Follow Up With Abe!
By Mike Conlon | July 8, 2010
As a follow up to my original interview and due to overwhelming viewer response, Abe Cofnas has provided the answers to your questions. You can view that interview here. In addition and going forward, Abe has graciously agreed to provide forex trading blog with a weekly feature, giving us insight into his unique perspective accumulated through years of forex trading.
So I’d like to extend a warm welcome to Abe and look forward to his weekly feature.
QUESTION: HOW DO YOU SUGGEST TRADERS SCAN THE MARKET AS THEY START THEIR TRADING DAY?
The best approach is first to have a mind-set that realizes that there is a lot of volatility in forex and therefore it is important to get a top-down viewpoint of what is happening. So one of the first things to do is to use multiple time frames.
When you are looking at a currency pair, look at three time frames at once. I suggest a 4 hour, 15 minute, and 5 minute time frame. The example below shows this for the EURUSD.
(click chart to enlarge)
Now follow that and the 15 minute chart offers a lot more granularity. Of course we have swings down, but the prevailing sentiment from the 4 hour was up and this means that the trader should only look for buy situations.
QUESTION: WHAT ROLE DOES THE 5 MINUTE CHART PLAY?
The 5 minute chart acts like the local traffic guard. If you want to go long, then you need confirmation on the 5 minute chart.
QUESTION: ARE THESE THE ONLY TIME FRAMES ONE SHOULD USE?
The concept is 3 time frames. One can use a 2 hour, a 15 minute, and a 3 minute chart. The essential feature is to never only look at one time frame.
QUESTION: WHEN DO YOU GO COUNTER-TREND?
Counter-trend moves can make you money, but a starting trader should not go against the trend. It’s a numbers game and the trend is your friend because it can provide you with more winning trades if you go with it.
Having said that, if the 4 hour breaks down support- or, I will be flexible - the 2 hour breaks support, you can look to the 15 and 5 to confirm it. The 2 hour chart below shows support at 1.255. So if the EURUSD broke through this- even though the 4 hour chart is still not broken looking for a sell is legitimate.
QUESTION: WHAT ELSE IS GOOD TO LOOK AT ?
Definitely look at the Dollar Index (DXY). It provides a quick look at global sentiment. So make sure you’re trading WITH the sentiment
QUESTION: ARE THERE ANY OTHER GOOD INDICATORS YOU LOOK AT?
Let’s deal with that on the next blog.
Tags: blog, comments, course, currenc, currency, currency pair, data, dollar, dow, EUR, forex, forextrading, fx, Il, index, lot, market, money, pairs, sentiment, time, tip, trade, trader, trades, trend, uptrend, USD
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The Party’s Over!
By Mike Conlon | June 29, 2010
This morning we are seeing a slew of consumer confidence figures coming out around the globe which are lower but largely in line with expectations. The Euro zone debt crisis is continuing to weigh heavily on the markets, and a leading economic index in China had its smallest gain in nearly 5 months, signaling that the Chinese economy may be slowing down.
Later this morning we are expecting consumer confidence figures here in the US as well as housing price figures. These are expected to come in lower as well, as the removal of the home buying tax credit has caused demand to wane.
Overnight in New Zealand, building permits were lower, and the Japanese jobless rate increased to 5.2%, higher than expected.
This has all contributed to lower equities markets, with US stocks and commodities set to open lower as well. As a result, we are in risk-aversion mode this morning. Keep an eye out for the 10AM numbers, as they may be the stock market’s only chance to recover.
Aussie (AUD): The Aussie is lower as risk aversion is reducing demand for carry trades due to global slowdown concerns, particularly from China. In addition, the market is looking for the new PM to move quickly on the proposed mining tax, which is seen as “anti-business” and bad for the economy.
Kiwi (NZD): In addition to risk aversion, the Kiwi is lower as building permits declined 9.6%, the second decline in 3 months. The Chinese leading index decline is also affecting NZ, as a number of exports go to China as well.
Loonie (CAD): The Loonie is also lower on a classic risk-aversion day, as oil prices retreat on fears of a global slowdown. Tomorrow will bring the Canadian GDP figures which will show how solid recovery is north of the border.
Euro (EUR): The Euro is lower this morning, though higher against the commodity currencies. Fears of the debt crisis have resurfaced, and bank stress tests are to include bank exposure to sovereign debt risk. This is sure to uncover a land mine or two, and the market is fearful of the size and the scope. However, business confidence came in higher than expected as a lower valued Euro should encourage exports.
Pound (GBP): The Pound is lower as well on risk aversion, though it is still above 1.50 vs. USD. Mortgage approvals came in slightly lower than expected, but expect the Pound to fare better than the Euro as GDP figures are due out tomorrow.
