With daily ATR's falling on average 15% across most of the majors and the crosses, along with several inside days, the price action chop fest has begun as the markets digest the Himalayan sell-offs, we have witnessed over the last few months.

This was intimated by how the intraday Ichimoku Clouds have gotten very finicky, like college students on triple espressos waiting to take their final exams.

Taking a look at the chart below, we can see how the Clouds or 'Kumo' have started the flipping contrast. Notice how the white portion of the cloud goes from top to bottom to top Mexican jumping bean style all over the charts for the last several days.



Remember according to Ichimoku theory, the cloud represents support and resistance levels. The thicker the cloud, the thicker the support/resistance it should offer. If its constantly flipping from thick to thin, then that basically is communicating an opportunity is right around the corner for the pair to reverse instead of continuing on in any particular direction.

Thus, if you are looking to catch any substantial move, the floor might drop right out from under you at any moment. This requires a more nimble trading approach as the flipping of the cloud results from the price action being direction less or zombie like bouncing from pillar to post looking for fresh meat. When I see this kind of chart formation, I generally result to the following tactical methods:

1) Drill down to smaller time frames (i.e. 1 or 5 minute charts) *we only suggest doing this if you've had practice/success at these levels and are choosing pairs with smaller spreads.

2) Super-size the time frames up to the larger parameters, aka the 4-hour or daily charts. This will create a pseudo-smoothing method and help one to see the larger ranges in play and play for rejections off the Bollinger Bands or 20EMA's with correlating flat Momentum readings (12 period.)

3) The last option is to stay out which has been my more enjoyable method besides the 1min time frames. Sometimes, there just are not too many ladies for me to dance with on the dance floor. When that happens, I usually re-evaluate whether I am in the right environment or or whether I want to dance at all. I do Tango dancing so if there are no ladies around, then I'm generally not dancing. There will always be another Tango Milonga to go to and there will always be another trade in the markets.

Remember the markets have a close relative called Las Vegas, and you want to make sure you are not always playing hands just because you have time and money to play. In the same fashion, you want to pick your games, tables and times to play where you are most likely to succeed. Based upon the current price action, this trader suggests smaller targets, trading pairs with tighter spreads, perhaps using Bollinger Bands and pivots if you are looking for a rejection play, and being more selective.

The chart below gives an example of such plays using the Bollinger Bands on the 1hr charts.



Chris Capre is the Founder of Second Skies LLC which specializes in Trading Systems, Private Mentoring and Advisory services. He has worked for one of the largest retail brokers in the FX market (FXCM) and is now the Fund Manager for White Knight Investments (www.whiteknightfxi.com/index.html). For more information about his services or his company, visit www.2ndskies.com.

Tuesday, September 8, 2009

Forex Trading - The Building Blocks to Learning Forex

Forex education is a critical part of starting a successful forex trading endeavor especially for someone who does not really know anything about the forex market. A lot of people have already been duped about how easy it is to make money trading forex. Without the right fundamentals, you will only succeed in gambling away your money - reaping gains on minute and then losing them again in bad trades. It is only through a thorough understanding of forex trading can you truly make a carefully planned forex trading portfolio to earn both short and long-term profits. You can start with learning about the building blocks of forex.
In the Kindergarten level at the School of Pipsology, you will be introduced to the basics you need to know to actually understand what trading is. You will learn about the two types of trading, fundamental and technical, as well as the types of charts used in forex trading at this level. Making a fundamental analysis of the market will be taught by showing how the market is affected by the country's economy. A technical analysis, on the other hand, will involve looking closely into price movements using charts. These charts are also outlined in this level. As you move on to 1st Grade, you will zoom in to candlestick charts, the most common of all charts used in forex trading.

You will find that candlesticks are formed by plotting in open, high, low, and close figures. The significance of this kind of plotting will show you how the market is buying or selling. By looking at how the candlesticks are formed, it is easier for you to see the direction the market is taking and consequently make your own trading decisions.




About the Author
Timothy Stevens is a Forex Options Trader who owns http://www.NonDirectionTrading.com - He has helped hundreds of people on Trading Forex with Options.

He has recently developed a free e-course showing you a step by step process for starting your Forex Trading easier. To learn how to start Forex Trading with Options without wasting your time and losing more money, visit http://www.NonDirectionTrading.com/members/FreeReport.htm
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)