Chart of the Day - Page 18

billh · #**256** (**permalink**) 05-18-2009, 12:35 AM

Quote:

Originally Posted by Thomas Long

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.

Tom, how far about would these highs have to be in order to be considered a double top?

Thomas Long · #**257** (**permalink**) 05-18-2009, 08:03 AM

Quote:

Originally Posted by billh

Tom, how far about would these highs have to be in order to be considered a double top?

Certainly if the market started selling off we could consider this a double top. But that is one of the problems with trading double tops and bottoms. Every time the market moves up to a new high, there will be a time when it looks like a potential double top and every time the market moves down to a new low, there will be a time when it looks like a potential double bottom. But a look at any chart shows that these formations do not form as often as they appear to form. We can only be sure of a double top when the market moves down through the low between the two tops or a double bottom when the market moves up through the high between the two bottoms. Until that happens, I prefer to stick with the trend and assume that the market is moving up to a new high or down to a new low. That happens more often than a double top or bottom.

Thomas Long · #**258** (**permalink**) 05-19-2009, 01:10 PM

The USD/JPY has been moving down on the 4-hour chart and has bounced up off of a low. The daily chart shows a possible head and shoulders formation which is bearish. Aggressive traders can look for a place to sell using their favorite approach while more conservative traders could sell on a move down through support. Remember to always trade with a protective stop and look for at least twice in potential profit as your risk for a 1:2 risk:reward ratio.

Thomas Long · #**259** (**permalink**) 05-26-2009, 11:39 AM

While the majors decide if they are moving up or down from their respective levels, the AUD/CHF has pulled back down to a support level while in an uptrend. That is the definition of a buying opportunity and we can see that this pair has experienced a slight bounce up off of the recent low. Traders could use any number of approaches to identify their entry with one being to buy on a crossover of the MACD which is posted on the chart. Traders should then place their protective sell stop below the low with profit targets set at twice that risk for a 1:2 risk:reward ratio.

billh · #**260** (**permalink**) 05-27-2009, 04:37 PM

Quote:

Originally Posted by Thomas Long

The USD/JPY has been moving down on the 4-hour chart and has bounced up off of a low. The daily chart shows a possible head and shoulders formation which is bearish. Aggressive traders can look for a place to sell using their favorite approach while more conservative traders could sell on a move down through support. Remember to always trade with a protective stop and look for at least twice in potential profit as your risk for a 1:2 risk:reward ratio.

Tom, if you were going to go short as it moved down through support, where would you enter? 10 or 20 pips below support?

And would you place your stop up above resistance? That seems like a long way up. Or some place closer to support?

Thomas Long · #**261** (**permalink**) 05-27-2009, 05:10 PM

Quote:

Originally Posted by billh

Tom, if you were going to go short as it moved down through support, where would you enter? 10 or 20 pips below support?

And would you place your stop up above resistance? That seems like a long way up. Or some place closer to support?

If I were to sell on a move down through support, I might consider moving down to an hourly chart for my stop placement. I would look for a lower high on the hourly chart and place my stop above that level to keep my risk lower. Another choice might be to sell on a move down through support on that hourly chart, which would be above support on the 4-hour chart. I would then place my stop above resistance on the 4-hour chart. Either way I might lower my risk by as much as 50%. Either way I sell one pip below support and place my stop one pip above resistance. To me, a breakout is a breakout and if the price level does not offer support or resistance, I want to be out of the trade. Also remember that most charts only show the sell side price, but the Marketscope charts offer the option to see a chart of the buy side prices. That is important for setting a buy stop or to buy on a move above resistance.

Thomas Long · #**262** (**permalink**) 06-02-2009, 11:36 AM

I post this 4-hour chart not to necessarily show a potential selling opportunity, although this pair does seem ready to make a new low in a downtrend which is a solid sell setup. But most of the talk this week in the DailyFX forums has been about the EUR/USD and the GBP/USD and which one to buy. This chart shows what I look for to make such a decision. With the EUR/GBP moving down, this means that the GBP is stronger than the EUR. So if I am looking to take advantage of the USD weakness, I would prefer to buy the GBP/USD over the EUR/USD to take advantage of the stronger GBP. This is a small edge, but they do add up.

