (01/03 high).  False breakouts often lead to dramatic reversals in the other direction, which is what we may see here.  .7759 (yesterday’s low) is critical support for the bullish case.”   

NZDUSD – Kiwi has stemmed its decline and the pair remains constructive as the rally from the .6840 low to .6938 is most likely wave A and the decline to .6859 wave B.  Wave B retracing 78.6% of wave A is typical of a flat pattern.  If a flat is unfolding, then Kiwi strength should persist until at least wave C equals wave A – which in this case would be .6956.  This level is just below the 50% retracement of .7096-.6840 at .6968.  

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EURUSD – Standing back and taking a look at the daily chart, it looks more and more like the decline from 1.3296 is a third wave in a 5 wave bearish sequence rather than a C wave in a 3 wave corrective sequence.  The point where the decline from 1.3296 would have equaled the 1.3367-1.3051 decline was 1.2980.  Yesterday’s low was 50 pips lower, thus an extended leg lower may be in the works.  If this is the case, then bearish targets are 1.2861 and 1.2787.  These points are where the decline from 1.3296 is 1.382 and 1.618 x the 1.3367-1.3051 decline.  This is also a previous congestion area.  If 1.2930 holds, then Fibonacci resistance comes in at 1.3016 (23.6) and 1.3069 (38.2).        

USDJPY – The USDJPY has broken above the neckline from the 13 month inverse head and shoulders pattern.  The door is now open for an assault on the 125.00 figure and ultimately a measured objective at 128.67 – which is where the advance from 108.96 would equal the advance from 101.67 to 121.38.  Daily RSI is in overbought so managing risk is key here for longs.  On the other hand, RSI just entering extreme territory could mark the beginning of a much stronger move.  Support is former resistance at 119.67.         

GBPUSD – Cable is little changed as the pair continues to look far more constructive than the EURUSD.  The pair has held above trendline support drawn off of the 10/11 and 11/15 lows.  The rally from 1.9260 to 1.9455 is in 5 waves and the dip to 1.9341 in 3.  The pair has turned up in what is either a 3 or a C wave that should challenge 1.9536 (which is where the price distance from 1.9341 would equal the 1.9260-1.9455 rally).  The 61.8% of 1.9749-1.9260 at 1.9562 reinforces resistance there.  1.9260 needs to hold for the bullish construction to remain.  If 1.9260 gives way, then the 11/10 high at 1.9178 is the next support area.

USDCHF – The USDCHF below through the 61.8% of 1.2768-1.1878 yesterday and reached a high of 1.2477.  Still, on the 240 minute chart, the pair is breaking below a supporting trendline that began on January 2.  The pair did close above the 200 day SMA two days ago for the first time since late October but there is often whipsaw type action around the 200 day SMA before a trend is in place.  Expect the pair to cross the long term moving average multiple times within the next few weeks before finding a sustainable trend.   

USDCAD – The USDCAD rally continues to mark time as the pair has stalled near the April 2006 high of 1.1771.  Since 01/05, the pair has traced out a small triangle.  Triangles usually end in a thrust in the direction of the trend (in this case…up) but the move is a terminal event.  Thus, a thrust higher (if it happens) eventually should give way to a turn lower.  A break below 1.1719 suggests that a turn lower is already in the works.  

AUDUSD – The AUDUSD closed below the all-important .7778 (12/15 low) but the break lower proved false as the pair has rallied today to take out the previous two day’s highs.  Bullish pivots to watch are .7878 (12/20) high, .7929 (12/8 high) and ultimately .7979 (01/03 high).  False breakouts often lead to dramatic reversals in the other direction, which is what we may see here.  .7759 (yesterday’s low) is critical support for the bullish case.   

NZDUSD – Kiwi has stemmed its decline and the pair remains constructive as the rally from the .6840 low to .6938 is most likely wave A and the decline to .6859 wave B.  Wave B retracing 78.6% of wave A is typical of a flat pattern.  If a flat is unfolding, then Kiwi strength should persist until at least wave C equals wave A – which in this case would be .6956.  This level is just below the 50% reracement of .7096-.6840 at .6968.

