FXstreet.com Live Sessions Archives

Using RSI in trading systems

Date: December 22nd, 2005 - 14:00GMT

Expert: Igor Belitsky, Analyst of FX-Dealer.com

Topics:

• General RSI trading rules
• Composition of RSI and Bollinger Bands
• Trading System example

Who Igor Belitsky?
Igor Belitskyis a specialist in applied mathematics and trading systems development. Since 1996 he has been working as a forex market analyst in a Moscow based financial company

Speech Material:

Using RSI in trading systems

1. General RSI trading rules
Relative Strength Index (RSI) is the most popular technical indicator. Below are 4 well-known RSI trading rules:

RSI levels of 70% and 30% (80% and 20%) are known as overbought/oversold levels. Buy signal generated when the market is oversold, sell signal generated when  the market is overbought. These levels are only working good inside range phase and produce losses during trend phase.

EMA often plays the role of support and resistance just the same as for the price itself. Buy signal generated when RSI rises above its EMA, sell signal generated when RSI drops below it's EMA. EMA is always lagged behind and often produce buy signal when up-trend is over.

Bullish divergence and buy signal occurs when price makes a new low which is not confirmed by RSI, bearish divergence and sell signal generated when price makes a new high while RSI fails to make a new high. The main drawback of divergences is that they are trying to predict trend reversals instead of trend-following signals.

Chart formations like trends, support/resistance, triangles, head and shoulders and so on are applied to RSI just the same way as they are applied for the price. Bad thing is that chart formations like trends and triangles are very subjective and could not be used in trading systems.

2. Composition of RSI and Bollinger Bands
We apply Bollinger Bands study to RSI indicator. Buy signal is triggered when RSI falls below Lower Bollinger Band. Sell signal is generated when RSI rises above Upper Bollinger Band. There are many signals against the trend so we need to use some trend filter. We add MACD indicator as trend filter. If MACD>0 the trend is upward, if MACD<0 the trend is down.

The main advantage of using RSI with Bollinger Bands is that it helps to catch trading signals inside trend phase while standard overbought/oversold levels are useless inside trend. We believe that RSI(Bollinger Bands) composition study is working good both in range and trend phase while 80% & 20% RSI levels are only suited for ranges.

3. Trading System example
Below is USD/CHF 240 minute chart with sample automatic trading system. Sell signal is generated every time RSI rises above Upper Bollinger Band while MACD<0. Buy signal is generated when RSI falls below Lowe Bollinger Band while MACD>0.

Click to enlarge :



Click to enlarge:

If we used RSI overbought/oversold levels on the chart above we would have missed sell signals inside down-trend as well as buy signals inside up-trend phase while composition of BOB(RSI) works fine.

Below is equity chart for this trading system based on target order = +400 pips and stop-loss order = -200 pips. There are 222 trades with total profit of 6040 pips. Spread of 5 points was included. We tested it on historical USD/CHF 240 minute chart with 2500 bars. This system is not perfect because maximum drawdown is more then 1500 points.

Click to enlarge:

Day and position trading strategies - forex trading lab III

Date: December 21, 2005 15:00GMT 10EST

Expert: Dr. S. Sivaraman M.Sc., Ph.D., CEO and owner of i-knowindices.com

Topics:

• Dr. Sivaraman has kindly agreed to host another session to solve any unanswered questions you may have about day trading techniques.
•    Plus on the day we will be hosting a LIVE FOREX TRADING LAB
•    Practice making LIVE Calls with the expert at your side to guide you in your thinking.
•    Trade in your own trading platform and take the live guidance - but you need to take your own decisions.

Who is Dr. S. Sivaraman M.Sc., Ph.D.?

Dr. Sivaraman has nine years experience in working with the Forex Market forecast, professional trading training Trading and Portfolio and forex fund Management. He provides professional Forex, Indices and commodity markets analyses using unique proprietary forecast algorithm.

Session Transcript:

In today’s Forex Trading Lab –we will analyze the day and position trading strategies and also about the expected forex market trend for the year 2006.

