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2007 April

April 27th, 2007 @ 7:39 pm by Sunil Mangwani

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Our second FX Instructor video highlights the use of Fibonacci’s and Divergence (including hidden divergence) in predicting price action.

[youtube]http://www.youtube.com/watch?v=aFILvlDEpIY[/youtube]

Stay tuned for future video releases by FX Instructor!

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April 24th, 2007 @ 11:43 am by Mihai Marinescu

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The title of our blog discussion already prompted reaction from our traders… Paul admits that if using stops makes him a sissy then he must be so when it comes to trading. Along the same line of thought I must admit to be one too, and I believe most professional traders could also be considered “sissies”, for the same basic reason: they refuse to trade without stops…:) Don’t worry Paul, I was just trying to make a point – neither I nor any of our instructors would ever advise anyone to trade without a protective stop… However this myth circulates among traders, we have heard this phrase more than once, which is exactly why I think it is important to clarify certain points with regard to the use of stops when trading on Forex.

I mentioned from the very beginning that we are considering the “sissies” to be more sensible then the “neckbreakers”, and in what follows we will explain some of the reasons why. However, those who believe trading without stops is preferable have some arguments of their own, that I will try to expose in brief in today’s article. So, why do the “neckbreakers” prefer “walking on a tight rope without a safety net”, as Sunil put it?

First, there is a technical argument. Some trading platforms suffer technical problems from time to time, and as a result price sometimes displays huge spikes of hundreds and sometimes even thousands of pips up or down in only a few seconds. Of course, any stops at any distance in the direction of the spike will be wiped out instantaneously, and the trader will get his trade closed for no reason, while all the other platforms perform without any problem. I suppose we can all understand that such a situation could make any of us mad…

Some traders believe that not using a stop at all will protect them from such situations. If their trading balance is big enough compared to their positions in the market, they might be right, too… These spikes are essentially errors, and they are corrected in a matter of seconds, after which price goes back to its normal movement. Our traders may be right inasmuch their trades would probably not be stopped out by such rare events. However, I personally experienced this problem with all the brokers I have worked with and I can say that even if my stops were hit on such an erroneous spike, all positions were eventually rolled back and I got out of the situation with no harm or loss of any kind in my account. Once I was even credited an unrealized profit just because without the spike I might have reached the target of my trade!
Of course, these highly improbable events are still possible and your broker may not be such a nice guy, so there is a possibility that you lose something after such a problem after all… Nevertheless, this is definitely not an argument in favor of not using stops when trading, due to some very sensible reasons: 1) these events are very rare; 2) even if they happen, respectable brokers always roll back all positions after the event so no harm is done and 3) even if your stop is hit- if it was placed correctly – this will not be a catastrophe and your account will not suffer much anyhow, so there is really no reason to make such a big deal about it.

Then, there is the argument of stop hunters… I must admit I personally consider this to be a point to be taken seriously, as all of us know there are many stop loss hunters out there, and placing our stops close to the market price will give them the tools they need to fight individual traders and win the battle. Especially brokers which act as market makers can manipulate price action in such a way that stops have a high probability to be hit if they stand around certain key levels… Basically, what the neckbreakers say is that they do not want their money to go to such sharks, and they prefer to keep their stops mental.

My answer to all this is yes, I admit such things may happen, and as much as that might bother us it is not really in our power to change market mechanisms and realities that have been there for decades… However, I would like to draw attention to 2 important points: placing a stop and getting it hit by a stop hunter is definitely annoying, but we must be smart choose the smaller risk…If our stop gets hit, we will live to trade another day, however if our trade goes hundreds or thousands of pips against us there may be no tomorrow for our trading account. The market is sometimes punishing us, and this is part of the business, what is harder to accept is to end one’s career just for being proud enough not to place a protective stop. Secondly, this reality prompts us to set intelligent and technical stops on our accounts and not mere dollar-value or round-number ones… Placing a stop is one thing, HOW and WHERE we place it, well, that’s an entirely different story… And this is where education can make the difference between a successful trader and one who can only watch some charts on a demo, wondering “what if”.

