Won Once Again Leads in Gain in Asia

The Korean won advanced at a fastest pace among the most-traded Asian currencies today as the risk-aversion that prevailed earlier this week ended unexpectedly and the outlooks for the Asian emerging economies improved.

Forex Cash Cow part II

The bigger the moves a currency pair makes the higher are the chances of success using this strategy. This is why I chose to use the GBP/USD pair; it has the largest short term moves of all currency pairs.

Many market analysts/system designers/technicians claim that for a trading strategy to be good it has to work in every single market. I strongly believe the opposite. For me, every market has its own personality. This is why I adapted this strategy to the GBP/USDpair. I think its personality is the most adequate for trading the Forex Cash Cow strategy (or any other trend following strategy).

The problem I encountered when designing this strategy was how to establish that a trend has started without it being too late to place a good risk/reward trade. I found that there are two problems with trying to identify and join a trend. First, you caneasily get tricked into thinking that a trend has started only to find out some time later that this was a fake move. Second, by the time you spot a valid trend it is either to late since it is ending or if it is not ending a very good reaction is due which could easily hit your stop loss.

The first requirement that must take place is an intraday “explosion” in price. We want to see the market being extremely bullish or bearish within a relatively short period of time. For our purposes “a short period of time” means one trading day (measured on a daily bar chart). I found that if the GBP/USD pair moves 140 pips or more to one direction in one trading day an “explosion” in price has taken place and the trend will probably continue into the next trading day or two. The 140 pips is a very important number.

Less than that and it is probably just a common intraday swing which does not provide any insight as to whether a good trend is possibly developing. It is not an every day occurrence that the GBP/USD moves 140 pips or more (in a single day), it probably happens an average of six or seven times a month and that is why it is so special. As a general trading rule, the less often a certain trading opportunity occurs the more profitable it can be.

Once we spot an explosion in price as described above, step two comes into play. On the next trading day we want to see the market move 70 pips in the direction of the price explosion. We enter the trade in the direction of the move at a distance of 70 pips (it will not always be exactly 70 pips as you will see later on when the 30 pip rule comes into play). Don’t worry, it is all very easy to calculate as you will learn shortly.

A stop loss of 60 pips is immediately placed. The exit is either a profit target of 100 pips or a time target of 11:30 of the next day, whichever is reached first.

Let’s go over several examples. All times New York time.

Forex Cash Cow part 1

Over time I have read and tested many trading ideas for different markets. In the past I was naive enough to think that the more complex and the more time and effort I put into designing a trading strategy the better it will work and the more money I will make. It took time and some loss of money in order for me to learn that it is the simplest and easiest to implement trading strategies that yield the best results. Using common sense with correct money management is the key. Understand and follow these two principles, and I guarantee you will be light years ahead of the 95% losing crowd.

I believe that a good trading strategy is one that exploits certain occurrences in the market that do not happen very often. While the losing crowd tries to trade every day and force trades on non- existent opportunities the winners wait like hunters for those high probability low risk trades.

Strategy Implementation

I refer to the Forex Cash Cow strategy as my bread and butter strategy! There are several reasons of why I like it so much. First, it is very accurate, probably the most accurate strategy I am currently using. Second, it does not occur every day, on an average I expect to see it 3-4 times per month. This means less stress for the trader and more free time to pursue other activities. Third, most of the time I know a day in advance if there is going to potentially be a signal or not. Fourth, it has the potential of providing a very nice profit for the patient trader.

The logic behind this strategy is simple, once the market has “exploded” price wise to a certain direction it will continue moving in that direction until it runs out of fuel. The Forex Cash Cow strategy aims to catch the move from the moment the market has proven to have “exploded” to the moment it runs out of fuel! The idea is simple, instead of speculating if and when a large move in price is due we just wait for the market to tell us “I started moving hard and fast, please join!”.

The Forex Cash Cow strategy works very well in the currency market simply because this market possesses the characteristic of having various sharp and long price swings. I have noticed that throughout the month currencies tend to have various strong two day trends. These two day trends are what this strategy aims to exploit.

The one thing that always bothered me when trading currencies are the fake moves that occur prior to the market really deciding on a direction. This phenomenon is very common in volatile markets and can kill you if you do not know how to handle it. Don’t get me wrong, volatility is very good for a trader. Without sharp moves we cannot make those handsome profits in the short term. However, you have to know how to approach this volatility.

