Orders

Resistances And Supports JULY 31 , 2006

Score frome 1/7/2006 to 30/7/2006




- Results Tuesday, July 04, 2006 -150

- Results Monday, July 10, 2006 +35

- Results Wednesday, July 12, 2006 +220

- Results Monday, July 17, 2006 -50

- Results Wednesday, July 19, 2006 0

TOTAL +55

Resistances And Supports JULY 28 , 2006

Resistances And Supports JULY 27 , 2006

Resistances And Supports JULY 26 , 2006

Orders

Resistances And Supports JULY 25 , 2006

Orders

Resistances And Supports JULY 24 , 2006

Resistances And Supports JULY 21 , 2006

How to Read a Chart and Act Effectively
Table of Contents

•Introduction
• Recommendation
• Using your charts effectively
• What to look at first
• How to use the information gathered so far
• How to trade the information gathered so far
• Other chart ideas
• Limitations of charts
• Summary
Introduction
This is a guide that tells you, in simple understandable language,
how to choose the right charts, read them correctly, and act
effectively in the market from what you see on them. Probably
most of you have taken a course or studied the use of charts in the
past. This should add to that knowledge.
Recommendation
There are several good charting packages available free. Netdania
is what I use.
Using charts effectively
The default number of periods on these charts is 300. This is a
good starting point;
• Hourly chart that’s about 12 days of data.
•15 minute chart its 3 days of data.
• 5-minute chart it’s slightly more than 24 hours of data.
You can create multiple "tabs" or "layouts" so that it’s easy to
quickly switch between charts or sets of charts.
What to look at first
1. Glance at hourly chart to see the big picture. Note significant
support and resistance levels within 2% of today’s opening rate.
2. Study the 15 minute chart in great detail noting the following:
• Prevailing trend
• Current price in relation to the 60 period simple moving average.
• High and low since GMT 00:00
• Tops and bottoms during full 3 day time period.
How to use the information gathered so far
1. Determine the big picture (for intraday trading).
Glancing at the hourly chart will give you the big picture – up or
down. If it’s not clear immediately then you’re in a trading range.
Lets assume the trend is down.
2. Determine if the 15 minute chart confirms the downtrend
indicated by big picture:
Current price on 15-minute chart should be below 60 period
moving average and the moving average line should be sloping
down. If this is so then you have established the direction of the
prevailing trend to be down.
There are always two trends – a prevailing (major) trend and a
minor trend. The minor trend is a reversal of the main trend, which
lasts for a short period of time. Minor trends are clearly spotted on
5-minute charts.
3. Determine the current trend (major or minor) from the 5 minute
chart:
Current price on 5-minute chart is below 60 period moving average
and the moving average line is sloping downward – major trend.
Current price on 5-minute chart is above 60 period moving
average and the moving average line is sloping upward – minor
trend.
How to trade the information gathered so far
At this point you know the following:
Direction of the prevailing trend.
Whether we are currently trading in the direction of the prevailing
(major) trend or experiencing a minor trend (reaction to major
trend).
Possible trade scenarios:
1) Lets assume prevailing (major) trend is down and we are in a
minor up-trend. Strategy would be to sell when the current price on
5-minute chart falls below the 60 period moving average and the
60 period moving average line is sloping downward. Why?
Because the prevailing trend is reasserting itself and the next
move is likely to be down. Is there more we can do? Yes. Look for
further confirmation. For example, if the minor trend had stalled for
awhile and the lows of the past half hour or hour are very close to
the 5 minute moving average then selling just below the lows of
the past half hour is a better place to enter the market then just
below the moving average line.
2) Lets assume prevailing (major) trend is down and 5 -minute
chart confirms downtrend. Strategy would be to wait for a minor
(up trend) trend to appear and reverse before entering the market.
The reason for this is that the move is too “mature” at this point
and a correction is likely. Since you trade with tight stops you will
be stopped out on a reaction. Exception: If market trades through
today’s low and/ or low of past three days (these levels will be
apparent on the 15 minute chart) further quick downward price
action is likely and a short position would be correct.
3) A better strategy assuming prevailing trend down, 5-minute
chart down, and just above days lows is to BUY with a tight stop
below the day’s low. Your risk is limited and defined and the
technical condition (overdone?) is in your favor. Confirmation
would be if today’s low was a bit higher than yesterday’s low and
the price action indicated a very short-term trading range (1 minute
chart) just above today ’s low. The thinking here is that buyers are
not waiting for a break of today’s or yesterday’s low to buy
cheaper; they are concerned they may not see the level.
4) Generally speaking, the safest place to buy is after a sustained
significant decline when the bottoms are getting higher. Preferably
these bottoms will be hours apart. By the third or forth higher
bottom it is clear a bottom is in place and an up-move is coming.
As in the example above your risk is limited and defined – a low
lower than the last low.
5) The reverse is true in major up-trends.
Other chart ideas
• There are always two trends to consider – a major trend and a
minor trend. The minor trend is a reversal of the major trend, which
generally lasts for a short period of time.
• Buying above old tops and selling below old bottoms can be
excellent entry levels; assuming the move is not overly mature and
a nearby reaction unlikely.
• When a strong up move is occurring the market should make
both higher tops and higher bottoms. The reverse is true for down
moves- lower bottoms and lower tops.
• Reactions (minor reversals) are smaller when a strong move is
occurring. As the reactions begin to increase that is a clear
warning signal that the move is losing momentum. When the last
reaction exceeds the prior reaction you can assume the trend has
changed, at least temporarily.
• Higher bottoms always indicate strength, and an up move usually
starts from the third or fourth higher bottom. Reverse this rule in a
rising market; lower tops…
• You will always make the most money by following the major
trend although to say you will never trade against the trend means
that you will miss a lot of opportunities to make big profits. The rule
is: When you are trading against the trend wait until you have a
definite indication of a selling or buying point near the top or
bottom, where you can place a close stop loss order (risk small
amount of capital). The profit target can be a short-term gain to
nearby resistance or more.
• Consider the normal or average daily range, average price
change from open to high and average price change from open to
low, in determining your intra-day price targets.
• Do not overlook the fact that it requires time for a market to get
ready at the bottom before it advances and for selling pressure to
work it’s way through at top before a decline. Smaller loses and
sideways trading are a sign the trend may be waning in a
downtrend. Smaller gains and sideways trading in an up trend…
• Fourth time at bottom or top is crucial; next phase of move will
soon become clear… be ready.
• Oftentimes, when an important support or resistance level is
broken a quick move occurs followed by a reaction back to or
slightly above support or below resistance. This is a great
opportunity to play the break on the “rebound”. Your stop can be
super tight. For example, EURUSD important resistance 1.0840 is
broken and a quick move to 1.0860, followed by a decline to
1.0835. Buy with a 1.0820 stop. The move back down is natural
and takes nothing away from the importance of the breakout.
However, EURUSD should not decline significantly below the
breakout (breakout 1.0840; EURUSD should not go below 1.0825.
• After a prolonged up move when a top has been made there is
usually a trading range, followed by a sharp decline. After that, a
secondary reaction back near the old highs often occurs. This is
because the market gets ahead of itself and a short squeeze
occurs. Selling near the old top with a stop above the old top is the
safest place to sell.
• The third lower top is also a great place to sell.
• The same is true in reverse for down moves.
• Be careful not to buy near top or sell near bottom within trading
ranges. Wait for breakaway (huge profit potential) or play the
range.
• Whether the market is very active or in a trading range, all
indications are more accurate and trustworthier when the market is
actively trading.
Limitations of charts
Scheduled economic announcements that are complete surprises
render nearby short-term support and resistance levels
meaningless because the basis (all available information) has
changed significantly, requiring a price adjustment to reflect the
new information. Other support and resistance levels within the
normal daily trading range remain valid. For example, on Friday
the unemployment number missed the mark by roughly 120,000
jobs. That’s a huge disparity and rendered all nearby resistance
levels in the EURUSD meaningless. However, resistance level 200
points or more from the day’s opening were still meaningful
because they represented resistance to a big up move on a given
day.
Unscheduled or unexpected statements by government officials
may render all charts points on a short-term chart meaningless,
depending upon the severity of what was said or implied. For
example, when Treasury Secretary John Snow hinted that the U.S.
had abandoned its strong U.S. dollar policy.