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EURUSD – The EURUSD has inched higher from yesterday’s low at 1.2971.  The bearish side is favored in the medium term with as daily studies remain bearish and 5 waves from 1.1640 to 1.3367 are completed. 1.3050, reinforced by the 23.6% of 1.3296-1.2971 at 1.3047 and the 12/18 low, has proven difficult for bulls to penetrate.  The next resistance level is the 38.2% at 1.3094.  A break below 1.2971 argues for a continuation of the downtrend towards next support at the 11/20 low at 1.2804.
   
USDJPY – The USDJPY has pushed above Friday’s high of 119.04, making the rally from 118.10 to 119.21 roughly equal to the rally from 117.97 to 119.04 (111 vs. 107 pips).  The equality of the two waves and the fact that they each subdivide into 3 waves suggests that the pair has traced out a flat to correct the impulsive 119.67-117.97 decline.  Price needs to turn down from near current levels for the bearish structure to remain intact.  A break above 119.67 shifts focus to 120 and beyond.  A measured objective for a move down is where the decline from 119.21 would equal the decline from 119.67-117.97 – at 117.52.

GBPUSD – Cable has rallied to test former support at the 12/18 low at 1.9432.  This is also the 38.2% of 1.9749-1.9260 at 1.9445.  Similar to EURUSD, a break of the recent low (1.9260) suggests that another leg down is in the works.  A push through 1.9455 targets the next resistance level at the confluence of the 50% fibo of 1.9749-1.9260 / 10 day SMA at 1.9505/07.   

USDCHF – The USDCHF is little changed today as the pair consolidates between 1.2331 and 1.2410.  The break above 1.2271 last week paints a bullish picture but be wary of a pullback.  240 minute RSI is divergent at the recent high (1.2393) and has declined from above 70.  The 1.2400 figure is likely well protected and the 200 day SMA is at 1.2384.  Near term support is at the 01/05 low at 1.2271 (which is also former resistance).        

USDCAD – The USDCAD rally has stalled just above the 4/3 high of 1.1771.  With daily oscillators declining from overbought territory, bears may see some relief.  However, a resistance line from a potential bearish channel rests at 1.1878 today, just above the 50% of 1.2732-1.0927 at 1.1830.  That level is most certainly flooded with stops, which if taken out, the 11/15/2005 high at 1.1975 could be seen.  As mentioned though, overbought conditions may lead to a correction first, with the 12/29 high at 1.1667 as initial support.   

AUDUSD – The AUDUSD has stabilized at support from the 12/15 low at .7778 – yesterday’s low is .7780.  240 minute RSI has increased from below 30 (oversold), suggesting that the near term could see a bounce towards resistance which begins at the 01/05 high at .7850 (38.2% of .7979-.7780 is at .7856).  A daily close below .7778 would bolster the bearish case and give scope to the 50% fibo of .7413-.7979 at .7696.

NZDUSD – Kiwi ‘s rally stalled at the 38.2% of .7096-.6840 at .6938 this morning.  The quick sell-off from that level gives scope to a continuation of the move lower that began last week.  Resistance above .6938 is the 61.8% of .7096-.6840 at .6998 (10 day SMA at .6992).  A breakdown below .6840 shifts focus to the next bearish target – which is the 38.2% of .5927-.7096 at .6651.  Keep in mind that the big picture sports a 3 year head and shoulders pattern.