Thirdly, there is the “I know what I’m doing” argument. I mean, some traders just “KNOW” the market will go up and down, and as a result they feel no need to place a stop since there is nothing to be protected against (If the market WILL go up, it can’t go down at the same time, right?). I think there is no need to comment on such a childish attitude, and of course any trader who thinks like this has no idea in what danger he is placing himself… Actually, it doesn’t even matter much if he places stops or not, unless he changes his view of the market failure will be for him just a matter of time – maybe not today, maybe not tomorrow, but eventually the market will eat him up and feed his account to the sharks.

Will be back with some more pros and cons on using protective stops…

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April 20th, 2007 @ 11:26 am by Mihai Marinescu

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OK, here we are attacking another classic traders’ myth which on Forex – because of the market’s high volatility – becomes a matter of a trader’s life and death.
We must have heard this dilemma a thousand times: should we, or should we not use stops when trading? Some say stops are for sissies… Others say trading without a stop is suicide… Arguments are on both sides, and in our next posts we will try to unveil some of the reasons why we believe the “sissies” are more sensible in their approach than the “neckbreakers”.
If we place stops, they will be there to protect us from large drawdowns… But then again, if we don’t place any stop there will be nothing to be hit, so money will just flow in and out of the trading account freely… Will that work in our favor, or against us? Can that make us rich overnight without any effort, or will that simple trade that we took and finally went wrong eat up our entire trading account because we failed to place a stop?
These are all questions we will try to find an answer to in what follows.
(to be continued…)

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April 18th, 2007 @ 3:22 am by Bogdan Parascanu

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EurUsd new highs

Euro managed to break through that small range formed in the first days of the week and now trades close to the 1.3600 area. Daily momentum is still rather bullish as we had a bullish outside daily candlestick yesterday and we got above the 1.3552 high of last week’s price action; if Euro holds what was gained so far we can start looking at future resistance areas, the closest one is the 1.3600 round number, after that we have December’s 2004 high of 1.3668.
Conversely if euro begins to fall under pressure we have to look at future support points, if that is the case we have a clear case of former resistance turning into support, first March 21st 1.3411 high then the high of December 3rd at 1.3365 if these two levels fail to break they can turn into key points of reversal for another leg north (we will analyze the situation if the price gets there), lower down we have the round number of 1.3300 which is also a swing high established on January 7th and even lower we can see the 1.3260 area February 27th high and also March 25/26th low.

Resistance Levels

  •  1.4532 – March 2005 High
  •  1.3668 – December 2004 High
  •  1.3600 – Round number

Support Levels

  •  1.3483 –March 2005 High
  •  1.3410 – March 21st High
  •  1.3365 – December 3rd High
  •  1.3300 – January 7th High
  •  1.3260 – February 27th High

EURUSD 18April

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April 16th, 2007 @ 2:22 am by Bogdan Parascanu

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Eur-USD thoughts

Euro opened the week at a new high at 1.3580 the highest we have seen since December 2004. After it gained 700 points since the beginning of the year (from 1.2860 on Jan. 12th to 1.3580 established last night in the Asian session) Euro has confirmed the strength some analysts were expecting.

After such a strong push north we must check out what resistance levels we have left, established only last night the 1.3580/1.3600 area is the first important resistance that needs to be cleared, next we have the high of 1.3668 of December 2004, in order to find other resistance swing points we need to go as back as 1995/1996 when the Euro wasn’t in circulation as a publicly available currency. If the push north comes to a halt or we begin to see some pressure on the short side there are some support level worth mentioning; the 1.3411/1.3440 highs made on March 21st and April 5th respectively, then we have 1.3364 December 3rd high, further south we have the 1.3250/1.3260 area February 27th high and March 26th low and even lower we have 1.3070 March 5th low and 1.2860 January 12th low which was the lowest price we have seen this year. Read the rest of this entry »

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April 14th, 2007 @ 1:04 am by Sunil Mangwani

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This first video in FX Instructor’s educational video series explores the relationship between the EUR/USD and USD/CHF currency pairs, and why it is important.

