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Wednesday, June 29, 2011

Trend for 29th of June 2011


Oil trends up

 

Hi, everyone. Let us look at market trends today. As I am not able to show you oil charts today, I can simply state that it has been going up after it has found support at 89.50. It is at resistance now and we have to look at price action now. Although it is above 200 sma on 1 hour chart, it is well under 200 sma on 4 hour chart. I am neutral on the commodity and wait for European session to see what opportunities are there for the security. 

Silver follows oil

 

Silver broke up together with oil and as far as I see oil was the leader in this move that commodities have experienced today. I do not think we have seen the real bottom yet, but simply looking at the technical picture I get the feeling that the bottom is very near. So, I am getting ready for a real bullish move in precious metals. And oil, of course!

Strong up trend for Canadian dollar when news is released

 

I hope you have seen how Canadian dollar reigned today against all currencies. Eur/cad was especially weak collapsing from 1.4068 to 1.3950 level in two hours. It was very easy to trade the pair this time. 1.4068 level was visited 6 times in these two days, but not broken. So, you could place a sell stop below the level just before the news release with a stop loss order at 1.4110 level and go with the flow down when the news was released. Exit could have been at even number of 1.4000 or other important previous support at 1.3960.
Usd/cad would not have been so easy to trade for the pair was moving down before the news and it would have been difficult to find a proper place to enter the market. So, if you see situation like that, it is better to search for the best pair to trade the news. In this case eur/cad was the best (at least I think so). 

Pound is bullish again

 

British pound, as I expected strengthened today. It has just broken resistance which I mentioned yesterday (gbp/usd) and it looks like the pair is willing to go up. One thing that I do not like is that the pair broke up not long ago and the volume is not very strong, so I am not sure if it will really go up through Asian session. However, if you are in doubt, it is better to have a smaller position (in case the pair does go up) rather than not having any position at all. 

As pound is strengthening, other pound pairs can be traded from the long side too. In my opinion gbp/jpy is the best (my favorite pair). At 13:30 GMT it fell to support, formed 123 pattern and moved back in the direction of the trend (upwards). So, at the break of point 2 you could have gone upwards.
Let’s hope tomorrow bring more trading opportunities. 

See also:


Disclaimer
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.

Tuesday, June 28, 2011

Trend for 28th of June 2011


Hi, everyone. The post will be short for I have very little time at the moment. If you look at the charts and remember my previous posts you will see that predictions with usd/cad did come true. The pair broke down a little during Asian session and then came back, but as I do not trade Asian session, this does not worry me much. An opportunity occurred again during American session when the pair crossed the low of 0.9848. That’s the point where you could have taken a short trade. As you may see the pair is at an even number, so this would have been a good shot. 

Pound strengthened a little today, especially against US dollar and Japanese Yen. My predictions about Yen have not come true yet and Yen may actually collapse now. After the news, pound collapsed, but it is has been going up from American session. The picture for gbp/usd is pretty bullish now. We have double bottom on 1 hour chart and double top on the very same 1 hour chart. The path of the least resistance is upwards. 

Let us wait for the news from Canada tomorrow and see what reaction it will have in Canadian dollar pairs.
Very short post today. I will write more tomorrow. 

See also:



Disclaimer
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.

Monday, June 27, 2011

Trend for 27th of June 2011


Hi everyone. Let us look if there were any market trends today that we could have predicted and traded. Let us also try to predict possible moves that could be in financial markets in the nearest future. Let us talk about metals first.

Precious metals continue their medium downtrend

 

As I expected both silver and gold continued going down today. Both formed some sort of double bottoms on 1 hour charts, but I think they are temporary and the commodities will continue their downward trend. The target which I expect silver to reach is at 30 dollar per ounce, possibly 25 and gold around 1380 bucks per ounce. Both estimates are based on weekly Bollinger bands. As you may understand the prices may go much lower (I don’t think so). So, at the moment the strategy could be: sell the rallies at most recent resistance (for day and swing traders). 

