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Minggu, 22 Mei 2016

What are we to do with Sharpe ratio - forex trading strategies today

What are we to do with Sharpe ratio ~ forex trading strategies today


I wrote several times before how useless Sharpe ratio is for certain types of strategies: see here and here. Not only is a high Sharpe ratio quite useless in telling you what damage extreme events can do to your equity, a low Sharpe ratio is also quite useless in telling you what spectacular gain your strategy might enjoy in the event of a catastrophe. I came across another brilliant example of the latter category in the best-selling book "The Big Short", where the author tells of the story of the fund manager Mike Burry.

Mike Burry started buying credit default swaps in 2005, essentially an insurance policy on mortgage-backed securities, betting that there will be widespread defaults on mortgages. Of course, we now know how this story would turn out: Mike Burry made $750 million in 2007 alone.  But there was nothing but pain for the fund manager and his investors in 2005-2006, since they had to pay an annual premium of 8% of the portfolio.  Investors who measured the performance of this strategy using Sharpe ratio, without knowing the details of the strategy itself, would be quite justified to think that it was an utter disaster prior to 2007. And indeed, many of them lost no time in trying to pull out their investments.

So what are we to do with Sharpe ratio, with its inherent reliance on Gaussian distributions? Clearly, it is useful for measuring high frequency strategies which you can count on to generate consistent returns every day, but which has limited catastrophic risks. But it is less useful for measuring statistical arbitrage strategies that hold positions over multiple days, since there may well be substantial hidden catastrophic risks in these strategies that would not be revealed by their track record and standard deviation of returns alone. As for strategies that are designed to benefit from catastrophes, such as Mike Burrys CDS purchases or Nassim Talebs options purchases, it is completely useless. If I were to allocate my assets over different hedge funds, I would be sure to include some funds in the first category to generate cash flows for my daily needs, as well as funds in the last category to benefit from the infrequent black-swan events. As for the funds in the middle category, I am increasingly losing my enthusiasm.
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Sabtu, 21 Mei 2016

CAD CHF TREND LINE BREAK AS EXPECTED BUT WHAT NEXT - forex trading system resources

CAD CHF TREND LINE BREAK AS EXPECTED BUT WHAT NEXT ~ forex trading system resources


Having broken the Outer Uptrend Line as expected, the CAD CHF is now at a bit of a crossroads. The Double Tops that were formed were strong enough to lead to the bearish break, but may not be enough to push the pair down much farther. We could see the formation of a Range that eventually leads to the start of a downtrend, but if we see a strong Bull Candle above the Counter Trend Line (CTL) the Uptrend could continue.

Daily Chart below shows the breakout that took place below the Inner and Outer Trend Lines. Supporting this breakout were the Double Tops and the fact that we had rallied by  600 Pips, exceeding the Monthly Range for this pair.


DAILY CHART


Despite this break, the Double Tops seen here were too weak to start a significant downtrend. The first part of this pattern was strong, but the weakness of the candles for the 2nd `Top` rendered the signal too weak.


DAILY CHART

















The candles shown here, however, are closer to what we would expect for Double Tops.


DAILY CHART


So what can we expect at this juncture? Well one of two options. 


SCENARIO 1 - CONSOLIDATION ?


Since this breakout may not take place right away, the market could go into a period of Consolidation in the form of a Range. This is typically what you will see when the Monthly Range is hit and/or a Trend Change is going to take place.


DAILY CHART- RANGE SETUP?

















We would see a rally to form the 2nd Support to complete the Range followed by a U-turn to breakout bearish. The new trend would be formed as the Swiss Franc regains lost ground against the Loonie.


SCENARIO 2 - RESUMPTION OF UPTREND ?

The Uptrend could actually resume with a simple Bullish Candle and break of the Counter Trend Line (CTL). Even though we are at the Monthly Range of the currency pair, trends can also continue once the setup and signals are strong enough.


