Monthly Archives: January 2010

Forex analyst Tim Mazanec posted yesterday on Forex Crunch about risk and reversal in the EUR/USD.  Starting with a dip into commodities (sugar??), Tim quickly moves on to the heart of the matter:

"To me EURUSD is the ultimate gauge of global risk-taking and if stocks are reversing then shouldn’t EURUSD be trading lower as well?"

He points out that the COT (Commitment of Traders) report, while extremely valuable, is also delayed by three days, an eternity in spot Forex.  Mazanec shows us how to use Currensee's Market Watch widget so see investor positioning in real time.

"The beauty of Currensee is that the MarketWatch table shows the positioning of traders and investors in real-time.  If you go from Long to Short you will see the change right away, not 3 days later.  There is also more than one way to view the MarketWatch data.  One way is to view the currency pair and positioning by positioning volume.  For instance, as of writing at midday on Monday (Jan. 25,  2010) 75% of traders had moved to Long in EURUSD.  Another way is to view the nominal amount of traders with a position at stake in a currency pair.  In this case it is almost evenly split with the amount of traders Long EURUSD vs. traders Short EURUSD."

This screenshot of the Market Watch Widget is almost 24 hours after Tim wrote his post and you can see how much things have moved already:

Market Watch Widget

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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We are trying something new this week. We know that every Forex trader has questions. From macroeconomic trends to trading strategies to managing risk, Forex trading can be overwhelming at times. That is why we are here to help.

Starting this week, Forex traders can post their questions to our Facebook Fan Page and Currensee’s own Chief Market Analyst, Shaun Downey, will answer them for you via a video response. We will be doing these Question & Answer sessions on a weekly basis, so anytime you think of a question, be sure to post it to our Facebook Fan Page.

Have questions? Post your questions now…

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

In the fast-paced world of Forex trading, information is everything, and timely information is, well, even more than everything, if that's possible. We've been burning the midnight light sweet crude at Currensee towers to bring some free educational webinars to market, and they're filling up fast, so sign up soon:

The Five Fundamentals of Forex with Jason Alan Jankovsky
Wednesday, January 27, 2010 11:00 AM - 12:00 PM New York Time (8:00 AM San Francisco, 5 PM Brussels)

Everybody knows that focus is a critical factor in trading success, but not everybody knows just what to focus on, especially when starting out. In this webinar, professional trader Jason Alan Jankovsky will outline five fundamentals that every Forex trader should know. Focusing on opportunities around the USD, Jankovsky will show charts and examples illustrating:

  • The Five Fundamentals of the USD
  • False Fundamentals: what doesn’t matter
  • Fundamentals in Flux: weathering economic change

Trading on Non-Farm Payroll Data LIVE with SpotEuro
Friday, February 5, 2010 8:00 AM - 9:30 AM New York Time (1:00 PM London, 9 PM Singapore)

Currensee and SpotEuro have partnered up to provide real-time analysis and commentary during the release of this very important economic indicator. Don’t miss out on a great opportunity to learn how to trade this economic report and ask questions while the market is moving!

  • EUR/USD will be emphasized
  • Learn how to trade during news events
  • See how technical analysis is applied to live market charts
  • Support and Resistance levels will be determined before the release
  • Ask questions while the market is moving

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

1 Comment

A fairly momentous week all round as a series of macro economic and political news hit the wires and created turmoil in Equity markets. Basically there were three stories.

1. China cooling down it economy by instructing banks to shut down lending.

2. Governments declaring pay back time on banks with a variety of policy suggestions.

3. Widening of Credit Default Swaps.

All three combined throughout the week to hit various sectors of the equity markets and cause a sharp selloff. Analysis of the S&P shows that only small further falls will see the whole of the rally from November taken out. 80% of it has gone in just 2 days. Equity markets hate uncertainty and there appears to be little to soothe those worries in the coming week.