Thomas Long · #**263** (**permalink**) 06-03-2009, 12:57 PM

The moves against the trend are deepening for quite a few pairs today. Since the US Department of Labor is releasing the Nonfarm Payrolls this Friday at 8:30 AM EST, this is really not surprising. It's not unusual to see profit-taking before a major news release. But unless the release is enough to change the trend of the USD, we should be looking for a continuation of the current trends once that number is out of the way. That means looking for a buy signal in the GBP/USD. I have plotted an MACD on this 4-hour chart as one way to see the reversal back into the direction of the trend. We would need to see the MACD line (green line) cross back above the Signal line (black line) for a possible signal to buy. Many of the USD pairs are in the same position with the USD/CHF, USD/JPY and USD/CAD being opposite as the USD is the base currency (first currency listed) instead of the counter currency (second currency listed) in these pairs.

Takira · #**264** (**permalink**) 06-03-2009, 01:40 PM

Quote:

The moves against the trend are deepening for quite a few pairs today. Since the US Department of Labor is releasing the Nonfarm Payrolls this Friday at 8:30 AM EST, this is really not surprising. It's not unusual to see profit-taking before a major news release. But unless the release is enough to change the trend of the USD, we should be looking for a continuation of the current trends once that number is out of the way. That means looking for a buy signal in the GBP/USD. I have plotted an MACD on this 4-hour chart as one way to see the reversal back into the direction of the trend. We would need to see the MACD line (green line) cross back above the Signal line (black line) for a possible signal to buy. Many of the USD pairs are in the same position with the USD/CHF, USD/JPY and USD/CAD being opposite as the USD is the base currency (first currency listed) instead of the counter currency (second currency listed) in these pairs.

Hello Thomas,

Have to thank you for all the great info. It is really a very big help.
I am fairly new to trading, and it has been very easy to see all the "pre-nonfarm" report profit taking oppertunities that have come up recently.

I am hearing people using alot of fancy language when they talk about the way the USD will move as a result of this fridays report. Could you shed some plain language light on what the USD is likely to do this friday and how one could profit from it.

Any info would be a great help. Thanks

Troy

Thomas Long · #**265** (**permalink**) 06-03-2009, 02:00 PM

Quote:

Originally Posted by Takira

Hello Thomas,

Have to thank you for all the great info. It is really a very big help.
I am fairly new to trading, and it has been very easy to see all the "pre-nonfarm" report profit taking oppertunities that have come up recently.

I am hearing people using alot of fancy language when they talk about the way the USD will move as a result of this fridays report. Could you shed some plain language light on what the USD is likely to do this friday and how one could profit from it.

Any info would be a great help. Thanks

Troy

Glad to be of help Troy. I always tell new traders that predicting the release is one thing, but predicting the market's reaction is quite another. There is no way to really know how the market will react as it is based on expectations of the traders involved. The good news is that I believe the best traders react to the market instead of trying to predict what the market will do. The most consistent way I know of to trade the news is in this piece which I have posted here a couple of times, but will post it again as it is applicable every month. Good luck with your trading!

This Friday (June 5th) 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.

You can see this release traded live with a DailyFX analyst. More at this link:

http://forexforums.dailyfx.com/q-dai...tml#post285701

abro · #**266** (**permalink**) 06-05-2009, 08:35 AM

Quote:

Originally Posted by Thomas Long

Certainly if the market started selling off we could consider this a double top. But that is one of the problems with trading double tops and bottoms. Every time the market moves up to a new high, there will be a time when it looks like a potential double top and every time the market moves down to a new low, there will be a time when it looks like a potential double bottom. But a look at any chart shows that these formations do not form as often as they appear to form. We can only be sure of a double top when the market moves down through the low between the two tops or a double bottom when the market moves up through the high between the two bottoms. Until that happens, I prefer to stick with the trend and assume that the market is moving up to a new high or down to a new low. That happens more often than a double top or bottom.

do u mean like this ? as shown in the chart below . like when the pair fail to bull from a certain point to retest its support and then bounce off the support breaking that certain point on which it failed to bull previously so its called a double bottom. ? this is what i know . and can u tell me that making 2000 % profit a month is sensible according to ur knowledge so far ?

Thomas Long · #**267** (**permalink**) 06-05-2009, 09:16 AM

Quote:

Originally Posted by abro

do u mean like this ? as shown in the chart below . like when the pair fail to bull from a certain point to retest its support and then bounce off the support breaking that certain point on which it failed to bull previously so its called a double bottom. ? this is what i know . and can u tell me that making 2000 % profit a month is sensible according to ur knowledge so far ?

This is a good example of how to confirm a double bottom on a chart. I have posted it below to key in on when the double bottom is confirmed. To assume a double bottom before the move up through the high between the two lows is risky. Some traders are willing to take that risk but have to make sure they win enough when they are right to account for the losses when they are wrong. But that is trading. I prefer to wait for the confirmation of the double bottom and then place my trade accordingly. I have noticed that you are becoming a trendline trader, which is a good choice. Many successful traders prefer not to use indicators in their approach and prefer to use trendlines to determine the trend and then to buy on a move down to support in an uptrend or sell a rally up to resistance in a downtrend. They are also quick to note short-term trend changes as the market moves through trendlines on their chart. A good approach to begin with and certainly as you become better at drawing significant trendlines, your trading results should improve.

