1: Know to sit on the sidelines when the market is not favorable (a lot of noise, choppy periods, whipsaws) and determine WHEN the market has the highest probability of going in a certain direction, and…

2: Place a trade using common sense risk management guidelines, and exit according to those guidelines.

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To start with we are going to discuss money management. I do not care how constant your system, strategy, or forex trading method is, without rock-solid and firm money management you will in due course end up wiping your trading account out. Over the course of time the common denominator among all expert forex traders I have meet has been unwaivering money management practices. Through using a pre-determined risk per trade you will be able to eradicate the fear that goes with over leveraging. By doing so your trading judgements will be founded on logic and not the fx traders worst enemies known as greed and fear. A safe practice is to risk between one to two percent each and every trade. That will ensure that no series of loses is able to take someone out of the game for good. This is 1 lecture most often learned the hard way.

Another essential ingredient to your forex day trading success is understanding that you have to to maintain a appropriate reward vs. risk on each and every fx trade that you place. Plainly stated your risk/reward must be 1 to 1 or better. This means that your stop loss should be no more than your take profit area. As a result of keeping that balance in check you can win 50% of your trades and still be break even. Numerous professional traders maintain a win/loss ratio of approximately 50%, but with a risk/reward of three to one or greater they are wildly successful! Everyones forex trading strategy is different and there is no exact risk/reward that will match everyone. However, for every forex trading style there is always a happy medium connecting your risk/reward and your win/loss ratio. They are extremely intercorrelated and varying one will effect the other. The answer is discovery the happy medium on both to permit for maximum return with your fx day trading strategy.

A forex trading room is a great place to be taught the other important parts to day trading, like those mentioned above. Fx day trading techniques are something that can be taught though courses in content form, but the above are usually the part of trading that is learned through watching as well as listening to a trader that has come prior to you and conquered it. Learning to trade forex is hard, and receiving all the help you deserve is able to provide a trader the best opportunity to become a lucrative fx trader and thus make this a full time career.

So how do you filter out the false trading signals? By using confluence. Confluence in trading means confirming a trading signal given by one indicator by a second one. For example, if you are using divergence as your main trading strategy than trading alone on divergence may not be profitable.

What you need to do is to confirm the divergence with candlestick patterns or another indicator. This way you increase the probability of success. Don’t be impatient. If you find a trading signal by one indicator wait for the confirmation by another indicator. This confirmation will filter out any false signal.

Once, both the indicators are confirming each other, you can safely enter into a trade. Different traders use different confluence strategies. With a little practice, you can also develop or find a strategy that works for you. In the same manner if you use candlestick patterns to get trading signals confirm them with another indicator like Stochastic, MACD, RSI, CCI or whatever is your favorite indicator.

Master how to use trendlines in trading. Drawing trendlines is an art that you can easily master. Trendlines can give you the support and resistance in the market. Support and resistance is a very important concept in trading. Using trendlines, you can easily find support and resistance. These trendlines will also tell you where to place the stop loss something very important for risk management.

Another thing that you need to keep in mind is: “Don’t use too many indicators.” Just master two indicators and then stick with them. MACD and Stochastic are two very versatile and robust oscillators that you can master. MACD ( Moving Average Convergence Divergence) is the difference of two moving averages and is a momentum oscillator that gives overbought and oversold signals.

In the same manner, Stochastic is also a momentum oscillator. Oscillator is an indicator that oscillates between two values. So, mastering trendlines, moving averages, candlestick patterns and either MACD or Stochastic will set you up as a forex trader and soon you will find your trading confidence increasing and profits increasing too.

There are a number of features that I consider to be a must in a trusted and creditable scalping system. Bare in mind that it is just not that easy to stay tuned for a whole day while facing the constant challenges by the potential trade set-ups over and over again and – in the meantime – keeping your trading temper by all means. You must find some time to think and observe the ongoing market movements so it is proved to be highly beneficial to have a reliable trading companion in your battles with the forex markets.