[youtube]http://www.youtube.com/watch?v=bRbXvy20YYc[/youtube]

Stay tuned for future video releases by FX Instructor!

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April 10th, 2007 @ 11:17 am by Mohammed Isah

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Please note that the below technical commentary is delayed by one day. To receive up-to-date fresh commentaries for free, please click here and register

Mon, 09th of April, 2007 6:57 am EST
TODAY’S FOCUS: EURUSD & GBPUSD
EUR Looks Vulnerable Nearer Term

EURUSD-After seeing a failure above 1.3400 level and closing lower at 1.3378 on Friday,EUR may likely face downside pressure nearer term as evidenced by its daily momentum indicators which are now beginning to point lower. In the short term the pair maintains its upside tone as long as its support zones at 1.3296/87, its Jan 02’07 high/Mar 30’07 and 1.3245/59 levels, 20’06 high/.50 Ret (1.3071-1.3441 rally)/Feb 27’07 high contain any downside weakness. The mentioned 1.3245/59 zone serves as a trigger for further downside losses towards its .618 Ret (1.3086-1.3410)/broken trendline at 1.3220/06 ahead of 1.3171/89 levels, its .618 Ret (1.2867-1.3363)/Feb 20’07.Conversely, maintaining at the current levels should put the pair on the path to challenging its Mar 22’07 high/April 05 high at 1.3410/41 with a break of there if seen opening the way for moves towards 1.3483 level, its Mar’05 high before its Dec’04 high at 1.3668.On the whole,EUR requires a return to 1.3441 high set last week followed with a break and close above it to bring the resumption of its medium and short term uptrend towards 1.3483 high.

Support Comments
1.3363 Dec’06 high
1.3296/87 Jan 02’07 high/Mar 30’07
1.3245/59 20’06 high/.50 Ret(1.3071-1.3441 rally)/Feb 27’07 high
1.3171/89 .618 Ret (1.2867-1.3363)/Feb 20’07

Resistance Comments
1.3410/41 Mar 22’07 high/April 05’07 high
1.3483 Mar’05 high
1.3668 Dec’04 high
1.4160 1995 high

GBP Continues To Push Lower

GBPUSD-GBP followed through to the downside on Friday on the heels of its Wednesday losses closing the week at 1.9653.This continuation of its decline from 1.9824 high set last week suggests that its nearer term downside looks to continue towards 1.9571/52 levels, its Mar 26’07 low/Dec’04 high/daily 50 ema followed by its Mar 16’07 high at 1.9505.Breaking below here targets 1.9460, its Dec 18’06 low and then the 1.9401/33 zone, its Feb 13 & 19’07 lows/ Mar 12’07 high.Additionally,its daily momentum indicators remain in support of this view. On the upside, initial barrier is seen at its Feb 15 & 27’07 highs at 1.9673/77 with a break of there putting the next upside gains at 1.9726/20 zone, its Mar 22 & 26’07 highs/.382 Ret (1.9744-1.9824 rally) ahead of its April’07 high at 1.9824.Beyond here lies 1.9915, its 2007/14-year highs and 2.0000, its psychologically important level. Overall, although a set back is in place nearer term, longer term bullish structure continues to be maintained by the pair.