For the more inexperienced trader it can become problematic in understanding, not only what all these things mean, but also how it affects the markets they trade.

So to point 1. China cooling down primarily affects commodities and therefore mining stocks and the Australian Dollar. On a broader front, China’s huge boom last year must clearly slow down as its current rate of growth, the economy would double in just 7 years. This slow down affects would economic growth.

Point 2. From Obama’s crackdown on proprietary trading, raising reserves, and a desire to make banks smaller, to Europe’s re-ignition of the Tobin tax, all point to the political need to persecute banks. They have not helped themselves by awarding large bonuses or having an arrogant attitude at the American hearings last week. My own view is the market has overreacted, but the war will continue between the two sides and continue to worry equities. The real problem would be if the plans were forced through (unlikely at present) and cause different parts of money market participants to engage in de-leveraging and leveraging at the same time. This is exactly the sort of problem that got us into the mess of 2008 in the first place.

Point 3. Regulatory and equity uncertainty are fuelling what is already an increasingly dislocated Credit Default Swap market. Greece has hit new highs, Spain reached its highest level since July last year, and America saw a move to a six month high.

So what does this mean for the Dollar and currencies in general? Normally equity weakness equals Dollar strength, but its performance on Thursday and Friday was relatively poor in view of the falls in stocks. However, the general trend remains up, which is negative for commodities, and a slow down in world growth (if it pressure equities severely), is also Dollar positive. It is Yen positive as well. When taken against the problem in Europe which equals Euro weakness, it is clear that last weeks breakdown can continue its trend. Poor statistics from Canada, the desire of the central bank to restrict Canadian Dollar strength, and further equity falls also point to Dollar Canada having further room to rise. The mooting of a fresh mining tax on Australian producers, plus its susceptibility to correlate with stocks, means this currency can also come under pressure. All three currencies against the Dollar broke down last week and changed there major trends on the technical measurements I use. Therefore, my strategy (the trend is your friend) is to use the times when economic statistics are released to take advantage of any Dollar weakness that moves to my support points. For now the macro political arena should overwhelm the normal economic statistical one.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Our good buddy and Senior Forex Analyst John Forman is calling the bottom of the USD in a post over at Forex Crunch.  Forman cites several technical indicators to make his case, including shallow retracement, a Band Width Indicator plot, and low N-ATR (Normalized Average True Range) readings.  I'll tease you with one of his charts, but you should check out the whole post at Forex Crunch.

http://www.forexcrunch.com/the-case-for-the-usd-having-made-its-bottom/

What do you think?  Are the days of inverse USD-S&P relations over?  Will USD bears start looking like fools with their charts on the ground?  Is this a sign of hope in the US economy?  As usual, only time will tell.  And, if you want more John Forman, be sure to check out his blog, The Essentials of Trading, and his Currensee webinar on using our exclusive Thomson Reuters IFR Markets Widgets.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Today is another Currensee first - the first Forex trading social network, then the first rewards-based Forex marketplace, and now the first success-based social trade automation system.  We're proud to announce the launch of the Currensee Trade Leaders Program,

As Currensee Trade Leaders, experienced Forex traders can attract and acquire trade “followers” from the fast growing Currensee trader network and be compensated for trading without the tedious effort of recruiting customers, managing money and reporting results.

The Trade Leader program is a great fit for traders who are confident in their success, open to the transparency of real trade performance and looking for a way to be compensated for trading successfully without all of the administration and effort.

So if you think you can trade Forex and you think you want to be compensated for trading success without a lot of administrative overhead, we think you should apply to become a Currensee Trade Leader!