Forex trading needs to have the understanding and focus. The market facilitators are larger traders who intend to trap the traders and earn their profits. We have to develop strategies to be unhurt and to earn from the market. When we have limited equity we need to determine the amount of risk we can take at a given time. We also try to minimize the risk and maximize the profit. That becomes possible when we diversify and spread the risk. The reward cannot be achieved without the risk. Many believe more the risk, more the reward. But we need to change the situation as less risk and more reward condition – that becomes possible when we have the outlook to minimize the risk and maximize the reward.

So any day trading should commence with minimum lot size position. Let the initial profit be less…but if the going is good and if you maximize the profit using trailing stop the reward becomes more than the risk. We know we can use the hedging order instead of stop when the position is negative and use-trailing stop once the position makes profit. This way we don’t lose the positions from the stop hunt moves of the operators. So a good going position of day trading can be changed with the long-term perception as position trading. The position trading will be leisurely trading, less exposure in the market, need not be monitored all the time of the market and the hedging order will protect the position and limit the risk in a given time. Many think when we use hedging, frequently it might be hedged and we need to cut with loss. But we should develop the mind set of accept minimal loss and maximize the profit. So that the profit earned from minimal risk and minimal loss will give good trading confidence.

Market means swings and we will continue to see the small to big up and down swings or moves. We normally fail to differentiate the type of moves and get confused with very recent moves or similar past moves. But the moves are no way related to the earlier moves. The operators from time to time based on the adverse positions of the traders decide the moves. If all the traders are holding long positions in EURO and GBP after the negative US data, they have no other go than to drop EURO and GBP to hit their stops by creating another story. So assuming the stories are real the analysts give the long-term projections. But the long term moves of the markets are depending upon the mindset and the surprise quotient of the traders. When the traders don’t become bearish during the fall and continue to take positions during drop, the drop will be more to attract margin calls. If the traders quickly change the market perception form bearish to bullish and again to bearish with in a day during each session, then we will see wide range swings of 100-200 pips intra-day. When traders refuse to accept the change in the market direction, then the extended larger moves of 1000-2000 pips happen. So how the traders are going to act towards the market from time to time determine the trends and not the intentions of the larger players unless politically motivated and supported.

So How the heard of traders are going to perceive the market for the year 2006 and what could be the possible trap moves of the operators during that time frame….we will see during the live session…see you there….

Special session Kathy Lien's of FXCM FX outlook for 2006

Date: December 20, 2005 15:00GMT 10EST

Expert: Kathy Lien, Chief Currency Strategist at FXCM

Topics:

• Do not miss your opportunity to hear kathy's outlook for 2006
• Kathy Lien brings her view point of the forex market for coming year.

Who is Kathy Lien?

Kathy Lien is the Chief Currency Strategist at Forex Capital Markets. Kathy is responsible for providing research and analysis for DailyFX, including technical and fundamental research reports, market commentaries and trading strategies. A seasoned FX analyst and trader, prior to joining FXCM, Kathy was an Associate at JPMorgan Chase where she worked in Cross Markets and Foreign Exchange Trading. Kathy has vast experience within the interbank market using both technical and fundamental analysis to trade FX spot and options. She also has experience trading a number of products outside of FX, including interest rate derivatives, bonds, equities, and futures. She has a Bachelors degree in Finance from New York University. Kathy has written for Stocks and Commodities, CBS Market Watch, ActiveTrader, Futures and SFO Magazine. She is frequently quoted on Bloomberg and Reuters and has taught seminars across the country. She has also hosted trader chats on EliteTrader, eSignal, and FXStreet, sharing her expertise in both technical and fundamental analysis.

Session Summary:

DailyFX proudly releases our 2006 Fundamental and Technical Market Outlooks for the 7 Majors.

For the year ahead, see what are the:
- Major Trends
- Major Risks
- Who Faces Political Crises
- Which Central Banks will be Shifting Policy

How they impact the currency market

EUR/USD Click each currency pair to read more:

2005 has been a phenomenal year for the US dollar with 2004 losses now nothing more than a distant memory.   After having fallen eight percent on a trade weighted basis in 2004, the dollar ended up over ten percent this past year.  Like a boxer still standing tall in the ring after absorbing repeated blows, the dollar still managed to come out ahead despite soaring energy prices and devastating natural disasters The US economy proved to be much more resilient than even the most respected analysts from the biggest banks had predicted as the country quickly recovered from Hurricanes Katrina and Rita which temporarily drove oil prices above $70/bbl.

