Hi All,
A concept which is both fascinating and confusing is the fibonacci series and its application to trading. The fibo series goes like 1,1,2,3,5,8,13 etc where it starts off with 1 and the subsequent numbers in the series are obtained by adding the 2 previous numbers. I am just another trader like you all and i have no idea how these numbers came to be associated with trading. Why should these numbers and this series matter to trading shares and currencies? if this series matters, then why not the series of prime nos or series of odd numbers or series of even numbers or series of any other numbers for that matter?
I have no idea....but what we do see is that the fibo numbers of 1, .382,0.5 and .618 do matter to trading and are refferred to a lot by many traders and professionals. I have been trying to read and understand these series and also trying to use this in my trading. I have read a lot about this fibo series but still i am not clear nor sure about it.
Its not that something is wrong with the fibo but it might be just that i am very bad at it. If someone is good at this, pls enlighten me. The point that i find most confusing is this:-
The fibo points are usually calculated between 2 points but how do i determine those 2 points. Like for example, let me take GBPJPY a couple of days ago. I had pointed out that 239.7 was a strong support cos it was the 50% (fibo) retracement of the low of May 11 and high of June 5. But we found that the price broke thru that resistance and then bounced from 238.9 which was the 61.8% rectracement of the same move. So far so good. But how do i catch that the low of May 11 and the high of June 5 are the points using which i need to calculate the fibo?
In other words, i can take any 2 prices and calculate the fibos for it and claim them to be supports and retracments. I can take the high and low of yesterday, calculate the fibo and the fibo points (50%, 38.2%, 61.8 % etc) would be resistances and supports. Likewise, i can take day before yesterdays low and high and calculate the same way. Likewise, i can take day before yesterdays high (if it was higher than yesterdays high) and yesterdays low (if it was lower than day before yesterday's low) as the 2 points and do the same. Likewise, i can take last months high and this months low and calculate the same. Last years high and this years low and do the same. I could just go on and on. If i keep calculating like this, i would be supposedly having a support and resistance every 5 pips. Is that the way it should be done? How do i know which 2 points i need to take so that their fibos give me the strongest resistance and supports. If i do like above, i could show any price as the fibo retracement of any 2 pairs of highs and lows. So how do i determine which prices i need to take to calculate good fib retracements?
From the above, you guys can see that either i am talking great sense or i am so stupid that i have no idea of fibos. What do you guys think?
Friday, June 8, 2007
Analysis of supports and Resistance on June 8, 2007
Hi all... It does not look good for the crosses does it. Only USDJPY seems a bit buoyed due to the fact that the stock market is doing well and also cos the bonds are supporting it as well. The other crosses simply seem to have been beaten to death with GBPJPY suffering a 400 pips loss in 2 days. It has recovered a bit but now i am beginning to feel that it might go down again. USDJPY is usually the catalyst for all the crosses and it is now near a very strong resistance. Either it has to push thru the resistance and carry the other crosses with it or if it is not able to overcome the resistance, it will drag the other crosses down along with it.
So let us wait and watch. The GBPJPY might go down till upto 236.5 (assuming that it will go down) and i dont think it will go down any further than that. So all those who have enough money in their accounts can keep loading it as and when they please.
I suppose that i need not analyse each individual resistance and support at this point cos as you can see below, the supports and resistances have held very well today as well.
What is most attractive about the crosses is their volatility. It can break you or make you. If you can play it carefully and in the direction of the trend, you can indeed make a lot of money in a few months time. All that you need to know are the resistance, supports and money management. All these are very simple to see and learn and if you could do that, there is no way that you can lose money on the crosses.
Those who do not have so much money can go for USDJPY where volatility is low, hence risk is low and of course, the returns will also be low. GBPJPY is the other extreme where risk, volatility and returns are huge but you need lot of money for sustaining the drawdowns and EURJPY is the middle man with a mix of both. So the crosses give u a wide choice and it is upto you to decide on which cross to trade depending on the money that you have and also on your risk appetite.
Happy Trading!!
So let us wait and watch. The GBPJPY might go down till upto 236.5 (assuming that it will go down) and i dont think it will go down any further than that. So all those who have enough money in their accounts can keep loading it as and when they please.
I suppose that i need not analyse each individual resistance and support at this point cos as you can see below, the supports and resistances have held very well today as well.
What is most attractive about the crosses is their volatility. It can break you or make you. If you can play it carefully and in the direction of the trend, you can indeed make a lot of money in a few months time. All that you need to know are the resistance, supports and money management. All these are very simple to see and learn and if you could do that, there is no way that you can lose money on the crosses.
Those who do not have so much money can go for USDJPY where volatility is low, hence risk is low and of course, the returns will also be low. GBPJPY is the other extreme where risk, volatility and returns are huge but you need lot of money for sustaining the drawdowns and EURJPY is the middle man with a mix of both. So the crosses give u a wide choice and it is upto you to decide on which cross to trade depending on the money that you have and also on your risk appetite.
Happy Trading!!
Thursday, June 7, 2007
Supports and Resistances for June 8, 2007
Another crazy day yesterday with huge volatility in all the crosses. GBPJPY moved 330 pips on a single day. Can you imagine that?? And yesterday was another day which showed the power of supports and resistances. For GBPJPY, if you take the low of May 11 and the high of June 5 and plot the Fibo, you can see the 50% at 239.7 and the 61.8%(from the top) at 238.9. Lot of traders expected a bounce from the 50% (which it did on May 30) but it broke that and bounced exactly from the 61.8% (check your lows for yesterday and you will see). Will any indicator in the world tell you the exact point of bounce(within 3-4 pips) of a 330 pip move? No. Only supports and resistances will. I strongly feel that the crosses will recover today and continue to recover if only the Dow jones will cooperate.. I have a feeling that the dow jones will bounce today and so will the crosses. Let see. Be careful though..
Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 121.10. If that is broken, next support is at 120.70 which is a very strong support and the final major support is at 120.50. On the topside, the resistance is at 121.48 and then at 121.70 and final major resistance at 122.10.
