Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Search the Community

Showing results for tags 'forex'.



More search options

  • Search By Tags

    Type tags separated by commas.
  • Search By Author

Content Type


Forums

  • Welcome to Traders Laboratory
    • Beginners Forum
    • General Trading
    • Traders Log
    • General Discussion
    • Announcements and Support
  • The Markets
    • Market News & Analysis
    • E-mini Futures
    • Forex
    • Futures
    • Stocks
    • Options
    • Spread Betting & CFDs
  • Technical Topics
    • Technical Analysis
    • Automated Trading
    • Coding Forum
    • Swing Trading and Position Trading
    • Market Profile
    • The Wyckoff Forum
    • Volume Spread Analysis
    • The Candlestick Corner
    • Market Internals
    • Day Trading and Scalping
    • Risk & Money Management
    • Trading Psychology
  • Trading Resources
    • Trading Indicators
    • Brokers and Data Feeds
    • Trading Products and Services
    • Tools of the Trade
    • The Marketplace
    • Commercial Content
    • Listings and Reviews
    • Trading Dictionary
    • Trading Articles

Calendars

There are no results to display.


Find results in...

Find results that contain...


Date Created

  • Start

    End


Last Updated

  • Start

    End


Filter by number of...

Joined

  • Start

    End


Group


First Name


Last Name


Phone


City


Country


Gender


Occupation


Biography


Interests


LinkedIn


How did you find out about TradersLaboratory?