This helped the mighty greenback hold onto its title, but the win was far from a clean sweep as some currencies actually held their own against the dollar while others managed to outperform it.  Regardless, a number of major themes impacted the market throughout the year, all of which are still unfolding as we enter 2006

USD/JPY Click each currency pair to read more:

Interest rates and oil pushed the yen to multi-year lows against the dollar in 2005. At the beginning of May USD/JPY traded at 104.18, but by December, the pair hit 121.38 with the dollar rising a full 1700 points higher turning the yen into the worst performing major against the greenback in 2005.  The decline of the yen is a testament to the power of the carry trade as US rates rose in 2005 from 2.25% to 4.25% creating a 425 basis point interest rate differential between the dollar and the yen. The critical question facing traders in 2006 is whether this spread will continue to widen or will it be the end of the great dollar carry trade? Part of the answer will of course depend on the greenback. If the US economy continues to perform as well as it has in 2005, if the US housing market does not suffer any significant slowdown and if the Japanese and the Chinese continue to fund the US capital account by buying US Treasuries then USD/JPY may well continue to go higher.  However, the other part other part of the equation - the yen - could see some strength of its own.

GBP/USD Click each currency pair to read more:

GBPUSD Outlook

2005 has been a brutal year for the British pound, which fell 12% from its high of 1.9325 to its low of 1.7048.  The key reason for the pound’s weakness in the  past year was the fact that the Bank of England became one of the first major central banks to reverse  the tightening program that it began in 2003 by beginning to lower UK interest rates this year.  As one of the first central banks to raise rates 2 years ago, the pound's growing interest rate differential and solid fundamentals attracted a significant amount of speculative capital.  Such glorious days are now only a distant memory as those same speculators watched the pound's interest rate premium to the dollar shrink to a mere 25 basis points.  With 200 basis points of that differential taken off the table in 2005, the exodus of speculators has been the primary catalyst for the currency pair's collapse.  In the year ahead, the differential is expected to tip into the dollar's favor, which should weigh even more heavily on the GBPUSD.

USD/CHF  Click each currency pair to read more:

Who would have thought as 2005 was coming to a close that aside from the US, tiny, staid, Switzerland would emerge as the fastest growing economy among the majors in the second half of the year? Yet, low unemployment improving consumer sentiment and a lower franc, which spurred the growth of the nation’s export sector have all combined to produce stellar economic results. In the third quarter, Switzerland registered an impressive 4% annual growth rate in its GDP, while the county’s most important economic statistic - the KOF index of economic indicators - has risen to its highest level since 2000. The unit’s one weakness is its ultra low interest rate of only 100 basis points which has made the Swissie vulnerable to carry trade flows especially against the dollar whose own interest rates increased by 225 basis points this year. Nevertheless as a model of political stability and steady economic growth, the franc stands ready to perform well in 2006.
Political Peace

USD/CAD Click each currency pair to read more:

USDCAD Outlook

For most market participants 2005 could certainly be considered the year of the Big Dollar with the greenback rising against all of the majors. But for many traders the past year will also be known as the year of the Little Dollar (as the CAD is affectionately called in the currency market). Buoyed by a more than 50% rise in oil prices, the loonie was the only unit to have gained on the greenback amongst the world’s most liquid currencies. From its January 3rd value of 1.2074, the USD/CAD lost more than 500 points dropping to a low of 1.1441 by the end of 2005. The near continuous decline in the pair which began in earnest in the middle of the year was precipitated by a rise in crude as well as a tightening monetary policy that made the Bank of Canada one of the few major Central Banks willing to raise interest rates in 2005. As a result, the CAD became the new carry trade, setting all time highs against low-yielders like the Japanese yen, with the CAD/JPY cross rising nearly 2000 points from 85.40 at the beginning of the year to 105 by the end of 2005. Will the loonie strength continue? To a large extent the answer depends on the price of oil and the resolution of political turmoil within the country.  For now, however, these are heady times for a currency, which only a year ago bought 65 US cents for each Canadian dollar. At present exchange rates of nearly 87 US cents to the Canadian dollar, the loonie has put smiles on many faces across the Great White North

AUD/USD Click each currency pair to read more:

