Hi All,
All of you would have seen the supports and resistances which i provide to all on a daily basis. These S and R are points in which the price is expected to stall and also there is a greater probability of the price falling from the resistance than it breaking. Thats what make the S and R useful and powerful.
But the big mistake that many traders make is to follow the S and R blindly. When the price nears a support or a resistance, we need to analyse the market situation as well as the market sentiment before we decide whether we are going to enter into the trade or not.
The market is like the frictionless ball which keeps rolling in one direction unless and until acted upon by a force. Everyday, atleast 3 forces act on the ball (market). These are the begin of the Asian session, European session and the American session. Apart from these three forces, there could be other forces like news, press conferences, rate hikes etc. but everyday will have atleast 3 forces. Lets say that in the begin of the Asian session, the ball is rolling in favor of the longs. The Asian traders would either choose to slow down the ball or force it to travel in the same direction faster or force it to reverse. Whichever is the direction, the ball keeps rolling in that direction till the begin of the European session (unless there is some news in between. If there is news, then that would be another force which will make the ball gain momentum or change direction). Likewise, the European traders would also make the ball move in a specific direction (either same or reverse). This trend continues during the American session as well and would be interrupted only by news etc.
So when entering a trade based on S and R, it is important to know what time it is and which direction the ball is rolling. The best example would be yesterday when in the begin of the Asian session, the ball began to roll in the direction of the longs. This continued in the Euro session as well. So midway, through the Euro session it would be foolish to enter into a short just cos we have met a resistance. The ball is rolling in favor of longs from the Asian session and continues thru the Euro session and since there has been nothing to change that direction, it is expected to roll in that direction only till the next force (like the news or begin of American session) comes in. So in such cases, it is better to wait for the next force to come in to get the correct direction (whether the force continues the move in the same direction or reverses it) before entering in the market. For example, yesterday, it would not have been a great idea to enter into shorts at any time just cos a resistance was near.
So always keep in mind the frictionless ball and trade accordingly.
In case anyone wants to contact me, you can do so at kartram.77@gmail.com.
Happy Trading!!
Saturday, June 23, 2007
Friday, June 22, 2007
Ramblings for the day..
USDCHF turned out to be false call but thankfully, something did not seem right to me in the morning and so i had closed my position for 4 pip profit...The crosses seemed to be on fire today which each of them making historic highs. There did not seem to be any fundamental reason behind it though. The weekend would be interesting though with few meetings scheduled. Moreover, the crosses have had many consecutive up days without any major correction so far and so this raises the risk level of longs a bit.
But so far, things seem excellent for the longs and those who entered at the right time should be sitting on huge profits by now. As i said, there are some meetings scheduled for the weekend and we need to see whether the crosses are mentioned in any of the meetings.
Another curious thing that has happened is that almost all the stock exchanges are down today (Chinese, Japanese, London and USA as of this writing) but still the crosses do not seem to be bothered at all and they keep rising. Few weeks back, they were mirroring the movements of the stock exchanges and even a small fall in the Dow jones would get reflected in the crosses. But nothing seems to have shaken them today. Very surprising indeed. Anyway, next week is another new week. Lets see things happening over the weekend and lets get ready for the next week.
I will try and write some more articles over the weekend to entertain the visitors over the weekend.
Happy Trading!!
But so far, things seem excellent for the longs and those who entered at the right time should be sitting on huge profits by now. As i said, there are some meetings scheduled for the weekend and we need to see whether the crosses are mentioned in any of the meetings.
Another curious thing that has happened is that almost all the stock exchanges are down today (Chinese, Japanese, London and USA as of this writing) but still the crosses do not seem to be bothered at all and they keep rising. Few weeks back, they were mirroring the movements of the stock exchanges and even a small fall in the Dow jones would get reflected in the crosses. But nothing seems to have shaken them today. Very surprising indeed. Anyway, next week is another new week. Lets see things happening over the weekend and lets get ready for the next week.
I will try and write some more articles over the weekend to entertain the visitors over the weekend.
Happy Trading!!
Thursday, June 21, 2007
Supports and Resistances for June 22, 2007
Hi all,
Well, the crosses seem to have got a second wind and now they have started moving up again. But there are rumors that China might announce a rate hike which might lead to some correction in the crosses. So we need to better watch out for that. EJ is moving towards the double top of 166.00 - 166.20....So it should be interesting to see what happens to that.Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 123.82. If that is broken, next support is at 123.64 which is a very strong support and the final major support is at 123.44. On the topside, the resistance is at 123.93 and then at 124.05.
