Last week we talked about how the US stock market seemed to be a leading indicator of the USD and the JPY. When the S&P 500 rallies, the USD and the JPY weakens. The reason is risk tolerance. When the US stock market is rising, traders feel comfortable taking on more risk in their investments. So they exit their "safe" investments in the USD and the JPY and look to take on more risk in other places. When the US stock market falls, traders look to avoid additional risk and exit those investments they are not comfortable with and move into the USD or the JPY. I bring it up again because of it's importance but to also show a chart compiled by Instructor Sean Hyman in his column in the FXCM Micro forum. This chart shows that the relationship between the GBP/USD and the S&P 500 is more pronounced than some realize which means that this is a tool worth adding to any approach to trading the FX markets.

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After printing new 2009 highs yesterday, the NZD/USD pulled back off of the highs and now appears poised to move up once again. Breakout traders would buy on a move up through resistance and then place their stop below support. Target to take profits should be set at twice that risk for a 1:2 risk:reward ratio.

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Hi,

the stop sits below support or below resistance of the channel? is there a way to estimate a place below resistance?

thx.

Some traders will buy on a move up through resistance and then place their stop below resistance instead of below support like I recommended. There are a couple of ways to do this. One is to just take a fixed amount and the other is to look on a shorter time frame chart for a higher low. Instead of just using a fixed amount like 25 pips below resistance, I would prefer to look at the hourly chart to see if their was a higher low to use as support and my stop placement. In this case one can see where the .6528 level might offer support and those who were looking for less risk on the trade might use that to place their stop at the .6527 level. The stop I recommended was below the first low at .6492. So you would risk about 36 pips less with this approach. Using a fixed amount is up to the trader as it is just a matter of personal preference.

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Thanks Tom, the lower timeframe swing method is great.

I have my Trade Ideas on the Daily chart, and my timing is based on the H1 swings. At times, by the time Price breaks a significant Daily level like Support/ Resistance, the swing is too far back to offer a good risk to reward ratio, even on a lower timeframe. In this case, I think its correct to wait for the next significant Swing like H1 after the level break. I hope you agree. Now the question is, is there a good way to estimate if the trend is going to continue at this next swing?

Thanks,
JForex.

I do agree in that the better trading opportunities come to you and that we should not chase the market. Since the beginning of organized markets, traders have been developing methods to try to judge the odds of a trending move continuing with Elliott Wave being one of the more popular. I just don't think you can predict the future and can only base your decisions on recent history. This is why the risk:reward ratio is so key to our success. The experienced trader is detached from the outcome of any one trade. Their confidence is in knowing that after a series of trades, they should be profitable. I wish I had a better answer, but I think as traders we can project what might happen next and never know for sure.

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Its very relieving to hear that from you.

I wrote a dozen trading systems, none of which I thought was tradable on a live account. However, I did observe that one big win followed by 2 or more small losses makes me square. So whats the point in trading if its a zero sum game? You'd rather not trade.

After thinking about it for a while, the only way I saw someone making money is by entering simple, historicaly successful patterns, risking with logical stops, and letting the trade run if it does turn profitable, to make up for all those unavoidable losses.

Otherwise, no one gain or loss is a good or bad news, unless someone plans to trade only once and run away with the winning.

HI Mr Long


Thank You for Elliot wave Link And I just reading Your Opinion, Yes that is very nice...

And Mr. Long, You have Very Good Knowledge So Could you Tell me Any Good System Like In This Forum A Guy Called Cmellon he Use Delta And His Delta count Is Mind Blowing so Could you Tell me Any This Type Of System In The Forex World....

waiting For your Post..


Thank you

Exactly....I think of trading as a coin toss. Heads I win, tails I lose. In the long run, I will win half of my trades and lose half of my trades. But if I win $1 on heads and lose $1 on tails, I will just be a breakeven trader. I either have to win more often or win more when I am right than I lose when I am wrong. I think the better choice is to win more when I am right. So if I win $2 on heads and still only lose $1 on tails, I would want to flip that coin 24 hours a day, seven days a week. Even if I lost five tosses in a row, I would not change a thing since I know from experience that my edge is my consistency and that after a larger series of coin tosses, I will be fine. How I achieve that return is based on my exit strategy rather than my entry. Most new traders spend alot of time looking for the perfect entry, when in fact it is their exit strategy that has more to do with their long-term results. It is not easy staying in a trade for a long period of time and letting the profits run. Most of us want to lock in a gain way too early. But that is what trading is all about and I don't remember anyone saying that it was easy. Simple maybe, but our emotions seem to try to keep it from being easy. That is why we need to be detached from the outcome of any one trade. We have to make our decisions based on the big picture rather than on one particular trade. When we can do that with consistency, we have made another important step on our path to being a profitable trader.

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Like the Elliott Wave, the Delta Phenomenon is an attempt to predict future market turns. It is based on the lunar cycle and it's influence on human behavior. It can be somewhat complicated and is not meant to be a stand alone approach to trading. You can find quite a bit on this subject by just doing an internet search on "The Delta Phenomenon". My real issue with this type of analysis is that new traders get caught up in trying to predict future market movement instead of reacting to what the market is currently doing. They have a tendency to support their prediction in spite of evidence to the contrary and may miss some good trading opportunities because of it. I think that new traders should first tackle the basics of trading, which includes trading with the trend and the use of strong money management before moving to more complex subject matter like Elliott Wave and the Delta Phenomenon.

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The US stock market continues to rally while the USD and the JPY continue to fall. This has been the story for a couple of weeks now. Adding to the downside pressure of the USD/CAD is the price of oil which has been moving up at the same time. That is just too much for the USD to handle and you can see on this chart that the USD/CAD is in somewhat of a parabolic move down. But instead of trying to time or predict the end of this move, experienced traders will try to take advantage of it. Look for any rallies on this pair as selling opportunities as profit taking toward the end of a week after a move like this might push this pair up later today and tomorrow. If traders sold at higher levels, some will buy back to close out the trade before the weekend. However, they are just as likely to sell again next week if the market moves up enough to offer an acceptable risk:reward ratio.

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This move is faced with immediate support at 1.0800. Right?

We do have a June 1st low of 1.0783 to move through. But strong downtrends are noted by a lack of support while strong uptrends are noted by a lack of resistance. So I would expect this pair to move down through that potential support, but at the same time be prepared for the failure. I think the state of the US stock market and the oil market on Monday will be the key. A rising stock market and higher oil prices is bearish for this pair.

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Thanks.

How will we approach the USDCAD trade entry? Wait for the 1.0800 to be broken and daily to close below it. Then, look for a H4/ H1 swing high to short. Does that sound like something right?

Or just start looking for swing highs right now? We are only 60 pips away from the 1.0800.

Thanks.

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I think you have exactly the right idea. I might prefer the swing on a 4-hour chart since this pair has been extremely weak and may be due for a bigger bounce. But a bounce on the hourly or 4-hour chart to sell is what we should be looking for in the next setup. I would sell on a bounce without a move down through the previous low too.

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