GBP/JPY Trade Positioning Update

I mentioned earlier (GBP/JPY – Short Position Bias Weekly Analysis) that GBP/JPY is likely to fall further given a rejection of the upper bound of the descending triangle.

As of now, we can see that price is not accepting levels above 140 well.

Zooming in on the Hourly chart, we can see a Double Top formation much clearer, but the rectangular box indicates a strong demand zone, supported by multiple candles with long lower wicks.

Although price has clearly rejected any immediate upside momentum, neither does it have the bravado to challenge the demand zone, thereby following through on the double top.

Price is likely to stay this way in a range-bound, see-sawing fashion – unless for some reason or another the market makes up its mind to take on 140 again or race down to Support Level 1.

With the BOJ due to release its interest rate decision in slightly less than two days on Thursday late morning/early afternoon, do exercise caution when trading the JPY pairs.

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Weekly Analysis

This week is going to be another volatility-charged week.

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Here are the key events that I will be looking at:

  • Monday, 9:30PM – ECB Draghi’s Speech
  • Thursday, 2:00AM – Fed Interest Rate + FOMC Speech by Yellen
  • Thursday, usually around late morning/early noon – BOJ Rate Release
  • Thursday, 4:30PM – SNB Rate Release
  • Thursday, 8:00PM – BOE Rate Release

(All in GMT +8, Singapore time)

So if you’re trading on Thursday, do take note of the above events and trade safe.

I will be monitoring if the USD will still give way to the downside, following the assumption that whatever expectations of a rate hike has already been priced in.
If it hikes, this will be the first rate hike of 2017, with the previous hike on Dec 14 2016. I am personally expecting a 25bp increase.

On the JPY front, I will be looking for bearish opportunities within the JPY cross pairs, especially GBP/JPY – which has the potential to free fall on the Daily timeframe.

May the pips be ever in your favor.

Productivity Tips in Trading (MT4 Trade Notifications Setup Guide Included)

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(Disclaimer: This is NOT a sponsored post.)

When it comes to productivity in trading, what comes to mind?

For me, it means trading seamlessly, fuss-free; trading with a clear mind, in a minimalist way.

Here are some tools that have helped me along the way, I’ll go through them one by one with you:

  1. myfxbook
    This is a must-have app for me. It mainly serves two functions for me – Progress and Planning.
    It is able to sync directly with my MetaTrader 4 (MT4) account by extracting all my trade information and sorting them into a page with statistical information where I can keep track of my trading progress. This includes a plotted chart with my equity growth, drawdown, etc.wp-1489249023604.png

    In terms of planning, it also has a widget function within the app to display the weekly economic calendar on the home screen of your phone, so I’m always aware of high impact news and their timings respective to my country’s timezone.

  2. Investing.com
    I use it mainly to have a quick overview of the current FX market situation, which lets me have a feel of whether the market is moving or just being extremely quiet.They also have a mobile app which also allows you to do the same, albeit it has an additional feature that I use on an on-off basis – the price alert function

    wp-1489249119086.png

    You can set the price at which you want to be alerted at, for whichever FX pair you’re trading. But a word of caution, if you’re looking for alerts that are instant and immediate, this would not be my first choice recommendation as the alerts sometimes comes in at a delayed timing.

  3. MetaTrader 4
    Every trader has definitely come across this program, surely you are all familiar with the platform. But its price alert function is something that is a must-use for me when I’m looking at specific price levels.
    It is also a function that many traders have struggled to enable properly to allow them to receive notifications on their mobile devices.First, you need to ensure you have your MT4 installed on the PC/Mac and mobile device.
    Then, go to Settings on your mobile device and scroll down.
    There, you will see your personalized MetaQuotes ID.

    wp-1489249013039.jpg

    Next, on your PC/Mac, go to Tools > Options > Notifications and key in the MetaQuotes ID from the previous step.
    Hit ‘Test’ to make sure it works; you should receive a test message on your mobile device
    .mt4alert1
    Now, if let’s say you’ll like to set a price alert for EUR/USD, double click the bottom of the MT4 screen on your PC/Mac (the bar that shows your equity, balance, etc.)
    This will bring up a panel with multiple tabs. There should be one named ‘Alerts’; click it.
    Now, right click anywhere in the ‘Alerts’ empty space and click ‘Create’.

    It should look something like this:

    mt4alert

    Now just make sure the Action tab is set to ‘Notification’.
    As for the condition, if it says Bid < , it means that you will receive a notification when bid price goes below the value you specified in the ‘Value’ box.
    The same goes for Bid >, vice versa.
    You can even type in the title of the alert in the ‘Source’ bar.

    And you’re good to go! Just take note, in order for this to work, your PC/Mac MUST be switched on at all times to receive the notifications.
    Any time it is off, you will NOT receive any notifications.

  4. Spotify
    I use it mainly to accompany me during my chart analysis and when I’m typing my blog posts for you guys, the readers!
    If you’re also one that uses music to boost your productivity, then I strongly recommend listening over Spotify; they do have a wide library of songs to choose from. You could even create a playlist specifically for when you are at your trading desk.

