Tag Archives: Trade Leaders

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

USDJPY daily chart painted a bullish flag. Flag is a technical pattern indicating a resumption of the trend. A bullish flag is created when there is a large upward price movement (that's the flag "pole"- marked in purple on the left picture) followed by sideways activity (three or more candles, marked in the light blue rectangle on the left picture) at the top of the flag pole, which do not cover most of the candlestick and are almost the same length.

USD/JPY chart - click to enlarge

The logic behind this pattern is that if after a healthy move its correction will be in a smaller range (sideways), the technical correction is weak and we should expect the trend of the flag pole to continue.

When entering this pattern it is better to examine other indicators to strengthen the entry point. Usually I am waiting for a candle that closes significantly (the amount of pips depends on the time frame of the flag) above the flag's resistance, but in this case I am using Woodie's CCI for improved entries. Woodie's CCI helps me to avoid minor or moderate corrections. I am observing the hourly chart looking for a zero line reject (ZLR) to join the uptrend. In the hourly chart, I marked in yellow, on the right picture, every ZLR that was created from the beginning of the flag (from 20.03.2014). Each of them gave a profit of approximately 10 to 20 pips. I will continue monitoring the hourly chart in order to take the next ZLR.

How does a bullish ZLR form?

First, a bullish ZLR must come after the first/s green bar/s. When the 50CCI (in black) is in the Zero line (ZL) region and rebounds sharply in a V-shape simultaneously to the 6TCCI (in light blue) which turns up in a V-shaped recovery below the ZL, close to -200. The pattern will be stronger if the V in both the 50CCI 6TCCI is big and very clear.

If a ZLR forms when the 50CCI is in the +100 region and the 6TCCI is in -100, it may not be the perfect ZLR. On those occasions, the established trend may temporarily resume and the 50CCI will swiftly return to the ZL in order to make a better ZLR.

In a previous post, I explained the nuances of the Zero Line Reject.

Trade Leader Or Kahana explains the Zero Line Reject and Woodies CCI.

Woodie's Commodity Channel Index (CCI) is a great technical indicator that provides continuation and reversal patterns. The indicator can be implemented on all time frames. I use Woodies CCI from the hourly chart and all the way to the monthly chart although the inventor of the indicator, Ken Wood (aka Woodie) uses the indicator for trading on charts of just several minutes without viewing the price of the selected instrument.

Woodie's CCI is not the common form of CCI that is available in every MetaTrader4 (MT) trading platform. You can download the indicator from this link (provided as-is, use as your own risk) or from any number of trading sites.

I use two averages in Woodie's CCI, 50 CCI (Trend, slow) and 6 TCCI (Turbo, fast). Let's first understand how Woodie's CCI works. When the Trend CCI (50) crosses the Zero-Line (ZL) from the top to the bottom, 4 grey bars will be initially painted below the ZL, followed by a yellow bar that suggests a new trend is developing and then a red bar, which confirms the bearish trend of the selected instrument as there is a sequence of 6 bars below the ZL.

When the trend CCI crosses the ZL upwards (from below the ZL), 4 grey bars will materialize, a yellow bar and the sixth bar and onwards will be green that confirms the established uptrend of the selected instrument. As with any other indicator it is best to use Woodie's CCI with other indicators in order to refine the entries and other indications towards the trade.

The ZLR

I would like to clarify one of the most popular patterns in Woodie's CCI, 'Zero-Line Reject,' or in short ZLR. Zero-Line Reject is a pattern used to join the established trend of the market after a partial correction has taken place. In other words, joining the trend after a partial correction, which is also known as 'buy on dips' where traders join the uptrend after a bearish correction or 'sell on dips' where traders join the downtrend after a bullish correction.

Resumption of an uptrend: ZLR forms when the 50CCI is in the ZL region and rebounds sharply in a V-shape simultaneously to the 6TCCI, which turns up in a V-shaped recovery below the ZL close to -200. The pattern will be stronger if the V in both the 50CCI 6TCCI is big and very clear.