AUDUSD Outlook

In contrast to many of the other major currencies, the Australian Dollar has held up very well in the face of this past year’s strong US dollar rally.  Having increased interest rates once this year, the Reserve Bank of Australia (RBA) has been able to save their currency from facing a similarly dire fate as the British pound.  Yet in retrospect, interest rates alone were not the primary reason the Australian dollar only experienced a gradual decline against the US dollar.  Buoyant demand from China as well as soaring gold prices have both lent support to the currency and helped to offset some of the drag brought on by the resounding strength of the greenback throughout the past year.   However the Aussie has not been without its own problems.  The booming housing market finally started to sputter in 2004 and remained relatively weak throughout 2005, putting a big damper on consumer spending throughout the year.  Looking forward to the year ahead, there is a lot to watch out for when it comes to determining the fate of the Australian dollar.  To figure out where the currency may be headed next, we need to watch for the answers to three key questions

NZD/USD Click each currency pair to read more:

NZDUSD Outlook

The New Zealand dollar has ended the year virtually unchanged at approximately 0.7000 against the US dollar.  Throughout the year however, there was quite a bit of volatility, with the NZD/USD reaching a 22-year high of 0.7462 in March and a low of 0.6683 in July.  The wide ranges this past year primarily had to do with the tug of war between US rate hikes and New Zealand rate hikes.  Next to the US, the New Zealand Central Bank was the most aggressive monetary authority this year, having raised its interest rates three times.  In fact, New Zealand’s status as the highest yielding country in the developed world has only enhanced as its interest rates increased from 6.50% to 7.25%.  Even though the US has increased interest rates by 200bp, New Zealand’s interest rate differential against the US has only shrunk from 4% to 3%.  New Zealand has been far less consistent with its rate hike campaign than the US, therefore each rate hike or time period leading up to the rate hike has corresponded with a strong rally in the Kiwi.  However shortly afterwards, the currency would give back its gains and become driven by dollar factors instead as the market becomes uncertain about when it will see the next move.  In the year ahead, the Reserve Bank of New Zealand is expected to drop its hawkish bias, keep its interest rates on hold and move to a wait and see mode to determine whether there is a need to shift to an easing campaign.  Whether they do so or not will depend on the resilience of consumer spending and housing demand as well as the price of oil which if it remains subdued, would reduce inflation pressures and validate the RBNZ’s on-hold stance. 

Derek Frey's Weekly FX OutLook

Date: December 19, 2005 15:00GMT 10EST

Expert: Derek Frey, Head Trader of Odom & Frey Futures & Options

Topics:

• Do not miss your opportunity to be updated in your trading needs this week.
• Derek Frey brings his view point of the forex market for coming week.
• Discuss market reaction to news.
• Enjoy his currency pairs predictions.
• Must have Fxtading information for a successful trading week

Who is Derek Frey?

Derek Frey has been a futures trader since 1989 and is Head Trader and partner at Odom & Frey Futures & Options, a firm that specializes in high probability, defined risk option spread trades for the futures markets. Derek is also co-author of O&F News & Views, a weekly newsletter that is published by several publications and over 20 financial websites including FXStreet.com.

Session Summary:

Stocks:
Stocks continue to defy gravity. I have been waiting for a pull back now for some time and it continues drift sideways. While the market has not gone down it has not gone up much either. Lack of conviction from both camps seems to be the theme lately. Overall I have seen nothing to sway me from the bear camp so I must continue to advocate the buying or spreading of puts on the indexes. Yes I know this is what I wrote last week but nothing has changed for me.

Bonds:
Bonds did start to rally as I expected but we have yet to break out. Todays high at 133-10 was two ticks shy of the old high at 113-12. So I will be looking for a move above that point early this coming week to confirm the breakout is underway. I do expect this market to make it to at least 114 this week. Derek Frey

Metals:
What a difference a week makes! After peaking last Friday Metals spent this week pulling back. This should not have come to a surprise to any of our regular readers as I warned this was coming last week. This is not the end of the rally but rather a pause before the next leg up. Look for Gold to stabilize above $500 and silver to stabilize above 8.50. I am expecting silver to lead the charge back up and do not expect to find much resistance until we get above 950. I recommend a bull silver trade this week. If you would like to see it send me an email and I will be happy to send you a copy. Copper continues to be propped up buy strike fears but I continue to expect a sharp fall in this market in the near term. Bid ask spreads on the put side in copper have been very wide which means nobody wants to take the other side of a put right now...this tells me that the floor traders are worried about a drop as well.

