Month: September 2010

Happy weekend FX people! On today’s FX feature is an update of the AUDUSD pair which I posted last September 5 (please see it here). As you can see, the pair has continued to rise within an ascending channel. And as I’ve suggested, the pair indeed rose to mark its fifth wave (wave 5). If the Elliot Wave Principle holds true and if my wave counting is correct then as the theory suggests, the pair should be due for a retracement. Remember that the EWP predicts a correction in the prices after the completion of the fifth wave, starting with wave A and ending with wave C. And given the obvious technical resistances ahead and an overbought condition as indicated in the stochastics, the pair could indeed dip or at least move sideways. If the Aussie weakens against the US dollar, the peak of the third wave around the 0.9200 level and the channel’s support should keep it from falling further.

The Aussie along with the non-dollar currencies rose this Friday due to the better-than-expected July wholesale inventories report in the US. Wholesale inventories has risen by 1.3% as compared to the 0.4% market forecast. China’s better-than-projected industrial production (13.9% vs. 13.1%) , retail sales (18.4% vs. 18.0%), new loans (545 billion vs. 500 billion), M2 money supply (19.2% vs. 17.5%), and the slower PPI (4.3% vs. 4.6%), have also helped the Aussie. Remember that Australia is one of the biggest supplier of raw materials to China. Hence, an increasing business activity means more business for Australia. A weaker PPI, in the same way, benefits the Aussie since a monetary tightening by the Chinese government would be postponed which would allow for business to go on without additional restrictions as of the moment.

For the coming week, no market moving events are scheduled in Australia. Given the lack of economic reports from the country, investors could take this as a chance to pocket some of their profits from their long Aussie positions.

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By Yan Petters – The AUD/USD pair continues its bullish trend with full steam. Recently, after peaking at the 0.9200 level, the pair saw a technical correction which took the pair as low as the 0.8775 level. However the pair promptly resumed the bullish trend, and is currently aiming the 0.9400 level.

• The chart below is the AUD/USD daily chart by ForexYard.
• The chart shows that the pair has gained about 1,300 pips in the last 4 months and approximately 600 pips during the past 3 weeks.
• Both the Slow Stochastic and the MACD have completed a bullish cross lately, suggesting that the bullish move has more room to go.
• The pair is currently testing the 0.9325 resistance level. If the pair will manage to breach this level, it has potential to reach the 0.9400 level.
• The next target after reaching the 0.9400 level might be the 0.9520 level.
• The next support levels are the 0.9265 and the 0.9200 levels.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

Following solid economic news out of China released last Friday, the euro, as well as other so-called riskier currencies, has maintained an upward trend going into this week. That being said, analysts are warning that these gains may only be temporary. Overall economic sentiment regarding the euro zone is still fairly pessimistic. The slightest bit of bad news could cause investors to revert back to the safe haven US dollar and yen, which would lead to a drop for euro pairs.

Economic News

USD – USD Starts Busy Week Down vs. Majors

Despite the significant gains the US dollar made in the first half of last week, a sudden switch to risk-taking among investors eventually caused the currency to slide back into a bearish trajectory. As we start off the week, the greenback continues to lose ground. The EUR/USD pair has gone up over 100 pips since markets opened, and is currently trading around the 1.2790 level. The USD/CAD dropped over 50 pips in overnight trading, reaching as low as 1.0311 before making a slight recovery. Currently the pair stands at around the 1.0325 level.

Today, USD crosses will likely fluctuate based on what ECB President Jean-Claude Trichet says in his speech. Pessimism in the euro zone economies is still relatively high. Should the ECB’s president reflect this sentiment in his speech, the dollar is likely to make steady gains as investors return to safer assets like the greenback.

As for the week ahead, traders will want to pay attention to a batch of potentially significant US economic data. Tuesday’s Retail Sales reports, as well as Thursday’s PPI figure and Unemployment Claims, will likely dictate the direction of dollar pairs for some time. Any gains made in the US economy will likely lead to bullish movement for the buck.

EUR – Analysts Question How Long Euro Can Maintain Current Trend

The euro was able to move up against most of its main currency rivals, including the Japanese yen and UK pound, in overnight trading. The gains can largely be attributed to renewed investor confidence, following positive Chinese data released last week. Since markets opened for the week, the EUR/JPY has gone up around 90 pips, while the EUR/GBP moved up close to 50 pips.

While the euro has been able to make some fairly significant gains as of late, most analysts are questioning how long the currency can maintain this trend. Confidence in the euro zone economic recovery remains particularly low. Today’s speech from ECB President Trichet may highlight these concerns; in which case euro crosses may correct themselves later in the day.