Resumption of a downtrend: ZLR forms when the 50CCI is in the ZL region and falls sharply in a reversed V-shaped movement and the 6TCCI, at the same time turns down in a reversed V-shaped movement above the ZL close to +200. The pattern will be stronger if the V in both the 50CCI and 6TCCI is big and very clear.

Key Rules

1) The odds of the first, second and even third ZLR being successful are significantly higher than the seventh or tenth ZLR. When the established trend remains for a substantial amount of time without a healthy correction, the next dip may be very aggressive.

2) If a ZLR forms when the 50CCI is in the -100/+100 region and the 6TCCI is in +100/-100 (opposing the 50CCI), it may not be the perfect ZLR. On many occasions the established trend may temporarily resume and the 50CCI will swiftly return to the ZL in order to renew the ZLR.

3) When a ZLR forms after the 50CCI traded above +200 or below -200 multiple times, the odds of a successful ZLR are slim.

ZLR Examples in the FX Markets

USDJPY, Hourly chart, 04.12.2013

 

 

This is a perfect ZLR. In the highlighted region, the 50CCI (in black) was at the ZL region and the 6TCCI (in blue) was near +200 and a perfect V was affirmed in both averages. This is a ZLR for short trades.

EURCAD, Daily chart, 11.06.2013

 

 

In the highlighted region a ZLR took place when the 50CCI (in black) was at the +100 region. Not the perfect ZLR, will usually supply a small price movement in the established trend.

AUDCAD, Monthly chart, 01.07.2010


This is a ZLR for going long. The 50CCI (in black) was at the ZL region while the 6TCCI (in blue) was at the -200 region. Sometimes you will see a "double" V formation. If the ZLR pattern has been invalidated as a V was not painted (as highlighted in the purple circle), it may be wise to continue monitoring both the 50CCI and 6TCCI since there are many occasions in which a "double" V confirms the ZLR.

 

Recap

When I last wrote about my expectations for 2014, I laid out some ideas on where to see the EUR/USD exchange rate during the next few weeks, saying the top will at the 1.38 level. Less than a few hours later, on December 27th, 2013, the euro soared higher by 1.5%, breaking through 1.3800 and almost reaching 1.3900 before closing back below 1.3800; this was due to low liquidity and in this case the wick higher can be ruled out of our analysis. The market remained calm during the final days of 2013 and the rate was not able to close but one pip above the figure. As anticipated in the last analysis, the euro retreated from the highs set in late December to begin trading the first few days down 2.2 per cent.

Fundamental

There was plenty of economic data released out of the Eurozone and the US along with the ECB rate announcement and Draghi’s press conference, along with Non-Farm Payrolls out of the US. While Draghi continued to reiterate the extended period of low rates, low inflation and that all possible instruments will be used if the situation deteriorated, he denied the possibility of the Eurozone slipping into deflation. From these comments, I think inflation within the EZ will remain a very hot topic to follow and any further signs of lower inflationary figures the euro could come under pressure.

The US market was surprised early this morning by the release of weaker than expected non-farm payrolls. While most expected a figure near 200k, a surprising 74k jobs were added with the previous monthly figure revised upwards by 38k. The unemployment rate, however, was much lower than anticipated. The figure came in at 6.7% as opposed to the 7.0% estimated. This mixed bag of news created quite a volatile state during the first few minutes with the USD broadly lower against all of the majors. Some analysts are pointing to weather being a factor for the lower NFP figure while the decline in labor force participation rate contributing to the lower unemployment rate. What’s important is that the next FOMC meeting on January 29-30 will be held without a press conference. If economic data throughout the month continues to underperform, I expect the FOMC to hold QE steady and possibly lower the purchases by another $10 billion during the March 19-20 meeting.

Technical Analysis

With the dollar showing gains during the last 10 days, I think it’s safe to say that we should see some consolidation ahead of further gains. The pair is currently testing support at the lower end of the rising channel (1.3580) with 1.3800 remaining a key figure of resistance. A daily close below 1.3580 should signal a further slide to 1.3400, the 200 day EMA.