EURJPY - Important support at 162.50. If that is broken, next support is at 162.25 and the final major support is at 161.80. On the topside, the resistance is at 162.90 and then at 163.30.
GBPJPY - Important support at 239.10. If that is broken, next support is at 238.85 and the final major support is at 238.42. On the topside, the resistance is at 240.10 and then a major resistance at 240.65.
Lets hope for a good day for the longs today..
Happy Trading !!!
Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 121.10. If that is broken, next support is at 120.70 which is a very strong support and the final major support is at 120.50. On the topside, the resistance is at 121.48 and then at 121.70 and final major resistance at 122.10.
EURJPY - Important support at 162.50. If that is broken, next support is at 162.25 and the final major support is at 161.80. On the topside, the resistance is at 162.90 and then at 163.30.
GBPJPY - Important support at 239.10. If that is broken, next support is at 238.85 and the final major support is at 238.42. On the topside, the resistance is at 240.10 and then a major resistance at 240.65.
Lets hope for a good day for the longs today..
Happy Trading !!!
Analysis of supports and resistances on June 7, 2007
So another crazy day with the JPY crosses running up and down like a cat with its tail on fire. But it is this volatility that makes these pairs such a great thing to trade in. Just have a look at the supports and resistances below which i have specified in the morning of the Asian sessions and you can clearly see how well they have worked. As predicted, EURJPY was caught between the support at 163.05 (lowest for the day was 163.04 on my platform) and the resistance at 164.1 (highest was 164.01). The other pairs were also caught between the specified supports and resistances (you can verify those yourself).
So what now? What is going to happen? As said before, i still dont see this as a trend reversal as there is no fundamental reason for it. It is just a correction. How long will the correction last is anybody's guess. Just make sure that you have enough money in your account to overcome the drawdowns and if u like to buy on dips, space out your buys so that you have enough money in your account.
USDJPY seems to be safe for now and it is the other crosses that do not seem to know what they have to do. This in itself clearly shows that this is not a trend reversal. If it was, then all the JPY crosses would fall together. But the fact that USDJPY is holding good and the other two are not, shows that it is cos something is wrong with EUR and GBP and not cos JPY has become stronger. EURJPY and GBPJPY have gone down and are dragging USDJPY with it. Bad news for USDJPY is that the Dow Jones is also negative and that is making the situation worser for all the crosses. Nothing can go on forever. WE just have to wait and watch and just keep collecting the interest.
Sit tight and just enjoy the ride on the roller coaster. For those who dont have enough money for the drawdown and are on the verge of losing their accounts, well, its a tought life. Just be happy that you have learnt a good lesson in money management. A lesson which no one could have taught you better and a lesson which you will not forget easily.
Happy Trading!!
So what now? What is going to happen? As said before, i still dont see this as a trend reversal as there is no fundamental reason for it. It is just a correction. How long will the correction last is anybody's guess. Just make sure that you have enough money in your account to overcome the drawdowns and if u like to buy on dips, space out your buys so that you have enough money in your account.
USDJPY seems to be safe for now and it is the other crosses that do not seem to know what they have to do. This in itself clearly shows that this is not a trend reversal. If it was, then all the JPY crosses would fall together. But the fact that USDJPY is holding good and the other two are not, shows that it is cos something is wrong with EUR and GBP and not cos JPY has become stronger. EURJPY and GBPJPY have gone down and are dragging USDJPY with it. Bad news for USDJPY is that the Dow Jones is also negative and that is making the situation worser for all the crosses. Nothing can go on forever. WE just have to wait and watch and just keep collecting the interest.
Sit tight and just enjoy the ride on the roller coaster. For those who dont have enough money for the drawdown and are on the verge of losing their accounts, well, its a tought life. Just be happy that you have learnt a good lesson in money management. A lesson which no one could have taught you better and a lesson which you will not forget easily.
Happy Trading!!
More on Stop Losses
How important are stop losses? Are they really required? Almost everyone who starts have trading would want to do trading in the right way and hence start off by having SL for all their trades. Due to the inexperience and lack of knowledge and various other factors, they choose wrong points to have their SL. The result is that the price hits their SL,closes their trade and then turns back and then carries on in the direction of the trade and the user is then heart broken.
This happens 5-6 times within a very short span of time and then the user comes to a conclusion that stops are of no use and then stops using the stop losses (!!). What happens then? 70% of the time, it leads to the account going up in smoke and rest of the 30% of the time, due to their good luck, the trade turns back and what was negative now becomes positive. That sounds great, aint it? If 30% of the time, if the trade does turn back in your favor, I guess most of us would be happy. But what we tend to do is conveniently forget the snowballing effect of negative trades.
Now lets look at what all we lose due to negative trades apart from the fact that we lose money. On the face of it, it seems that whatever amount we are in negative is the only loss that we have due to losing trades. But just think of the other losses that are not so obvious. Lets say that you short GBPJPY and the price goes against you. You donave a stop loss and by the end of the day it becomes -50 pips. Next day, it teases you, runs back and forth and then again turns against you even more and the loss becomes -100 and assume that it keeps doing this for a week and after one week, you find that the trade is -125 pips against you. You are too scared to take any other trade till this trade gets over and so you wait and keep watching this trade alone.So you have lost 125 pips worth of money so far.
But is that all? As said before, you are too scared to take any other trade. You have locked the premium money that you paid for the trade, you have locked 125 pips worth of money for about a week and also you have locked some more, say 100-200 pips of more money which you have had in your balance to sustain further losses. This means that roughly you would have locked about $300 on a mini account for a week.
If you had your SL at 75 pips, it would have got hit maybe on the second day of your trade and though you have lost 75 pips, the closed losing trade would have freed up all the locked money listed above. Using the $300 of freed money, in a weeks time, with proper trading, you could have easily made much more than 75 pips on GBPJPY. One more thing, in the above losing trade, by the time the price turns in your favor, you are exhausted, tired and tensed due to your wait and what do you do? Once the price turns in your favor and once you see just 5-10 pips of profit, you are overjoyed, you don’t want to lose the minute profit and you want to get out of this trade somehow. So instead of letting this profit ride on, you closed this trade and you are very happy for having survived the trade without a SL.
