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How to trade the Euro in this economic climate
Day Trading and Forex Trading
As you all know the Euro has been under immense pressure with the situation in Greece, which I believe to be just the tip of the iceberg. I am not primarily a fundamentals trader although I do trade most news announcement for their spike value, but in is clear that the ECB and other Eurocrats are doing their best to polish a turd. This is a unique opportunity and my gut feeling is that there is more to come in the coming weeks and months. Now the thing is, it’s no good just jumping in with wide stops and most of you know my max stops on the Euro are 40 pips (very rare that I use such a massive stop). That means that the entries need to be precise and timed for either maximum momentum (Like Trichet’s speech today). It sent ecstatic shivers up Europhiles backs and they bought the Euro like it was going out of fashion after a minor drop on the interest rate non event. This was a great opportunity to get short just above the Pivot point around 1.3678 for a good momentum ride down to below S1 at 1.3573 for over 100 pips with little interruption. The shorters took profit from below S1 and drove it back to S1 where a new wave of selling began breaking the weekly pivot at 1.3590 and a good down wave to below M1 and so forth.
I guess what I’m saying is this:
- Get those Pivot points on your charts if you don’t already have them.
- Mark your support and resistence areas clearly.
- Try to get in as high or low as possible with a tiny stop, it’s cheaper to enter three times with a 5 pip stop than once with a 30 pip stop. Take a deep breath in between and don’t get hypnotized by those dancing colorful charts and lines. Stay Conscious.
- Look for entry points around an event or speech when momentum is high. Know that all momentum is a state of mini hysteria and it will pass, so ride it fwiw and get the flip out.
- Stay focused around these events, if you have problems with that get this from Guy Finley’s “Secrets of being unstoppable “ as soon as you can afford it. ($50 – mind you if you can’t afford it you shouldn’t be trading at all). Get on to his mailing list and listen to the man, he’s one of the few “Gurus” who is not after your wallet.
- If you haven’t bought Forex Rebellion yet, you are being stingy and stupid, it’s a great visual confirmation of a trend change and even though I usually enter before a signal is given, it confirms my entry and for some of you will be the entry.
- This is a business and when you sell someone is buying, forget about having a laugh, this is serious work, laugh when the trade is over and the dosh or mullah or dough or whatever your preferred terms is is flipping banked.
Ok, here is another tip, if you suffer from low self esteem, or have run a big loss get over it, get some hypnosis cd or read a book, don’t bring a miserable self to the trading zone because you will regret it.
Finally, there is a correlation between the equities and the USD, as equities get bought, USD get sold usually (this does change depending on the economic climate), but for now, it seems to hold. Note, that often the Euro gets bought during the US morning session and then starts dropping towards lunch time (not always), but it is worth noticing how diffrent times of day bring different action. There are cycles and a collective herd memory which is worth studying and applying.
Last few nights (UK time – midnight or 19:00 EST) I have set limit sells on the Euro with a 1:2 Risk/Reward ratio, left then in and picked up the profits upon waking up from my slumber. Doesn’t always work but when a acuurency is under duress, it’s a higher probability trade.
Note that this situation can change any time as I am not an analyst, I trade what I see and my opinion is not what I trade, although it does lead me to some profitable conclusions. Who knows, a fairy with a magic wand may appear and make it all better for the way overpriced Euro (my personal opinion). So stay alert and focused.
Have a good day
Cheers,
Mark
PS. If you like my post please use the buttons below to spread the word, if people click the adverts or buy something here I get a few dollars which helps keep this site free.
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Hey Friends,
Scalping the Euro lo and behold
This is a very short post, just to let you know that I have extended my DAX scalping to the Euro now. Why? There are many fundamental changes in Europe now, with Greece issues and other members under the financial cosh. Also, my broker has reduced the spread to only 1 pip that means that it’s cheap enough to get in.
The scalping method is identical to my DAX system see it here ==> DAX Scalping
The beauty about scalping the Euro is that if you take it from one of the pivots (See here ==> Pivot point system) a cheap scalp with a stop of no more that 6 pips can turn into a 30-50 pip runner.
Remember though, when scalping you need to remain focused and ruthless, you may scalp 10-20 times for 2-10 pips at a time, so never let it run against you. If you have problems getting into the zone try using some meditation (get some binaural beats to use, check my meditation blog) or re read Mark Douglas’s book “Trading in the Zone”
Today has been a awsome day for scalping, both the Dax and the Euro, check out below and notice how breach of the Pivot point brought on an avalanche (OK, ECB statements didn’t help much eithr  ), also see how the hit on S1 area brought a nice tradeable bounce:
 Scalping the Euro _________________________________________________________________________________________
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Many traders have asked me why I trade the pivot points and what is my fascination with them?
Just to clarify, I regard the Pivots as areas of a certain width, so for GBP I allow upto 20 pips as the lower/higher region.
The answer is very simple, here are the reasons:
- They are obvious and most traders (who use NYC open and close time) see the same area.
- There will almost always be a response to these areas, simple action and re-action. If the price has been falling sharply into S1, some traders will want to take their profits, so it will bounce.
- Even if the Pivot (I use s1, s2, s3 , PP, and r1, r2 and r3, although I do have the M’s plotted for reference) does not hold, a very small stop tells you there is more in the move and other factors are at play. Could be big orders being pushed and the smaller intraday traders are being flushed out. So, for GBP a stop of 20 pips is more than enough and 15 for Euro). The probability of getting 10 – 20 pips on impulse is high and often you catch the reversal which means your risk is tiny and the reward can be 100 pips.