EURJPY - Important support at 165.65. If that is broken, next support is at 165.30 and the final major support is at 165.10. On the topside, the resistance is at 166.02 and then at 166.42.
GBPJPY - Important support at 246.25. If that is broken, next support is at 245.85 and the final major support is at 245.40. On the topside, the resistance is at 246.85 and then a major resistance at 247.20.
Happy Trading !!!
Well, the crosses seem to have got a second wind and now they have started moving up again. But there are rumors that China might announce a rate hike which might lead to some correction in the crosses. So we need to better watch out for that. EJ is moving towards the double top of 166.00 - 166.20....So it should be interesting to see what happens to that.Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 123.82. If that is broken, next support is at 123.64 which is a very strong support and the final major support is at 123.44. On the topside, the resistance is at 123.93 and then at 124.05.
EURJPY - Important support at 165.65. If that is broken, next support is at 165.30 and the final major support is at 165.10. On the topside, the resistance is at 166.02 and then at 166.42.
GBPJPY - Important support at 246.25. If that is broken, next support is at 245.85 and the final major support is at 245.40. On the topside, the resistance is at 246.85 and then a major resistance at 247.20.
Happy Trading !!!
USDCHF and EURJPY...
Hi All,
My system says that USDCHF has reversed and is ready for a rise of atleast 30-40 pips....but it is near its 6 mnths rise and so the rise could be slow and painful...Lets see...Also EURJPY seems to be getting ready for a drop though the signals are not confirmed yet.,..If EURJPY falls below 165.5 and stays there for 3-4 hrs, then i guess the signal would be confirmed...Lets see though...
Happy Trading!!
My system says that USDCHF has reversed and is ready for a rise of atleast 30-40 pips....but it is near its 6 mnths rise and so the rise could be slow and painful...Lets see...Also EURJPY seems to be getting ready for a drop though the signals are not confirmed yet.,..If EURJPY falls below 165.5 and stays there for 3-4 hrs, then i guess the signal would be confirmed...Lets see though...
Happy Trading!!
Trading your Plan
Many of you, by now, should be having a trading plan or system. If you dont,then you must be pretty new to trading. So you better get a system for yourself as soon as you can. If you dont, the law of averages would soon catch up with you and you will soon start losing money. Your system or plan can be anything but the biggest thing here is sticking to your plan.
You have developed a great trading system which you find that works 70% of the time. It is on a 1H timeframe and you usually get signals every day. So now what happens? You get a signal. You either take it or leave it. Assuming that you take it, and you get a profit of say 50 pips and then you close out the trade. The pair continues to move in your direction and keeps going on for 2-3 days in the same way. You are out of the trade and slowly you get frustated. What do you do? You try to generate signals in your mind. You open your chart, have a long hard look at it and try to see things which actually do not exist.
Why do you do that? Cos you are out of the market and you want to get into the action. You see people and traders around you making money out of the move but you are left behind. So you want to do something to get back to it. The charts do not show signals for you to get into the action but somehow you want to do it. So you start seeing signals which do not exist. One of the biggest mistakes made by traders is to see things in charts which do not exist and try and take trades just cos you want to be in the thick of things. Signals in good trading systems should jump out of the charts and stare at you in the face. They should not be hiding inside the charts that you have to go in search of it. If they are like that, then either it is not a good system or it is not a good signal. So dont take those signals.
Wait for the signals to jump out from the charts. You need patience. Lots of it. That is the key. Dont try to generate signals and dont try to look hard to see things which are not there. Sit back, enjoy your trading. Enjoy the times that you are out of the market and wait for the right signal. Signals, if they arise, would be good and bright enough for you to see even when you are half asleep. You need not put your reading glasses on to see where the signals are. They will come to you eventually. It might take hours or even days but they will come. Make sure you take them when they come and only when they come.
So getting a good trading system is only part of the job. The biggest and most important thing is sticking to your trading system at all times and all costs.
Happy Trading!!
You have developed a great trading system which you find that works 70% of the time. It is on a 1H timeframe and you usually get signals every day. So now what happens? You get a signal. You either take it or leave it. Assuming that you take it, and you get a profit of say 50 pips and then you close out the trade. The pair continues to move in your direction and keeps going on for 2-3 days in the same way. You are out of the trade and slowly you get frustated. What do you do? You try to generate signals in your mind. You open your chart, have a long hard look at it and try to see things which actually do not exist.