British pound maybe bottoming

 

When I look at various pound pairs (gbp/usd, eur/gbp, even gbp/jpy) I see that it is bottoming and can be ready to go up soon. This could even start tomorrow for we have very important news coming from Great Britain (Gross Domestic Product) at 8:30. I will be looking at proper levels of resistance to by a breakout upwards if it really occurs. It is too early to discuss those levels now for the price may move radically over the next 12 hours and the areas we mark now might be absolutely irrelevant at the time news comes out. 

Yen is not able to break through

 

Yen is trying to beat its way and is not very successful now. I think sell high (other pairs against Yen) is the best strategy for now. Much will depend on the upcoming price action in oil. If US and the International Energy Agency will throw some 60 million barrels of oil into the market this can push the price of oil down pretty much. However, at the time the thing was announced correlation between Yen and oil disappeared, oil went one direction and Yen in the opposite. Let’s continue watching whether this trend will continue. 

Canadian dollar can strengthen on Wednesday

 

Canadian dollar can also strengthen. If you look at usd/cad on 15 minute chart you will see a bearish reversal pattern (head and shoulders). You will notice that cad/jpy formed a double bottom and 123 pattern on 1 hour chart and has been going up today. Wednesday is important day for loonie for we have data from Canada coming at 11:00 GMT (Consumer Price Index). This can add some bullishness to Canadian dollar even before Wednesday comes. 

So much about market trends today. Let us wait for tomorrow and see how market will react to the news from Great Britain. Good luck in your trades.

See also:


Disclaimer
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.

Sunday, June 26, 2011

10 essential rules for trading Forex news profitably



I have written several articles which are about fundamental forex news trading. This post is a set of rules about one of my strategies which I use, when economic news is released. I have already written a lot on the subject in my previous posts, but let me expand a little on it today. Here are a few tips for you to dwell on before trading any fundamental information. Be sure to read till the end and find a few other very useful tips as well as my general philosophy regarding trading these fundamental events. I will give you a few examples that really sobered me up in terms of trading these special cases and showed me the way how to catch bigger moves when there is a discrepancy between nature of news (positive or negative) and absolutely different market reaction. 


Disclaimer: All trading involves risk. Only risk capital you’re prepared to lose. Past performance is not an indication of future results. This content is for educational purposes only and is not investment advice.

When you finish reading this article, please take your time to read other posts on the subject:

Also watch my main videos on news trading:




Now, let us go to some rules.

1. Decide which piece of information you want to trade

If you want to be efficient in news releases trading system you have to find out which piece of news is the most important one. Almost every day there could be around 15 chunks of news coming from various countries. You could open any forex trading dealer website and find such information (often it is called ‘calendar’). Most often the news releases are divided in days and majority of providers mark which information is of high, medium and low importance (visit dailyfx.com or forexfactory.com to get all the events for the current and upcoming week). I choose information which is highly important and neglect news which is of low importance and most of the news which is of medium importance. 

2. Now you have to mark support and resistance levels

I base my news trading strategy on breakout of support and resistance, that’s why you have to know and mark those levels on your charts. I do it with all major pairs and their crosses. Support and resistance are places where price came and bounced off. When high time comes you will place a buy stop above resistance and sell stop below the support. 


3. Choose forex pairs you are going to trade for the event

If you want to be successful with this trading method you have to know how to select the best candidates for your trades. You have to decide which pairs are best for you and trade only those pairs. When you look through those pairs, you have to select only those who have the best picture in terms of support and resistance levels. At the time you look at the charts the price has to be in between those levels, preferably in the middle. The best distance from support to resistance is around 80-110 pips. It could vary depending on the pair you are going to trade. Distance can be bigger for gbp/jpy pair and much smaller for eur/chf pair, because gbp/jpy is much more volatile pair than eur/chf. 

4. Now place trend lines

Technical traders know how important trend lines are in technical analysis. So, when you have decided which currency want to trade start placing trend lines. You will have to place 2 trend lines: one 5 pips below support and one 5 pips above resistance 1 or 2 hours before news announcements. Do not place your orders yet.