Vendor


Favorite Markets


Trading Years


Trading Platform


Broker

Found 145 results

  1. Instability can be off-putting, but the correct strategy will allow you to take advantage of it. While there are of course countless exceptions, traders generally find that their positions are more profitable during less volatile times of day. There are a number of reasons for this, and it’s something that every trader should work on if it’s an issue. Ideally, you need to be able to trade effectively at any given time of day, following any news event. We all have our strategies, but it’s important to remember that they might need fine-tuning and altering depending on when we’re trading. You might find that your strategy is particularly effective for the most part, but is prone to considerable failure sometimes. You have to ask yourself what the reasons behind this could be. In many cases, the degree of volatility in a market can flip a strategy on its head. If you can ensure that you are taking volatility into account, and can adjust your strategy accordingly, you’ll find more success. To explain what generally happens when volatility shifts, we need to look at the most common mentality of a forex trader. As already stated, this is an over generalisation, and there are many differing viewpoints, but primarily, the most common trading strategies have the following as their basis. When a traders sees the price dropping down towards a level of support, whatever that might be, and however it has been calculated, the instinct is often there to buy in anticipation of the bounce back up. Conversely, if a price is moving its way towards resistance, then more often than not, a strategy will look to sell before the expected drop. The problem with this strategy is that, when the market becomes more volatile, the price will frequently move outside these levels of support and resistance. When they do, you may well find that you lose out more frequently than you are in profit. The solution to the issue is to not only mitigate the potential negatives of volatility, but to actually capitalise it. The best traders have a way to deal with nearly any eventuality. If you’re one of those people who avoids the market when it’s fluctuating rapidly, then you’re missing out on a considerable amount of trading time. The Breakout Strategy A breakout strategy is widely regarded as one of the most effective methods of trading when prices are capricious. It takes advantage of prices moving beyond given levels of supposed resistance and support. In the simplest terms, when the price moves above resistance, the strategy would have you buy, and when it drops below support, you sell. The rationale behind this is that when things are unstable, they are inherently likely to break above and drop below the levels you’d expect. So what’s the best way of determining the levels at which you should measure support and resistance? Many are of the opinion that a relatively simple Donchian channel is the best method. For those that don’t know, this takes the highest high and the lowest low of the previous x amount of time. One of the most common, and arguably the best length of time from which to take the points of resistance and support, is 20 hours. The strategy is relatively simple then. You have your trading platform plot in the Donchian channel, and then whenever the price moves outside the parameters, you open the corresponding position. It is essential that you monitor things; volatility means that prices will move quickly, and you need to ensure you realise the profit. It’s also prudent to decrease leverage and tighten up any of your stop orders. Measuring Volatility Of course, the secrets to making this strategy don’t end there. If the volatility was low, prices would be likely to move swiftly back within expected levels. If you trade a breakout strategy in these conditions, you’re likely to see more losses then profit. The golden rule then, is to make sure that the market is truly volatile before you switch your methods. There are a number of different ways of measuring volatility, and you should pick whichever you find works the best. Your forex trading platform is likely to come with several different options, but you can always download additional ones. The standard deviation over a given period is the most common way of measuring volatility. A breakout strategy is by no means a fool proof method of making successful trades when the markets are volatile, but it is certainly a very useful starting point if you’re generally very cautious when prices look unstable. If you can take advantage of any given situation, then you’re far more likely to come out with a positive balance sheet.
  2. What are the factors that drive Forex prices in the long term?
  3. Countries that are looking to calm currency volatility or bring exchange rates to a more sustainable level can implement Unsterilized Intervention to accomplish their aims. Unsterilized Intervention will allow the monetary base of the domestic currency to change and can be seen in contrast to Sterilized Forex Interventions.
  4. Bit coin exchanges, such as the Trade Hill Exchange, offer clients the access to buy and sell currency on a digital platform. Bitcoin software allows traders to protect against changes in inflation, as these applications are designed to progress as a geometric series. The Trade Hill Exchange caters to some of the more exotic currencies (such as the Chilean Peso and Indian Rupee) but more commonly traded currencies can be bought and sold on the Trade Hill Exchange as well.
  5. As most forex brokers offer traders a large amount of leverage in the current trading environment, Transaction Risks are arguably higher now than at any point in market history. Individual traders must keep this in mind when placing trades, as over-leveraged accounts can quickly lead to margin calls and significant losses.
  6. Virtual Balances are something that traders should pay special attention because this is a good indication of whether or not your account is trading too close to a margin call. When this is the case, leverage should be scaled down to more managable levels.