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Written by Thomas Long, FX Power Course Instructor

One of the main differences between a stock market and the FX market is that the FX market is a true 24 hour a day market. Trading is continuous around the clock and really only is closed on weekends due to the lack of volume rather than an actual close. The result of this is that you very rarely see gaps on the FX related charts. A gap is when the open of one session is far enough away from the previous close to leave an actual gap on the chart. There can be many gaps on stock market related charts since the market stops trading late in the afternoon and will not reopen until early the next morning. If a company’s earnings are released after the close, the next day’s opening price can be much higher or lower than the previous close. Any news item that causes a shift in the opinion of the value of the market can result in a gap on the chart. In the FX market, you do not see these gaps during the week as the market is open and trading. However, you can see gaps between the Friday closing price and the Sunday open. This week’s trading is a good example as the chart below notes a gap as a result of the G7 meeting over the weekend. You can find more on the G7 meeting at www.dailyfx.com, but the chart shows that the EUR/GBP opened much lower on Sunday than it closed on Friday. When you see a gap on a chart, the first thing traders will look for is for the market to move back to fill the gap. If the market gaps from 1.2500 up to 1.2525, traders will look for a move back down to 1.2500 to fill that gap and then reevaluate the news and its influence on the trend. We can see where this is exactly what happened last month as the market opened higher than the previous close and eventually moved back down to fill that gap before continuing on with the uptrend. The gap from this last weekend has not yet been filled and I would suspect that many traders are following this closely to see if that happens once again.

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Written by Thomas Long, FX Power Course Instructor

One of the more popular technical indicators in use today is Bollinger Bands. Created by John Bollinger in the early 1980s, this tool is essentially a Moving Average with a volatility filter. Volatility can be of great value in an indicator for those times when the market is swinging wildly between the lows and the highs as a result of some news event. If the average swing for a currency pair is 50 pips in a quiet market, but expands to 100 pips in a volatile market, a trader has to adjust their approach to account for the bigger swings. After all, a 50 pip stop is different in a quiet market than it is in a volatile market. What makes Bollinger Bands different is that the distance between the bands is designed to widen when the market becomes volatile and tighten when the market is quiet. When using this tool to find a trade, the first step is to identify the direction of the trend on the daily chart. If the daily trend is up, we want to look for buys only and if the daily trend is down, we want to look for sells. So if the market is in a downtrend, we should look to sell on a test of the upper Bollinger Band and if the market is in an uptrend, then we should look to buy on a test of the lower Bollinger Band. That entry price level will move further away from the market in volatile times, giving you a better entry that is adjusted to the current situation rather than past activity.

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Written by Thomas Long, FX Power Course Instructor

In our FX Power Courses we teach new traders that when the market is in a strong uptrend, we should look for any pullbacks off of the highs down to a support level as a good buying opportunity. However, at times there does not seem to be any visible support on the chart to offer that opportunity. This is one situation where the use of Fibonacci retracement levels can offer that support for a buy in an uptrend or resistance for a sell in a downtrend. The key is to first identify the direction of the trend and then to wait for that move against the trend. The use of Fibonacci retracement levels offer three popular levels of potential support in an uptrend and three levels of resistance in a downtrend and they are the 38.2%, the 50% and the 61.8% levels. An example would be if the market moved up 1000 pips off of a low to a high and started to pull back off of the highs, a 38.2% pullback would be 382 pips of that 100 pip move, a 50% pullback would be 500 pips, while the 61.8% pullback would be 618 pips off of the high. Many traders will buy at the 50% or 61.8% retracement levels and place their protective stop beyond the 61.8% level. Others will use a technical indicator to help better time their entry. The pullback to within the 38.2% and 61.8% levels signals the trade, while on the chart below we used a crossover of Slow Stochastics as the signal to enter into the trade. This example uses all of the classic trading tools. We only look for buys since the trend is up, we wait for a pullback down to support to note a trading opportunity and then we use a technical indicator to help us time our entry. If this looks simple, it is because it is meant to be simple. The difficult part is waiting for these solid setups to form and then to be there to take advantage of them. But knowing what to look for is the first step to trading these setups.