Grains:
Grains struggled a little this week but did manage to finish the week rather strongly. I continue to be bullish and am now long Corn, Wheat , and Bean Oil. Of the three I think wheat will see the most movement over the longer haul. Oats had a breakdown and as I have been saying they tend to lead the pack so do not be surprised by a breakdown next week. If we do go down I do expect previous support levels to hold, and I would buy the dip if we get one. Overall though grains are back in play and should no longer be ignored.

Meats:
The Live Cattle market responded without much fanfare to the resumption of imports to Japan that began this week. This market is still suffering from an overbought environment and is struggling to keep the Bull going even with the reopening of a serious demand corner for the industry. While Live Cattle for the most part traded within the upper portion of its recent range it failed to follow through after taking a peek at new highs on two occasions. I'm looking for this market to retreat to the lower end of the trading range before making another stab at this breakout to the upside.

The piggies headed south this week as seasonal demand begins to soften and both the Hogs and Bellies finally broke out of their long established consolidation periods. Getting short at these prices should still be a smart play.

EUR/USD: Well my 1-2-3 bottom was confirmed and we did see a sharp move above 120. Next target is 122, this point could prove to be formidable resistance in the near term so do not be surprised to stall as we approach that point.

USD/CHF: We did get the move below 130 that I have been waiting for but I am still not convinced that this market is really wanting to break down. For now i am bearish with tight stops but not very enthusiastic about this market. Stand aside if not already in

GBP/USD: The Pound touched 178 this week and continues to look strong. There is minor resistance at 179 but I expect the market to push right through it this coming week.

USD/JPY: Well we tested 118 and fell right through it. This market was clearly overbought as i mentioned last week. We could fall all the way to 112 before finding any real support. But near term my first target is 114. Minor support there too but not expected to hold.

AUD/USD: The Ausi made a stab at 76 but then fell back quite a bit. This market also lacks conviction at this time and I will be spending my trading in other markets this week.

USD/CAD: This market spent the first half of the week moving lower only to get a late rally. Don't be fooled by this dead cat bounce. Look for a move back below 115 this coming week.

USD/MXN: The short squeeze continues and I will continue to watch from the sidelines.

'Strategy 10 Revised and Updated'

Date: December 15, 2005 15:00GMT 10EST

Expert: Rob Booker, Independent Currency Trader of www.Robbooker.com

Topics:

• Conservative Profits, Compounded Gains
• Turning $10k in to $100k
• Does Leverage Matter?
• Does Your Risk:Reward Ration Measure Up?

Who is Rob Booker? Rob Booker is an active proprietary trader, money manager and forex educator. Mr. Booker has trained hundreds of forex traders around the world, assisting them with developing their own trading systems, but more importantly, Mr. Booker focuses on helping traders deal with the mental, psychological, and discipline issues related to trading. Mr. Booker has authored Strategy:10, one of the most popular electronic books on currency trading, which has been downloaded over 100,000 times. He has also written The Currency Trader's Handbook, to be released in early 2006. Mr. Booker avidly employs technical analysis in his search for trading opportunities.
Read Rob's blog at: http://www.piptopia.com

Click to read an extract of the new book:

Scalping vs. Swing/Position Trading FX

Date: December 14, 2005 16:00GMT 11EST
Expert: David Floyd, Aspen Trading Group, President

• - Swing/Position Trading FX
• - My favorite time frames
• - Dollar Index (DXC) as a lead indicator
• - Basic analysis techniques
• - Correlations to other asset classes
• - Stop-losses and price projections

Who is David Floyd?

Dave Floyd has been a professional trader since 1994. He got his start in the early days of upstairs electronic trading of the equity markets, which he still does to this day. However, recognizing that asset management and research distribution to clients was not viable for that time frame of trading, his began to focus on the FX market in 2001-2002, recognizing that his existing skill set as a trader was transferable. He now provides FX research and actionable trade ideas to clients worldwide as well as asset management services. He and his company, Aspen Trading Group, are based in Bend, OR.