Determining a Currencies Technical Condition

Determining a Currencies Technical Condition
The technical condition of a currency is an important yet often
overlooked component in forecasting future price movement. The
technical condition of the market cannot be directly determined by
looking at charts or other technical indicators.
To get a good feel for the technical condition of the market requires a
special skill to think outside the box; read between the lines; a little bit of
contrarian thinking helps too.
What a trader tries to do is figure out “where the market is”, which means
are the short-term players long or short or have no position. Further, what
have the longer term players done lately that would indicate their
technical position (on the whole do they need to buy or sell around
current levels or is their business around current levels already done (they
have no interest).
Admittedly, there is never proof whether your assessment of technical
condition is correct or incorrect; other then putting on a position and
making a lot of money.
Let me give you an example. On Monday September 29th, 2003 the
EURUSD rallied from 1.1420 to 1.1580 in about an hour. This was more
than the range the entire previous week. Was this move predictable?
Mabye.
The prior week the EURUSD made new highs above 1.15 a few times
indicating an expected USD sell off would materialize. Each time a new
high was reached a breakout to 1.16 or higher appeared imminent; and
each time there was a lot of buying and then a lot of selling when the
priced dropped back below 1.1500. The EURUSD never really went
down much either though; bottoming out repeatedly above 1.1420.
Early Monday morning in Europe the EURUSD fell sharply to slightly
below 1.1400. This was a major disappointed to market players.
Everyone was betting on USD weakness after the G7 meeting and there
was no follow through from the opening in Europe the prior Monday to
the opening in Europe today (following Monday). To make matters worse
the EURUSD traded below 1.1420; lower than it traded all last week.
Traders bailed out of long EURUSD, in addition to long GBPUSD and
AUDUSD positions. The market was now preparing for a test of still
lower levels (higher USD); U.S. stocks were up overnight and traders
were thinking a blowout to the downside for the EURUSD, GBPUSD,
and AUDUSD was in the cards for today.
Opinion on the EURUSD was pretty much one way – its going down
today. All of the longs covered in disgust and armed with their charts and
technical indicators everyone was selling EURUSD for the move down
today.
With day traders short and the longer-term players already sold out of
their long positions after the repeated failures above 115; the EURUSD
was in a technically strong position. Meaning when EURUSD started to
go up the only sellers was short sellers; there were no long positions left
in the market. EURUSD gapped higher and higher, meeting first
resistance at 1.1580.