 

What are some of the trading tools you use to streamline your trading process?
I’d love to hear from you.

 

 

 

Where is DXY (Dollar Index) headed now?

Our favorite monthly NFP has just been released 2 hours ago, with actual figures beating both estimates and previous month’s figures.

But the strange thing is that the USD didn’t seem to move in line with the data release.
Discrepancies in the markets like a deviation from an expected norm should raise some caution among traders.

Here on the DXY Daily and H4 chart, we can see that it is currently in a textbook ‘rising wedge’ pattern:

Have a closer look at what happened during the hour of NFP release:

It should act as a telltale sign that something is not quite right with the USD.

Extreme caution should be taken when trading USD pairs, especially with the Federal Funds Rate next Thursday morning at 0200hrs Singapore Time.

My personal bias would be a downside breakout for the USD as it doesn’t seem to have sufficient bullish momentum to sustain its uptrend, not even outstanding economic data could support it.

 

Running out of trade opportunities?

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I’m sure every trader reading this has come across this problem – the lack of trade setups.

Perhaps you’re used to trading on the H4 or Daily chart and ideal trades don’t come by that often.
Then you start to consider options such as:

  • Maybe I should jump down to the shorter timeframes to find more trading opportunities
  • Maybe I should eliminate some of my rules to increase the probability of finding a “valid” trade
  • Or maybe there is just something wrong with my system that is not picking up enough trades

Sounds familiar?

But today, I’ll share with you a technique that helps me to find more trading opportunities out of my system, without breaking my rules.

Ever heard of the term – correlation?

According to dictionary.com, correlation means the degree to which two or more attributes or measurements on the same group of elements show a tendency to vary together.

In FX trading, being directly correlated means the two currency pairs tend to move in the same direction. Being negatively correlated means the two currency pairs tend to move in the opposite direction.

For example: Given that EUR/USD and AUD/USD share a highly positive correlation – this means that a fall in EUR/USD will also lead to a similar degree of bearish action in AUD/USD

You can find out more on the correlations that the different pairs share through this tool: https://www.oanda.com/forex-trading/analysis/currency-correlation

Note: This is NOT a sponsored post. It is a tool that benefitted me in understanding the relationship that the FX pairs share.

However, today we’re not talking about the correlation between different currency pairs. We’re talking about 1 currency versus other currencies. Which means when we’re looking at AUD, we’re looking at AUD/USD, AUD/CAD, AUD/CHF, AUD/JPY, AUD/NZD, EUR/AUD, GBP/AUD, etc. – everything that has an AUD in it.

Perhaps an illustration would be clearer:

If we’re watching a nice setup forming on AUD/USD, but hey, all of a sudden, it starts to run further and further away from your ideal entry price. Now, the risk to reward has started to diminish, making it less attractive to get in the trade.
Does that mean you’re all out of options, having to look for new setups in the market again?
Heck no.

Now, you start looking for possible setups in AUD/CAD, AUD/CHF, AUD/JPY, AUD/NZD, EUR/AUD, GBP/AUD, especially those that have yet to move much, and hopefully they present a reasonably attractive risk to reward ratio too.

Instead of having just 1 setup, you now have another 6 more chances at finding an entry to go short or long the AUD, based on which pair you choose, all without breaking your system rules!

Remember I mentioned at the start of the week I had a bias in shorting the AUD/USD?
(AUD/USD – Ready for Next Move Down?)
AUD/USD ran before I could enter with my trade rules.
I found AUD/CAD and netted a cool +2.81% gain on it, which was yielded the same effect as AUD/USD.


By learning to bend the circumstances in your favor, trading isn’t so boring after all now, ain’t it?

A Mini Strategy-Crafting Guide

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If you’re just starting out, this article might be useful to you.
But if you’ve been trading for a while now and have a profitable strategy, then this should bring back some warm nostalgic feeling.

Sure, everyone wants to have a system that is profitable. We want a system that we can rely on all our lives so that we might, one day, not have to work in future and let our money work for us.

But does trading work that way? If so, your friends and family – everyone of them would be billionaires sitting at home right now.

In order to succeed in trading, it takes more than reading a Dummies guide to Technical Analysis, or watching Bloomberg.
You need to have serious PASSION for this, because when the drawdowns hit, it is the only thing that keeps you going.
You need to develop a strong interest in the markets – economic news, brokers, TA, FA – learn everything as widely as you can.
You need to know that there will be psychological challenges throughout your journey, even for the most experienced – not just a simple keying in a buy or sell.

If you think you’re ready for it, then here goes.

Once you have developed a level of understanding of the markets and basic TA, it is time for you to start demo trading. Do not start on a live account until you’re consistently profitable on your demo

1) Your character
Do you think you’re a really patient trader and can wait for a potentially large profit?
Or are you someone who prefers taking multiple trades per week?
Or are you an extremely daring person, willing to take trades multiple times in a day?
Once you find out the type of trader you are, this determines the time frame you ought to be looking at.

