6 setups for active forex traders
Dave Floyd is a professional FX and stock trader
based in Bend, OR and the President of Aspen Trading Group. Dave’s approach to
FX combines technical and fundamental analysis that results in trades that fall
into the swing trading time frame of several hours to several days. To learn
more about how Dave trades,
click here.
As mentioned yesterday morning, the DXC
(Dollar Index) had fallen far and fast and was due for some sideways to higher
price action. This has pretty much been the case, and despite the possibility
that DXC will drift back towards the lows, it will likely take a bit longer as
yesterday’s losses are digested by the market.
That being said, the 240-min charts on the pairs we follow are currently
oversold, while the 60-min charts are setting up for lower levels (i.e. DXC).
While lower DXC prices are still likely, the oversold conditions on the 240-min
charts will make it a bumpier ride for the time being – in essence, the set-ups
are not ‘perfectly set-up as they were yesterday morning.
AUD/USD to the long side is the one exception as its current technical picture
is quote solid. Support is seen at the .7540-45 level, and if this holds, we
would look for a move towards our 24-hour target price of .7590.
EUR, GBP are poised for higher levels too, but, as mentioned above, oversold
conditions on the 240-min chart make it less clear as to when prices will move
higher. USD/CAD is set to move lower, but shares the same dilemma as EUR & GBP.
Wednesday’s 24-Hour FX Targets
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Notes/How To for The 24-Hour FX Targets
Today’s FX traders are now demanding a more systematic approach, and this new
feature will nail those desires right on the head. With our 24-hour forecasts
you have specific entry prices, stop-loss and price targets.Â
Entries:Â entry prices are meant to be taken at the time of posting by
simply placing an order to buy or sell at the market. Targets will typically be
posted by 5 AM PDT.
Stop-Loss:Â we suggest that all traders place a stop-loss equivalent
to ½ of the value of the projected gain in pips. For instance, if the price
target for the EUR/USD is 1.2200, and it is trading at 1.2100 at the time (100
pip gain) of the forecast, we would suggest setting a 50 pip stop loss
(1.2050).Â
We also discuss a basic trailing stop strategy at the end of this article.
Exits: traders should take profits when the ‘Target Price’ is
achieved. Â If, by 5 AM PDT the following day, the stop-loss or target price has
not been achieved, simply close the trade at market.
Let’s look at an few example as a way to illustrate how this will work.Â
Below is a screenshot from Thursday October 20th, it is exactly the same format
that will be posted here each Monday and Wednesday.
The far right column, 24-Hour Targets, is simply our estimate of where the
pair will trade towards during the next 24-hours. A ‘N.A’. simply
indicates we do not have a price target.
The ‘Current Bias’ column will only show a bias for the pairs that are
highlighted ‘blue’ as these are pairs that we also recommend on a discretionary
basis.
At 5 AM on 10/20/05 GBP/USD opened at 1.7665. The price target, as
noted above, is 1.7735 – a 70 pip gain if achieved. The initial stop-lossÂ
would be 35 pips, or 1.7630.Â
GBP/USD went on to achieve both targets.
Naturally, not all of the forecasts will play out, and like most systematic
approaches, the number of iterations will increase your success. Pairs like
USD/JPY and EUR/USD did not achieve their targets and were stopped
out, resulting in a loss of 65 pips, while AUD/USD, USD/CAD and
USD/NOK easily offset the 65 pip loss with solid gains.
Trailing Stops:
Traders may also look to employ a trailing stop strategy to protect gains.Â
We suggest using a trailing stop equivalent to 1/4 the value of the targeted
gains. So, in the example of the GBP/USD above, the target is for a gain of 70
pips, therefore a trailing stop of 17 pips might be a prudent approach.
Ultimately the decision is yours. Other traders/clients simply use our
forecast(s) as a guide and then identify their own entry points based on their
trading methodology.
As always, feel free to send me your comments and questions.
P.S. Would you like to learn the strategies that I use to trade the Forex for
a living? If so,
click here to register for my free online workshop on Thursday, October 27
at 12:15 ET. We’ll look at the current market together and I’ll show you what
strategies are working me. Please note: Space is limited to only 45 traders, so
click here now and register.