  7. There are so many novice traders who get introduced into the "Forex world" and they hear about all the money you can make in this profession, but after 6 months, a year, or maybe even 2 years if you a persistent, they give up trying to master the markets because they say its impossible or too hard, does this sound familiar? Sadly i hear about this far too often...I am a piano instructor, and lesson after lesson i hear "Teacher, i'm so excited, i practiced for 8 hours this week!" only to be disappointed because the piece sounded exactly as it did last week. The students weren't lying, they did indeed play the piano for hours, just like they told me, notice how i changed the word from "practiced" the piano, to "played" the piano? Just changing a single word, can have a huge impact on its meaning. To PLAY the piano is something i do for enjoyment, just pleasure for myself or for others, not planning on improving much of my performance during this period, but to PRACTICE the piano, to practice is to take your time, go slowly, look at the bigger picture, fine tune the timing, the finger positioning, the accents, dynamics, muscle control, muscle movement, taking a step forward in your skill/performance level by improving something that will better you as a pianist. This can be directly related to trading, people think that if they make tons of trades, they are gaining "experience" yes and no, you do need to make trades, and get the feeling of what making trades is like, watching the market unfold against you or for you, BUT taking trades alone, wont give you the experience needed to one day have the financial freedom we all ache for. There is a saying that practice makes perfect, but i think PERFECT practice makes perfect. Anyone can learn to have financial freedom from the markets, but it takes time, dedication, and will. Take the time to get the knowledge needed, PRACTICE and apply this knowledge on the market, and then start building up your experience. There are no short cuts in this field, but take one small bite at a time, and eventually those bites will get smaller and smaller and smaller. Go make some pips!
  8. I am designing software which will act as a trading tool for traders, trading on any platform and any instrument (stocks, forex, commodities). Some of the features are listed below. I would like to gauge a sense of its demand before I launch it publicly and any input anyone may have. I am doing an early launch with basic functionality so I can fund the additional enhancement on the system (some listed below) 1) can read data of the screen and compare between two platforms and place trades automatically to capture arbitrage and spread trading opportunities. NO API NEEDED (finished) 2) NO API connection or back end software integration needed to read data of your broker’s platform and then place trade on their system (finished) 3) automates traders movement on the screen to place trades automatically when trader defined basic parameters are met (finished) (advanced algorithm based parameters still in progress awaiting additional funding) 4) ability to setup invisible stops limits, place stops in the tool instead of brokers platform, and when price is met, the software will place trade on the brokers platform (finished) 5) communicate data of your actions (buy/sell signals) to multiple traders (using this platform) simultaneously so they can follow your actions on their platform. (work in progress-awaiting additional funding) 6) if you are a recipient of another traders buy/sell signals, you can automate the action to place trade on your platform as simultaneously as you receive the signal and reduce reaction time. (work in progress-awaiting additional funding) 7) Advanced algorithm in simple language (work in progress-awaiting additional funding) I can post a video of the system in action (comparing rates between two forex brokers and then placing a trade between them to capture arbitrage opportunities). System is ready enough to place trades on arbitrage opportunities (I will post vdo shortly), trader defined stops limits. System will work on any platform and any instruments, including stocks, commodities futures (and capture spreads and arbitrage between them, faster than any human can)
  9. USDCAD: With USDCAD continuing its weakness and testing the 0.9841 level to close lower on Tuesday, the threat is for an eventual break and hold below the 0.9841 level, its Aug’2012 low. If this occurs, the pair will resume its medium term weakness towards the 0.9800 level. A violation of there will allow for a move lower towards the 0.9700 level, its psycho level and possibly towards the 0.9600 level. Conversely, the only way to prevent these bear threat is for it to decisively break and hold above the 0.9945 level. This if seen could propel it further towards the 1.0000/83 levels. A breach will aim at the 1.0105 level and then the 1.0165 level. All in all, the pair remains biased to the downside in the medium term.
  10. Managed Forex Accounts are generally pursued by people who want to invest in the forex markets but do not have the time or expertise to do so. Managed Forex Accounts offer different levels of education and trader involvement, which allow the capital owners to actively monitor their money.
  11. CONSTRUCTING A FOREX TRADING SYSTEM - PART 1 Before beginning our construction of a forex trading system we need to know whether our system is going to be purely rules-based and fully mechanical, or discretionary, or a mix of both (the most popular ones). We shall keep in mind that there are hundreds of systems available on the Internet trading forums, and I shall be posting several of the better ones on my blog, with the permission of the originators. But for now, we are going to build our own “from the ground up.” WHAT KIND OF SYSTEM? It would be wise for us to stick to purely rules-based trading for our first forex trading system. I say this because beginner-traders usually trade with their emotions, and with poor knowledge of how markets, indicators and charts really work. For inexperienced traders to be making discretionary trading decisions based on what the account balance is doing, can cause panic and uncertainty. Mechanical Trading Systems can always have a degree of discretion added later on, as traders grow in trading wisdom and experience. For example, it might be ok to simply take a “buy” trade because the rules say so, but to be buying when price is almost hard up against a strong resistance level, is not something