But just imagine how much you have lost from the above. You locked in $300 worth of money on a mini account for a week, did not take any other trades for a week, was scared to the hilt, was watching your monitor wasting electricity, not have proper food just to make 10 pips of profit in a week?
If you had had a SL, and if you are confident of your trading, you could have just digested the loss and moved on and made much more money by digesting the loss from your trade rather than wait for it to turn back. So try to use a SL as much as possible but at the same time, try to have it at the correct point. Study each trade, place your TP and SL at the correct points and enjoy your trading.
Happy Trading!!
This happens 5-6 times within a very short span of time and then the user comes to a conclusion that stops are of no use and then stops using the stop losses (!!). What happens then? 70% of the time, it leads to the account going up in smoke and rest of the 30% of the time, due to their good luck, the trade turns back and what was negative now becomes positive. That sounds great, aint it? If 30% of the time, if the trade does turn back in your favor, I guess most of us would be happy. But what we tend to do is conveniently forget the snowballing effect of negative trades.
Now lets look at what all we lose due to negative trades apart from the fact that we lose money. On the face of it, it seems that whatever amount we are in negative is the only loss that we have due to losing trades. But just think of the other losses that are not so obvious. Lets say that you short GBPJPY and the price goes against you. You donave a stop loss and by the end of the day it becomes -50 pips. Next day, it teases you, runs back and forth and then again turns against you even more and the loss becomes -100 and assume that it keeps doing this for a week and after one week, you find that the trade is -125 pips against you. You are too scared to take any other trade till this trade gets over and so you wait and keep watching this trade alone.So you have lost 125 pips worth of money so far.
But is that all? As said before, you are too scared to take any other trade. You have locked the premium money that you paid for the trade, you have locked 125 pips worth of money for about a week and also you have locked some more, say 100-200 pips of more money which you have had in your balance to sustain further losses. This means that roughly you would have locked about $300 on a mini account for a week.
If you had your SL at 75 pips, it would have got hit maybe on the second day of your trade and though you have lost 75 pips, the closed losing trade would have freed up all the locked money listed above. Using the $300 of freed money, in a weeks time, with proper trading, you could have easily made much more than 75 pips on GBPJPY. One more thing, in the above losing trade, by the time the price turns in your favor, you are exhausted, tired and tensed due to your wait and what do you do? Once the price turns in your favor and once you see just 5-10 pips of profit, you are overjoyed, you don’t want to lose the minute profit and you want to get out of this trade somehow. So instead of letting this profit ride on, you closed this trade and you are very happy for having survived the trade without a SL.
But just imagine how much you have lost from the above. You locked in $300 worth of money on a mini account for a week, did not take any other trades for a week, was scared to the hilt, was watching your monitor wasting electricity, not have proper food just to make 10 pips of profit in a week?
If you had had a SL, and if you are confident of your trading, you could have just digested the loss and moved on and made much more money by digesting the loss from your trade rather than wait for it to turn back. So try to use a SL as much as possible but at the same time, try to have it at the correct point. Study each trade, place your TP and SL at the correct points and enjoy your trading.
Happy Trading!!
Wednesday, June 6, 2007
Supports and Resistances for June 7, 2007
First of all, i would like to thank everyone who has been kind enough to spare some time to read this blog and also leave some comments for me. Your visit and especially your comments inspire me a lot and gives me great happiness. Please continue to visit and leave your comments in the blog so that it becomes more interactive.
Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 120.90. If that is broken, next support is at 120.70 which is a very strong support and the final major support is at 120.50. On the topside, the resistance is at 121.48 and then at 121.70 and final major resistance at 122.10.
EURJPY - Important support at 163.20. If that is broken, next support is at 163.05 and the final major support is at 162.80. On the topside, the resistance is at 163.70 and then at 164.10.
GBPJPY - Important support at 240.70. If that is broken, next support is at 240.23 and the final major support is at 239.82. On the topside, the resistance is at 241.40 and then a major resistance at 242.05.
Today is going to be a D day for the crosses as it will show whether this correction is going to continue for a much longer time or the crosses are going to bounce back today. Dont expect anything to happen cos in the markets, always expect only the unexpected. So watch what is happening and act acordingly.
Also, today is the BOE rate decision and that should prove to be very interesting as well. The Chinese stock exchange is up as of this writing. So it should be an interesting day..
Happy Trading !!!
Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 120.90. If that is broken, next support is at 120.70 which is a very strong support and the final major support is at 120.50. On the topside, the resistance is at 121.48 and then at 121.70 and final major resistance at 122.10.
EURJPY - Important support at 163.20. If that is broken, next support is at 163.05 and the final major support is at 162.80. On the topside, the resistance is at 163.70 and then at 164.10.
GBPJPY - Important support at 240.70. If that is broken, next support is at 240.23 and the final major support is at 239.82. On the topside, the resistance is at 241.40 and then a major resistance at 242.05.
Today is going to be a D day for the crosses as it will show whether this correction is going to continue for a much longer time or the crosses are going to bounce back today. Dont expect anything to happen cos in the markets, always expect only the unexpected. So watch what is happening and act acordingly.
Also, today is the BOE rate decision and that should prove to be very interesting as well. The Chinese stock exchange is up as of this writing. So it should be an interesting day..
Happy Trading !!!
Analysis of supports and resistances for June 6,2007
A Crazy Day indeed. All the crosses as well as the other currency pairs went crazy today for no specific reason. The stock markets were down today and that seems to be the only factor favoring the correction with no other reason in sight. Is this a short retracement or a huge correction or a reversal in trend? No one can say. We just need to wait and watch.