Powerpoint Presentation: Click to enlarge!

Technical Viewpoint of the EUR/USD

Date: December 13, 2005 15:00GMT 10EST
Expert: Justin Strausbaugh, Currency Analyst of CMC Markets

Topics:

• In-depth analysis of the key/support resistance levels.

Who is Justin Strausbaugh?

Justin Strausbaugh serves as the in-house Analyst at CMC Markets in New York. CMC Markets was established in 1989 and has evolved into a market leader in real time Internet trading. After launching the world's first real-time Internet Foreign Exchange trading platform in 1996 the firm has evolved and now services clients in over 100 countries, offering them real-time internet trading in thousands of products.

Chart 1:  3 month daily chart

Chart 2:  1 year daily chart

Derek Frey's Weekly FX OutLook

Date: December 12, 2005 15:00GMT 10EST
Expert: Derek Frey, Head Trader of Odom and Frey Futures & Options

Topics:  

• Do not miss your opportunity to be updated in your trading needs this week.  
• Derek Frey brings his view point of the forex market for coming week.  
• Discuss market reaction to news.
• Enjoy his currency pairs predictions.  
• Must have Fxtading information for a succesful trading week

Who is Derek Frey?
Derek Frey has been a futures trader since 1989 and is Head Trader and partner at Odom & Frey Futures & Options, a firm that specializes in high probability, defined risk option spread trades for the futures markets. Derek is also co-author of O&F News & Views, a weekly newsletter that is published by several publications and over 20 financial websites including FXStreet.com.

Views and thoughts on the coming week:

EUR/USD: The Euro continued to stabilize this week and I believe it is setting up for a move back above 120.00. If you notice there is a 1-2-3 bottom formation being formed at this time. A move above 119.02 will confirm this. Buy stops above 119 are a good way to catch this next move if you are not already on board from last weeks recommendation.

USD/CHF: This market is trying to break down below 130 but so far has not been able to on a closing basis. I am slowly becoming a bear of this market but will wait for a decisive move below 130 before jumping on board.

GBP/USD: Looks like my call for a new low was wrong. This market seems to really be getting some legs and I now expect to see 178 taken out this week.

USD/JPY: After briefly pushing through 121 we are now beginning to see a stall. Like I said last week this market is very overbought and needs to at the very least consolidate recent gains if not give some of them back. Expect some downward pressure this week as a test of support at 118 is not out of the question.

AUD/USD: The Ausi is trying to make it way back above 76 and that is still my target but the pace is very slow.

USD/CAD: My 115.88 level was taken out this week. I expect to see this market really break down this coming week so longs be warned and shorts get ready! This market could find itself making new lows all week.

USD/MXN: Wow can you say shakeout. The peso had been selling off earlier in the seek only to rally for the ladder half of the week. I was stopped out of my shorts and for now will stand aside. Derek Frey 12-09-05

FXCM live FX weekly Analysis

Date: December 9, 2005 14:00GMT 9 EST

Expert: Richard Lee, FXCM Currency Analyst

Topics:

 
• Do not miss your opportunity to be updated in your trading needs this week.
 
• Richard Lee brings his view point of the forex market for coming week.
 
• Discuss market reaction to news.
 
• Enjoy his currency pairs predictions.
 
• Must have Fxtading information for a succesful trading week

Who is Richard Lee?
Richard Lee is a Currency Strategist at Forex Capital Markets. Employing both fundamental models and technical analysis applications, Richard contributes regularly to DailyFX, Yahoo Finance and Comtex. Prior to joining the research team, Richard was one of the senior instructors for the FX Power Course, teaching thousands of traders the basics of currency trading, technical analysis and how to implement trading strategies. He has extensive experience in trading the spot currency markets, options and futures. Richard previously traded FX, equity and equity derivatives for a private equity consortium prior to joining FXCM. He holds a BA in Economics as well as a BS in French with an emphasis in International Business from the Pennsylvania State University

Speech Material:

Market Reaction to News:
Little change in Dollar action against most majors for the week with a lot of trader focus centered on central bank announcements.  Bank of England stayed, Europe issued further suggestions of future tightening and New Zealand raised in spite of the major currency taking a beating.  In addition, economic data made a solid showing for the world's top two industrialized nations.