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Written by Thomas Long, FX Power Course Instructor


You see that the EUR/USD was moving up strongly, so you bought this pair on the last pullback. But now after another move up, the pair has pulled off of the highs and is moving down and you wonder if there is a way to measure the strength of the move so you could have exited earlier to protect more of your profits. There is and it is called the Average Directional Index (ADX). Developed by J. Welles Wilder, the ADX is meant to evaluate the strength of a current trend, be it up or down. The important point is that this technical indicator will not give you the direction of the trending move, but rather will tell you if that move is gaining or losing strength. A simple look at the ADX plotted on a daily chart of the EUR/USD shows the value of this tool. We can see that the market was moving up strongly as the ADX was moving up. I have drawn lines on the chart with an arrow showing where the ADX peaked and started to move down. We can also see that this change in trend of the ADX was also a change in the direction of the EUR/USD. If the market was in a downtrend, the ADX would also rise as the market was selling off and peak as the market started to change direction back to the upside. But the key is to remember that this indicator only measures the strength of the trend and does not tell us the direction of that move. As a trend trader, this change in momentum can be a valuable tool to help you determine the end of a strong move. If trading with the trend, a trader using the ADX on EUR/USD trades would exit as the ADX peaked and started to move down. This way the trader would be able to better time their exit and keep more of the profits in the trade.

To learn more about currency trading, please visit www.fxpowercourse.com

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Written by Thomas Long, FX Power Course Instructor

I’ve seen some new traders have some incredible winning results in a short period of time.
However, quite often they will lose those gains as just quickly.
Since their approach did not change, they will come to us in the FX Power Course for some sort of answer.
The reason is usually the same in that they forget to first identify the mood of the market before finding their trade.
What I mean by that is to first identify the direction of the trend on the daily chart and then find your trade.
If the daily trend is up, then only look for buys and if the daily trend is down, then only look for sells.
If the daily chart shows a range bound market, then look to buy above support and sell below resistance.
If you are not sure of the trend, then the play is to move onto another currency pair where the trend seems obvious.
I see many traders buying the pullbacks on a currency pair that is in a strong uptrend and enjoy tremendous success.
Then when the trend stalls out or changes, they continue to buy those pullbacks and lose all of their previous gains.
Being on the right side of a trending move can result in some great trades while trading against the trend can lead to many quick losses.
A good way to see if this may be one of your problems is to run a report on your FX Trading Station to see all of the trades you have made.
Then take a look at the daily chart and note where you entered into the trade.
Now ask yourself how your results would have been if you had only traded in the markets where you could confidently identify the direction of the trend on the daily chart.
Below are two current examples of strong trending markets.
The EUR/USD is trading up near all-time highs while the USD/JPY is trading down near lows not seen since 1995.
These trends are obvious and because of that offer some good trading opportunities.
We want to look for buys in the EUR/USD since it is trending up and look for sells in the USD/JPY since it is trending down.
You may find that adding this simple first step of identifying and trading with the daily trend increases your chance of success.

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Written by Thomas Long, FX Power Course Instructor

This Friday, March 7th at about 830AM Eastern, the US Department of Labor will release the most anticipated news report of the month, the US Nonfarm Payrolls. This report can result in increased volatility and a chance to profit handsomely in a short period of time. However, more often than not, new traders are not the one’s profiting but rather losing. The main reason is slippage, which is when your order is filled away from the price you wanted. The reason for slippage is simple, big traders stay away from these events and new traders all try to do the same thing at the same time. If the release is bullish for the EUR/USD, everybody wants to buy at the same time. However, most find that there is nobody willing to sell to them at their price. But eventually your order is filled, but at the seller’s price. Soon you find the market moving against you and you exit to keep your losses from getting too big. But what about those who were selling to you? As the market continues to fall, you start to wonder about these traders who sold to you and the fact that they are now making money. What did they do different? These traders are playing the reversal and taking advantage of the fact that the first move after a release is often based on emotions and wrong. Here is a 5-minute chart from the last release of the Nonfarm Payroll on February 1st. We can see that just before the release, the EUR/USD was trading at 1.4892. After the release, the market started to rally up to near the 1.4940 level. The market then started to reverse and traders who are playing the reverse will sell at the price where the market was trading just before the release. The assumption here is that all traders who bought after the release are now in a losing trade and selling to get out. So these new traders sell at 1.4892 to get in and use a 50 pip stop with a 100 pip limit order to take profit, which is what we recommend in our FX Power Courses. This is our 1:2 risk:reward ratio and allows us to be profitable if only winning 40% of these setups. The market soon moved down 100 pips from the 1.4892 entry and rewarded those who were patient and reacted to the market environment rather than the emotional first response to the release. These reversal traders will also use the EUR/USD as much as possible in these situations because of the increased volume and better fills. But you don’t have to be first to get into the trade to be right, you just have to be patient and react to the market and not the news release. The EUR/USD doesn’t act like this on every release, but it does frequently enough to make this a valuable strategy.

