Attachment 65388
Before we get going on entries it's been brought to my attention that many novice traders are having some problems with keeping up with all the charts that I cover and are finding it even more difficult actually following the trades.
It's all well & good when you have 3,4 or 5 screens, but as some of you are working from a single laptop I'm going to make a little suggestion that will pretty much ensure that you never miss another trade again.
Why do we miss trades? We're looking at something else.
Why were we looking at something else? Because we are looking at too much.
Why are we looking at too much? Because we don't want to miss a trade !!
The neverending circle of viciousnessnessnessnessness........ ..
Well most markets move at the same time so unless you have an unlimited account, the chances are you are going to take on one trade anyway. The problem is finding the best one.
How do you identify the best one?
You need to spend some months studying correlation and ascertain the strongest and weakest currency pair at any given moment.
This lesson is going to be a good foundation from which to begin your quest on the correlation highway and I hope it helps you make more successful trades and helps cut down on your mistakes.
Once you've mastered this you may want to look further afield, or you may wish to stick with this.
This is how it works.
Gold, as many of you know is one of the main driving forces at the moment of the FX pairs. It's a great representation of USD strength or weakness. Yes it's driven by the Chairman of the club, Crude, but if its falling heavily you probablr know WHY without looking at Crude.
So, by assessing in which direction USD pairs are likely to go, we follow Gold.
Gold goes up, USD is weak, Gold goes down, USD is strong. How am I doing?
Now a pair with USD as the prefix, or first three letters of the pair as already discussed - USDJPY, USDCHF etc move up with a strong Dollar and down with a weak Dollar, opposite to Gold.
A pair with USD as the suffix, or last 3 letters of the pair as discussed previously - GBPUSD EURUSD etc move up with a weak Dollar and down with a strong Dollar, the same as Gold.
Take a look yourself at a daily chart for EURUSD and Gold in a previous post. Now take a look at the same Gold daily chart with a USDCHF daily chart tiled horizontally. Almost indentially opposite.
So what we're aiming to do here is take one position at a time on either USDCHF or EURUSD. Easy.
The problem lies in identifying which is the best trade to take when Gold is strong. Is it EURUSD long or USDCHF short?
Introcducing ladies and gentlemenn, flown in tonight espcially, all the way from the Alps, the one and only........ EURCHF.
We can see which is strongest between the Euro and the Swssie by looking at this chart.
When its above ma's and moving up it's Euro that's the strongest. When it's below m.a's and moving down it's Swissie that's strongest.
As an example, let's assume we are looking at a weaker Dollar with Gold moving up. We know this means a weak Dollar and therefor we are looking EURUSD long OR USDCHF short
We also see the EURCHF chart down. This means the Euro is weaker than Swiss so we opt for USDCHF short as the Swiss is likely to be the better mover.
If we see the EURCHF chart moving up, we can safely say that Swiss is weaker so we'd opt for the long EURUSD.
Start by tiling 4 charts. EURCHF in the top left Gold in the bottom left.
EURUSD in the bottom right, USDCHF in the top right as in the attached picture.
Having established the direction of Gold and which is stronger or weaker of the Swiss or the Euro we are ready to look for possible plays.
It's nice and simple, and in this example. with Gold moving up and EURCHF moving down, we know that Swiss was stronger than Euro so USDCHF short was a better option than EURUSD long. It moved 200 pips from the cross of the 84 CCI, opposed to EURUSD's 160. Only 40 pips I hear you say !
Well if I could get an extra 20% or more out of a trade I most certainly wouldn't turn it down.
May this serve you well.