Something Interesting in Financial Video June 2015 - page 2

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Indicators: AutoTrendLines

Sergey Golubev, 2013.10.09 18:20

How to Exit While Trading with Trendlines

Talking Points:

  • Traders should focus on their exit plan just as much as their trade entries.
  • Trendline traders could set their stop losses beyond the nearest support or resistance level and set their limits within the nearest support or resistance level.
  • Setting exit prices according to support and resistance levels could tip the odds in your favor.
How Important Is Your Exit Strategy?

Many traders have a strong set of rules that they follow to enter trades, but have difficulty in selecting their exits. This is troubling because how we exit a trade should be just as important, if not more important than how a trade is entered. After all, our exits ultimately determine if our trades are profitable for us or not. So we need to make sure our exit strategy is just as logical as our entry strategy.

When we place our trades based on trendlines, we are placing them based on support and resistance levels. We are thinking the price will bounce off a trendline like it did in the past. I propose we use the same logic when setting our stops and limits.


In the example above, it’s easy to see the sell entry that was given to us based on the bearish trendline. We entered right at the trendline looking for a bounce back down, but where do we want to exit? When do we call it quits if the trade goes against us? Where do we place our profit target? Let’s take a look.

Setting Stops Beyond Support/Resistance

We need to look at placing our stop somewhere above this trendline. If the resistance is broken through, we were wrong on the trade and should accept the loss quickly. It’s possible that price could return back to profitable territory after breaking this resistance, but we cannot rely on being lucky. We can only trade based on what we see.



I like to set my stop 5-25 pips from the closest support/resistance level depending on the time frame I am trading. The smaller the time frame of the chart, the tighter I will place my stops. On this trade, I set my stop 5-6 pips away from my entry since that was beyond the resistance line as well as the previous swing high (Bounce #2).

Remember that when we set our Stop loss, this is also setting our monetary risk on the trade. So we also need to consider our trade side in respect to our Stop loss distance.

Setting Limits Within Support/Resistance

Now that our stop is set, we need to focus on our profit target. For our limit placement, we have two objectives:

  • Our limit’s distance needs to be further than our stop’s distance.
  • Our limit needs to be placed within the closest support/resistance (by at least 5 pips).
The reason we want our limit further than our stop is because we always want to try to make more money than what we are risking on each individual trade. This is something we discuss heavily at DailyFX so I will say it again here. We want a positive risk/reward ratio.

And the reason we want our limit to be placed within the closest support/resistance level (by at least 5 pips) is for the exact same rationale we used to open this trade to begin with. We know prices have a tendency to bounce off price levels they have bounced off of before, so we want to make sure that no support/resistance is in between our entry and our limit level. In the example below you can see I placed my limit 5 pips above the swing low (potential support). This gives price a clear path to a profitable trade.


Trendline Strategy Complete

This trendline strategy is one that can be used universally across all currency pairs and time frames so it is definitely a worthwhile style of trading to learn. The logic behind the entry and exit rules is also something that can be tailored to other types of strategies as well. Good trading!



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Something Interesting in Financial Video December 2013

Sergey Golubev, 2013.12.02 10:16

19. How to trade trend lines in Forex

In this Forex training video we discuss how to trade trend lines when the market is trending upwards and downwards. We provide detailed instructions on how to draw trend lines, set targets and stop losses whilst also focusing on how not to get caught out with fake trend lines.





 

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Something Interesting in Financial Video August 2013

Sergey Golubev, 2013.08.05 09:52

61. Why Markets Move Ahead of Interest Rate Announcements

A lesson on how markets and traders anticipate interest rate changes for stock, futures and forex traders.

In our last lesson we looked at how The Fed is expected to react at different points in the business cycle, and what the expected market movement will be as a result. In today's lesson we are going to look at how the Fed goes about signaling to the market changes in their thinking on the direction of monetary policy, so we can begin to understand why markets react not only to Fed interest rate announcements but just as importantly to events which change the markets anticipation of how the Fed may react.

While we have simplified the situation in order to better understand the basics of how The Fed uses monetary policy, as you can probably tell by now, forecasting economic conditions and using monetary policy to try and manage those conditions is a very difficult process. The members of the FOMC are constantly analyzing economic data from across the country to try and gauge where the economy is in the business cycle and what if any monetary policy action is needed.

