InterTrader Blog

Trading webinars this August from InterTrader.com

2011-07-26T13:15:00.001+01:00

This summer InterTrader.com continue their popular webinar programme which covers all aspects of spread betting and online trading from beginner to professional. Our informative educational webinars are complemented by our live trading sessions where your host and professional trader Steve Ruffley interprets the figures as they are released and trades live during the session talking through the market movements.

Dates for the webinars in August:

· Thursday 04/08/2011, 8.00pm - Introduction to Financial Spread Betting

· Friday 05/08/2011, 1.00pm - Live Trading Session: Non Farm Payroll

· Tuesday 09/08/2011, 12.30pm - Introduction to Technical Analysis

· Thursday 11/08/2011, 8.00pm - Trading the News

· Friday 12/08/2011, 1.00pm - Live Trading Session: US Retail Sales

· Tuesday 16/08/2011, 12.30pm - Channel Trading

· Thursday 18/08/2011, 8.00pm - Introduction to the energy markets & Oil Trading

· Tuesday 23/08/2011, 12.30pm - Trading Psychology

· Tuesday 23/08/2011, 8.00pm - Poker player to Financial trader

· Thursday 25/08/2011, 8.00pm - Money Management

· Tuesday 30/08/2011, 12.30pm - Trading in Probabilities

To register for any of these events, please go to https://intertrader.omnovia.com/webcasts

https://intertrader.omnovia.com/webcasts

The webinars will be hosted by Steve Ruffley who is a career trader with over 7 year’s experience within the trading arena. He began his career with PWC on their IFA graduate scheme. He then went on to become a professional Intra-day trader with Marex and then a self-backed trader at Schneider’s; he also has experience with risk managing a large floor of traders at Refco.

Spread betting and CFD trading carry a high level of risk and you can lose more than your initial deposit so you should ensure these trading products meet your investment objectives and if necessary seek independent advice.

A sigh of Relief

2011-07-25T14:20:00.002+01:00

Dean Peters-Wright

Senior Analyst

fxKnight.com

Although Europe is not out of the woods yet, at least there is some consensus about the navigation in which to get there. The markets have been rallying this morning with the news that authorities have finally come to an agreement in how best to deal with the Greek crises satisfying previous concerns. Even the bonds markets have been celebrating as yields have fallen throughout the Eurozone including Spain, Italy, Ireland, Portugal and Greece. The Greek 2 year bond yield in particular has dropped to 27 per cent and although still significantly high, this is a decrease from a high of around 39 per cent at the start of the week.

There have been significant compromises most notably by the ECB who have conceded on accepting Greek collateral if the EFSF guarantees the loans. The likely scenario is that the bailout will now be likely seen as a selective default by agencies. Private bond holders will be involved for the first time to contribute to a target of €37bn in addition to the new €109bn bailout fund.

A sigh of relief? For the time being, yes. The key is that a solution has been found to satisfy the parties involved and the idea being that until Greece is able to financially stand on its own two feet again, it will be supported by Europe. There will be relief also felt by Ireland and Portugal as well as Greece as the rate in which they have to pay back their own bailout fund will be cut to around 3.5% which were previously around 5.5%.

Greece still has a long way to go and most likely will still have a debt to GDP ratio that will be unsustainable and will have to be addressed again in the future. At least for now there is a light at the end of the tunnel although there could be some delay in getting there.

CFD trading and spread betting carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors. Ensure you fully understand the risks involved and seek independent advice if necessary. These products are only intended for people who are over 18.

US Debt Ceiling and its Impact on FX and Stock Markets

2011-07-21T13:20:00.000+01:00

The US Federal Government spent more than it earned virtually from its inception. The first recorded deficit budget that had to be financed by a loan was that of January 1791.

Since then, government spending has consistently been more than government income, although there were relatively short periods during which income exceeded expenditure.

When the government spends more than it earns, it has to borrow the difference. In the US, this is done through the issue of Treasury Bills. Since the 1960s, the percentage of US Treasury Bills held by foreign countries has been steadily increasing. At the moment the biggest buyers of US Treasury Bills are China, Japan, and the United Kingdom.

Ceiling

Article 1 Section 8 of the US Constitution has put Congress in charge of managing public debt. Initially Congress had to authorise every issue of Treasury bills separately, but in 1917 it decided to simply implement a debt ceiling. As long as Government debt does not exceed this limit, approval from Congress is not necessary.

US Government Debt Crisis

Over the years US deficit spending, often as the result of wars such as the American Civil War, WWI, WW2 and lately the invasion of Iraq and Afghanistan, has steadily pushed up the level of Government debt in that country.

When this debt level reaches a point where it approaches the debt ceiling, Congress has to authorise an increase in the ceiling. President Obama is now ( July 2011) asking for a $2 trillion increase in this ceiling, which will only be sufficient to ensure the US Government can keep on functioning until the end of 2012.

When the politicians controlling the US Congress cannot come to a decision about increasing the debt ceiling, it raises the risk of the US Government being unable to meet its obligations. In this case, welfare payments or other Government programmes might have to be stopped.

Short Term Effects on FX and Stock Markets

When the US Government ends up in a position where its lending approaches the debt ceiling, it can only roll over existing debt – it cannot issue new Treasury bills. What happens next is usually that the demand for these bills exceeds supply, causing interest rates on them to drop.

As government expenditure comes closer to the debt ceiling, and fears of an impasse start to grow more intense, the stock markets are often negatively affected – unless there are of course other factors working in mitigation of this.

Such a situation also puts downward pressure on the US dollar, which could once again be mitigated by other factors.

Relief

Once the politicians agree on increasing the debt ceiling, the stock markets and USD FX markets normally react favourably – even though this might be short-lived. Interest rates on Treasury bills usually start increasing again.

Exploiting the Situation

An astute trader could cash in on this situation by going long on the USD or a stock index such as the S&P 500 before an agreement on the debt ceiling is reached. There are, however, risks involved: A prolonged stalemate could have unforeseen consequences that might send markets into a downward spiral from which they could only emerge after a prolonged period of time.

Decision time with Greece

2011-06-30T09:26:00.002+01:00

Dean Peters-Wright

Senior Analyst

fxKnight.com

There is a species of shark that distinguishes itself from the rest known as obligate ram ventilators. The distinguishing feature of these sharks is very interesting. Through evolution, they have lost their ability to pump oxygen through their gills as they have evolved a more efficient way of taking in the oxygenated water through their mouths and flowing through their gills just by moving through the water. However, this means that if they encounter an obstacle, they must head in a different direction to avoid asphyxiation. In short, if they stop swimming, they die.

Have I too much time on my hands? Well sometimes yes; there are only so many documentaries about, well …you can guess. However, the parallel should be obvious as we head out of the worst recession to hit the global markets, into the week that should see a decision being made regarding the austerity measures for Greece; if Greece stops swimming it will share the same fate.

Greece needs money. However, we have all known a ‘friend’ who we have a lot of sympathy for, who has gone through a bad time, made a few wrong decisions and we have said “I feel so sorry for you, I’m here if you ever need to talk”, knowing full well that the one thing he is really hoping for is that you put your hand in your pocket to help him get through the week. Only we won’t, because we are concerned that we’ll never see that money again.

So what do we have here? In order to bail out Greece, that money has to come from somewhere, in this instance the ECB. Governments need money and so interest rates will rise. The reason interest rates will rise is because they will have to borrow money at a higher risk premium because no one will feel as secure in buying government bonds. In order to pay for these higher premiums, governments will have to raise the money by doing what they do best…raising tax revenue. In the face of slow economic growth, the ripple effect will reach out to everyone as wages are rising more slowly and disposable income is dwindling. Without that income being pumped into the economy we find ourselves in a vicious circle which will not be helped by increasing taxes. However, governments cannot print any more money because that would reduce the value of their bonds further and hence not be able to raise money by selling them which leaves them little choice.

So why lend to Greece? Why do we care?

We care because it will affect the very foundations of the EU and if Greece is bailed out, then there is only one place that money is coming from and that is the tax revenue by every member nation.

If Greece is allowed to default then the results could be catastrophic. Not least because the euro would fall in value, strengthening the value of other currencies against it which would have an effect on imports into the euro zone as they would become more unaffordable to buy. This would also then have the knock on effect of stifling growth by exporting nations into the European zone.

In order to secure the necessary funding for a bailout, Greece has to provide the necessary budget deficit and this will only be provided with an increase in tax revenue. To further complicate this, if investors pull their capital out of Greek banks, this could cause a bank run leading to a collapse in credit and hence another credit crunch and as we have seen, credit crunches have an uncanny way of spreading, in this case, to other vulnerable European nations. In short this is everyone’s problem.

We shall see what will be decided, however if there is one sure thing on the table it’s that if the Euro has any hope of securing a credible future on the world stage, it has to survive.

Keeping swimming!

Equities Trading Strategy - The Ichimoku Kinko Hyo

2011-05-19T15:17:00.000+01:00

Equities Trading Strategy

Introduction

The Ichimoku Kinko Hyo is a highly versatile trading indicator. In fact it is a set of indicators that gives traders a complete overview of the market. It was developed in the previous century by a Japanese journalist by the name of Goichi Hosada. He worked on it for more than two decades to further refine it and later published his findings in a 1959 book.

It is still not widely known in the West, although its popularity is on the rise. In Japan it’s hard to find a trading room without an Ichimoku Kinko Hyo chart somewhere on a screen or against a wall.

The trading strategy for equities we set out below uses the Ichimoku chart in Fig. 5.17. The reason for this is that the strategy is very much based on trend following, which is what the Ichimoku was developed for in the first place.

Strategy

In Fig. 5.17 you will see a graph depicting the daily price of the DAX from April 2010 until May 2011. During this period the price moved gradually upwards, then went through a major correction but still closed more than 1 000 points above its closing price on the 19^thof April last year.

If we followed the simple trading strategy below, we would have captured most of the upswing and made a very nice profit.

First requirement – The price must be above the Ichimoku Kinko Hyo cloud before a bull market is indicated.

Requirement B – The green Chinkou Span line must be above the price 26 periods ago. The Chinkou Span is the current price plotted 26 days in the past. Since the Ichimoku is in the first instance a trend indicator, this is simply a visual way of immediately showing us that the current price is higher than the price 26 days ago, indicating a bull market.

Requirement C – The price must be above the red Tenkan-Sen line. The Tenkan-Sen depicts the average of the high and low prices for the past 9 periods and, as such, is similar to a short-term average. If the price moves above this line, it simply indicates that the longer term bull run is confirmed by a short-term upturn in the price.

Requirement D – The red Tenkan-Sen line must be above the blue Kijun-Sen line. The Kijun-Sen is the average of the highest high and the lowest low for the past 26 periods. It is therefore a longer term average. When the shorter term Tenkan-Sen moves above the longer-term Kijun-Sen it therefore acts as short-term confirmation of the longer term bull market.