DAILY CHART
















Until the market shows us its cards, lets wait on the sidelines and then take appropriate action. Get familiar with how to trade these setups and then enjoy the Pips as they continue to roll in using my Methodology.





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Duane Shepherd 
(M.Sc. Economics, B.Sc. Management and Economics)
Currency Analyst/Trader
Contact: shepherdduane@gmail.com
Twitter: @WorldWide876
Facebook: DRFXTRADING 

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Managed Forex What are The Pros and Cons - forex h4 trading system

Managed Forex What are The Pros and Cons ~ forex h4 trading system


The decision to invest in a managed Forex account can be a difficult one. This is a significant decision just like any investment you might make. The big difference in this investment compared to others is the leverage used.

The leverage is actually borrowed money that the broker has given you. Because you are borrowing money you give them the right to close any trade as they need to protect themselves. If you agree to this then sign up and start trading.

If you have made the decision to invest in the Forex market then there are three different accounts you can invest into: standard, mini, and managed. Each option has both pros and cons and it will be up to you to decide which account is best for your needs.

1. Standard. This type of account is the most common. Basically you have access to a major amount of currency. The worth is $100,000. You do not have to put the $100,000 down in order to do trading. Basically, you need $1,000 in the account for t his to work.

Pros Forex brokers will often times give extra benefits and services to this type of account. The potential gain is also the very high as you are investing a serious amount of money into each and every trade.

Cons Capital Requirement - Most brokers would require you to have a starting balance of at least $2,000 and others more than that. Potential to Lose - Just like you could make $1,000 a day, you could also lose that $1,000 in a day.

2. Mini - This account allows money to be moved in blocks or lots. The mini lot is roughly $10,000.

Pros Risk - The risk is much lower because you are using such smaller lot sizes. This is great for who have little to no experience trading the forex market. It also allows for you to test out trading strategies with less risk. Capital required - The amount to start an account can be as little as $250.

Con Low reward - Because you are risking such a small amount of money then of course the potential gains will be much smaller.

3. Managed Account - The managed Forex account is different than the others. You allow your money to be traded by a professional trader in the hopes that he can do a better job than you.

Pro Professional trader - A trader with years of experience will be trading your account giving you more time as you will not have to constantly watch the market.

Cons Fees - You will be required to pay a fee of 20% to 50% of all the gains made on the account each month. Capital - Most managed accounts will have a minimum investment amount of $5,000 to as much as $100,000.

It is always wise to research as much as possible to see which option best fits your needs. Always remember it is your money and you have to be the one watching over it.

By Ryan D. Moxie
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Forex Intraday Trading Strategies What Forex Brokers Dont Want You To Know - gann forex trading system

Forex Intraday Trading Strategies What Forex Brokers Dont Want You To Know ~ gann forex trading system




If you are an intraday trader Forex, I want to let you in on a little secret ... you are your favorite dealer to customers. It is a well known fact among Forex brokers that trade in typical intraday trading strategies Forex very often, increase profits you pay differentials. You will be surprised to know that if you use one of the many trading strategies Forex Scalping there intraday, your broker can make even more benefits they are!

If its any consolation, youre not alone, unknowingly make your broker rich. There are literally hundreds of thousands of people out there using Intraday Forex trading strategies that are designed to make your broker rich. The good news is, it is a way to get the benefits from your broker right now, just to go against the conventional wisdom of the crowd. At the end of this article you aware of this little-known Forex day trading strategy that will make you more benefits than has never done, just by exchanging 10 minutes a day.


Most Forex intraday trading strategies revolve around the resale market for a few glitches here and there throughout the day. Intraday Scalping Forex strategies are apparently fine at first, because they have a very high probability of making the chain of successful operations. If you really think about it, though, because youre so pick a profit a few pips at a time, while a great loss to open as wide as it hits your stop loss, which have a very good chance of throwing your advantage a week or even months with only a bad loss.