Support Comments1.9571/59 Mar 26’07 low/Dec’04 high
1.9505 Mar 16’07 high
1.9460 Dec 18’06 low
1.9401/33 Feb 13 & 19’07 lows/ Mar 12’07 high

Resistance Comments1.9726/21 Mar 22 & 26’07 high
1.9673/77 Feb 15 & 27’07 highs
1.9748/78 Feb 02 & 07’07 highs
1.9824 April 03’07 high

Mohammed Isah
Market Analyst
FX Instructor LLC
misah@fxinstructor.com
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

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April 2nd, 2007 @ 12:06 pm by Mohammed Isah

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Please note that the below technical commentary is delayed by one day. To receive up-to-date fresh commentaries for free, please click here and register

Fri, 30th of March, 2007 3:05 am EST
TODAY’S FOCUS: EURUSD & GBPUSD
EUR Continues To Look Vulnerable Nearer Term

EURUSD-Although EUR took back some of its Wednesday’s gains at the end of Thursday closing session, it still remains vulnerable to the downside targeting its .50 Ret (1.3071-1.3410 rally)/Dec 20’06/Feb 27’07 highs at 1.3240/59 unless a close above 1.3363/73, its Dec’06/Mar 28’07 highs is seen. If this occurs, a run at 1.3410 levels, its 2007 high could follow with a break paving the way for further gains towards 1.3483 levels, its Mar’05 high ahead of 1.3668, its Dec’04 high. In addition,its weekly stochastics indicator remains positive supporting this view. On the contrary, if the 1.3240/59 zone succumbs to downside pressure,then the next two downside objectives lies at its .618 Ret(1.3071-1.3410 rally)/broken falling trend at 1.3214/02 and 1.3171/89 levels, its .618 Ret (1.2867-1.3363)/Feb 20’07 high. Below there comes another solid support at 1.3080/52 zone, representing its Feb 22’07 low/Dec 18’06 highs/range breakout point/Mar 06’07 low. On the whole, EUR requires a break and close above its Mar 28’07 high at 1.3373 to create more room for gains towards 1.3410 and beyond.

Support Comments

1.3296 Jan 02’07 high
1.3230/59 Dec 20’06/Feb 27’07
1.3216/02 Broken trendline/.618 Ret(1.3071-1.3410)
1.3171/89 .618 Ret (1.2867-1.3363)/Feb 20’07 high

Resistance Comments

1.3363 Dec’06 high
1.3410 2007 high
1.3483 Mar’05 high
1.3668 Dec’04 high

GBP Eyes 1.9571/52 Zone

GBPUSD-After an intra day recovery to as high as 1.9658, GBP gave back most f those gains to close Thursday trading session at 1.9614.The pair remains exposed to downside risks nearer term towards 1.9571/52 zone, its Mar 26’07 low/Dec’04 high except a turnaround is seen taking its above its Feb 15 & 27’07 highs at 1.9673/77.Until that happens, focus remains on the downside nearer term with a break of 1.9571/52 opening the door for further downside losses aiming at its daily 50 ema/Mar 16’07 high at 1.9516/05 followed by 1.9460, its Dec 18’06 low. Breaking and holding below there expose support levels located at 1.9401/33 zone, its Feb 13 & 19’07 lows/ Mar 12’07 high and its Mar’05 high at 1.9326.While overbought remains a factor on the daily time frame, its RSI indicator points to the downside suggesting more downside pressure. On the upside, if invalidation of 1.9673/77 zone materializes, the next upside target to aim at is the 1.9748/78 zone, its Feb 02 & 07’07 ahead of a key resistance level at 1.9915, its 2007/14-year highs and then its psychological resistance at 2.0000.In conclusion, GBP requires a close above 1.9726/21 levels to increase its chances of pushing for further upside gains.

Support Comments

1.9571/55 Mar 26’07 low/Dec’04 high
1.9524/05 Falling Trendline/ Mar 16’07 high
1.9460 Dec 18’06
1.9401/33 Feb 13 & 19’07 lows/ Mar 12’07

Resistance Comments1.9673/77 Feb 15 & 27’07 highs

1.9748/78 Feb 02 & 07’07 highs
1.9915 2007/14-year highs
2.0000 Psychological Resistance

Mohammed Isah
Market Analyst
FX Instructor LLC
misah@fxinstructor.com
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

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