Most of the brokers provide data even for simulation accounts at no cost but it is worth going after it and choose a firm which – at least – seems to be honest when it comes to spreads, hidden costs and market behaviour. You as a forex scalping trader will demand accurate market data even in the 10 seconds and 1 minute time frames but all the better if tick-charts are reliable as well. You can put your preferred scalping software to the test by using demo accounts from brokers and if you are satisfied with the results then go on and try your trading software out under real time market conditions.

If your broker is honest then you should check the spread that they will charge upon you and find 2-4 pips for major currency pairs. The smaller it is the more favourable conditions will present themselves for scalping. Your software should definitely be able to make transactions and operate in these super short time frames.

Moreover, get a scalping software that you feel comfortable with because this matter will be on of the most important factors to your lasting success as a forex scalper. The software that you chose has got to be in line with your risk tolerance level, with your trading manner and with your money management principles. If these requirements are met then you have green light to go.

Nevertheless, try to keep your forex scalping software as simple as possible because the more complicated you make it the more time it will require to follow; and time is such a precious element of scalp trading that no professional trader can afford to waste.

If you believe that you have finally found the ultimate weapon for your forex scalping trades then first check and then double check if it really works for you. You need to settle down with a system that you feel comfortable with what suits your trading manner and what is in accordance with your money management rules. Keep these ideas in mind and you will see your portfolio value increasing on a constant basis!

I wish you a successful career as a forex scalping trader and I hope you will be able to use some of my ideas.
I will help you to keep yourself focused and get the most important bits of information from this unique database. If you would like to be updated about the newest trends and inventions in the world of forex scalping strategies then do not stray and keep on reading my blog posts.

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The majority of forex traders apply certain type of charting software to be able to see past and present volatility on the market. These charting packages would be the key to giving an investor signals on when a buy or sell situation may be coming into play. Probably the most popular and used tell tale signs is the place support or resistance levels are broken, this is a forex signal that the price is looking to create a new high or lower in the market along with a profit taking opportunity has arisen. One of the most common support and resistance levels that your charting software can calculate for you may be the pivot points.

Pivot points are clear lines across your charts that show support and resistance levels for previous price action in the following day. Traders might begin using these trading signals as trend reversal points or breakthrough points about the continuation of the trend, either way they are clear forex signals.

Another common signal utilized by most traders is moving averages; you will discover that no matter whether you are a long term trader or perhaps a scalper, moving averages set right Nbr periods provides you with the answers on a currencies trend direction. A good example of using these moving averages as entry and exit point on the forex market is definitely illustrated on the 5 minute chart. If you have 2 moving averages set to 10 and 20 Nbr periods and the trend is upgrading, the 10 moving average will be on top if the trend starts to reverse the 10 moving average crossing over the 20 is a forex signal how the trend is reversing, hence becoming a sell trade. This is an indication to market that currency, if the moving averages cross over again this would be a sign to exit that trade.

Many traders make use of the formations of the candles about the charts themselves as forex signals. You might have heard of pattern recognition, trading triangles or channels. These are all signals that suggest the currency will make a breakout from the particular pattern with the hope of some profitable volatility. Although this does involve some support and resistance assessment it’s normally localized to a couple hours instead of days. In case of a currency bouncing between two prices of 40 pips apart for two hours you will observe the candles forming a reasonably straight cannel it’s when the price breaks from that channel that you’re looking for the profitable volatility. It’s these channels that one should identify as a forex signal.

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Trading on the daily charts is a much easier strategy as compared to trading intraday. This daily charts strategy can make you 100-500 pips per trade. You don’t need to sit in front of your computer for hours when trading with this daily charts strategy.

Let’s discuss this Daily Timeframe Strategy. This Daily Timeframe strategy uses only two indicators. This is Bill William’s Accelerator Oscillator (AC) and the Stochastic Oscillator. The Bill William’s Acceleration/Deceleration Indicator (AC) measures the acceleration and deceleration of the current driving force.