Key support and resistance for major markets: Are we at a top for the USDJPY?  Will EURUSD breakout of the tight range provided by support at 1.1650 and resistance at 1.1850?

Insight on the week in review and the week to come: All eyes are on next week's U.S. trade balance report.  The question remains, will global investors remain interested now that the Federal Reserve looks to be nearing the end of its tightening cycle?  In addition, do inflationary pressures persist in the U.K. economy?

Currencies/Economic Indicators: Euro- Traders took to recent suggestions by Chief Economists Otmar Issing that further interest rate hikes will be applied in the event inflation expands.  German factory orders also rise lending some bullish favoritism to the euro single currency.

Dollar- Productivity grows in the U.S., ultimately confirming previously nascent signs of expansion.  However, inflation remains tepid leading some to question the continuance of current rate hikes.

Pound- Bank of England retained it 4.5 percent repurchase rate, opting not to cut benchmarks as inflation remains a concern in the near term

Yen- BOJ Governor Fukui hints at a near term end to loose monetary policy prompting some to initiate long yen positions.  In mid week action, household spending remains healthy as the Nikkei benchmark makes a stride to 35 percent gains on the year.

How to trade the NEWS?

Date: December 8, 2005 15:00GMT 10EST

Expert: Abe Cofnas, Forex Instructor of Online Trading Academy

Topics:

• Currency pairs move in response to important economic reports scheduled in advance.
• What is the best strategies for trading the news?
• How to spot news trades.
• How to know which ones are important.
• Technical Analysis before a news report.
• Trading Tactics

Who is Abe Cofnas?
Abe Cofnas has spent over a decade as an equity broker, futures trader, and technical analysis instructor. Abe was one of the first professional trainers in the world to provide web-based interactive training exclusively on Forex trading. Since 2001, Abe's Forex Trader column in Futures Magazine has been a mainstay of the publication, providing innovative observations and educational tips on Forex trading to a world readership of over 65,000 traders. You'll enjoy learning Forex from this master!

Speech Material:

BEST TIME TO TRADE IS AROUND NEWS REPORTS

Even though the Forex market is a 24/7 duration, the question often arises as to When is the best time to trade.    A very good answer to this is you trade when The pattern appears that offers a high probable trade.   Using this criteria, one of The best times to trade is when an economic news report comes out.

Click here to enlarge:

Allow the market to demonstrate where sentiment is at.  Before the news, the market Hesitates and forms a sideways action.  When the news comes out, the market reacts. If there is surprise the movement will be strong.   When the results are not surprising The move may be very small.

Lets’s explore some key examples.

Let us see the example. Click to enlarge:

EURUSD REACTION PATTERN ON 911

RETRACEMENT IN A MONTH  Let’s see these simple examples:

Click to enlarge:

A KEY CONCEPT IN TRADING NEWS OF ANY KIND IS REACTION AND THEN DIFFUSION OF THAT REACTION KEY CONCEPT-  DON’T PREDICT THE RESULT.   YOU NEVER KNOW WHEN YOUR SURPRISED AND IF YOU ARE ON THE WRONG SIDE YOUR IN TROUBLE!

HERE IS AN EXAMPLE OF A BIG SURPRISE

Click to enlarge:


HERE IS AN EXAMPLE OF NO SURPRISE AND THEREFORE LITTLE REACTION

Click to enlarge:


RULE OF NEWS TRADING-  LET THE MOVE HAPPEN AND TRADE THE REACTION

Click to enlarge:


EXAMPLE OF FAILURE TO RETRACE

Click to enlarge:


KEY PRINCIPLE IS LET THE MARKET REACT AND THEN FORM TRADABLE PATTERNS FOR YOUR ENTRY YOU HAVE TIME TO PICK AN OPTIMAL ENTRY

HOW PRECISE CAN YOU BE? IN NEWS TRADING YOU CAN USE 5 MIN AND EVEN 1 MIN PATTERNS!

Click to enlarge:

CONCLUSION

LET THE NEWS HAPPEN – DON’T TRADE BEFORE IT AFTER THE NEWS OCCURS,  DON’T CHASE THE TRADE, LET THE PATTERN EMERGE