Short term resistance should be near 1.3650-1.3705 (currently 1.3442), the latter being previous support that was broken once the rally above 1.3800 failed to hold. I don’t expect gains above 1.3700 at this time and prefer to sell at those levels.

Longer term, I still favor the USD and a break below 1.3400 should confirm this analysis to the 1.300 figure before further consolidation. To the upside, only a break and close above 1.3800 would undermine my position.

Summary

Today’s movements have been volatile and another day of trading should provide better analysis of where the market is heading. Still favoring the short EUR/USD trade with the 1.3800 level as playing a key pivotal resistance level. Currently looking for dollar weakness to consolidate previous gains, especially seen on the DXY (dollar index). A break below 1.3580 should provide further selling to the 1.3400 level at which point I expect a break to cause a much larger drop, targeting 1.30-1.3100 level.

Short term resistance – 1.3650-1.3700

Short term support – 1.3580-1.3600

According to the Motley Fool, "get a new/better job" is #4 of the top 10 new years resolutions. If that's on your list and you're in the Boston area, check out these career opportunities at Currensee towers:

Inside Sales Representatives: Entry-level gig: make calls, give demos, study for and pass your series 3 and 34, earn commissions.

Inside Sales Manager: Manage a winning team to even greater heights.

Compliance Officer: Use your legal chops and experience with NFA and CFTC to help us take the high road to success.

Manager of Trade Leader Recruitment and Oversight: Manage the Trade Leader application and due diligence process

If that's not enough, we're also looking for some paid (yes, paid) interns in the Engineering group:

Software Development Intern

Development Operations Intern

What's more, we continue to accept applications for the ultimate Forex job, Trade Leader. If you're a professional Forex trader with rock-solid risk management discipline and a winning record, you may want to consider applying. But first, read about the due diligence process.

Alex Kazmarck of Trade Leader SpotEuro presents analysis of the GBP/USD.

Technical Analysis

The weekly GBP/USD chart shows a very long consolidation pattern in the form of a triangle following the big drop during the 2008 crisis. Once the bottom formed near 1.3500 a retracement began to take shape, finding a top just under the 1.6800 level, which can be noted as the 50% retracement level. This triangle continued to consolidate for the next three years until the first quarter of 2013 when it was broken to the downside; however, the move to the downside lost traction mainly due to the dollar and the risk-on environment. There was a double bottom in mid-2013 before the sterling began to rally back towards the upper end of its previous four year range.

Looking at the daily chart, focusing on the July impulsive movement that created a new low during 2013 but was unable to close below the figure, I think many are surprised at the resilience the pound has shown during the last few months. Most of the move can be attributed to a weaker dollar (USD Index) along with supporting evidence of stronger economic growth within the UK; however, I think it’s too early to call this a new trend until we see a clear break above the earlier mentioned 50% retracement.

Once the pair closes above 1.68, it should get a positive boost from a technical perspective and it will be “open water” all the way to 1.76, the 62% retracement on the weekly chart.  If this occurs, the analysis would have lost much of short term bearish potential I’m looking for.

While I’m not calling for any specific direction at this time, I’d like to note that the false breakout to the downside has also created a possible head and shoulders formation with the orange box representing the left shoulder and the current rally representing the “head” of the formation. It’s also interesting to point out the rising trend-line from the triangle acting as resistance.  Having said that, there is also an inverted head and shoulders formation with the double bottom representing the head and the 1.5850 level representing the neck-line as can be seen on the daily chart.

Summary/Outlook

Technically, this setup can play out in several different ways and I am placing more emphasis on the USD than on the GBP. While technically this pair has rallied quite nicely following the false break and double bottom, I am reluctant to take a long at these levels and would prefer to short the pair into a possible risk-off scenario going into the December FOMC announcement. I’m keeping an eye on the daily trend-line and a close below 1.5800 should support the bears. Once the pair closes below the 1.4900 level, the pair should continue to gain momentum and a possible retest of 1.43 and 1.36 will be targeted. Perhaps we’ll continue to see more range-bound activity with increased volatility.

