Monday, July 27, 2009
EURAUD Long Candlestick!
July 27 2009. A funny and bizarre day. EURAUD showed strange movements. EURO was going down a bit. And then it was going down and down and then the candlesticks showed some rejection. Bulls were starting to win and I thought it was not going to beat the secondary support from far away.
Later on, a massive super long bear candle appeared.
Very strange and bizarre but it was on the 11th hour and the drop was sharp. Was it a market event? Well I am too lazy to check. But this drop won me 100 pips. Hehe.
Cost of Opening Trades
Do you think opening and closing Forex Trades are painless? Well, I mean you can just click on Buy or Sell, enter the amount in units or lots, and then enter stop loss or take profit values and then click SUBMIT, right? It doesn’t cost you a dime.
Well, think again. When you click submit, you will have lost money in the form of spread. If you take notice, you would realize that there is a buy and sell price for every market pair. So if you Buy, the broker opens your trade at the buy price and the difference between the Buy and Sell prices would be the spread. That difference costs you money and that is what you will be paying to the broker!
So generally, if you scalp a lot, you will be paying the spread many times to the broker in a day. But if you play position trades or daily trades, or do not open and close trades that frequently, you do not need to spend as much money trading.
Wednesday, July 15, 2009
USDCAD Breakout
USDCAD is currently having a breakout! It was rising but then it slowed down. And it was counter-trending for many days, but now it is July 15, 2009 and wham. Let’s see. Canada has been experiencing a downtime for the whole of last month but things cleared up and everything seems OK and stable. Then USD started fluctuating again and that explains the counter-trend.
This can be related with the spring effect. When you press a spring hard between your fingers, it will start to compress and store inertia energy until it can take no more and then when you release, it the spring makes a big jump! And it seems like USDCAD jumped downward. July 14 was about a decrease of 200 pips. Wow.
Thursday, July 9, 2009
RSI - A Big Help in Trend Trading
Recently, I have been paying a lot of attention to a simple but powerful indicator - the RSI, also known as the Relative Strength Index. This indicator shows you whether the current trend of the market is powerful or not.
As you may already know, trading ranging markets maybe dangerous although profitable. But most of the time, only those very experienced and full-time traders can successfully trade ranging markets. People like me who go to college and have other commitments cannot continuously watch the markets to scrap pips from the ranging markets and therefore, prefer to trade during trends.
But the problem is to find out whether the trend is strong enough to trade. I find that the SMA 21 indicator can help a lot, but the RSI is simply easier and faster to use. My system for using the RSI is simple. I just see what the RSI value is, on a daily chart (D1). If it is 60 and above, the market is going up. Below 40, it is going down. In between, I won’t trade. So I just take a glance at the RSI figure and if it starts with a 4 or 5, I will skip to the next pair. Trading when RSI is at the extremes - in my case above 60 or below 40 - greatly increases winning probability.
Thursday, July 2, 2009
The Simpler the Better?
A lot of people trade using lots of indicators. Some trade using Forex robots or Expert Advisors that are based on indicators as well. But there is a school of thought that says that trading using indicators has a big disadvantages.
Disadvantage number 1:
Lots of indicators will clutter the screen and in the end, we will not be able to tell what the market is really doing and what direction it is really going and we end up making the wrong decision. All thanks to the whole lot of indicators that are supposed to help.
Disadvantage number 2:
The indicators lag. Most of the time, when the indicators have shown a nice tradable move in the market, the move would have already reached its end when it is revealed by the indicator and trading based on the indicator would be unwise. Although sometimes the indicators do predict the correct subsequent moves.
Therefore, some people think believe that using just 1 or 2 indicators would be enough, and then based on them, a system is developed and the traders would just stick to the system with discipline.