TECHNICAL ANALYSIS

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Thursday, May 31, 2012

Is the Greek's exit of the Eurozone a good thing?

The Eurozone is tumbling and there is no visible solution in the near term for the many challenges it faces. In light of a probable exit by the Greeks, we ask ourselves if the market has not discounted this already, and the exit will mean a positive news to those remaining in the zone. On the other hand, many others think that the exit could only trigger discussions from the sort: “who will be next?”, thus keeping the bearish pressure on the Euro economy. This can be a very intense debate, but we ask ourselves again, is the alternative really saving Greece? In times of war and in Chess, would you protect the wounded pawn to the detriment of the queen?

Friday, March 23, 2012

Yield Curve

We have borrowed some text from FX Words  (http://www.fxwords.com/y/yield-curve.html)
This is the basis for our service which we’ll explain below.
The yield curve describes the relation between the interest rates and the maturity dates of debt instruments for a given currency (such as bonds and other related securities). For example, FX traders often study the yield curve between the US dollar interest rate paid out to US Treasury securities with varying maturities. Typically, the yield curve is upward sloping asymptotically, suggesting that higher yields are offered to securities with longer maturities. This is referred to as the 'normal' yield curve. However, yield curves can also be inverted, or humped in shape.

Normal Yield Curve
As stated above, the normal yield curve describes a positively sloping curve indicating that larger interest rates are associated to securities with longer maturities. Generally, this reflects the fact that most traders expect the economy, and inflation, to grow in the future. An increase in inflation is generally accompanied by tighter monetary policy and an increase in short-term interest rates by the Fed in order to slow growth and pressure from inflation. Thus, traders will ask for higher rates of return on securities with longer maturity dates in anticipation of higher future interest rates in general.
Inverted Yield Curve
An inverted yield curve, as the name implies, inverts the relationship described in the normal yield curve. Paradoxically, long term yields fall under short term yields, indicating a negatively sloped curve. This trend indicates an expectation of a receding economy in the future, or a belief that the market will not exhibit any continuing inflation. Overall, low or negative expectations about future conditions might cause this kind of yield curve, as demand for short-term investments exceed long-term, driving up the interest rates on securities with a lower maturity date.

Although the correlation is not prefect, but inverted yield curves have preceded numerous recessions in the past.

Humped or Flat Yield Curve
In a Flat yield curve, all maturities offer the same yield, while in a Humped yield curve, long term and short term maturities offer the same yield while middle term maturities offer varying return interest rates. Generally, these kinds of curves hint at overall uncertainty about the future and usually shift towards a normal or inverted curve as more information is made available.

Overall, yield curves are important to FX traders as it offers what amounts to be the sum expectations of all market participants on future interest rates. Yield curves are one of the best indicators of the future performance of an economy.

Our service:
Taking the 10 year (10Y) yields for each currency we calculate the returns for the pair and track it with several updates throughout the day. Simple enough right? I found this information extremely useful when trading the pairs. It is important to mention that this information is mostly tailored to day-traders. We plan to update this every week on Fridays! a good summary of the week and a good reference for the next one.


10 year yield comparisson for selected FX pairs. Each point corresponds to a trading day, the last one being March 23 2012. The time frame in the upper corner is only a reference for when the pairs are not heavily traded in the European market.




Remaining pairs for week 12 (19 March-23 March 2012)

Wednesday, October 19, 2011

Forex signal Oct 19

Buy GBP/CHF at 1,4230 .Stop loss: 1,4114

The pair shows a significant cross of the Tenkan Sen over the Kijun Sen (black line over red line on Oct 18) Since then we have been monitoring the pair until it gets out of the cloud. At the moment of the snapshot, we see retracement and we will keep buying cable at 38,2 - 50 - 61,8 and 78,6 fibonacci retracements. However if price stays in the cloud too long we will be exiting our position early. We expect the price to bounce out of the cloud in the short term (2-6 periods).

The cloud is considerably thick which gives us some extra certainty on this trade; however, we categorized the signal as "Weak" due to the fact that the Tenkan Sen crossed the Kijun Sen below the cloud.  For real time updates check our twitts.

