Chart of the Day - Page 36

lissyking · #**526** (**permalink**) 10-23-2009, 09:50 AM

Quote:

Originally Posted by Thomas Long

Thanks to lissyking and Franosh for offering their thoughts on the chart below. Time will tell for sure what will happen so we will all have to wait it out. Thanks again.

Hey Tom

Do you get the chance to look at the eur/gbp? Today's news for the pound GDP had a massive surprise today with the report came out worst than expected with -0.4%. With that report, buyers went into the market for this pair rapidly. Also it bounced nicely from the trendline which starts from the low point as first touch of the trendline August 6, second touch on august 18 and 19.....and now the third touch today. Finally, drawing the fibs from the low point to the high point, this pair has bounced off the 38.2% level............This pair is telling us it is going up again. What do you think?

Kingsley

Thomas Long · #**527** (**permalink**) 10-23-2009, 10:07 AM

Quote:

Originally Posted by lissyking

Hey Tom

Do you get the chance to look at the eur/gbp? Today's news for the pound GDP had a massive surprise today with the report came out worst than expected with -0.4%. With that report, buyers went into the market for this pair rapidly. Also it bounced nicely from the trendline which starts from the low point as first touch of the trendline August 6, second touch on august 18 and 19.....and now the third touch today. Finally, drawing the fibs from the low point to the high point, this pair has bounced off the 38.2% level............This pair is telling us it is going up again. What do you think?

Kingsley

I agree....but this is not quite what I was expecting (obviously) when looking for a hint to the trend direction. As of now, I am watching the USD/JPY for direction on the overall strength of the USD. If this pair continues to move up, then something has changed as far as sentiment. If the pair reverses and starts to move down, then there really has been no change. But the GBP weakness is our first clue that nothing has changed in the fundamentals of the market.

Thomas Long · #**528** (**permalink**) 10-27-2009, 09:31 AM

While we wait for the USD to decide what it wants to do, the EUR/AUD has bounced up off of the low, up to support while the daily and 4-hour chart both show a downtrend. This is a selling opportunity. Here I have the hourly chart with support and resistance noted. There are two support levels as the higher support would be a point for more aggressive traders to enter while those traders who are more conservative can enter on a move down through the lower support. No matter what approach you use for entry, protective stops should be placed above resistance with profit targets set at twice that risk.

lissyking · #**529** (**permalink**) 10-28-2009, 05:17 PM

Quote:

Originally Posted by Thomas Long

While we wait for the USD to decide what it wants to do, the EUR/AUD has bounced up off of the low, up to support while the daily and 4-hour chart both show a downtrend. This is a selling opportunity. Here I have the hourly chart with support and resistance noted. There are two support levels as the higher support would be a point for more aggressive traders to enter while those traders who are more conservative can enter on a move down through the lower support. No matter what approach you use for entry, protective stops should be placed above resistance with profit targets set at twice that risk.

Hey Tom

is like the USD is back on track in getting strong while the dow J stock is getting weaker. So far this week forex market is not going good......all potential trade setups are moving in the opposite directions.

what you think?

Kingsley

Thomas Long · #**530** (**permalink**) 10-29-2009, 10:12 AM

Quote:

Originally Posted by lissyking

Hey Tom

is like the USD is back on track in getting strong while the dow J stock is getting weaker. So far this week forex market is not going good......all potential trade setups are moving in the opposite directions.

what you think?

Kingsley

I agree and am still keeping an eye on the USD/JPY and the EUR/GBP for a hint on sentiment. Right now it does look like the possibility of a trend change is as good as it has been since March. But still too early to be confirmed. Trading in demos is the play until you have a clear view of the trend. All pairs seem to be in between right now as my previous post on the EUR/AUD confirmed. The AUD/JPY and the NZD/JPY may be the next big moving pairs, but that is just a guess and mine at that.

lissyking · #**531** (**permalink**) 10-29-2009, 08:03 PM

Quote:

Originally Posted by Thomas Long

I agree and am still keeping an eye on the USD/JPY and the EUR/GBP for a hint on sentiment. Right now it does look like the possibility of a trend change is as good as it has been since March. But still too early to be confirmed. Trading in demos is the play until you have a clear view of the trend. All pairs seem to be in between right now as my previous post on the EUR/AUD confirmed. The AUD/JPY and the NZD/JPY may be the next big moving pairs, but that is just a guess and mine at that.

Hey Tom
thanks for writing back! I have a question. To have the highest probability of successful trades on your side, it is best to trade the strongest currency against the weakest currency. Suppose there are more than one pairs setting up with such condition, what would you do? For example let say the aud and nzd are the strongest currencies against the euro! I know you might say check the aud/nzd pair and see which one is the strongest. But suppose that pair is moving sideways, how can you choose? Sometimes we will have many setups but we end up picking the wrong ones.

Thanks Tom

Thomas Long · #**532** (**permalink**) 10-30-2009, 12:33 PM

Quote:

Originally Posted by lissyking

Hey Tom
thanks for writing back! I have a question. To have the highest probability of successful trades on your side, it is best to trade the strongest currency against the weakest currency. Suppose there are more than one pairs setting up with such condition, what would you do? For example let say the aud and nzd are the strongest currencies against the euro! I know you might say check the aud/nzd pair and see which one is the strongest. But suppose that pair is moving sideways, how can you choose? Sometimes we will have many setups but we end up picking the wrong ones.