Bill Williams is famous for his application of Chaos Theory to Trading plus his concept of fractals. Bill Williams says that before price behavior changes, momentum changes and before momentum changes, there is acceleration and deceleration. Knowing acceleration/deceleration can give you an advanced warning. This oscillator does exactly that. But we don’t need to go into the theory as this daily charts strategy is simple and easy to implement.

Stochastic oscillator is another popular indicator that tells you about the overbought and oversold condition in the market. It has two lines, the %K and the %D. %D line is the moving average of %K. %K is shown as a solid line while %D is shown as a dotted line.

Open any daily chart on your MT4 Platform. Attach the AC Oscillator on the chart. Choose green color as the value up color and red color as the value down color. The choice of colors is not important. You can choose, your colors as long as you remember the value up color and the value down color. Choose the 5,3 and 3 settings for the Stochastic and attach it to the AC Oscillator. So, you will find both these oscillators superimposed on each other.

Now follow the following rules for a long and short trades. When the green AC and the Stochastic both are above zero, enter into a long trade. When both read AC and Stochastic are below zero, exit the long trade. When both red AC and the Stochastic are below zero, enter into a short trade and exit when both green AC and Stochastic are above zero. Use a stop of 100 pips above or below the short or long entry.

Practice this Daily Timeframe Strategy on your demo account and see how easily it can make hundreds of pips per trade for you. Once, you have practiced this Daily Timeframe Strategy and mastered it on your demo account, you can trade live with it. Good Luck!

It doesn’t matter if you trade stocks, bonds, futures or forex. Regardless of your market of choice, it is important that you study your charts. What I recommend is that you first go through your chart without your trades visible and study the best entry points. See if you can figure out why the entry was a good one and why prices moved strongly after that point. Mark all of these entries and spend some time with them to see if you can find a pattern that you can take advantage of the next time you see it in real time. Save these charts and go back and review them at a later date.

Secondly, note your entry and exit locations on the chart and review all of your results for the day. Determine what went right, and why. Then spend time on the failed trades and see if you can determine why the trade failed and what would or could have prevented your from entering at the wrong place. As an example, did you go short at a strong support area or did you go long at a strong resistance area? Maybe you were counter trend trading in a strong trend? In time you will slowly learn why prices react certain ways at certain times, and why price action trading is so important to profitable trading.

These issues mentioned in the paragraph above are some of the most common trading problems that lead to failed entries. One of the biggest mistakes you can make is to simply walk away from your trading at the end of the day and not know why you failed or what you could have done differently. Trading is one of the most difficult professions in the free world, and regardless of how smart you are, or how high your IQ might be, you will not succeed without a lot of hard work.

Peyton Manning, Tom Brady, Tony Romo and Drew Brees are arguably some of the best professional quarterbacks in the NFL, yet each one spends an inordinate amount of time studying the tape on opposing teams. Your adversary is the market you are trading against and the impulses of the other participants. In order to learn the opposing trader’s tendencies and to be better prepared for what the market may throw at you, it is important that you study the tape or charts so that you can improve your winning percentages.

If you are not already spending time reviewing and studying your charts at the end of each day, I challenge you to begin doing this today. Commit to it for one full week and see what a difference it will make in your trading. What you will notice is that you will learn to quickly see the best patterns “after the fact” each day. However, with time, you will slowly begin to see these patterns emerge in real time as they develop on your chart. Once you begin to see the patterns printing in real time, directly on your screen, you are well on your way to becoming a better trader. Most importantly, you will get a strong understanding of price action trading and how to use it in your daily trading. Regardless of the trading course you use to trade, daily chart study will be the key to it’s overall success.

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Let’s use the graphs of any Singapore broker to see what is hidden behind a candlestick chart when it presents a potential breakthrough of the support or resistance level. The most tolerant traders who are already in the market and keep the open positions will leave their positions open waiting for the end of the market’s correction. The more emotional traders will notice the opportunity to enter the market on the opposite side, hoping to catch the top of the market’s trend. The rest will remain as watchers, not entering the game and their opinions on the further development of the situation will be different.