Day Trading Fundamentals

Day Trading Fundamentals
Few Traders have caught on to perhaps the most profitable low risk
currency trading strategy in the world right now – trading the release of
reoccurring weekly and monthly economic indicators and also scheduled
news conferences and release of monthly minutes of meetings, interest
rate announcements and monthly bulletins.
I have been profitably trading news since the beginning of July and the
results have been phenomenal. Here is how it works.
I did the legwork and went back and documented the actual headline
number versus the consensus forecast for all U.S., Eurozone, British,
Canadian, and Australian scheduled economic releases, minutes of
meetings, interest rate announcements, and monthly bulletins, since the
beginning of the year.
When the actual is significantly different then the consensus forecast,
there is an initial 20 to 50 pip price gap, followed by an additional 50
points or more of directional move. The news itself seldom justifies the
extent of the move; what apparently happens is market perception shifts,
and both short term and long term traders are “going the same way”.
HOW TO STRUCTURE TRADES FOR MAXIMUM RETURN /
MINIMUM RISK
Practically all the FX broker electronic platforms guarantee fills at the
rate on stop loss orders. Thirty second prior to release time place a stop
loss order (orders) and adjust the entry level if necessary until release
time. There are two types of orders: 1) Targeted buy or sell. 2) Straddle.
Targeted buy or sell is used when you wish to enter the market if a
specific event occurs, such as the announcement of an unexpected change
in interest rates. A stop loss entry order is placed such that the order will
most likely only be triggered if rates or in fact changed.
For example, in July there was an outside chance Canadian rates would
be lowered. I entered stop loss buy USDCAD orders 15 and 25 points
above the current market just before the announcement. If rates are left
unchanged I cancel the orders immediately. Generally a small reaction
opposite my orders will occur as traders who were long USDCAD into
the announcement square up. Point is there is usually time to cancel
orders. In this case rates were lowered and USDCAD was 100 points
higher in seconds (I was long USDCAD 85 and 75 points below current
market).
A more recent example; release of minutes of U.K. policy committee
meeting on Wednesday October 22nd; if vote on holding rates steady was
close, market would buy GBPUSD and sell EURGBP. Turned out to be 4
and 4 and the head of the committee cast the deciding vote to hold rates
steady. When this news hit the wire GBPUSD took off. I was able to get
long GBPUSD at 1.6750 by having a stop loss in the FX brokers. Market
traded to 1.6790 in a heartbeat and proceeded to 1.6930 by days end.
Later in the day Canadian retail sales and leading economic indicators
were due out (GMT 12:30). Market was looking for weak numbers;
USDCAD was sitting 20 points off multi year low. The USD was getting
chopped up elsewhere, especially against GBP and EUR. I entered stop
loss orders 10 points below market price just prior to news release; my
thinking was if the numbers were pretty good the lows in USDCAD
would be taken out because the flipside – USD – was tanking. Numbers
were pretty good – USDCAD collapsed.
There are trades similar to this almost everyday in one of the major
currencies. When I am wrong, most times I can pull my order and lose
nothing. Sometimes the number is just slightly good enough or bad
enough to trigger my entry; in those cases (rare) I am stopped out for a
10-point loss – worse case basis.
With a risk/reward ratio of 10 to 1, it is easy to imagine the potential
here.
2) Straddle
When the USD is sitting on the fence and a sudden wind (news release)
will determine direction I enter orders on both sides of the market to enter
if a scheduled news release is a surprise – significantly different than
consensus forecast. There are many indicators that are notorious for
coming in far away from consensus forecast – monthly unemployment,
retail sales, and durable goods to name a few. Unemployment and retail
sales are important directional indicators; as such, when the consensus
forecast is way off a price adjustment in the USD occurs. What’s key is
that the price adjustment is usually a lot more than what would be
expected based upon the forecasting error. What’s even more ludicrous is
that the government agency releasing the news states on their website that
the forecast can be off. Retail Sales for example; the government
acknowledges it can be 1.5% over or under; they call it statistical error.
Doesn’t matter. Fact is there is usually a big move in the USD when these