an experienced trader would be looking to do. Therefore, discretion to ignore that signal would be used, and the trader would wait with interest, to see if a “sell” signal developed after testing the resistance level. There is far more to that situation, of course, but enough for now. FIRST PRINCIPLES … things we need to know and consider Right now we will keep our trading system simple. All we need to know is how to “read” the chart, so as to understand what kind of probability we have of price going higher/lower, and how to get into and out of that trade in the best possible places. In order to profit through trading, we need to be along for the ride when price moves … simple. Buy when price is going up … sell when price is going down … right? Well … yes … and no. Quite often much of the move is over by the time we visually recognise a change in the trend. Or the move is short-lived, and reverses or moves sideways before we can take a position, or establish any profit. But sometimes a strong trend commences, and it is these trends that make us the money in trading, providing we recognise an entry in good time. I should state here that many traders start their trading careers by trying to scalp the market. While I have no opinion on what you should or should not do, I would just say it is something that I would not be looking to do myself as a beginner. Why? Because scalping requires specialist knowledge of the instrument traded. The moves can be fast and furious – as can be the reversals. Traders need very well-developed reflexes to know and understand and judge what might be going on in the market when certain moves occur. Experience can tell the trader if the move is a reversal, or volatility. A novice trader would not be expected to understand or know how to handle that. Volatile price moves could be fake-outs, designed to shake weak hands from their positions. Or they could be just knee-jerk responses to news, causing great price swings before settling down again, and the previous trend, more frequently than not, resumes. Such trading occurs in the lower time-frames like the 1 minute and 5 minute and even the 15 minute charts. Traders of the higher time-frames, like the 1 hour, 4 hour and Daily time-frames call this “noise” and avoid trading it. It usually has little to do with the main trends. So let’s make our first decision based on time-frame to trade. For the purposes of this exercise, we’ll choose the 4 hour. This is a time-frame that gives us plenty of time to analyse, and is not easily moved by news announcements, or sentiment. And if there is going to be a change of direction, this time-frame usually sends signals to traders that it is going to do that, in time to react to what price is doing. Our decision will be unhurried, and low-stress. I should add that after we construct our forex trading system, we will be able to apply it to other time-frames too. Price action is said to reflect the thinking of the market participants, and the price activity seen in the chart is the manifestation of what the market was collectively thinking at that time. Well … we didn’t get far today. I had hoped to define all the parts of the trading system, but I can see it is a bigger task than I realised. I did discover one thing though, and that is if we are going to create a trading system, we have to define every component. There are sound reasons for that. I have never been one to simply put indicators or trend-lines or moving averages on a chart and expect to be able to make a trading decision based on what I can then see. If I have something on my chart, then I need to know it has earned the right to take its place there. I will have an expectation of it, to tell me its secrets. I need to have as many indicators and filters on my charts as I need to confirm my actions … but not more. If there are too many, then the purpose of having them there is defeated. Each filter chokes back the opportunities more. Each moving average and indicator screams “Look at me!” and soon you have a series of conflicting signals. We don’t want that. We want to keep it simple, and meaningful. We need to be able to look at every object on out charts, and KNOW why they are there, and WHAT it is that they are telling us. We'll take this further next time ... and hopefully get some real progress on designing our own strategy and system. _________________________ __________________ Posted in my Blog: http://forexapplepie.com/
  12. If you find that more often than not you are either in a trade, thinking about being a trade, or even “itching” to be in a trade, you are probably addicted to trading the markets. If you find it difficult to remove yourself from your computer after placing a trade or you are staying up until 3 in the morning watching every tick for or against your trade with frazzled nerves, you are probably addicted to trading. How do you stop your addiction to trading? If you are man enough to admit that you are addicted to trading then read on for some tips on how to break free from this addiction, if you want to continue on in denial of your addiction, then it’s better to click off this page now. Stop trading small time frames When I say “small time frames”, I am talking about any chart time frame below the 1 hour time frame. I personally believe these time frames are too full of random price movement that carries with it very little significance. As a result, I feel that traders who focus primarily on these small time frames end up getting “seduced” into over-trading because they naturally spend more time analyzing and watching the markets as a result of having more (mostly meaningless) price movement to analyze. We humans tend to be good at finding “patterns” in things, or meaning in things that perhaps don’t carry any inherent meaning. Traders are really good at doing this when trading the lower time frames. Also, any trading signal on a 5 minute chart is going to inherently carry with it a lot less weight than that same signal on the 4hr or daily time frame. So, if you want to break your addiction to the charts…stop watching the small time frames all the time, the reality is that it’s only causing you to over-analyze, over-think, and over-trade. Be accountable People who are addicted to drugs or alcohol lack accountability to themselves, they don’t care about their