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Written by Thomas Long, FX Power Course Instructor

One of the oldest and most powerful money management strategies used to enter into and exit out of trades is using new highs and new lows over a certain period of time.An example would be to sell a new 10-day low to enter into the trade and use a new 10-day high as your trailing protective stop. This allows one to trade on the daily chart without having to follow the market throughout day. To set your trailing stop, you just have to check the daily chart after the 5PM Eastern close to see what the highest high of the 10 previous days was. If it was different from the previous day’s stop level, you just move your stop, if not, you leave it alone. You can do this until the market comes back up to stop you out, meaning you are trying to get the most out of the move. The key is to only trade in the direction of the trend as that is where you will find some of the biggest moves. The 10-day recommendation is only that…a recommendation. Some of the most successful traders have used values from as little as a new 3-day high or low to as much as a new 40-day high or low to enter into or exit out of a trade. You can also use this approach on an intraday chart, although I would recommend using higher values. Perhaps a 20-period high or low on the 4-hour or hourly chart would be more appropriate than a 10-period high or low. You have to check to make sure. But it is easy to backtest this approach as it is easy to identify new highs and lows….either they are or they aren’t. The key to trading on the intraday charts is once again to only trade in the direction of the daily trend. While this money management approach may not be perfect, it is better than most money management strategies used in the markets and is relatively easy to use. That makes it a valuable tool worth looking into by traders who currently struggle with how to get into and out of a trade.

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Written by Thomas Long, FX Power Course Instructor
A look at the daily chart of the EUR/USD with one year of trading shows something that we haven’t seen in this pair recently.

This chart shows that the currency pair is in a range bound environment.
The market is trading within two similar price levels that have been offering support near the bottom of the range and offering resistance near the top of the range.
The reason is a possible changing interest rate environment.
We know that higher interest rates usually lead to a higher currency value while lower interest rates usually lead to a lower currency value.
With the US Federal Open Market Committee lowering interest rates in the US as the European Central Bank (ECB) was raising or leaving them unchanged, we saw that this pair had been in a strong uptrend for close to two years.
But now we see that there is some talk by ECB members of a changing bias that could result in them lowering rates in the near future.
This means that the move by the EUR/USD up through the 1.5000 level may be on hold until traders get a better idea of the interest rate environment going forward.
If the ECB raises rates, that might be enough for the market to break out to the upside.
If the ECB lowers rates, we might see a break down through support and a trend change to the downside similar to the GBP/USD daily chart.
The best place to keep track of this is at www.dailyfx.com, where you will find analysis devoted to the FX markets and the latest on Central Bank moves and meetings.
Live clients at FXCM have that same information and more at DailyFX+.
So rather than waiting for the breakout in either direction, follow these sites to keep track of the fundamentals of the markets to put yourself in a better position to anticipate the direction and the timing of the breakout.