At this time, the direction of prices stays uncertain, since the opinions of the traders in the market are different. In addition to that there are still a big number of other traders who are currently out of the market and they are not in a hurry to start trading.

Every trader has his own minimal measure of minimum uncertainty that is needed to start a trade. This criterion is directly influenced by the psychology of the person. As every trader has his own measure of risk, so they will start trading at a certain price level at different time. When the most of traders make their decision and start trading in a certain direction, the market will become the most stable. In the graphs it will be presented by a long trend in a certain direction accompanied by some price corrections.

There are many external factors that decide the market’s direction. The most important one is a fundamental factor based on the analysis of the macroeconomic events as well as the technical conditions laid down in the past movements. When all these parts contribute to the rate movement in the same direction, an experienced trader has an ability to see a potential trend before it starts.

Therefore to see a good trend with a high level of probability, we recommend you to make a detailed analysis of the price movements in the past together with technical and fundamental analyses that will give you much more information than watching the market waiting for the breakthrough of the resistance or support levels.

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For the same reasons I should have gotten out of my NZD/JPY trade the other night instead of holding, I didn’t feel comfortable with the weakness showing on the 4-hour chart early this morning. Overnight price action basically flat-lined…not what I would ideally expect to see real buying momentum had carried over from the previous session. Again, my entire approach hinges on momentum and follow through in the near-term…not where will it be days or weeks from now. In that vein, of course it’s possible to see this pair higher based on the current technicals. But I’m not in the business of sticking around in a trade that long to find out…too much event risk exposure that I’m unwilling to deal with.

I’m happy to take the money off the table this time around.

The 4-hour chart shows buyers powering up. This is as good as any a point to test the waters with a small probing trade. If we see a break above 1.5740 bid I’ll fee a lot more confident that sellers have probably stepped away.

If on the other hand price action breaks below 1.5495 bid then I’m out.

Though it could possibly go back up I’d rather take the money and run at this point. Unfortunately, it wasn’t necessarily the best close since I was thinking about closing it out last night before going to bed at a much higher level. There were subtle signs of weakness developing last night but I decided to hold on instead to see what the overnight action would do for me.

Nevertheless, it was a profitable trade and I’m now looking forward to the next.

The Daily and 4-hour charts are looking strong and so far the momentum is on my side (not to mention the carry). At this point there is no reason to question or second-guess the charts although one should always be prepared for the worst. The worst being that price action can turn on a dime and run against me without abandon.

I’ll watch for any early signs of weakness on the 4-hour charts before considering getting out of this trade. Additionally, if weakness develops and continues into the close of the trading session (5 PM New York time) I’d be much more motivated to close the trade. For those who follow my posts, you know that I’m an intermediate term swing/momentum style trader (typically holding for just a few days at a time). Not allowing large amounts of unrealized gains evaporate into thin air is a critical part of the approach since the window of opportunity for my trades can quickly close without much warning.

To be continued…

Carry trades unwinding will probably be a drawn out process punctuated by brief violent sell-offs as it develops. Now if you feel that the carry is still acting as support and yielding good opportunity now might be a time to consider getting long. Again, this is for a shorter to intermediate term trade…holding too long could get you hurt.

Notice the Daily versus the 4-hour attached screen grabs. We have a potential subsiding in selling interest the past couple of days developing. The Daily chart is in the middle of contracting volatility but still in a modest upward direction. I’d say any break below 86.65 would invalidate this idea since it would indicate that our timing is off or that the bears are much stronger then anticipated.

Let’s see what happens!