For a short position, the requirements should of course be reversed: the price has to be below the cloud, the Chinkou Span must be below the price 26 periods ago, the price must be below the red Tenkan-Sen, and the Tenkan-Sen must be below the Kijun-Sen.

Practical Application

Returning to Fig. 5.17 we see that at point A1 the first three requirements are met. The price has just moved out of the cloud, the green Chinkou Span line is above the price 26 periods ago and the price is also above the red Tenkan-Sen short-term average.

The last requirement, that the red Tenkan-Sen line must be above the blue Kijun-Sen, has not been met yet. In this particular case it would have been worked out well if you did not wait for this to happen, but it might also have been otherwise.

When the red Tenkan-Sen lines moves above the blue Kijun-Sen at point A2 in Fig. 5.17, we have received another short-term confirmation of the longer term bull market. Going long at this point would have given us a nice profit of several hundred points, depending on what we used as a stop loss point.

Stop Loss

Using the red Tenkan-Sen Line as a stop loss is very conservative and would have kicked you out of an otherwise profitable trade several times. The blue Kijun-Sen would have been a better option. It would have kicked you out of the trade on the 30^th of November and again on the 10^th of January, only to enter again when the price returned above the level of the Tenkan-Sen. Eventually this strategy would have become erratic towards the end of February/beginning of March, with several false exits and entries before the price finally dropped back into the cloud.

The best option would have been to use the cloud itself as an exit strategy – in other words exit the trade the moment the price drops back into the cloud. This would have given us the biggest profit and the lowest number of false entries/exits.

Conclusion

At Point B all four requirements above were again met – this time for a short trade, but there wasn’t much profit in that particular trade. An early exit, e.g. the red Tenkan-Sen, would have worked best in this instance.

At point C all four requirements for a bull market were once again met. The price subsequently moved up just over 200 points, but has now retracted to a level below both the Kijun-Sen and the Tenkan-Sen.

A cautious trader will wait for a continuation signal, such as the price moving above the red Tenkan-Sen again, before entering a long position. If the price moves down further and enters the cloud, wait for the requirements for a short position set out above to be met.

Fig 5.17

Don't forget to register for our Trading the News webinar 19/05/2011

2011-05-18T15:04:00.000+01:00

This Thursday we will be hosting the InterTrader.com Trading the News webinar at 8pm BST.

Using the news and economic events to make trading decisions is just as important

as trading from charts. In this session you will learn:

- Introduction to economic calendar events

- Understanding the different events and their potential impact on the market

- Planning your trade

- Review different the 3 different techniques

- Summary

- Q&A

Upcoming webinars from InterTrader.com

2011-05-12T12:06:00.000+01:00

InterTrader are happy to announce the dates of their upcoming webinars which cover all facets of online trading from the basics of financial markets to in depth technical analysis.

Dates for the webinars are:

Thursday 12^th May - Introduction to Financial spread betting

Tuesday 17^th May - Introduction to Technical analysis

Thursday 19^th May - Trading the news

Tuesday 24^th May - Channel trading

Thursday 26^th May - Introduction to the energy markets – special focus on oil

More dates will be released in due course and places must be booked on https://intertrader.omnovia.com/webcasts

The webinars will be hosted by Steve Ruffley who is a career trader with over 7 years experience within the trading arena. He began his career with PWC on their IFA graduate scheme. He then went on to become a professional Intra-day trader with Marex and then a self backed trader at Schneider’s, he also has experience with risk managing a large floor of traders at Refco.

Introduction to Financial spread betting

12/05/2011 8pm BST

This session will cover the following topics

- Why Spread betting

- Spread betting Vs traditional trading

- Type of bets

- Spread betting example

- Introduction to financial markets to include:

Equities, Indices, Forex and Commodities

- Q&A, giving you an opportunity to ask Steve about any of the points he has covered.

Introduction to Technical analysis

17/05/2011 8pm BST

Part I

- What is Technical analysis

- Charts

- Trends

- Support & resistance

Part II

Trading central provide techncial analysis and signals for a large varitaty of instruments. In this session we will teach you how to operate the terminal and customize it to your own needs. Trading central is a great decision support system if used correctly. This session is for advanced traders who are experiened in technical analysis and are looking to complement and benchmark their own analysis.

Trading the news

19/05/2011 8pm BST

Using the news and economic events to make trading decisions is just as important

as trading from charts. In this session you will learn:

- Introduction to economic calendar events

- Understanding the different events and their potential impact on the market

- Planning your trade

- Review different the 3 different techniques

- Summary

- Q&A

Channel trading

24/05/2011 8pm BST

In this session we will learn how to identify and trade price channels. The seminar will cover:

- Type of channels

- How to plot a channel

- building your own channel strategy

- Capital management

- Advanced stops and limit orders

- Summary

- Q&A

Introduction to the energy markets - special focus on Oil

26/05/2011 8pm BST

In the seminar you will learn about:

- Oil production and consumption

- Types of oil, where and how it's traded

- How the real world affects oil prices

We will also be reviewing the following trading strategies :

- Economic calendar trading

- WTI-BRENT arb

- Brent crack

Medium to Long Term Technical Analysis of Gold

2011-05-12T12:03:00.000+01:00

Gold has technically been in a bull run ever since it broke free of the Ichimoku Kinko Hyo (see fig 5.11) in mid-February. There was a relatively large correction at the beginning of March – enough to send the price below the blue Kijun Sen medium term average. The price subsequently recovered and ended at a new high of 1562.05 on the 29^th of April.

On the 2^nd of May it briefly touched a high of 1574.95 before starting to decline. It dropped as low as 1462.25 on the 5^th of May before recovering somewhat. At the time of writing, the price is hovering around 1498.

If we look at Fig. 5.11, gold is still technically in a bull market. The green Chinkou Span line is still well above the price 26 periods ago and the price is also still trading above the cloud.

The fact that the price has dropped below the blue Kijun-Sen medium term average, however, shows us that a price correction is on the way. A return above the red Tenkan-Sen line could indicate that the bull market is intact and that we can expect new highs.

Should the price increase above the recent high of 1574.95 again, traders will have even more confidence that the bull market is intact.

Except for day traders, who trade in shorter term movements, it’s too early to look at short trades right now. The price must first at least enter the Ichimoku Cloud, or preferably break out downwards.

The forces driving the gold price are still in place: uncertain economic times, a decline in the dollar, political unrest in the MENA region and uncertainty over the credit worthiness of some emerging economies. Everything else remaining the same, it is unlikely that we will soon witness a major downturn in the gold price.

Fig 5.11

The contents of this report are for information purposes only. It is not intended as a recommendation to trade. InterTrader do not accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

InterTrader.com launch the first ever Spread Betting app for iPad

2011-04-28T11:18:00.002+01:00

InterTrader.com has launched the first ever financial spread betting app for the iPad, along with an app for the iPhone, both of which enable traders to keep on top of market movements, news and events on the move. The unique feature rich app for the iPad can be downloaded directly from the App Store - http://itunes.apple.com/gb/app/intertrader/id416981265

InterTrader’s purpose-built app for the iPad exploits the larger screen offered by the iPad. It enables users to switch easily between both landscape and portrait views and supports high resolution graphics, fast and easy to use navigation and one-click trading functionality.

Shai Heffetz, Head of Financial Spread Betting and CFD at InterTrader, commented:
“We work from the premise that ‘time is money’ and our app® for the iPad makes it easier and quicker for InterTrader customers to react to breaking news and events when on the move. This is from InterTrader following the recent launch of TradeBack™, a cash back loyalty programme for spread betting. With low margin rates, tight spreads and Tradeback™ our customers can now use the apps for both the iPad and iPhones to make the most of their capital in the global markets.”

Using InterTrader’s iPad / iPhone app:
Traders can access the InterTrader Markets menu from the main navigation panel at the bottom of the screen. This will bring up quick links to the markets offered, grouped into each specific type of market: indices, shares, foreign exchange, commodities and bonds/interest rates.

There is also a quick link to the list of the most popular markets. Users can browse through any of these groups of markets by scrolling through the list.
The Search facility will help find markets that are not listed in these groups. To open the search screen users tap the magnifying glass icon at the top of the screen, then enter the name of the market they’re looking for.

Trading Patterns webinar with Tom Hougaard, 5th May 2011

2011-04-28T11:14:00.000+01:00

In this 90min webinar professional trader Tom Hougaard from WhichWayToday.com and TraderTom.com will explain in great details the trading patterns he wrote about in the 16 articles published on CityAm newspaper. He will go through each of the patterns he described in his popular articles and show chart examples and describe the setups in great detail.
Tom Hougaard spent 8 years in the City, where he became an extremely familiar and popular guest on Bloomberg, CNBC, CNN and BBC. Since 2009 he has traded solely for himself and is running a live trading room where people interested in learning to trade in a live environment can hear where Tom is buying and shorting in real-time.
Join Tom on the live webinar on Thursday 5th May at 19.00 London time. Webinar lasts 90 minutes.
Register here https://intertrader.omnovia.com/webcasts

All’s well that ends well – Europe Interest rates and the US Job numbers

2011-04-03T12:29:00.000+01:00

Dean Peters-Wright

Senior Analyst

fxKnight.com

The European central bank is expected to raise interest rates this week in an effort to fight the rising inflation causing panic within governments. It is expected to be raised by 25 basis points, the first time the ECB has changed the rates since May 2009. In an attempt to curb the rocketing prices which has caused global inflation, the effects will be felt in different ways across different countries. Pressure on Portugal, Spain, Greece and Ireland as they struggle with liquidity issues may result in further complications in the regions financial systems. Spanish banks are exposed to Portugal’s banking system and liquidity problems in Portugal could inadvertently cause a credit run on the Spanish markets. This in itself would not cause the case for Portugal to accept a bailout, but it will make it harder not to.

An interest rate hike will most likely cause further strengthening of the euro against most other currencies. Whilst this is good for production that use overseas materials and suppliers, this will also will put pressure on exporters and those economies that gain a substantial percentage of their GDP through tourism from visitors outside the single currency zone. If however the perceived danger to the smaller weaker economies outweighs the benefits of fighting inflation, there could be a sell off the euro as confidence decreases in the regions stability.

The US had a surge in the dollar when the non farm payroll figures were disclosed and the unemployment rate fell to 8.8%. Whilst the most powerful economy in the world celebrated along with all of its trading partners that have generally relied on the US being the engine driving world economic growth, it did highlight just how far the recovery has to go as prior to 2008 the US unemployment rate was under 5%.

The EUR/ USD has once again reached a key resistant point at 1.4234 where the euro sold off heavily before. If however the buying pressure breaks through this key level then we could be seeing new highs gained against the dollar with an ultimate target of 1.4790. Further long targets to watch for are 1.4427 and 1.4680 where key buying and selling levels have taken place through 2009.

IF the EUR/ USD retreats then 1.4037, 1.3887 and 1.3725 are significant support levels from before.

Technical Analysis of the FTSE100

2011-04-03T12:25:00.000+01:00

For readers who are not familiar with the term FTSE100 – it is simply an index of the 100 largest companies on the London Stock Exchange. The index is maintained and owned jointly by the Financial Times and the London Stock Exchange.