As for the week ahead, traders will want to pay attention to a number of potentially impacting news events. Tuesday’s German ZEW Economic Sentiment figure as well as Wednesday’s CPI and Core CPI figures are all predicted to create market volatility. Traders will want to note that should any of these results come in below analyst predictions, the euro will likely move down as a result.

JPY – Yen Corrects Earlier Gains as Risk Taking Returns

The yen corrected much of its recent gains in trading late last week and into overnight trading today. Positive Chinese economic news, as well as better than expected American labor news are seen as the leading causes for the return to risk taking.

As a result, the yen took some heavy losses against the euro and Swiss franc beginning last Friday. The one exception appears to be the US dollar. After beginning the week with slight upward movement, the USD/JPY pair has since dropped close to 30 pips and is currently trading around the 84.05 level.

This week, yen traders will want to pay attention to European and US economic news. Positive news is likely to give further confidence to investors in the global economic recovery. If so, then the yen will likely continue to lose ground against its main currency rivals.

Crude Oil – Optimism in US Recovery Causes Crude Prices to Soar

Positive US economic news, as well as the most recent US Crude Oil Inventories report has led to a prolonged upward trend for crude prices that appears to be continuing into this week. Crude prices are largely determined by the state of the US economy. Following a number of positive indicators last week, oil demand in the world’s largest energy consuming nation appears to be on the rise.

Since beginning its most recent bullish trend late last week, oil prices have shot up over 300 pips. Currently, a barrel of crude goes for around $77.10. Traders will want to pay careful attention to US economic indicators this week in order to determine the direction crude is likely to take. Should the news again come in above expectations, prices are likely move up further.

Technical News

EUR/USD

There appears to be a fresh bearish cross on the hourly Stochastic (slow), indicating an impending short-term correction for the pair. The 4-hour Stochastic (slow) is also climbing towards the over-bought region and could also form a bearish cross later in the day if upward momentum does not change in the next few hours. Going short with tight stops may be a wise way to gain quick profits in intra-day trading today.

GBP/USD

This pair appears to be trading within a distinct bearish channel, and has recently touched the upper border of this trend. The hourly Stochastic (slow) has a fresh bearish cross, while its RSI may also be just entering the over-bought territory. Short-term downward movements may be expected throughout the first half of the trading day. Selling this pair for short-term profits may be a wise move today.

USD/JPY

Most indicators on this pair appear to be floating in the neutral territory, suggesting the current trend may continue. The long-term movement of this pair is in a very distinct bearish channel spanning the last few months. The only indicator which appears to suggest an upward correction is the weekly chart’s RSI, which has the price of the pair floating just within the over-sold territory. Continuing with the downward direction by opening short positions may prove a smart decision for this pair.

USD/CHF

The hourly Stochastic (slow) on this pair appears to be showing a recent bullish cross, suggesting upward movement may be imminent. The hourly RSI also floats in the over-sold territory, which supports this notion. Additionally, the weekly chart’s RSI has the price of this pair floating deep within the over-sold region and beginning to turn upward. Longer-term upward movements may be expected on this pair.

The Wild Card

Crude Oil

The recent bullish movements on this pair have pushed many indicators into corrective territory. The hourly, 4-hourly, and daily charts’ RSIs all have the price in the over-bought territory. The Stochastic (slow) on all three of these charts also shows either a fresh or an impending bearish cross. Forex traders can usually be certain that after such strong movements there will be similarly strong counter-movements, and Crude Oil is no exception. Going short on oil today may not be a bad idea.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

EUR/USD

Broke above 1.2765/75, the recent consolidation ceiling and 1.2815, trendline resistance, to extend recovery and focus 1.2920/31, key near-term resistance zone. Clear break here is needed to confirm a higher low at 1.2586 and resume short- term uptrend from 1.1875. Otherwise, lower top under 1.2931 and fresh attempt at 1.2625/1.2586 would be the likely scenario.

Res: 1.2865, 1.2875, 1.2920, 1.2931
Sup: 1.2775, 1.2765, 1.2745, 1.2701

GBP/USD

Maintains positive near-term structure off 1.5295, 07 Sep low, with market currently attempting through 1.5477/90 resistance zone, en-route to 1.5532, key near-term resistance. Break here is required to resume recovery and expose 1.5596/1.5617, 26/23 Aug highs. Failure under 1.5532, however, risks lower top and fresh weakness, and below 1.5343 to open 1.5295 for retest.