Why do you do that? Cos you are out of the market and you want to get into the action. You see people and traders around you making money out of the move but you are left behind. So you want to do something to get back to it. The charts do not show signals for you to get into the action but somehow you want to do it. So you start seeing signals which do not exist. One of the biggest mistakes made by traders is to see things in charts which do not exist and try and take trades just cos you want to be in the thick of things. Signals in good trading systems should jump out of the charts and stare at you in the face. They should not be hiding inside the charts that you have to go in search of it. If they are like that, then either it is not a good system or it is not a good signal. So dont take those signals.
Wait for the signals to jump out from the charts. You need patience. Lots of it. That is the key. Dont try to generate signals and dont try to look hard to see things which are not there. Sit back, enjoy your trading. Enjoy the times that you are out of the market and wait for the right signal. Signals, if they arise, would be good and bright enough for you to see even when you are half asleep. You need not put your reading glasses on to see where the signals are. They will come to you eventually. It might take hours or even days but they will come. Make sure you take them when they come and only when they come.
So getting a good trading system is only part of the job. The biggest and most important thing is sticking to your trading system at all times and all costs.
Happy Trading!!
Wednesday, June 20, 2007
Supports and Resistances for June 21, 2007
Hi all,
So as predicted yesterday in this blog, 166.10 proved to be a very strong resistance for EJ. A short there would have yielded 50 pips by now. Now is the time to wait and watch the pricer action. All crosses(as ofthis writing) are at important supports with the Chinese stock exchange about to open. Will have to wait and see whether there is further retracement. If there is, we could buy on dips. For now, lets wait and watch.Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 123.42. If that is broken, next support is at 123.20 which is a very strong support and the final major support is at 123.00. On the topside, the resistance is at 123.70 and then at 123.90.
EURJPY - Important support at 165.25. If that is broken, next support is at 164.85 and the final major support is at 164.40. On the topside, the resistance is at 165.65 and then at 165.92.
GBPJPY - Important support at 246.10. If that is broken, next support is at 245.40 and the final major support is at 244.70. On the topside, the resistance is at 246.60 and then a major resistance at 247.20.
Happy Trading !!!
So as predicted yesterday in this blog, 166.10 proved to be a very strong resistance for EJ. A short there would have yielded 50 pips by now. Now is the time to wait and watch the pricer action. All crosses(as ofthis writing) are at important supports with the Chinese stock exchange about to open. Will have to wait and see whether there is further retracement. If there is, we could buy on dips. For now, lets wait and watch.Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 123.42. If that is broken, next support is at 123.20 which is a very strong support and the final major support is at 123.00. On the topside, the resistance is at 123.70 and then at 123.90.
EURJPY - Important support at 165.25. If that is broken, next support is at 164.85 and the final major support is at 164.40. On the topside, the resistance is at 165.65 and then at 165.92.
GBPJPY - Important support at 246.10. If that is broken, next support is at 245.40 and the final major support is at 244.70. On the topside, the resistance is at 246.60 and then a major resistance at 247.20.
Happy Trading !!!
USDCHF and fourth call..and EURJPY
Hi All,
So the fourth call given on going short on USDCHF worked fine as well. It was slow, it was painful but it worked just well. My system still shows further weakness but i did not want to risk it and so have come out of the trade. Sold at 1.2400 and closed at 1.2366. Sounds good so far.
So the crosses have got a second wind though as of this writing , they seem to be slowing down. EURJPY seems to be the slowest of the lot and it has to break 166.20 to be good for longs again. Until it breaks that level, it is better to stay out or short it with small SL which is what i did with 10 pips profit. It has to break on the upside very soon else 166.10 will become a kind of double top which will be very very difficult to overcome later on.
Happy Trading!!
So the fourth call given on going short on USDCHF worked fine as well. It was slow, it was painful but it worked just well. My system still shows further weakness but i did not want to risk it and so have come out of the trade. Sold at 1.2400 and closed at 1.2366. Sounds good so far.
So the crosses have got a second wind though as of this writing , they seem to be slowing down. EURJPY seems to be the slowest of the lot and it has to break 166.20 to be good for longs again. Until it breaks that level, it is better to stay out or short it with small SL which is what i did with 10 pips profit. It has to break on the upside very soon else 166.10 will become a kind of double top which will be very very difficult to overcome later on.
