favorite time frame for determining daily profitable

What is your favorite time frame for determining daily profitable trades? What indicators do you use to establish your daily support and resistance? dgulegin


ANSWER: I begin with an assessment of what kind of a day is it going to be; a big move day or a small move day. Examples of potential big move days are non-farm payroll, trade figures, conference board consumer confidence, Advance GDP, Current Account, FOMC annaouncement etc. Big days also occur when Greenspan speaks and to a lesser extent ofter key Fed Presidents. Other big day indicators are major long-term chart points nearby, overdone recent price action etc. Also the two days following big spikes etc. Once I have determined the kind of day I expect it to be then I decide on what tools to use to find my trade for today.

If I determine it may be a big day I have specific strategies for dealing with that such as pre-planninmg strategy for responding to key economic numbers by knowing what type of a difference between expected and actual is needed to cause a significant price move (spreadsheets on past months releases good for that); Spreadsheets also have past history that tell me what kind of a move to expect, given a specific difference between actual and consensus. Two trades are possible; if like Friday’s payroll the difference is small and the price action reverses, and also if the difference is large whats the maximum price I can enter at and still expect a reasonable profit; to do this right requires a good price projection, which requires spreadsheet analysis to make that determination.

What I believe your question is about is the 77% of the time their is no big news, big chart points etc and so your question really is how to trade a trading range that is either somewhat straight accross or slanting up or slanting down. In EURUSD, for example, the first thing I do is make a determination of what I think the extreme price change can be. By that I mean from 5pm NY time to 5pm NY time the next day what is the likely maximum price change to be; my studies, based upon the last 6 years, indicate that about half a percent is the maximum price change on a small move day; essentially 65 EURUSD points. So if EURUSD closed on Friday at 1.3235; 1.3300 high close and 1.3170 low close is my first assessment.

From their I check the Fibonaaci levels; High 1.3666 to Low 1.2730 = 61.8% at 1.3308 AHHA; suits my 1.3300 for resistance perfectly. Then I check the Fibonacci for the “usser” side as they say in Europe; Fridays low was 1.3086 and the high was 1.3252 = 38.2% at 1.3169 AHHA; suits my 1.3170 support level perfectly. I conclude EURUSD will range trade between 1.3300 and 1.3170; I not that the “breakout” on Friday was 1.3165 (there was a prior high there so resistance becomes support) AHHA so 1.3170 will be a “tough nut to crack” to the downside. I ponder what if it does break lower? Well I assume all the “break buyers” with a longer-term trading style (hedge funds, CTAs etc) will have their stops beginning at 1.3155.

I conclude buy at 1.3175 (got to leave allowance for spread to enter and also a couple of points for the “broker shuffle”; after all if there are no stops until 1.3155 the brokers “computer program” will not make 1.3172-75 and allow me to buy unless is absolutely positively has to). No point missing a potention 75 point trade for a couple of points. So my limit order with an oco (one cancels the other) would be; buy 1.3175, if done sl 1.3150 tp 1.3250 (below Fridays high). On the topside I would sell at 1.3300, sl 1.3325 or tp 1.3225, which is 10 points below Fridays close. These orders assume I will be golfing or playing racquetball. If I was actually watching the market I would include trend lines, trend channels, 30 min and 5 min 60 period moving averages and seek the smaller moves.

To answer your question I use a proprietary daily range finder, fibonacci levels, 5 minute and 30 minute 60 period moving averages, formation of hourly bars (lower highs in downmove and higher lows in upmove), prior day’s high and low and close, trend channels, and trend lines. If it’s a potential big day I focus on the event that will cause the big move and all of the above take a back seat.

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Why do most people failed in forex trading?
Is it possible that the professionals have different set of strategies that can beat individual investors. harry_wyk

Most fail because of ignorance; too many trades; killed by mark ups, not being wrong; flipping a coin would keep a trader about even over the long run. Most underestimate how much uncertainty impares judgement under stress; they know they should buy it but for “some reason” they sold it. Lastly, its a fact 90% of new traders lose money; it’s a also a fact that 90% of new traders only use technicals and trade short-term. Technicals work great long-term and are horrible short-term, especially “momentum positive indicators”, such as MACD.The fact is the 10 and 20 point moves are nothing more than a random combination of technical traders putzing around, Bank FX traders pushing prices to run stops, exporters and importers doing normal business, and options traders protecting levels.

Most FOREX professionals, such as hedge funds and wealthy individuals, take a long-term view of the market and focus on the big trend. Currencies have a documented history of trending for long periods of time and only changing trend slowly – in the long run. By focusing on the big picture and taking the long run approach hedge funds and wealthy individuals are successful because they are on the right side of the true nature of currency rates – long-term persistant, sustained trends. To be frank, the in and out trading; I want to make “just” $300.00 a day strategy that most new FOREX traders persue is a loosing strategy and thats why they lose. Basically, the internet is overloaded with half truths and “white lies” about FOREX and most new traders are cooked before they “jump in”.
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Are there tools or indicators that bank fx traders use that an experienced independent trader would not or would never have access to on regular consumer trading stations?

