EURUSD

EURUSD Monthly chart

EURUSD Weekly chart, 23 july 2009

EURUSD Daily chart, 23 july 2009

EURUSD H4 chart, 23 july 2009

EURUSD H1 chart, 23 july 2009

On the monthly chart, the EURO is just above a monthly 23.6% Fibonacci level. A close above 1.42 at the end of the month might keep the EURO rising higher, towards 1.47. The Weekly chart displays a trendline resistance and a supply area at 1.4330 – 1.4360. A break above that would be a confirmation that the uptrend will continue towards 1.47, but I personally favour a fade back down.

On the medium term, we have a daily TL (trendline) resistance in confluence with 1.4331 resistance level, which should provide a nice fade when it gets there. A break under 1.4155 (23.6% daily Fib level) would be a confirmation that the pair will trade lower towards 1.3800 (the bottom of a big daily range).

The 4 hour chart looks quite choppy, showing that bulls are losing strength and there is a lot of indecision in the market. A break below 1.4200 H4 23.6% Fib level and TL support will give confirmation that the bears are in control.

In the 1 hour chart, we’re still trending up, but we’re now inside a nice ranging channel. Price could not stay above the range and it continues to get sucked in, giving signals of reversal. A break below 1.4180 could be a good signal to short the market. 1.4145 is also a critical level though and that will be our final confirmation that the market is reversing and I would go short with tight stops until 1.4145 gets broken.

Overall, I am bearish on EURUSD in the following days and the following week, considering the pair is highly overbought and has made significant rallies. A correction is certainly due. As a trader, though, you need to be prepared for any possibility, so with a break above 1.4250 and if the price starts using it as support, I would go long.

I’ve been training myself at a brokerage firm for 6 weeks so far. Actually, it was more a “testing period” than a training course. In all this time, I only had to follow two rules:

A. Fixed profit/loss targets: GBPUSD 55 pips, EURJPY 60 pips, EURUSD 45 pips. I just set stops and take profit orders and wait. I am not allowed to close a trade before it gets to the stop or the take profit level.

B. 3 minute rule: When I first open up the platform, I have 3 minutes to open a trade on each of the three pairs I’m trading. After I close one trade, I have 3 minutes to take another one on the same pair.

Why these rules?

Well, they haven’t told us explicitly, but I figured out what the reasons are.

A. Having fixed targets makes you get rid of the two killer-emotions: fear and greed.

A fixed stop eliminates the fear of losing a trade. Many noobs close out their trades in fear when the trade is 5 or 10 pips in loss. After they do that, most of the time the trade returns in favour of their position and then they get frustrated. They’ve closed too early, without giving a chance to that trade. This also eliminates greed. Many times, noobs don’t even set a stop loss order or widen it as the trade is turning into a loser, thinking it will go back in profit. I did that in the past, being driven by my emotions, sometimes even closing trades at -120 pips. This rule forces you to cut losses short and at the same time to give space to your trades.

B. The 3 minute rule eliminates the fear to jump into new opportunities in the market. You’re no longer afraid to enter into a position. You are always prepared, no matter what the market is doing. You will also learn to forecast market movements all day with pretty good accuracy in a few months. Screentime is very impotant and that’s your greatest teacher. As a friend said: “You have to be in it to win it”. Meaning that if you want to make profits, you have to take the risks, you can’t win anything if you don’t take the opportunities that the market has to offer. Many times in the past, I thought “I should go short here, at this resistance level”, but I couldn’t pull the trigger. In 30 minutes, price was already over 50 pips lower and I was cursing myself for not entering the trade.

The truth is that emotional control is 90% of your success as a trader. If you don’t learn self-control, you will never make it. You will just provide money to those who do…

Tips and tricks that make the difference

A. Trend analysis

Trend analysis is one of the most important parts of technical analysis. The more able you are to gauge the trend and market sentiment, the more you will be able to collect a big chunk of pips each day.

An uptrending or bullish market is a market that makes higher highs and higher lows:

Uptrend

A downtrend is an “upside-down uptrend”, meaning the market is making lower highs and lower lows.

Identifying a trend

As a short-term trader I always have to be alert, know what the current trend is and watch out for trend reversals. I’m only interested in short-term H1 (1 hour) trends. An H1 uptrend can be just a correction in an H4 chart, but that doesn’t matter for me, since trading based on the H1 chart allows me to meet my profit targets easily. Such short-term trends can change dramatically, especially on important news reports. That’s why you need to learn how to become a market chameleon and adapt fast to changes in the market.

Downtrend changing into an uptrend

Above is a picture of what a trend reversal usually looks like in a downtrend. The lower lows in a downtrend act as resistance levels as price goes further down. When the price actually breaks through one of those lows, then that broken low becomes a support level and a new trend (or possibly just a bigger correction) is starting. That’s our signal to stop shorting the market and buy at support. Also, reversals tend to happen at 61.8 or 76.4% Fibonacci levels of a bigger wave that the trend is part of. 76.4% Fib is an overbought signal in a downtrend or oversold signal in an uptrend.

You can also plot an 8 hour and 21 hour EMA (exponential moving average) on your chart. These will signal a trend reversal when they cross. When the 8 hour EMA crosses the 21 hour EMA from above, a downtrend is begining. When it’s crossing the 21 hour EMA from below, an uptrend is begining.

Learning how to identify trends and how to use support and resistance levels is the key to Forex. I’m starting to dump Fibonacci and pivoit points, because I find them to be much less reliable than support/resistance levels that I draw myself on the chart. Anyway, if you do want to use some tool, I suggest dumping pivots and sticking to Fibonacci. Pivot points are calculated using daily highs/open/close data and that can be different for different brokers (a daily bar can have dramatically different open and close prices).

Cheers!