Daily FX | Dynamic Trader Blog

Technical Indicators

Good morning dynamic traders.

From the large number of emails we get at Dynamic Trader asking us which indicators we use and what are the best ones is one of the most common questions. Most new traders are always in search of the holy grail and especially of the one indicator that is always right that tells you when to buy and sell making you lots of money with very little or no work at all. The truth is no indicator like that exists!

The most common trading indicators are Moving Averages, RSI, MACD and Stochastics. These are the ones you will commonly see on most traders charts and on ours too. A common misconception is that the more indicators displayed on a chart the better the analysis will be. Filling the chart area with numerous indicators is only going ot lead to paralysis of analysis.

Keep your chart space fairly simply and clear and don't get tied down with what the indicators are saying all the time. Indicators are meant for confirmation only and relying on them heavily will not provide accuracy in your trading. Price is the most important aspect of trading and leads the indicators.

Some typical settings traders use for the common indicators are listed below.

Moving Average - 50 or 100 or 200 EMA
RSI - 14
MACD - 12,26,9
Stochastics - 8,3,3 or 14,3,3

Again, please use indicators to confirm what you already gleaned from the charts. Concentrating on indicators and then price is a very blinkered form of trading.

More forex analysis here

Good trading.

Forex Analyst
Anne Chapman

Loonie Uptrend

Good morning Dynamic Traders.

The USDCAD as shown on the 4 hour chart below is in an uptrend but it is not far from a resistance level. If we break out of the channel then teh support levels I have identified should be noted. Don't forget though, we have been in an channel since December 14th 2007 on the daily chart so trading on a smaller time frame is based on smaller trends.

Click here for more Dynamic Trader forex analysis.

USDCAD Advanced Get chart analysis. Data provided by eSignal. Click here to read more about Advanced Get.

Forex Analyst
Anne Chapman

Euro Congestion Zones

Good morning Dynamic Traders

We are looking at the Euro Dollar chart this morning and identifying the trading cycle on this pair. Below is a weekly chart and the areas highlighted in green are area where this pair has previously found congestion. Notice the areas of congestion are at the big figures and then a breakout took place and a continuation to the upside.

Where the pair is right now is a congesion zone. This is where swing traders may choose to stand aside and wait for a trading opportunity. Traders can still trade this pair on a shorter term basis but this requires analysis on smaller time frames as trends will be more obvious.

A support from the trendline and also the previous double bottom will often act as a spring board should the price reach those levels. For a continuation to the upside we need to break the all time high shown in the green zone.

Forex chart below courtesy of Advanced Get. Data is provided by eSignal.

Further forex analysis at www.fxcps.com

Forex Analyst

Anne Chapman

Dynamic Traders

What makes a Dynamic Trader?

A Dynamic Trader first and foremost has the ability to detach themselves from the market emotionally. An emotional resilience is undoubtedly the biggest advantage when trading the markets. The markets consist of human emotions and also over 90% of losing traders (mainly as a result of emotion and lack of education). Detaching emotions from trading is 75% towards a successful Dynamic Trader.

In addition a constant desire to improve is essential. A Dynamic Trader as the name suggests does not and cannot remain static and needs to be able to adapt to the ever changing market conditions.

The Dynamic Trader does not look to chase markets or incorporate heavy risks into trading but uses a structured rule based form of trading which involves discipline and intellignece.

Dynamic Traders look for high probability set ups with the odds stacked in their favour as opposed to trade and pray. Many traders hold on to losing positions and pray that price goes back in the direction they are trading in. This is a recipe for disaster and Dynamic Traders always cut their losses quickly giving them the ability to trade tomorrow.

A traders approach is very important which is why new traders should aim to become Dynamic Traders.

Visit our Dynamic Traders Forex Blog for daily updates and training webinars.

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Forex Analyst
Anne Chapman

Triangle Formation

Hello Dynamic Traders,

The GBPJPY is completing a traingle formation on the weekly time frame. This cross is producing multiple divergences and we have the figure and triangle upper trendline acting as a resistance. Watch for a reversal indication or a breakout using our ESLT although we favour a reversal more.

Put this onto your watchlist for next week as this cross will be providing moving quite some pips in the weeks to come. You can read more at our other forex analysis website.

Have a good weekend.

Forex Analyst
Anne Chapman

Chart below is courtesy of Advanced Get. Data provided by eSignal

Trading Diary

A trading diary is an essential element of trading yet one many traders decide to bypass. Every trader should keep track of their trades to identify  why and how they took the trade and why and how they exited the trade. Below is a list of information a traders log should contain.

• Date
• Time of entry
• Entry price
• Position size
• Risk size
• Profit target
• Exit price
• Results
• Lessons learned

Our trading diary contains more information than the above stated but if you currently do not log your trades then this is a starting point for your own personal traders journal.

Once you have a months trades documented in your trading diary then you should start with analyzing the trades and work out where you can improve your forex trading. This is a very important exercise and  well worth taking the time out to do as it will be one of the best ways to improve your trading approach.

You can learn more about forex trading by signing up to our FREE lesson newsletters at www.fxcps.com

Good trading.

Money Management

Many new forex traders we have come across seem to find money management boring. Well, like it or not, money management play an extremely important part of trading and to ignore it is to admit defeat before the battle even begins.

Money management not only restricts your losses but it also give you your profits.

Before taking a trade you need to stack the odds in your favour. This is something we go through on our courses and mentoring sessions and is much too vast a topic to explain in a few paragraphs here. Once the odds are stacked in your favour then you need to identify your entry point. After that an exit point needs to be established and this is where the stop loss comes in to action. Your stop loss is your safety net and very important in limiting your losses and giving you the ability the trade for another day.

The positioning of your stop loss is as important as when to enter a trade. We have seen many traders scared of having a big loss that they place the stop loss only a few pips from the entry point. This scared method of trading inevitably leads to more losses than profits.

Stop loss levels are very important and unless a trader uses them correctly they will only cause losses by a trade taking out your stop and then reversing and going in the direction you were hoping for in the first place.

Hopefully those of you we have mentored are applying our strategies for not only entries but also stops.

Good trading.
Anne Chapman

Euro Hits New Highs

Last week we had some memorable moments but what a bizarre 5 days it was.

On Monday crude oil went close to it's all time high taking down the Dollar at the same time.

Tuesday Bernanke's testimony gave the impression of weaker growth in the economy and rising inflation. Equities were dropping as Bernanke was talking and oil came down about $9 a barrel from yesterday but today will be remembered for the new all time high created by the Euro Dollar. The Cable produced a new high from the last 3 three and a half months.

Wednesday saw a further move down in oil which now reached £132 a barrel based on a Government report that US oil supplies had increased. The Euro started selling off against the Dollar which maybe as a result of profit taking but provide a pop and drop shorting opportunity to some traders.

Thursday saw even further decrease in oil which now closed at $130 a barrel and the Euro clawed but some losses but convincingly at all. However, it decided to rest above the support level.

Friday gave further weakness in equities at the open but closed modestly higher and oil dropped again closing at $129 a barrel.

The whole week provided volatility in both equities and the currency market. While the currency market was focussing on the Euro continuation or reversal from an all time high, the equities were concerned over Fannie Mae and Freddie Mac.

Good trading.
Anne Chapman