Happy holidays and a Happy Rich New Year!

I won’t be trading until the end of 2008, so I’ll be taking a “post-break”

Hope you all had a good year and look forward for a successful trading year.

Cheers!

Hi, guys!

This week might be good for carry trades, so the EURO may look for new highs against the USD.

For those that are not familiar with carry trades, a carry trade is selling a currency with low interest rates to buy a currency that yields bigger interest rates. USD currently has a 0.25% interest rate and EUR has a 2.50% interest rate, so many traders are still buying EUR with dollars, and keeping positions overnight so they get the difference between the interest rates (2.5 – 0.24 = 2.25%). The AUD and NZD also have the highest interest rates (4.25% and 5%), so that’s why they’ve been rising.

Also watch the price of oil, because that could influence the EURUSD (oil goes up, US pays more for oil, so the dollar weakens).

Cheers!

Hi, guys!

Today I’d like to talk to you about an important price action concept that I find to be very important when trading support and resistance lines.

Price always reacts in some way on these lines. But the problem is how will it react. You need to know if the level will hold or not. If it’s strong and it holds, then you fade it (buy at a support or sell at a resistance). If there are signs that it will break, then you play a breakout (sell below support, buy above resistance).

So, what is momentum and what does it tell us?

I’m not sure this is the best (or the most clear) definition of momentum, but here goes: Momentum is the speed at which price is going down (if it’s heading towards a support level) or up (if it’s heading towards a resistance level). You can think of it as pips/second.

Let’s say we are watching a support line and price is heading towards it. If it’s going down fast, without stalling too much, then price has strong momentum and if it keeps this strong momentum even when it’s 20 pips away from the support line, chances are it will break that support line and I will place a sell stop below it.If, instead, price is going down 5 pips, then goes back up 3 pips, then goes down another pip, then pulls back a bit, or stalls, and the down-move is slow, then we say that price has weak momentum and we will probably look to go long at the support line.

I lost many trades when I started out because I wasn’t looking at momentum, but recently I found it to be a very important thing to look at. Not MACD, not Stochastics, or who knows what indicator. Price action and market fundamentals are the best indicators in the Forex market. So, watch out for support/resistance levels, momentum and key Fibonacci levels.

Cheers!

Hey, guys!

Well, you probably read my trade tally today. I took a short at the break of the 50% fib level on the euro. Now, the reason I took the trade is because the market was bearish since yesterday and the dollar started to get stronger, as oil continued to go lower and the Bush administration approved a 13.4$ billion bailout for the automakers. And on top of that, this is the end of the week and there’s just one week until Christmas, so a lot of big institutions that had longs closed their positions today, for profit taking. So there were a lot of reasons to short the EURO today.

But here is another interesting thing that Nial Fuller pointed out. I got a video link on my email from him and I liked it, so I thought I’d share a few thoughts with you about that.

EURUSD pin-bar formation

That is a daily chart of the EURO. So a pin-bar is a candle with a small body and a big wick. The candle’s wick should be about three times the size of the body or more. A pin-bar tells you to trade in the opposite direction of the wick. So, in this case, it signaled a short. We also had the 50% fib just below the candle, so that turns out to be the perfect place for a short. This is pretty nice.

As I said, I took this trade, but for different reasons and with a small take profit level of 58 pips. Then I shorted again later at a small H1 support breakout, for another 57 pips. So 115 pips on two trades. This breakout was worth at least 350 pips though, so I’ll be watching these formations next time.

Ok, well, with these said, thanks Nial for pointing this out and I wish you all a Merry Christmas and Happy holidays!

Hello, guys.

This was a great trading session. Here goes:

- sell EURUSD at 1.4178, stop at 1.4200, take profit at 1.4120. This was the break of 50% fib level and also the break of the previous daily pin-bar candle. Took my profit. I don’t see any mistakes made, possibly should have used a bigger take profit level, maybe 100-120 pips for this one.

- sell EURGBP at 1.3977, stop loss at 1.3999, take profit at 1.3920. I took this on the break of a small H1 support level, but it paid off. Take profit level was touched and I am happy.

Today’s summary: +115 pips. Things to watch out for: risk/reward ratio.

Any trades I’ll be taking today, I’ll write about here.

Cheers!