It cannot be a reversal in trend as there is no fundamental reason for the trend to reverse. So this has to be a correction. But the only unknown factor here is the size of the correction. So what would be the best approach in this situation? For those who have enough money, keep buying the dips but make sure that you space out your entries so that you have enough money to sustain the losses and keep you in the market until it reverses. For those who do not have so much money, just wait on the sidelines to get an idea of the clear direction before jumping in even if it means missing out on 100 pips. Not getting 100 pips is far far better than losing 100 pips.
Supports and resistances would hold good now as well and we need to keep waiting and searching for the support that is going to hold. Till we get that, it is all downhill for now..
There are big technical levels closeby for all the three crosses and so we need to wait and see whether they get broken or whether they will hold. Tomorrow is another big day with the BOE rate decision and a new day with new challenges awaits us. I will be back with my supports and resistances tomorrow and some more thoughts on forex.
Happy Trading!!!
It cannot be a reversal in trend as there is no fundamental reason for the trend to reverse. So this has to be a correction. But the only unknown factor here is the size of the correction. So what would be the best approach in this situation? For those who have enough money, keep buying the dips but make sure that you space out your entries so that you have enough money to sustain the losses and keep you in the market until it reverses. For those who do not have so much money, just wait on the sidelines to get an idea of the clear direction before jumping in even if it means missing out on 100 pips. Not getting 100 pips is far far better than losing 100 pips.
Supports and resistances would hold good now as well and we need to keep waiting and searching for the support that is going to hold. Till we get that, it is all downhill for now..
There are big technical levels closeby for all the three crosses and so we need to wait and see whether they get broken or whether they will hold. Tomorrow is another big day with the BOE rate decision and a new day with new challenges awaits us. I will be back with my supports and resistances tomorrow and some more thoughts on forex.
Happy Trading!!!
Losses, Profits and Stop Losses
Everyone needs to understand that losses are a part and parcel of the trading game. There is no way that anyone can avoid it. No one can be 100% successful always. So we need to take losses in our stride and try to minimize them as much as possible.
Trading is a game of percentages. If your win percentage is 50%, you are not doing great. But just increase that percentage to 70% and you would be sitting on a huge amount of profits. You need not be successful 90% or 95% of the time. Just being successful 70% of the time would make you a hugely rich man. We need to learn that and also accept that. But we need to ensure that we are atleast 70% successful consistently and this is where choosing your supports and resistances comes into the picture.
Does knowing support and resistances always make you successful and guarantee that all your trades end up in profits? No..Not at all. The knowledge of supports and resistances and other tools of the trade increases your chances and your percentage of your successful. Thatll. When you start off trading, you have 0% chance of success. Maybe you have some luck on your side and so your chances increases to 10-20%. That might make you win trades initially but in the long run, you would end up a loser. As you learn more and more the tricks of the trade and improve your knowledge and strategies, you slowly increase your chances of success and only when you increase it to above 50% do you start earning profits on a consistent basis. That is why there is no one in this whole world who keeps winning in his trades right from day one till the end of his trading career. No one can keep winning always. We need to remember that. Our main aim is to increase our chances of success as close to 70% or 80% and not 100% cos you never can be 100% successful always.
Now lets move on to stop losses. Stop losses are something which no one ever seems to get it right. Its tough for any trader to deal with the stop loss. Which is the ideal SL for my trades? Is it 100 pips or 300 pips or what? No one has endless money to keep hanging on to losing trades forever. If we did, we would not be trading. That is why it is good to have enough money, have good money management so that your SL is big enough to handle your losses. There is no fixed SL for any currency pair or for any trades as such. Your SL should vary depending on the pair and also depending on the situation and how and where you have taken your trade.
Yesterday, I had talked about averaging. I had said that averaging should be done only in the direction of the trend. While the trend is still intact, you can extend your SL to the maximum extent that is possible for you. Lets take GBPJPY as an example. It is in an uptrend right now. Lets say that it has met with some resistance and so you have taken a short. Having a SL of 300 pips for your short when it is against the trend is foolish. So if you want to trade against the trend, have your SL at a safe place where you know that it is not going to come back. For GBPJPY, it can be 75-100 pips maximum.
On the other hand, if you know that you have taken a trade with the trend, you could afford to have a much bigger SL and also add to your losing trades as well for the purposes of averaging. Your SL can even be 300 pips for GBPJPY if you are sure that the trend is still intact while having the same SL for a trade against the trend would be foolish. So the SL will always vary with the currency pair and also the situation under which the trade is taken. This is why it is very important to understand whether a move against your trade is due to a change in trend or due to a retracement. How do we identify that? We will discuss this sometime soon.
Happy trading!!!
PS - Like my friend Tony, please feel free to leave your comments so that I know what you guys are thinking, what you guys are looking for so that I can make this blog better. If you like this blog, please spread the word around so that others can benefit as well.
Trading is a game of percentages. If your win percentage is 50%, you are not doing great. But just increase that percentage to 70% and you would be sitting on a huge amount of profits. You need not be successful 90% or 95% of the time. Just being successful 70% of the time would make you a hugely rich man. We need to learn that and also accept that. But we need to ensure that we are atleast 70% successful consistently and this is where choosing your supports and resistances comes into the picture.
Does knowing support and resistances always make you successful and guarantee that all your trades end up in profits? No..Not at all. The knowledge of supports and resistances and other tools of the trade increases your chances and your percentage of your successful. Thatll. When you start off trading, you have 0% chance of success. Maybe you have some luck on your side and so your chances increases to 10-20%. That might make you win trades initially but in the long run, you would end up a loser. As you learn more and more the tricks of the trade and improve your knowledge and strategies, you slowly increase your chances of success and only when you increase it to above 50% do you start earning profits on a consistent basis. That is why there is no one in this whole world who keeps winning in his trades right from day one till the end of his trading career. No one can keep winning always. We need to remember that. Our main aim is to increase our chances of success as close to 70% or 80% and not 100% cos you never can be 100% successful always.