Do bank traders use candlestick or line charts? I heard that they only look at price values.

Can an independent trader gain access to the same data feeds that are used by banks?

If I candlestick represents an open/close difference of 0.0032 how could you calculate what that value represents in dollar volume? Is there a way to find out?

tysun

Bank FX traders have their customer order book and know what their historically profitable clients are doing, they do deals with sharp hedge funds and CTAs and “go with them” on the trades. Bank traders talk to each other about customer orders and deals (“you show me yours , I’ll show you mine”). Bank traders deal on the EBS and Reuters Dealing 3000, both of which provide very valuable information about who is driving he market. For example, I was working at a Japanese Bank and I had an order to buy 200 million USDJPY; I put in buy orders for 100 in EBS and get Merrill Lynch on 90 of them. At that point I will fill the client and stay short 110 as I know from experience when Merrill Lynch has wood to chop in dollar yen they have a ton of wood to chop.There are subtle advantages...

A good Bank trader does not need charts; he has identified and consistently exploits profitable market niches, such as arbitrage and “running with the good clients” or “do what they do”!

An independent trader can gain access to the interbank electronic brokers trade feed and see the prices dealt; but only the counterparties to a trade know who the buyer and seller are and the amounts traded; and who is selling and who is buying and the amounts is key.

Your last question about Candle Charts is unclear. An open close difference of .0032 is 32 points on a round lot in EURUSD, GBPUSD, NZDUSD and AUDUSD; thats 320 bucks.

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What are your opinions on CHF/JPY trades to support carry trades on long high yielders? Murli

CHY/JPY is fundamentally a function of mideast war and oil price; if oil prices rises as a result of terrorism and fighting esculates, CHF benefit as safe haven currency and JPY loses because 100% dependent on imported oil. Technically CHF/JPY goes down when the dollar goes up and vice verse as generally USDJPY, one of he “legs”, tends to lag USD moves in both directions. If your question is how to choose which low yielder, CHF or JPY, to match with a high yielder then I would say it depends upon the amount of time and what is expected to happen fundamentally over the time period.



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Do you feel that it is possible to trade on trend indicators and technical analysis alone? omar.grant

Yes. Provided you are trading long-term only. Short-term definitely NO.



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Please share your view on trade exits and what you look for to qualify the exit. Msalak

This is an excellent question; results are based upon exits – not entries. I exit a trade whenever a sharp spike occurs in my favor; spikes reak of desperation, take advantage when you can. Most of the time getting out on the spike is wrong for the moment but right for hour.
Trailing stops based upon a number of points are suspect (25 point trailing stop for example); they are oftentimes triggered after a spike occurs when the correction ensues. Better to “get out” on the spike and reenter when the correction is over.I like hourly bar chart for EURUSD positions; for example when a bull trend is young (third bar say) it’s reasonable to assume the hourly lows will be higher each time; a good stop is below the low of previous hour. I don’t recommend this strategy for time periods less than an hour.



I like the one minute GBPUSD 60 period moving average after a sharp Pound move (100 points or more). AUDUSD and NZDUSD always retrace so I like to exit those two currencies “while the going is good”. Basically I like to “give away” my winners; when everybody wants em and I have em I give em.

Exiting with a loss is more difficult. I have a daily money stop that automatically, no matter what, sets the “limit” of the loss. I adjust the size of the position so that I allow for normal market volatity within my “limit”. The real issue with exiting with a loss is whether or not your getting out for the right reason. If you hit your daily limit your out – no matter what. Think of it as a knockout – your done for today. But if your looking for a reason to cut a winning trade or a breakeven trade or a small loser (it’s not moving comes to mind) that’s wrong, thats a psychological defect, or a human instinct; trading is stressful, avoid stress, cut the trade.

Lastly, try not to relate a specific amount of money your trying to make today with your exit strategy; base your exit on technicals or safety and not your “dreams”.

Forex Question

What time frames would be suitable for short term trading and why?
I think your referring to the length of time devoted to each bar on a chart? For example 30 minutes chart, 60 minute chart etc. If so, for day trading I prefer 30 minute bar chart and 5 minute bar chart; in particular I pay attention to the 60 period moving average.

When can a trend be identified?
Most chartists argue that three connecting points minimum and the more times a trendline is tested the stronger it becomes. Personally, I look for 3 or more rising bottoms to identify an uptrend or 3 lower tops to identify a downtrend. The minimum time period is an hourly bar chart but I prefer a daily.