As of right now, I still believe that a long potential may exist relative to the price action on the Daily chart. It’s running right into the area of congestion I pointed out in my previous post. I still believe that near-term this area of congestion is acting as supoprt so until it’s clearly violated to the downside I won’t necessarily be changing my stance just yet. What I’m doing now is hanging back and watching for another opportunity to time my entry. If on the other hand the pair breaks definitively below the 1.5650 area I’ll stop being a Bull and start to reassess what trading opportunity, if any, exists at that point.

Happy hunting.

The area roughly between 1.5750 and 1.5650 is a cluster of congestion and naturally acting as support. The price action ran into it and bounced upwards (at the time of this posting). Think about the battle between buyers/sellers in this area that caused that cluster of price action to develop. Now I’m not saying that going long is a sure thing but it definitely seems worth a shot to me.

I’d throw on a small probing trade anywhere at the current level (at the time of this posting). But I wouldn’t feel completely bullish until price bids above 1.5890. If and when it gets to that point I’d probably throw on my full position size. Keep in mind, my probing trades are small trades whereby if I’m wrong on my timing and it doesn’t work out it’ll be a relatively small hit to the account. But if it works out I’ve put on a small portion of my trade at a relatively great price. It’s a form of scaling into a trade whereby I scale in, in two pieces.

The danger at this point is that it might still be too early for EUR/AUD to follow through to the upside. It could conceivably drop to retest the congestion area so set your stops accordingly. A break below 1.5760 will make this scenario more likely so buyers beware.

At best, if the downtrend remains intact it will allow me to get back short at possibly better prices. Right now, I was able to exit gracefully with a very negligible hit to the account. Now I’m ready for the next trade.

A probing trade is a very small position that by itself is relatively inconsequential if it wins or losses. But the great thing about a probing trade is that it gives you a better feel for what the market is doing because you have money on the line. Additionally, once we get confirmation that sellers are stepping back in we can build into this making it a bigger position with only a slightly worse average cost for the overall position.

I’d be comfortable adding to this position on a break below the .9743 level.

Let’s sit back and see what happens next.

Now if you believe the USD/CAD free fall from parity the past month is bound to continue then here is how I would play that angle:

As of this writing, we have a bounce on the Daily chart that sets us up for a potential entry to short. I’d now begin searching for any signs of weakness on a smaller timeframe (my favorite, 4-hour chart) indicating when sellers might be stepping back in. The danger with any trade like this is to be aware when sellers start running for the exits en masse…this is something we’d have to keep an eye out for on the Daily and use Stops based on key levels on the chart indicating when sellers may have lost faith shorting.

Right now, I’d sit patiently on the sideline waiting for signs of the bears beginning their assault on the bulls before putting my position on. I’ll post to follow up on this idea as it develops.

Personally, my needs are quite modest…give me candlestick charts in an easy to use customizable layout interface and I’m good to go. Additionally, if I can create price/technical alerts with relative ease to help me stay on top of the market this is always a huge help. When you trade as many pairs as I do it’s a little challenging to monitor all 20+ pairs constantly at all times of the day so alerts functionality is a plus for me.

For those of you that require a bit more professional functionality and are still looking for the “right” charting package/service, consider these things:

• should be intuitive to use and easy to learn
• supports wide range of functionality/customization
• layouts/workspace should be portable (accessible from any computer)
• stable and reliable

For these reasons, my package of choice is ProRealTime. Even though I don’t personally use technical studies there is an impressive roster of studies available for those of you who do use them. I especially like the fact that I create multiple layouts that I can access from any computer because it’s all online and server based. The chart images in my posts are all generated by this package.

In any event, you’ll need to try out various packages until you find one that meets your needs and will allow you to develop some level of basic proficiency relatively quickly. I don’t know about you but I’d don’t have time to read a 300 page instruction manual just to learn how to use a charting package…all my extra time is spent on perfecting the trade.

The short game is over if price action breaks above the 235.50 area definitively. This could be a bumpy ride for shorts.