Thanks Tom

I think my reaction to this may be dependent on how I feel at the moment. Normally, I will check the crosses (like the AUD/NZD) to judge the one I want to trade. Sometimes I will take smaller positions and open both and sometimes I will check to see which trade involves less risk. But really my decision is based on how I feel about each currency at the moment. That is not always the right decision, but more often than not this is not my problem when getting stopped out with a loss. That is a change in trend that is usually the reason for my losing trades.

Thomas Long · #**533** (**permalink**) 11-03-2009, 09:58 AM

Let's take another look at the USD/JPY trade we talked about last week. If you remember, I was using this trade as somewhat of a "scout" to give me a clue as to the strength/weakness of the USD and the potential for a trend change. So far, this trade has acted as expected in that it is moving down. My thinking is that if the USD is going to gain strength and move up against most currencies, it most likely will move up against the JPY also. That has not happened yet, so I am maintaining my bearish USD stance. I do not have enough confidence to act on that yet, other than this open position of the USD/JPY short, as the real test is coming this Friday. At 830AM Eastern, the US Department of Labor will release the Nonfarm Payrolls. This report has the reputation of being a trend maker and a trend breaker, and deservedly so. So we will know more by the Friday close, but this chart will hopefully show me what traders think of the USD and it's next big move.

iceoverflow · #**534** (**permalink**) 11-03-2009, 09:14 PM

Hi Thomas,
This is probably not the best place to post this question, but I was curious about the volatility index created by FXCM. You show that the best time to do a carry trade or go long term is when there is low volatility and not when there is high volatility. I was wondering how you calculate it and if there is a way to put that indicator in a more prominent place like right on the homepage or linked to the trading platform would be preferable. Coming from equities, the VIX is an important indicator when trading, and my short time so far in Forex I have come to watch this volatility indicator. It definitely has some advantages in my opinion. Thanks.

Thomas Long · #**535** (**permalink**) 11-04-2009, 11:15 AM

Top Ten Reasons to Trade with a Protective Stop

Today's Chart of the Day is not a chart but rather an economic calendar. This is quite a load with ten news events being released by the end of the week. It starts today at about 215PM Eastern with the FOMC decision and annoucement on interest rates. There is the chance of some big swings which to some may be good trading opportunities but to others be a nightmare. It is quite acceptable to let these go without making an attempt for a quick profit as that is very difficult to do with any consistency. But make sure that if you are in trade, to have a protective stop in at all times to keep this week from being a trading nightmare for you. All times on this calendar are Eastern. Here is the link to the main economic calendar:

Forex Trading Calendar | Currency Events Calendar

Thomas Long · #**536** (**permalink**) 11-04-2009, 03:44 PM

Quote:

Originally Posted by iceoverflow

Hi Thomas,
This is probably not the best place to post this question, but I was curious about the volatility index created by FXCM. You show that the best time to do a carry trade or go long term is when there is low volatility and not when there is high volatility. I was wondering how you calculate it and if there is a way to put that indicator in a more prominent place like right on the homepage or linked to the trading platform would be preferable. Coming from equities, the VIX is an important indicator when trading, and my short time so far in Forex I have come to watch this volatility indicator. It definitely has some advantages in my opinion. Thanks.

I also like these different indicators. Here is the explanation of how it is calculated:

The DailyFX Volatility Index measures the general level of volatility in the currency market. The index is a composite of the implied volatility in options underlying a basket of currencies. Our basket is equally weighed and composed of some of the most liquid currency pairs in the Foreign exchange market.

In reading this graph, whenever the DailyFX Volatility Index rises, it suggests traders expect the currency market to be more active in the coming days and weeks. Since carry trades underperform when volatility is high (due to the threat of capital losses that may overwhelm carry income), a rise in volatility is unfavorable for the strategy.

Basically, this is the same way the Volatility Indexes are calculated in the equity markets as they come from the Chicago Board Options Exchange. I will pass along your recommendation on placing them in a more prominent place as I agree with you on their value. Thanks for your comments.

For those that are interested, here is a link to the most recent report:

DailyFX - Has the Strong US GDP Reading Banished Doubts and Revived Risk Appetite and Carry Flows?

afo · #**537** (**permalink**) 11-05-2009, 03:22 AM

Quote:

Originally Posted by Thomas Long

This piece has been posted before in this forum, but I like to remind traders of what is happening this Friday, October 2nd at about 830AM Eastern, which is when the US Department of Labor will release the most anticipated news report of the month, the US Nonfarm Payrolls. 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 the one’s 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 Power 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.

Just want to remind people interested in looking out for this strategy explained by Tom to trade NFP tomorrow.
Happy trading

lissyking · #**538** (**permalink**) 11-06-2009, 09:56 AM

Quote:

Originally Posted by afo

Just want to remind people interested in looking out for this strategy explained by Tom to trade NFP tomorrow.
Happy trading

Hey Afo
Thanks for the heads up!

Kingsley

afo · #**539** (**permalink**) 11-06-2009, 10:06 AM

Quote:

Originally Posted by lissyking

Hey Afo
Thanks for the heads up!

Kingsley

Hey Kingsley.
How ur trading today. This strateggy kind of work today and am up about 37 pips now. Even though it looks like the up movement is getting tires so my SL is @ BE now. BIg thanks to Tom 4 showing me this

lissyking · #**540** (**permalink**) 11-06-2009, 11:14 AM

Quote:

Originally Posted by afo

Hey Kingsley.
How ur trading today. This strateggy kind of work today and am up about 37 pips now. Even though it looks like the up movement is getting tires so my SL is @ BE now. BIg thanks to Tom 4 showing me this

today's strategy moving very weak.......lol