Chart of the Day - Page 17

Thomas Long · #**241** (**permalink**) 04-26-2009, 03:28 PM

Quote:

Originally Posted by lissyking

Hey Thomas
I totally understand that we should trade with the daily trend and then switch to 4 hr chart to find our trades.
One of your methods of taking trade, for example in a downtrend, is to sell at the brake of the support and protective stop above resisitance. Vice versa in an uptrend.

In the daily chart, the overall trend is down but there is a rally going on. Now since the overall trend is down, I should look for sell entries from the 4 hr but instead the 4 hr chart is showing an uptrend that represents the latest rally on the daily overall downtrend chart. That rally can go on for weeks and hence I won't be able to find sell entries. Instead I can find buy entries but doing so I am going against the rule which is to trade with the trend from the daily chart.

My question is this: Can I trade only with the 4 hr chart? Meaning if the 4hr trend is up, I look for buy entries by buying through resistance and if the trend is down, I look for sell entries by selling through support.
This way I will be riding with the trend up and down.
Thanks

There is little volatility right now, so I would recommend trading on the hourly chart in the direction of the trend on the 4-hour chart. As soon as volatility picks up, the play would be to move back the trading off of the 4-hour chart in the direction of the trend on the daily chart. You have to be flexible to be consistently profitable and recognizing the volatility of the market in one way to do that.

Thomas Long · #**242** (**permalink**) 04-27-2009, 09:01 AM

The JPY is gaining strength and the EUR appears to be one of the weaker currencies right now. So we look to the EUR/JPY for a sell setup. We've talked about quite a few approaches to time the entry with another being waiting for a candle to close below support for entry and then placing your stop above support. We should still look for twice that risk in profit for our 1:2 risk:reward ratio.

Thomas Long · #**243** (**permalink**) 05-01-2009, 09:54 AM

After a strong move up on March 12th, the EUR/CHF has been falling. The daily trend has also been down as the pair has been trading below the 200-day Simple Moving Average for all of 2009. On this 4-hour chart we can see where once again the pair has rallied off of a recent low and started to move back down. Agressive traders can use their favorite technical indicator to time their sell entry while more conservative traders can sell as the market moves down through support. Protective stops should be placed as high as above resistance with profit targets set as twice that risk for a 1:2 risk:reward ratio.

alpha19 · #**244** (**permalink**) 05-03-2009, 08:41 PM

Hello Tom!
I have a quick question:
At any given time, how does one find out what is the strongest currency and what is the weakest currency ?

Thanks!

Thomas Long · #**245** (**permalink**) 05-04-2009, 10:41 AM

Quote:

Originally Posted by alpha19

Hello Tom!
I have a quick question:
At any given time, how does one find out what is the strongest currency and what is the weakest currency ?

Thanks!

Although there are many ways to do this, I prefer to use the charts and judge the strength of each currency myself. I start with a 4-hour chart of the EUR/USD to see if the pair is moving up or moving down. If it is moving up, then the EUR is stronger than the USD. If it is moving down, then the USD is stronger than the EUR. I will then check the USD/JPY, GBP/USD, the USD/CHF and the other majors. It is just comparison shopping, so to speak. On a small scale, if the EUR/USD is moving up and the USD/JPY is moving up, then the EUR is stonger than the USD which is stronger than the JPY. This means that buying the EUR/JPY may be the best play. I just try to find the strongest, which is the currency moving up against all other currencies and then find the weakest, which is the currency that is moving down against all other currencies. I then look for a trade in that particular currency pair. This is just a small edge, but a few small edges is all many professionals need to be consistently profitable traders.

Vlad1961 · #**246** (**permalink**) 05-04-2009, 12:39 PM

I open Micro account and can't find program file in my computer. Could you help me ?

Thomas Long · #**247** (**permalink**) 05-04-2009, 05:09 PM

Quote:

Originally Posted by Vlad1961

I open Micro account and can't find program file in my computer. Could you help me ?

Here is the link to the Micro forum where you can get this kind of help:

http://forexforums.dailyfx.com/fxcm-micro/

Thomas Long · #**248** (**permalink**) 05-05-2009, 02:54 PM

Comparing the 4-hour charts shows that the AUD is quite strong. We can also see that the JPY and the USD appear to be weakening. I will post the AUD/USD chart here, but this same analysis would also apply to the AUD/JPY. No trade setup yet but with the US Dept of Labor release of the Nonfarm Payrolls this coming Friday morning at 830AM EST, this pair is worth watching. The trend is up, so we should look to buy any pullback down to support. But we should wait until after the Nonfarm Payroll report is released to not get caught up in the volatility this release is known to cause.

Thomas Long · #**249** (**permalink**) 05-06-2009, 02:24 PM

Yesterday I mentioned the AUD/JPY as one of the stronger pairs to trade, so here is the chart. We can see a series of higher highs and higher lows on the 4-hour chart. When you combine that with an uptrend on the daily chart, you have a trading opportunity. This pair will not be as vulnerable to this Friday morning's release of the Nonfarm Payroll, but that release will still have an influence on how this pair trades. Both these pairs are moving up today, which shows the strength of the AUD. There still may be some profit taking before Friday but I would treat that as another buying opportunity. This does seem to be the currency of the week. I wouldn't sell it against any pair, but would look to buy it against any pair I thought was relatively weak.