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Written by Thomas Long, FX Power Course Instructor
Written by Thomas Long, FX Power Course Instructor

One of the more important points we try to stress to new traders in one of FXCM’s Power Courses is to look for confirmation of a signal to enter into a trade.  This is especially true for technical indicators which can generate many false signals on their own.  The problem is that most of the time new traders will use one technical indicator to confirm the signal generated by a different technical indicator.  But most indicators are really just fancy moving averages and they have a tendency tell us the same thing in a different way.  Here is a daily chart of the EUR/JPY.  The daily trend is up, so we are only looking to buy on a pullback.  On the pullback, we can use a technical indicator to help us time our entry into the trade.  The first indicator on the chart is the MACD (Moving Average Convergence/Divergence), followed by the RSI (Relative Strength Index) and finally the Slow Stochastics.  We can see that the RSI signaled to enter after having moved to above from below the value of 30.  Next, the Slow Stochastics gave the entry on a crossover after having been below 20.  Then finally the MACD gave the entry signal on the crossover.  Since they are all based on moving averages, they all gave a signal to buy, but the timing is different.  The RSI is usually first, but can sometimes not move to extreme levels to signal an entry so you might miss some trades.  The Slow Stochastics will give you more entries than the RSI which may mean more losing trades.  Then the MACD will usually give the signal last which means not as good of an entry as the other two indicators.  These are just three of the more popular indicators but there are many to choose from.  But the point is that you only need one or two to help time your entry.  Plotting up to 10 indicators to search for that “perfect” entry will usually cause more confusion than certainty.  So my recommendation is to pick just one or two that you find easy to use.  Being able to identify the signal to enter as it is forming is what trading is all about, so keep it simple and consistent to achieve those results you are looking for.

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hefeiddd

Written by Thomas Long, FX Power Course Instructor
Last week we discussed that while the USD/CAD showed a strong downtrend through most of 2007, the current situation is a little unclear.
We won’t be able to confidently know the direction of the trend until more trading has taken place, but that does not mean we should not trade.
This is the time to search out the new currency pairs that are currently in strong trends on daily charts.
As I write this I see the daily chart of the EUR/GBP to be in a strong uptrend with the daily chart of the GBP/CHF showing a strong downtrend.
The relationship is the current weakness of the GBP.
The reason is that the Bank of England has now adopted a bias towards lowering their interest rates instead of raising them.
This is one of the main reasons the USD was weak in 2007 as they were the only major country lowering interest rates.
Interest rates are the biggest determining factor in the value of a currency.
Higher interest rates usually lead to a higher currency value while lower interest rates usually lead to a lower currency value.
So now that the Bank of England is lowering interest rates, we see a weak GBP against most other currencies.
Changing your opinion of the strength of the trend in each pair is something that has to be done frequently.
Just because one made money selling the USD/CAD last year does not mean that this is the pair to trade this year.
Finding the strongest trends to trade is still the first step in finding a solid trading opportunities.

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hefeiddd

Written by Thomas Long, FX Power Course Instructor
The current daily chart of the USD/CAD is very interesting.
It could be an optical illusion for some traders.
It this market still in a downtrend as noted by the lower highs designated by the A, B and C tops?
Or have we seen a change of trend to the upside noted by the higher lows designated by the #1 and #2 bottoms?
This is important since we only want to take trades in the direction of the trend as seen on the daily chart.
If the daily trend is up, then we should only look for buys.
If the daily trend is down, then we should only look for sells.
Rather than force a decision, we are better off only trading those trends that are obvious.
If you look at a daily chart of a currency pair and can make a case for either direction, you should probably skip the pair and move on to the next one.
Finding the strongest trends to trade is a choice that we can make before entering into a trade.
It is an important decision to make as trading with the momentum of the market increases our chance of success.
I always tell new traders in our FX Power Courses to be very picky about what pairs to trade.
With time, you may add the fundamental picture to help in these situations, but finding the strongest trends should be an easy task.
Most pairs should fall into the “I don’t know” category, meaning that the trend is not strong enough to offer a solid trading opportunity.
But there are usually a few pairs that are in an obviously strong trending move and these are the pairs we should concentrate on when looking for trading opportunities.

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