Tag Archives: Stochastic indicator

This is the third installment of our trader interview series.  Currensee Trade Leader JLFX Network (Ticker: JOLSU.G) uses a technical pullback strategy on overbought or oversold positions. His entry is based on Pivot Points, Moving Averages, Bollinger Bands, Relative Strength Index and Stochastic indicators. Exit is generally based on 3 to 20 pips of profit depending on market conditions and does not use lagging technical indicators. His stop loss is usually set at 2 to 5% total equity loss for all open positions as to prevent 'fix stop-loss hunting.' JFLX’s profit target for account JOLSU.G is a conservative strategy with 5 to 20 trades per month, an average growth of 2 to 4% per month and a total return of investment of 24 to 48% per annum.

Do you believe 2012 will be as volatile as the end of 2011?Currency Trader

The first quarter of 2012 will be as volatile as the fourth quarter of 2011 mostly due to the continuation of the Europe crisis and yen strength. The market will gradually stabilize when most of the global issues have been solved and rectified. Sometimes the best strategy is to not trade during high market volatility and uncertainty to avoid unnecessary losses.

What types of Forex strategies will continue to prevail in 2012?

Different traders will have there own strategy. A counter trend strategy, where a trader enters a position when the market has been extremely overbought or oversold based on technical indicators is my best strategy. Predicting an upward or downward trend is always difficult.

What would a breakup of the euro mean for your strategy?

It may be good for other currencies because the euro has too much weightage on the dollar. Movement of other major pairs will be more predictable and less aggressive without the euro.

 

Next week: Adantia LLC (Ticker: ROCED.A)

 

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

In case you haven’t picked up FX Trader Magazine yet (how could you miss it?), Currensee’s very own Chief Market Analyst and Head Pip Shaun Downey is featured in the latest edition covering the true meaning of overbought and oversold. As a newbie trader myself, one of the first concepts I drilled into my head was the Stochastic 80/20 and RSI 70/30 rules for identifying overbought and oversold. It’s simple, it’s concrete, and best of all, it relies less on my instinctive aptitude as a trader and more on my ability to read a semi-complex chart.

Is the ideal trading strategy built on the backbone of Stochastics and RSI? No, and Shaun will be the first to tell you these indicators by themselves can be “lazy and inaccurate”. But then again, you can really say that about pigeonholing yourself to any one indicator as a tell-all trading signal. From the MACD to Elliott Wave, every indicator can only tell you so much.

According to Shaun,

“The indicators of choice have limits of scale and the market in theory can move anywhere and often can do it very quickly.”

The most experienced traders spend years tweaking, abandoning, and perfecting trading strategies that are not only the right mix of indicators, but also weighing the importance of those indicators. It’s part alchemy, part art form.

If you haven’t come across Shaun’s take on overbought and over sold, we suggest reading it. If you want to see what strategies keep thousands of Forex traders tickin’ and pippin’, join them.

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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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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

1 Comment

I have had a few questions about what the strategy should be based on the statement on Wednesday. Some wondered whether the more positive tone would lead to higher rates and therefore continue the process of the carry trade unwinding and be Dollar positive. Whilst that is a distinct possibility it is not due to higher rate expectations as both the T Bond market and the short end of the curve rallied strongly on Thursday. It appears that the market perceives that the recovery is still too slow.

In fact, in contrast to the unemployment report which was so surprising it caused a news event to overwhelm the Dollars outlook, the recent strength I think is purely technical in nature. This has two basic facets. The first is the corporate repatriation of Dollars from overseas as we approach year end.

The second is due to the technical analysis based outlook. My commentaries have been showing that the Dollar has been building a base for some time now, but Thursday saw a key change as the Eurodollar, Swiss Franc, Yen and Canadian all switched their major trend on Thursday. The Pound and Aussie had already down so. I define a major trend change by the movement from one distribution into another. This means that what was perceived as fair value has shifted significantly and this has now occurred across the board. Adding to the momentum is the fact that traditional indicators such as the Rsi and Stochastic are showing overbought reading which encourages top pickers, who are then forced out as the Dollar makes fresh highs. On my measurements the Dollar is still far from overbought.

So what should you look for? The key will be the ability to stay in these new distributions or trends. This means 1.4515 on Eurodollar and 1.0340 on the Swiss need to hold any correction on a closing basis.

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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.