Thomas Long · #**250** (**permalink**) 05-07-2009, 10:18 AM

I've posted this a couple of times in this forum, but think the subject is worthy enough to post it once again. Good luck with your trading!

This Friday (May 8th) at about 830AM Eastern, the US Department of Labor will release the Nonfarm Payrolls report. This employment report is the most anticipated news release of the month and this month is no exception.

This report can result in increased volatility and a chance to profit handsomely in a short period of time.

However, more often than not, new traders are not profiting but rather losing. The main reason is slippage, which is when your order is filled away from the price you wanted. The reason for slippage is simple, big traders stay away from these events and new traders all try to do the same thing at the same time. If the release is bullish for the EUR/USD, everybody wants to buy at the same time. However, most find that there is nobody willing to sell to them at their price. But eventually your order is filled, but at the seller’s price. Soon you find the market moving against you and you exit to keep your losses from getting too big. But what about those who were selling to you? As the market continues to fall, you start to wonder about these traders who sold to you and the fact that they are now making money. What did they do differently?

These traders were playing the reversal and taking advantage of the fact that the first move after a release is often based on emotions and wrong. Here is a 5-minute chart and an example of a reversal after the release of the Nonfarm Payrolls. We can see that just before the release, the EUR/USD was trading at 1.4892. After the release, the market started to rally up to near the 1.4940 level. The market then started to reverse and traders who were playing the reverse sold at the price the market was trading just before the release. The assumption here is that all traders who bought after the release are now in a losing trade and are selling to get out. So these new traders sell at 1.4892 to get in and use a 50 pip stop with a 100 pip limit order to take profit, which is what we recommend in our DailyFX Courses. This is our 1:2 risk:reward ratio and allows us to be profitable if only winning 40% of these setups. The market soon moved down 100 pips from the 1.4892 entry and rewarded those who were patient and reacted to the market environment rather than the emotional first response to the release. These reversal traders will also use the EUR/USD as much as possible in these situations because of the increased volume and better fills. But you don’t have to be first to get into the trade to be right, you just have to be patient and react to the market and not the news release. The EUR/USD doesn’t act like this on every release, but it does frequently enough to make this a valuable strategy.

To find out more about this release and another view on how to trade it, please see this piece at DailyFX:

EUR/USD: Trading the Change in U.S. Non-Farm Payrolls

Thomas Long · #**251** (**permalink**) 05-11-2009, 02:19 PM

The USD/CAD has been weak since printing a high on March 9th. This is easier to see on the 4-hour chart which is posted below. I see this current bounce up as another selling opportunity. I also post this potential trade to bring in the SSI report from DailyFX. The Speculative Sentiment Index is a contrarian indicator which notes that we should look for continued weakness. But as traders, we should still be looking for confirmation before selling. A move down through the previous low is about as good as it gets as confirmation of continued weakness and is where many traders enter into a sell. Protective stops should be placed above resistance with target to take profits set at twice that risk.

Thomas Long · #**252** (**permalink**) 05-12-2009, 01:42 PM

The GBP/USD 4-hour chart is showing the same USD weakness as the USD/CAD chart we showed yesterday. This market is in a strong bullish channel which offers the opportunity to buy on a new high or a test of the bottom trendline. The daily chart is not as strong as I would like to see, but the USD seems to be weak across the board so finding the current strong currencies to trade could represent a solid trading opportunity. Stops should be placed below support with profit targets set as twice that risk for our 1:2 risk:reward ratio.

jcole252 · #**253** (**permalink**) 05-12-2009, 08:17 PM

Does the RSI(14) divergence visible on the daily chart, but most pronounced on the 4-hour chart, cause no concern? I've read more than once that tops are usually accompanied by divergence.

The Trend of the Day forum also suggests a GBP/USD buy, as do the tradaholics at Reuters. From my limited experience, when everyone knows, that's about the time it changes...

For the record: yes, I've lost a lot of money betting against the trend!

Thomas Long · #**254** (**permalink**) 05-13-2009, 08:16 AM

Quote:

Originally Posted by jcole252

Does the RSI(14) divergence visible on the daily chart, but most pronounced on the 4-hour chart, cause no concern? I've read more than once that tops are usually accompanied by divergence.

The Trend of the Day forum also suggests a GBP/USD buy, as do the tradaholics at Reuters. From my limited experience, when everyone knows, that's about the time it changes...

For the record: yes, I've lost a lot of money betting against the trend!

Good point. Frankly, I am always concerned about the market going against me and seeing divergence is just another reason to be concerned. However, I do consider the direction of the trend to be the most important piece of technical information we can use in our trading approach, so divergence takes a back seat. If I am already in a trade and I see divergence, I might tighten up my stop or take part of the position off. But I rarely avoid a trade based on divergence and rarely enter a trade based on divergence since it is usually against the prevailing trend.

Thomas Long · #**255** (**permalink**) 05-14-2009, 01:41 PM

The AUD/USD has once again pulled back off of a high while in an uptrend. This is a classic buying opportunity. Entry could be based on using your favorite technical indicator or to buy on a move up through resistance. Initial protective stops should be placed below support with profit targets set as twice that risk for our 1:2 risk:reward ratio.