Archives for October 2013

A nice move down for the GBP during the first half of UK session is followed by a reversal in the US session.

I’m going to show 2 different time intervals today to make a point – the 15 minute and the 60 minute charts.  I like the 15 minute chart for trading but many institutional traders have their eyes on the 60, 240 minute and daily intervals.

We have a tremendous advantage in trading the 15 minute chart, because it sets up much faster, and reversals are evident much sooner which allows us to place smaller stop losses.  We also can protect our profits along the way by seeing reversals setting up much sooner than on a 60 minute chart.

After the UK CPI y/y economic release, a beautiful short setup is evident on the 15 minute chart requiring an initial stop loss of 19 pips for a potential 74 pips to our Target 2.  – See 15 minute chart below.

Now compare the 60 minute chart and how the institutional 60 minute traders are viewing the short.  It is still a beautiful short setup, but the stop loss is 34 pips…which is too much for my style of trading.

Look to the left on the 60 minute chart at our Targets 1 & 2 levels.  It is evident that price has bounced at those levels recently.  This adds confluence to our targets and we want to  be very cautious as price reacts to them. The target levels have nothing to do with support or resistance, but reading a larger chart enables us to gain additional perspective.

We use certain tools to add confluence to our entries and exits – being able to read and react to price, knowing the levels that institutional traders pay attention to – is very powerful.

Hope this helps.  Send me a question if it is not clear to you.

Good luck with your trading!

Back tomorrow if we find a trade.

Another very active Asian session for the AUD and NZD.  As mentioned yesterday, my preference is to find a reversal when this happens.  An hour into the US session, a reversal sets up and an entry long is taken with the intention of getting to the Asian session high.  The high also corresponds with our Target 2 and gives us a 2:1 Reward to Risk ratio setup, which is acceptable for this time of day.

The AUD and NZD often move in lock-step.  When they do, my preference is to find the better setup and trade the pair, but keep an eye on both pairs for continuity of price behavior.

This was a fairly straightforward trade, although it didn’t make it all the way to the Asian session high.

Good luck with your trading!

Off tomorrow…back Tuesday if we find a trade.

A very active Asian session followed by a continuation move in the UK session.  I don’t mind a large Asian session move, but my preference is to catch a reversal move – not to chase an extended move.  The EUR weakness continued as the UK session got underway and the GBP got hammered.

As the US session got underway the JPY made a third lower high for the day.  The idea was to ride it down to the Asian session low, which also corresponded with our Target 1.   The risk was 11 pips for a potential 49 pips of profit – can’t argue with that.  Unfortunately the market had other ideas.  The pair moved down and bounced upward without testing the 97 figure.  We close for minimal gains.

Good luck with your trading!

Hoping for a more productive day tomorrow.

USD weakness in the first half of the session was followed by USD strength in the second half once the US traders came on.  Uncertainty continues in Washington DC.

It was very difficult to find a trade entry early in the session.  As the US session got underway, the AUD topped out within 2 pips of our upside Target 2.  Price reversed after a triple top and an entry short is taken with an initial  stop loss of 9 pips.  Our first objective is ride price to and hopefully through the Asian session high which is better than 3:1 Reward for the Risk.

Price move down and through the Asian high where we expected it to retest this level.  As the UK session close approaches, we close the trade.

Lots of potential for volatility remains this week, so keep the stops tight.

Good luck with your trading!

Back tomorrow if we find a trade.

The EUR moved down – the CHF moved up and there was no NFP Employment number pending to keep us on the sidelines.

As the EUR began to drop, we see a setup in the CHF giving us a 3:1 Reward to Risk ratio to our Target 2. Allowing for a retest of the Asian session high, we place a stop just below it.    Price goes sideways for an hour before it begins to climb and test yesterday’s high.  This level corresponded with our Target 1.  As price retests our Target 1, we close the trade to finish the week.

Tip 1:  Use small stops and get the risk out of the trade as soon as possible to protect your gains in the event of a sudden reversal – particularly in advance of the US Open or pending major economic news releases.

Tip 2:  If you use Forex Factory for news times, be aware that some news releases occur 10 minutes in advance of the posted time on Forex Factory.  This means the institutional traders have already seen the number on their Bloomberg terminals.  Always protect yourself in advance of  major news releases, as 50+ pip candles are not uncommon at such times.  Institutional traders like to stop out retail traders.  The huge institutional traders – like hedge funds, like to stop out smaller institutional traders.  Salmon eat herring.  Seals eat salmon.  Whales eat seals.

Enjoy your weekend!

Back Tuesday if we find a trade.

The USD was weak versus the JPY as the UK trading got underway.  As it moved down closing well within it’s Asian range, a short sets up.  Although it looked like it would drop…it went sideways until the US session got underway.  To reduce the risk which was initially 18 pips for a potential 74 pips to our Target 2, we move the stop loss down to minus 10 pips in advance of the US Open.  This allows us to have the stop above the Asian session high, but keeps us on the edge of our seat until the US Employment figure is released.  This pair tends to be very active with US traders.

As  price moves down, we are patient around the levels and protect our profits accordingly by moving the stop down.  As price dropped into the UK Close, we kept the trade open for another candle protecting Target 1 and close at Target 2.

Apparently the US NFP Employment number will not be released tomorrow due to the current political issue regarding the US Government shut down.

We will be back tomorrow if we find a trade…if not – Tuesday.

Good luck with your trading!