Happy Trading!!
Tuesday, June 19, 2007
Price Action vs. Indicators
Hi All,I started out trading blindly like many other traders. I did not know what to buy, what to sell. All i understood was to buy pairs which went up and sell pairs which went down. This worked for sometime but later on the law of averages caught up with me and i started losing. Then slowly i started learning system trading. I went around forums and other parts of the net and tried to find trading systems which worked for me and which made money for me.
I found many systems, some which worked, some which did not. But there was something wrong in all the systems that i tried out. They refused to work under some circumstances. There was no system which said that if this happens, price would rise or if this happens, price would fall.There was something in there which led to whipsaws, wrong calls etc. which made me lose money and also which made implementation of the system difficult as well as subjective.
Also, many trading systems looked very complicated to me. There are systems which ask to use 10 ema, 15 ema, 39 ema, wait till one crosses another, wait till red becomes blue and black becomes yellow or whatever. But does a country's economy (on which currency is based on) depend on indicators? Do they depend on a indicator turning blue from red? Does Bernanke say 'ok 10 ema has crossed 15 ema, lets make a statement to make it cross back again'. No...So things cannot be so complex or cumbersome. There must be something straightforward.
And that straightforward stuff is price action. Everything that happens in the market is based on price action. Indicators are based on price action. All the indicators, colors etc. are merely a reflection of the price action.
And price action is a reflection of history. It is based on history. Why do trading systems stop working under some situations? Its because of the price action. Once we understand price action and how it relates to history and how to interpret all these, then we should be able to make money consistently. Indicators tell you what has happened. No indicator will tell you what is going to happen. Indicators tell you that when lot of people buy something and the price goes up, it tells you that it is overbought. It does not tell you why it is overbought nor does it tell you where and when it will stop.
If EURJPY goes from 165 to 170 without any rectracement, its obvious that its overbought. You dont need an indicator to tell you that. What concerns you at that point is whether the rise will stop, if yes, when and where. Not that the price has risen very much which is something that you can see from the chart itself and is common sense.
Where and when it will stop will be given by price action. The speed of rise will slow down, price action and history will tell you probable points of resistance and support which in turn give points where price will reverse. These tell you when and where the rise will stop. No indicator or systems based on indicators can tell you that. They always tell you what has happened and not what is going to happen. Only price action and history can tell you those. Fibos and elliot are based on price action and history and that is why they succeed so much. They are simple and straightforward. They are based on price action and that is why they are so effective.
So learn to analyse price action. This is the best way to make money in trading.
Happy Trading!!
Supports and Resistances for June 20, 2007
Hi all,
Nice little correction in all the crosses but i guess it was not deep enough. It did not even reach the 23.6% fibo....so will have to see whether the correction becomes strong enough to reach the fibos or simply shoots up from their current points...Yesterday my call on EJ that strong resistance was there at 166 proved to be right as the pair corrected from there.Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 123.30. If that is broken, next support is at 123.05 which is a very strong support and the final major support is at 122.65. On the topside, the resistance is at 123.70 and then at 123.90.
EURJPY - Important support at 165.65. If that is broken, next support is at 165.35 and the final major support is at 164.90. On the topside, the resistance is at 166.02 and then at 166.25.
GBPJPY - Important support at 244.90. If that is broken, next support is at 244.45 and the final major support is at 243.80. On the topside, the resistance is at 245.50 and then a major resistance at 246.00.
Happy Trading !!!
Nice little correction in all the crosses but i guess it was not deep enough. It did not even reach the 23.6% fibo....so will have to see whether the correction becomes strong enough to reach the fibos or simply shoots up from their current points...Yesterday my call on EJ that strong resistance was there at 166 proved to be right as the pair corrected from there.Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 123.30. If that is broken, next support is at 123.05 which is a very strong support and the final major support is at 122.65. On the topside, the resistance is at 123.70 and then at 123.90.
EURJPY - Important support at 165.65. If that is broken, next support is at 165.35 and the final major support is at 164.90. On the topside, the resistance is at 166.02 and then at 166.25.
GBPJPY - Important support at 244.90. If that is broken, next support is at 244.45 and the final major support is at 243.80. On the topside, the resistance is at 245.50 and then a major resistance at 246.00.
Happy Trading !!!