Now lets move on to stop losses. Stop losses are something which no one ever seems to get it right. Its tough for any trader to deal with the stop loss. Which is the ideal SL for my trades? Is it 100 pips or 300 pips or what? No one has endless money to keep hanging on to losing trades forever. If we did, we would not be trading. That is why it is good to have enough money, have good money management so that your SL is big enough to handle your losses. There is no fixed SL for any currency pair or for any trades as such. Your SL should vary depending on the pair and also depending on the situation and how and where you have taken your trade.
Yesterday, I had talked about averaging. I had said that averaging should be done only in the direction of the trend. While the trend is still intact, you can extend your SL to the maximum extent that is possible for you. Lets take GBPJPY as an example. It is in an uptrend right now. Lets say that it has met with some resistance and so you have taken a short. Having a SL of 300 pips for your short when it is against the trend is foolish. So if you want to trade against the trend, have your SL at a safe place where you know that it is not going to come back. For GBPJPY, it can be 75-100 pips maximum.
On the other hand, if you know that you have taken a trade with the trend, you could afford to have a much bigger SL and also add to your losing trades as well for the purposes of averaging. Your SL can even be 300 pips for GBPJPY if you are sure that the trend is still intact while having the same SL for a trade against the trend would be foolish. So the SL will always vary with the currency pair and also the situation under which the trade is taken. This is why it is very important to understand whether a move against your trade is due to a change in trend or due to a retracement. How do we identify that? We will discuss this sometime soon.
Happy trading!!!
PS - Like my friend Tony, please feel free to leave your comments so that I know what you guys are thinking, what you guys are looking for so that I can make this blog better. If you like this blog, please spread the word around so that others can benefit as well.
Tuesday, June 5, 2007
Supports and Resistances for June 6, 2007
Hi,Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 121.30. If that is broken, next support is at 121.10 which is a very strong support and the final major support is at 120.85. On the topside, the resistance is at 121.48 and then at 121.82 and final major resistance at 122.10.
EURJPY - Since this pair ended up virtually unchanged from yesterday, supports and resistances remain almost the same. Important support at 164.05. If that is broken, next support is at 163.67 and the final major support is at 163.30. On the topside, the resistance is at 164.30 and then at 164.60.
GBPJPY - Important support at 241.80. If that is broken, next support is at 241.53 and the final major support is at 241.02. On the topside, the resistance is at 242.20 and then a major resistance at 242.70.
With the Chinese stock exchange in the green as of this writing and with ECB rates today and BOE tomorrow, expect the crosses to be buoyant.
Happy Trading!!
USDJPY - Important support at 121.30. If that is broken, next support is at 121.10 which is a very strong support and the final major support is at 120.85. On the topside, the resistance is at 121.48 and then at 121.82 and final major resistance at 122.10.
EURJPY - Since this pair ended up virtually unchanged from yesterday, supports and resistances remain almost the same. Important support at 164.05. If that is broken, next support is at 163.67 and the final major support is at 163.30. On the topside, the resistance is at 164.30 and then at 164.60.
GBPJPY - Important support at 241.80. If that is broken, next support is at 241.53 and the final major support is at 241.02. On the topside, the resistance is at 242.20 and then a major resistance at 242.70.
With the Chinese stock exchange in the green as of this writing and with ECB rates today and BOE tomorrow, expect the crosses to be buoyant.
Happy Trading!!
Analysis of supports and Resistances for June 5, 2007
With the market still raging due to the comments by the various Finmin and others, lets analyse the supports and resistances for today. Today, was a perfect example of the concept of averaging, use of supports and resistances and money management.
Averaging is the concept by which you keep adding to losing positions (which you know will eventually turn in your favor) so that it becomes enough for the entity to recover even a small bit for us to make a profit. For eg. lets says that we buy at 10 and the price goes down to 6. Normally, for us to break even, the price needs to move up back to 10 which may or may not happen or even if it happens, it wil take a long time. Lets say that we know that there is strong support at 6. We buy one more at 6 so that the average value becomes (10+6) / 2 = 8. So now, it is enough if the price reaches 8 for us to break even. If price manages to reach 10, then we make a profit for 2 x 2 = 4 which is fantastic.
Likewise, lets take gbpjpy today for example. It went up till 243 which was a resistance. So we wait for it to drop or break that resistance. It dropped down to support at 242.5 and there we go long with 1 lot. Then it went down to 241.1 (as mentioned below in our daily updates on support and resistance) which is again a support and we buy one more lot and wait for it to recover. Price again dropped to close to 241.6 which was close to a support again and there we buy 1 more lot so that we now have 3 lots. So when the price retraced to 242.4 within an hr, one lot would have a profit of 80 pips, another 30 and another - 10 which means that we would have made 100 pips in an hour.This is the power of averaging and knowing the supports and resistances.
If we had done the above for all the crosses, we would have made a profit of 200 pips in an hour. That is the power. But here money management is also very important as you need to have enough money to buy the lots and also to sustain the losses. We also need to make sure that we do this only when we know that the rise or fall is due to a retracement and not a reversal in trend cos doing the above against the trend would be disastrous.
As can be seen below from the daily updates of supports and resistances, they held up fairly well for all the 3 pairs today as well. Tomorrow i would be back with my daily regular updates on supports and resistances. Happy trading!!
Averaging is the concept by which you keep adding to losing positions (which you know will eventually turn in your favor) so that it becomes enough for the entity to recover even a small bit for us to make a profit. For eg. lets says that we buy at 10 and the price goes down to 6. Normally, for us to break even, the price needs to move up back to 10 which may or may not happen or even if it happens, it wil take a long time. Lets say that we know that there is strong support at 6. We buy one more at 6 so that the average value becomes (10+6) / 2 = 8. So now, it is enough if the price reaches 8 for us to break even. If price manages to reach 10, then we make a profit for 2 x 2 = 4 which is fantastic.
