In this email I am going to give you my view on STOPS as we are in a very choppy market for US Dollar denominated pairs.Chop is to be expected as the dollar rally is a bear market bounce in an otherwise continuing long-term down trend.
In light of many questions regarding the use of STOPS in trading and the emphasis on placing applying mental stops vs. hard stops, the following missive is posted.Please note that the following can also be said of placing exit prices to take profits and arguably, this is by far the better problem to have.
This brings me to my point of the day.HARD STOPS and EXITS PLACED WITH A BROKER SHOULD NOT BE USED BY THOSE WHO SUBSCRIBE TO THIS NEWSLETTER UNLESS TRADING THROUGH A REPORT THAT COULD AFFECT THE PAIR YOU ARE TRADING.Hard stops (and exits sometimes) with a broker should only be used to trade through a report or some lame official that will be speaking that could affect the currency pair that you are trading or if for whatever reason if you must leave your monitor (to prevent you from blowing up your account), ALL OTHER STOPS/EXITS SHOULD BE MENTAL.With over 1000 subscribers, a number of order entries can be seen by brokers as ripe for hunting, pooling and picking.Remember that order entries can be seen by brokers as ripe for hunting, pooling and picking.If, for whatever reason you cannot watch the trade and must use a hard stop and/or exit with a broker, I recommend adding 5-10 PIPS to the prior defined STOP or in the case of setting exit/target prices, subtracting 5-10 PIPs from the EXIT/TARGET Price.Keep in mind that this might change the risk vs. reward profile of the potential trade that you intend to undertake and you will have to weigh the viability of the trade with these new limits should you chose to use them.This is why it is explained on the website and that key areas of support or resistance be used when placing stops to allow time for the execution of any mental stops and also not to get panicked out of a position on a spike reversal or other faulty trade.
If in doubt, DO NOT TRADE!!! It is OK not to take a trade.This is also why it is explained on the website.
Last month for instance, notice the EUR/USD marginally stopped out on spike reversals on thin volume.
The Nov. 11-12, 2010 trade was written:
“The swing trade for today’s Asian-London-U.S. session is to BUY the EUR/USD in the 1.3605-1.362 area with a STOP @ 1.3585 and a TARGET of 1.3850 for 240 PIPS.Yes, going for the 0.382 retrace of the last 7 day decline move...so loose trailing stops are recommended if you got PIPS!!!”
Well this did require adjustments in the Live ForeX Trading Room to get 100PIPS as this is indicative of hard stops being pooled, hunted and then taken out before the primary trend resumes.Had the trade not been taken out, over 100 PIPS would have been had by all.Most stops in the newsletter trades are far away from defined levels that they really should not even come close to be taken out. In this case, I will admit that it was harder than most.For example, last week’s trade entry at 1.3607 from a defined upper range of 1.3585 to 1.3610…take-out print at 1.3587 in less than 5 seconds on very thin volume.Another takedown occurred some 30 minutes later to 1.3675 and if not for a quick reversal would have put the trading rational at risk (i.e., the rational was to play the bounce off of the 1.3600-1.3604 weekly and monthly pivot level.Remember, commercials (i.e., banks) get money out of thin air and will give it to their proxies as overnight REPO loans and marginal stops are easy pickings.Never said trading was easy.
The trade was choppy with as much as 40 PIP drawdowns was delt by those that used trailing stops. I suspected as much and specified that no trailing stops used in Live ForeX Trading Room, other than to break even, and while the 0.382 Fibonacci Level was not hit we did readjust our target to the 0.234 Level to take over 100PIPS on that trade.
SO:
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Risk Warning!Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All information posted on this website is of our opinion and the opinion of our visitors, and may not reflect current situations and occurrences. Please, use your own good judgment and seek advice from a qualified consultant, before believing and accepting and acting upon any information posted here or on this website.
In this e-mail I am going to give you my review for the month past and view on the market for the month of December, the week ahead thru Friday the 3rd of December 2010.
The swing trade for today’s Asian-London-U.S. session is to BUY the GBP/USD @ 1.550-1.551 area with a STOP @ 1.5470 and a TARGET of 1.5650 for 140 PIPS.
NOVEMBER REVIEW:November was the month of a strong U.S. Dollar countertrend rally starting at the beginning of the month to the present.From last months’ letter “The dollar decline is getting just like the Euro decline earlier in the year.Time to continue to look in regards to the possible re-emergence of dollar strength as we all know the market has a way of making sure the majority of traders miss major turning points ... With the light volume in the market we know there is price manipulation and QE II due to be formally announced ... which is helping to boost prices and exaggerate market movements but it could end up to be a “Sell the News” event in which the dollar could be bought ...I still expect a Head and Shoulder neckline underside retest in the 79-80 area, which also coincides with key Fibonachii retracement levels and the declining 50-day moving average.”<<< A case of not knowing how correct I would be given the EU problems of late.