News Trading
There used to be a time when it was quite easy and profitable to trade the news. I used to do that for sometime. But like any other method which brings good, consistent money to the small traders, this method also caught the attention of the market makers and they have made sure that nowadays this method does not work well. This method is very simple.
All you had to do was place a buy order 20 pips above the current price and a sell order 20 pips below the current price just 2 mins before a major news released. If the news was good for the pair, it would shoot up, trigger the buy order and go further up thus helping us sit on a very good profit. The same was true for the sell as well. But now, slowly, the market makers have come up with the strategy to stop this. They don't guarantee orders to be filled during news times. They increase the spread. They don't allow us to close our positions at the rate that we want during news times. So many strategies to stop the small traders from making easy money.
But this is good in a way. Traders have to earn through the tough ways.Traders have to understand that money cannot be made easily. Everything in this world has to be worked for and earned and nothing is for free.So traders need to keep coming up with new strategies and new methods and keep changing these periodically to keep in pace with the changing market conditions. Traders always need to be on top of their game to make money consistently which is fair enough. If you launch a business,you keep thinking about marketing etc. and you keep pushing yourself to make money. Same strategy needs to be applied for trading as well. You need to keep pushing yourself, keep learning, keep gaining knowledge for you to make money. Never stop and never stagnate. A lake does not flow and so collects filth. A river keeps flowing and that's why it is always clear. So keep working and keep flowing so that you always have a clearpath to success.
Happy Trading!!!2000 and counting...and USDCHF
Another good day for this blog. Yesterday, this blog received its 2000th visitor. Considering the very little publicity that has been given to this blog, it is indeed a great achievement that this blog has got 2000 visitors just 15 days after its starting. I dream of the day when thousands would be visiting this blog everyday. So far we have got 2000 visitors and 3500 page views. I would like to thank all of you for your continued and unstinted patronage for this blog and I also wish that youall could spread the word around so that others can also make use of whatever little that people can learn from this blog.
I wanted to write a lot today but my silly computer had some problems and I just could not post about anything at all. Sorry about that people. USDCHF is refusing to go down so far. The 23.8% fibo of the last move up is at 1.2390 and that is holding up well so far. This pair is caught in a nice tight range so far and hence it should breakout in somedirection soon. With 1.2450 being the highest for the past 6 mnths, I think the breakout would be on the downside. My system says so as well though with the price not going down soon, it is also starting to get confused a bit. Lets see.
Monday, June 18, 2007
Supports and Resistances on June 19, 2007
Well well...what can i say..All the crosses seem to be running like crazy horses and there seems to be no stopping any of them. Why have they suddenly started running like this? No one knows. When are they going to stop? My charts say that not anytime soon. Too bad for those who missed getting on this train. Since we do not know when it is going to stop, it would be dangerous to get on to it at these levels and it also looks bad to be at the sidelines when they are going up like this. But thats is trading. There is always another day. All we can do is wait.Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 123.55. If that is broken, next support is at 123.40 which is a very strong support and the final major support is at 123.05. On the topside, the resistance is at 123.70 and then at 123.90.
EURJPY - Important support at 165.65. If that is broken, next support is at 165.15 and the final major support is at 164.90. On the topside, the resistance is at 166.02 and then at 166.25.
GBPJPY - Important support at 244.90. If that is broken, next support is at 244.45 and the final major support is at 243.80. On the topside, the resistance is at 245.50 and then a major resistance at 246.00.
Happy Trading !!!
USDJPY - Important support at 123.55. If that is broken, next support is at 123.40 which is a very strong support and the final major support is at 123.05. On the topside, the resistance is at 123.70 and then at 123.90.
EURJPY - Important support at 165.65. If that is broken, next support is at 165.15 and the final major support is at 164.90. On the topside, the resistance is at 166.02 and then at 166.25.
GBPJPY - Important support at 244.90. If that is broken, next support is at 244.45 and the final major support is at 243.80. On the topside, the resistance is at 245.50 and then a major resistance at 246.00.
Happy Trading !!!
Third call from system almost right...
Sometime back, i had posted how my system had given a signal for going short on GU....it made 40 pips though considering the fact that the system is based on 4H, i expected it to make much more pips...so as far as this signal is concerned, the system was only partially correct.
now my system has given a signal saying the USDCHF would be weak and hence good for a short in the next couple of day...lets see though...
now my system has given a signal saying the USDCHF would be weak and hence good for a short in the next couple of day...lets see though...