The index came into being on the 1^st of January 1984 with a base value of 1,000. It reached a record level of 6950.6 on the 30^th of December 1999. The financial crisis of 2007 – 2010 saw it drop dramatically to 3,500. Since then it has recovered to a large extent, reaching a high of 6,091.33 on the 8th February 2011.

Analysis

If one looks at the price of the FTSE100 in relation to the Ichimoku Kinko Hyo cloud in Fig. 3.29, it clearly shows that the market is currently in a declining phase. The price is well below the cloud, which indicates that a long position at the present moment cannot be recommended.

The green Chinkou Span line is also well below the price, which supports the signal given by the Ichimoku cloud.

The Index started trading below the cloud after the earthquake/tsunami disaster in Japan and closed at a low of 5552.50 on the 16^th of March. Since then it has recovered significantly, but during the last few days it has started drifting sideways with no clear direction being evident.

If the market should recover and break through the upper level Senkou Span A line of the cloud, this could indicate that the previous bull market has been restored and that we can expect further price increases.

A drop below the blue Kijun Sen line will, however, be a signal that the downward movement has gained momentum and in that case traders should look at a short position to cash in on a potentially significant price drop.

How to Trade Oil Profitably in the Current World Situation

2011-03-23T15:20:00.000Z

At the moment, the oil market appears to be in something of a state of turmoil. There are certain forces at play that will push prices up for the foreseeable future; yet recent events have created a situation that could have a dampening effect on prices, at least in the short to medium term.

Market Analysis

On the demand side, large economies, such as India and China, are still growing strongly. If this trend continues, it will ensure constant growth in the demand for oil in the short to medium term. On the other hand, economic activity in many important Western economies is still lacklustre. Despite several predictions of an imminent upturn, the US and UK economies have not lived up to expectations, which will, to a large extent, keep demand for oil in check. The upcoming summer months in the northern hemisphere will also act to keep demand for oil within reasonable limits during that period.

A number of countries have suffered crippling natural disasters in the past few months. The earthquake and subsequent tsunami in Japan was no doubt the worst of these and has now raised fears of a recession in one of the world’s biggest economies. Once the focus shifts from immediate need to rebuilding, the construction industry in Japan will no doubt receive a huge boost. This will, in turn, lead to stronger demand for various imported commodities and stimulate economic activity, and the demand for oil will increase.

The latest unrest in various oil producing countries of the Middle East/North Africa (MENA) region has created fear of disruption to the oil supplies. This situation has been exacerbated by recent developments in Libya, where a civil war could potentially break out after military intervention by Western powers. This will lead to further upward pressure on the price of oil.

Something else that has to be taken into account is that the threat of a nuclear disaster in Japan has made many nuclear powers rethink their approach towards this form of energy. Germany, for example, has already decided to close several of its older nuclear power stations.

Since nuclear energy is an alternative to oil, any development that curtails the supply of this alternative energy source will, in the long run, act to stimulate the demand for oil and push the price up even further.

What we will probably see in the short to medium term therefore, is a temporary lull in the demand for oil. In the medium to long term, everything points to higher oil prices and it would not be surprising to see new record prices within the next two years.

Technical Analysis

Technical analysis of the situation seems to confirm the foregoing conclusions. The market was in a strong bull run before the earthquake in Japan on 11^th March 2011, but since then there has been a significant price correction, because many traders feared an imminent recession in Japan. The market reached a low on the 15^th of March, with Brent Oil closing at 108.28 – see fig. 3.21.

At its lowest level, the price moved marginally below the Kijun Sen (the blue line) on the Ichimoku Kinko Hyo, but rebounded sharply from there and right now it is trading above both the blue line (Kijun Sen) and the shorter-term average, the Tenkan Sen (the red line).

Trading the Current Oil Market

The Ichimoku Kinko Hyo currently indicates a clear bull market. The Chinkou Span (the green line) is above the price of 21 days ago; the price is well above the cloud and also above both the blue and red lines of the Kijun Sen and Tenkan Sen.

A possible trading strategy is therefore to buy Brent with a stop loss placed at the red Tenkan Sen line. Along with the Ichimoku Kinko Hyo, this line always acts as your first level of support. Once the price breaks through the blue Kijun Sen, a long position is no longer advised.

The first resistance level is at 118.47, which was reached on 7^th March. Once the price breaks through that level, watch out for 119.40, a previous high that was reached on 24^th February. If the price breaks through this level, new highs are very possible.

As long as the price is above the cloud of the Ichimoku Hyo, medium term short trades cannot be advised. This does not mean, however, that an astute day trader cannot make money from short-term corrections in the price. In this instance, figure 3.21 should be redrawn using an hourly or even shorter-term chart. The same rule applies when the price is trading above the cloud; take in a long-term position. When it is in the cloud, stay out of the market and when it trades below the cloud, it is time to go short.

Technical analysis GBP/USD

2011-02-10T17:55:00.000Z

GBP/USD made a valid attempt at rebound in the final week of January, yet the limit stayed well below 1.6057 resistance and eventually weakened. Initial bias remains neutral for the upcoming week and more consolidations could still be achieved below 1.6057. Nevertheless, even if there was another drop the pair is expected to remain bullish in the short term. This depends on how well 1.5664 resistance turned support holds and whether the rise from 1.5343 is allowed to continue. Above 1.6057 should resume the rise to 1.6298 first. Still, break of 1.5664 will be proof that a rebound from 1.5343 is completed and focus should shift back to support.

Spread betting carries a high level of risk and you can lose more than your initial deposit, so you should ensure spread betting meets your investment objectives.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade. InterTrader do not accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Technical analysis EUR/USD

2011-02-10T17:52:00.000Z

EUR/USD jumped as high as 1.3757 in the final week of January. The pair stayed at that level for a short while on bearish divergence conditions in four hours MACD. However, strong support above 1.3245 is anticipated to bring a rally in the coming weeks. The pair’s total decline from 1.4281 should have ended in three waves down to 1.2873 already; above 1.3757 should lift the pair closer to 1.4 to test 1.4281 resistance first.

Overall, the question that remains is whether mid-range correction from 1.6039 has finished its three waves down to 1.1875. The hard break above 1.35 again affirms that the fall from 1.4281 was simply a correction and the general rise from 1.1875 is ongoing. Also, insiders are quick to note that break of 1.4281 will give new life to the argument that mid-range term correction from 1.6039 was completed in three phases down to 1.1875 and that a long-term uptrend could be resuming. On the other hand, below 1.2873 is likely to turn the focus back to the 1.1875 low.

Over the long term, considering the five wave structure of the long uptrend from 2000’s low of 0.8223 to 2008’s high of 1.6093, price actions from 1.6039 are considered merely correction. Thus, watchers first anticipate strong support between 61.8% retracement of 0.8223 to 1.6039 at 1.1209 and that 1.1639 will contain downside. Second, another high above 1.6039 is expected eventually, once correction from 1.6039 has been confirmed as completed.

Guide to swing trading

2011-02-10T17:49:00.000Z

Swing trading represents a middle ground between fast-paced day trading and long-term trend trading. Those who follow a swing trading strategy typically hold a stock for a period of time, usually no longer than a few days or weeks and trade shares based on the stock’s weekly or monthly fluctuations.

Keys to Successful Swing Trading

Choosing the right stock: The most favourable candidates are the large-cap stocks that are most actively traded on the major exchanges, for example Cisco, Intel, Microsoft, etc. In an active market, these stocks typically move broadly between high and low extremes. The swing trader follows the trend in one direction for a period of several days or week and then switches to the opposite side of the trade when it reverses.

Choosing the right market: Swing trading presents some unique challenges in both a bear and bull market. In these extremes, even the most active stocks fail to exhibit the normal oscillations that occur when indexes remain relatively stable for weeks or months at a time. In a bear market or a bull market, stocks are carried by momentum in a single direction for long periods of time and may exhibit only subtle shifts that can be difficult to catch. Therefore, the best strategy during periods of market extremes is to trade along with the long-term trend.

A stagnant market is best suited for swing trading. When stocks and indexes are stable, there is a greater opportunity to take advantage of short-term movements. For the swing trader, these short-term ups and downs generate the most significant profits.

Setting the baseline: Historical analysis has proven that a market favourable to swing trading is one in which liquid stocks tend to trade above and below a shared baseline value. This value is often shown on a chart with an exponential moving average (EMA). Once the swing trader has used the EMA to identify a desired stock’s typical baseline, the trader can then adjust the swing strategy to the long or short, depending on the direction of the trend. Conventional swing trading strategy dictates going long at the baseline when the stock is trending up and short at the baseline when the stock is trending down.

The most important consideration here is that swing traders are not looking to cash in on a single trade; there’s no real incentive to allowing oneself to become preoccupied with precise timing, to buy at a stock’s rock bottom and sell at its ultimate high or vice versa. Instead, successful swing traders wait for a stock to hit its baseline value and reveal its direction before making a move.

When a stronger trend in either direction is evident, the trader may choose to go long when the stock falls below its EMA and wait for an uptrend or may short a stock that has jumped its EMA and wait for the drop.

Taking profits: The object of swing trading is to exit each trade as close as possible to the upper or lower limit without being overly meticulous. Of course, this also increases the trader’s risk of missing the most lucrative opportunities. In a strong market, when stocks are exhibiting definitive and certain directional trends, swing traders are likely to wait for the stock to reach the channel line before claiming their profits. In a weak market, when trends are harder to predict, traders may take a profit before that limit is reached in anticipation of a sudden directional shift that forces the stock to miss the channel line.

Conclusion

Swing trading is historically one of the best strategies for novice traders, but still offers substantial profits for more experienced and even advanced players. Swing traders are able to receive feedback on the trades in a short amount of time, which goes a long way to build motivation for those new to stock trading. However, the long and short positions that are typical to stock trading last several days; this is generally sufficient enough to stave off distraction. Trend trading may promise greater profit potential if the trader can catch a major market trend over weeks or months, but few traders actually have the discipline to hold a position for that long without succumbing to distraction. On the other hand, while day trading may be more intense and exciting, buying and selling dozens of stocks each day usually proves overwhelming for the majority of traders who employ the strategy. Thus, swing trading is a happy medium between these two extremes.

The UK, the FTSE 100 and the effects that the Euro difficulties that could impose on sustained UK growth in 2011

2010-12-14T09:08:00.001Z

Dean Wright ,Senior Analyst ,Fxknight.com

Many questions are being asked this week as the year draws to a close of how the economical outlook for the UK will look in the following year. On the frontlines of media coverage, it would be forgiven to assume that the UK is still at the foot of the hill and struggling to climb out of a recession that has taken hold of the UK economy and not let go. Benefits and welfare have been cut, pubic sector job losses have added to the dire unemployment situation and last weeks protests against raising tuition fees for university students has stamped its mark of perception of a lean treasury chest.