Likewise, lets take gbpjpy today for example. It went up till 243 which was a resistance. So we wait for it to drop or break that resistance. It dropped down to support at 242.5 and there we go long with 1 lot. Then it went down to 241.1 (as mentioned below in our daily updates on support and resistance) which is again a support and we buy one more lot and wait for it to recover. Price again dropped to close to 241.6 which was close to a support again and there we buy 1 more lot so that we now have 3 lots. So when the price retraced to 242.4 within an hr, one lot would have a profit of 80 pips, another 30 and another - 10 which means that we would have made 100 pips in an hour.This is the power of averaging and knowing the supports and resistances.
If we had done the above for all the crosses, we would have made a profit of 200 pips in an hour. That is the power. But here money management is also very important as you need to have enough money to buy the lots and also to sustain the losses. We also need to make sure that we do this only when we know that the rise or fall is due to a retracement and not a reversal in trend cos doing the above against the trend would be disastrous.
As can be seen below from the daily updates of supports and resistances, they held up fairly well for all the 3 pairs today as well. Tomorrow i would be back with my daily regular updates on supports and resistances. Happy trading!!
Money management
The concept of stop loss and money management cannot be stressed enough. It is very easy to makemoney in the forex market. How much you make and in what time depends on how good you are. Let meexplain how easy it can be. Any sane person can find the long term trend in a currency. Just open the daily chart and find in which way the chart is moving. If it moves up from left to right, then the trend is up. If it moves down from left to right, the trend is down. Simple. You dont need to know rocket science to find this.
Next, you need to have enough money and you need to buy lots in the direction of the trend. Assume that you have $5000 in your mini-account and you buy 1 lot which would cost you, say $50. This means that you still have $4950 for handling the situation when the buy goes against you. Assuming that you buy EURUSD, the price has to move 4950 pips for you to burn up your account and be out of the trade. And what is the chance that the price would move 4950 pips against you if you had bought it in the direction of the trend? One in a million maybe. The price may go 300-400 pips against you but it will always come back if you had bought the pair in the direction of the trend. So making money in forex is as simple as picking the direction of the trend and having enough money to sustain your losses.
As said before, how much money you make and how soon the price, after it moves against you, comes back depends on what juncture you picked up your lot. It may come back in a few hours or days or months but it will surely come back. If you had picked it up at the right point and in the right direction, it will come back sooner. If you did not pick the right moment, it will still come back but it will be later. This is why you need to know the supports and resistances and the direction of the trend. If the trend is up and you go long at a support, even if the price breaks through the support and drops, it will surely come back. You need to wait patiently.
So always have enough money in your acccount and choose the time you get in, carefully. Lots of time is still left and the market is always going to be there. So dont hurry and dont blow up your account. There have been instances when many users open a $250 mini account and buy 1 lot in the wrong direction and blow up the account in a few days time. They keep doing this 4-5 times before they start realising this. Whereas, if they had spent time to accumulate that money (4 times $250 is $1000), they could have invested $1000 in the account and chosen the right moment to get in and thus made money. $1000 gives you a much better chance of survival than having $250 in your account.
So keep it simple. Choose the direction, choose the time and go for it and make money!!
Next, you need to have enough money and you need to buy lots in the direction of the trend. Assume that you have $5000 in your mini-account and you buy 1 lot which would cost you, say $50. This means that you still have $4950 for handling the situation when the buy goes against you. Assuming that you buy EURUSD, the price has to move 4950 pips for you to burn up your account and be out of the trade. And what is the chance that the price would move 4950 pips against you if you had bought it in the direction of the trend? One in a million maybe. The price may go 300-400 pips against you but it will always come back if you had bought the pair in the direction of the trend. So making money in forex is as simple as picking the direction of the trend and having enough money to sustain your losses.
As said before, how much money you make and how soon the price, after it moves against you, comes back depends on what juncture you picked up your lot. It may come back in a few hours or days or months but it will surely come back. If you had picked it up at the right point and in the right direction, it will come back sooner. If you did not pick the right moment, it will still come back but it will be later. This is why you need to know the supports and resistances and the direction of the trend. If the trend is up and you go long at a support, even if the price breaks through the support and drops, it will surely come back. You need to wait patiently.
So always have enough money in your acccount and choose the time you get in, carefully. Lots of time is still left and the market is always going to be there. So dont hurry and dont blow up your account. There have been instances when many users open a $250 mini account and buy 1 lot in the wrong direction and blow up the account in a few days time. They keep doing this 4-5 times before they start realising this. Whereas, if they had spent time to accumulate that money (4 times $250 is $1000), they could have invested $1000 in the account and chosen the right moment to get in and thus made money. $1000 gives you a much better chance of survival than having $250 in your account.
So keep it simple. Choose the direction, choose the time and go for it and make money!!
Monday, June 4, 2007
Supports and Resistances for June 5, 2007
Hi,Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 121.65. If that is broken, next support is at 121.50 which is a very strong support and the final major support is at 121.26. On the topside, the resistance is at 121.88 and then at 122.10.
EURJPY - Since this pair ended up virtually unchanged from yesterday, supports and resistances remain almost the same. Important support at 164.05. If that is broken, next support is at 163.67 and the final major support is at 163.30. On the topside, the resistance is at 164.30 and then at 164.60.
GBPJPY - Important support at 242.20. If that is broken, next support is at 241.80 and the final major support is at 241.45. On the topside, the resistance is at 242.65 and then a major resistance at 242.90.
The Chinese stock market is yet to open as of this writing. There is scheduled meeting for bankers and all those people and what they say might change the market in a big way. So watch out today!!
As said yesterday, wait till the price comes near a support (or resistance) and then buy (or sell) near that point. Have a SL of max 30 pips because if a support (or resistance) is broken, the price then goes down (or up) till the next support (or resistance) and then there would be no point holding on to the losing position. You might as well use that money which you would lose, to buy (or sell) some other position and make up for that loss easily.
Good Luck!!
USDJPY - Important support at 121.65. If that is broken, next support is at 121.50 which is a very strong support and the final major support is at 121.26. On the topside, the resistance is at 121.88 and then at 122.10.