Short term support – 1.6300 to 1.5850

Short term resistance – 1.6500 to 1.6800

1 Comment

We're super excited to be hosting another Webinar, this time featuring Trade Leader Spencer Beezley along with Bill Schneider and Licheng Cai of Currensee.  It's this Sunday, September 22, at 7:00pm New York time (that's 4pm in California and 9am in Sydney)

Currensee's Trade Leader Spencer Beezley and Licheng Cai, Currensee Trade Leader Selection and Due Diligence Manager will discuss Spencer's common sense approach to Forex Trading and why he was selected and chose to join the Currensee Trade Leaders Investment Program. Currently Investors can follow two of Spencer's strategies, TCM and Harbor FX. Bill Schneider, Global Institutional Sales Manager will provide a quick overview of the Currensee Trade Leaders Investment Program.

What you’ll learn by joining us:

  • Insight into Forex trading from a professional money manager
  • How to manage risk
  • The four steps to building and managing a Forex Portfolio

Upon completion of the webinar, we hope we have aided you in deducing if Forex is right for you and key things you should consider before making an investment on your own or with Currensee.  We hope you can join us, please register now!

We’re excited to announce a new regular feature on the Currensee Blog, Spencer Beezley’s Forex Trading Chronicles. Spencer Beezley, the brains behind two Currensee Trade Leader strategies is going be blogging about his personal journey as a trader, providing insight along the way into money management, smart leverage, backtesting, and building and sticking to a trading plan. Spencer has been a Currensee Trade Leader for about two years and holds both Series 3 and Series 34 Licenses. He has been a fund manager and Forex trader since 2008 as well as a developer and programmer of trading systems. He is a self-described “strong believer in rules-based technical trading.”  Look for the first installment of his Forex Trading Chronicles soon, and feel free to check out Spencer’s strategies at Harbor FX and Trimmer Capital Management.

FXstreet.com is organizing a special webinar together with Currensee Trade Leader Taylor Growth, tomorrow Thursday at 15 GMT / 10 am EST!

Tom Dawson and Josh Colton

In this webinar Tom Dawson and Josh Colton from Taylor Growth will discuss how a high degree of leverage can work against you as well as for you. Josh and Tom will discuss the risk/reward tradeoff, the importance of establishing your investment objectives and balancing your objectives with your appetite for risk.

Gift for attendees!

A special limited-time webinar promotion will be offered to all attendees of this webinar by Liquid Markets!
Details regarding this promotion will be announced at the webinar including eligibility, enrollment and terms & conditions. Don’t miss out!

REGISTER NOW!

If you never attended a webinar before on FXstreet.com, make sure to read our instructions.

Taylor Growth Company is a privately held financial services firm that was founded in April 2007 to develop long term savings and investment programs as alternatives to the stock market. We specialize in spot foreign exchange (Forex) currency trading. Investors have a choice of investment strategies at Taylor Growth Company. Taylor Growth Company is a member of the National Futures Association (NFA), and adheres to NFA guidelines and ethics. NFA # 0405331

The Currensee Trade Leaders™ Investment Program is the unique autotrading service that delivers a select network of emerging foreign exchange managers, called Trade Leaders. Once you open and fund your account, you simply choose the Trade Leaders you want to follow by adding them to your portfolio. By joining the program, you leverage sophisticated technology that replicates the trades of a Trade Leader in your account in real-time, regardless of where you are in the
world.

REGISTER FOR TOMORROW’S WEBINAR ON FXSTREET.COM

In the webinar a couple weeks ago a question came up from one of the attendees as to when the best time of day is to trade. This is a question that comes up a lot among forex day traders, though obviously most folks who seek to operate in that arena are constrained by the time zone in which they live. I’m going to present two distinctly different answers to the question – ones that contradict each other.