As we have touched on in previous lessons, the FOMC has 8 regularly scheduled meetings throughout the year where they meet to discuss current economic conditions and expectations of future conditions. It is at these meetings that decisions on what changes if any in monetary policy need to be made.

As we've learned in previous lessons, what the FOMC decides to do with their target for Fed Funds Rate at this meeting has wide ramifications for the economy and therefore the markets. With this in mind the results of these meetings are closely followed by market participants. It is important to understand however that the market not only looks for whether or not the FOMC takes action on the Fed Funds Rate and by how much, but also for any clues in the Fed's Statement as to what their bias may be for future rate decisions.

This is a very key point to understand because the markets are always trying to anticipate what is going to happen and therefore they move up and down depending on what people think will happen to rates going forward. Anything that comes out from this meeting or any thing else that is in line with what the market expects should have little or no effect on the market. Conversely anything that comes out which changes the markets forecasts on what if any Fed action will be, can cause drastic moves in the markets as participants react to this new information and markets adjust accordingly.




 

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Press review

Sergey Golubev, 2015.06.18 07:52

Video: Fed Leaves Dollar To Its Own Devices, Euro Tension Serious (based on dailyfx article)

  • The FOMC walked a tight rope in its policy decision such that the market didn't see a clear view
  • Yet, where the decision, statement and eco forecasts disarmed; rate forecasts speaks to the USD

EURUSD was teed up for the Fed. All they had to do was given enough clarity on a hawkish or dovish lean to break a tight wedge. Instead, we trickled through. This doesn't fit the bill of a break as there is little conviction to follow with momentum on the other side of the boundary. In the FOMC event this past session, the policy authority tried to balance its decisions and views such that there was little for speculators to trip on. Where there was some very clear concern/interest for the medium-term view though, investors decided to fall back on complacency...that may not end well. Outside of timing rates, UK data has been sending the Pound soaring, New Zealand event risk has driven the Kiwi Dollar lower, and the pressure on the Euro as the Greek drama drags on is beyond any other current fundamental risk. We discuss all of this in today's Trading Video.



 

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Sergey Golubev, 2015.06.19 13:15

Trading Video: Beware a Market This Blase on Greece, Risk, Fed (based on dailyfx article)

  • Greek negotiations faltered once again while a warning about the stability of its banks leaked out
  • US inflation data ticked up, but a market unwilling to lift USD on FOMC forecasts would overlook this too
  • Markets are worryingly calm in the face of the same fundamentals that have capsized us before

The financial markets seem tranquil in the face of a storm of troubling fundamental developments. Complacency does not stretch forever however, especially as the threats grow increasingly acute and near. The list of threats to our seemingly stable system are the kinds that would look like 'obvious' triggers for catastrophe in a post mortem of a market collapse or general financial crisis. The implications of the Fed possibly raising rates in September to cut into already razor thin returns, a Greek exit sparked by a banking system liquidity crunch, or an elemental speculative slump guided by excess in regions like China all carry the right level of influence. Yet, despite all three of this threats swelling these past 48 hours, there are no casualties yet...but that may be a matter of time rather than circumstance. We take a look at the market with a particular view of Dollar, Euro and risk in today's Trading Video.



 

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Something Interesting in Financial Video February 2014

Sergey Golubev, 2014.02.10 11:15

06: DURABLE GOODS

This is the 6th video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this lesson we cover the Durable Goods report.

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Previous parts:

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Durable Goods Orders

Durable Goods Orders (DGO) is an indicator of orders placed for relatively long lasting goods. Durable goods are expected to last more than three years, e.g.: cars, furniture, appliances, etc.

This indicator is important for the market because it gives an idea of the consumers' confidence in the current economic situation. Since durable goods are expensive, the increase in the number of orders for them shows the willingness of consumers to spend their money on them. Thus, the growth of this indicator is a positive factor for economic development and leads to growth of the national currency.

  • Release Frequency: monthly.
  • Release Schedule: 08:30 EST, the fourth week.
  • Source: U.S. Census Bureau of the Department of Commerce.

