Forex Trading

Trade Leader Or Kahana presents technical analysis of EUR/CHF.

EUR/CHF is not like any other pair. Most of the time the price is held in a tight range. Please notice the most important highlights when trading in this pair:

  1. Recently, the average daily range is about 15 pips.
  2. Using the short time frames (15M to H1) in order to find entries. [I am using the hourly chart.]
  3. Use more than one indicator to find good entries. [When the graph is held in a tight range, some indicators will provide you with false entries.]
  4. The pair is for scalping.
  5. Hedging is possible.
  6. Patience and perseverance are necessary. Some trades can reach to their targets after a long time. If you are already holding a trade in EURCHF for a quite some time, you need to make an adjustment of the take-profit in order not to lose due to the interest.

EURCHF painted a bearish pattern in the monthly chart suggesting a nice decline to 1.2071. The graph usually moves between the upper Bollinger Band to the lower band and the contrary. In this case, EURCHF monthly graph began its movement in the upper band, closed a candlestick below the 20MA (the middle band) and should reach the lower band price level.\

EUR/CHF Chart

In addition when observing the Woodie's CCI weekly chart, one can see that there was an extreme movement upwards, the 50CCI (in black) toke off to 550CCI area.
In most cases, when the 50CCI reaches to the 200CCI, it will also reach the -200CCI.

I will monitor the hourly chart looking for a bearish entry. I am using a few indicators to help me to prefect my entries: Bollinger Bands, Woodie's CCI and Moving Averages (MA) and the best is to combine them with Japanese patterns (if created).

The final target is at 1.2071. As mentioned above, this pair is for scalping so the final target should not be used as your take-profit. Monitoring the short time frames (15M – H1) will provide you enough entries that in total could give you an opportunity for nice profits.

Since peaking out in mid-March just shy of 1.13, USD/CAD has been making fairly rapid progress to the downside. With the market having now broken 1.07 to the downside, however, it is probably a good point to look for the volatility to ease off and some support to develop. A starting point for thinking that way is the seasonal pattern for the pair. It has generally been a negative one for the last several weeks, but over about the next month or so that shifts to a more positive bias. This certainly isn’t to say 2014 couldn’t see the market go against the historical averages, but it gives us a reason for caution when considering playing the short side from here.

Perhaps more significant, though, is the weekly chart pattern. As can be seen below, the market has now retraced to just above the peak from July 2013. That peak was in a rejection zone from the spike high of October 2011 and even when it was broken in December it took a few weeks before the market could muster enough strength to pull clear. That suggests strong resistance, which now likely means good support.

USD/CAD chart

Of course one thing that could be seen as working in favor of a continuation in USD/CAD lower is the fact that the Bollinger Bands have only relatively recently begun expanding. Normally this would indicate a likely early-stage trend situation. In this instance, however, the Bollingers could continue expanding for a little while still without the market moving much as they catch up to the volatility seen of late.

What looks to be a good play from here is to watch for the market to move back up toward the area above 1.08 where it found support in May that was finally broken a couple weeks ago. That support should now be resistance if the market is to remain strongly bearish. Thus, a failed rally back in that direction would make for a good entry to play an eventual continuation to new lows for the move. And if the market can get clear above that resistance, then it’s probably not as weak as we might think.

1 Comment

Trade Leader Or Kahana presents technical analysis of the EUR/AUD

EURAUD uptrend is in its infancy. EURAUD is building a potential bullish Vegas pattern in Woodie's CCI daily chart. The pair created three hills in the -200CCI area and two hills in the -100CCI area. I am trading with the trend but here is an opportunity to take a trade-edge, using a trend Reversal Pattern.

EUR/AUD chart - click to enlarge

In the daily chart, EURAUD started its uptrend from the lower Bollinger Band. Usually the graph moves between the lower band to the upper band and the opposite.

In addition, the graph built a bullish wedge, closed a daily candlestick above it and made a pullback to it. The Woodie's CCI H4 chart and H1 chart also painted bullish patterns. The 50CCI (in black) should reach the 200CCI in both charts.