Looking a little deeper into the situation however, it is not so clear to distinguish and the outlook is a little more positive. The office for budget responsibility, the new forecasting office put in place by George Osbourne, has predicted that even though growth will slow sharply in the coming quarters due to the quick fire increase in national output the UK experienced being unsustainable, there will still be a steady increase in GDP output over the next two years.

Employment in the private sector has actually risen and the GDP outlook for next year has been forecasted at 2.1% which is up from 1.8% this year. 2012 has been predicted a further increase in growth, pegged at 2.6 %.

The FTSE has had a steady climb indicating investor’s confidence with the question being raised on whether the FTSE will break the 6000 level this year.

FTSE 100

The ups and downs of the Eurozone has certainly had its effects on the FTSE 100 price with the Greek debt crises pulling the FTSE down to 5060 from 5800 in an unfounded short space of time earlier this year. However, the FTSE 100 is back up to 5826 at the close of play last week, and it is possible investors confidence will continue to grow with the economy and push the FTSE up to 6000 level.

From a purely technical point of view, there certainly is scope for the FTSE to reach the 6000. The initial bull move in July saw a pull back to the 50% level on the daily chart. This level was tested several times as support before buyers out numbered the bears and the price started to rise once again. The 161.8% Projection level has been reached, usually signalling the complete move. However the levels have been respected as both support and resistance by buyers and sellers and has closed above the 161.8 % level at 5826.

If buyers now come in at this level to push the price up then there are a number of targets where bears are most likely to come in. Firstly there is the most recent high at 5904. If the bulls have enough power to push through this level, then anticipation of sellers coming in at the 6000 mark will likely see selling coming in just before this level.

If however the 6000 mark is broken, then the 200% Fibonacci level which is at 6071 could be a final resting place before selling drives the price back down again.

To the short side, the 138.2% and 127% Fibonacci projection levels have been significant levels with which traders have respected and so 5674 and 5602 would be ideal short targets for bears.

However, the forces of economics are seldom, if ever straight forward and taking an eye of the bigger picture, even for a second, could lead to some hard faced realities.

The weather outside

The dangers of the European crises from economies such as Ireland, Spain, Portugal and Greece, may have a substantial effect on the UK output with exporting industries suffering. Rising yield prices and the cost of borrowing for many countries in the EU is increasing the strain on member countries. A growing resentment from those countries that have abided by the rules having to foot the bill for other member countries mistakes is becoming ever more apparent and fresh whispers about the survival of the Euro have been sparked, further consolidating pro-Euro and anti-Euro camps.

The actuality of any one of these struggling economies even contemplating leaving the Euro (in order to devalue their new currency and hence growing out of their deficit through exports) would be disastrous and would reach out far beyond their own boarders having the effect of the UK suffering collateral. Weaker economies in question could find themselves in the same dangers that Greece faced if allowed to default and if no bailout was offered: A deposit run and outside investors withdrawing capital; both of which would stall economic recovery, thus leading to a knock on effect in the UK and other countries in Europe with trade and exports.

Something to be wary of as we have seen time and again that when slow reactions to a fast changing economic reality can often lead the unthinkable becoming the inevitable.

The provision of third party content is for general information purposes only and nothing sent to you should be construed as providing investment advice or a solicitation to purchase or sell any investment. InterTrader has no commercial interest in FX Knight and does not endorse any recommendation or analysis contained in their material. InterTrader accepts no responsibility for and has no control over the content (including legality, suitability, accuracy, timelines, reliability or availability) of any of the material supplied by FX Knight

EUR/ CHF – Instability in Eurozone may push Euro down further

2010-11-30T08:52:00.001Z

Dean Wright ,Senior Analyst ,Fxknight.com

As the confidence in the Euro continues to fall amid the fears of the fiscal crises in Europe, the EUR dropped sharply against most currencies including the CHF.

The EUR/ CHF has been playing to a Fibonacci projection since 2008 and is currently consolidating after reaching the 161.8 % level.

It is likely that the EURO will continue to fall with the release of the bailout for Ireland in which case, the 1.3038 price level may break and act as resistance, pushing the EURO even further as sellers drive the price down to the 200 Fibonacci level at 1.2257.

Should the EUR/ CHF find buyers, it will most likely be at 1.3038, however the two long targets that have recently been strong resistance are 1.3750 and 1.3934

Confidence in the Eurozone shaky at best

2010-11-30T08:51:00.001Z

Dean Wright ,Senior Analyst ,Fxknight.com

The Euro continued to fall during the week amid fears that the Euro zone as the markets increasingly loose confidence in the member country’s ability to contain the Fiscal debt crises spreading to vulnerable economies such a Spain and Portugal.

The Spanish Prime minister has defiantly stated that there will be no bailout for Spain warning “those investors who are short selling Spain are going to be wrong” Meanwhile the cost of borrowing has risen for Spain showing just where the market’s confidence currently lies.

The bailout package for Ireland is expected to be released today which will outline how much and in what form the Irish government will pay back the loan in an effort to calm the markets. However the simple fact that Ireland needs this loan was enough to raise the worries of the stability of the economic community with Europe.

This will have a negative effect the on the price of Europe as investors fears that the debt crises in Greece throughout Europe is slowly being realised.

Dean Wright

Senior Analyst

Fxknight.com

EUR/USD Target Hit - Next Levels to Watch

2010-11-30T08:49:00.000Z

Andrei Knight, Chief Strategist, fxKnight.com

Ireland's formal request for an EU bailout continues to weigh heavily on the Euro, as Spain's bond market begins to show signs of trouble as well. Portugal, Belgium, and Italy also remain potential trouble spots, and Greece is not out of the fire yet as well. This, coupled with initially fairly promising holiday retail numbers out of the US (up 6% from last year, as high as 25% for some online retailers), should make for some interesting trading on the EUR/USD in the final weeks of the year.

With our target from last week hit at 1.3128, we are now looking to see whether that level can hold as the new resistance or not. If so, the next downside target is at 1.2931, with an additional one potentially waiting at 1.2612 if we break below the first; if, on the other hand, we get back above 1.3128 and find some support there, then I will be looking for an eventual return to 1.3446, with resistance on the way at 1.3221 and 1.3296.

Combining Technical and Fundamental Analysis

2010-11-18T09:14:00.000Z

Technical analysis is a strong instrument in the trader’s tool kit and, in fact, many investors argue that it is the most important form of research.

Nevertheless, when a single tool has such a material impact on your decision making process it is worth appreciating its assumptions and potential limitations.

Stock Market Models

The validity of technical analysis is based on behavioural finance which studies how social, cognitive and emotional biases affect the price movements of the stock markets.

The two main observations from behavioral finance are:

1) Investors tend to make systematic errors that affect the market and take away the advantages of market efficiency

2) Traders can fail to materialise a loss and, although all indicators show that the market will continue to trend against them, they make the irrational decision to hold their position and hence incur even greater losses

A contrasting model for stock market movement is the ‘Efficient Market Hypothesis’ (EMH) which states that the price of a stock at any given moment represents a rational evaluation of all the known information.

The EMH model has at least two interesting consequences:

1) The return on equity can be expected to be slightly greater than that available from non-equity investments. If this was not the case then the same rational calculations would lead equity investors to shift their funds to these safer non-equity investments that could be expected to give the same or better return at a lower risk level

2) Because the price of a share at every given moment is an ‘efficient’ reflection of expected value the curve of expected return prices will tend to follow a ‘random walk’. This will be determined by the random emergence of information over time

Combining Technical and Fundamental Analysis

So, how can such models be used in order to make more informed trading decisions?

When entering into a position it is important to understand the market paradigm at the time of the decision with respect to the most relevant economic indicators. For example, if an investor is trading the GBP/USD spread betting market then they should record the current situation and expectations for both economies.

Below is an example of how an investor might combine technical and fundamental analysis when considering a position on the GBP/USD market. In this case the investor is making use of a daily chart:

Technical Summary:

- GBP has been gaining against the USD since May of this year and is supported by a firm rising trend line

- The 20 days EMA is above the 50 days EMA which supports the bullish view

- MACD (12,26,9) is above 0 and seems to be consolidating with its signal line which may be just another corrective movement in a bull market

- RSI (14) is neutral

- Stochastic (28,6,6) is showing signs of bullish divergence

- Summary: The investor could decide to go long above $1.595 with targets of $1.63 and $1.65

Fundamental Summary:

	US		UK
Lagging Indicators	Recent Releases	Consensus For Next Release	Recent Releases	Consensus For Next Release
Employment	9.7%, 9.6% (MOM)	9.6%	7.6%	7.6%
Overnight Interest Rates	1.0%	1.0%	0.5%	0.5%
GDP	1.8%, 2.0%	2.1%	1.2%, 0.8% (QOQ)	0.8%
CPI	1.0%, 1.1%	1.0%	0.5%, 0.0% (MOM)	0.2%

The above table/fundamental summary is just a glance at some of the main figures, there are other key indicators that could be included such as money supply, consumer sentiment and building permits. It is also important to take into account the overall fiscal and monetary policy of the central banks and governments involved.

If we try to summarise both forms of analysis, we can observe a consolidating bullish trend combined with a divergence in monetary policies where the US is expanding and UK is pushing for austerity.

So, an investor may decide to take a bullish view on the GBP/USD market and watch out for any changes in the current market paradigm. As long as the new information is inline with consensus, it might be expected that the technical trend will continue to be sustained. Any new information that challenges current expectations could manifest in an adverse reaction on the currency pair.

The above regime may sound like laborious work, however, in my experience, most retail traders do not seem to have the discipline to follow such analysis. On the other hand, it is a known fact that most retail traders are net losers so it might be worth putting in the extra effort.

Good luck and happy trading

Shai Heffetz

Spread betting carries a high level of risk and you can lose more than your initial deposit, so you should ensure spread betting meets your investment objectives.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade. InterTrader do not accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

EUR/ USD found a high at Fibonacci

2010-11-15T08:38:00.001Z

Dean Wright ,Senior Analyst ,Fxknight.com

The EUR/ USD has recently consolidated and hit the previous Bull and Bear targets over the last two weeks.

The EUR/ USD played beautifully to the Fibonacci projection with the price reversing at 1.4234, the key level discussed on the analysis published on the 10^th of October.

http://www.fxstreet.com/technical/forex-strategy/currencies-technical-strategies/2010-10-10.html

As the price of the EUR/USD has closed below the key level of 1.3726, it has a likely chance of continuing to the downside, in which case, the bear target of 1.3333 is most likely still in play.

Due to the fact that last week, buyers came in at 1.3595, this should be a key level to watch on the way down as buyers may come in again.

Should 1.3889 fail to hold as resistance, then the most likely target to the upside would be the 138.2 Fibonacci projection level at 1.3889, a key buying and selling point for traders in recent weeks. If price continues to move to the upside then a double top could occur at 1.4234 and so this should be a key level to watch for sellers coming in again.