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USDJPY M5 : 47 pips price movement by USD - Durable Goods Orders news event

EURUSD M5 : 32 pips price movement by USD - Durable Goods Orders news event :




 

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Something Interesting in Financial Video February 2014

Sergey Golubev, 2014.02.04 11:48

05: ISM MANUFACTURING

This is the 5th video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this lesson we cover the ISM Manufacturing report.

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Previous parts:

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Description #1 :

ISM Index (Institute of Supply Management's index, former NAPM — National Association of Purchasing Managers) is the index of business activity.

ISM figures above 50 are usually considered as an indicator of expansion, while values below 50 indicate contraction. Typically, when ISM approaches 60 investors begin to worry about possible economic overheating, inflation increase and the corresponding measures (raising rates) by the Federal Reserve Bank. Figures below 40 entail talks about recession.

ISM is released just before unemployment data are announced, and is often used to refine data by Bureau of Labor Statistics.

  • Release Frequency: monthly.
  • Release Schedule: 10:00 EST, the first business day of the month.
  • Source: Institute for Supply Management.

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Description #2 :

  • Source : Institute for Supply Management
  • Measures : Level of a diffusion index based on surveyed purchasing managers in the manufacturing industry
  • Usual Effect : actual > forecast = good for currency
  • Frequency : Released monthly, on the first business day after the month ends
  • Why Traders Care : It's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy
  • Also Called : Manufacturing ISM Report On Business

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Press review

Sergey Golubev, 2014.01.17 15:52

How Forex News Traders Use ISM Numbers (adapted from dailyfx article)

  • The Institute for Supply Management (ISM) was founded in 1915 and is the first supply management institute in the world.
  • Servicing 40,000 business professionals in more than 90 countries, ISM focuses on supply chain management.
  • Forex traders rely heavily on ISM’s release their Purchasing Managers Index (PMI) on the first business day of each month to gauge economic growth.

NZDUSD M5 : 17 pips prrice movement by USD ISM Manufacturing PMI :


What is ISM?

A country’s economy is as strong as its supply chain. The Institute for Supply Management (ISM) measures the economic activity from both the manufacturing side as well as the service side. Formed in 1915, ISM is the first management institute in the world with over 40,000 members in 90 countries. Since it can draw from information gathered from the surveying its large membership of purchasing managers, the ISM economic news releases are carefully watched by Forex traders around the world as a reliable guide to economic activity.


ISM Surveys

ISM publishes three surveys; manufacturing, construction, and services. Published on the first business day of the month, the ISM Purchasing Managers Index (PMI) is compiled from surveys of 400 manufacturing purchasing managers. These purchasing managers from different sectors represent five different fields; inventories and employment, speed of supplier deliveries, production level, and new orders from customers.

XAUUSD M5 : 3345 pips price movement by USD - ISM Non-Manufacturing PMI news event :



In addition, ISM construction PMI is released on the second business day of the month, followed by services on the third business day. Forex traders will look to these releases to determine the risks at any given time in the market.

EURUSD M5 : 37 pips price movement by USD - ISM Non-Manufacturing PMI news event :


Forex Market Impact

The Manufacturing and Non-manufacturing PMI’s are big market movers. When these reports come out at 10:30 AM ET, currencies can become very volatile. Since these economic releases are based on the previous month’s historical data gathered directly from industry professionals, Forex traders can determine if the US economy is expanding or contracting.

Forex traders will compare the previous month’s number with the forecasted number that economists have published. If the released PMI number is better than the previous number and higher than the forecasted number, the US dollar tends to rally. This is where fundamental and technical analysis comes together to create a trade setup.

AUDUSD M5 : 21 pips price movement by USD - ISM Non-Manufacturing PMI news event :


In the example above, notice how the better than expected PMI number triggered a US dollar rally against the Euro. As seen in the chart above of the EURUSD, the ISM Non-Manufacturing was not only above 50 but at 55.4, beat the forecasts calling for a drop from 54.4 to 54.0.

When an economic release beats expectations, like in the example above, sharp fast moves can result. In this case, EURUSD dropped 22 pips in 15 minutes. Traders often choose the Euro as the “anti-dollar” to take advantage of capital flows between two of the largest economies.