bodies enough to stay disciplined enough to stay away from substances that harm them. Similarly, traders who gamble their money away and who are addicted to the markets, lack accountability; they are unorganized and undisciplined and so they need something to be accountable to. The best way to inject some accountability into your trading is to develop a Forex trading plan based around an effective trading strategy, as well as a Forex trading journal. Then, you have to force yourself to actually use them; if you can manage to do this you will then have something to be accountable to. When you self-manufacture these tools of accountability in your trading, it helps you stay disciplined and helps to forge positive trading habits in your trading. Traders who gamble and who are addicted to the markets actually reinforce negative trading habits and thus it can be nearly impossible for them to turn their trading around. Understand that NOT trading IS a valuable position Another very important thing to understand that will help you break your addiction to trading is that NOT trading is often the best position to take. Think of it like this, if you are addicted to the markets and are over-trading, you are going to have many more losing trades than you would have if you were disciplined enough to simply not trade when you knew you shouldn’t have. Just to get back to breakeven you have to then hit enough winning trades to make up for all your losers. Whereas, if you simply had traded like a sniper and not a machine gunner, you could have avoided many losing trades and thus had a much more consistent and profitable equity curve. Don’t put pressure on yourself to make money The reason why many traders get addicted to the market is because they put too much pressure on themselves to make money from their trading. This is a very dangerous thing to do. Traders who find success in the markets feel little to no pressure, they don’t put too much significance on any one trade. If you see trading as your “only option” at having a happy life, you are obviously going to become emotional the first time you lose a trade, then that’s going to kick off an avalanche of emotional trading mistakes and trading addiction that will only result in you losing increasing amounts of money. In short, remover your “need” to make money in the markets, and the money you so badly desire will actually come faster. Making sure you don’t “relapse” As any addict knows, relapse is always lurking around the corner, waiting for you like an unavoidable temptation in the night. When you’re a trading addict, the situation is exactly same, and perhaps even more difficult than being addicted to drugs or alcohol, since you are still going to see your temptation (the markets) everyday. You have to consciously be on-guard against falling back into your old ways of being a trading addict. The easiest way to do this is to stay disciplined and organized by thinking about your trading like a business and making a trading plan and trading journal and using them with passion. You also need to keep in mind that you COULD lose money on ANY one trade, so keep that fact in your mind at all times while trading, and ask yourself before every trade if THIS is a trade that a I REALLY want to risk money on, and is THIS amount of money an amount I am TRULY OK with losing? In short, there is no concrete way to avoid slipping back into your old bad habit of trading addiction. But, you can pre-empt all your actions in the market by doing the things I just described, this will greatly increase your chances of avoiding a relapse. Also, you should realize that trading is a life-long event, so don’t get too hung up on any one trade; your trading success is measured over months and years, not over days or weeks. Find other hobbies, don’t get obsessed with the markets, and realize the markets will always be there, so missing out on a good trade setup is not a big thing. By and large, traders who take a slow and controlled approach to trading the markets make a lot more money over their lifetimes than traders who take a fast and emotional approach. Nial Fuller is a respected Forex trader and trading coach. He teaches forex traders to simplify their trading by learning to read the “raw” price action of the market and by trading with simple yet highly logical and effective strategies. If you want to find out more about him and his price action trading methods, check out his Forex Trading website here:
  13. The “Overlay” in a Currency Overlay gets its name from the overlaid hedging factors that are added to a company's forex portfolio. The key element of the practice is risk reduction and separation from the management of other assets.
  14. Hirose Financial is a FSA regulated subsidiary of Hirose Tusyo of Japan, a top 10 award winning FX broker established in 2004. The Hirose Group offers multiple platforms to over 120,000 clients worldwide, transacting over $90 billion of FX volume a month. In 2010 we became the first Japanese FX broker to open a FSA regulated office in London Technical Strength through Innovation Hirose utilises some of the latest transaction processing technology allowing it to transact thousands of trades simultaneously (using straight through processing) without requotes. It also means that traders can deploy any type of trading strategy you want, from scalping to long term trading due to the underlying liquidity that Hirose has access to.
  15. Cross-Currency Settlement Risk is a characteristic of the forex markets because of the global nature of each transaction. In many cases, the opposing currency in a forex transaction is not received until that particular market is open for business.
  16. The aim of credit netting is to reduce the number of credit checks that need to be conducted. The forex market is arguably the most active market and it is viewed as preferable to reduce the number of credit checks that are needed for leveraged trades.