G20 discussions rise in temperature and the USD/ JPY seems to have finished cooling off

2010-11-15T08:24:00.003Z

As the talks continue between the members of the G20, a growing consensus is developing that countries are moving away from the tight union observed when the financial crises started, to a more ‘do what is right for me’ type attitude.

The problem being that what is good for one country may not be in the best interests of its trading partner and hence why the G20 is finding it a tall order to come to any kind of agreement on trade imbalances and currency exchange rates. Unsurprising when such a complex set of economies, entwined and entangled, all have a self interest to sustain their own economic health.

Artificial devaluation of currencies is a particularly hot topic. An astute example being the United States fiercely contending that China has undervalued its currency in order to give China an unfair export advantage. The United States however is being accused of the same thing by China as Quantative Easing and easy money policies that the United States have adopted have the same effect; weakening the dollar and hence boosting exports; a feat surely welcomed by an administration that is finding its popularity consistently in question.

The fact of the matter is that any agreements made will be a long drawn out process and either one of two things will happen: Either by the time any agreements are made, the markets may have naturally solved some of the issues, or the economic conditions at a global or local level may change making the current discussions obsolete as different actions may need to be taken. For example the crises in Greece that forced the Greek government to radically change policy.

Looking at the USD specifically in relation to the JPY, we can see that the USD has declined against the JPY since the financial crises started in 2007 which has not helped Japan’s exports in any sense. However, due to the fact that the USD/ JPY is almost at the lowest point the USD/ JPY has been since 1995 at 79.846, a purely technical rational may see buyers come in as any bear traders or traders waiting to buy at a bargain price do not have much else as a frame of reference.

This means that we could see the USD/ JPY rally. Due to the fact that the pair has been in a heavy down trend and if the move has indeed stopped, the price will most likely move into a consolidation pattern and so therefore traders may want to watch close key levels such as 84.76 and 90.50 to the upside This also depends on whether the Japanese government intends to interfere with the markets.

However, if 79.84 breaks, then from a purely technical point of view, the USD/ JPY will be looking for support in which case the Fibonacci movement can provide some indication of where buyers are most likely to come in, and so 78.35 which is at the 161.8 Fibonacci projection level is a likely key buying level.

It is doubtful that the bank of Japan is likely to let the USD depreciate against the JPY any further than this for the reasons discussed, however the next long term target down would be 67.66 at the 200% Fibonacci projection level. The currency pair is more likely to see buyers come in sooner rather than later, but these things can not ever be for certain.

market review from LS Trader

2010-11-15T08:22:00.000Z

Stocks

The S&P 500 reached new 2 year highs at 1224.5 on Tuesday but then moved lower from there, back below the 1200 level and closing the week at 1195.4 and may yet fall further to support at 1167.

The European indexes held up better than the US markets and Friday saw some late buying on the Germax Dax, with the Dax ending higher having been sharply lower earlier in the day. The Asian markets also showed weakness having also been higher earlier in the week.

The stock indexes remain in a long term uptrend and are all above support.

The stock markets continue to be bullish and the long term trend remains up almost across the board for indexes.

Volatility Index (VIX)

It's been a fairly strong week for the VIX, which has once again continued higher from the 17.90 support area and ended with a weekly gain of 12.87%. The next upside target is around the 24.50 area and it remains to be seen over the coming weeks as to whether 17.90 was a significant bottom.

Commodities

Last week we wrote that we were looking for $1400 early in the week as well as the market closing above that level in order to be able to push on. We got a move above $1400 on Monday and a new all time high at $1424.3 on Wednesday and the market managed 2 daily close above $1400. On the weekly chart we did not get the close above $1400 and saw a very steep sell off on Friday of almost $53. In spite of this move the long term trend is still very much up and the market remains above support.

Sugar had a very volatile week having reached a new 30 year high on Thursday but then made the steepest 2 day sell off in 30 years, falling through short term support. Cotton was also lower as were most of the commodities. Overall the long term trend remains up for virtually every commodity market.

Currencies

The US dollar has had a good week with the Dollar Index pushing up to test resistance at the high of the bearish engulfing pattern formed on the 21st October, which is also at a resistance point that has held for over 5 weeks. Friday saw a doji pattern which points to indecision at this level. Due to the market's proximity to this level we will likely see a breakout or a reversal on Monday. If this level can be cleared then we will likely see a move higher towards 80.

The British Pound held up better than most of the majors and buying is entering the market on any falls to around the $1.60 level at present. The Pound also continued the recent revival against the Yen, showing some short term strength in reaching new 6 week highs. The long term trend remains down against the Yen but up against the dollar.

Interest rate futures

Interest rate futures sold off during the past week with the longer term 30 year T Bonds being the most heavily sold, taking the market through support. This has been the weaker link in the interest rate futures sector but the trend overall in the sector remains up.

If you like the idea of such a system that can be followed in less than 1 hour per week, you can visit the link below to sign up and get started right now.

Kind Regards

Robert Stewart & Phil Seaton
The LS Trader Team

The provision of third party content is for general information purposes only and nothing sent to you should be construed as providing investment advice or a solicitation to purchase or sell any investment. InterTrader has no commercial interest in LS Trader and does not endorse any recommendation or analysis contained in their material. InterTrader accepts no responsibility for and has no control over the content (including legality, suitability, accuracy, timelines, reliability or availability) of any of the material supplied by LS Trader

EUR/ JPY – 115 Holding as resistance.

2010-10-19T09:22:00.000+01:00

The EUR/ JPY has re-traced back to the 200% Fibonacci projection level and has hit the first bull target from June.

Should this level break as resistance, then we could expect a further target to be the 161.8 % projection level @ 119.70; a key support level from February this year. If this level also break then we could expect sellers to also come in at 122.44.

As re-tracement down will likely end up at 108.11 where buying power has come in before, however, if the price breaks lower than this level and actually re-tests 108.11 as resistance, then we could see a fall back to 2001 levels of the EUR/ JPY.

There is a support level @ 99.91 which could see sellers take off positions and enough buying to come in to stall the fall, however should the price go lower, then the ultimate target would be at 89.36 where the 423.6% Fibonacci projection levels are as well as the decade low.

Getting Properly positioned

2010-10-05T09:02:00.001+01:00

How many of us have experienced a profitable trade turning into a stop loss disaster? Or, on the other hand, a trade that went bad from the beginning then getting stopped out exactly when the market reaches a key reversal point and makes good? These occurrences cannot be fully avoided, but we can reduce their occurrence by better managing our trading positions.

Let’s start at the beginning. Before you open your position, it’s important to document the current situation, from both a technical and fundamental perspective. The first means mark the price at which the trade is executed. According to the horizon of your trade, (be it hours, days or weeks) capture the current level of key indicators such as the 20, 40 and 89 exponential moving averages, and mark the first and second support and resistance lines (if you are proficient in channel plotting that could be of use as well). One should also record the level of key indicators like MACD (moving average convergence/divergence), stochastic and RSI (relative strength indicator) levels.

Arguably even before you get to this stage, though, the question you need to ask is: Which time frames should I use. The consensus configuration among professional traders is that scalpers should use 1, 5, and 15 minute charts, day traders should use 5, 15, and 60 minutes intervals and swing traders 1 hour, 4 hours and the daily chart. Those who look to trade positionally should look at 4 hours, daily and weekly numbers.

There’s good reason why we have three time frames for each type of trade. The longest is used for market perspective and the ‘long’ term trend, the middle is the one upon which you would decide the direction of your trade, and the last is merely to optimise the timing of entering into the trade.

Let’s assume you have a long position open with a day’s trader perspective. You would be using the hourly chart, and it’s important to watch out for key signs, such as getting close to support and resistance; price action can be erratic around these levels. Watch also the main overlays for any kind of moving average cross over (MACD). If the MA20 line crosses under the MA 40, it may indicate a trend reversal.

The indicators can tell you a lot – mostly the MACD. If you’re trading a long position you should expect the MACD line to positively diverge from it’s signal line – watch out for ‘fake’ crosses – while a negative divergence should alert you to a possible reversal. Those signals don’t always indicate full trend reversal, it might be just a correction or the market is taking a breather, but you must be alert and vigilant when they occur.

Fundamental analysis, meanwhile, is trying to capture the current sentiment in the market. You have to be aware of the general price direction, what fundamental information is driving that price, and what are the up-coming expectations. The common tools for that are economic calendars, especially the detailed ones that offer some market commentary as well.

Last but no least, decide in advance the different potential courses of action, both for better and worse, of where, when and how to make your exit. Just like the prior examples, the reasons for doing this (and the movements that prompt you to exit) can be both technical and fundamental. A good example for a technically-influenced exit would be to set a breakout or a breakdown over the current trading channel, or a high-probability reversal pattern such as a ‘head and shoulders’ formation. A fundamental reason would be to revaluate the trade when a GDP, unemployment, or a relevant interest rate announcement is expected. This sheet should then guide you when you monitor your open positions.

So far, the easy part. What’s harder is managing yourself when there is money on the table. It’s very hard not to give in to one of the two most basic desires – fear and greed. Fear will appear whenever the market is trading against you, either creating a loss or eating into unrealised profit. At this point, it’s critical to make an effort to stay rational and analyse the situation. Check: has something materially changed from a technical or fundamental perspective since the position was opened? If the answer is no, then you must be strong and stick with the plan. On the other hand when profits are running and you have reached your target, unless something again has materially changed close your position, or you will suffer - perhaps not this time, but some time soon - from greed.

The other more dangerous manifestation of greed is actually when a trade is going against you and about to hit your stop, and you decide to extend the stop. In most cases this will just make you lose more money; do not fall into this trap. It’s much more probable that your analysis, made before there was money on the table and greed preying on your mind, is still accurate.

Another, and more proactive, manner of managing trade is hedging. Just to be clear, opening an opposite position on the exact same instrument is NOT hedging: it’s a waste of money. Hedging is a position established in one market in an attempt to offset exposure to price fluctuations in some opposite position in another market, with the goal of minimising your exposure to unwanted risk.

Therefore, if you want to use hedging, which is an advanced method of managing risk on your open positions, you need to do it on a different market. Let’s assume your medium term perspective (3-6 months) on the EUR/USD cross is bearish, therefore it would make sense to sell the December futures contract. It might be that while this position is running a shorter term analysis is indicating a bullish correction. At this point you can either use the October or the spot contract to hedge your position; it can be a perfect, partial or even an over-hedge. Another more advanced technique for hedging would be to use OTM (Out Of Money) options, but this requires a much more detailed analysis as a whole new level of complexity is introduced when trading options.

Another consideration that one should take into account is the trading session. In the UK we have three major trading sessions in the day: Asian, European and American, though some overlap with the others. Some traders prefer to close their position when the underlying market session is over, while others are happy to keep their positions open overnight.

If you decide you wish to keep position open after market hours or just let them run while you sleep it is highly recommended to take protective measures before signing off. A lot can happen while you sleep, therefore revaluate your stop-loss order and consider adding a limit if you don’t already have one.