2) The nature of your trades – your trading style:

  • Trend Trader
  • Swing Trader
  • Breakout Trader
  • Mean Reversion Trader

Each type of trader looks at different things on the chart and uses different indicators or charting tools to help them.

3) Indicators and Chart Tools
There are tons of trading indicators out there that can aid you in crafting your first trading strategy.
RSI, Stochastics, Pivot Points, Bollinger Bands, etc.
Find out the function of each one and see how it suits you as a trader.
For example, if you’re a mean reversion trader looking at taking reversal trades, perhaps Bollinger Bands might help you in that area.

Most importantly, what you choose must be relevant to your strategy and you must have a full understanding of your tools.
Although some experienced traders might beg to differ that they can trade on a naked chart, this is only gained through experience. For starters, this would be a good way to get started.

4) Entries and Exits
Are you going to wait for some candlestick pattern to form before entering?
Are you going to wait for a certain level to break before entering?

Have well defined entry and exit rules, not click buy and sell whenever you “feel” like it.

5) Backtest
Now, put them altogether and start trading on your demo account.
Create an Excel spreadsheet to keep track of your trades – entries, exits, even screenshots of your before/after taking the trading.
The screenshots of your trades are the only visual evidence you have of your mistakes and success when doing a strategy review.

 

If your new system is consistently performing well for around 3 months, feel free to take your trading to a live account.
Start with a small sum first, then if you’re feeling more confident and the results of your strategy is kicking in, that’s the time you can start thinking of depositing the actual amount you’re willing to invest in your trading.

But if your system turns out to be unprofitable in demo trading, have a look at your screenshots and find out what the issue is.
Most likely, you’ll need to do some tweaking to your system specifications – whether or not it is an indicator problem or emotionally-charged entry, only you know the problem yourself.
Rinse and repeat till results are ideal to you.

 

And there you have it, a strategy tailor-made for yourself.

What I can say is that having a profitable strategy does not automatically turn you into a profitable trader. It requires an acute sense of discretion when analyzing potential trades, strong emotional control, strict risk management and last but not least, experience.

 

AUD/USD – Ready for Next Move Down?

We just had the release of the AUD cash rate half an hour ago, which was maintained at 1.5% – no increase, no cut.

AUD pairs spiked upwards shortly after but don’t look upside-convincing to me.

Shall observe what happens after London Open.

If it heads south, these are the next support zones to watch, based on simple price structure:

S1: 0.75385
S2: 0.75066
S3: 0.74552

Once these 3 support levels are cleared, its pretty much free-fall zone for AU till 0.7310 before we see some support.

Weekly Focus/News Trading Strategy

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This week is going to be one that will yield great volatility in the FX markets.

We have our monthly famous NFP, AUD interest rate and ECB meeting/bid rate on the calendar.

(All in Singapore Time, GMT+8)nfp

I personally love such events as with great volatility comes great trading opportunities.

Very often you hear of advice being thrown around, such as:

Don’t trade when there is high impact news as you can get stopped out when price whipsaws.

And next thing you know, you’re seeing things like:

Captured XXX pips from XXX/XXX

Ironic, you may think to yourself.

How these traders profit from such large moves by major news events is actually pretty simple:

  • Have a bias of where price is likely to push into
  • Time your trade such that the stop loss is reasonably distanced from entry price and provides a good risk to reward
  • If price doesn’t move in your favor much within few hours from time of major news release, close out the position at breakeven or at a small loss.
  • If price moves starts to move in your favor progressively, time to start shifting your stop to breakeven
  • Wait for news release

The idea is to position yourself well before the news actually occurs, with the exception of black swan events which no one can predict.

Now there will be two outcomes to this:

If news is favorable to your FX pair, enjoy rolling your profits – you’ve successfully achieved your objective.
If news is unfavorable to your FX pair, it would be best to close out immediately to protect your profits instead of waiting for it to hit your stop-loss at breakeven.

Either way, you win.

Manage your risks accordingly and trade safe!

“Weekends are for analysis, weekdays are for execution”

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It’s always a good idea to have a plan in advance when it comes to trading.

 

Here are some benefits why you should do so:

  1. Allows you to focus only on the pairs that qualify under your ‘radar’
  2. Be on alert for relevant news events that may impact your trades
  3. Weekends are for analysis, weekdays are for execution

To be honest, it is true that you’re supposed to be doing your analysis on the currency pairs during the weekends, when the markets are shut and there is nothing in the market that can distract you.

Ever wondered how they all do it?
Banner advertisements of traders claiming: “I only spend 15 minutes a day to trade”

Now you know how they do it.

Because during the weekdays, there is only time for order-setting and execution of trades.
The rest of the time goes back to doing daily things in real life – going to work, going to school, doing your household chores, etc.

 


 

On the side note, for this week, I am generally bearish on the AUD, bullish on the USD and particularly bullish on CHF.

Let’s see if the market serves up something good this week.

Have a safe and great trading week ahead!