EURUSD Daily chart analysis

Basic indicators  Moving Average Convegence Divergence (MACD),Slow stochastic, Relative Strength Indix (RSI),Simple Moving Average, Bollinger Bands, Candlestick patters used for analysis.

In trading envirnment there is no avsolute truth.No body knows what is the right thing to do in any given situation and what is right forone trader is wrong for another.That is the reasons there are both bulls and bears in the market and both of them make money.Joe Ross " Trade what you see, not what you think".

Saturday  September 6, 2008.

EURUSD chart with 20 SMA AND 5/32/5 MACD

Click on the chart to view it big.

Trend   analysis using 20 SMA.The slanting of 20 SMA is downwords. Price closed below 20 SMA

MACD 5/32/5  Below 0 line, Bearish cross (Sell Mode)

Candle stick   After is series of fall and a long bearish candle a doji candle is formed.This indicates market is in a state of rest (Consolidation).

The market can continue its trend Or reverse.

Trend is your friend and if you are trading in the direction of trend , you sell rallies or stand aside.When you sell ralies towards Resistance use stop loss and profit targets.

EURUSD daily chart on the same day with RSI 14 and Bollinger Band Sandard setting.

This is a suitable set up for counter trend trading.The RSI is oversold with a positive divergence.Price is in the Lower Band of Bollinger Band. A doji is formed.How ever the close is below lower bollinger band.

This is a set up you can trade .Trigger of entering the trade is when the price break out of the H P of doji you can enter with tignt stop loss and a soft target of 20 SMA.The stop loss can be placed in two ways using the doji candle  High Risk stop loss 5 pips below the LP of doji OR Medium risk stop loss 5 pips below the OP of the doji candle.

You can be a trend trader OR a counter trend trader in  this two set up. This is why Money Mangement is very important.You should have a minimum of 2.5 and above risk reward.Even when your set up fails 50 percent of time still you make money .Let us see on Monday how the price is going to behave.Muraleedharan.

PRACTICAL GUIDE TO DEVELOP AN APPROACH TO CURRENCY TRADING.

Goal of currency Trading. To earn 36 percent annual ROI .

Land Marks   To earn 36 percent annual ROI you must earn 3 percent monthly ROI on your equity.The goal is to be broken up into monthly ,weekly and daily goals and measure your performance against your goal.Your equity is 5000 USD. You should earn 1800 USD on the end of the 12th month and you should earn 150 USD per month 40 USD per week 8 USD per day to reach your target.Any goal should be measurable and you should evaluate your performance against goal.

You should decide your style of trading. For example your style is 'swing trading'.Swing trading can generate a profit of 100 to 300 pips in a period of few days.

Once you have decided your style you should decide your system parameters  .Example Condition 1 ) You will trade only in the direction of the primary trend.How to decide the primary trend.You should examine the Weekly chart and daily chart to determine the trend.Put 20 SMA on your weekly and daily chart.

Example chart Weekly with 20 SMA

 

Here if you examine the slope of the 20 SMA the steep is down and the Current price is trading below 20 SMA. Hence the trend is confirmed as down.

Example of Daily chart with 20 SMA

Here in the Daily chart the 20 SMA is sloping down and Current price is trading below 20 SMA . Hence the trend is considered down.

One of the three decisions ie Buy , Sell or stand aside is to be taken.Here the trend is clearly down. Hence you can eliminate the buy decision.Now you are left with two choices 1) Sell Or 2) Stand aside.Now you are confronted with a question when to sell.

Here you take the help of 4 Hour chart. You put two more indicators 1) Bollinger band stndard setting 2) Slow stochs 8/3/3 setting to find out the trading set up.

Your Set up conditions are 1) Price Pierces the upper band and closes inside. 2) Trend in 4 Hour chart is sideways. 3)The slow stoch is above 80 and making a bearish cross.Once this set up is ready you look for entry trigger which I will discuss below.

Four Hour Chart is shown below to find out set up conditions.

Here when you examine the conditions 1) Trend is sideways and this condition is satisfied. 2) Price should pierce the upper band and this condition is not satisfied. 3) Slow stoch should be above 80 and should make a bearish cross and this condition is also not satisfied. Hence this set up is not a valid set up. Wait for next week to get a valid set -up.

System Parameters.

Primary Trend analysis using Weekly and daily charts and 20SMA and trade in the direction of Primary Trend.

Retracement  rallies to be identified using 4hour chart,20SMA, Bollinger band with stndard settings and slow stochs with 8/3/3 settings.

Find out using the momentum is reduced and reversed using hourly chart candle sticks and slow stochs to trigger entries.

Incorporate money management rules 2% on the equity and risk rules that minimum of 2.5 R multiple for entry and half of the order on Risk pip levels to cut lossess and the remaining half to run profits.

Find the statistics of the system over 100 trades and make a tabulation to know win loss ratio and other numbers with out deviating from system parameters.

The reasonable target can be placed to Lower Band level of 4 hour chart and first half exit can be placed on 20 SMA of 4 hour chart.When exiting the first half the other half stop loss can be moved to break-even level to reduce risk.

The Main theme of this game is to cut your lossess, run your profits, trade selectivity, R multiple and a confortable system to trade with.

Record and evaluate each trade using a ten point scale and examine to find out flaws on a daily ,weekly and monthly basis.Evaluate your system performance against your profit goals and record your comments that whether it is possible to meet the goals and if not why?

24th November 2008

4 Hour chart slow stoch 89

The trend on 4 hour chart is sideways with a down bias.The sloch conditions is satisfied. The set up is not complete since price is not touched upper bollinger band.

4 Hour chart

Here the price tagged the upper band 1.2671 Price 1.2675 and retraced.This completes the set up.

Entry trigger using 1 hour chart

 

Here an engulfing bearish candle is formed after touching the upper band of hourly chart.Slow stoch is also showing a bearish cross.1.2600 is the entry point with stop loss of 1.2685 Target exit  1.2451




Link Goddess of Fortune views on currencies