Dollar (USD): The Dollar is catching a bid from risk-aversion and is higher against all but the Yen. Consumer confidence figures are due out at 10AM EST and they may be the stock market’s last hope for a turn-around today if the numbers are better than expected. Home price figures came in slightly better than expected, most likely due to the tax credit. Today looks ugly for stocks, which should mean continued dollar strength.
Yen (JPY): The Yen is higher as the rapid unwind of carry trades is driving demand for the Japanese currency despite the fact that industrial production and household spending fell. In addition, unemployment ticked higher to 5.2% vs. an expectation of 5% in a sign that recovery is clearly slowing down.
Well, we knew it was only a matter of time before this global charade was exposed as unsustainable and now the market is starting to realize that it may be time to pay the piper. Obama’s pleas at the G-20 fell on deaf ears, and governments outside of the US have decided that it’s better to cut bait than to try to continue to fish.
In other words, countries are trying to cut their losses and get back to economic health. The only way to do this by taking the “medicine” of financial austerity and debt reduction. This is going to be one heck of a hangover, as now the party may be finally over.
However, all is not lost and I am not trying to be a doomsday forecaster. There are definitely pockets of strength in our economy, including corporate America. All of the lay-offs of the past have allowed corporations to increase profitability, and many are trading at low multiples.
However, it is definitely time for people to wake up. The eventual fallout and backlash against our big-spending government will only bring about better policy in the future. Government, no matter what type of social engineering they try, CAN NOT control economic cycles. The longer they try to pro-long an unnatural order, the worse the pain will be.
Usually the “summer slowdown” takes effect, though this time it may be different. I expect there to be heightened volatility as the world navigates the treacherous waters of the global economy. Expect there to be highs and lows, as well as gains and set-backs.
There is no better time than RIGHT NOW to protect yourself from global economic conditions through the forex market! Don’t be one of the ones left standing when the music stops!
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, bank, cad, carr, carry trade, China, commodities, commodity, course, crisis, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, fear, financial, forex, forex market, free, fx, fxedu, gbp, home, Il, index, Japan, jpy, Kiwi, live, loonie, lower, Mike Conlon, new zealand, nzd, oil, pip, pound, practice, practice account, rate, RSI, ssi, stock, stocks, time, tip, trade, trades, unemployment, USD, Yen
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What is Chermany?
By Mike Conlon | March 18, 2010
Remember this word: Chermany. It is the new, hip lingo for speaking about China and Germany. What do these two have in common, you may ask? These are the top 2 largest exporters of manufactured goods in the world. As you might expect, this means that they have trade surpluses and thus are in positions of great strength on the world economic scene. Because of this, rightly or wrongly, Chermany feels like they can dictate terms to the rest of the world.
So it should come as no surprise that Germany is leading the charge to obstruct bailout plans to Greece in the drama that has been unfolding. In the latest act, Germany is saying Greece should seek economic aid from the IMF, and not the EU. This undermines previous efforts made to assure the marketplace that this situation is under control. As a result, mild risk aversion is the early-morning theme.
The other side to this new term is China. While I don’t focus on China too often as we can’t trade in their currency, their importance on the world stage cannot be understated. China has “pegged” their currency to the US dollar in an effort to keep it from floating freely in the market like almost every other currency out there. Many would say that this is blatant currency manipulation, and has been one of the major reasons why they have accrued such an economic surplus. Because they have been allowed to operate under these conditions for some time, their ill-gotten wealth has now emboldened them to continue with this policy, regardless of its impact on world economics. The US is now trying to turn up the heat on China, and whether or not anything comes of this remains to be seen. Stay tuned.
In currencies:
Aussie (AUD): The Aussie is lower this morning on risk aversion and on concerns that China will take steps to slow down their economy. Because China is a major importer of Australian raw materials, this could have an impact on the Aussie going forward.
Kiwi (NZD): The Kiwi is higher this morning, bucking risk aversion and quite frankly I’m not sure what’s going on here. They came out with Consumer Confidence figures in the overnight session, but I can’t get a good reading on whether or not those figures were significantly better or not. Regardless, the market seems to like the Kiwi, as it’s up across the board.
Loonie (CAD): The Loonie is slightly higher this morning, and near flat with Yen and the US dollar. They are down-playing concerns of Dollar/Loonie parity as this seems to be a foregone conclusion. There was some concern that the government may try to intervene, however this does not appear to be the case.