Forex brokers do not want you to know is that there is another form of trade which is much more profitable than most strategies scalping Forex intraday trading. Called Forex breakout trading, and allows you to use much less often and make more profits, all at once! Consider this: Most people are happy to accept small gains each time to the emotional rewards of being right most of the time, with a lot to do with their own emotional needs erroneous and nothing to do with the profitable business in the long term. For the truth above the crowd and reach a level of operating income in the amount of talking, of course, you forget what everyone is doing and even go against them using commercially starting currency.

Boot Forex trading underlines that most Forex trading strategies intraday fall flat, because instead of being killed by the great movements during periods of volatility, Forex trading break allows you to make a killing on these movements spot! Not only the Forex trade more selective rupture and more profitable, more importantly, does not take big risks to make frequent small profits. Instead, pointing to a risk reward ratio of 1: 1, with an accuracy of 60-70% for consistent profits, stable and gives peace of mind to sleep well at night. Business start-change is not new at all, but barely heard because you hate Forex trader you will trade less with this Forex trading strategy intraday.

One of the best starting intraday trading strategy forex trading I found Forex is called Forex Trading applies the morning, and as its name indicates trades once a day. Forex Morning Trade is very low maintenance as well: you can manually change for only 10 minutes a day, or you can use the fully automated version that will do all the trading for you. I personally use Forex Trading morning and in the last six months, I averaged 300 pips a month trading profit. My agent received a blow to extend the benefits of since I started using it, but hey, Im in this to get rich and not rich for my agent. So if you are looking for a Forex trading strategy intraday tried to apply Forex trading successfully escape, then its time to get Forex Trading morning and start making serious money for yourself.
More info for Forex Intraday Trading Strategies What Forex Brokers Dont Want You To Know ~ gann forex trading system:

Kamis, 19 Mei 2016

USD CHF 100s OF PIPS BULLISH OR BEARISH - forex trading system reviews

USD CHF 100s OF PIPS BULLISH OR BEARISH ~ forex trading system reviews


Hundreds of Pips in either direction appear to be possible for the next few weeks if we see strong Bullish or Bearish breakout signals. The Weekly Range has recently been hit after a very long and slow trend and has now settled above a major Downtrend Line. A convincing Bullish Candle break above Resistance would put the 0,9400 area in play, while a break short to also take out the Uptrend Line would make 0,8700 the long-term bearish target.

The currency pair has started to move within a small Range above the Inner Uptrend Line, following a rally to the 0,9100 area.


DAILY CHART


The gains for the Swiss Franc also put the pair above a major Outer Trend Line of a previous Downtrend.


DAILY CHART

















As you can see, the recent uptrend was part of a break from the Inner Trend Line to the Outer Trend Line of that Downtrend. From this point, the market could either break higher for an even stronger Uptrend or break lower to resume the overall Downtrend. In continuing higher, the Daily Chart would first have to break the Resistance of its current Range setup.


DAILY CHART
















The first major target would be the next Weekly Range which would be at the 0,9435 area. Short-term targets will be hit along the way as traders exit profitable positions in this new uptrend. Equally profitable targets could also be hit going short if there is a breakout bearish from this Range along with a break of the Outer Uptrend Line.


DAILY CHART

Before breaking bearish, the currency pair could actually spend a little longer in this Range to carry it closer to the Outer Trend Line. At times, trend changes that involve Consolidation breakouts tend to take place simultaneously with Trend Line breaks to make the start of the new trend even more convincing (TRADE TIP).

See how the concept of the Weekly Range and Consolidation breakouts worked on past trades in the Free Preview of the Trading Manual;




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Duane Shepherd 
(M.Sc. Economics, B.Sc. Management and Economics)
Currency Analyst/Trader
Contact: shepherdduane@gmail.com
Twitter: @WorldWide876
Facebook: DRFXTRADING 

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Rabu, 18 Mei 2016

What You Didn’t Know About The Psychology Of Forex Market Trading – And How It Might Bankrupt You - forex king kong trading system

What You Didn’t Know About The Psychology Of Forex Market Trading – And How It Might Bankrupt You ~ forex king kong trading system


by: Joseph Plazo


When it comes to trading on the Forex market, winning is a matter of the mind rather than mind over matter. Any trader who’s been in the game for any length of time will tell you that psychology has a lot to do with both your own performance on the trading floor and with the way that the market is moving. Playing a winning hand depends on knowing your own mind – and understanding the way that psychology moves the market.