Notice thickness of the cloud. This should give us plenty of space to hold our position for further upside.. Our primary stop loss will be below the kumo, but we will give updates via twitter.

Wednesday, October 12, 2011

Ichimoku pays off for USD/CHF ; CHF/JPY

Please take a look at our Ichimoku based trading strategy. Below the results for yesterday's position.

Sold USD/CHF @0,9105

Sell signal was triggered as price failed to break the resistance given by the lower Kumo.

Saturday, June 4, 2011

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Wednesday, April 27, 2011

Signals for Wednesday April 27th

Signals generated by the Rolling Stone's trading system. GBP has gained strongly due to recent news favoring the currency, however, against the EUR this should be a temporary situation and the uptrend should renew sooner than later, same for the GBP/CHF. USD/JPY is a favorite candidate to trade short due to the long major downtrend that the pair is experiencing (at the moment the USD is strengthening towards the JPY but we consider this to be short term as it has timidly broken the 60EMA low)

Tuesday, April 19, 2011

Trader Sentiment Indicator (TSI) update - January/February 2011

Below, you will find an update on the TSI (see own page on how the indicator is built). The indicator is displayed together with the correspondent EUR/USD chart. Please note that the indicatior is calculated manually, at the moment we are working on the March update and soon will catch up with current developments.

It is possible to observe very interesting behaviour on this curve, specially since it's main input are news mixed with technical indicators. It accurately describes what happens with the pair, and in some cases, can be a very helpful guide to describe "what to expect" as the trader sentiment is not something that changes lightly. It is a lagging indicator, that is for sure, however it has helped me greatly on my strategies (i.e. I would never trade against the main TSI direction.), but that is me, other traders might take the peaks of the TSI and trade against it for a short period, and still be very profitable.

Trend lines have been added to see when the trends are broken

Monday, April 18, 2011

Did you catch the trade?

Reference is made to the signals issued on April 18th... see results a few moments after the signals were issued:

Updated chart on USD/CHF. Price moved as expected following the main trend. Profit was instant




Updated chart on GBP/CHF. No further comments.

Signals for Monday April 18th


Signal generated by the Nutcracker trader system. Potential for a sell entry developing on this pair. Should price break the high 34EMA, a stop-loss will be released.


Another pair which is offering opportunities to enter the market. We have placed small orders on these two pairs and plan to increase the size of the orders as the price moves in our favour (downwards). Should it not behave that way, we will exit and analyze.

Friday, April 15, 2011

Signals for Friday April 15th

Long term signals generated by the Fast and the Furious trading system. We have opened limit orders on these pairs. Please note that we might post trades (via twitter) that go against the expressed here, the reason for that is the time frame on which we are trading. The signals below are long term (for us that means more than 5 days with open positions), while we might have also daily positions that we close at the end of the session (this will be dictated by the development on these pairs). Follow us on twitter for quicker updates on our open positions and trading tactics.

Signals generated by the Fast and the Furious trading system. All signals have been checked against main trends (100EMA, RSI) already in place, meaning that they represent tactical entry points to ride the current trend. We have opened limit orders and wait for them to get filled.

Monday, April 11, 2011

Signals for Monday April 11th

Signals generated by the Nutcracker system.
Major pairs bouncing from support levels. Be cautious with entries here, we have placed small orders for all three waiting to see the pair bouncing and then, only then, we start buying more heavily.

Sunday, April 3, 2011

Signals for Monday April 4

Signals generated by the Rolling Stone system. Price continuing the confirmed trends on the 4H charts. Signals have been confirmed with RSI values (38,2 - 45,7 - 63,3 respectively). Notice that we are entering AUD/CAD at a not to healthy RSI, therefore we are assigning a smaller position size. In other words, we are buying less AUD than GBP for instance. 

Wednesday, March 30, 2011

Why EUR/USD is not good to trade the rest of week 13 (March 28th-Apr 1st)

Traders and analysts will normally employ complex technical analysis to advice in which direction to go regarding a currency pair provided that a support/resistance level is broken, tested or none of the above. 