As I hope I’ve outlined, managing your positions is a serious and complex craft which can have a significant impact on your trading results. It all starts by making a well-informed decision and documenting relevant information, followed by a building a rigourous regime with a central message: stick to your plan.

NZD/ USD consolidating in Channel

2010-07-20T10:09:00.000+01:00

The NZD/ USD is still in consolidation finding support and resistance within a channel which has appeared to be finding lower lows and lower highs. The currency pair also seems to be find support and resistance along the Fibonacci projection that completed May 2009.

Should the pair break out to the Long side then obviously selling prices are 0.7319 and 0.7759 respectively.

If the pair continues to find lower lows then we could see support at the most recent key level of 0.6555. However, it should be noted that a strong support level could be where the lower channel line and the Fibonacci level intersect at 0.6406.

This information is brought to you by

Dean Wright,Senior Analyst at FX Knight ,fxknight.com

Intraday Channel Trading

2010-07-13T16:24:00.001+01:00

Constructing a Channel Spread Trading Strategy

Trading channels is a well known and often used trading technique.

It’s based on the observed tendency of many financial instruments to set a direction and then maintain it for a period of time. A change of such a paradigm is often well connected with planned and unplanned macro economic events.

A recent example would be the sovereign debt crisis in EU, lead by Greece. Once the information emerged many instruments shifted and reversed some of their existing underline trends.

A channel is defined when an instrument’s price is confined between 2 upper and lower parallel bands. The lower line is considered support and the upper line considered as resistance.

In order to claim a channel has formed we must have at least 4 touch points, 2 on the supporting band and 2 on the resistance band. The more points connected without material breakout, the stronger the channel will be considered.

As you may already guessed we have 3 types of channels:

Ascending – When the price action exhibits a positive slope with rising tops and rising bottoms.
Descending – When the price exhibits a negative slope with falling tops and falling bottoms.
Sideways – When the price does not exhibit a particular slope. This is combined with a mix of rising and falling tops and bottoms. Sideways movement can also be broken down again into categories:
- Diverging Sideways – This is best described with a combination of rising tops and falling bottoms, such that the price action diverges, yet the overall pivot line remains roughly the same.
- Horizontal – When support and resistance bands are parallel with each other but with minimal or no visible slope.
- Consolidation – A combination of falling tops and rising bottoms, such that the price action converges towards the pivot. Equilibrium may be achieved momentarily.

Channel Trading Example Chart - GBP/USD Forex Market:

Plotting a Channel

There are many ways of drawing a channel. The first, and most common, is drawing parallel lines, using the naked eye, which try to connect as many touch points as possible according to the principles outlined above.

A more scientific method would be to use linear regression to plot the pivot line and build the channel around it. There are three main methods of channel building that are based on linear regression:

Standard Deviation Channel – Two lines can form a standard deviation channel if they are parallel to the linear regression trend line. These are usually set two standard deviations either side of the regression line.
Standard Error Channel – The standard error can also be used, in place of the standard deviation. This is preferred by some investors. It is the standard deviation divided by the square root of the sample size.
RAFF Channel - The distance between the channel lines and the regression line is the greatest distance that any one closing price is from the regression line.

See in the below example how the 3 lines appear on an intra–day GBP/USD chart.

Building your Channel Trading Strategy

There are countless ‘off the shelf’ strategies for channel trading but this article will provide all the ingredients for building your own custom channel trading strategy.

From each section below you should pick the method that you find most suitable for your own trading style. Once you have determined which methods to use, you will have a comprehensive strategy that covers all the necessary aspects of channel trading.

It is highly recommended with any trading strategy, be it channel trading or otherwise, that you back test your strategy using automatic tools such as E-signal or Ninja. This may demonstrate a potential flaw before you risk your own trading capital.

Entering the Trade

As mentioned, there are several methods for entering into a trade; you can decide to either trade with the trend, against the trend or even trade both.

Trading with the trend is considered the safest method as it mostly enjoys a higher accuracy rate. In fact even when a channel is broken, breakdowns do have a tendency to recover at least to the bottom of the channel which can be an exit point for either breaking even or with a small profit.

Another option is to decide to trade both ways; SHORT on a breakout from the upper band and LONG on breakdowns from the bottom band.

The greatest benefit of trading both sides is that one may get lucky and hit a material reversal, i.e. it could be a catching the top of an uptrend channel switching to a downtrend or vice versa. These are the rare occasions when out of scale profits can be made.

The third method would be trending only against the trend. Some traders see the sense in this but, personally, I don’t.

One thing to note is that with a spread betting account investors can gain quick access to a range of financial markets and you are able to trade in both directions, i.e. trade either long or short.

Exiting the Trade

Many traders take the view that getting out of a trade is as important, if not even more important, than getting into it. When trading channel breakouts you have several important decision points.

The first one is channel recovery, when the price either falls or climbs back into the channel. One should pay careful attention to the patterns developing around the boundaries and decide if this is the time to close the trade.

The second important decision point would be the pivot line; pay extra attention to this point especially when trading against the trend as counter trend movement sometimes breaks around the pivot line.

The third and last decision point would be the opposite boundary. If you have reached this point you should be deep in profit so it’s probably the time to play it right and secure the majority of it as realized profit.

Entry and Exit Style

The simplest way to enter and exit trades is to decide in advance how much you are willing to risk on a specific trade and work out the desired stake size. Yet, there are also more sophisticated ways to trade:

Scaling In - When using this method you would usually divide your overall investment into 3 batches. A third is to be placed when opening the trade. The second third would usually go in after price recovered back into the channel and the final third would be added once the price crossed the pivot line and the direction of the current movement is confirmed. When the price target has been reached the whole position will be closed.

This method allows the trader to increase their stake only when price action is going their way and by trailing the stops, the risk factor may remain the same despite increasing the overall stake.
Scaling Out – When using this method a trader would place the entire stake when opening the trade and reduce his exposure as price action moves his way, locking in more and more profit.

Both trading styles are very much valid and investors can alternate between them they see fit. In my experience, Scaling In works out better when trading against the trend and Scaling Out delivers better results when trading with the trend.

Capital Management

One important trading rule that many investors follow is 'refraining from risking more than 1-2% of trading capital' on a single trade.

Aside from this, it is also advisable to build a well diversified portfolio where some of the contracts act as a hedge on others. This is to reduce the risk of all your holdings running against you simultaneously as the result of an unforeseen event.

For example, let’s assume one decides to open various long positions on the US Dollar against the Japanese Yen and the British Pound.

Both Britain and Japan are net importers of commodities and, therefore, are susceptible to changes in commodity prices. A natural hedge against these would be to take short positions on the Australian and Canadian Dollars as these two countries are net exporters and will enjoy increased commodity prices.

This is especially necessary when trading the FX markets as positions can be very volatile. In addition, remember that the markets are well connected and you should always try to quantify your real net exposure. This can be done by summing the LONG and SHORT trades you may have in multiple positions.

Hedging and Net Exposure Example:

Instrument

Direction

Size

Open

Stop loss

Distance

EUR/USD

SHORT

$100,000

1.255

1.28

250

GBP/USD

SHORT

$100,000

1.502

1.52

180

USD/CHF

SHORT

$50,000

1.0675

1.08

125

AUD/USD

LONG

$100,000

0.8413

0.835

83

USD/CAD

LONG

$50,000

1.066

1.06

66

EUR/GBP

SHORT

$50,000

0.82

0.826

6

Net exposure:

Instrument	Exposure	Overall Risk (Pips)
USD	100,000	412
EUR	-150,000	250
GBP	-50,000	120
CHF	-50,000	125
AUD	100,000	83
CAD	50,000	60

You may observe that the positions which are placed to hedge any un-favourable movement have stop losses which are placed much tighter than the ‘main’ positions.

This is so that once the market moves in the ‘correct’ direction we will be looking to remove the hedge, allowing us to enjoy the most of the current swing in the market. It is always important to revaluate your risk once some of the positions are closed.

Stops and Limits

Stop losses should basically be placed very near to the closest high for short trades and next to the closest low for long trades. In essence you need to pin point a price level where the view that a reversal is imminent invalidates.

In the chart below we can easily see how the GBP/USD was range bound in a very clear channel.

When a trade is going well there are two key points where investors should consider trailing stops.

The first is once the market has regained the channel and completed a corrective movement, many traders choose to trail the stop close to the peak, for short trades, or bottom, for longs, of the movement.

The second trail should come into effect once the price has pierced through the top of the channel. This is where a trader must carefully control his stops and limits in order to optimize his exit from the trade.

Unlike stop losses, which are strongly advised in any position, limit orders are something that many traders find they can do without.

This doesn’t mean that targets should not be set, yet when the price is getting closer to the target area it becomes important to make judgment calls according to emerging patterns, momentum and overall market sentiment.

Please note that not all stop losses are guaranteed.

Good luck and happy trading

Shai Heffetz

(Original article written 9 July 2010).

Spread betting carries a high level of risk and you can lose more than your initial deposit, so you should ensure spread betting meets your investment objectives.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade. InterTrader do not accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

BP - Did they really lose 35% otheir value in just over a month ?

2010-06-08T10:19:00.003+01:00

Warren Buffet once said - "Be Fearful When Others Are Greedy And Greedy When Others Are Fearful".

If you ask today most people if they are willing to buy BP (BP.L) shares they will give you a dirty look and kindly advise you to check in with at the closest mental health clinic. Most people are not what we would consider successful in their investment they will usually buy a stock near the pick and sell around the bottom.

The reason for that are simple, we humans are driven by our emotions fear and greed. I would suggest for you to take a close look at BP's financial and think again if their current share price is justified or is it just that people are scared.

Let's look at the facts :

- BP's earning for 2009 amounted to over $243B ,their net income was $16.5B

- Their average net income for the past 5 years has been $21B

- Current Market cap is $122B which means a multiplier of 0.5 on earning and 4.5 on net income.

Let’s assume that the cost for BP to fix the problem and clean the bay will reach $1B and law suits that will take years to resolve will cost them another $1B . So over the next couple of years it means a 5% reduction in net income. Does that justify a 36% drop in share price ?

Another approach would be run a technical analysis exercise on their chart.

Share price dropped 36% since the beginning of the crisis forming a triple bottom together with October 08' and March 09' ,each time the bottom seems to inch a bit higher than the previous one. BP has held on to the 400p support twice in the last 2 years.

Let us assume that the BP is in a bearish channel we know that for every action there is a reaction ,Fibonacci retracement provide us with use useful clues on the target price for the corrective move.

The 23.60% the closest line which is the minimum and stand @ 471p ,the 38% is @ 507 and the 50% which will determine the overall direction of the trend is far away at 536p.

I am not in any way advising if one should speculate on the movement just take a look at the facts and decide for your self.

Shai Heffetz
Head of InterTrader.com

Disclaimer
The comment in this blog is the personal opinion of the contributors and not InterTrader.com. The content does not constitute financial, investment or tax advice. You are advised to discuss your specific requirements with an independent financial adviser prior to entering into any bet. InterTrader.com is not responsible and disclaims any and all liability for the content of comments written by contributors to the blog, and the content of any third party sites linked from this blog.