Importance of leverage
Most small traders use what is known as a mini account where 1 lot is of 10K units and each pip is worth 1 unit. These mini accounts can be opened with as little money as $250. At the outset, this looks like a boon to small traders as people can get exposed and also make money with as little as $250. If you get a call right, you can make 10-20% of your investment in a single day. Now where else can you get such returns. This mini account with $250 should surely be a boon, we might think. But…Think Again..
Here is where the concept of leverage is very important. Leverage is the ability to control a large amount of something using a small amount of the same thing. Here in a mini account, you control 10K unit using just $250. Here in this case, the leverage is 10,000/250 = 400:1. That is your leverage. It looks great on paper as long as you only think about the profits that such a leverage can bring in. Assume that you bought 1 lot of EURUSD using this money. Lets assume EURUSD was 1.0000 when you bought it. It goes in your favor and rises by 1% and becomes 1.0100. So you make a cool (10000 x 1.0100) – (10000 x 1.0000) = $100 on your trade. This means that you made 40% of your investment in your trade. That sounds fantastic. Absolutely!!
But now consider this. The same trade goes against you and the price falls by 1%. So you lose the same $100. This wipes off your account by 40% while EURUSD has moved just 1 % !! So you lost 40% of your account in a single trade leaving you with next to nothing for your next trade. If your trading and your account is worth only for one trade, then it will not be a very good trading career that you are going to have.
Now consider this. You have $1000 in your mini account and as above, you buy 1 lot of EURUSD. This time the leverage would be 10000/1000 = 10:1. Now if EURUSD falls by 1%, you will lose $100 again but this time, it will be just 1% of your account. You lose 1% of your account when EURUSD moves by 1% which is fair enough and this gives you a lot of leeway for EURUSD to move even further against you. Even if it moves further against you, you still have money in your account to sustain that move. If you chose to close it, again you are left with $900 using which you still survive in the trading business.
Of course, a rise of 1% would fetch only 1% return but the aim of trading is not to become rich overnight but to remain in the game for as long as possible and to make slow, steady and consistent profits.
Always remember to have as low a leverage as possible. Trading 1 mini lot using a $250 account can be done only in dreams. Don’t even think of it. Try and have a minimum of $1000 for a mini account (many professional traders will say that even this is very less). I am sure that there are few success stories around of people who made a lot with just $250 but remember, we are not here in trading to be exceptions and to be a smart ass. We are here to make money against a lot of odds. So be as much leveraged and have as much margin as possible. If you don’t have enough money, just wait till you get the required money as it would be no point starting off with $250 because you are going to lose it anyway.
Happy Trading!!
Here is where the concept of leverage is very important. Leverage is the ability to control a large amount of something using a small amount of the same thing. Here in a mini account, you control 10K unit using just $250. Here in this case, the leverage is 10,000/250 = 400:1. That is your leverage. It looks great on paper as long as you only think about the profits that such a leverage can bring in. Assume that you bought 1 lot of EURUSD using this money. Lets assume EURUSD was 1.0000 when you bought it. It goes in your favor and rises by 1% and becomes 1.0100. So you make a cool (10000 x 1.0100) – (10000 x 1.0000) = $100 on your trade. This means that you made 40% of your investment in your trade. That sounds fantastic. Absolutely!!
But now consider this. The same trade goes against you and the price falls by 1%. So you lose the same $100. This wipes off your account by 40% while EURUSD has moved just 1 % !! So you lost 40% of your account in a single trade leaving you with next to nothing for your next trade. If your trading and your account is worth only for one trade, then it will not be a very good trading career that you are going to have.
Now consider this. You have $1000 in your mini account and as above, you buy 1 lot of EURUSD. This time the leverage would be 10000/1000 = 10:1. Now if EURUSD falls by 1%, you will lose $100 again but this time, it will be just 1% of your account. You lose 1% of your account when EURUSD moves by 1% which is fair enough and this gives you a lot of leeway for EURUSD to move even further against you. Even if it moves further against you, you still have money in your account to sustain that move. If you chose to close it, again you are left with $900 using which you still survive in the trading business.
Of course, a rise of 1% would fetch only 1% return but the aim of trading is not to become rich overnight but to remain in the game for as long as possible and to make slow, steady and consistent profits.
