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May 8th, 2007 @ 4:42 pm by Sunil Mangwani

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Our third FX Instructor video demonstrates the use of our custom FXI Pivots indicator during a Live Trading Room session. The indicator is designed to visually indicate support, resistance, and momentum lines.

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

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May 7th, 2007 @ 2:31 am by Bogdan Parascanu

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EUR/USD slowed down

Euro slowed down last week after five weeks of gains against the USD, the pair didn’t manage to make a new high coming short a few pips of 1.3680 the YTD high. Price is forming has entered into a trading range for the past 3 weeks, bouncing around 1.3523 and 1.3680, a break on either side of this range would set the terrain for future more cleaner swing moves. If price gets bellow this 150/160 pip range, this meaning it is going to break the resistance of April 16th low at 1.3523, we can start looking at March 2005 high of 1.3483, March 21st high of 1.3410 and December 3rd high of 1.3365 as clear cut examples of former resistance levels now turned into support. If on the other hand the Euro recovers some of its strength and takes another shot at breaking above the 1.3668/1.3680 resistance we have to see how price action develops on the lower timeframes to establish some potential targets and resistance areas.
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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]

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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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