Hello Trader, the reason your are on this page is because you have either been trading signals based on indicators, technical analysis and /or Expert advisors and you are looking a better alternative.
Some of these Technical analysis signals work, some others dont.
Some are profitable 50% of the time or more, others are loosers.
The truth is people, Technical analysis is only good enough when u are using it with Foundamental Analysis/economy news. Trading Technical analysis is almost trading blindly as a single economy report can break resistance/support /trend or whatever line you maybe watching.
I started out trading the forex using Technical analysis (TA) after a few lessons from a DVD i bought for $600.
To cut a long story short, my TAs did not work out. I was winning some trades but loosing even more.
My self confidence was low, and i felt like quiting quiting the forex until one day, i discovered the Power of Economic News Releases.
One of my mentors had his first loosing trade yesterday in 8 Weeks!!!
Wouldn't you like to be THAT person?
Lets re-think what the forex market is
The FOREX or Foreign Exchange market is the largest financial market in the world, with an estimated volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another. ...
In short, one currency in the pair is traded against the other in the pair according to how strong or weak the other one is
for example, EURUSD pair. This pair is trading EURO vs US dollars.
on a EURUSD chart if the EURO goes up agaist the USD, the chart will point up, vice versa if the USD strengthens against the EURO.
What really drives the market
The primary factors influencing exchange rates include the balance of payments, the state of the economy, implications drawn from chart analysis as well as political and psychological factors.
Economic data report is the major mover of them!
The REAL Trading Factors
The top factors that have a major market impact on a regular basis are:
- Employment data
- FOMC meetings
- US Federal Reserve Chairman's testimoy
- Trade balances
- GDP
- ECB rate decisions
- Consumer Price Index
- Retail sales
rest of these and their implications are
hereMore importantly, There is a link on this blog right
here that you can use to measure the magnitude and importance of these reports. You could also download ax XL file that shows the magnitude of these reports
here but if you should ask which of these are traded the most, then that would be
NonFarmPayroll
retail sales
cpi
durable goods
gdp
trade bal
tics
Trading these Factors
To trade these factors My way you first need an economic calendar and a news source.
some calendars can be found at forexnews , Forexfactory, EventPak,and Dailyfx.
Try them all and compare data as concensus may vary amoung them
news sources can be found in various trading platforms like MGforex and coesfx. Juter,st open a demo account with them ( or a real one ) and use the news they offer in the platform.
The faster the news source, the better so i use a source from my partner who signed up with bloomberg, this source is very fast and i am sure u would love it based on how we gonna trade.
The Strategy
step 1. Review economic calendar and pic out the most important movers for the day.
Forexfactory tells u this using color codes, if they are red, it means maximum potential volatility.
step 2. Identify the time of the trade you are going to make
The calendar should show the time when the data will be released which is the time you will
be trading.
step 3. Identify the previous and the concensus for the Economic data and look at the chart to tell how price would move if the data is better, worse, or just as expected.
This is the only time you should use technicals in this strategy, just to tell how much
step 4. Setup your trade plan
An example would be to Short the GBPUSD if:
the US trade balance previous was -$65.0B and the Market expects (concesus ) -$67.0B and the Actual came out to be -$62.0B. This is way, way off the concesus and is a thumbs upsurprise which is good for the dollar.
this plan would look like this in sumary:
previous:
-$65.0Bconcensus:
-$67.0BLong ->
GBPUSD if US trade balance -$68.0B or less negative
Short ->
trade balance is -$66.0 or more positivethis is how u should setup your trade plan. You must also be aware of conflicting reports like for example if a Industrial production and Manufactoring production values dont
both mean a short or a long, then dont trade as the values conflict and the currency is ambiguous
Step 5. Trade that plan!!
You will get into the trade EXACTLY when u see the figures come out, dont hesitate, or else u are screwed. Stay in only as long as the charts tell you or before a retracement is complete so that you dont loose your pips.
I personally only stay in my trades for about 2 minutes max, AVG of 30 seconds
Lesson finish, happy trading