numbers aren’t close to forecast – and that ’s about half the time.
The straddle trade risk is 24 points. For example if EURUSD is 1.17 80-
84; a sl sell at 1.1770 and sl buy at 1.1794 are entered. Once one side is
triggered, the stop loss is moved to 10 points and then breakeven as soon
as practical to do so. As a general rule once the position has 5 points
profit the stop is moved to 10 points from entry and then to breakeven
when a 15 point unrealized profit is reached.
WHAT CAN GO WRONG
1) Scheduled Economic release: Headline number good, revision
bad (and visa verse)
2) Minutes, Monthly Bulletins: Good stuff and then bad stuff;
similar to above.
BOTTOM LINE
The new frontier is on-line FX brokers; they honor stops at the price – at
a price – when your level is reached your done. For example a 1.1790
stop in EURUSD is done when market reached a low price of 1.1790-94.
This is where they get you. In addition they can mess around with the
spread and stop you out. For example, interbank may be at low of
1.1790-92; they jack in 1.1786-90 and stop everyone out to 1.1786. Not a
problem with news trades as market usually gaps anyway.
There are other ways to take advantage of news trades; such as repeatedly
refreshing the government website that reports the news starting 30
seconds before scheduled release. Sometimes the news hits a little
early… and I hit a few bids (haha).
Although the strategy does best with guaranteed stops, the results would
still be good without guaranteed stops. However, the risks would be
greater. Since I have never been a fan of risk I prefer to enter orders prior
to news release.

Orders

Resistances And Supports JULY 20 , 2006

Outline – Things Traders Should Know

FOREX MARKET
-History and evolution of today’s FX market.
-History and evolution of foreign exchange rates.
-Personal experiences past 25 years in FX market.
-Description and evolution of FX brokers.
-Bank Traders
-Hedge Funds
-Financial Institutions
-Corporations
LONG TERM FUNDAMENTALS
Fundamentals that determine the long -term strength or weakness in the major
currencies include:
-Present and future government
-Economy and outlook
-Inflation and inflation target
-Current interest rates, anticipated changes
-Trade balance - is it a problem
-Current account - enough money flowing into the country
SHORT-TERM
Short-term currency movements are immediately impacted by:
-World events
-Comments, statements by government officials
-Unexpected changes in economic numbers
-Technical - charts
-Stock markets
-Bond markets
-Commodity markets
-Newspaper articles
-Interviews with influential individuals
-Rumors
TRADING BASICS
Trading in the direction of the prevailing trend.
Bar Charts
-Construction
-Identifying the trend
-Highs and lows
-Trend reversal
-Time
-Support and resistance
-Trend channels
-Sideways markets
-Limitations of bar charts
ON-LINE FX BROKER
-History of on-line brokers
-Resolving issues with on-line broker
-Basics of trading platform
-Entering orders
-Changing orders
-Using news service
-Using charts
-Advanced features
CANDLESTICK CHARTS
-History of candlestick charting
-Basics
-Formations
-Combining with western charting
-Combining with technical indicators
-Advanced concepts
TRADING SYSTEMS TOOLKIT
-Why use a trading system
-Basics of building a trading system
-Back testing a trading system
-Choosing a system that’s right for you
-Components of a trading system
-Other people’s trading systems
TRADING PSYCHOLOGY
-Trading with total confidence
-Staying calm and focused
-Remaining positive during losing streaks
-Goal setting
-Matching a trading style to your personality
-Visual Imagery – Rehearsing your moves
-The power to change
EVENT TRADING
-Profiting from release of monthly economic reports
-Placing stop entry, if done stop loss and take profit
-Capturing the move with little risk
-Holding periods
-Indicators go in and out of fashion
-Knowing what indicators are driving the FX market
-Combining technical analysis and events.
-Breakouts related to news event trades
TRADING RULES
-Amount and allocation of capital
-Stop loss orders
-Bucking the trend
-Closing trades without a good reason
-Averaging losses
-Patience
-Hedging
-Following others advice
-Reducing trading after loss
-Getting in wrong and out wrong
TECHNICAL ANALYSIS
-Entry signals
-Exit signals
-Trailing stops
-Retracements
-Market direction
-Momentum
-Combinations
-Price probes
-Sentiment
TRADING QUALIFICATIONS
-Knowledge
-Patience
-Nerve
-Good health
-Control over emotions
-Realistic
-Plan
CHART PATTERNS
-Mountain Top
-Head and Shoulders Top
-Double Top
-Triple Top
-Rounding Top
-Descending Triangle
-Broadeneing Formation
-Single Bottm
-Inverted Head and Sholders
-Double Bottom
-Triple Bottom
-Rounding Bottom
-Ascending Triangle