Always remember to have as low a leverage as possible. Trading 1 mini lot using a $250 account can be done only in dreams. Don’t even think of it. Try and have a minimum of $1000 for a mini account (many professional traders will say that even this is very less). I am sure that there are few success stories around of people who made a lot with just $250 but remember, we are not here in trading to be exceptions and to be a smart ass. We are here to make money against a lot of odds. So be as much leveraged and have as much margin as possible. If you don’t have enough money, just wait till you get the required money as it would be no point starting off with $250 because you are going to lose it anyway.
Happy Trading!!
Sunday, June 17, 2007
Supports and Resistances for June 18, 2007
Hmmm....Another new days and another new week. Lets see what the pairs do. Since today is Monday, traders would be returning back after their weekends and so they would be trading with extra vigor which could make the markets a little more volatile than usual. Lets see what they do. Personally, I feel that the crosses are in an overbought situation and so they might undergo some small correction.Below are the supports and resistances for the JPY crosses for today:-
USDJPY - Important support at 123.33. If that is broken, next support is at 123.06 which is a very strong support and the final major support is at 122.65. On the topside, the resistance is at 123.65 and then at 123.80.
EURJPY - Important support at 164.80. If that is broken, next support is at 164.05 and the final major support is at 163.45. On the topside, the resistance is at 165.40 and then at 165.85.
GBPJPY - Important support at 243.70. If that is broken, next support is at 243.15 and the final major support is at 242.35. On the topside, the resistance is at 244.35 and then a major resistance at 245.00.
Happy Trading !!!
USDJPY - Important support at 123.33. If that is broken, next support is at 123.06 which is a very strong support and the final major support is at 122.65. On the topside, the resistance is at 123.65 and then at 123.80.
EURJPY - Important support at 164.80. If that is broken, next support is at 164.05 and the final major support is at 163.45. On the topside, the resistance is at 165.40 and then at 165.85.
GBPJPY - Important support at 243.70. If that is broken, next support is at 243.15 and the final major support is at 242.35. On the topside, the resistance is at 244.35 and then a major resistance at 245.00.
Happy Trading !!!
How do currencies balance?
Hi All,
Today lets find out how come currency pairs always keep circling around the same price range and even if they move on to a larger value, it takes place over a period of 20-30 years and not much sooner. Lets take GBPJPY for example. We all know that pound is a very strong currency, yen is weak, the carry trade stuff is also very strong. So why does the pair simply not shoot up and keep going to 300 or 400 or whatever. The pair has a daily range of about 150 pips and so if the trend is so favorable for the longs, it should be able to reach 300 within 2-3 mnths but that never happens. Why?
The value of a currency depends on the underlying economy. The value of the pound depends on the British economy, the value of the yen depends on the Japanese economy etc. This is the reason why the value of the currency pairs change based on the announcement of various economic news pertaining to each country. Now lets assume that GJ pair shoots upto 300 within this month from its present price of 243. Now assume that a exporter in Britain exports a car part and gets paid say 1000 yen per hour of work put in. So today he would be making around 4 pounds per hour. Next month, when the GJ value increases to 300, he would be making less than 3.5 pounds per hour. If he puts in 100 hrs of work for every car part, it means that he loses 50 pounds on each part that he makes.
This is just one example of a single trader. I am sure that all of you understand that this is a very minute and lame example but this is just to show the effect of an uncorrected rise. So in the above situation, the trader faces huge losses and this is the situation for all exports to Japan from Britain. So the money got by Britain through its trade gets hit to a great extent and this immediately reflects on the British economy and you have losses, slowdown etc. in the next month. When this news releases, everyone understands that the economy is in a downtrend and the value of the pound goes down. On the other side, Japanese exports would get a huge boost as previously, for every pound that he got for his service, the manufacturer would get only 243 yen but now he would start getting 300 yen which would lead to a 20% increase in his profits and this would make the Japanese economy very very strong. This would also get reflected in the economic news of Japan and so next month, the realisation would arrive that British economy is weak and Japan economy is strong and so the price of the currency pair would then automatically correct itself to reflect this change.
This is what is happening to all the USD pairs over the past month. EU went upto 1.36 or 1.36 and GU went upto 2.0 due to excellent economic news from Europe and bad news from USA. Now due to this high change in the value, the British and euro economy could not sustain themselves as they dont get the same returns from the USA (monetarily) like they used to while USA got higher returns due to a cheaper dollar. So this month we see stronger economic news from USA and weaker ones from Europe and we see that the currency pairs then have started adjusting themselves.