However, today I would like to use the same systems we implement to execute our orders, and provide advice, to actually tell why a particular pair is not a good candidate at all for trading this week.

We generated a sell signal on Monday March 28th at EUR/USD 1,4078 . Our order hit the SL at 1,4132 (above the volatility threshold for that timeframe of 50pips) and came back to hit the 1,4040 levels with indications of continuing the downtrend if it hits 1,4017 support. Some analyst estimate that the trend is upwards nonetheless and a break above 1,4115 will trigger further upward movement. To me, and with all due respect, this is like reading the horoscope (there is always something for everybody up or down). I honestly can’t see a clear direction on the EUR/USD going ahead this week and therefore I prefer to blunt out that this is not the best pair to trade. Period.

What to look for avoiding high risk trades:

RSI: fluctuating between 40 and 50 in the 4H chart. Depending what type of trader you are, in my case I use the 4H chart, but if you are a position trader (longer term) you can use the same analogy to a daily or weekly chart.

Price action: Open and Close near each other in the previous 10-15 periods. No clear indication of trend

34EMA wave: Simply flat

Optimal tracking filter: Inside the 34EMA wave which eliminates the chance for signal generation if you follow the Nutcracker system.


Real time example:

Notice the indecisive RSI as it matches the also vacilating price action. Trading during these conditions will only increase your heart rate

Tuesday, March 29, 2011

Update on signals from March 28th - Did you catch this trade?

If you followed the Nutcracker system you probably cashed in on this opportunity (see picture below). I did catch it, but this happened very early in my morning... I guess a trading robot would have not missed it...

The Nutcracker system issued a buy signal when the price crossed down on the 34 EMA high. Very quickly after that price action moved in our favor. However this is regarded as a short lived upward movement as the main trend is downward and there is no major indication that it will change soon.

Monday, March 28, 2011

Signals for Monday March 28th


Signals generated by the Nutcracker system. See picture below taken on the NZD/USD pair. We have opened limit orders on the three pairs and wait for their fill. All signals have been generated using a 4H chart however they have been calibrated towards the daily charts in order to respect the major trend.



Notice how the price action follows the main trend, we however do not recommend entering the trend ASAP as there might be a better positioned entry point later on.


Saturday, March 26, 2011

Friday, March 25, 2011

Signals for Friday March 25th

Using the same long term approach we have updated our signals from March 17th as the moving averages develop. Please find our updates below.

Signals generated by the Fast and the Furious system. Long term signals replace the ones issued on March 17th as the system updates those signals that did not generate an entry.

Tuesday, March 22, 2011

About Expert Advisors (Forex Automated Systems)

I am new into Expert Advisors, I like to follow the charts, the price action and eventhough the rules for the system of my choice are not modified, I still like to have the feeling that I have the power to bend them. However I've been told so many stories about good results from using Expert Advisors (EAs) that I had to look into what solutions are out there and how I can apply them into my trading systems. I found some interesting one I would like to share with you here:

* Forex Market Trader V.2.0 (Expert Advisor)

* MetaTrader 4 (MT4) Expert Advisor - Free download through ad below - then click on "platforms":

Thursday, March 17, 2011

Signals for Thursday March 17th

Introducing a Long Term Trading Strategy (based on "Fast and Furious" trading system).
It follows the same principles of the above mentioned trading system, however it looks over a longer time frame, which reduces the risk enormously. We have three open positions following this system (follow them on twitter: Short on AUD/CAD & USD/CAD and Long on GBP/USD) as of today they are totaling: +250pips with a target profit of +500 to +650 pips . We decided to share our portfolio of limit entries...

The entries have been chosen on a 4H chart however considering the long term perspective of daily movements and established trends.

Friday, March 11, 2011

Signals for Friday March 11th

Watching closely USD/CHF 0,9368 is under the breakout of 80EMA high. This will represent a good opportunity on the buy side. EUR/USD showing further strength on the short side. Sell AUD/NZD, important break in downward direction