Results :-

0

move S.L to 177.17

thanks

Resistances And Supports JULY 19 , 2006

Understanding the FOREX Market

Understanding the FOREX Market

What are currency rates and why do they exist

When an American owned Toyota dealership in the United States buys

cars from the manufacturer – Toyota, Japan the price is in Japanese Yen.

The American dealership checks the current exchange rate of U.S. dollars

for Japanese Yen and figures out how many U.S. dollars each car will

cost. If the dealer chooses to do so he can call a Bank and enter into a

foreign exchange contract. The Bank will give him the Japanese Yen he

needs to buy the cars and in exchange the dealer will give the Bank the

U.S. dollars. The number of Yen the dealer receives for those U.S. dollars

is the exchange rate. For example, if the dealer received 112,000,000 yen

for $1,000,000; the exchange rate would be 112.00 (112,000,000 Yen/

$1,000,000).

To do this identical transaction on the FXCM platform, the dealer would

wait until the quoted price was 112 00-04. The dealer would sell 100 lots

at 112.00; thereby selling U.S. dollars and buying Japanese Yen. We

refer to this as selling USDJPY.

Without a reference exchange rate that the dealer could rely on and be

able to transact at, he could not do business with Toyota, Japan. Foreign

exchange rates therefore exist to facilitate trade between different

countries that use different monies.

History and evolution of foreign exchange rates

From 1944 to 1971 the world operated under a system of fixed exchange

rates. The U.S. dollar was convertible into gold at a set rate and all the

countries fixed their currencies to the U.S. dollar at a set rate. There was

no need for a foreign exchange market.

On August 15, 1971 all that changed. President Nixon announced that the

U.S. dollar could no longer be cashed in for gold. In 1973 the U.S.

formally announced the permanent floating of the U.S. dollar thereby

officially ending the system of fixed exchange rates.

Exchanges rates between different countries began to fluctuate widely;

creating the need for a foreign exchange market where exporters and

importers could lock in rates; clearly a prerequisite for doing business.

Simply put, an American Hondo dealer is quoted a price per car in

Japanese Yen from Honda, Japan. If the dealer could call a Bank and get

a current dealable price for USDJPY, then the dealer would know for

sure how much those cars were costing him and whether or not he could

sell them profitably in his dealership.

And this is exactly what began happening. U.S. importers bought their

Yen when they signed a contract to buy Hondos; then they left the Yen in

the Bank earning interest until contract payment date. It didn’t take long

for the Banks to figure out they could provide value added service by

quoting the importer a price for the contract date. The Bank did this by

simply starting with the current rate and adjusting the current rate to

account for the net interest earned or paid from trade date to contract

date. This became known as the forward rate.

History and evolution of the foreign exchange market

Because there was no central marketplace for transacting foreign

exchange in the early 1970s, exporters and importers could not accurately

track daily movements in the currencies. In fact, they had no prior

experience with floating exchange rates and therefore no in-house

expertise. They were at the mercy of the moneychangers, the Banks.

Overnight foreign exchange became a huge source of bottom revenue to

the banking industry.