5. Readjust support and resistance areas

You have to be sure that half an hour before the specific news release you readjust your support and resistance levels. It is highly probable that those levels might be breached and the price is out of those channels. So, you will move a trend line higher if price is above the support and move another trend line lower if the price is below the support. 

6. Define places for orders (long and short) and also stop losses

After you readjusted your trend lines you have to decide where to place your buy and sell stops and also stop losses for those orders. Occasionally I place only buy or only sell orders as sell area or buy area is too far away. If you are a newbie I would not advise you to put more than one order in one direction (one buy and one sell order). You should place a buy stop order 5 pips above your resistance trend line and a sell stop order has to be put 5 pips below your support trend line. Now you also make a decision where to place your stop loss order. You should not risk more than 2 percent of your deposit on any given trade. It does not matter whether it is this specific strategy or any other trading system. 

7. Choose a place where you are going to take your profit 

At this stage you are very close to the news event and you have to decide where you want to exit your profitable trade (if it is going to be profitable). If you are not a newbie you can trade with two positions and close your first one at the closest support or resistance level, depending which direction market will take. I also mark even number levels (you must have noticed that).  Big boys usually take their profits there and so should we. The second position (if you take two positions in one direction) you can ride as long as the market exhausts itself. 

8. Now is the time to place orders

When 2-3 minutes are left before the release, start placing your orders, starting with the level the price is at a greater distance from the level. If the price is 20 pips from resistance and 50 pips from support you place a sell stop below support first. And vice versa, if the price is at a greater distance from resistance you place your buy stop above the level first. After that you place your second order. By now the news might be hitting the market. 

9. Readjust your open orders

When the news comes one of your orders is opened. What do you do now? You should also move your stop loss order below/above 15 minute breakout candle as soon as you can. This is how you reduce your risk and increase your profit. At this stage you also remove the order that was not opened. 

10. Exit your trades

One way you exit the market is when your take profit is reached. That’s when your platform should close your order automatically. Another way is when your stop loss is hit. If you have been moving it in the direction of the move it is in the profitable area and you exit your trade with profit. It is also possible that when news is released, you have choppy price action and your stop loss order is hit. So, you lose the amount you have pre-planned. You then wait for another opportunity to trade news. 

My general philosophy about trading news

When news is released I want to see how market reacts to it. It often happens that very good news comes and the market completely ignores it. It shows that there is a prevailing opinion among big market dogs where the price should be headed. The same can be said about bad news. When tendency is present market will shake this news off. 

When I started trading Forex in 2004 I remember one particular instance that shocked me and turned around my thinking regarding the question. It was Friday and Non Farm payrolls had to be released. These were times when market would wildly react to the data and you would often see 200 pip moves in a matter of 1 second. Sometimes even 300 pip move! Now, that particular Friday the news came and it was extremely good. Job market created twice as many jobs as was expected and it was the highest number in four or five years. To my greatest surprise US dollar rallies a little and then sold off. I lost on the trade. However, I gained much more than I lost. When you see these things happening, just trade in the direction of the market. Leave your opinions and adopt the opinion that the market has. You will win in the long run.

I saw these kind of situations repeat again and again. Most recently I saw it happen to New Zealand dollar. On the 13th of March (2013) there was interest rate decision from the Bank of New Zealand. The governor did the ‘currency war’ talk by expressing his wish to see New Zealand dollar lower. The market reacted initially and the kiwi fell. However, the next day it rebounded and proceeded to making new highs for the year. 


Conclusion

As you may see there are a lot of ways to trade fundamental news announcements. It is important to follow a strict set of rules. It is likewise essential to understand that even the news that is of high importance often has short term impact and market often goes on in the direction it wants. So, if you intend to trade these events be sure to watch how market reacts to news. You might catch pretty big moves and make nice cash as a result. 

Ok. I hope you benefited from the post. I would continue the topic of different market states in my next post. Hope to do it very soon! If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. 



Disclaimer
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.