Studying the psychology of the market is nothing new. It doesn’t take a genius to understand that any arena that rides and falls on decisions made by people is going to be heavily influenced by the minds of people. Few people take into account all the various levels of mind games that motivate the market, though. If you keep your eye on the way that psychology influences others – including the mass psychology of the people that use the currency on a daily basis – but neglect to know what moves you, you’re going to end up hurting your own position. The best Forex coaches will tell you that before you can really become a successful trader, you have to know yourself and the triggers that influence you. Knowing those will help you overcome them or use them. Are you saying ‘Huh?” about now? Believe me, I understand. I felt the same way the first time that someone tried to explain how the mind games we play with ourselves influence the trades and decisions that we make. Let me break it down into more manageable pieces for you.

Anything involving winning or losing large sums of money becomes emotionally charged.

All right. You’ve heard that playing the market is a mathematical game. Plug in the right numbers, make the right calculations and you’ll come out ahead. So why is it that so many traders end up on the losing end of the market? After all, everyone has access to the same numbers, the same data, the same info – if it’s math, there’s only one right answer, right?

The answer lies in interpretation. The numbers don’t lie, but your mind does. Your hopes and fears can make you see things that just aren’t there. When you invest in a currency, you’re investing more than just money – you make an emotional investment. Being ‘right’ becomes important. Being ‘wrong’ doesn’t just cost you money when you let yourself be ruled by your emotions – it costs you pride. Why else would you let a loser ride in the hope that it will bounce back? It’s that little thing inside your head that says, “I KNOW I’m right on this, dammit!”

Bottom line: You can’t keep emotions out of the picture, but you can learn not to let them control your decisions.

To most people, being right is more important than making money.

Here’s the deal. The way to make real money in the forex market is to cut your losses short and let your winners ride. In order to do that, you have GOT to accept that some of your trades are going to lose, cut them loose and move on to another trade. You’ve got to accept that picking a loser is NOT an indication of your self-worth, it’s not a reflection on who you are. It’s simply a loss, and the best way to deal with it is to stop losing money by moving on – and really move on. Moving on means you don’t keep a running total of how many losses you’ve had – that’s the way to paralyze yourself. This brings us to the next point:

Losing traders see loss as failure. Winning traders see loss as learning.

Not too long ago, my twelve year old son told me that before Thomas Edison invented a working light bulb, he invented 100 light bulbs that didn’t work. But he didn’t give up – because he knew that creating a source of light from electricity was possible. He believed in his overall theory – so when one design didn’t work, he simply knew that he’d eliminated one possibility. Keep eliminating possibilities long enough, and you’ll eventually find the possibility that works.

Winning traders see loss in the same way. They haven’t failed – they’ve learned something new about the way that they and the market work.

Winning traders can look at the big picture while playing in the small arena.

Suppose I told you that last year, I made 75 trades that lost money, and 25 that made money. In the eyes of most people, that would make me a pretty poor trader. I’m wrong 75% of the time. But what if I told you that my average loss was $1000, but my average profit on a winning trade was $10,000? That means that I lost $75,000 on trades – but I made $250,000, making my overall profit $175,000. It’s a pretty clear numbers game – but how do you keep on trading when you’re losing in trade after trade? Simple – just remember that one trade does not make or break a trader. Focus on the trade at hand, follow the triggers that you’ve set up – but define yourself by what really matters – the overall record.
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Minggu, 15 Mei 2016

Making Money in Forex Trading What You Must Know Before You Trade Forex Full Time - forex trading grid system

Making Money in Forex Trading What You Must Know Before You Trade Forex Full Time ~ forex trading grid system



Whenever I get emails from subscribers asking how to become a full time trader and what is the capital to be able to trade currencies full time. Although I mentioned that if you have a good forex trading system and you follow the rules of trade, perhaps one day a success. But I have also mentioned that psychological control, discipline, money management and other materials to be successful on the market in the long term.