In order to avoid the bearish corrections, one should wait for a bullish ZLR in the H4 chart or in the H1 chart to join the uptrend. You can learn more about the Zero Line Reject from my earlier post on the topic.

The initial target is 1.4521 (the upper Bollinger band level in the hourly chart). The final target is at the upper band level in the daily chart - 1.4711. The interest in EURAUD is very high so one might prefer taking this pair to the short term.

For my PhD research I am working with a data set that includes a couple of million trades. On a whim the other day I decided to have a look at how those trades break down in terms of a few different metrics. It’s not stuff that is likely to play any significant part in my dissertation beyond inclusion for descriptive purposes, but I thought it would be interesting for trades to see.

One of the things that jumps out of the data right away is clear evidence for what academics refer to as the disposition effect, but we traders simply know as holding our losers and cutting our winners. I’ve written about this a couple of times before (here and here). In case you have any doubts about how much this really happens, let me give you a couple of numbers.

In the approximately 2.4 million trades I’ve run the analysis on, the average holding period for a winning trade is just slightly over 1 day. In the case of losing trades it’s just shy of 1.7 days. In other words, trades are holding losers almost 70% longer than winners.

If that’s not enough evidence, I’ll toss in another tidbit. The average winning trade gains 0.194%. This is just looking at how much the exchange rate moved over the course of the trade. It doesn’t take into account the leverage used, so it’s not a net realized return. I’ll get to how things look once leverage is factored in momentarily. In terms of the losing trades, the average loss is 0.37%, so losers are almost twice as big as winners. Doesn’t sound like these traders are cutting their losses and letter their winners run, does it?

The win rate for all these trades comes in at just under 63%. Putting that together with the figures above, we get an expectancy in terms of the exchange rate move captured of:

(.63 x 0.194%) + (.37 x -0.37%) = -0.01468%

So what we have here is a situation where the average trade is a fractional loser. Now let’s factor in leverage, which I wrote about recently as well. Here’s where things get a bit ugly.

The average amount of leverage used in winning trades comes in at just under 7.7:1 while the leverage used on the losing trades averages almost 10.6:1. That’s a difference of about 30%, which is quite significant. So not only are forex traders failing to cut their losers and hold their winners, they’re also using more leverage on those trades.

Plugging the leverage factors into our expectancy formula we get:

(.63 x 0.194% x 7.7) + (.37 x -0.37% x 10.6) = -0.51%

That means on average each trade done is costing the traders in this sample just about a half a percent of their account balance. Not very good, eh?

On the positive side, these figures provide guidance in how to improve one’s own expectancy. The three elements of relative leverage used, win %, and the ratio of average gain to average loss are all areas a trader can look to address. They just have to not fixate on in the win% when they should spend at least as much time considering the other parts of the equation.

2 Comments

Trade Leader Or Kahana presents analysis of the AUD/JPY.

AUDJPY created numerous of bullish patterns on several time frames, from the hourly chart to the daily chart. The uptrend can develop into a monthly trend, depending on the monthly close.

AUD/JPY chart

AUDJPY created a bullish pattern in the Woodie's CCI hourly chart. The 50 CCI (in black) made a nice bearish movement by building two hills in the -200 CCI area and another hill in the -60CCI and crossed the zero line upwards.

In order to avoid the bearish correction, don't enter a long position in AUDJPY right away; wait for an hourly ZLR to perfect your entry. I've written earlier about recognizing Zero Line Rejects.

In the daily chart there is a potential for a ZLR in Woodie's CCI. If the 6TCCI (in blue) will reach the zero line a daily ZLR will be closed. It does not depend on the closing price level; it can be during this day or the next days. In the daily chart, the price also didn't reach to the upper band after it closed above the 20MA. Therefore, I expect the AUDJPY to target 96.440.

As mentioned in the first paragraph, this establishing uptrend can develop further even to the monthly chart.