The Daily chart still indicates downside momentum and the 4-hr chart is now showing buyers failing for the first time to come in. I’d be more confident with shorting if the pair holds at or below the 230.80 area come Noon New York time. If it fails to do this we may see buyers come back in supporting the pair near-term.

Keep in mind, relative to the other JPY pairs this one seems stronger. It won’t go down without putting up a good fight first.

Following up on my previous post, I find it more comforting to wait for a bounce after a strong selloff or downtrend before potentially getting into a short. On the Daily chart for GBP/JPY we have this bounce developing. What is the risk? The risk is that the current buying could go higher before potentially coming back down. Continued buying could be likely given the circumstances so beware getting in too early.

If it breaks higher at this point there could be a lot of follow through as bulls pile in to reestablish their carry trades. This is definitely the scariest part of this idea and would crush the short. But no risk, no reward, right? Just make sure you have your stops in place if you decide to get into this. Or, you could also wait on the sidelines to see more selling pressure develop first before timing your entry.

During most normal market conditions, the chances of the pair bouncing upwards versus falling another 700, 300 or even 100 PIPs relative to where it was yesterday is much more in favor of the bounce. If you watch enough of these kinds of selloffs over time on a Daily chart you’ll see what  I mean. The primary reason I’d rather wait for the bounce is because it represents a lower risk entry while giving me a better price…the kind of action I need so that I can sleep at night when trading a 24-hr market like Forex.

If you are an extremely aggressive “shoot from the hip” kind of trader then the only other opportunity to have gotten into GBPJPY in my opinion was back on Tuesday, Aug. 14th when the initial break downward occurred on the Daily chart. But since I’m a bit more conservative, I generally don’t like playing “breaks” out of ranges or congestion areas on the chart because based on my own experience I haven’t been able to be a net winner with those kinds of setups. Not to say that someone else out there couldn’t get these kinds of setups to work…I just go with what works for me.

The good news is there is always another trade around the corner more to my liking. So here I am waiting patiently for that setup. And yes, shorting a bounce in GBPJPY and some of the other JPY pairs is still a potentially good idea in my mind. We’ll wait and see.

This and other JPY pairs are notorious for fast and furious moves so beware and be prepared. Look for a solid bounce on the Daily chart followed by signs of weak buying before timing your entry to short. This could easily be said for any of the other JPY crosses as well so this opens up the potential opportunities for us to lock onto.

As of today it seems that the bears may have the edge. But it’s questionable as to how much committment they have in pushing this pair much further down.

When you see this sort of indecision playing out on the daily chart it’s best to stay away and let the professionals battle it out until one side clearly wins.

There is definitely potential for this to go higher but I’d rather see buying resume on the Daily and 4-hr charts before getting back into it. The probability of success though is reduced because of how close overhead resistance is right now (roughly 1.3820 area). But if we get a decent pullback giving us a bit more running room towards resistance we might be fortunate enough to catch a break beyond…at worst, we get out at roughly resistance or a relatively small loss.

For now, I’m sitting back and watching.

I definitely didn’t expect the strength of the move today but in the end it doesn’t matter. When looking at charts all you can do is identify high probability points where the market shows signs of buyers/sellers coming in so that you can catch the wave of buying/selling pressure…how far it takes you is anyone’s guess but by knowing where the next level of support/resistance is you can make an educated guess.

For upside momentum to remain healthy I’d have to say that we shouldn’t expect to see price retrace below the 1.3750 area and hold below it. I wouldn’t be surprised to see a retrace to this area but I would expect to see buying come back in soon after to give me the confidence of hanging onto my long position. Let’s see if the market can retest the 1.3850 level and beyond next week.

On the flip side, if sellers step in pushing below the 1.3635 area I’ll back off getting long until the dust settles.

The long idea is still valid with a break above the 1.3726 area since that’s where sellers most recently stepped in keeping buyers at bay. Psychologically, if the 1.37 figure is breached today then we may get some good further upside action supporting this idea. Let’s see what the month of August brings for EURUSD traders.

