Free webinar - Get to grips with Position Sizing
Expert: Tony Beckwith
When: Thu, Oct 29, 2009, 12:00 EST
Tony Beckwith of specialist risk control software firm MTPredictor returns to explain how to get your forex trade size right to cope with winners - and why it is imperative to do so!
Click here to join the webinar.
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The US Department of Labor will publish its weekly Initial Jobless Claims Report Tomorrow (22 Oct).
The Report is a measure of the number of people who file for unemployment benefits for the first time during the given week.
The number of jobless claims is used as a measure of the health of the job market, as a series of increases indicates that there are fewer people being hired.
Usually, a move of at least 35K in claims is required to signal a meaningful change in job growth.
A higher than expected reading should be taken as negative/bearish for the USD, while a lower than expected reading should be taken as positive/bullish for the USD.
Analysts forecast last weeks measure of 514.00K to rise to 518.00K.
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Euro Dollar
The Euro broke the yesterday's support 1.4964, and reached the first target of this break, and Fibonacci important support 1.4891, tested it strongly, but eventually it survived (yesterday's low 1.4881). We will adopt this support level as support of the day, because if it holds, this would mean that the short-term correction is already over, and that we are heading to areas above yesterday's high 1.4993. But, if broken, what will be expected is a correction for the move up from 1.4480, and if this is the case, targets will not be less than 1.4797, and may be 1.4737 also. Short-term resistance is 1.4950, and if broken, we will head with the Euro to the top of the rising channel on the hourly chart, which is currently at 1.5048, and may be we will reach the highest level since Aug 2008, at the resistance 1.5082. The support level at 1.4891 is the most important level for today, and is the line separating positive areas from negative.
Support:
1.4891: Fibonacci 61.8% for the short-term.
1.4842-1.4849: The support area which contains the lows of Thursday & Friday.
1.4797: Fibonacci 38.2% for the whole move from 1.4480.
Resistance:
1.4950: short-term resistance.
1.5000: psychological level.
1.5048: the top of the rising channel on the hourly chart.
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USD/JPY
The Dollar-Yen with amazing accuracy at the first support in yesterday's report (lowest price after the issuance of yesterday's report is 90.06), and then rose to 91.05, breaking 90.73 on the way, but what followed was a modest move. The most important support is the Fibonacci 61.8% for the short-term at 89.77, and if broken the direction would be down to test the important support 88.68, which must hold to prevent another attempt to test 87.97 which survived 2 weeks ago an attempt for a break. As for the resistance, the most important one is 90.90, and the key to the most important stop in these areas is 91.63, which is expected to be an important test. Breaking it means that this rise will continue in the next few days, to areas above 92, where 92.52-92.58 is the first target for this break. While failure here would indicate that this is but a short-term rise.
Support:
89.77: Fibonacci 50% short-term and the bottom of the rising channel on the intraday charts.
89.38: Oct 7th high.
88.68: support area that supported the price twice this month.
Resistance:
90.90: short-term resistance.
91.63: previous support & resistance area, the most important resistance for the short-term.
91.93: Sep 2nd low.
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Forex trading analysis by Forexpros - Written by Munther T. Marji
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Disclaimer
Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
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Check out our new and improved Technical Studies Section.
Some thoughts on using technical market analysis to determine risk management in forex trading. Perhaps the greatest strength of technical analysis is that it allows traders to quantify precisely, and thereby help control, the risk factors inherent in trading. The most obvious risk control application of technical analysis is stop loss placement. Technical analysis employs a simple and elegant rationale for determining the location of stop losses. When the reasons for getting into a trading position are no longer valid, that position should be abandoned, usually at a loss. The purpose of a stop loss, after all, is to cut losses while those losses are still manageable.
For example, in a breakout situation where a trade is entered on a price breakout above a certain resistance line, if price falls back significantly below the line, the reasons for entering that trade would no longer be valid. Therefore, the stop loss should be placed at some pre-determined point directly underneath the line, where the break will have proven itself to be either false or premature. A failed breakout, as described above, is certainly a good reason to get out of a trade with a manageable loss.