Res: 1.5492, 1.5532, 1.5596, 1.5617
Sup: 1.5402, 1.5375, 1.5343, 1.5295

USD/JPY

Recovery off 83.33, year-to-day low, seeks a lower top, likely under 84.47/62, for the next leg lower to 83.33/82.98. Above 84.50/65, delays bears for further recovery 84.95/85.21. However, underlying trend remains firmly negative.

Res: 84.47, 84.62, 84.82, 85.00
Sup: 83.79, 83.51, 83.33, 82.98

USD/CHF

Last Friday’s rejection at 1.0276, just below 38.2% retracement of 1.0625/1.0063 downleg, confirmed the underlying bear structure. Market looks for a final push through 1.0060 support, to open way for fresh bear phase, with 0.9980/60 seen first. Upside, regain of 1.0236/76 is needed to easy the immediate bear pressure.

Res: 1.0205, 1.0237, 1.0276, 1.0310
Sup: 1.0099, 1.0059, 1.0027, 0.9980

By Danielle Franklin – The opinion about how easy it is to learn forex trading seems to have two sides – while some resources claims that 90% of traders don’t make it, others provide arguments regarding the possibility of mastering forex and earn the living. Which source should you trust? Is it so black and white? Or it is rather gray? Do you have a chance to become a professional trader?

In general, learning the basics of forex trading shouldn’t be a problem. You don’t need to have a phd in economics in order to figure out the essence of currencies. The vital parts that every beginner needs to know by hard are:

1. Technical and fundamental Analysis (yes, both of them, since in order to see the whole picture, you need to use both analysis). 2. Charts and time frames 3. Candlestick 4. The double P (pivot points)! 5. Fibonacci 6. Support and Resistance 7. Price movements 8. Money and risk management 9. Position sizing 10. Trading plan, discipline and daily trading journal

Once the basics are covered every trader realizes that there is more to trading then just the theory, because even if you know it all by heart, you are still most likely to lose money. So what is the solution? Is there a magic trading strategy that assures success? Can you follow what other successful trader does?

The problem is much deeper than you might think – trading is all about emotions and here is where most traders fail. While your trading decisions are majorly influenced by your feelings and emotions, you are most likely to stay on a loser’s bench.

There is no one universal solution to forex, since it is dynamic, flexible and rather complex. In order to become profitable, it is necessary not only to be top-notch analyzer, but also be ready for radical changes and fast logical decision making.

What can possibly go wrong, even if you know it all?! Hesitation, fear, greed and envious frustration are well known pullbacks in trading. Every time a trader is attacked by these poisonous and destructive feelings, most likely the poor decision will be made and, not only will the possibility pass by, but there is a big chance of significant money loss.

So how to stay focused and not join the 90% of proclaimed loser traders? The trick is not to turn yourself into greedy, money-hunting Uncle Scrooge, constantly dreaming about the “deserved” itsy-bitsy slice of the several-billion-a-day-forex pie. Focusing on money is bound to affect the decisions and the quality of your trading.

Instead, your ultimate goal is to brush away the thoughts of soon-to-be-obtained millions in your bank account and year-long holidays in Bahamas, and to concentrate on becoming rather mechanical in your trading, analyzing and profit calculating.

The most difficult part of it all is to chance your perception about profit-loss. It is in human nature to feel guilty, ashamed and hopeless when we find ourselves in the loss situation. The trick is to turn the loss situation into a lesson, write it down in your trading journal and try not to make the same mistake again. With one lesson learned, you are one step closer to unlock the profitable trader in you.

Another worthy tip – keep it simple! Do not use all the indicators possible and do not overanalyze. By thinking too much you block yourself from focusing in order to make decisions!

Lastly, stay away from overtrading. Fear it as you fear the tsunami, the apocalypses, the global earthquakes, demons, cockroaches, graveyards – whatever makes you squeal! I personally have a huge poster right above my computer saying ” Don’t Overtrade Today, Stupid!” and it honestly helps!

In case you cannot define overtrading, here are some examples: * Putting on trades outside your rules / trading plan. * Putting on more trades than you can effectively manage. * Scalping in and out of the market when holding a trade would have produced better profit. * Feeling the need to get the lost money back RIGHT NOW! * Searching frantically for possible trades without any reason for it.

To summarize, yes forex is difficult but with the right set of mind you can earn the living with it. Becoming in a way robotic and much less emotional will tremendously help you not to freak out and cry over the spilled milk, but rather move on to the next challenge. And no, the challenge is not about getting those lost money back. NO! The challenge is to follow the plan, start over the next day and find the best opportunities.

