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Tuesday, April 19, 2011

Trend for 19th of April 2011

Today was another nice day in currency markets in terms of trend trading. In fact, I want to start from yesterday and remind you that aud/jpy broke its’ channel and went down. One thing that could have caused you some confusion was that it broke the support long before the news from Australia (Reserve Bank Board’s Minutes) was released. So, it was a technical breakout and in these kind of situations you reduce your trading position, let’s say by half. Your profits would have been smaller, but also your risk. You wait for ideal situations and then risk more. However, ideal situations are not so often in financial markets. Therefore, you need to manage your risk. 

As you may see aud/jpy reversed in a matter of a few hours and is trying to break previous support, which is now resistance. The same happened with other pairs that were in some short term trend yesterday. Eur/usd if you remember broke support yesterday and collapsed around 200 pips. It has reversed then and is slowly going up now. So day trading daily trends is a pretty cool idea, but you always have to remember that they are short term and may reverse any time. 

The best situation today for trading a trend was in Canadian dollar pairs. And as it often is, the catalyst for the move was news from Canada (Consumer Price Index data was much higher than expected). This caused the Canadian dollar to strengthen across the board. You could have taken any Canadian dollar pair (even an exotic one) and could have traded it profitably.  The biggest problem in this situation was that the pairs started moving a little bit before the news and if you wanted to get into the move you had to react the last second by placing the order for the moving price. I attach usd/cad chart to show you better where you had to place the order. The price was a few pips from the order before the news was released. 

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Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.