Forex and Trading News

May 5, 2012

Grid trading, also called the no stop, hedged, grid system has become very popular amongst forex traders because it does not use stops, is highly mechanical, has no reliance on direction, uses the natural wavy nature of the market, does not require indicators or charts to trade and can be easily automated.

On the downside it can appear complex and illogical initially, it can incur large drawdowns if poorly managed, requires more patience than normal and may require forex traders to make a huge paradigm shift it their thinking.
Grid trading refers to the trading approach which uses fixed price levels to enter and exit trades. Grid gaps are the gaps between these price levels.

The steps to trading the grid system are simple:

Step 1: A trader would start out by selecting a grid gap suitable to the currency traded.
Step 2: The trader would enter a simultaneous Buy and Sell in the currency. Normally this will be done at a round number value price for the particular currency.
Step 3: The transaction price would move away from the entry value by the grid gap value determined in step 1
Step 4: At that level the trader would enter another simultaneous buy and sell transaction. The trader will also cash-in or close the profitable transaction from the previous level and leave the negative transaction open
Step 5: Continue trading until positive or breaking even when the price reaches the next grid level. When this happens cash-in or close all transactions and start all over. You would also cash-in all your transactions if your transactions have reached your predetermined maximum drawdown level.

Apr 29, 2012

Watch the latest analysis of the GBP/USD, EUR/USD Forex pairs for the upcoming April 30th session in this video. GBP/USD — is a currency pair that simply hasn’t stop gaining lately. If you haven’t had a chance to enter the trade, you would simply be chasing it at this point in time. We have been straight up for couple of weeks. As such many traders have missed out on this move higher. Looks ironic with this move, UK has entered into recession. Having said that we broke out of 1.6050 level and any pullback in this pair we will find buyers to step in who have missed out this move. Quiet obviously the trend is up. So we like buying on dips for this pair. EUR/USD — we have a little bit of a downtrend line which could possibly turn out to be a triangle. We are interested to see how this plays out as the Friday session saw an attempt to get back over that line. The 200 MA is above this line. The European situation continues to deteriorate, as such the next couple of session is going to show whether or not this line is going to hold. We are currently bearish of this pair. We are suspicious of breakouts until we get above the 1.35 level as it would break not only the trend line but also the 200 MA and the next massive resistance level higher. If we fail from here looks like we will continue to grind lower and we will test the 1.30 level again.

Apr 28, 2012

The Double Bottom Pattern is a very strong bullish signal as it shows that the market’s sellers have pushed prices to low levels twice, yet failed to continue the rout of the currency pair. The psychological aspect of the pattern is that sellers will find that they simply do not have the power to continue the selling, and that they suddenly find themselves losing money. The fact that they have to buy the pair back in order to cover their shorts only adds to the power of this technical pattern.

The pattern itself starts with a prolonged downtrend, followed by a rise or bounce in the marketplace as buyers come in to offer support. After a while, the bounce dies off, and the sellers come back into control of the market. However, when they push prices back down to the previous lows, they find they cannot continue the bearish run on the currency pair.

The pattern suggests that the trend is changing, and it makes sense if you think about it. The sellers who were once in control are suddenly finding themselves unable to push prices lower. Not only has this happened, but many of them will get caught in the rise up as their positions are suddenly worth much less, or worse – are now losing money. When that happens, most traders will exit their positions, and as mentioned above, have to buy in order to do so. This of course, means more buying pressure.

Apr 26, 2012

The Zig-Zag Indicator is in some ways part moving average, and part oscillator. The reason for this is that it simply tries to smooth out noise in the marketplace and allow a trader to see clear trends. It can also be used to help identify certain patterns as well, such as the head and shoulders technical pattern.

The indicator is simply a series of lines that are drawn on top of price, in an attempt to show the overall direction of price. It looks similar to a series of trend lines, and can help keep a trader on the right side of the market. As it smoothes out the rising and falling of prices, it works in the same way a moving average does – pointing the correct direction of the market over time.

One thing that makes this indicator different is that is measures percentage changes in this overall price of a currency pair. Quite often, a trader will set the lines to change direction after 3–5% price moves. In other words, a trend will still be intact until the price goes against it by whatever setting the trader chooses. This helps the trader differentiate between a simple pullback, and a dramatic trend change. By knowing the overall direction and the difference between pullbacks and trend changes, the trader can trade accordingly.

The Zig-Zag indicator is also very good at making patterns more visible as the lines are much more straightforward than candles can be at times. An errant bump in price won’t change the overall lines on the indicator, so it is much clearer in that way. Used with other indicators such as oscillators, you will be able to spot changes in trends in a very clear and concise way. It will also help you understand when a pullback is about to turn back in the trend’s favor by combining this indicator with others as well, such as the Stochastic Oscillator.

Apr 16, 2012

Currency expert Rob Booker discusses the often-contested topic of holding open forex positions over the weekend and presents several merits and risks on either side of this debate.

Apr 5, 2012

Watch the latest analysis of the EUR/USD, USD/CAD Forex pairs for the April 5th in this video. EUR/USD — fell precipitously yet again as Draghi suggested something we all knew — Europe was going into recession. Dovish statements will almost always equal a weaker currency. The Spanish are having issues selling bonds again as well. It looks like 1.30 is definitely in the cards. The previous support—resistance area should offer resistance as well. Any rallies will be sold on signs of weakness or a break of the bottom from Wednesday session could be sold to 1.30. Below 1.30 level we will fall much quicker. USD/CAD — The Dollar keeps rising to parity level — 1.0000 level and falling. The easiest trade that we see is to sell once we get close to the parity level. The oil markets will continue to drive this pair and there is a significant resistance all the way upto 1.01 level. Signs of weakness in this general area could be sold for a quick gain.

Mar 31, 2012

Currency expert Rob Booker explains how the COT reports can give forex traders valuable clues as to what the smart money is doing.