Euro (EUR): The Euro is lower today in response to German resistance to the Greek bailout. The rest of the EU thought they had measures in place, only to find out that Germany was not on board. Chancellor Merkel mentioned the other day that “expulsion” should be an option for countries that don’t comply with EU membership stipulations.
Pound (GBP): The Pound is lower this morning as good news that the budget deficit for February was less-than-expected was trumped by disappointing mortgage approvals. In addition, the political rhetoric is starting to heat up which is contributing to the fears of a “hung Parliament”.
Dollar (USD): The Dollar started the morning higher on risk aversion but now looks like it this may reverse after the CPI and initial jobless claims figures came out. As I mentioned yesterday with the PPI figures, today’s CPI figures show lower-than-expected gains which is basically buying time for the Fed to keep rates low for that “extended period” they love so much. As long as the Euro doesn’t implode, I expect risk-taking may occur by the end of the day.
Yen (JPY): Word today is that the measures the BOJ took yesterday in doubling the monetary easing program may have little effect on deflation. As I mentioned yesterday, just because the amount of money available for loan increases, does not mean it will be lent out. If demand decreases, then prices typically fall. We are seeing this exact same situation here in the US housing market.
The world economy is a cycle of “give and take”. What is starting to become apparent is that countries that benefit from low currency value whether through manipulation (China) or through inclusion in a monetary union (Germany) need to be wary that by effectively “cornering” the manufacturing market, they are setting up untenable situations that can only end badly.
It will be interesting to see if the market forces Chermany to take action, or if they try to “take their toys and go home”. Either way, world economic recovery hangs in the balance.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, Australia, buck, cad, China, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, fear, fed, free, fx, fxedu, gbp, home, housing market, Il, interest, intervene, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, money, news, nzd, practice, practice account, rate, setting, ssi, time, tip, trade, USD, Yen
Topics: What To Look At In The Market | 1 Comment »
GBP Still Strong!
By Mike Conlon | October 16, 2009
The British pound is still strong today, showing a little bit of follow through from yesterdays gains. Yesterday I called out a trade in GBP/AUD as a low risk opportunity based on some technical factors, despite the fact that the trade was “counter-trend”. Let’s see how its doing:
(click charts to enlarge)
As you can see, this trade is up about 169 pips from yesterdays entry price (1.7828-1.7659=169 pips). While you’re not going to be able to retire just yet LOL, this high probabilty set-up is showing some initial gains and looks promising going forward. To give you an idea of what this means, with just one lot, you would have made $169 if you were in this trade.
And the cost to get into this trade? Just $50 in margin. So in theory, you put up $50 to make $169. That’s pretty good coin! Now imagine what happens when you use the multiplier effect of leverage!
While its never a good idea to over-leverage your account, taking high probability trade set-ups can be extremely profitable if you know what you’re doing!
To learn about how to spot trade set-ups such as these, check out our currency trading courses here.
Want to test my calls in real time with a practice account of your own? Get started here.
Tags: account, AUD, blog, British, charts, course, currenc, currency, currency trading, forex, forextrading, fx, fxedu, gbp, idea, Il, lot, Mike Conlon, pip, pips, pound, practice, practice account, real time, spot, technical, tip, trade, trend
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Watch out for the U.K. rate decision this morning @ 7am EST!
By Sean Hyman | July 9, 2009
Rates are expected to be at .50%. Keep an eye out for any commentary about the BOE’s rate decision and how the market reacts to it. It comes out at 7am EST. Also look to see how the CAD Housing Starts come out this morning. Those are the two events to watch this morning. CAD Housing Starts come out at 8:15am EST today.
The yen was very strong yesterday as stocks fell. The yen is the number one defensive currency right now and the dollar is the “2nd best” defensive currency right now. This can be seen when you directly compare the USD and JPY against each other in the USD/JPY pair. You’ll notice that it has still gone down even though the dollar and yen have both risen against most every pair. Yet against each other, the yen has remained the stronger of the two when the market gets defensive. So shorting “yen pairs” is typically better right now when the stock market tanks and currencies go on the defensive.
Tags: blog, cad, currencies, currency, decision, dollar, dow, fxedu, Hyman, jpy, market, mywealth, pair, pairs, rate, rate decision, Sean, Sean Hyman, short, stock, stocks, tip, USD, Yen
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Why Currencies are in “Pairs”!
By Sean Hyman | July 7, 2009
You know, when I was in the stock market, you would just see one thing being traded and quoted (ex. IBM, Google, GE, etc.).
However, when I came over to the currency market, I noticed that currencies were in “pairs” rather than just individually quoted and I always wondered why they were that way.
