Aspenalysis: Simple To Follow FX Trade Ideas

Good evening traders. It is my hope that quotes and passages like the one below help round out our understanding of markets at large. While the insights gained (whether you agree or do not) may not determine our next NEW TRADE ALERT, they certainly allow for us to frame longer-term investment/trading scenarios going forward.

However, think about it, if you have a longer-term investment thesis and it begins to play out, your conviction level will be elevated thus allowing you to fully capitalize on the move/scenario. Contrast that with someone who just reacts to whats going on - like the old saying says: 'if you stand for nothing; you will fall for anything.

That said, this quote from TIS Group is spot on in my opinion:

"Restructuring or outright liquidation of debt in the Western world is necessary to re-start economic growth. The U.S. is nearing the QE phase where the markets, the politicians and the Fed realize that for Main Street, another approach is needed which includes fiscal reform and structural entitlement reforms, not just another shot of monetary juice."

That will represent a major shift and certainly asset classes will get crushed (bonds) while others will benefit greatly (gold?). Naturally FX markets will be rocked too and thus we will be better prepared if and when this situation develops.

Dave
 
Did You Take These 3 Simple Steps Before Your Last Trade?

Learning to trade can be one of the most rewarding, and at times frustrating, experiences. The lure of trading for a living remains the #1 reason individuals pursue the markets.

However, without a plan, the odds of success are near zero. But many traders ask:

What is the plan?
How do I develop a plan?

Your journey to become a profitable trader does not need to be overly complex initially, but it does need to be practical.

Here are 3 simple steps to develop YOUR trading plan that will also keep you on the right side of the market:

Trade in the direction of the trend

Determine which time frame you are trading on (15-min, 60-min, daily) then use tools such as ADX, trend-lines or Aspen's Top 5 to align your trades with that trend

Use a simple stochastic indicator to prevent you from buying tops and selling bottoms

Stochastics won't show you when and where to enter the market, but they will ABSOLUTELY tell you when not to enter the market

Target Fibonacci levels to establish positions

Once you know the trend of the market, using minor sell-off and rallies (i.e. corrections) to get long/short is a lower risk way to get exposure. Key Fibonacci ratios like .382, .500 and .618 are simple enough to determine.

While these may sound too simplistic - they are not. They are the building blocks of successful trading and will be refined and enhanced over time. Trust me, these 3 simple steps will provide a very robust framework from which to operate and grow.
 
wackypete2 said:
At least here in the US, I would't classify regulators as guardians of the marketplace. They act when they absolutely have to, such as when something gets out to the public of wrong doing. Otherwise they turn a blind eye to everything else.

Just my opinion.

Peter
Click to expand...

Peter - very true - close the barn door AFTER the horse has left. Guess we should not be surprised though.
 
Traders, while the normal day to day focus is on identifying trades that might have a duration of a few days, there is a lot of work that goes on behind the scenes here at Aspen. Not just chart work but attempting to piece together macro data points and cause/effect scenarios. Not only is it beneficial for longer-term investments/trades, but that research absolutely complements the shorter-term trades too.

That said, last weeks limit down day in the Japanese bond market (JGB's) struck me immediately. How can that be, the BoJ is The Fed on steroids right now, yields should at a minimum remain flat or go down. I know the answer but I am asking to prove a point.

A colleague of Bill Fleckensteins offers this insightful nugget. You can be sure this only further heightened my interest in keeping a very close eye on Japan.

"He believes we need to keep our eyes closely peeled on Japan because in the very short run, the stock and currency markets there have acted like they are (preemptively) rejecting the concept of money printing.

He pointed out that while the yen has tanked 15%, and Japan's bonds have backed up 25 basis points (though merely back to January/February levels) from a base of 50 basis points(!), beneath the surface the volatility has increased in such a way that it might begin to cause problems for Japanese derivative books. When you are in a country such as Japan, where interest rates have been zero for so long, you can be sure that all manner of volatility has been sold, in an attempt to enhance yields, at the wrong price. So if volatility and interest rates increase, we could see quite a lot of chaos precipitated from Japan, just like when the housing bubble burst, when it wasn't just declining housing prices that caused problems, it was the levered up exposure to mortgage-backed assets and other crazy products."
 
My short-term update on EUR/USD

5.14.13eurUPDATE.png
 
I forecast for prices to move lower in EUR/USD earlier today when prices were at 1.2970'ish - they have since fallen 40 odd pips.

There is more downside in the days to come, but first prices look set to rally modestly towards 1.2940/60 before another wave of selling takes over.... continue reading
 
EUR/USD looks like the consolidation/correction may be complete, gravity has this one - don't try to buy this oinker
 

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Quote of The Day:

Idleness can be a great investment. Excessive hard work is counterproductive, i.e. watching a screen all day is pointless.