EURJPY - Since this pair ended up virtually unchanged from yesterday, supports and resistances remain almost the same. Important support at 164.05. If that is broken, next support is at 163.67 and the final major support is at 163.30. On the topside, the resistance is at 164.30 and then at 164.60.
GBPJPY - Important support at 242.20. If that is broken, next support is at 241.80 and the final major support is at 241.45. On the topside, the resistance is at 242.65 and then a major resistance at 242.90.
The Chinese stock market is yet to open as of this writing. There is scheduled meeting for bankers and all those people and what they say might change the market in a big way. So watch out today!!
As said yesterday, wait till the price comes near a support (or resistance) and then buy (or sell) near that point. Have a SL of max 30 pips because if a support (or resistance) is broken, the price then goes down (or up) till the next support (or resistance) and then there would be no point holding on to the losing position. You might as well use that money which you would lose, to buy (or sell) some other position and make up for that loss easily.
Good Luck!!
Analysis of the Supports and Resistances for June 4, 2007
Hi,
With the day slowly drawing to a close (though still a few hours are left, there is usually little action after this time provided something major happens), lets analyse how the supports and the resistances behaved today.
USDJPY - Not too much volatility today and everything stuck to the technicals as it was supposed to. On the top side, as predicted below, 122.08 proved to be a tough nut to crack and the max that it reached was 122.12 which would have been a good place to short. On the supports below, 121.85 held for most of the day and it was only during the NY session that it was broken. After it was broken , the next support of 122.50 held very well which would have been a good place to go long. So, all in all a good day for the supports and resistances and if watched carefully, we could have got atleast 2-3 calls on these correct and could have made 40-50 pips...
EURJPY - Did not come very close to the support of 163.70 which held up very well. On the topside, as predicted below, 164.10 and 164.30 proved to be very tough resistances and though it touched 164.30 2-3 times today, it pulled back. So it would have been nice to go short at these points today and could have made 40-50 pips again on this today. So a good day as far as resistances are concerned. Could have imrpoved a bit on predicting the support though.
GBPJPY - Came very close to the support of 241.60 as predicted below which stood up well. Hit the upper resistance of 242.50 2-3 times today before finally breaking it. Next resistance is at around 242.80. So good day for supports and resistances and could have made 70-80 pips with the correct playing of supports and resistances.
Tomorrow, the Chinese market could go up as today there was a huge fall and so it is usually followed by a 'UP' day as users start feeling that they market has gone down enough to buy. So it should be a good day for JPY crosses. Lets see...
With the day slowly drawing to a close (though still a few hours are left, there is usually little action after this time provided something major happens), lets analyse how the supports and the resistances behaved today.
USDJPY - Not too much volatility today and everything stuck to the technicals as it was supposed to. On the top side, as predicted below, 122.08 proved to be a tough nut to crack and the max that it reached was 122.12 which would have been a good place to short. On the supports below, 121.85 held for most of the day and it was only during the NY session that it was broken. After it was broken , the next support of 122.50 held very well which would have been a good place to go long. So, all in all a good day for the supports and resistances and if watched carefully, we could have got atleast 2-3 calls on these correct and could have made 40-50 pips...
EURJPY - Did not come very close to the support of 163.70 which held up very well. On the topside, as predicted below, 164.10 and 164.30 proved to be very tough resistances and though it touched 164.30 2-3 times today, it pulled back. So it would have been nice to go short at these points today and could have made 40-50 pips again on this today. So a good day as far as resistances are concerned. Could have imrpoved a bit on predicting the support though.
GBPJPY - Came very close to the support of 241.60 as predicted below which stood up well. Hit the upper resistance of 242.50 2-3 times today before finally breaking it. Next resistance is at around 242.80. So good day for supports and resistances and could have made 70-80 pips with the correct playing of supports and resistances.
Tomorrow, the Chinese market could go up as today there was a huge fall and so it is usually followed by a 'UP' day as users start feeling that they market has gone down enough to buy. So it should be a good day for JPY crosses. Lets see...
What are supports and resistances?
Supports and resistances are points in the price of an entity (it can be a share or a currency pair or a commodity or any other entity) where the prices stall. They have got more to do with history and user sentiment. Lets say that the price of the entity is 5 to begin with. It begins to rise and it keeps rising and seeing this price, more and more people would want to jump in and they keep buying and the price rises even more. This means that the demand is more than the supply and as long as this happens, the price will rise.
The price will continue to rise until a stage is reached where people start to feel that the price has become high enough or those who bought it early feel that they have earned enough profit. Lets say that at this point, the price of the entity is 10. So, people start feeling that the price has risen too much (this is also called overbought conditions) and slowly start selling. The demand becomes less than or equal to the supply and the price slowly drops from 10. As the price continues to drop, the people who plan to make money on shorts also jump in and the buyers (even though they might have very less profits or are in loss) start getting panicky and they start selling and the price starts falling more and also at a faster rate.
So the price continues to drop from 10 and thus 10 becomes resistance as the price has not breached 10. Next time the price comes close to 10, the buyers and the sellers will look at past history and find that 10 was the place where selling started the previous time and so the buyers would want to get out at that point just to be on the safer side and so 10 becomes a even bigger resistance.
The price drop from 10 continues and at one place, the opposite to the one explained above happens ie. the users feel that the price has dropped too much (say at 2) and they start buying again and the price starts to rise again. Thus 2 becomes the support.
Remember, the greater the amount of time that a support or resistance has not been broken, the stronger it is. Even yesterdays high and low are resistance and support respectively but they are not very strong as they are quite recent prices.
So, always watch out for supports and resistances. The big banks and traders dont sit with their ema or whatever indicators and buy and sell based on that. They look out for stops and resistances and buy / sell based on that. So be careful, watch out for opportunities and get a feel of the market before jumping in.