I came to learn that really, everything is a paired trade when you think about it. For instance, when you buy Google’s stock, it’s really like GOOG/USD. Why? Because you’re betting that Google will go up much more than just holding dollars or depositing your dollars in a savings account and earning the meager interest that it earns.
So if you felt that Google’s stock would perform better than your dollars in a savings account, then you’re exchanging your dollars for Google’s stock since you think it would go up more over time than your dollars and the outright interest that they earn.
In the same way, you value a currency by comparing it to what you think another currency is worth. After all, the dollar could perform one way vs. the euro (EUR/USD) and a totally other way vs. the Japanese yen (USD/JPY).
It’s Simple: Put your Money into the “Best Currency vs. the Worst Currency”!
It’s entirely possible that the dollar could lose value when compared to the euro but gain value when compared to the yen, for instance.
So the dollar’s strength is measured by its strength against another currency….OR…I could say it this way. A currency’s strength is determined by how much of another currency that it could buy at the time. If it can buy more today than it could yesterday, then it’s stronger. If not, it’s weaker.
Therefore, in the “pairing game”, what you want to do is buy the absolutely strongest currency and pair it against the poorest performing currency. As I often say, “If I could rig a fight, I’d want to put the strongest fighter vs. the weakest fighter and place my money on the stronger fighter”. Well, that’s exactly what we’re doing in currencies.
Some traders determine the “strongest fighter” by looking to the charts to see how well a currency is performing (trending) vs. other major currencies. Yet other traders will look to see which country has the best fundamentals overall and which has the poorest.
Either way you determine this, it’s important that you do so. You need to have an opinion. Not only that, you need to have a “strong opinion” on the pair you choose. That way, it will help to keep you in the trade when the pair goes bobbing all around and your account equity temporarily jumps around all over the place.
Find out which “Currency Camp” describes you!
Right now, there are “two camps” out there battling it out. One is the camp that thinks that the deflation out there still will carry on and that the central banks and governments of the world can’t possibly pull us out of it anytime soon. Those traders are the ones that feel their “strongest currencies” are the dollar and yen vs. most other foreign currencies (especially higher yielding currencies that they feel have the most to move down in interest rates like
In other words, they’d be short the AUD/USD, AUD/JPY, NZD/USD and NZD/JPY pairs since they feel that the deflation will draw people to the dollar and yen and away from the “high yielders”.
The “other camp” is the one that thinks inflation is returning and that the global economy is on the mend. They feel that we are past the trough of the global recession and we’re working our way out back into expansionary/inflationary mode and away from deflation and an economic contraction.
These traders are buying the countries with the highest inflation rates (again, like
I say…You can count on governments to “print their way” out of a global recession causing inflation!
It will be a while before we see which side wins. Personally, the way I see the fundamental data tilting, it’s all tilting towards the latter crowd rather than the former crowd.
However, either way you feel, if you have an opinion about where the world is headed economically (inflationary or deflationary), then you have an opinion on which currency pairs to look towards.
Never pair “medium strength” players together though. Always, “rig the fight” by putting your strongest candidate against what you feel is your “worst candidate”. By doing this, you will have a pair or two that you feel the most strongly about and you will find that you hold up better when your P&L is bouncing around all over the place.
Tags: account, AUD, blog, currencies, currency, currency market, dollar, dow, EUR, Euro, fundamental, fx, gbp, Hyman, interest, interest rate, interest rates, jpy, money, nzd, pair, pairs, recession, Sean, Sean Hyman, ssi, tip, trade, trader, trend, USD, Yen
Topics: What To Look At In The Market | 1 Comment »
An RSI trick to get you more signals when the traditional settings just won’t do it!
By Sean Hyman | July 3, 2009
Many times, in stronger trends…the traditional RSI setting just won’t cut it (14 periods). It won’t even come close to the overbought/oversold levels of 30/70.
[B]However, if you tweak your RSI settings to where they are set to 9 periods…then you will find that the RSI gets wider swings which will trigger more RSI signals at or very close to the 30/70 levels when the 14 period didn’t even come close.[/B]
See my chart and you’ll see what I mean. Copy/Paste this link into a new browser and you’ll be able to see the chart. http://www.forextradingblog.com/wp-content/uploads/2009/07/rsi-14-9.JPG
[B]Note:[/B] In downtrends, it’s best to ONLY take sell signals for your entries. In an uptrend, it’s best to ONLY take buy signals for your entry signals.
I’ve circled many of the signals below that triggered on the 9 period RSI that didn’t trigger on the 14 period RSI setting. This would allow for a lot more potential trading opportunities on this chart with that one small “tweak”.
Try it out, mainly when your 14 period RSI isn’t generating enough signals often enough. See if you like it.