With all the JPY crosses crumbling on daily charts like it was going out of style and the majors experiencing similarly strong moves, I hope you were all able to catch a piece of the action.

I would hope no one is making the mistake of fading these kinds of gigantic moves. I’m sure some traders may disagree with me on this and unless you’re extremely experienced I wouldn’t recommend it for the average person. With such broad sweeping moves this past week it becomes even more important to be patient and pick your spots carefully. On daily charts I’d prefer to wait for an actual retracement/bounce before considering getting into some of the pairs.

For example, it’s possible that there could be more downside follow through for USDJPY next week but, it’s best to wait for a bounce first and gauge how likely continued selling will be based on the extent of the bounce. Friday’s candlestick is fairly indecisive so if a bounce were to happen then this bar sets up the potential for it early next week. If and when the bounce happens we’d need to see it develop to figure out if it’s worth a shot to short again. By waiting for a healthy bounce we’d be able to get a better price while increasing the chances of catching a wave of selling pressure as bears attempt to retest the most recent lows and beyond.

It’ll be interesting to see how the markets shape up next week relative to this past week’s action. Buckle up, it could be a bumpy ride.

With that said, here is the bargain I’m going to make with myself for this trade…I’ll move my stop up to breakeven. Considering the recent action, either the buyers are committed with momentum on their side or they’ve hit a wall at the 1.6650 area. Regardless, if momentum is on their side then I don’t believe we should see the pair drift back under the 1.66 figure (I originally posted on this when it was trading just under 1.66).

If we get a rebound then it will probably want to retest the recent highs at which time it’ll either go for it and break higher or not.

I was ideally looking for a break above 1.6610 and for the pair to hold it. By the close on Friday the price settled underneath the 1.6600 figure so it didn’t follow through with my expectations. Still, the week ended for this pair in good territory. The chart tells me that more buying is still likely in the coming days so I’m sitting tight for now.

What I’d like to see is a break above 1.6635 to create good conditions for a retest of the 1.6662 area.

Anyway, as the rout of these pairs began to pick up steam I was able to short USDJPY in the 121.50 area for similar reasons…technical levels were starting to be violated to the downside on the 4-hr as well as Daily charts. Fortunately, it ended the day decently in the money but the damage was done and Friday was more of a “damage control” day of trading for me. Once the dust settled, I was happy to see that my money management rules did its job and set me up for a relatively easy come back in the days to come. Remember, days like today even if you’re caught on the wrong side should not create insurmountable losses in the near-term.

For your reference here is the USDJPY chart showing how relatively weak it has been the past couple of weeks…the sell off from yesterday just helped things move along further to the downside. Going into the new week, I’d like to see a break below the 120.70 area. If this happens then the 120 figure is an open target.

Since the last update on this long play, CHFJPY has teetered back and forth moving roughly sideways for many days. I’ve come to the conclusion today that the high probability setup that I initially saw has lost its mojo and decided that it was time to let this one go. I’m now flat getting out a little higher than when I first posted on this idea (trading at roughly 101.35 at the time of this writing). Little “red flags” on the chart are indicating possible short-term pressure to the downside or at best continued sideways action.

I’d definitely consider getting back long this one once buying action reasserts itself and assuming the upside trend isn’t laid to rest before then.

Something has to give and my money is on the bulls. Let’s see if the the bears are still as committed with a break above the 1.6610 area.

Here is a typical scenario, you have lightening quick charts with all the bells and whistles and you spend hours pouring over them to find that perfect trade setup. Once the setup occurs you go to your trading platform and place the trade but, 1) you have difficulty getting your order filled of any significant size and/or, 2) you get horrific fills despite the fact that the market isn’t really moving (for a major no less). There are other possible variations to this scenario but you get the point. Who cares how great the charts are if the market maker you have your account with is incapable of giving good trade execution on a 24-hour basis.

Remember, the charts don’t execute your trades so make sure you choose your market maker wisely.