Is it good to use just technicals, fundamentals, news releases, or a little of all depending on the climate?
Just as you wouldn’t buy a house without checking it inside and out, the neighborhood, the schools etc; your trade analysis should cover all bases (fundamental, technical, market sentiment) as well.

How often should one trade the forex and for how long a period?
Depends upon your trading plan or trading system. I look at daily range trade strategies that trade 3 or 4 days a week and also a moving average based daily trading system that trades 4 to 6 times a year. IT depends upon what market niche your trying to exploit.

On which session is there likely to be more action or volatility?
European opening (2am to 3:30am Eastern Standard Time) and New York major economic release time (8:30am to 10:30am).

krdstock01

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Do you think it is possible to construct a trading system that only uses news and be profitable for more than 80% of the generated signals?
Yes. If you focus on the major news events. However charts and technical market conditions should be part of the equation for maximized performance. For example, if USD is very strong and a key UK indicator is released and its very bullish for GBP; a long position in GBPUSD will not yield spectacular results because the currency pair is mismatched; meaning if you bought GBPUSD; you bought a strong currency GBP but also sold a strong currency USD, so your likely outcome would be marginal. In that particular case (USD strong, UK news bullish), the preferred trade would be sell EURGBP; this way your long GBP, the strong one< and short EURO, a weak one.

maartenhuybrecht

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What do you feel is Greenspan´s true affect on the USD?
The Chairman of the Federal Reserve Board essentially dictates monetary policy; monetary policy directly affects the level of short term interest rates, which has a direct impact on the economy and ultimately the level of the USD. Greenspan also has a dramatic effect on the USD when he talks about the current account deficit; if he says foreigners may pull their money out and the dollar could decline significantly thats talking the dollar down, in which case the dollar usually takes a beating. If Greenspan says the current account will improve, then the USD tends to go up for awhile. Essentially Greenspan has a direct influence on the dollar from both a monetary policy point of view and also from a verbal point of view.

bfrenchy99

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Often news favor a certain market direction, however, when entering position according to the new data, one get´s stopped out by a spike in the opposite direction. How to avoid that?
Generally I place my stops beyond the pre-release level and only trade the major releases. Also consider what type of market your in. If the market is focused on the big picture (macro) issue of U.S. current account, then a number thats positive for the economy, such as rising GDP, also means more imports and hence a WORSENING of the current account; in a nutshell, good can be bad; it depends on market focus. Also if the USD is trending then you should expect less of a reaction in the opposite direction of the trend.
For example, if USD is weak and trending lower, and positive dollar news comes out, the upmove will likely be short lived as longer-term traders take the opportunity to sell in anticipation of further weakness once the good news “wears off”.

fhaidekker

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Is the Non farm payrolls the stronger indicator?

Non-farm payroll is the strongest indicator of the health or strength of the economy for two main reasons 1) it foreshadows all the other indicators that follows; for example; if lots of people are getting jobs its reasonable to assume consumer confidence will be high, retail sales will be strong because people are spending, industrial production will be high because if retails are ordering factories will be producing, etc etc. 2) Non-farm payroll is released early in the month so the information is fresh. Economic indicators that are released way after the fact tend to be less potent.

grlule


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what is reasonable risk (in pips) for short-term trades after news events?

I think if you trade in the direction the news implies, a stop loss beyond the pre-release news price is a good stop loss level. I cannot express it in pips because it would vary depending upon the severity of the news. For example, U.S. trade number comes in 60 bil and market looks for 54; to buy EURUSD would require paying perhaps 80 points above pre-release level; so your stop would be 90 points. If weekly inital joblessness claims came in at 295 vs 312 expected perhaps you could sell EURUSD 15 points from pre-relase, in which case you stop could be 25 points.

idim

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How I can know when the currencys goint to react whit the result of the economics indicators?

Compare the consensus forecast to actual release and note the difference; then record the price action from release time forward (I like first 15 monutes especially); assemble this information for the past 12 months or longer. You should be able to determine 1) how big a difference is needed to cause the price to move 2) how big a price move should occur based upon the current months difference between expected and actual.

jorge_ramos

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how do you trade your way around bad economic news when the news is contrary to techical trade set ups and market expectations ?

I assume your asking if the news is worse than expected and the charts and technical indicators are better suited for better than expected news. So for example if GBPUSD was in a two week uptrend and was nears the highs with a lot of congestion etc; so if UK news was bullish GBPUSD would breakout and go a lot higher etc; but the news is counter-trend, meaning bearish? I would look to buy the Pound when the effect of the bearish news wore off. I would use a one minute GBPUSD 60 period moving average and play a break above it to enter long. Most news will not change the trend just slow the trend down.

steve

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