Sean Hyman
Tags: currency, dow, downtrend, forex, Hyman, lot, RSI, Sean, Sean Hyman, setting, time, tip, trading, trick, uptrend
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Medium Term Fundamental Trade: A Case for the Euro!
By Sean Hyman | April 27, 2009
I want to show you how to crawl into the mind of a fundamental trade. As an example, I’d like to show you a recent example of how I go about formulating a longer term fundamental view of the euro (EUR/USD). So let’s take a look below…
For the first time in a long time, I see the start of a fundamental shift for the Euro Zone. It’s not just one thing but actually there are six pieces to this pie as I see it. Let’s take a look at them for a moment.
The talk among the European central bankers is starting to change. For instance, over this past weekend, the ECB’s Wellink is talking about a “floor for the benchmark interest rate”. Others have stated that it may not be a wise move to take interest rates lower.
So for the first time in a while we’re seeing the European central bank members talking about halting the interest rate decreases. That’s a first step in halting the fall of the euro.
Also over this past weekend, the Group of Seven (G-7) nations got together and have released a statement that said, “Economic activity should begin to recover later this year”. Then they went on to say that, “Recent data suggests that the pace of decline in our economies has slowed and some signs of stabilization are emerging”.
This will give investors a sigh of relief and it will encourage them to “come back out of hiding” from within the dollar and yen and to inch back into beaten down currencies that have a huge chance for appreciation. The first place money usually runs to is the euro (nicknamed the anti-dollar). So if money leaves the dollar (and I think it is), then the first stop is the euro.
Now, the next changes that I’ve begun to notice are the recent changes in the sentiment indicators for the Euro Zone (particularly
For instance, the German ZEW economic sentiment indicator came in at -3.5 two months ago but was expected to come in at +1.8. However, it blew out those expectations by coming in at +13.
Another sentiment indicator complimented the ZEW. It’s called the German Ifo report and it is a survey that has to do with the business climate. Two months ago, it came in at 82.2. This past month, it was expected to inch fractionally higher to 82.4. Yet it blew by those expectations and came in at 83.7.
So with the Euro Zone being in such disarray and the sentiment numbers still coming in more bullish than expected, it becomes a huge vote of confidence going forward for the euro.
Then we come to the final pieces of the puzzle which are the recent improvements in both the manufacturing and services numbers for
What does the stabilization of commodities have to do with the euro? The EUR/USD pair is predominately driven by “dollar flows”. So as the dollar falls, the EUR/USD rises and vice versa. As commodities rise, the dollar tends to become weighed down. As commodities fall, it’s like the ankle weights are being taken off of it and it propels higher. So if commodities have completed their fall and they’ve based sideways, it’s only a matter of time before they turn upward and head higher once again. As that happens, the dollar will plummet and the euro will be one of the biggest beneficiaries of the slide off in the dollar.
Therefore, for these six reasons mentioned above, I believe that the euro has put in a floor around the 1.25 level to the dollar and that we will see it start to head higher in the months ahead.
For many, this will be a “hard pill to swallow”. After all, I hardly know of anyone out there talking about the euro going higher in the months ahead. Almost everyone is betting on the rise of the dollar in the months ahead because of how well it has done in the past year. However, the dynamics that blessed the dollar with a good year last year are starting to change….and my readers are tipped off to it ahead of the masses.
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Tags: bank, blog, central bank, commodities, currencies, data, dollar, dow, economic, EUR, Euro, Europe, falls, forex, forextrading, fundamental, index, interest, interest rate, interest rates, invest, investor, lower, money, mywealth, pair, Sean Hyman, time, tip, trade, USD, Yen, You Tube
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Swing Trade Idea produces 100+ pips!
By Sean Hyman | March 31, 2009
In times like this, when the swing trade works out so well, so fast….you may want to take part of your trade off of the table by closing 1/2 of your lots and moving your stop to breakeven. If you’re happy with the 115-125 pip gains thus far, then you could pull the trade off entirely. If you were long EUR/USD, you also collected a few pennies on your dresser to boot.
These pairs continue to rally, but are overbought in the very short term.
Sean Hyman
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Tags: CHF, EUR, fxedu, idea, index, lot, money, mywealth, pair, pip, Sean Hyman, time, tip, trade, USD, wealth, You Tube
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For the Rest of Your Investments…
By Sean Hyman | March 27, 2009
Tags: blog, ETF, idea, invest, money, mutual fund, Sean Hyman, stock, strategy, technique, time, tip, trade, trend, video, wealth, You Tube
Topics: What To Look At In The Market | 4 Comments »