FX trading Oct 22-26

[SavanteFX]

Given the very poor news posted about the US existing home sales being as low as they have ever been since being recorded, and Cables inactivity at 2.0500, Eur/Usd's spike and subsequent return to 1.4200-1.4250 range it was exhibiting prior to the news, can we assume that the news may have already in some way been priced into the market?

My thought's now, as they were yesterday, are looking to theses Dollar crosses to take a fall. Not one of significance, but simply a period of making it's mind up, trading within the range that has dominated October, 2.0225-2.0500. Although the confirmation I need to take such a positon isn't there yet, what is the general sentiment out there?

 

[bbmac]

the attached 1hr chart screenshot tells the story today with most price action occuring in between the 2 red lines (so far.)

 

[Trader333]

can we assume that the news may have already in some way been priced into the market?

If you look at the long term trend then you will see that price changes due to news are at best noise in the overall scheme of things. Great to trade though


Paul

 

[bbmac]

The screenshot below shows another 1min Reversal at that resistance area again that has capped the upside today. The 5min screencap shows the hidden divergence set-up to confirm the 1min set-up back short.

These set-ups in what are obviously rangy intraday conditions just at the momement remain high probability. (Fort the avoidance of doubt, I can't claim to have traded that one as was away from the desk, just seen it as I came back, but would like to think I'd have got it if had been at desk.)

 

[bbmac]

Savantefx, I concur with your analysis insofar as I ever try and predict future direction...it seems reasonable and logical. Tony / TheBramble posted some analysis last evening and was pretty much spot on, and i'm guessing much of your thoughts concur with his on that.


For my own part however I am a simple 'pattern spotter' so only trade the set-ups as they present themselves. As such I have no need to predict whether the market will turn up or down. Added to this my trigger is the 1min so the next 10mins seem a long time, Lol. (Thats my answer to the usual reponse/question from people that learn that I trade currencies, ie 'Where will the $ be at year end' To which my response is that I have no idea where it will be in the next 10mins let alone year end.

The serious point is that, when you trade the set-ups you don't need to, you just need to know that overall they produce a net gain across ant typical sample of set-ups. As Mark Douglas rightly points out, the distribution of winning and losing trades across any sample of your trading edge is unknown in advance, so needing to know the market direction becomes unimportnat in this style of trading.

 

[shadowninja]

Can you guys recommend a suitable stop level for GBP/USD and EUR/USD if I want to buy and hold for 3 or 4 days to ride the trend?

I've been using 50 points for EUR/USD and it seems to drop me out if I move the stop up as the position moves into profit. Tradindex has a default of 75 points which seemed a bit big, BUT running a test account going in at similar times, all my positions have closed from the last 3 days on my main account, but for my test account with 75 points, they're all in and with averaging up, I have about 235 points profit currently. The easy option is to say, "Use a stop of 75." but it sounds a bit big for EUR/USD. (I wonder if my 18 point spread on IG Index is the problem.)

Thanks.

-Darren

 

[Trader333]

In my view you should set it at approx 1.2 x the ATR of the 4 day range


Paul

 

[shadowninja]

Thanks for the reply.

ATR being this? http://www.trade2win.com/traderpedia/Average_True_Range

ETA: woah. 92 points!!? That's huge.

 

[bbmac]

The market doesn't care how big your arbitrarily calculated stop is. It doesn't care that you only want to risk x and not y. The sensible place for a stop if trend following (assuming an uptrend example for the purposes of the example) is under the higher swing low of the retrace before last...see diagram. Move the stop only when the current swing high has been taken, up to the under the next higher swing low. This method gives you the greatest chance of staying longest in the trend. Alternatively and sticking with the uptrend example, put it under the last significant higher swing low on the next time frame up you are trading/the time frame of the trend you are involved in.

 

[Trader333]

I don't actually agree with your comments but it wouldn't do for us all to trade the same way. The market also doesn't care that you place a stop at the last swing low of a retrace any more than it does placing one as I have suggested. The approach I use for trend trading works extremely well for me and I take no notice at all of supposed support and resistance levels after all in trend trading they are no more relevant than other ways of trading. This has been especially the case in recent times when the EUR was making historical highs against the USD and where I was adding to positions as it did so. Eventually I did get stopped out on this trade but this was after significant compounding that gave me excellent levels of profit as it has, and continues to, on other currencies as well.


Paul

 

[JillyB]

Thought this might be of interest.

08:58 GBP/USD: Fresh Sell Interest Expected Above 2.0500 London, October 25. Fresh sell interest may emerge above 2.0500, following yesterday"s Swiss fund selling above 2.0500. That action helped to cap GBP/USD at a NY session high of 2.0511, following the 14:00GMT disclosure of September"s larger-than-expected 8% drop in US existing home sales. We have also been told that there was model fund selling above 2.0500 yesterday as well.
Sterling scaled a three-month peak of 2.0560 in early Asian trade on Monday, on the back of post-G7 USD selling. The subsequent same-day three-cent slump to a low of 2.0258 was attributed to USD buy-backs. 2.0519 was Tuesday"s high, with 2.0517 marking yesterday"s top.
GBP/USD support points include 2.0450 (yesterday"s NY session base) and 2.0426 (yesterday"s low).
UK September BBA mortgage approvals will be disclosed at 08:30GMT. A UK clearer forecasts 67k, from 61k previously."

