Trend for 20th of May 2011

Bad day for Canadian dollar! I would not say that the data that came from the country was bad, but the market reacted in a negative way. Good or bad data presents us with opportunities to trade the market in any direction it goes. I like trading news by marking channels on my charts. I usually take 4 hour candle. The low of the candle is the support, the high of the candle is the resistance. I put a trendline at the high and a trendline at the low. When there are a few minutes left before news I put a buy stop order a few pips above the high and a sell stop order a few pips below the low. 

So, news comes and price moves either up or down. One of the orders is opened and I go with the short term trend that was created by the news. In case of Canadian dollar news 0.9680 was the level to go long and 0.9635 to go short (in usd/cad pair). The long order was triggered and we went long. It is always better to go into market with a few orders and close the first one as soon as you see some profit. The second should be kept till some important level of resistance is reached or simply when a pair reaches an even number. So, the first order could be closed at 0.9700 and the second at around 0.9730 just before important resistance. 

Usd/cad looks a little bearish for me, so I do not encourage you to keep your long positions in the pair. However, use your own head in making decisions. You can only learn to trade by practicing, limiting risk and keeping to your discipline. I am not going to trade today, but will watch what happened in the market (in the evening). See you tomorrow. 

Read my previous post:

Moving average

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.

Trend

Trend is one of the best seasons in financial markets. It is time when most traders make money. It is due to the fact that when trends start they usually go in one direction till they exhaust themselves. Big trends do not happen very fast, usually one or two times a year. That’s when most of the money is made by large investment funds. However, smaller trends do happen on a monthly, weekly and daily basis as well and you can capitalize on those using various technical, fundamental and other kinds of tools. 

Trends usually start when there are adequate fundamental conditions for that. After staying for a long time in ranges prices finally move out of their ranges and start trending. I like these periods in the markets because I can build up a line of positions and go with the flow. However, the same principles can be applied not only in mega trends but also in micro trends. Some fundamental news can cause a huge move and you can profit on that. Let us look at what happened today in Forex market.

Trend for Monday, March 14, 2011

As you may know the tragedy hit Japan recently. It was one of those fundamental factors that influence markets a lot. Japanese government threw billions into markets to slow the collapse in stocks. You could have traded this news by buying a break of 123 pattern in usd/jpy that formed on 15 minute chart right after market opened. In fact, you could have traded any Japanese yen pair by selling yen. You would have closed your position after a failure to reach a higher high and a breach of lower low. Look at the example and you will understand it better. So much for today. See you tomorrow.