  17. One of the things that separates the forex markets from those where other asset types are traded is the fact that currencies are priced in pairs. Essentially, what this means is that we are never buying or selling a currency by itself. Instead, currency performance can only be viewed in relative terms and this can have drastic on the type of trades that should be placed and the various strategies that should be implemented. If this didn't complicate things enough on its own, another factor that traders must understand is that some currencies are highly correlated with some of its counterparts and inversely correlated with others. But while it might seem to be a daunting task to research and memorize the ways various currencies align with each other, currency correlations can provide traders with potential trading opportunities and tactics for managing your total risk exposure at any given moment. Understanding Correlation Comprehending the interdependence that is seen in currency pairs is easier in some cases than it is in others. For example, when dealing with the EUR/JPY we would expect there to be some similarities to others, such as the EUR/USD and the USD/JPY. A trading session particularly strong buying activity in the Euro would likely send the EUR/JPY higher but if the same trading period saw the EUR/USD trading lower, we would know that the US Dollar was the strongest of the three currencies that session, with an inevitable run higher in the USD/JPY. More specifically, correlation can be measured using the “correlation coefficient”, which ranges from +1 (highly correlated) to 0 (unrelated or random) to -1 (inversely correlated). Currencies with a coefficient of +1 would essentially move in lock-step with each other. Currencies with a coefficient of 0 would have no decipherable relationship with each other. Currencies with a coefficient of -1 would show price patterns that are mirror images of each other. Of course, most currencies will not fall exactly into one of these categories and instead will fall into some interval degree of these three coefficients. Correlation Tables Many currency brokers offer currency tables that display the correlation coefficients of the most commonly traded pairs. These are updated regularly, so traders will always have the most up to date information. Below is the currency table that is offered by OANDA, separated by regular time intervals: The table above shows the relationships between the EUR/USD forex pair and its commonly-traded counterparts (along with silver and gold). Relative to the EUR/USD, the EUR/JPY has a 1-week correlation coefficient of 0.81, while the USD/JPY has a 1-week correlation coefficient of 0.57. To better understand these coefficients, the following descriptions are given: 0.0 to 0.2 Very weak to negligible correlation 0.2 to 0.4 Weak, low correlation (not significant) 0.4 to 0.7 Moderate correlation 0.7 to 0.9 Strong, high correlation 0.9 to 1.0 Very strong correlation From this, we can see that the 1-week correlation between the EUR/USD and the EUR/JPY is “strong,” while the 1-week correlation between the EUR/USD and the USD/JPY is “moderate.” The EUR/USD and the EUR/JPY will move in the same direction 81%, while the EUR/USD and the USD/JPY will move in the same direction 57% of the time. These numbers, of course, are constantly changing depending on the various market conditions currently in place. In this case, the longer term 1-year correlation became stronger in the EUR/USD – EUR/JPY, while it weakened in the EUR/USD – USD JPY. Interestingly, looking at the table above, the EUR/USD and the USD/CHF had a perfect negative correlation of -1 during the latest 1-week to 3-month periods. With this, we can see that these pairs moved in opposing directions 100% of the time. In the next article, we will look at ways this information can be used to construct trading plans.
  18. Commodity Pairs include forex pairs like the AUD/USD, the USD/CAD, and the USD/NZD. Since the economies of these countries are highly dependent on exports, they are given this categorization.
  19. Using Pivot Points to make Better Trades Pivot Points have been used by floor traders at the major equities and futures exchanges for a long time. Traders found that the price tended to hover near the pivot level and trade in between the pivot and support and resistance levels generated by a simple calculation based on the previous day’s high low and close. One advantage of using Pivots is they are a predictive indicator as opposed to lagging. Predictive Vs Lagging Indicators The majority of technical indicators most traders use such as moving averages and RSI are lagging. Meaning they are telling us what has already happened, or at best, what is happening in real time. Few indicators are predictive; one type of predictive indicator is Pivot Point study. Pivot Points use old data to predict future price movement, and, since technical analysis is based on the idea that many people looking at the same thing will draw similar conclusions, we can use pivot points in a variety of ways to improve our trading. Pivots have been used by floor traders for many years, traders found that daily price action seemed to fluctuate more intensely around certain levels based on the previous day’s high, low and close. Traders also found that by using the pivot point and the previous day’s range, high and low, they could set support and resistance levels that price respected. There are several methods of calculation for these pivots we will explore the classic calculation method in this article in detail but we will also discuss the alternative methods. Classic Pivot Points To calculate the pivot point, take the previous day or session’s high(H), low(L) and close©, add them together and divide by 3 [(H+L+C/3 = Pivot Point (PP)] Now we can calculate the support and resistance levels based off of the pivot, Support 1 is (PP x 2)-H , Resistance 1 is (PP x 2) – L =, S2 is (PP-Range), S3 is(PP-Range) x 2 and S4 is (PP-Range) x 3. R2 is (PP+Range), R3 is (PP+Range x 2) and R4 is (PP+Range x 3). Range is High-Low. E-mini S&P500 Chart: For this example we will use the E-mini S&P 500 futures. The previous session high was 1124.25, the low was 1110.25 and the close was 1122.25 Using these values we can calculate the pivot point, which is 1118.92, Support1= 1113.57, Resistance1=1127.58, S2=1104.94, S3=1090.92 and S4=10796.92. R2=1132.92, R3=1146.92 and R4=1160.92. Looking at this chart, we see that when price fell, it fell exactly to the first level of support and bounced higher. We used the exchange hours to set our session and ignored the Globex/overnight session when calculcating our pivot points. The reason we did this is because