The big gains one typically sees from the winners in trading contests are not easily repeatable month after month. Those who treat trading as a get rich quick scheme come away disappointed. Those who treat trading as a get rich slow proposition give themselves a chance to be long-term successful traders. Professional traders are more concerned about identifying and controlling their risk rather than how much money they can make and quickly they can make it. The profits come with time, but losses can add up quickly. I recommend to new traders to make it a goal of being profitable every month. Even if you only make $1 in the month, give yourself credit for being profitable in that month. The big gains will come with time and by using a consistent and disciplined approach. There is but one guarantee in the world of speculation and that is if you trade, you will have losing trades. But how you handle those losses has as much to do with your long-term success as any other factor. In professional circles, a trader who earns 50% a year is considered a very good trader. A trader who can do that for 10 years in a row is considered world class. I think you are on the right track with your approach Abro, but think you need to be easier on yourself as far as expectations. Just try to be consistent in your approach, limit your risk on every trade and good things will happen with time. Good luck with your trading and we are here to help.

abro · #**268** (**permalink**) 06-05-2009, 09:42 AM

Quote:

Originally Posted by Thomas Long

This is a good example of how to confirm a double bottom on a chart. I have posted it below to key in on when the double bottom is confirmed. To assume a double bottom before the move up through the high between the two lows is risky. Some traders are willing to take that risk but have to make sure they win enough when they are right to account for the losses when they are wrong. But that is trading. I prefer to wait for the confirmation of the double bottom and then place my trade accordingly. I have noticed that you are becoming a trendline trader, which is a good choice. Many successful traders prefer not to use indicators in their approach and prefer to use trendlines to determine the trend and then to buy on a move down to support in an uptrend or sell a rally up to resistance in a downtrend. They are also quick to note short-term trend changes as the market moves through trendlines on their chart. A good approach to begin with and certainly as you become better at drawing significant trendlines, your trading results should improve.

The big gains one typically sees from the winners in trading contests are not easily repeatable month after month. Those who treat trading as a get rich quick scheme come away disappointed. Those who treat trading as a get rich slow proposition give themselves a chance to be long-term successful traders. Professional traders are more concerned about identifying and controlling their risk rather than how much money they can make and quickly they can make it. The profits come with time, but losses can add up quickly. I recommend to new traders to make it a goal of being profitable every month. Even if you only make $1 in the month, give yourself credit for being profitable in that month. The big gains will come with time and by using a consistent and disciplined approach. There is but one guarantee in the world of speculation and that is if you trade, you will have losing trades. But how you handle those losses has as much to do with your long-term success as any other factor. In professional circles, a trader who earns 50% a year is considered a very good trader. A trader who can do that for 10 years in a row is considered world class. I think you are on the right track with your approach Abro, but think you need to be easier on yourself as far as expectations. Just try to be consistent in your approach, limit your risk on every trade and good things will happen with time. Good luck with your trading and we are here to help.

yeah thats a good example howevr i figurred all of that myself . well now i use trendline in 5 min and i traded on a demo with all my concentration , with everything i had . i made 900 % in 10 hours . but i guess i was luky . still i think when one knows why the market moves the reason why it moves he can make more then a 100 % a month on realistic basis . here is a micro demo i traded on wednesday . and i never put stops more then 40 pips and trade the daily trends like gaining 60 to 80 pips . and have a good risk to reward ratio .i am a very young man ( TEENAGER ) , but i guess i have discovered the heart of forex . and will practice day and night to be consistent with my method .

billh · #**269** (**permalink**) 06-05-2009, 09:43 AM

This worked well this morning, Tom. After EUR/USD zoomed up after 830 am, set entry at 1.4160 just below a low a few minutes before, stop 1.4210, limit 1.4060. Made 100 pips. Thank you.

Thomas Long · #**270** (**permalink**) 06-05-2009, 10:10 AM

Quote:

Originally Posted by billh

This worked well this morning, Tom. After EUR/USD zoomed up after 830 am, set entry at 1.4160 just below a low a few minutes before, stop 1.4210, limit 1.4060. Made 100 pips. Thank you.

You're welcome. Although I do not trade these releases myself, this is one strategy that allows a trader to take advantage of the volatility rather than letting the volatility take advantage of them. It does not play out like this every month, but often enough to be make it worth your time to prepare for it.