 

[combotrader]

Stop

I don't actually agree with your comments but it wouldn't do for us all to trade the same way. The market also doesn't care that you place a stop at the last swing low of a retrace any more than it does placing one as I have suggested. The approach I use for trend trading works extremely well for me and I take no notice at all of supposed support and resistance levels after all in trend trading they are no more relevant than other ways of trading. This has been especially the case in recent times when the EUR was making historical highs against the USD and where I was adding to positions as it did so. Eventually I did get stopped out on this trade but this was after significant compounding that gave me excellent levels of profit as it has, and continues to, on other currencies as well.


Paul

I would use 1.5 ATR of the last 10 days if you are serious about holding a position for 4 days on cable. It will be volatile now, trying to break 500. Anythin less than 100 could easily whip you out and go on to make new highs.
With current volatilityhowever, there are more opps intraday - but obviously more risk.
NOTE - reduce your position size accordingly if you are going to hold for 4 days.
CT

 

[shadowninja]

Thanks for the advice on the 4 day holding idea. Food for thought. I will have to think about my entry strategy and how it works with the suggestions. Probably will stick to EUR/USD as it's less volatile than GBP/USD.

ETA: on my test account I've been averaging up. Now have 5 positions open and moving the 75 point stop feels a bit like that plate spinning trick.

 

[shadowninja]

Here we go... (GBP/USD)

ETA: missed it. IG Index's java graphs froze so it'd be like driving in the fog. Also, noticed Tradindex suspended trading for about 20 seconds during that climb. Hm! (Maybe they've done something to my account as it's sitting on £5k potential profit in 3 days of trading.

Shame it isn't real money but maybe they panicked and had to check my account wasn't a live one. Or am I being paranoid?)

 

[bbmac]

A quick run up out of the 1hr congestion channel to find resistance at the Daily Res T/line from 24/7, area of Dly R1 pivot, Top of current 4hr channel and current wk/mth hi 0535/37 area. This followed interim resistance found at 22 area that found support at the asian highs at 0501 on the 2nd bounce.

Screenshot shows the good shorting set-up at that resistance on my 1min trigger chart.
(Reversal C)

MNi talking about 0550/60 as possible option barriers/resistance/likley offers in region now. The last 5/15min potential RBS zone is 0495-0471 with asian hi just above.

 

[bbmac]

screenshot shows the daily chart res t/line referred to above. Last completed 4hr candle was a near perfect bullish thrust.

 

[trendie]

Here we go... (GBP/USD)

ETA: missed it. IG Index's java graphs froze so it'd be like driving in the fog. Also, noticed Tradindex suspended trading for about 20 seconds during that climb. Hm! (Maybe they've done something to my account as it's sitting on £5k potential profit in 3 days of trading.

Shame it isn't real money but maybe they panicked and had to check my account wasn't a live one. Or am I being paranoid?)

No. They REALLY are out to get you.

 

[shadowninja]

No. They REALLY are out to get you.

 

[bbmac]

The minor 5min RBS 0521-0500 zone gave out to the downside for price to find support between that and the 5/15min RBS zone below that at 0495-0471, 0501 being the asian hi.

The 1min screenshot shows the regular divergence set-up and the 5min shows the hidden divergence set-up (2 of the 3 oscillators showing hidden divergence, macd not) The set-up resulted on the 2nd test of that support. (always a good idea to confirm an area, lol) Interestingly (!) the support was the top of where the most price action occured in the recent 1hr congestion channel just broke to the upside, ie 0497-0459 is where most price action occured in that channel.

I was away from desk so didn't take the trade but a fair set-up at RBS (resistance becomes support) Very often you see regular divergence in your trigger oscillators or extreme and hidden divergence in your intermediate chart oscillators on any deeper pull back for a high probability re-entry to your longer time frame (+) trend.

(Reversal A(ii) with 5min Reentry type 4 confirm)

Will the set-up result in a new high? I have no idea but its seen 20pips profit already and if you can nail the entry the highs in an uptrend/lows in a downtrend are often at least re-tested even if that results in a lower hi/lo or double top/bottom.

If a new high results the potential RBS becomes 0535-0497 on the 5/15/30min charts. We'll see what develops.
88 the pip range lo-hi for the day still below the 5/10/20 averages of 145, 165 and 142 respectively and yesterdays 91.

 

[bbmac]

Weekly U.s initial/cont claims due at 1330pm BSt, along with Durable goods, the forecasts for which show a bounce back from last month's negatives. With New home sales later at 1500pm and the minor help wanted index. Forecasts are for a decrease again in the housing data and with yesterdays record low existing home sales, it might move things a bit if market takes it as a further sign that the Fed will again cut?