Here at Currensee towers we love a good educational forex webinar.  As you know, trading forex alone in your basement can be lonely, so it's great to get out there - even if only virtually - and meet some more experienced traders and learn from them.  We're working on a whole passel of webinars (and would love to hear from you if you have ideas) but I'll just point out two:

Today at noon ET: Using Simple Moving Averages to find Support & Resistance Levels with Casey Stubbs of Winners Edge Trading

In this practical and results-oriented session for traders of all levels, Casey will discuss setting realistic trading goals and suitable risk and profit targets and will show you:

  • How to set up the moving averages on your charts
  • How to find support and resistance levels with moving averages
  • How to use moving averages to find good trade entry points

This session is $10, but Currensee members and readers of this blog can get in for 8 bucks via the Currensee Marketplace or this EventBrite link.

Friday, February 5, at 8:00am ET: Trading the Non-Farm Payrolls Data Live with Alex Kazmarck of SpotEuro

Currensee and SpotEuro have partnered up to provide real-time analysis and commentary during the release of this very important economic indicator. Don’t miss out on a great opportunity to learn how to trade this economic report and ask questions while the market is moving!

  • EUR/USD will be emphasized
  • Learn how to trade during news events.
  • See how technical analysis is applied to live market charts.
  • Support and Resistance levels will be determined before the release
  • Ask questions while the market is moving.

This session is free to attend although space is limited, and registrants will get a special offer from SpotEuro.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

My last blog post noted the spurious nature of what set off the downtrend, but since then there has been no denying that it has accelerated. So what next? Often when a trend is swift there is a temptation to close the entire position, when in fact the momentum is so strong, that the reality is that some portion of the position should remain and until that trend changes, day trade opportunities must be used to re-enter on any corrective move. These methods will be covered in future blogs and visual detail provided in a future webinar, but for now, what are the future drivers of the trend?

Firstly, while commonly used indicators such as the RSI and Stochastic are oversold, the inherent flaw in using such indicators means that bottom pickers will be active, and if price breaks down again, will simply add to the wave of selling. So what is flawed? It’s obvious when you think about it, but somehow an established mantra becomes law and few players actually question it. Markets are non-linear and the indicators are linear. In other words, while price can go anywhere on the upside and zero on the downside, the indicators are limited between zero and one hundred. Therefore any strong trend that see simply a one or two day correction can cause theses indicators to move disproportionally and encourage players to trade against the trend. If divergence is evident (as nearly all trends with these indicators show) this will simply encourage them further. Today’s positioning at the close of London in Currensee highlights this fact as it is 77% long.

One of my mantras of trading is this...if a runaway truck is hurtling downhill towards you, don’t stand in its way. Far better to wait for it to prove it has some brakes. At the moment for the Eurodollar, the break of 1.4140 and the close below the standardized limit of range at 1.4170 (a close below my 3rd Range Deviation Pivot from chapter 1 of my book Trading Time), is highly bearish. Greece has been at the forefront of the negativity, but I think the next thing to look out for is the fact that Spain’s credit default swap is also widening sharply. It hit its highest level since July last year today, and with Spain being a far bigger economy than Greece, further widening of the spread will begin to exert huge strains on the Euro’s credibility.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

We are now more than two weeks into the new year and the currency markets remain rangy and searching for a trend. This goes not only for the USD but the Euro, Gbp and Yen which have all been oscillating in ranges thus far. Is this really all that surprising? Probably not given the issues on expected global banking regulations, global tax hikes, the slow G7 economic recovery and the US health-care/political landscape. Toss in a few holidays and many of us can’t wait for these ranges to give way and for the next trend to develop.

Others may not agree though. Some would argue that knowing levels that will act as strong support and resistance or finding divergences is far more important to a trader. For example if you dive into the Strategy section on Currensee the ‘MACD Strategy’ works off 5 minute charts and uses MACD readings for signals. It doesn’t get much more straightforward than that and it has been able to boast positive return since May, 2009.

Others would prefer to scalp the markets and not worry about whether we are trending or oscillating. Just looking at the cumulative return of the ‘Channel Scalping’ strategy used by one trader does not show the entire picture of this strategy. Digging deeper shows that when this trader is scalping EUR/GBP on a 5 minute basis it reveals a 77% win-to-loss ratio. The return is a handsome 13.6% as well. This isn’t the only currency pair that shows strong win-to-loss ratios for this trader as AUD/USD, USD/CAD & USD/JPY all boast ratios of over 50%.

