Forex Trade: EURAUD 300 Pips in 3 hours
March 8, 2009
Want to show you all a great trade from last week on the EURAUD which shot up over 300 pips in 3 hours. Forex has its ups and downs, sideways movements, stale markets… well, not with this pair on Friday. I’ll point your attention to the ever-useful Rainbow MMA Crossover template as seen on this FXDD Meta Trader 4 chart. At around 7:50 GMT the pair crosses over from a downward trend, to an upward moving trend as evident with the “flipping of the rainbow.” If you are trading just that indicator alone, you would have made anywhere from 250-300 pips in a few hours, exiting near any one of the resistance points, motnhly daily, or even fibonacci target lines.
I did not enter this trade, merely watched it fly into the statosphere, kicking myself after each resumption of the upward trend after each pullback occured. Darn, maybe next time I should have a little more confidence with this pair, even though my spread is 6 pips.
Identifying Support And Resistance
February 14, 2009
One of the first concepts I’ve learned in trading forex is the idea of Support and Resistance. The two terms apply in all stocks, commodities, futures trading and refers to a certain level on a chart that price is likely to find “support” or “resistance.”
In theory, all market data shows areas of support and resistance resulting in more activity in terms of buying and selling around such areas. Some natural areas of support and resistance are certainly whole numbers on a chart. A whole number on GBP/USD could be considered 1.5000, an area where many traders might think it is a good sell and will set their profit targets there. This might set off a huge downtrend if trader after trader acts the same way. So, these points again are not “magical” what makes them work is that a mass of other traders use them too. This is much like the reasoning why Fib targets work, simply because so many large traders and trading institutions trade off of them in concert.
Specifically support is a point where price moves downward to and rebounds off of, indicating buying of the pair, and even some times reversal of a downtrend. You might here people say, the pair went down and “found support” at 1.4200, meaning there was much interest in owning GBP at this price.
On the other hand, when price is moving upward and hits a point and rebounds downward, indicating selling of the pair. This can also stall and reverse an upward trend where traders have set their take profit level. This is a point where buyers are typically staying out of the trade and sellers have stepped in to make a profit.
I’ve identified a few areas of support and resistance we should add to our charts:
1) Whole Numbers, not always something that will reverse a trend, but almost always becomes an area where traders have set stops and take profit levels, resulting in increased buy/sell activity.
2) Monthly Pivot
3) Weekly Pivot
4) Daily Pivot
5) Previous Day’s High/Low
6) Previous Week’s High/Low
7) Previous Month’s High/Low
8) Fibonnaci Levels, this is something you need to constantly draw on your charts, or use a Fibonnacci Expert Adviser, but I tend not to trust Fibs I did not draw myself. These are levels that are routinely traded off of by major trading institutions and big forex traders. So to ignore Fib levels is to really be operating without knowing where large traders are looking to get in or out.
Support and Resistance with Top Gun Software
I’m also working on an article enumerating the many Support and Resistance levels that are employed with custom Top Gun Software indicators, unique to only that program. There are many different indicators that are based on mathematical statistics with respect to price volume and how much a pair has moved statistically over a certain period of time. My new favorite indicator is the “CONTAINMENT BAND INDICATOR” which purportedly averages how much a pair has moved over the last 20 days and draws a containment band on your chart with a midpoint line that acts as a 60min moving average. Typically price will touch the outer edge of this band and meet major resistance or support and signals the end of that trend.
M3 Harmonized Index of Consumer Prices
February 8, 2009
I’ve rcently learned that the M3 Harmonized Index of Consumer Prices is one of the most important indicators in determining the sentiment in trading of the EURO because Germany represents over 30 percent of the whole of Europe GDP. The HICP is basically an leading indicator of inflation and price stability for the ECB. The euro area HICP is a weighted average of price indices of nations who use the euro. Based on this, the main function of the ECB is to maintain price stability which is defined as keeping the HICP below but close to 2% over any given period of time.
Biggest Moving Currency Pairs in Forex
January 13, 2009
Knowing how much a Forex Currency Pair can move in a particular day is a great way to make more pips. A while back I began to wonder which pairs in Forex move the most in a day. So, I researched the topic and came up with a few different things that tell you how to find the biggest movers in Forex. If you get a spread over 5 pips, for any pair, then you really want to consider if that’s worthwhile if you’re day trading, swing trading, or scalping the spread will matter. The Bank of Japan has the greatest buying and selling power of all central banks in the world and has a great interest in seeing Read more
Forex Patterns & Probabilities: Trading Strategies for Trending & Range-Bound Markets
December 23, 2008
Forex Patterns & Probabilities: Trading Strategies for Trending & Range-Bound Markets Book Description:
Most Forex books deal with general concepts and neglect how to trade specifically. On the other hand, Forex Patterns and Probabilities provides you with insight on real-world Forex trading strategies and a unique glimpse into the mechanics of currency trading. Leading Forex trading professor Ed Ponsi explains what moves the currency markets up and down and provides strategies to enter, exit, and money management in between trades. Ed provides us with countless examples of charts and explanations that will guide you each step of the way and allow the the beginner forex trader to “look over the shoulder” of a professional forex trader who’s only business is trading.
Not sure if the name “PONSI” is a bad omen, since it resembles the word PONZI scheme so much, and in this time of Bernie Maddoff the Ponzi King, who’se willing to give it a shot? “Forex Patterns and Probabilities” has a fair amount of useful information that is presented in an easily understandable and enjoyable manner. The number of strategies is are not numerous and some aren’t very new, but they are effective no doubting this. It is clear that this book is written by an experienced trader. One giveaway is the tremendous detail and the clear process of thought that Ed Ponsi has applied in describing these theories and strategies. Ed goes as far as to show us instances where his trades didn’t work and explain why.