My essential trading system

If you want to get to the top of the forex market “food chain” you have come to the right place. The strategy that we are about to reveal to you is a completely new, efficient and reliable trading strategy that comes as the result of years of forex market research using sophisticated mathematical methods and is based on a fundamental property of financial markets.

Regardless of how strong a long-term market trend is, the market never moves only in the direction of the long-term trend - there are always minor movements against the longterm market trend. These deviations usually don’t last very long and after them the market moves again in the direction of the long-term trend.
The picture above shows a snapshot of a E/U candlestick chart. Although the market shows both upward and downward market movements it can be easily recognized that the long-term market trend is clearly bearish.

Frequent relationships are 25%, 38%, 50%, 61% and 75% (Fibonacci ratios).
Suppose we entered the market short and the market move into our direction and reached the point (1). 
However, after that the market starts an upward movement toward point (2). What to do now ? Inexperienced trader would like to close the position, happy to take small profit.

This would be the wrong decision because the market turned back to it’s main direction afterwards….
Just an example but you will meet above situation frequently, the essential question is :

When do we decide that our trade has run out of steam and should be exited ?

This is where our strategy come into play. We have used the phenomenon described above as a starting point to develope a complete original and until now the best trading system that combines basic principles of Elliot Wave theory together with well-know properties of Fibonaci rates. The result is amazing, as you will soon find out. It will help us find the best possible time to exit the trade and extract maximum profit from the market !

Using Divergences to Identify Market Reversals

Using divergences correctly can help spot key market turns

Many traders and analyst use price-momentum divergence to identify trend reversals. For those of you who are not familiar with this term divergences may be defined as follows:

* Bullish divergence: When price lows are lower in a trend but momentum lows are higher
* Bearish divergence: When price highs are higher in a trend but momentum highs are lower

Basically what this is effectively saying is that momentum, that is the pace of the trend, slows then the underlying momentum indicator will not confirm the new price extremes by making new momentum extremes.

Forex Chart Patterns

• Head and Shoulders: pattern in which the value of the pair has a top, followed by a higher top, followed by a lower top at about the same level of the first top; the 'reverse head and shoulders' is analogous but works with bottoms instead of tops
• Double top/bottom: two consecutive tops/bottoms at about the same resistance/support levels
• 5-3: in the Elliot Wave theory, a pattern consisting of three strong bullish waves, alternated with two weaker bearish waves
• ABC Correction: in the Elliot wave theory, a pattern that usually manifests itself immediately after the 5-3 pattern and consisting of a strong bearish wave, a weaker bullish wave, and finally a strong bearish one
• Ascending/Descending/Symmetrical Triangles: a long series of alternating support and resistance levels that forms the shape of an ascending, descending, or symmetrical triangle converging to a specific level.
• Read more: "Common Forex Terms and Definitions: Essential Glossary for the Novice Forex Investors" -http://currencies.suite101.com/article.cfm/common_forex_terms_and_definitions#ixzz0CT0EBOML

Understanding Forex Quotes

Reading a foreign exchange quote is simple if you remember two things:

1. The first currency listed is the base currency
2. The value of the base currency is always 1.

As the centerpiece of the forex market, the US dollar is usually considered the base currency for quotes. When the base currency is USD, think of the quote as telling you what a US dollar is worth in that other currency. 

When USD is the base currency and the quote goes up, that means USD has strengthened in value and the other currency has weakened. Rising quotes mean a US dollar can now buy more of the other currency than before.

Majors not based on the US dollar 

The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). For these pairs, where USD is not the base currency, a rising quote means the US dollar is weakening and buys less of the other currency than before. 

In other words, if a currency quote goes higher, the base currency is getting stronger. A lower quote means the base currency is weakening. 

Cross currencies 

Currency pairs that don't involve USD at all are called cross currencies, but the premise is the same. 

Bids, asks and the spread 

Just like other markets, forex quotes consist of two sides, the bid and the ask: 

The BID is the price at which you can SELL base currency.
The ASK is the price at which you can BUY base currency. 

What's a pip? 

Forex prices are often so liquid, they're quoted in tiny increments called pips, or "percentage in point". A pip refers to the fourth decimal point out, or 1/100th of 1%. 

For Japanese yen, pips refer to the second decimal point. This is the only exception among the major currencies.