Forex Trading Strategies 14

Currency Trading Strategy Number 74:
I just returned from a meeting with a group of young traders who
have been at the forex for the past two and a half months. They are
making steady progress, and I am extremely proud of them. I
thought I would pass along their observations that may prove helpful
to your own trading. They have backed off short-term trading, and
are more into position trading the forex – using a longer timeframe –
taking cues from the 1 hour chart. They also believe that signals that
occur on that chart are more powerful than those on the 15 min. For
example, a signal on the 1 hour would have more weight than an
indication on the 15 min. Basically, what they are saying is that you
should wait on a trade for confirmation on the 1 hour chart before
pulling the trigger, unless of course you see an ironclad setup on the
15 min chart. Trading is shades of gray ladies and gentlemen. These
ideas are working for them. That doesn't mean to say you can't
experiment on your own. If you do and find something that works for
you, please let me know, and I'll share it with the rest of the gang.

Currency Trading Strategy Number 75:
Clarification re Aug. 22/03 chart, thanks to Bill: Bill quite rightly
pointed out in the chart for August 22/03 that there were hammers
at 3:01 and between 5:01 and 6:01 that didn't take. My answer to
him was that such a candle should be complemented by some other
indication of a shift in price direction. For example, in the cases he
cited above, price did not break the down trendlines - so, in effect,
the hammers' supposed effect was nullified. To conclude, bar
formations that should signal a change in price direction should be
accompanied by other signals, including pivot points. In other words,
what happens to price around a pivot point when you see a hammer?
Does the pivot point support what the candle is saying? Thanks Bill
for this.

Currency Trading Strategy Number 76:
I was recently asked where one could find volume figures for a
currency. None of the popular sites carry it. Nor is it necessary as the
Forex is a very liquid market. Volume is somewhat redundant
anyway in that regard. You just need to use technical analysis to
trade the Forex.

Currency Trading Strategy Number 77:
Pay attention to that news. I had been calling for an advance in the
euro and Swiss franc and, sure enough, they both popped on bad
unemployment news in the U.S. September 5, 2003. News is not
noise in the Forex.

Currency Trading Strategy Number 78:
There are “talking” bulls and bears and there are “real” bulls and
bears. The real ones are reflected in volume and open interest. But,
these numbers are not available for inter-bank currency trading.
However, they are reported for futures markets, which represent a
good proxy for sentiment because they are primarily a vehicle for
speculation.
Turning points in currency markets often coincide with extremes in
open interest levels, which represent extremes in speculation. The
key here is to watch for extreme levels and extreme changes in both
open interest and volume to signal a possible change in trend.
Open interest numbers are of little use intraday. However,
knowledge of a change in trend or extreme speculation in a particular
currency based on open interest and volume can be valuable
information for any trader in any time frame. That’s where an
understanding of how COT works can improve your chances of
detecting the underlying bias to a particular FX currency based on its
futures counterpart, and anticipating its next move.
As at September 2/03, the commercial traders were extremely long
with their net futures positions on the euro FX and the Swiss franc
FX, versus the funds, which were extremely short. When you see
such extreme divergence between these two camps, you know that
price will probably follow the commercial traders’ lead.
The euro FX and Swiss franc FX represented good position trades to
the long side at that time. A good buy-and-hold situation for position
traders. Sure enough on September 5/03 we had bad unemployment
numbers coming out of the U.S., and both currencies popped. Who
could have guessed?

Currency Trading Strategy Number 79:
I think there is a misconception out there that you have to trade only
the 15 min chart. You can also trade off the 1 hr and daily charts. It
just lengthens the cycle. For example, when I called the euro and
Swiss franc to rise, you could have taken a position on the daily chart
and rode it up. That's all I'm saying. Likewise, you can wait to take a
position until you see a valid entry point on the 1 hr chart. Etc.

Currency Trading Strategy Number 80:
For newbie traders, it is probably best to steer clear of Mondays, the
day after a holiday weekend and end-of-quarters where there is a lot
of position squaring going on.
Of course, there’s more to be learned about currency trading
strategy in my original book on trading and the two e-books on
trading the forex – available only at currency trading strategy You
automatically get all three when you order at that link. If you are
reading this page, you probably already have these books, and are
reaping the benefits.