Post of the Day - Page 22

lissyking · #**316** (**permalink**) 09-22-2009, 11:32 PM

Hey Richard,
Do you believe this currency pair is in a range bound? What will be your comments about this pair?
Thanks
Kingsley

Richard Krivo · #**317** (**permalink**) 09-23-2009, 01:32 PM

Quote:

Originally Posted by lissyking

Hey Richard,
Do you believe this currency pair is in a range bound? What will be your comments about this pair?
Thanks
Kingsley

Thanks for your question on this topic.

Take a look at the chart below for a visual...

To make a determination if a pair is ranging or trending, I like to consult the Daily chart first. While the pair may demonstrate some range-like tendencies in lower time frame charts, the Daily will provide a more detailed and compelling overview.

That being said, since the pair has been building higher highs and higher lows on the Daily for quite some time, it can be said that the pair is in an uptrend.

Richard Krivo · #**318** (**permalink**) 09-30-2009, 04:45 PM

Student’s Question:

EURO/USD
Between June and August 3 - Divergence between MACD and price of Euro/USD. Signal --- the price should decline. Doji formed on August 4th and 5th followed by bearish candle - Sell August 6th at 1.4400 with stop at 1.4325.
This divergence continues until Sept 3rd when the signal line crosses over the MACD sending the buy signal. At the same time Harami was formed in one of the candle followed by the bullish engulfed candle sending the strong buy signal. Position: Buy (Monday Sept 7) @ 1.4320 with stop at 1.4250. Do those sound OK?

Power Course Instructor’s Response:

Nice job on recognizing the MACD divergence, the crossovers and several candlesticks/patterns...

Bear in mind that more important than MACD divergence in deciding which way to trade a pair is the direction of the Daily trend. Since this EURUSD pair is in an uptrend at this time on the chart, we would be looking for buying opportunities as they would have the greater likelihood of success.

Richard Krivo · #**319** (**permalink**) 10-07-2009, 08:33 PM

Student’s Question:

If you get the time would please post an example of a histogram divergence, I think I know what you mean but an example would make it more clear for me and maybe the other students would like to see it too, thanks, CB.

Daily FX Course Instructor’s Response:

Sure...

You will find several examples of histogram divergence on the chart below...

lissyking · #**320** (**permalink**) 10-08-2009, 07:47 AM

Hey Richard, do you think the aud/jpy is in a tight range market, ranging from 76.48(support) to 79.97(resistance)....which started from August 24, 2009?
Currently price is touching resistance. Any comment?
Please see attachment
Regards
Kingsley

Richard Krivo · #**321** (**permalink**) 10-12-2009, 05:13 PM

Quote:

Originally Posted by lissyking

Hey Richard, do you think the aud/jpy is in a tight range market, ranging from 76.48(support) to 79.97(resistance)....which started from August 24, 2009?
Currently price is touching resistance. Any comment?
Please see attachment
Regards
Kingsley

Hi Kingsley...

Based on the posted chart I would agree that the pair has been trading in the range that you have identified. However, since the AUD is so strong and the pair is in an uptrend on the Daily chart, I would only consider buying opportunties at the support level of the range. No guarantees, but when breakouts occur, there is a greater likelihood that the breakout will occur in the direction of the Daily trend.

Since posted this a few days back, the pair has broken to the upside and is currently trading at 81.46

Thanks for the post...

Richard Krivo · #**322** (**permalink**) 10-12-2009, 05:58 PM

Student’s Question:
Was I wrong in thinking that the chart was showing me a double top pattern where line A was the top and line B was the bottom? The last three candles on the chart have not exceeded the previous high, so doesn't that mean that a temporary resistance level has formed?

Power Course Instructor’s Response:

Yes...a temporary resistance level has formed. That does not necessarily mean, however, that the pair will be changing direction in any permanent fashion. To try to trade "counter trend", is to invite more risk into a trade. The strongest tool that we can use to determine the direction to trade a pair is the Daily trend...all else is secondary.

The higher probability trade will always be in the direction of that Daily trend. The greater likelihood of success will be to look for buying opportunities based on how this pair has been moving. Take a look at the chart below for a visual...

That being said, what you suggest could in fact take place but it a less likely event than the pair continuing higher.

Richard Krivo · #**323** (**permalink**) 10-20-2009, 07:09 PM

Student's Comment:
I can trade this 2 ways. I would watch the retracement as it approaches the different FIB lines. As the price either bounces or trades through the FIB lines I can trade it either way. But I would say the 61.8 is the strongest of the three as there is quite a bit of congestion at that level to the left.

Instructor's Response:

While you mentioned that you can trade this USDJPY pair two ways, keep in mind that since the pair is in a downtrend on this Daily chart, the higher probability trades will be in that direction as opposed to buying opportunities.

While the Fib line that you drew is correct, it goes back to April. Using those levels, there would likely be a considerable wait for a retracement of 500 pips to the 38.2 level and over 800 pips to the 61.8 level.

Consider either Fib line 1 or 2. Both of them are valid as well but would necessitate a far lesser retracement. Put those Fib lines on a Daily chart and see how they play out.

Richard Krivo · #**324** (**permalink**) 10-21-2009, 08:08 PM

Student's Comments:

Please let me know your thoughts. After placing this trade, and taking a step back, I probably would should not have done it this way (but losses are limited as you will note . I am questioning the position because;

The strong downwards movement at 10/15 and 10/16...
The 0.9000 round number may actually be a "target"
Could 10/13 be the "top" of the trend identified on the chart...
Should the trend on the chart rather have been 9/14 - 10/09...

These positions are still open as of now (10/21) but I am second guessing the analysis I did, and also the entry points...

Instructor's Response:

Very nice job on your analysis of this EURGBP trade.