First, conventional wisdom
When the question of best time of day comes up the answer often put forward is the London/New York overlap period. The reason here is a combination of volume and volatility. London is the center with the highest average forex market trading volume, and New York comes in second (see The Most Traded Currency Pairs for specifics on which pairs are the most active globally and across regions). As such, there is maximum liquidity during this time of day for the major traded currency pairs.

On the volatility side of things the London/NY overlap is also the period when many of the most significant data releases and news items are released. Obviously, the NY morning is when most US data headlines post. Most UK and European data hits before NY gets going, but central bank statements and press conferences do happen in the NY morning. Also, key speakers often have their comments crossing the wires during the overlap period. In other words, there is a lot of news and data to move the markets and create volatility.

Thus, the London/NY overlap period offers volatility and liquidity, which many folk see as keys for worthwhile day trading. But wait!

Performance reality
The folks at DailyFX did a study a few months back looking at the performance of FXCM clients based on the time of day they traded. The results they came up with were entirely contradictory to the conventional wisdom noted above. They argue that it’s the lower volume NY afternoon, Asian, and early-European sessions which see the best trader performance.

Why so?

The author’s argument is that most individual traders tend toward a range-trading approach. This style of trading is ill-suited to volatile markets. As such, the news and data induced volatility we see in the London/NY overlap period is actually a negative for trading in the major pairs. They include a graph which shows a clear trough in the success rates of trades in the NY morning and another that shows the relative volatility peaks at that time of day.

Now, as I wrote in Optimize trading performance by time of day selection, there are some issues with the DailyFX article in its focus on win % as its main metric. The authors did include some system performance figures which provide some more results to back up the overall premise, though. As a result, I think it’s worth at least taking a very hard look at how your trading would do in different time frames during the day.

Makes you have to start wondering about conventional wisdom, doesn’t it? It should also have you thinking about opportunities to diversify your trading time of day. This may not be something you can do yourself because of your available time and locale, but using an autotrading system might offer you an opportunity to do so.

Editor’s Note: Originally derived from the webinar, the question examining what time of day is best to trade Forex had been answered by Trade Leader Taylor Growth during the Q&A session. Since he is a range trader himself, his response was congruent with the second part of the above answer, which leans towards the lower volume NY afternoon, Asian, and early-European sessions as yielding the highest trading success rates.

Taylor Growth explained that the best time of day to trade really depends on the strategy the trader is using. Since his conservative strategy is very technical, he believes it fares better in Asian sessions when trading European pairs. Since it is nighttime in Europe while the Asian markets are most active, no European news releases are making their way out and influencing trades.

This is our fifth and final installment of the trade leader interview series. In this post we ask three of our Trade Leaders what they think about volatility, trading strategies and the Euro. The traders are Janus Investments (Ticker: JASMI.I), Chen Investments (Ticker: CHCMP.S) and BAK Trading (Ticker: TCBRF.A).

Janus Chen BAK Trading Currensee

 

1. Do you believe 2012 will be as volatile as the end of 2011?

Janus: 2012 will bring more volatility than 2011, but in a smaller range than 2010 and 2011, because central banks will intervene to dampen volatility trying to set upper and lower boundaries.

Chen: Yes, it will be more volatile.

BAK: Yes, but volatility will only be 60-80% as 2011's ending months. The most volatile period is probably already over.

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

Janus: A portfolio of different non-correlated strategies will work in any market.

Chen: I think any strategies which can live well in 2011 will still have a chance in 2012, but we have to adjust our strategies to suit a riskier market.

BAK: Scalping and swing. Position trading will not prevail in 2012.

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

Janus: No change, our strategies are not based on long-term trends (monthly, yearly), but on short-term price action (intraday).

Chen: This is something tough for us to think about. I feel the only thing a trader can do is have proper "stop losses" in place.

BAK: Not much as I only focus on ultra short-term changes of major pairs. The Euro currency should still be around, at least for Germany, France, and a few other countries.

 

-------

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.