The Euro zone has a large liquid capital markets which can absorb the huge waves of capital seeking refuge from the U.S. So a weak US ISM Non-Manufacturing number usually leads to a dollar sell-off and a rise in the Euro. Another scenario is when the number released is in line with forecasts and/or unchanged from the previous month, then the US dollar may not react at all to the number.

AUDUSD M5 : 32 pips price movement by USD - ISM Manufacturing PMI :



Overall, an ISM PMI number above 50 indicates that the economy is expanding and is healthy. However, a number below 50 indicates that the economy is weak and contracting. This number is so important that if the PMI is below 50 for two consecutive months, an economy is considered in recession.

PMI’s are also compiled for Euro zone countries by the Markit Group while US regional and national PMIs are compiled by ISM. As you can see, traders have good reason to pay special attention to the important releases from the Institute of Supply Management.

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Sergey Golubev, 2015.06.23 09:26

Video: Euro Tempts with Greece Progress, Equities Rally Bolsters Risk (based on dailyfx article)

  • A light at the end of the tunnel has appeared in the standoff between Greece and creditors
  • Global equities rallied uniformly to open the week, with the DAX posting its biggest surge in years
  • These prominent trade opportunities deserve a deeper conviction as the stakes are far too high

The skirmish line between Greece and its creditors seems to have moved to start the week and the market is responding. Global equities took reports of progress to heart with a universal rally led by the biggest DAX (Germany's benchmark equity index) in years. Yet, the same optimistic response was not realized with the Euro. EURUSD held to its coiled wedge below 1.1500 as FX traders think 'we've been here before'. Skepticism and caution remains for an 'easy' solution to Greece - whether positive or negative - and the markets are unwilling to commit until the air is clear. That is as true for the limited risk response in equities as it is the cool Euro view. It is better wait for commitment from the speculative ranks before jumping in and sacrifice an early entry than jumping in on the wrong direction of a dramatic market move. We review the Euro, Dollar, global equities and unusual pairs like NZDJPY in today's Trading Video.



 
High Probability Trade Entries and Exits by James Chen

James Chen, CMT, Chief Technical Strategist for City Index Group teaches high probability technical trading strategies that employ confluence principles for maximizing trade entries and exits.


 

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Sergey Golubev, 2015.06.25 09:22

Greece Stand Off Enters Final Days, Seek More Productive Options Than Euro (based on dailyfx article)

  • The ultimate resolution to Greece's financial impasse can generate major Euro swings - bullish or bearish
  • However, in the negotiation phase, the Euro will struggle for clear direction and momentum
  • There are more productive options arising in GBP and NZD pairs, while USD and JPY may soon join the fray

When Greece and its creditors choose either default or debt forgiveness, the response from the Euro can be dramatic. Trading potential on such a provocative fundamental development will be substantial and certainly something we plan for ahead of time. That said, in the messy period of negotiating preceding this clear outcome, the currency is going to be erratic and difficult trading. Patience is warranted, but that doesn't mean we have to sit staring with bated breath. There are developing technical and fundamental themes in other corners of the market.

We look at the big setups and the active movers in today's Trading Video.



 

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Sergey Golubev, 2015.06.26 08:38

Trading Video: Preparing for Euro and Dollar Moves (based on dailyfx article)

  • Greece is on the top of all - not just Euro - traders' minds, and anticipation will disrupt trend
  • The Dollar is similarly focused on upcoming conditions between next week's NFPs and holiday conditions
  • Crosses further away from such prominent fundamental risks still offer better technical opportunity

Markets will soon face a reckoning after this extended period of quiet complacency. On the risk front, officials are running out of time and liquidity to find an acceptable compromise over Greece's strained financial health. After Thursday's failed talks, all parties will reconvene on Saturday and try to push through a solution before a IMF payment and the official expiration of the country's rescue program on Tuesday. For a monetary policy focus - the most productive fundamental theme over the past year - US rate expectations will be charged by June NFPs, but the lead in will be particularly interesting between anticipation and expected holiday trading conditions. Meanwhile, it is worthwhile looking outside of the Euro, Dollar and Yen (the most risk-sensitive) for less restrained opportunities. We look at the potential building up and playing out in today's Trading Video.



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