If you plan to become a full-time operator, it is good that you are targeting, but you must understand the situation, it is now. Already it has negotiated very well today and make consistent profits every month? Still, you are able to overcome the psychological barrier of having to give up their full-time job and switch to fair trade?Several factors should be considered carefully before entering the full-time corporate world, which is not as easy as they say it is. I really consider forex trading as a professional work because its so special! Yes, anyone can learn currency trading and money begin too much money. But is he / she able to maintain good performance in the coming years? He really needs a bit of experience and knowledge to support a lot of business performance. I saw traders have failed after a few years of commercial success ... why? Greedy and overconfident, an error and beat all the income is returned. But that is not the main reason they left is the lack of confidence for trade negotiations which scared again.


Another important factor that will decide whether you can go full time to negotiate is the commercial capital. Yes, you can trade with small accounts when you are just beginning, but in order to become a full time trader, you will need reasonable enormous bills. This is because you should not risk 1% to 5% of their capital per trade and therefore the beads means small loss and small profits, how to earn a full time income in this way? Here are the 3 main reasons why small forex accounts are presented fail.


1) You will take more risks. With a small account, you will have smaller pay increases due to much smaller business. Most people will focus on the face value (dollars earned) instead of return on investment (percentage growth). When you see that you do well, but the gains are small, youll be tempted to break the money management rule and risking a large percentage of its capital. Then, an error will destroy much of your trading account. I therefore recommend a commercial capital of five digits, if possible.


2) the erroneous mentality. Most people will not treat your business seriously if it is only a small capital. They think if they lose money, they will only lose what little. It will not take you seriously a bad habit. Once is bad habit, it is difficult to remove. On the contrary, a good habit takes time to build, but only a mistake of loot.


3) It makes you want to trade more. Chances are he will not be satisfied with the amount of benefits you have done, as seems low. Most people think they are so good at negotiation and begin to look for opportunities every day (instead of trading along the trend). There will be quality jobs every day and the more you try trade, more mistakes you make and then slowly, your account will be reduced.

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Rabu, 11 Mei 2016

THOSE PESKY FALSE BREAKOUTS WHAT DO WE DO - forex trading system system

THOSE PESKY FALSE BREAKOUTS WHAT DO WE DO ~ forex trading system system


False breakouts are one of the necessary evils of the Forex market. Signals that appear to indicate the start of large gains for the trader often turn out to be broken promises that lead to unexpected losses. Spotting the signs that actually give a heads-up as to the potential for these reversals helps to avoid these scenarios that arise during long periods of market indecision and low liquidity.

Take the recent movements of the EURO NZD and the GBP AUD as examples. These both gave bearish signals that broke the Support of their respective Consolidations that had formed below larger Pennants setups. Given that these smaller Consolidations represented a test of the Support of these broken Pennants, gains of several hundred pips would have been expected.


EURO NZD - DAILY CHART


Source: FXCM Marketscope


















DAILY CHART- GBP CAD

Source: FXCM Marketscope
















Nevertheless, the candles that broke these setups were not strong enough to justify entry. Whenever this happens, you will either have a stronger candle that appears a few days later to continue the breakout, or an opposing candle that starts a False Breakout reversal. In this case, the latter was the result for both pairs.


DAILY CHART- EURO NZD


Source: FXCM Marketscope

















DAILY CHART- GBP CAD


Source: FXCM Marketscope















From this point, we could have one of two scenarios unfolding in the next few days. We could see the market move sideways for awhile before providing another set of bearish signals that start their respective downtrends. On the other hand, the reversals could indicate that start of uptrends that take them back inside of their Pennants, possibly breaking out above the Resistance. But how can we know in advance that what seems like perfectly normal signals will actually lead to these types of reversals?