Still others may prefer trends and being able to buy the dip or sell the rally with confidence. I have a daily model that I utilize for EUR/USD; it produces a signal about 2/3rds of the time and utilizes very simple inputs to receive its signal. It went from Long to Neutral in early December and has been idle ever since (snooze). Back in the Strategy section though shows that others have been able to produce models that are a bit more active. The ‘Simple EMA Cross EA’ utilizes 30 minute time-frames and is being used, profitably, on the 4 major dollars.

Interestingly the top performing currency pair in the ‘Simple EMA Cross EA’ happens to be GBP/USD. The length of the average trade is just under 1 hour and it has widely outperformed EUR/USD in closed P&L.

I’m sure though if you or I looked for strategies that favored another currency such as the Yen there would be strategies in the Strategy section on Currensee that are worth taking a look at. This may be of interest for those that trade during Asian hours or want less sensitivity to economic sensitive news (with zero interest rates).

Point being that if you are trying to build a model of your own or just trying to find the right currency pair to trade then you may want to dig a little deeper than scanning the targets and cumulative returns. Sometimes not all currency pairs trade in a similar fashion therefore finding the right pair for you may make all the profit and loss difference in the world.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

1 Comment

Last week it was noted that the Eurodollar currency was trapped, but it was required to stay above 1.4515 to confirm that a new higher trend could develop. It managed to do this for almost the entire week, (although without any much needed acceleration), before the overnight session on Friday saw the original break out point at 1.4440 give way. On waking up Friday morning it was clear that only this currency had shown any real weakness, so it was necessary to look for clues as to what it was. After scouring the wires the conclusion was that a rumour that Angela Merkel would resign was the reason. However, a government spokesman said: 'Rumours about Angela Merkel's resignation are just pulled out of thin air.' The origin of the rumours was unclear. The break actually occurred at 1 a.m. U.K. time when the market is at one of its thinnest moments, when a critical support point was breached.

By the time the main market woke up, the lack of any real reason for the break (for those who don’t believe in Technical’s), led to a somewhat spurious excuse that feeds on itself to explain the move. This type of justification after the price move is a classic example. Another common one is that one major block of players such as funds are coming into a market. Again, in a world far removed from past decades when FX was traded on the phone and by human market makers, and therefore there was a degree of visibility, in the current trading environment, large players go to great lengths to hide there activity via sophisticated automatic trade engines. This has led to such terms as “Dark Pools”, which is a term for hidden liquidity. The question for traders, who are not in the professional market, is whether they are at a disadvantage. This is where Currensee’s social indicators and views of the communities positioning can provide some visibility that is relevant and up to date. It is easy, if discipline is not strict, to feel that the market is conspiring against you and can cause great damage to the ability to trade. Your position is wrong; the reason why seems nonsensical, and hope can easily enter your trading plan. This is nearly always ruinous.

So what is the solution? It may seem obvious, but there are two basic rules. The first is simply to day trade in your time zone, so there is no overnight event risk. Tomorrow is always a new day and opportunity. The second is the placement of stops. Whilst it is true that volume is thin in Asia compared to the other time zones, the FX market remains the area of deepest liquidity among all the asset classes. It is far better to have been taken out of a trade, in order to be able to reassess your analysis when not actively involved. One of my key mental tasks, if a current position is causing me uncertainty, is to go back to my days as a market maker, when often you were forced to have positions you didn’t want.

My question is. If I didn’t have a position, would I get long or short? Again, it seems somewhat simplistic, but in cold analysis, it is often easy to eliminate one side of the market, as it is obvious that it does not coincide with your trading plan and template. If it doesn’t do this, then the answer is that you shouldn’t have a position at all.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.