Please understand that there are other factors involved like rates, inflation, bank intervention etc. but the above is essentially the basic idea why currency pairs restrict themselves to a specific range over a period of time.
Happy Trading!!
Today lets find out how come currency pairs always keep circling around the same price range and even if they move on to a larger value, it takes place over a period of 20-30 years and not much sooner. Lets take GBPJPY for example. We all know that pound is a very strong currency, yen is weak, the carry trade stuff is also very strong. So why does the pair simply not shoot up and keep going to 300 or 400 or whatever. The pair has a daily range of about 150 pips and so if the trend is so favorable for the longs, it should be able to reach 300 within 2-3 mnths but that never happens. Why?
The value of a currency depends on the underlying economy. The value of the pound depends on the British economy, the value of the yen depends on the Japanese economy etc. This is the reason why the value of the currency pairs change based on the announcement of various economic news pertaining to each country. Now lets assume that GJ pair shoots upto 300 within this month from its present price of 243. Now assume that a exporter in Britain exports a car part and gets paid say 1000 yen per hour of work put in. So today he would be making around 4 pounds per hour. Next month, when the GJ value increases to 300, he would be making less than 3.5 pounds per hour. If he puts in 100 hrs of work for every car part, it means that he loses 50 pounds on each part that he makes.
This is just one example of a single trader. I am sure that all of you understand that this is a very minute and lame example but this is just to show the effect of an uncorrected rise. So in the above situation, the trader faces huge losses and this is the situation for all exports to Japan from Britain. So the money got by Britain through its trade gets hit to a great extent and this immediately reflects on the British economy and you have losses, slowdown etc. in the next month. When this news releases, everyone understands that the economy is in a downtrend and the value of the pound goes down. On the other side, Japanese exports would get a huge boost as previously, for every pound that he got for his service, the manufacturer would get only 243 yen but now he would start getting 300 yen which would lead to a 20% increase in his profits and this would make the Japanese economy very very strong. This would also get reflected in the economic news of Japan and so next month, the realisation would arrive that British economy is weak and Japan economy is strong and so the price of the currency pair would then automatically correct itself to reflect this change.
This is what is happening to all the USD pairs over the past month. EU went upto 1.36 or 1.36 and GU went upto 2.0 due to excellent economic news from Europe and bad news from USA. Now due to this high change in the value, the British and euro economy could not sustain themselves as they dont get the same returns from the USA (monetarily) like they used to while USA got higher returns due to a cheaper dollar. So this month we see stronger economic news from USA and weaker ones from Europe and we see that the currency pairs then have started adjusting themselves.
Please understand that there are other factors involved like rates, inflation, bank intervention etc. but the above is essentially the basic idea why currency pairs restrict themselves to a specific range over a period of time.
Happy Trading!!
New Feature added to blog...
Hi All,
With growing number of visitors to the blog, i thought this would be a good time to add a new feature to this blog. You can see this new feature on the right sidebar where we have a chat box. All you have to do is enter ur nickname (it can be anything) and then enter a message for you to chat with me or anyone else on the blog. Please keep your messages as short as possible and your message can be about anything. It can be about what you feel is the trend or your entry point or a question to another user of this blog or a question to me. Whenever i visit my blog, i will surely answer any questions addressed to me. I thought this would be easier for the users than entering any comments for articles.
I really want to make this blog more interactive and so i thought this would be a good way of achieving that. Lets hope that this chat feature would be of good use to all of us.
I would also try and write down as many articles as possible to cater to the needs of our ever increasing audience.
Happy Trading!!
With growing number of visitors to the blog, i thought this would be a good time to add a new feature to this blog. You can see this new feature on the right sidebar where we have a chat box. All you have to do is enter ur nickname (it can be anything) and then enter a message for you to chat with me or anyone else on the blog. Please keep your messages as short as possible and your message can be about anything. It can be about what you feel is the trend or your entry point or a question to another user of this blog or a question to me. Whenever i visit my blog, i will surely answer any questions addressed to me. I thought this would be easier for the users than entering any comments for articles.
I really want to make this blog more interactive and so i thought this would be a good way of achieving that. Lets hope that this chat feature would be of good use to all of us.
I would also try and write down as many articles as possible to cater to the needs of our ever increasing audience.
Happy Trading!!
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