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Forex Directory

USDCHF broke above the downtrend line from 1.0624 to 1.0450, suggesting lengthier consolidation of downtrend is underway. Range trading between 1.0060 and 1.0350 would more likely be seen in next several days. Key support is at 1.0060, a breakdown below this level will indicate that the downtrend from 1.1730 (Jun 1 high) has resumed, then deeper decline could be seen to 1.0000 area.

Daily Forex Analysis

By Danielle Franklin – There tones of technical indicators available for forex traders. The question is, which ones are actually working? How many should you include in your strategy? Does the rule the more the matter apply? Or you should keep it simple instead? What are the right forex tools for every day trading?

Even when there are all these elaborate choices of indicators available today, it doesn’t mean you should use them all. In fact, using too many indicators will only confuse you and most probably lead to bad trading decisions.

So, instead of making forex even more complicated than it already is, focus on combining the right set of indicators that will actually show useful information about the market and confirm your ideas about trades.

Why is it important not to use indicators that show the same data? Think about this, instead of getting a so-called “signal confirmation”, you basically look at the duplicated data, which by no means confirms anything.

Below are the indicators that can be used together to confirm your trading decisions:

1. Stochastic – the best timing tool (crossovers with bullish/bearish divergence, chart resistance/support, overbought/oversold levels).

2. Relative Strength Index (RSI) – shows the strength of the trend.

3. The Bollinger Band – shows volatility of the price.

4. Moving Averages – shows when to load in new trades or show the level to trail the stop.

There are other powerful technical indicators such as ADX line and, of course, MACD, however with the above 4 indicators, you are set towards a great trading strategy and profits.

Keep in mind that there is no short cut in forex. You have to blend into real trading and see those indicators in action. Practice, make mistakes, write it down, analyze what went wrong and get back on that bull! Experience is the only reliable indicator you will ever get!

It’s all about combining indicators for profit – no indicator works on its own, so you need indicators that complement each other. Now that you know which indicators to include in your daily trading, let’s see what can happen if you don’t use your indicators correctly.

Below is couple of tips to use the indicators correctly:

1. Don’t use indicators on meaningless data – indicators are pretty much useless on short time frame charts, since daily volatility is pretty much random and no technical indicator will be in any way useful.

2. Make sure you have enough evidence that price momentum is indicating the levels will hold. Good momentum indicators are ones such as, the stochastic and Relative Strength Index (RSI) and if used with pivot points or moving averages, you have a powerful combination

3. Don’t try to predict market direction. It is impossible to predict turning points. PERIOD! What you need to do is to find a confirmation and act accordingly. Only this way you can increase your chances of winning.

Forex trading is not a guessing game, fortune predicting system or perfect gambling technique. The above mentioned indicators have been doing their job for ages for many traders and still are equally effective today. These are the best forex trading indicators and if used correctly can dramatically improve your profits and decrease risks.

About the Author

Forex Broker Reviews – Forex brokers reviews and rating, comprehensive forex tutorials and articles, latest forex news and forex blog.

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Forex Links

By James Woolley – Forex trading was never designed to be easy. Just learning the basics is hard enough, but then you have to come up with a trading system that is able to generate consistent profits in the long term. So to help you achieve this goal I want to offer one valuable piece of advice and that’s to let your winning trades run for as long as possible.

You would be amazed how many people are taking huge risks just to make small profits. For example I’ve come across people who use huge stop losses of say 500 points and are only targeting profits in the region of 50-100 points. Worst still there are some people out there who don’t use any stop losses at all, which is just absolutely crazy, and will almost certainly lead to disaster.

The ideal trading system should keep losses to a minimum and use tight stop losses so that any losses that are incurred are relatively small. Furthermore you should only risk a small amount of capital (I personally suggest no more than 3%) on any one trade. For instance if you have $10,000 in your trading account, then your maximum loss on your next trade (if your stop loss is triggered) should be no more than $300. As I pointed out earlier, you should also let your winning trades run. There are two ways you can do this. You can either patiently hold on to a long-running position until a trend appears to be over, which is quite hard to do in practice, or you can do what I do and that’s to scale out of a position in two stages.

I generally close half the position for around 50 points on the major currency pairs when trading my 4 hour system and then let the other half of the position run for as long as possible in the hope that it move several hundred points in my favour.

The beauty of this approach is that the second half of the position is essentially a free trade because I will always move my stop-loss to break-even as soon as I close the first half of the position. This takes some of the emotion out of the trade and allows you to hold onto your winning trades for a lengthy period until the trend is over or until your long-term price target is reached.