Practice, practice, practice. With Candlestick Patterns, one has to review several examples of breakouts to be able to quickly distinguish between the ones that lead to breakouts and those that will only cause unnecessary headaches for traders. This will allow you to confidently enter and trade those that will actually break and provide strong gains over a very short period.


DAILY CHART- CHF JPY

Source: FXCM Marketscope

















DAILY CHART- USD CAD

Source: FXCM Marketscope

















The concept of the average Daily Range of a currency pair is also important. Most breakout candles that lead to trends are usually the same size of the Daily Range of that pair. This range also varies among currencies such that a normal candle that is acceptable to be traded for one currency pair may not be strong enough for another. One must also be able to determine if the candle and the start of a potential breakout would also coincide with the Weekly Range of that pair. This would significantly increase the possibility of a reversal such as that which is now taking place on the EURO USD.


DAILY CHART - EURO USD

Source: FXCM Marketscope



















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 ___________________________________________


Duane Shepherd 
(M.Sc. Economics, B.Sc. Management and Economics)
Currency Analyst/Trader
Contact: shepherdduane@gmail.com
Twitter: @WorldWide876
Facebook: DRFXTRADING 

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Rabu, 20 April 2016

What are we hedging here - forex trading system australia

What are we hedging here ~ forex trading system australia


I wrote a blog article last year on why hedging isnt always better. The more I try to practice what I preached, the more I am convinced that most of the time, we are hedging the wrong risks.

Hedging should not be about reducing volatility in our portfolio. If reducing overall volatility is our goal, we should simply reduce leverage, as I have argued in my previous article. If volatility in a particular industry group is too much for us, (banks? brokerages? energy stocks?), just reduce the capital allocation in that group.

Sure, if hedging does increase your overall Sharpe ratio, go ahead and hedge to your hearts content. Kellys formula tells us that the higher the Sharpe ratio, the higher the compounded growth rate of your wealth. The problem is, many of us hedge even when doing so do not clearly increase Sharpe ratio. A further problem is that we can achieve this maximum growth rate only if we use the high leverage recommended by Kellys formula, but this leverage often exceeds what our brokerage would allow us. It is not clear that it is beneficial to waste our buying power on the hedge if we can only operate at sub-optimal leverage.

To me, hedging should be about eliminating the risk of ruin (equity reduced to zero) due to unexpected, catastrophic events. (Many sophisticated hedge fund managers cannot even meet this simple survival criterion, giving lie to the whole notion of "hedge" funds.)

For instance, lets assume that the worst one-day drop in the market index can be 20%. Furthermore, lets assume that you are able to endure a 30% reduction in equity during one trading period. Then you should not be afraid to have a net long exposure of 150% of your equity. In other words, not only should you not hedge, but you should go ahead and leverage your long-only portfolio 1.5 times.

I believe this notion of hedging, or buying insurance, extends to all spheres of our lives. We should avoid ruin, not mere losses. Otherwise, you will be paying too much on the insurance policy over the long term. In other words, max out the deductible on your insurance policy!
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Kamis, 07 April 2016

What Is The Right Forex Day Trading Strategy For Me - forex high probability trading system

What Is The Right Forex Day Trading Strategy For Me ~ forex high probability trading system


Trading in forex requires strategic planning. So how does one decide what is the right strategy to adopt about investing in the forex market. The right forex day trading strategy were depends on the objective of the individual traders.Different objective will require different strategy.

So what is the right forex day trading strategy? Before one can decide the answer to the question, you should consult with your broker and discusses what your investment objectives are. Only after you have decided your objectives can you start to formulate a trading strategy.

There are many different Forex day trading strategies out there. Each one is tailored to the individual according to need and desire. Your goals will be discussed and formative strategy will be put into place in order to position you for the maximum benefit when dealing with foreign currency.

As this is a risk venture, you will also be informed of what your risk load will be and what you should expect given the circumstances. The best Forex day trading strategy will then be formed and enacted in order to give you the most result depending upon market value.