The price will continue to rise until a stage is reached where people start to feel that the price has become high enough or those who bought it early feel that they have earned enough profit. Lets say that at this point, the price of the entity is 10. So, people start feeling that the price has risen too much (this is also called overbought conditions) and slowly start selling. The demand becomes less than or equal to the supply and the price slowly drops from 10. As the price continues to drop, the people who plan to make money on shorts also jump in and the buyers (even though they might have very less profits or are in loss) start getting panicky and they start selling and the price starts falling more and also at a faster rate.
So the price continues to drop from 10 and thus 10 becomes resistance as the price has not breached 10. Next time the price comes close to 10, the buyers and the sellers will look at past history and find that 10 was the place where selling started the previous time and so the buyers would want to get out at that point just to be on the safer side and so 10 becomes a even bigger resistance.
The price drop from 10 continues and at one place, the opposite to the one explained above happens ie. the users feel that the price has dropped too much (say at 2) and they start buying again and the price starts to rise again. Thus 2 becomes the support.
Remember, the greater the amount of time that a support or resistance has not been broken, the stronger it is. Even yesterdays high and low are resistance and support respectively but they are not very strong as they are quite recent prices.
So, always watch out for supports and resistances. The big banks and traders dont sit with their ema or whatever indicators and buy and sell based on that. They look out for stops and resistances and buy / sell based on that. So be careful, watch out for opportunities and get a feel of the market before jumping in.
Sunday, June 3, 2007
Supports and Resistances for June 4, 2007
Hi,
Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 121.85. If that is broken, next support is at 121.68 and the final major support is at 121.50. On the topside, the resistance is at 122.08 and then at 122.30.
EURJPY - Important support at 163.70. If that is broken, next support is at 163.35 and the final major support is at 163.15. On the topside, the resistance is at 164.10 and then at 164.30 which is also a huge resistance as that has not been broken for a long time.
GBPJPY - Important support at 241.60. If that is broken, next support is at 241.10 and the final major support is at 240.55. On the topside, the resistance is at 241.85 and then a major resistance at 242.20.
With the Shanghai market down a great deal, the bias would be on the downside today. So if one support is broken, watch out for it to touch the next support and likewise with the resistances as well. So watch what the market does carefully and then jump in...Wait for the market to come near a support or resistance and then jump in and you can then have a SL of 15 or 20 pips cos if that support or resistance is broken, there is not much point in holding on to that losing position.
Good Luck today!!!
Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 121.85. If that is broken, next support is at 121.68 and the final major support is at 121.50. On the topside, the resistance is at 122.08 and then at 122.30.
EURJPY - Important support at 163.70. If that is broken, next support is at 163.35 and the final major support is at 163.15. On the topside, the resistance is at 164.10 and then at 164.30 which is also a huge resistance as that has not been broken for a long time.
GBPJPY - Important support at 241.60. If that is broken, next support is at 241.10 and the final major support is at 240.55. On the topside, the resistance is at 241.85 and then a major resistance at 242.20.
With the Shanghai market down a great deal, the bias would be on the downside today. So if one support is broken, watch out for it to touch the next support and likewise with the resistances as well. So watch what the market does carefully and then jump in...Wait for the market to come near a support or resistance and then jump in and you can then have a SL of 15 or 20 pips cos if that support or resistance is broken, there is not much point in holding on to that losing position.
Good Luck today!!!
Upcoming week for JPY crosses
The upcoming week would be a huge week as far as volatility for the EURJPY and GBPJPY is concerned. The first 2 days of the week would be quiet and then the fireworks would begin with the Euro interest statement on Wednesday, the British interest statement on Thursday and some more important news on Friday...
The general expectation is for the Euro bank to raise the rate and for the GBP to maintain the rate as is but who knows....they might spring some huge surprises or they might go with expectations but in the accompanying statement, they might say something surprising...so watch out..
It is in such situation that pivots, resistances and supports would be most useful. The indicators simply do not work in such circumstances cos most of them are lagging whereas supports and resistances work time and again. For those who are new to support and resistances, i would be explaining them on this blog sometime over the week when i find time.
Supports and resistances should not be followed blindly. The momentum of the market should also be taken into consideration and for that u need experience in the market so that u get a 'feel' of the momentum. For eg. , last Friday, for the GBPJPY, there was a big resistance at 241.45...it tried getting past that figure for almost 10 hrs but once the big news from USA got released, u could almost feel the momentum and could feel that it would break that resistance. so a lot of money could have been made by shorting whenever it came close to that figure during the 10 hrs and then by going long at the same figure after the news was released and after u got the feel of the momentum...this is where experience comes in...and once one resistance is broken, the price simply shoots thru to the next resistance...
right now, EURJPY is close to its peak and hence a huge resistance...likewise with GBPJPY and USDJPY as well...so watch out...
anyway, i would keep you guys updated with all the pivots, supports and resistances to help you guys along!!
The general expectation is for the Euro bank to raise the rate and for the GBP to maintain the rate as is but who knows....they might spring some huge surprises or they might go with expectations but in the accompanying statement, they might say something surprising...so watch out..
It is in such situation that pivots, resistances and supports would be most useful. The indicators simply do not work in such circumstances cos most of them are lagging whereas supports and resistances work time and again. For those who are new to support and resistances, i would be explaining them on this blog sometime over the week when i find time.
Supports and resistances should not be followed blindly. The momentum of the market should also be taken into consideration and for that u need experience in the market so that u get a 'feel' of the momentum. For eg. , last Friday, for the GBPJPY, there was a big resistance at 241.45...it tried getting past that figure for almost 10 hrs but once the big news from USA got released, u could almost feel the momentum and could feel that it would break that resistance. so a lot of money could have been made by shorting whenever it came close to that figure during the 10 hrs and then by going long at the same figure after the news was released and after u got the feel of the momentum...this is where experience comes in...and once one resistance is broken, the price simply shoots thru to the next resistance...
right now, EURJPY is close to its peak and hence a huge resistance...likewise with GBPJPY and USDJPY as well...so watch out...
anyway, i would keep you guys updated with all the pivots, supports and resistances to help you guys along!!
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