Ron writes at Forex Magnates, "Bolstering features in its newly acquired Currensee copy trading network, OANDA has rolled out a new function called “Circuit Breakers”." Similar to "Fat Finger Rules" the Circuit Breakers refuse to replicate trades that would violate Trade Leaders' stated rules on currency pairs, leverage and drawdown.

Read the original article at Forex Magnates

2 Comments

Trade Leader Or Kahana presents technical analysis of the GBP/USD.

GBPUSD created numerous technical bullish patterns in three different time frames: hourly chart, H4 chart and daily chart. At the time of writing there is a long entry at 1.6787. If GBPUSD will be around this price, you can still enter the trade but if not one should wait for an hourly or H4 ZLR.

Aside this, the weekly chart is establishing a potential Bearish Wedge. It is only a potential scenario since there was not a third retest of the upper line of the wedge. In order to minimize my risk and help me avoid the bearish corrections, I would wait for a bullish ZLR in Woodie's CCI hourly chart or H4 chart to join the trend. To learn more about ZLR, you can read my previous post.   Additionally, I liquidate a part of my trade for the short term and a smaller part for the medium term.

GBP/USD chart, click to enlarge

GBPUSD hourly chart painted a bullish pattern which is called "Rising Three Methods". This pattern is created when a large bullish candlestick is followed by three or more bearish candlesticks that do not cover the large candlestick. The technical correction is weak and we should expect the trend of the large candlestick to continue.

The H4 chart built two bullish patterns both in the graph and in Woodie's CCI.

In the graph, the price started to rise from the lower Bollinger Band and usually in those cases it should reach to the upper band. Also, the woodie's CCI didn't reach the 200CCI yet, observing on Woodie's CCI, the bullish trend is not yet to end.

Last but not least the daily chart bullish wedge and the "Rising Three Methods" pattern. Both are indicating strength in the pair. In the daily chart the pattern in the Bollinger Band is brighter. The price rose from the lower band and closed above 20MA (the middle band). Mostly in those cases the price would reach the upper band.

My targets according to my analysis:

A: 1.6816

B: 1.6831

C: 1.6886

 

Trade Leader Or Kahana presents analysis of the USD/JPY.

The Japanese Yen is expected to weaken against a basket of currencies. Some of the pairs closed a bullish pattern for the short term and some for the long term. USDJPY closed a bullish pattern both in the Daily chart and the H4 chart.

Bullish on the USD/JPY

The daily candlestick from last Friday (06-06-14) is not a hammer but it is indicating strength in pair. It is seen in a brighter way in Woodie's CCI. The 6TCCI (blue) is under the 50CCI (black). The shadow below the candlestick body made the 6TCCI fold up and when there will be a movement in the capital markets; it will create a V shape and establish a bullish pattern in Woodie's CCI.

The H4 chart painted a bullish pattern which is called "Rising Three Methods". This pattern is created when one large bullish candlestick is followed by three or more bearish candlesticks of approximately the same size that close within the range of the large bullish candlestick. The correction is too weak and we should expect the trend of the large candlestick to resume. To read more about the rising/falling three pattern, check out my prior post.

In addition, the big bullish candlestick in the H4 chart (marked in a yellow rectangle) was opened in the lower Bollinger Band and was closed above 20MA (the middle band) and its' following candlesticks made a pullback to 20MA. Usually when a candlestick closes above 20MA it will reach the upper band. The initial target is 102.67 and the final is 102.75.

In order to avoid the bearish corrections, one should monitor the hourly chart and wait for a bullish Zero Line Reject (ZLR) to join the uptrend.

Two weeks ago when news broke about the first confirmed instance of gold price manipulation (because despite all the "skeptics" claims to the contrary, namely that every other asset class may be routinely manipulated but not gold, never gold, it turned out that - yes - gold too was rigged) we said that this is merely the first of many comparable (as well as vastly different) instances of gold manipulation presented to the public.

Read the original article at Zero Hedge