Michael Covel
 
OK, we have the basic building blocks for a short trade here in AUD/USD

5-waves lower off of a completed Wave iv correction
Oversold stochastic
Clear Fibonacci resistance zone from which to get short
 

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People often ask me –

How can you get up from your screens, grab a workout or run errands or worse yet….go to bed?!

It is simple – but let me ask you a question first.

Why can’t you get up from your screens?

The answer I most often hear is as follows:

- I need to make sure I protect my profits
- I was looking at some trading blogs and I saw another viewpoint
- My trading style demands me to watch the price action very closely

Allow me to respectfully dispel these ideas:

- Protect your profits – this is nothing more than I was up 50 ticks on this trade, now I am only up 23 – I need to get out. Who says the trend has changed – rarely does a trade go linear, it ebbs and flows.

- Trading blogs – why do you need to get an opinion on your trade AFTER it has been placed – do you not trust your thesis?

- Unless you are scalping 1-minute charts, staring at your screens adds no value – each tick against you actually triggers your brain to start thinking about what can go wrong – it plays on you and gets you to abandon your reason for getting into the trade.

These answers relegate the trader to be a prisoner of their screens, as it clearly indicates that the trader is not operating from a robust trading plan or as I call it – a framework.

If you do not have a framework you are compelled to manage and watch every change in prices thinking that that somehow puts you in control.

Nobody can control the market – you are kidding yourself!

Having a framework accomplishes the following:

- Increases your confidence in placing and staying with trades

- Provides an objective rule based approach

- Allows for freedom – get away from the screens – do other activities that actually get your brain ready to come back later refreshed and recharged

- Enhances your ability to stick with trends and capture the big dollars.

Do what every professional trader that trades for a living does - get yourself a framework.
 
Got an email from long-time client Dmitri in California - it goes as follows:

Hi Dave,

Maybe a naive question, but if EUR/USD is going down, why are we long EUR/SEK?

Thanks,
Dmitri

Dmitri - not a naive question at all - logic would suggest that something does not add up if we are bullish one but bearish another. However, take a quick look at the video below - it should address your question.

How Can I Be Bullish & Bearish EUR? - YouTube
 
Good afternoon traders. Well another week is now beginning and let's take a look at what is on the radar screen.

Last weeks soft close by the S&P's (1629) was certainly out the norm - I mean equities only go higher with 'The Bearded One' at the helm - right? Kidding aside, the move lower off the May 22nd highs is likely just part of a long overdue correction. It is certainly possible prices could move lower towards 1604 (minimum downside target if wave count is correct) while a move back above 1637 creates overlap and gives the bulls reason for hope.

I could do all sorts of further scenario analysis, but the fact is, the S&P's are not as key recently for FX markets as is the Dollar Index (DXC). This index is not only a bit cleaner in terms of the price structure/wave count but is far better correlated with the likes of EUR/USD, AUD/USD and NZD/USD.

DXC: broke down off the May 22nd highs and while some minimum Fibonacci support levels have contained the drop, the action off the May 30th lows is not convincing me just yet that a low is in place. Additionally, some of the momentum studies (triggered May 30th) I also rely on are suggesting the bears have control for the time being.

EUR/USD: the rally off the May 22nd lows is not impulsive and last week's break above 1.2997 suggests momentum/directional change could be in the works.

USD/JPY: benefit of the doubt goes to the bulls unless the 99.87 level gives way. For now I am neutral on this pair.

AUD/USD: the downtrend remains intact, no reason to look for picking a bottom at this stage. However, looking for shorts in and around current levels is not advised either.

AUD/NZD: this is the FX cross I find most interesting presently. It has been a solid downtrend since mid-March, yet on May 31, price action triggered some fresh upside momentum that may have legs. Additionally, the move above 1.2030 gives further ammo to the bulls.

EUR/NOK: last, but certainly not least, our orders to get long in EUR/NOK at 7.6435 remain in place and if EUR/USD can begin to make a move higher early in the week - this cross could catch a nice bid higher.

As always, there will be some twists and turns - but that is trading, but if you lack a plan you know the odds of making money are greatly reduced.
 

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Yet another reason it can be very costly to try and call tops (or bottoms). Sure, [Link Removed] fell away hard overnight.

- Certainly a major heads up to possible trend change
- How it reacts AFTER that break is the key part often overlooked

Simply put, a break is just that, a break. The most important piece is the move after the break. In this case it is looking increasingly clear that EUR/AUD does not want to go lower.
 

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