Trading news

2010-05-27T16:22:00.000+01:00

Trading economic calendar events

In this article we are going to cover 3 different techniques to trade market moving financial events. They each cover a different point in time relative to a particular event.

The first involves opening a trade prior to the announcement, the second considers trading the announcement itself and the third is based on the aftermath of the release.

Before going into the specifics of each technique there are a few basic concepts which are common:

1. The Trend is Your Friend – As a rule of thumb, I prefer a trade inline with the underlying trend. One exception would be a material breakdown, below the channel, in a bearish trend or a breakout, above the channel, in a bullish trend.

2. High Risk Reward Ratio – As trading news carries a higher level of risk, due to a high possibility of slippage and extreme volatility, it’s recommended to go into trades with a risk reward ratio greater than 1:3 or even 1:4. When you are looking to open a trade you should attempt to determine where the current support and resistance levels are to establish where your own stop loss and limit order levels should be.
Therefore, in order for the trade to enjoy a positive expectancy, one should aim that the distance of the limit order level from the current price will be 3 to 4 times bigger than the stop loss level, hence a 1:3 or :4 ratio.

3. Tight Range – Prior to the announcement it’s preferred if the market is trading in a tight range as this will confirm that traders are sitting on the sidelines, expecting the announcement.

Identifying the Trend and Assessing the Trade’s Validity

To establish the underlying trend and momentum there are a several indicators and overlays aside from price action that may assist you in your analysis.

The first thing I like to do is to observe the prices by using a candlestick chart and following the first rule of trending; rising bottoms for a bull market and falling tops for a bear market.

The second indication I look for can be derived from the daily EMA(87); the 87 period Exponential Moving Average applied to a daily chart. When the market is bullish you can expect the price to mostly hover above it’s EMA(87) and vice versa for a bearish market.

The third indicator is used to asses the current momentum in the market. Typically I use the MACD(12,26,9) and look for positive or negative divergence without any signs of engulfing.

In the next example, we are going to review the underlying condition in the Dow Jones industrial average (DJIA) prior to the March 5^th 2010 unemployment announcement in the US.

Observations:

- The Market is in a bullish trend.

- For July 2009 until January 2010, the market managed to stay above the EMA(87). In February it broke below this and only recently has it recovered back above it.

- The MACD, as our proxy for momentum, suggests that the market is recovering from its recent breakdown as the MACD is diverging positively and has recently just crossed the 0 line.

In order to determine what the risk reward ratio is, you will need to find the potential market turning points.

As we are considering going long we would look for the closest support as a stop loss and the next resistance line as our limit. As explained before, we should aim for the risk reward ratio to exceed 1:3

In the chart, the Dow Jones is most recently trading around 10,400. Therefore, our profit target is 10,070 and our stop loss should be at 10,300. The profit target is 300 points from the current price whereas the stop loss is only 100 points away. As a result, our risk reward ratio is 3.1:1 which is just Within the positive return spectrum

Now let’s get to business and discover the different ways we can trade the news.

Can You Prophet?

With this strategy we will be opening a position that reflects our view of the market approximately 30-60 minutes prior to the announcement. You should identify the current trading channel and try to get a position below the pivot line if you are going long or above the pivot line if you are shorting.

Your stop loss should be placed at a point where you believe is beyond the reach of a probable market dip or spike, i.e. outside the ‘stop loss kill zone’. If there is something worse than being wrong, it’s getting it right after being stopped out.

Therefore, your stop should meet the two important qualification criteria; it must be below the stop loss kill zone while still meeting the required risk reward ratio. If you cannot meet both of these then don’t get into the trade.

Holding the Stick Both sides

This technique is very different as you will not be taking a view on the market.

When using this method you will be placing two opposite limit-to-open orders that each have their own associated stop loss and limit orders.

You should get into this trade if you believe that there is a very high probability for this event to move the market but are not sure how it will play out.

This trade enjoys an increased probability in two circumstances. The first is when the price is close the top of a bearish channel, or the bottom of a bullish channel, and the news may determine whether the current channel is completed or will be re-established.

The second occasion is if, in the days or even weeks prior to the announcement, the market is contained in a sideways movement lacking any real direction. This is a suggested step by step list:

1. Identify the current range the market is trading in.

2. Decide if market conditions justify using this method. If so:

a. Place a limit-to-open long order above the upper bound of the range.

i. Associate a limit order at the next resistance level.

ii. Associate a stop loss order at around the bottom of the range.

b. Place a limit-to-open short order below the lower bound of the range.

i. Associate a limit order at the next support level.

ii. Associate a stop loss order at around the top of the range.

It should look something like this:

There are a few very important golden rules when attempting this sort of opposite orders trade.

The long limit-to-open order should be above the stop loss level of the short limit-to-open short order including a safety distance in case the market slips. If possible I like to use guaranteed stops. The last thing you want is to find yourself in a fully hedged position after both your long and short orders are met but no stops are triggered.

There are two possible scenarios where you may incur a loss. Sometimes the market may decide to move one way when the announcement is released, or perhaps shortly before it, and then sharply reverses. In that case you may lose one of the positions and not benefit from the other.

An even worse scenario is if the market becomes extremely volatile and burns your stop loss on both positions. You can minimize this risk by researching the market in terms of volatility and reviewing how the market behaved in the past when the specific announcement was released.

The risk reward analysis mentioned before remains valid, it’s just that now you must make sure it works out both ways in order to validate the positive expectancy of the specific trade.

Are you sure this is where you’re going?

When using this strategy you should still adhere to the basic rules of conducting pre-analysis and determining your actions beforehand.

For example, if you were trading the Dow Jones on the back of a US unemployment news release, this is one decision making process that you could follow:

1. Determine the current trend in the market.

2. Consider current price in relation to the trading channel, i.e. is it a pivot, an upper boundary, or a lower boundary?

3. Research the previous three releases and review:

a. How the market reacted.

b. The accuracy of the analysts consensus.

4. Decide what would be your action plan. For example:

a. If current consensus is that unemployment will reduce to 9.7% then

i. If the actual number is 9.6% or below - LONG, Stop Loss - 10,000, Limit - 10,400.

ii. If the actual number is 9.9% or above - SHORT, Stop Loss - 10,200, Limit - 9,600.

Once you have determined your action plan you sit tight and wait for the news to be released. Hold tight while the market reacts.

At this point there are multiple scenarios. However, you only care about those which you have an action plan for and believe have a positive profit expectancy.

If the desired correlation between the released figures and the price action takes place then you should get ready. You should wait for the market to make its first move and retrace back. When the price retracement seems to be concluded, that’s when you open your position.

At this point in time the market has made its first move and confirmed the new direction and so the profit expectancy of this trade has dramatically increased.

Below you can find an example based on the May 20^th weekly unemployment report. Consensus expectations were for -446k when the market is trending down. The plan is that if the figure proves to be worse then expected it may fuel further selling and, therefore, short is the way to go. See chart below:

Summary

In this article we reviewed three different ways of trading financial news.

We started with an option where you take a stand prior to the release; this trade carries significant risk and yet offers the highest reward within a short time span.

The second one is unique in nature as you do not take a stand initially but you operate under the assumption that a range breakout will enjoy a continuation.

The third method encourages you to trade a trend continuation after an initial corrective move in the market. The most evident downside to this method is that you might miss out on the first big movement in the market. In this case, the retracement you are waiting for may never occur, or may take place at a much lower level where the risk reward ratio does not justify a trade.

It’s important to remember that, regardless of the strategy you employ, to research, plan and execute a trade only if the underlying conditions match your plan. Do not be tempted to trade just because you prepared for it and are looking for action.

Trading EUR/USD – A multi year technical analysis topped with some fundamentals.

2010-04-21T15:24:00.001+01:00

In this review on the EUR/USD pair we will be looking to understand from a technical point of view where this pair might be going. The methodology is to look into past performance and find leading indicators that can provide us with clues for the future. For that we will be using a set of overlays and indicators.
I divide the different tools in my into two types. The first are primary tools, the signals they provide are used to take a view on the market. The second type are confirmation tools. Before opening a position most of my indicators should tell the same story. In this analysis I will be using the following
Primary:

EMA (120) and EMA (60) [Exponential moving average on price]
MACD (24,52,18) [Moving Average Convergence Divergence)

Confirmation

RSI (28) [Relative strength index]
Fibonacci retracements

I recommend for you to either open in a different window or print the Chart below before we continue (Dotted line is EMA(120) and solid line is EMA(60)

Past performance :
In August of 2008 we can see observe the following phenomenon. Price is making a new high where:

The EMA(60) exhibits a bearish engulfing over the EMA(120)
MACD plummets from 272 to around 68
RSI declines from 73 to 54

Not far after we can see the EUR crashing in a classic 5 wave pattern.

In late October 2009 and at the beginning of November of the same year after the EUR depreciated by 23%, we can observe the following

MACD is in positive divergence from it’s signal line
RSI is going up
EMA (60) is well below EMA(120)

Since only one of the main indicators suggests a reversal I would have stayed on the side lines this time around. In reality price recovers by 16% in less then two months. The reversal is not sustained and a classic head and shoulders formation with a double bottom is formed between October 2008 and March 2009.
Only in May of 2009 we can again see a clear combination of signals suggesting a sustainable trend reversal.

EMA(60) is cross over EMA(120)
MACD is in positive divergence against it’s signal line and in an overall bullish trend.
RSI climbs from to 47
Price crosses the 61.80% Fibonacci retracement mark.

All these signals combined and pointing in the same direction suggest to me there is high probability long trade here. When trading, one should always have a stop loss and a target. I tend to use a concrete price for stop loss and indicators for my take profit. The stop loss should be placed at the bottom of the movement dated April 19th price 1.2980 .The take profit target should be when EMA(60) crosses under EMA(120). This method would have produced profit of 850 pips over an 8 months period.

Beginning of January we can see the exact mirror pattern of the May 2009 one suggesting it’s time to short the EUR.

Now that concluded the analysis, it’s time to evaluate where we now:

EMA(60) is in a 397 pips (2.37%) negative divergence from the EMA (120)
MACD is climbing steadily and is in positive divergence from it’s signal line
RSI is in an upwards channel
Price touched the 61.8% Fibonacci retracement line.

So… It’s a mixed bag. One of our main indicators suggests a high probability for reversal where the other is still far away from indicating a positive reversal. Our confirmation indicators are both bullish.

Action: I am currently short this pair and therefore I would hold for now. If I was neutral I would wait for the pair to test 1.3400 support, If support hold and there are signs of a bullish engulfing from the EMA (60), I would take a cautious long position.

From a fundamental perspective my view on the EUR remains bearish. The latest crisis had a dividing affect on the Euro zone. We have strong economies (Germany, France) that are on the road to recovery where inflation lurks around the corner. On the other side with the PIGS(Portugal, Ireland, Spain and Greece) are in significant debt and I can’t see any light at the end of this tunnel. The divergence may have devastating affects on the EURO as different fiscal policies with a deadlocked monetary policy ,the ECB cannot increase interest rates as it will push the PIGS into defaulting on their debts. Mr George Soros wrote an article published in the FT two months ago about the same, take a few moments to read the article.