To offset the risks of holding currency positions taken as a result of

customer transactions, the major banks entered into informal reciprocal

agreements to quote each other throughout the day on preset amounts. It

was understood that a certain maximum spread would be upheld, except

under extreme conditions. It was further agreed that the rate would be

supplied in a reasonable amount of time. Generally this meant the FX

dealer made the price within seconds, and therefore without calling

another bank for a second opinion. This was called direct dealing and all

the major banks participated.

In the beginning, banks were quoting customers one-way prices. The

customer would say where could I sell $10M USDJPY and the bank set a

rate. The bank left itself plenty of room for error, oftentimes quoting as

much as 50 points below the current market. This was a bonanza for the

banks. However, a lot of money was lost when other banks called for a

rate.

Description and evolution of the FX brokers

The first foreign exchange brokers came on the scene in the mid 1970s to

satisfy the demand for continuous price quotes in the major currencies

from the thousands of medium and small banks with significant customer

foreign exchange business to offset. These banks were unwilling to be in

the direct market because providing competitive rates to the large banks

was costing them more money then they were making from their

customers.

Initially the foreign exchange brokers installed direct lines to all the

banks willing to participate. Generally a major bank made a rate and the

brokers showed the rate to all the banks at about the same time. The first

bank to deal on the rate completed a transaction. The others waited for

the next rate. Any bank could make a rate; show a bid or an offer. Soon

the brokers became quite efficient at putting together a continuous twoway

price.

Reuters introduced a web based dealing system for banks 1992, followed

by a similar web based system introduced by EBS (Electronic Brokerage

System) for banks in 1993; although it took some time, by 1996 it was

clear the voice broker was being replaced by the electronic broker.

Around the same time web based dealing systems that corporations could

use in lieu of calling banks on the phone began to appear. Followed by

the first web based dealing systems for individuals. Today there are

hundreds of online FX brokers fighting for the business of the small

trader or investor. Some are good; some are not (more on this later).

The movers and the shakers in the FX market

It is widely understood that day traders in the aggregate do not move the

currency market much. They buy and sell and at the end of the day they

have no net long or short position. Therefore they have not changed the

demand/supply equilibrium and accordingly have not in the aggregate

had a lasting effect on the price of a currency.

What moves the currency market is the other time frame; central banks,

hedge funds, financial institutions, and corporations. These guys buy or

sell huge amounts and their time frame is generally weeks to months,

possibly years. Their transactions unbalance the market, requiring price

adjustment to rebalance demand and supply.

Furthermore, changing fundamentals or longer-term technicals generally

triggers the actions of the other time frame. Their affect on the price is

therefore two -fold; in addition to causing a demand/supply imbalance,

their actions generally reflect a price change that may have needed to

occur even if they did not get the ball rolling through large transactions.

Evidence that this is so can be found in the unusually large price moves

that often occur after significant scheduled economic news releases.

Oftentimes the move is much greater than what would appear necessary

given the deviation of the expected versus actual number (more on this

later).

Currency Trading Rules

Currency Trading Rules

1) Your maximum daily loss limit should be 2% of capital. This

allows you to trade without fear or emotion; knowing that your

worst day will not hurt you.

2) Be patient with winning trades. Don’t look for excuses to take

profit; use trailing stops based upon a systematic formula for

locking in profits.

3) Trade active currencies and only when significant price change is

occurring; trade in the direction the market is going.

4) The shorter the time frame, the more random currency

movements become. In the absence of news, don’t look for

fundamentals reasons to justify holding onto a losing position.

5) Traders, like the market, have up-trends and downtrends; when

your trend is up trade aggressively and when it’s down tread

lightly.

6) If you get into a currency position at the wrong price and time,

get out right. Getting in and out wrong is very expensive.

7) Economic news releases oftentimes create a move much greater

than the news itself justifies. Get use to this, it’s the norm and not

the exception.

8) Waiting is difficult and stressful when you have an open position

and the price is fluctuating in a narrow range. Get use to it; the

market range trades 80% of the time.

9) Never, under any condition, add to a losing trade.

10) Don’t try to enter the market at the top or at the bottom, allow the

trend to gain a foothold and join the move in progress.

11) Don’t spread yourself too thin. Focus on one or two currencies

and get to know them well.

12) Each currency has it’s own trading personality which must be

learned from experience.

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13) Trade where the market is going not what the price is; avoid

thinking the price is too high or two low.

14) Always remain true to your trading plan. That means maintaining

the discipline to control losses.