At the time of the analysis, with the Daily trend being biased to the upside, the long wicked candle, and being at a support level your analysis of taking the pair long was quite solid. Many looking at this pair reflected, as did you, that a bullish move could play out. Going forward, you may want to put a slow stochastics indicator or MACD on your chart to see what information they might provide regarding fine tuning the entry.

Here is a link to a piece by one of my associates on the EURGBP pair...scroll down a bit and you will see it. He underlines the fact that one can be stopped out on a trade due to something other than poor execution.

http://forexforums.dailyfx.com/dailyfx-course-instructor-trading-tips/57450-chart-day-35.html[/url]

Richard Krivo · #**325** (**permalink**) 10-22-2009, 07:49 PM

Student's Comments:

All is noted on chart, the daily USD/JPY in a downtrend. Also some RSI opportunities. I know some would say there is some hindsight here but I would appreciate any comments on my "up and down trading"--in a downtrend, based on these patterns.

Course Instructor's Response:

Good observations and a nice job on the candlestick recognition.

As far as "up and down" trading in a downtrend goes, we would not recommend it. The higher probability of success will be in the direction of the Daily trend. While there are pips to be made in "counter trend" trading, those pips will come with more risk associated with them and, therefore, would not be the most prudent trade to make. Since you are using the MACD and the RSI indicators on the chart, we could optimize the use of those indicators by only taking signals from them that would indicate bearish momentum (momentum in the direction of the Daily Trend) is in place.

Also, bear in mind that a doji represents indecision and a potential change in direction ...it is not an absolute.

Richard Krivo · #**326** (**permalink**) 10-26-2009, 06:56 PM

Student's Comment:

GBP/USD 1 Day Chart

The MACD crossed on 1/16 together with the shooting star candlestick the same day. Short entry, in the direction of the trend, by the 1/19 candle. In reality, I would have gone to a shorter term chart, which would probably have shown a entry before the 19th. What do you think?

Course Instructor's Response:

You make some good observations, and you present a good analysis using MACD and taking the trade on the cross of the MACD line over the Signal line to the downside.

Using a lower time frame to see how a pair is behaving on a "faster" chart is a good plan to employ...it is called Multiple Time Frame Analysis.

Here is a link that will take you to a little more indepth explanation of the strategy...

Post of the Day

Richard Krivo · #**327** (**permalink**) 10-27-2009, 08:56 PM

Student's Comment:

This is from past daily chart of NZD/USD.

Shows uptrend. Traced from down to up.
First it breached the 38.2 level completely. So I would have waited for it to reach the 50.0 mark. But, then it showed a bullish engulfing. That pattern would have caused me to buy some lots.
Is there anything wrong in trusting this candlestick pattern immediately after such a breach before it?

Instructor's Response:
In this case that interpretation would have worked quite well and I think it is a valid interpretation after the bullish engulfing occurs especially given the pair is in an uptrend on this Daily chart. That being said, there are no guarantees. The highest probability Fib retracement trades are the ones that reach the 50% - 61.8% level.

The key here will be stop placement. Either below the 50% level or below the lowest penetration of the 38.2% level would be a prudent level for a stop.

Richard Krivo · #**328** (**permalink**) 10-28-2009, 07:31 PM

Student's Comments:

Daily EUR/USD chart. Saw the uptrend. Drew the support and resistance lines. Then looked at a 30 mins chart. Placed an Entry order at 1.4758. Hopefully it touches the support for the third time by then. Otherwise i will have to keep a watch till it touches the support for a third time. Then put a Stop order at 1.4706 and a Limit order at 1.4958. Whats your opinion?

Instructor's Response:

You are correct that we only want to look for buying opportunities in an uptrend.

As you suggest, we would want to wait for a pullback to support before placing our buy. Take a look at the chart below and note the area labeled Buy Zone...that would be the optimum entry area on this chart. As the old expression goes, in an uptrend a trader would want to buy on "dips" (the pulback or dip down to support) and in a downtrend a trader would sell on "rallies" (the pullback or rally up to resistance).

Also, based on where the stops and limits were placed on this trade, it is set up for an approximately 1:4 Risk Reward Ratio...well done.

Richard Krivo · #**329** (**permalink**) 11-02-2009, 06:15 PM

Student's Comments:

Here is my assignment on candlestick charts and trendlines. Please leave your feedback.

Instructor's Response:

When drawing trendlines, we want to take care that our lines do not go through the bodies of the candles themselves. It is alright if the lines go through the wicks but not the bodies. Take a look at the chart posted below...

We also see that a breakout to the downside has occurred at our support line. If the yellow (open) candle closes below trendline support, that would negate that support line going forward as it would now be treated as resistance.

Also, when setting stops and limits, always have a least a 1:2 Risk Reward Ratio in our favor. In other words, we are looking to gain at least twice the amount we are placing at risk. Since on the posted chart, the risk is 140 pips and the gain is 80 pips, we have a negative risk reward ratio in place. Over the long haul, that will not work in favor of the trader.

Richard Krivo · #**330** (**permalink**) 11-05-2009, 07:05 PM

Student's Comment:

On the topic of Support and Resistance lines, here is my NZDUSD 1Hr chart showing current levels of Support and Resistance.

Instructor's Response:

Good work...

The chart you posted shows valid support and resistance lines.

When we discuss support and resistance, think of a room with a floor and a ceiling.

The FLOOR is SUPPORT and the CEILING is RESISTANCE. A large ball bouncing between the FLOOR and the CEILING represents PRICE.

When PRICE (BALL) hits the FLOOR (SUPPORT) it bounces UP. When PRICE (BALL) hit the CEILING (RESISTANCE) it bounces DOWN.

When the PRICE (BALL) breaks through the CEILING(RESISTANCE); the old CEILING (RESISTANCE) becomes the new FLOOR.