Ideally, I’d like to see a break above the 117.25 area to give me some confidence that it really wants to go higher. For extreme sports fans getting in earlier has its rewards but expect higher risk…buyer beware.

Remember, seek high probability setups only and stick to them until the price tells you otherwise. For now, I’m neutral and flat this pair. Getting out at this area leaves us slightly in the money relative to my original post for this pair.

Of course we’d love to see it go straight up from when we initially get into a trade like this (who wouldn’t) but that’s just not realistic. Technically speaking on the charts the price action is still healthy and indicating that the uptrend is still in place.. Until we see price action that definitively says, “sell sell sell!” this is still a potentially healthy long play.

If selling comes in hard, potential retest of the most recent swing low is possible.

The overnight action recovered most of the lost ground. Keeping this in mind CHFJPY is my pick for greatest potential if and when those who’ve been shaken out of their longs yesterday come rushing back in to grab their stake before it’s too late.

Though I like most of the Yen crosses I think CHFJPY is the one that represents the path of least resistance to the upside from a technical perspective on the chart. Cleary, I’m assuming there is more upside potential just because the trend hasn’t ended yet.

The GBPCHF potential from my previous post disappeared into thin air as a strong wave of selling pushed it down over 150 PIPs in one day. Granted, getting long was admittedly a higher risk trade but well within the realm of possibilities since the overall price direction upward was pretty “trendy”.

You might wonder why I wouldn’t short even though I noted that there was a possible double-top. One, I don’t believe that double-tops represent high probability trades (I only trade high probability stuff); two, I’ll only trade with the underlying direction (trendiness) of the price action (much higher probability). In this case, it didn’t work out but in the long run this kind of idea from my experience will have worked out more than half of the time…the kind of odds I like.

Since all out selling hasn’t been sustained or successful since a rebound on July 2nd there is potential for the buyers to be stepping back in, in an attempt to rally higher.

For example, because the spot FX market is a decentralized market, the bar-to-bar price action on charts could differ depending on the market maker and/or pricing source you do business with. This means that depending on the timeframe of the chart you analyze and the source of the rates for that chart, it’s very possible that the way a candlestick bar forms on the screen for one trader will be different for someone else…yet, both traders are looking at the same exact currency pair. 

Imagine, one trader might see a Doji (sign that upside move might be losing steam) form on their candlestick charts but another trader within the same circumstance will not. Which trader is seeing the correct candlestick bar chart? The answer will surprise you…neither trader’s charts are right or wrong. This is simply a reality of the market and the nature of how the data is displayed by each chart provider. So how does one analyze charts effectively in this market under these conditions? 

There are a couple of things one can do to help minimize the impact of this type of display inconsistency… 

First, study charts of larger timeframes. Not only does the price action have less “noise” on larger timeframes (i.e. Daily or greater) putting you in better touch with real moves as they occur, but the way candlestick bars are drawn will involve less variation between charting providers since we’re talking about bigger moves in the market where a few PIP’s difference between price sources won’t amount to much of a visual difference on each candle bar. Whereas a few PIP’s difference on smaller timeframes may result in very big differences on how individual candles are displayed across different charting providers effectively making your analysis of those charts useless or at best inaccurate. 

Second, get used to eyeballing price action as a whole and not focus too much on individual price bars. Though it’s important to try and detect the clues that individual bars might reveal, you shouldn’t read too much into any one particular bar knowing that it’s possible for bars (especially on smaller time frames) to be giving you an incomplete picture. It’s much better to take individual bars and compare relative to “big picture” recent price history/action in order to determine if what any one or set of bars might be indicating makes sense relative to the broader price action. 

Following these suggestions won’t eliminate the impact of this and other similar discrepancies entirely. But what they will do is help minimize them to the point where you become less dependent on individual bars and increase the chance of you avoiding misinterpretation of what you’re seeing on the screen based on price bar display inconsistency. This should help you identify trading opportunities better regardless of what charting provider or price source you use.