Another example of risk management from a technical analysis perspective is as follows. For a trader who has entered a long position on a pullback to an uptrend support line, if on one of the subsequent pullbacks price breaks below that uptrend line by a significant amount, a good location for a stop loss would be at some pre-determined point directly below the trendline. A breakdown below the ascending trendline would mean that price is no longer pulling back and continuing the uptrend, but might perhaps be reversing its trend. If this is the case, the original reasons for getting into that trade (uptrend continuation) will have begun to be invalidated, and a properly placed stop-loss below the line can potentially prevent a great deal of pain.
Risk management with the use of technical analysis is both logical and straightforward. By using technical analysis to help dictate stop losses, a forex trader is allowing the market to determine when to cut losses. This is much more reasonable than setting stop losses merely according to an arbitrary number of pips or some random point of pain.
- James Chen, CTA, CMT
* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .
* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.
* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX
This is a very common affliction, especially among technical traders. Paralysis by analysis can occur when traders have too many studies on their charts and seek endless confirmations before taking any action. This is the polar opposite of traders who initiate trades recklessly based on “gut feeling” alone. Paralysis by analysis may be the lesser of the two evils, but both of these afflictions can be extremely detrimental to forex traders.
There is a lot of good in being cautious and conservative when deciding to take trades, but becoming paralyzed by the decision-making process can be totally counterproductive. Having all of the latest and greatest indicators on your charts can be exciting, but will it really help you become a better trader? Maybe, but probably not.
A good remedy against paralysis by analysis is a combination of solid risk control and money management. Technical analysis is very helpful in setting risk management measures like a logically-placed stop loss that’s not too tight and not too loose, and a good reward-to-risk ratio. And money management is an absolute essential for any trader who wants to be successful. With these prudent measures in place, traders need not be paralyzed by the trade entry process. A trader will never come anywhere close to 100% correct, even with 50 indicators, oscillators, trendlines and squiggly lines pointing in the same direction at the same time. But that’s perfectly okay, as long as risk and money management are in good order.
This is not at all to say that traders should ever just jump into trades without first doing their proper analysis. As mentioned, that is an evil in and of itself. But there are many traders that are utterly unable to pull the buy/sell trigger unless all of the many stars in the galaxy are perfectly aligned. This almost never happens.
Stick to the essentials and only what works best for you over time. When a good opportunity presents itself according to your careful analysis, take it. But always have strict risk controls and money management guidelines in place.
- James Chen, CTA, CMT
* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .
* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.
* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX
For those of you who are interested in forex trading, you may want to start off by getting some good forex training. Forex training is a necessity for anyone with this interest. This is because a lot of money is involved in forex trading. If you don’t get some forex training, you are bound to lose a lot of money.
Some of you may not even know what forex trading is. If you don’t know this, you defiantly need some forex training. Forex stands for foreign exchange. Forex trading is basically the exchange of one countries currency for another countries currency. This is done simultaneously in hopes of gaining a profit.
You can get forex training from several different places. The first place you should get forex training from is online. There are many websites that offer free forex training. The forex training these websites offer is both reliable and accurate. The forex training on these websites often offers a free demo account to teach you how to trade without actually using any real money.
A second place to get Forex training is at your local college campus. Forex training courses at college are usually inexpensive and very thorough. The forex training courses offered should also include hands on experience with trading, to help you get the edge. You can also get some books on forex training or research forex training at your local library. The best place to get forex training is from someone who is already involved in forex trading. The forex training these individuals provide will be more realistic for you and give you different aspects of the forex trading game.
The forex training you get should first start with learning how the foreign trade market works. The trade market is always changing, so you need to understand it first. The second part of your forex training should be about risk control. You never want to invest more than you can afford. The right forex training should teach you how to cut your losses and have less risks of failure. Next, your forex training should teach you how to open and manage a forex trading account. But this should be done with a demo account. All forex training should be done this way first, before you try the real thing.
With all of this in mind, you should be able to find some good forex training. Learn the ropes of forex trading and take the time to learn it well. Be sure to try a demo forex trading account before you start a real account. With the right forex training, you will soon be on your way to a profitable way to supplement your income.