Adopting the correct forex day trading strategy, you are able to position yourself correctly in a volatile market. Because forex markets are easily influence by external and internal factors, your trading strategy will guide you on how to play the market when the changes occur.

To formulate a proper forex day trading strategy, you need to study and analyze all the relevant information. The decision regarding buying and selling positions as well as holding positions will depend on market conditions. It is the strategy that you adopt, that will back you can how to react so that you can take advantage of the market changes, at any point in time.

Your Forex day trading strategy may change several times in a day, if not more often depending upon the market and what currency you are trading in. By taking note of and acting on the information you will be able to make that strategy work for you.

Ensure that you formulate proper strategy before actually beginning trading. By taking proper steps of strategizing your investment goals, you are more likely to make a profit and minimize losses in the long run.

By Joel Gardner
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Sabtu, 19 Maret 2016

TRADE RESULT AUD USD - automated forex trading signals system

TRADE RESULT AUD USD ~ automated forex trading signals system



Trade Type
Breakout, Medium Consolidation
Signal Needed
Daily Chart
Target
Breakout Equivalent
Result
-100 Pips



________________________________________________________________________


The intention here was to continue to go long in favour of the Aussie in response to the breakout signal provided above the Daily Charts Pennant. The pair had actually formed a smaller Pennant above a larger Pennant before providing the Bull Candle Signal for entry. Instead of breaking higher, however, the currency pair reversed unexpectedly despite having a strong setup and signal. So what could have been the reason for this loss?

Lets first take a look at what the overall picture was on the Daily Chart. As we see in the chart below, the smaller Pennant was essentially testing the broken Resistance before giving the breakout signal.


DAILY CHART

Source: FXCM Marketscope

















This was also taking place in an uptrend that added support for the currency pair to continue moving higher. Following the close of this candle, entry took place immediately with the Stop Loss set at the appropriate point on the 4 Hour Chart and the target of the Breakout Equivalent put in place. Within a few days, the market reversed sharply to take out the trade, resulting in the loss of 100 Pips.


DAILY CHART

Source: FXCM Marketscope

















The issue at hand now following this loss and trading losses in general, is to ascertain the possible cause especially given the apparent clarity and strength of this setup. Two separate, but related reasons could provide the answer.


SCENARIO 1

It is quite possible that these two Pennants are actually about to give way to the formation of a larger Range Setup. This is something that happens from time to time in the currency market. If this is the case, then we could see a pattern that looks like this.


DAILY CHART


Source: FXCM Marketscope



If this is what will be formed, then we could either see another bullish signal to continue the uptrend or a bearish breakout that starts a downtrend.


SCENARIO 2

The alternate scenario involves taking a wider view of this currency pairs previous patterns. The unexpected reversal that took place could actually be the start of a bearish wave within a much larger Consolidation setup that is being formed.


DAILY CHART

Source: FXCM Marketscope

















Confirmation of this will come in the upcoming days or weeks in the form any of these Candlestick Formations below the Uptrend Line;


  • ABC Reversal Signal;
  • Formation & Break of Small Consolidation;
  • Counter Trend Line Setup & Break;

Provided they are strong, any of these signals could lead to a steady downtrend over the next few months until Support is hit, over 500 Pips away.

With any successful Methodology that is applied to the currency market, losses are always expected along the way in between profitable trades. One of the distinguishing advantages of trading with the higher time frames, however, is that it allows the trader a lot more time to calmly analyze the reasons for these losses and make adjustments where necessary. This helps to take the emotions out of trading and avoid the common habit of trying to exact immediate revenge on the market - a habit that inhibits long-run profitability in Day Trading. 

Lets patiently waiting on the next opportunity that this market will provide on this or any other currency pair as we start a new month.


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Duane Shepherd 
(M.Sc. Economics, B.Sc. Management and Economics)
Currency Analyst/Trader
Contact: shepherdduane@gmail.com
Twitter: @WorldWide876
Facebook: DRFXTRADING 

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