MONTH OF DECEMBER:Going forward, the dollar has room to move higher here, but prices need to follow through higher, and two possibilities now exist.The first being the underside neckline test which is where the USDX is now poised to bump into the 81 area and would need to see some confirmation of topping action to confirm with the 82 area being the limit of upside if this case is to be valid.The second is if the 82 area is exceeded then a larger consolidation pattern (a triangle wedge) would be in play with 86 as the target.This month should tell us where we will go.We may have to endure some serious price swings to see which plays out first. The daily close-up shows once again how important the 200-day moving average (DMA) is in flagging the next major direction for the dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD.The EUR pairs were expected to be overall weaker than the corresponding correlated GBP pairs however there still appears to be rotation of relative strength between the two currencies from day to day.Overall, economic data continues to be abysmal from a strong dollar currency standpoint but given EUR problems of late, it is a case of pick your poison.
An argument can be made that the EUR is a bit overvalued and think that GBP is more attractive currency. A choppy decline of the EUR/USD was expected to continue to the 1.350 area but now the 1.29-1.30 region can be in play before a longer term advance is expected to resume.This decline could just as easily end here at the 200-day moving average as the EUR moves higher to test the underside of the 50-day moving average at 1.37 and then possibly another pullback to 1.34 before the key 1.442, 1.495 and 1.600 areas are expected to be seen longer term (should Ireland, Portugal and Spain hold it together).The EUR chart seen here,http://www.stockcharts.com/charts/gallery.html?$XEU shows these areas now on a sell signal.Place your trades accordingly.All charts courtesy of www.stockcharts.com.
Recent sterling strength has given way to weakness on Dollar strength. The GBP is still in bullish alignment with the 200-day moving averageand a bounce is expected upon confirmation of a small reversal bar as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, and traders should take a wait and see approach although a trading range is expected it could be fast and be ready to jump on either way if it moves.
For the JPY intervention look to have been put on the back-burner as recent Dollar strength has mitigated the need for such action and any trades taken on the JPY would be as a buyer so as not to inadvertently fight the Bank of Japan.Be wary of the wash and rinse instead of a fast move in either direction that would normally be expected before the turns but looks to be rolling over longer term. Traders should continue to use caution should the JPY pairs be traded for the time being as seen on the chart given herehttp://www.stockcharts.com/charts/gallery.html?$XJY.
On the commodity currency front, the Aussie looked on the verge of collapse but then reversed the reversal and looks like it wants to make a head and shoulder top on the daily.While the fundamentals do not support such an outcome, based upon an interest rate differential to the Dollar; it would be unlikely that any such carry trades be unwound, this is the currency to watch.More than likely, more consolidation is favored rather than going full sell of the Aussie here.Like the EUR, heavy, choppy consolidation, is expected to continue before the range is broken, most likely to the upside.The AUD is seen here,http://www.stockcharts.com/charts/gallery.html?$XAD.
WEEK AHEAD:In addition, more US data, an FOMC statement in the form of how much QE-II and US mid-term elections leave plenty to chose from.Based on last week’s data, the Fed may not have to print money as aggressively as previously thought or so the logic goes and the Dollar might soon see some initial buying which could feed into some intense short covering...be advised if heavily long in dollar denominated pairs.
There are many activities and reports that I note this week that will factor in some trading sessions going forward.This week is data and news heavy so sentiment is key going forward.
Most of this week’s key reports are spread towards the end of the week with heavy doses on Wednesday thru Friday.They are:
1. Tues. Nov. 30, 2010 - (8:30am EST) CAD GDP and (10:00am EST) US Consumer Confidence.
2. Wed. Dec. 1, 2010 - (4:30am EST) UK Manufacturing PMI; (8:15am EST) US ADP Non-Farm Employment Change; (10:00am EST) US ISM Manufacturing PMI.
3. Thurs. Dec. 2, 2010 - (7:45am EST) EUR Minimum Bid Rate decision and (8:30am EST) US Unemployment Claims.
4. Fri. Dec. 3, 2010 - (4:30am EST) UK Services PMI; (7:00am EST) CAD Employment Change and Unemployment Rate and (8:30am) US Non-Farm Employment Change and Unemployment Rate.
That's it for today.Remember that I trade in the Live Forex Trading Room between 1am-6am Eastern Time.I will be hosting my regular 3-4 hour session and assessing and exploiting PIP opportunities as they arise.
Enjoy trading and good luck everyone!
Trade with Mr. GREEN for $49$ for a 1 week trial.Don’t miss out on more PIPS!!!
For those who join with this special, the service costs only $179$/month after the trial expires, unless you cancel the membership.Trades are issued in real time, including exact entries, exits and detailed explanations. The service costs $179 per month. So go to GreenForexTrading.com now and take advantage of this offer.
Mr. Green
Risk Warning!Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All information posted on this website is of our opinion and the opinion of our visitors, and may not reflect current situations and occurrences. Please, use your own good judgment and seek advice from a qualified consultant, before believing and accepting and acting upon any information posted here or on this website.