15) Keep it simple. The more indicators the more ambiguity.

16) Follow the market wherever it wants to go; don’t waste your time

predicting where it will go.

17) It’s easy to take money from the currency markets; the tough part

is not giving it back.

18) When everybody agrees you have the right position, you have the

wrong position.

19) Take windfall profits whenever you can. If you put on a trade and

get a quick 50 points take it.

20) Trade with your head. Not over it.

Before the Trade

Before the Trade

Relax. Breath in as deeply as you can and exhale slowly. Close your

eyes; see and feel the air as it flows into your lungs and out of your lungs.

Repeat this a few times; a relaxed mind and body is key to achieving

<>peak trading performance. Getting “pumped up” to trade is wrong; avoid it.

Visualize. Go over in your mind what a good trade feels like from start to

finish… A trade signal flashes on the screen. A smile comes across your

face. The game is on and the fun begins. You know the worse thing that

can happen is a tiny loss. You know taking tiny losses is inevitable and a

necessary component of your successful trading strategy that is

consistently making you money. You confidently enter the stop loss

entry, if done stop loss and if done take profit as one trade entry on your

broker platform. You don’t enter the stop loss entry first and then enter

the if done orders because that will cause you stress and take you out of

your game. You know staying relaxed and confident means avoiding

anything uncertainty. By entering all three components as one trade limits

your risk immediately and therefore you can remain “cool as a

cucumber”. You have been practicing entering orders and know you can

do it quickly and correctly. Your not thinking about winning or losing on

the trade, your not thinking what could happen if you enter the trade

wrong, your only focusing on the task at hand – entering the complete

order accurately and in a timely fashion.

Once you have entered the complete trade and double-checked it you’re

your thinking about when it is likely the next message flashed on the

screen will come and what action will be required of you. The trade has

gone 20 points your way and you know it’s coming – take half profit. It

flashes on your screen “take half profit”. You’re smiling. You’re smart.

You knew it was coming. You confidently enter a market order to reduce

your position by half. You don’t care about the rate. It’s like using a hand

grenade or playing horseshoes, close is good, gets the job done. You

reduced your position by half and locked in some profit. You checked

your remaining existing order to make sure it now reflects the trade you

did correctly. It does. You’re order is now for half of what it was before

you closed half. All good.

You know it’s coming if it’s not there already. There it is on your screen.

Move stop on remaining half to breakeven. This feels good. You know

you don’t need to rush or get stressed adjusting your stop to your original

entry level; market is about 20 points below that anyway. You glance at

the current rate and see it’s still about 20 points below your entry level.

Calmly you adjust your stop. No worries, no rush. Life is good. You

double check to make sure you adjusted the stop correctly. You did.

Your anticipating Jimmy’s next message. If the market starts going back

up Jimmy is going to flash “close position”. You’re ready. You know the

fill will be relatively ugly. Doesn’t matter. You got 20 points on half the

position and worse case on the remaining half is breakeven. You got your

stop in at breakeven. There is nothing to stress about.

Market stops to drop and it’s 35 points from your entry level. You’re

watching the screen. You know jimmy’s going to take profit and close

the position or move the stop to protect profits. There it is, “move stop to

85”. That’s still 20 points above the current market. Easy peasy. You

effortlessly adjust the stop with two mouse clicks. The market is still

falling, now 50 points profit. You click on market order and close your

position. You look up at the screen and there it is. A message from

Jimmy “close trade”. You feel good about yourself. You took action

before the fact. Worse case was you locked in 50 points profit. You’re in

the zone. Acting independently but smartly, not emotionally. You double

check to see you have no position and your profit looks correct. It is.

Mission accomplished. You think about making a cup of herbal tea as a

reward for your fine performance.

Market continues to drop. The idea you could have made another 20

points never crosses your mind. You have better things to do with you’re

time than thinking about what could have been. You not anticipating

Jimmy doing anything right now. You know he will wait until the market

stabilizes, goes up somewhat and generates a fresh sell signal. You ask

yourself, “what did Jimmy see that caused him to sell?”. You know he

looks at 1 minute, 5 minute, and 30 minute charts to pinpoint entry levels.

You go back to the charts and see what they looked like when Jimmy

sent the stop loss entry order. What was he anticipating? What was the

trigger level? Why there?. Ok. New low for the day. That’s cool, makes

sense. But what else. Where was Swiss at the time. Oh, I see, Swiss was

already a lot higher. And Sterling was already above short-term trend

line. Look at USDCAD it had already spiked higher. How about

USDJPY. How about not, that currency is totally out of wack due to

intervention. How about EURJPY. Hmmm. Breaking trendline to

downside. Cool. Will help EURUSD go lower and that suits our short

EURUSD trade. How about EURGBP. Also breaking lower. Also

supports a lower EURUSD trade. EURCHF is a lot higher that’s not

good. Or is it. Could be the reason it’s higher is because traders are

buying USD and reaching to higher levels to buy USDCHF.

