Forex Tips

The GBP began to rise early in the UK session above the Asian session highs.  This is usually a trap which lures in retail breakout traders and is followed by a pullback to stop them out.  I was taught by a huge Chicago trader years ago to NEVER be a breakout trader! (Hint)

When I see the breakout traders lured in and the market pull back, I wait for a second round of the breakout and pullback to occur.  There is an art to this and it didn’t set up that way this session.  On Thursday it set up nicely and unfortunately the market didn’t move much… but the setup was clear.  The Big Boys call this a wash and rinse.

Today as price began to descend with lower highs, there is one candle low that concerns me, so I wait another 15 minutes before entering.  The session low is clearly taken out and the Reward to Risk is 3:1 to my Target 2 -which is acceptable… a 2:1 RR once the US traders have begun is acceptable to me also, because I have 4 or less hours left in the UK session from that point.

Our Target 1 coincidentally coincides with the June 19 2014 high and the July 15 2014 low.  This area will be ripe to be retested by price and it is today.

Price continues to drop and we protect our profits while in the move and especially when price breaks below our Target 2.  We know US economic news is pending and as buyers begin to enter, the move down concludes for the session.  Price comes right back to our Target 2 – retests the level – moves up to our Target 1 and rises above the previously mentioned levels of June 19 and July 15.

A currency pair will typically move so far in a given day and then reverses to trap traders into holding their positions longer or overnight.  Institutions can well afford to take longer term position trades and do, but retails traders are often frustrated giving back their profits to retracement traps off highs and lows of a day. It’s better to know statistically how far a pair may move given its current market behavior.  This is how we set our Targets 1 & 2.  Trading is not an exact science – it’s an art and the more you know about what matters to the BIGGEST traders and how to see the charts the way they see them, the easier it is to identify high probability trade setups.  Despite what many marketers would tell you, a Stochastic, RSI, MACD, Bollinger band etc. are not used by most large institutional traders and at best they are simply lagging indicators.  If you want to learn what the largest traders use… and are willing to put in many hours of practice learning how to trade, contact me.

Good luck with your trading.  Enjoy your weekend!

I like this setup whenever I see it.  The UK traders pushed price below the Asian session lows… luring in breakout sellers.  They  immediately bring price back up, reverse it and lure breakout shorts a second time followed by another pullback.  In this case, it looks like an “M” formation with the second pullback making a lower high.  As price moves lower, we enter short with a stop loss above the lower high of the session and hope price will fall to our Target 2.

It sure looked good at the time!  Price fell but not nearly as low as we had anticipated.  As the US traders begin their session, price climbs a bit hitting our profit stop and we are taken out for a modest gain.  As there was US news pending, we remained out and hope for a larger gain tomorrow to conclude the week.

The US Federal Reserve continues to be dovish despite the improving economy and employment numbers. The market continues to await a more hawkish tone and has not heard it yet.

Geopolitical events are a wildcard and could effect the market abruptly.  Keep stops tight and be patient.

Good luck with your trading!

Back tomorrow if we find a trade.

NZD retraces briefly but does not give us the full move we had hoped for today.  One of my favourite trades is after a currency pair makes an extended move during the Asian session – to have the UK traders retrace the move entirely or at least 85% of it.

The NZD sentiment seems to be fading and the pair may have put in its high for now, near the .8835 level.

Janet Yellen’s comments yesterday although not hawkish, might be considered by the street as “less dovish” than in the past.  Are we going to see a slow grind higher with the USD?  We are about to find out…

After a sell off during the Asian session, we see the NZD get bought as it tested the Asian session lows.  We enter long with a 12 pip stop – hoping to capture a full retracement but it wasn’t to be.  The pair begins making higher lows but as Janet Yellen’s testimony Day 2 got underway, price pulled back and closes us out at our profit stop for a meager gain.

Important US economic news releases tomorrow…trade accordingly.

Good luck with your trading!

Back tomorrow if we find a trade.  Tuesday was just too tricky for us to trade. If the setups aren’t there – come back the next day.

The GBP set up nicely for a short but found buyers below the 1.7100 figure.

As the UK traders began their session, the GBP tested the Asian session lows, then began to move upward. As wicky tops created 3 lower highs indicating that sellers were entering above 1.7143 area, we find a short entry as price comes back down to the Asian session high.  With a stop placed above the session highs costing 13 pips for a potential 50 pip downside move, we enter short liking the R/R.

This is a classic candle setup coupled with a time of day when trending moves frequently set up.  Price tests and retests the Asian high before gradually descending to the Asian low – completing a pattern.  We expect a retest of the Asian lows before a further descent and we get it.  We have systematically moved our stop loss, now profit stop downward…thereby removing any risk from the trade and assuring a successful outcome.

Although our first Target is 1.7097, we know that the current bullish GBP trend may have difficulty penetrating the 1.7100 figure.  As price begins to bounce as we approach the figure, we close our trade choosing not to give back any more of our gains.

Although position traders may remain long the GBP, we have seen this week that the 1.7179 level has not been challenged and the 1 hour chart is showing some lower highs.  We will see what next week brings…

Good luck with your trading!

Summer is an excellent time to relax and hone your trading skills.  I have reduced the price of my course until August 30th.

If you have any trading questions about my methodology, please email me at Michael@privateforexcoaching.com

Enjoy your weekend!

Back Tuesday if we find a trade.

The JPY pair continued downward during the UK session.  This pair has not been overly active recently and has been cycling up and down in a fairly tight range since April.  It’s lower highs made it an attractive short today. With a very inexpensive stop loss of 5 pips, we take it short with a Reward to Risk Ratio of 4:1.

Price trades sideways until the US session gets underway – then moves down to our Target 2.  As price bounces above this target, we exit.  Knowing how far a pair is likely to move in a given day enables us to determine our R:R and evaluate the best setups among the majors.

Last week turned into a holiday for us and it’s nice to be back as I enjoy summer trading very much.

Good luck with your trading!

Back tomorrow if we find a trade.

Little news aside from the UK Current Account release.

The CHF set up after almost getting away from us.  Just as the US session got underway an entry is found short meeting our Reward to Risk ratio.  Be cautious entering trades a new session gets underway – today there was no important pending US economic news to whipsaw us and the stop loss was 9 pips.

The CHF was trending lower after an initial stop run on Asian traders to begin the UK session.  There had been no buyers above the Asian high where price began to trend lower.

Price dropped to the Asian low then went sideways before making one more dip. As price approached the .8900 figure and bounced – we exit to protect our profits.

Good luck with your trading!  Enjoy your weekend!  It’s a long one for me and I will be back Wednesday if I find a trade.