much more volume is traded during the exchange session and the institutions that really move the price are trading during these hours. Most institutions do not trade the low liquidity overnight session unless there is a news event. So when the market opened the next day it immediately fell and found support exactly at S1. The difference between R1 and S1 was about 14 points, which is a pretty large range for this contract. In other words, it would take a major event to push the price to the next level of support or resistance (S2, R2). By using S1 as the buy entry and our pivot point as a take profit level we can use S2 as the Stop Loss level, the difference between S1 and the PP was 5.34 (5.25 rounded down, which is 21 ticks on this contract), so that was our profit potential on this setup. Conversely, we could have set a buy stop slightly higher than R1 and a sell stop right below S1, this would be more of a breakout strategy where we look for the price to move through either level with momentum and continue down to S2 or move higher to R2. Alternate Calculation Methods There are several methods to calculate pivot points, 2 alternate methods are Woodie’s and Fibonacci. For Woodie’s method instead of using the previous session’s closing price, we use the current session’s open price. The formula to calculate the pivot point is PP=(H+L+(Today’s Openx2)/4. Our Support and Resistance levels are calculated the same way as the classic method. Another method is Fibonacci, this method uses the Classic calculation to find the Pivot Point (H+L+C)/3 but uses the major fibonacci levels to calculate support and resistance levels. S1=PP-0.382 x (H-L), S2=PP-0.618 x (H-L) and S3=PP-1.0 x (H-L). R1=PP+0.382 x (H-L), R2=PP+0.618 x (H-L) and R3=PP+1.0 x (H-L) Here is a table using the same Open, High , Low and Close data to compare the different calculation methods: Combining Pivots with other tools. Pivot Points are a valuable tool for any trader, however, no single tool tells the whole story, we are looking for multiple indicators to align and confirm a move. Meaning, if the price is nearing R1, our RSI is above 90 and we have an important Fibonnacci level at or around the same price, that validates our prediction that we will encounter resistance more than relying on any 1 indicator. It is important to look at different indicators that tell a different story. For example if you are using a moving average crossover for entry confirmed by a MACD, you are basically looking at the same thing in two different ways, a MACD measures the difference between 2 moving averages so of course the signal will be confirmed! But if we mix the inidcators up by using a momentum indicator such as RSI or Stochastics, now we are looking at 2 different instruments that are giving a similar reading. Combine these indicators with support and resistance tools such as pivots and Fibonnacci, now you have 3 totally different indicators for confirmation, that means you have a much better chance of making a good trade. You may find yourself taking less trades, however this is about quality, not quanitity. In the end, trading is all about probablilty, and if you put the probability in your favor over and over again, you will increase your chances of coming out on top. Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors. Jesse Richards is a Series 3 registered Commodities Futures Broker and a Principal of Fast Trading Services LLC
  20. After the union of southern and northern parts of Yemen in 1990 both Southern Dinar and Northern Rial was used as legal lender. However in 1996 Dinar was withdrawn from circulation and only Rial was considered to be the official currency of Republic of Yemen.
  21. The name given to the currencies traded in foreign countries are called Xeno currency. For example when Chinese yuan or Korean won are traded in US markets or exchanges it is considered as Xenocurrency. Governments or corporations deposit into foreign banks is also called XenoCurrency.
  22. In the forex market, standard lots are equal to 100,000 units of a given currency. Thus, a yard is comprised of 10,000 standard trading lots. Since this is more capital than individual investors possess, yards (or half yards) are generally traded by central banks and large private institutions. Trade orders of this size generally increase volatility and if these orders are not telegraphed, these trades can take many traders by surprise.
  23. Trading positions are generally based either on a fundamental news event, a collection of macroeconomic data, or technical chart analysis. Once positions are established, traders will either gain or lose money depending on the accuracy of their initial forecast, the initial entry level, and the price at which the trade is closed.
  24. Speculative Attack is a term that refers to a collective strategic investment that is made in order to push market prices in a specific direction. The word “attack” in this case can be viewed as an attempt to influence market activity. Defining what is actually a legitimate speculative attack can be difficult to do. Many argue that the use of the term is more closely related to political rhetoric, rather than an adherence to statistics. One way of understanding whether or not a true speculative attack has occurred can be seen in the length of time it takes for the currency to recover to previous levels. Quick recoveries are seen as less legitimate than recoveries that take years. An example of a speculative attack can be seen in the legacy of George Soros. In the 1990s, Soros led a speculative attack to drive down the value of the British pound in the face of questionable central bank activities.
  25. Since these transactions are done at central banks, and in large quantities, this tends to create a great deal of volatility for the underlying currency. Currency interventions tend to have questionable levels of success. In general a central bank’s economic policy will be directly tied to the acceptable value of a currency and when markets deviate from these levels, a central bank will attempt to reverse the trend. Since the value of the currency is a direct function of supply versus demand, a central bank can choose to weaken a currency by increasing supply, or strengthen a currency by limiting supply.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.