- You can use these points as a Stop and Reverse area too, which gives you another crack at it.
So, to sum it up, these are relatively easy trades and the risk/reward is pretty damn fine. Just look at GBP/USD today, hit S1, bounced 10, hit it again bounced 14, made a double bottom (5 minutes) and kicked off 22 pips so far. Have a profitable and peaceful day,
Mark
PS. Combine this method with a currency meter, just to make sure you are not standing in the way of an avalanche. Listen to news too.
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If you are not using a currency strength meter, then you are missing out on a potential trade saving device.
For 2 years I’ve had several currency meters, some purchased and some programmed by my friend, but I never really took any notice of them. I had a Forex Trading System that worked and was quite happy with the results. A few months ago I started noticing a performance deterioration and I attributed it to my own state of mind, and not seeing things clearly. However, one of my colleagues pointed out that he had refined the systems we were using and always consulted the currency strength meter before he entered a trade.
I thought about it and managed to dig up some of the meters I had buried in the outer reaches of my hard drive and started using them. The idea is simple, currency strength is calculated for a basket of currencies and values assigned based on the movements of a currency against all others. So if for example the USD is strong against the GBP but neutral or weak against the Euro, a short Eur/Gbp may be the ticket, if it fits your Forex Trading system parameters. Better still, if your system or method shows a potential trade, you can consult the meter and find out if you have a better probability. I added this to my arsenal of tools and have avoided several trades that although fitted my system criteria were not support by the currency strength. I don’t use the meter itself as a trade finder, I use it confirm or deny a potential trade I am looking at.
As you know my trading method involves using pivot points, basically, buying support and selling resistance or, using the break and retrace to enter in the trend direction. (The video and post of this method is Click). Since I’ve started looking at the relative strength of the currency I have improved the results of this method by approximately 25%, a good saving and well worth the effort.
The other method I use is Forex rebellion which is an EA (expert adviser in MT4), and once again am using the meter to avoid low probability trades.
There are several packages out there with prices ranging from $199 to over $500. However mataf.net (an incredible Forex resource site) offers what they call a currency index which looks like this:
As you can see each currency is plotted in a different color and you can easily see which is strong and which is weak. You can also change the timeframes to suit your own method, so for example the GBP may be weak on the 4 hour charts, but strong on the 5 minutes charts. This gives you additional ammunition for both entering a longer term swing or position trade and also for taking ‘with trend’ trends based on retrcemens. The mataf.net currency index is free, like most of the tools on the site and you can see it here ==> Click Mate
There is another one which works directly within MT4 and costs $199, you can check it here ==> Click
I make no specific recommendation as I use my own propriety meter but I suppose that having it updating in real time in MT4 can be a good advantage, Just check them out and see what suits you best.
That’s my quick post for today, I am still working on creating a PDF of all my methods and systems but with all recent market volatility and other commitments haven’t had the time yet. It will come… in the meantime most of my methods are scattered around this blog and you can find them if you like
Cheers,
Mark
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Day Trading and Forex in 2010
Firstly, Hello to all regular readers and welcome all new readers. Wishing you an abundant and peaceful 2010 and may this be the year that all your dreams come true.
The market has been pretty slow in the first few days, the true ranges have been low and generally not seeing any urgency either way, bulls or bears. The USD has strengthened somewhat in the first few days and it may just be that Risk Aversion associated with buying the Japanese yen is subsiding. Personally I cannot see the reason for buying Yen against anything at the moment and wonder where this idea came from. When interest rates where high in the West and selling Yen was considered a good little earner (carry trade) the Yen dropped considerably and is probably still correcting as all rates are low. (Excpet for Aus and NZ). Anyway, I believe that the Yen will return to mean over the next few months, news out of Japan is still not great.
The GBP kicked off it’s lows and rose to 1.6239 on the last day of 2009, since then it has dropped to 1.5887 and rising again today. The political uncertainty in the UK and Labour government un popularity contributing to erratic trading.
The Euro is also in a medium term downtrend and with the Greek situation and unemployment hitting the dreaded 10% today we may see further downside here.
However, all said, I have little interest in the longer term as a day trader. 2009 has been an excellent year for me and many of my subscribers (it’s free, just enter email in the box on the right).
My trading profits for 2009 can be divided into 4 methods, the last method is one I’ve only been using for a couple of months but considering it cost me $97 and made me over $20,000 I’m happy with it. The trading methods I use are listed below:
- Software driven news trading – around 20% of annual profit using ‘Fast Economic News’
- Dax and Euro Scalping – around 45% of annual profits – this is my own method and you can search this blog for details.
- Pivot point trading – around 35% of annual profits – again using my own method – details in the blog posts.
- Forex rebellion Forex trading system – only been using this for 2 months but have been making consistent profits with it. Haven’t included in 2009 figures yet.
I have decided to produce a PDF with a detailed explanation of my methods and systems. I have started working on it and will be ready in the near future. The PDF will be free as I make my money trading and not teaching others how to do it. If you’d like to receive it opt in to my mailing list and you will be notified.
Once again, thanks for your loyalty and thanks for clicking thru to some of the sites and ads on this site, this helps keep the costs down and cover expenses.
Remember – Trading is all in the mind, get the mindset right and the money will come.
I have set up a new blog about meditation with some free binaural beats for you to enjoy. Meditation for Manifesting.
Cheers,
Mark
PS You can talk to me on Yahoo Messenger Free Yahoo messenger Download
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