Happy Trading ,

Shai Heffetz
Head of InterTrader.com

Disclaimer
The comment in this blog is the personal opinion of the contributors and not InterTrader.com. The content does not constitute financial, investment or tax advice. You are advised to discuss your specific requirements with an independent financial adviser prior to entering into any bet. InterTrader.com is not responsible and disclaims any and all liability for the content of comments written by contributors to the blog, and the content of any third party sites linked from this blog.

Multi time frame trading

2010-03-15T13:21:00.001Z

Like many others I always try to increase the probability of each and every trade becoming profitable. One such way is to use multiple time frames when you are considering entering into a position. Next I will share with you they way I use this method for intraday trading, although I will usually stay in the market for no more then 6-12 hours I am still using charts from a completely different scale to support my decision.

For my trading I am using 3 different time frame before making any decision.
1.Daily chart over 24 months
2.Hourly chart over 3 months
3.15 minutes chart over 7 days

The daily chart will be used in order to understand the underline trend of the market overall. I will use the USD/CHF pair as an example. According to my analysis we are currently in a downturn towards the lower boundary in a bullish run. This implies two potential and opposite trades.
1. Long - assuming that I am correct about the trend there is a high probability that price will rebound once it touches the lower bound of the trading channel.
2.Short - The argument is the same but, why wait ? We can go short now and exit when the price hits the lower bound.

The hourly chart tells a different story. From the beginning of January 2010 to the 19th of February the market was in a bullish trend , a 45 degree positive incline. From February you can see the trend has run out of steam. The rising bottoms are gone replaced by falling tops are everywhere, this suggest that the bullish run is over and we are now in the midst of a bear move. See the chart below:

This is enough information for me to make a decision which way 2 go. I will take the downside, short on the US Dollar, My target would be the bottom of the channel on the daily trend and my stop loss will be placed around what I see as the closest resistance point (1.0737).

In order to fully optimize the potential of the trade I will drill down to the 15 minutes chart. This chart will not affect in anyway the decision if to go long or short, it will only determine where the optimal entry point is.

For this I will be referring to the Elliot wave principle. Assuming the main movement is down one can assume we are now in wave 4 of the movement; all we need now is a beginning of a downturn indicating for wave #5 to commence in order to get into the position. See chart below.

To summarize, we use the daily chart to understand overall market direction and the type of the trend (direction, uniformity, stage). The hourly chart will be used to determine the direction of the trade and the 15 min chart to locate the optimal entry point.

I will be reviewing this trading idea in 5-10 days and see if the market behaviour was similar in anyway to my expectations.

Good luck and happy trading.

Shai Heffetz

Disclaimer
The comment in this blog is the personal opinion of the contributors and not InterTrader.com. The content does not constitute financial, investment or tax advice. You are advised to discuss your specific requirements with an independent financial adviser prior to entering into any bet. InterTrader.com is not responsible and disclaims any and all liability for the content of comments written by contributors to the blog, and the content of any third party sites linked from this blog.

Building your own trading system

2010-03-11T14:35:00.002Z

Many traders find themselves very successful on paper but when it comes to real life somehow profitability eludes many of us. Why is that ? how we can come around and change it. I would like to offer a couple of principles and methods that changed they way I am trading and more important the bottom line.

First of all you need to start with some kind of a concept. This is an idea usually originated from your own commonsense and understanding of the markets you are trading.

This could come from looking at a chart or an indicator and finding a reoccurring patterns.

At this point you should increase the time scale of your little idea and see if the concept is applicable further into the past ,the next stage would be to see if this rule applies to more then just one market. Working with a system that appears to be profitable using back testing on multiple and un correlated markets decreases your risk significantly, since all technical analysis signals are probability based the greater the sample the higher your confidence.

Now you need to set some objective rules to it. These should be rules that would be set in stone and should include:
1. Entry Criteria.
2. Target for success (Limit)
3. Target for signal failure.

Here is an example I will take the EUR/USD pair as an example. The rules for my system will be simple

* Time Frame : Daily chart
* Indicator : 87 exponential moving average
* Entry Criteria 1 long : If the moving average is trend for more then 5 days in the * same direction and price is above the EMA(87].
* Exit criteria limit : If the EMA (870 has turned down for over 3 days and price *
crossed under the EMA (87) level exit.
* Exit criteria stop : If I lost more then 200 pips exit.

The short version will be just a mirror of the long one.

In the chart below you can see a rough sketch for potential entry and exit points.

I am not claiming for this specific system to be good or profitable, although it does look like it. More important the rules are all set in advance and they are quantitative , there is almost no room for judgment calls.

The next stage I would advise on is back testing with a tool like esignal ,they offer an easy to use wizard where you can generate a code that will apply the rules. Once complete run a back test on the markets you intend to trade looking 12-24 months into the past.

At this point take the data you got on your trades analyze trying to find out how you can improve the system, fine tuning. Even good systems will show a loss first time around only once you tweak them you may find way to refine your system. Once you are satisfied. It's time to move to get cracking.

Money management - At this point you need to decide how much money you are willing to risk using this system, Once you decided it's time to set up the risk parameters. risk is a combination between your stake size and the stop loss , it is recommended that in each trade you will not risk more the 1% to 1.5% of your trading capital. In proactive then . If I am trading the EUR/USD pair using the above system with a £5 per point stake and a 200 pips stop loss , my risk per trade is £1,000 therefore my initial balance should be £66,000- £100,000.

Now that you have your system comes the part where most of us fail, easy to say but very hard to follow. Do what your system tells you to do and mostly ignore any decision you are looking to make on the fly. The reason for that would be that while trading your decision making process is tampered by wither fear of loosing or greed of trying to squeeze an extra profit. you must fight these urges and listen to the system that you created and tested.
There are some exception to that ,sometimes their might be some fundamental changes in the market which would have a significant impact on the market and should be take into consideration before entering or exiting a trade as well as while managing a live one.
A trading system even one that exhibited magnificent results in back testing is not a guarantee for future profits, but I can tell you that it does increase the probability and likelihood of becoming a more profitable trader then one with no plan at all.

Good luck and happy trading

Shai Heffetz

Disclaimer
The comment in this blog is the personal opinion of the contributors and not InterTrader.com. The content does not constitute financial, investment or tax advice. You are advised to discuss your specific requirements with an independent financial adviser prior to entering into any bet. InterTrader.com is not responsible and disclaims any and all liability for the content of comments written by contributors to the blog, and the content of any third party sites linked from this blog.

Market direction a Macro view - Dow industrials average

2010-03-09T15:50:00.002Z

I would like to offer a view on the direct of the stock market. I will be using the Dow industrials average (^DJI) for this as most indices follow it's lead. I tried to use the Elliot wave theory and apply it to the beginning of the 2008 crisis. In my view this was the beginning of a new primary cycle (bearish).

According to my analysis this primary cycle has now ended and we have just begun a new primary cycle which in my view is bullish.

I would advise from this point on for you to have the chart attached in front of view as I intend to reference it frequently

Wave 1

Started on the 15th of May 2008 and completed on the 10th of July same year. The drop was 16%. At this point most still were under the impression this is just a minor correction

Wave 2

This corrective wave tells the real story, it lasts about almost 2 months until October with a perfect 23.60% Fibonacci retracement. It end abruptly is Lehman brothers go under.
Wave 3 - This was the largest wave with a 34% decline from the top of the wave 2 , with a perfect internal ABC structure, it lasts 2 long months
Wave 4

This corrective wave gives hope that the worse may be behind us but, again a perfect Fibonacci retracement to the 38.2% line from the top of the wave and 23.60% from the beginning of the cycle ,just like the books says it should be.
Wave 5

This wave appears as soon as everyone are back from the Christmas break and there seems to be no stopping .If you may remember back then many thought the financial world is imploding and many started to claim capitalism is gone.

A nice anecdote is too look into the what some of the investment and trading legends of our time , Mr George Soros and Mr Warren buffet where doing , If you don't know then I will tell you. They were buying anything they could get their hands on . In the words of the legendary investor Benjamin Graham " When other are greedy be fear full when they are fear full be greedy.

March of 2009 marked the beginning of the corrective wave for the primary movement. A was from March to June , 2 was from June to July and C from July until....

This is the tricky part. Some may say that we are still in the midst of wave C but, Allow me to offer an alternative solution. In late August 2009 the index hit it's 50% Fibonacci retracement line from the beginning the cycle. Even more you can observe that the angle of the rise changed. From a 71% angle to a 26% angle.

This hypothesis is also supported by the flow of fundamental information typical to a bullish wave 1. Does this sound familiar in any way.

- Fundamental data is still negative
- put options are in vogue
- implied volatility in the options market is high

So , where are we today then ? My view is that we are now in the middle of 2 for in the new primary cycle, therefore as long as 10,146 holds as support this should be confirmation of the trend. My target price before reevaluation would be around 11,000 . In many ways it’s not the number on it’s that tells the story but they the market reached the target level which may reveal what will be the next step.

Good luck and happy trading

Shai Heffetz

Disclaimer
The comment in this blog is the personal opinion of the contributors and not InterTrader.com. The content does not constitute financial, investment or tax advice. You are advised to discuss your specific requirements with an independent financial adviser prior to entering into any bet. InterTrader.com is not responsible and disclaims any and all liability for the content of comments written by contributors to the blog, and the content of any third party sites linked from this blog.

Introduction

2010-02-08T11:44:00.000Z

This is the official Blog for InterTrader.

In this Blog we will mostly provide our personal views on different markets using a combination of Technical and fundamental analysis.

We are not suggesting anyone to take our views and act on them as advise, we merely wish to stir a healthy discussion where traders can post their views and exchange ideas with each other traders. We believe that in order to make better decision one must make more informed ones.

It does not matter if you use fundamental or technical analysis to take a view on the market as long as research and consider your actions before executing.

We would also like to use this as platform to commicate changes and enhacments to the service ,looking forward for feedback from you and create an open dialouge that will lead us to provide you a better service.

Remember that spread betting carry a high level of risk to your capital with the possibility of losing more than your initial investment. These products may not be suitable for all investors, and are only intended for people over 18. Please ensure that you are fully aware of the risks involved and, if necessary, seek independent financial advice

Happy trading ,

Shai Heffetz & The InterTrader.com team.

Instrument	Direction	Size	Open	Stop loss	Distance
EUR/USD	SHORT	$100,000	1.255	1.28	250
GBP/USD	SHORT	$100,000	1.502	1.52	180
USD/CHF	SHORT	$50,000	1.0675	1.08	125
AUD/USD	LONG	$100,000	0.8413	0.835	83
USD/CAD	LONG	$50,000	1.066	1.06	66
EUR/GBP	SHORT	$50,000	0.82	0.826	6