That would suits our short EUR long USD short position. Now I get it.

All the ducks were lined up in favor of EURO lower and USD higher.

That’s why Jimmy sold EURUSD when it too made a new low,

confirming it was ready to join the others and gain ground against the

USD.

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Orders

Resistances And Supports JULY 18 , 2006

Results


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Resistances And Supports JULY 17 , 2006

Building Your Knowledge Base

<>
Build a knowledge base; an understanding of what it is you are trading.

Why does it exist? When did it start? What does the future look like?

Understand generally what currency trading is all about and know a little

Bit about the history and evolution of the FX market.

Learn those aspects of technical and fundamental analysis that you need

To know to be a successful foreign exchange trader.

High-speed number crunching capability is a relatively new thing and as

Such many traders rely on highly mathematical technical indicators in

Arriving at their buy sell decisions. In my opinion number crunching is

Highly effective in some areas such as arbitrage but its ability to

Profitably forecast future price changes is suspect, especially when

Fundamentals are completely ignored.

Fundamentals refer to the Government itself and its policies and all the

Factors affecting the economy of a particular country and its currency.

Most technical traders pay no attention to fundamentals. The argument is

That current price reflects all available information so there is no need to

Know the fundamentals. Their argument goes further and says

Fundamentals matter for long-term trading and should be ignored for day

Trading and intra-day trading.

The evidence as I see it puts fundamentals at the heart of short-term

Trading. In fact, upon close examination you will find that most

Meaningful daily changes in currency values occur after the release of

Scheduled monthly and weekly economic numbers. At the very least, it is

Widely accepted that when an economic report is released and the number

Is much higher than the estimate or much lower than the estimate, a price

Adjustment will soon occur to reflect this new information.

In itself that makes day trading fundamentals a viable and extremely

Profitable venture. There’s more. Upon close examination you will find

That at times unexplainable relatively large price changes occur in

currencies following scheduled economic releases that are right on the

mark – exactly as expected. Why this happens no one knows for sure.

Later on we will explain why we think this happens and how you can

take advantage of it and book serious trading profits.

In order to take advantage of these opportunities, getting in early and

confidently, you need to understand the fundamentals. In addition to

knowing the fundamentals, an understanding of market expectations and

market sentiment is also required.

Simply put, market expectations are what the economist forecast the

economic number would be. When the economist are wrong in their

projection (the actual reported number is meaningfully different from

what the economist forecast) the currencies react, oftentimes

significantly. We dig deeper into the projections for clues of their likely

accuracy. For example, we believe an economist for a brokerage firm

would tend to be consistently overoptimistic. We go further, studying the

past forecasts versus actual for clues of likely accuracy or more

importantly for our trading purposes – likely inaccuracies (more on this

later).

Market sentiment is how the market feels about a particular currency in

general. For example, recently the UK had the issue of a government

official spinning the Iraq chemical weapons information; the GBP

therefore had a dark cloud over its head. Despite clearly improving

economic numbers the Pound was weak. In time the cloud passed and

now the Pound is a darling of the currency markets (more on this later).

Suffice it to say, to be a complete trader requires an understanding of

what, why, and when the market moves. Armed with this knowledge it is

much easier to initiate a position because it makes sense to you. Missing

a two hundred-point move because “it doesn’t make sense” is a

knowledge deficiency and not an option for a complete trader.

Once your foreign exchange knowledge base is in place you are a step

closer to trading but your not there yet. Next is money management. How

much you want to invest; how much of a return you’re looking for; is the

relationship between the two reasonable and doable? How much can you

risk at one time and expect to survive the bad trading periods. How you

should react to bad times – and good times. Why are you trading? What

are you really looking to get out of trading?

Work with yourself to answer all these questions truthfully. Then put

together a trading plan that works for you. Then stick to your plan; it is

vitally important (more on this later).

The online foreign exchange brokers are in business to make money. I

have been dealing with them and know many of their strengths and

weaknesses. You can benefit from my experience. Know what to expect;

how to best react to problems as they arise (more on this later).

Spend some time trading a demo account. Become an expert on the FX

platform of your choice before trading with real money.

Good luck.

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