Anyway the point is that the longer you let your winning trades run, the easier it is to make consistent profits (providing you use a tight stop loss of course). This is because this style of trading requires a much lower overall success rate. You don’t need every trade to be a winner. You just need a few big winning trades every so often.

About the Author

Click here for more forex trading tips and to read a full Forex Mastery 2.0 review.

Types of Ea

Robots trade with a set of ideology and it is important that the user understands it.

In circumstances when the user are unaware of how the robots are traded, the maximum draw-down* will be unknown to them. All profitable trading robots are sure to make losing trades and when the users are faced with 5 consecutive losing trades, they will be experiencing great fear and may stop them from following the system.

(Maximum draw-down: This is the largest overall drop in the investment’s value which occurred in a given period before it returned to its previous high. Large maximum draw-downs indicate higher risk.)

Had they known how the system traded, how it performed the past 10 years and the maximum consecutive losses, they will not have panicked. They will be well aware and mentally prepared to accept the losses. If the system traded for the last 10 years have a maximum consecutive loss of 5, the well-informed user will be expecting for a win with the next trade and not fearing the system may have stop working.

Thus, knowing how the robots trade is crucial to Your Trading.

Here, we examine a few trading ideologies

Scalping Robot

– Work extremely well during certain times of the day only

– Take profit is usually a few pips only

– Stop loss level is set many times more than their take profit level

– Extremely low risk:reward ratio

– However, they are compensated by very high accuracy trades (80% winners)

– Trades made are usually within very shot period of time (in mins to a few hours)

Trending Robot

-High risk to reward ratio

– Low accuracy trades (40% winners)

– Trades are entered whenever there are signs of a breakout (means you will have many losing trades in conditions of a false breakout or ranging conditions)

– Due to high risk to reward ratio, one winning trades can make back all of the losing trades

– Usually do not have a fixed take profit, take profit is trailed by a moving average or 2 bar low/high

– Trade made can last for many days

About the Author

By Warren Seah

Warren examines commercial trading systems. He analyzes to uncover good systems which bring in consistent profits in the long term.

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By David Adams – It would be very convenient to have a day trading system that worked under all conceivable conditions without fail. Whether the market was consolidating, trending upward, or trending downward the ideal system would churn out profits regardless of prevailing market conditions. Unfortunately, no system adequately deals with varying market conditions that can arise throughout the course of their daily trading session. Obviously, this causes problems for novice and experienced traders alike.

One of the very real problems that day traders experience is adjusting their trading style to the changing personality of the futures market. The very best metaphor that I can conjure is one of fishing. To say the least, fishing is a fickle pastime to engage in. There are days that fish attack a certain type of lure, yet the very next day the exact lure will prove to be of little value. On some days, you’re choice of lures may change throughout the course of the day. The point is a simple one, what works at one point of the day may not work later in the day, or even the next day. In fishing, you have to be flexible and adjust your fishing style and bait to meet the ever changing water and weather conditions.

It’s really not so different when trading. On certain days one set up will consistently result in profits. On the other hand, the very next day the same set up will produce nothing but losses. I don’t have a rational explanation for this phenomenon other than explaining the market is constantly changing and evolving. Your ability to determine which trades will be a profitable on a certain day is a core skill.

For example, on most days the market tends to honor support and resistance levels. Time and time again the price action will advance and decline to previous support and resistance levels and change direction. Of course, this makes for some very accurate trading for those who are familiar with trading support and resistance. On the very next day however, the market may pay no attention to support and resistance and blast through your support and resistance level as though they did not exist.

What does this mean for you as a trader?

It is essential that you have a number of trades in your trading arsenal and approach the next trading opportunity with a different set up. In my experience, after a few test trades I can usually find the trading setup that is effective for that day. On the other hand, many traders labor away with their preset trading style and endure substantial losses. It is imperative that you ascertain the mood and tenor of the market so that you’re able to match appropriate trades to that day’s particular trading session.

This takes some experience and experimentation to perfect. However it is imperative to adjust your trading style within the overall framework of your trading methodology to meet with changing market conditions. Staying with a trade that worke yesterday but is not working today will results in certain losses. In my own trading, I use a number of setups based upon price action, indicators, and oscillators. I have yet to find a day that one of these indicators would not set up a profitable trade. The secret is to find which setups and/or configurations of setups that will be most effective.

I do say this was one caveat; it is very difficult to trade consolidating markets and I have yet to find a truly effective methodology to profit in markets that are trading in a very narrow range. It is my recommendation that you avoid trading markets that are range bound as they are generally difficult and unprofitable to trade.

About the Author

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