My name is Steven Primo and in my upcoming series of articles I plan to teach you how to trade the different Forex market currency pairs. I am a 35 year trading veteran of all markets I began as a Specialist on the floor of the Pacific Stock Exchange and later went on to managing a private Fund. I also held the position of Director of Education for Trading Markets, and then ultimately became the President and Founder of Specialist Trading.
I have experienced and traded just about every market environment imaginable, from the Crash of ’87 to the great Bull market that followed. Through all of this I’ve learned that one thing remains constant, regardless of market conditions, most traders – Stock, Futures, or Forex – will blow out their accounts within the first year of trading. Please be aware that when I say “blow out” I do not mean they will sustain a series of losses. I mean they will actually lose their entire trading accounts. It’s at this point that a prospective trader must make a decision – either to end his dream of one day becoming a successful trader, or to begin the long journey towards acquiring the insights, wisdom, and trading strategies needed in order to become a successful trader. The good news is that I’ve already made that journey for you. My goal is to shorten your learning curve by teaching you how to trade with the edges that I’ve already acquired within my 35 years of trading. And even though my career began with stocks, everything I have learned on the Exchange Floor can easily be transferred onto the Forex markets.
Click here to register for a free, interactive webinar where Steven Primo will be discussing some his favorite Forex trading strategies presented at the upcoming Forex Trading College.
Let’s begin by looking at a current chart of the GBP/USD and asking a simple question, “Has this ever happened to you before?”
In Fig. 1 the currency pair has been in a sustained up-trend throughout most of the month of August but is beginning to show signs of weakness. At this point you decide its “topped out” and time to sell. After all, the GBP/USD looks tremendously overbought and the daily chart appears to want to go back and test the lows. So you jump in and sell at the market, but guess what happens?
In a little over a week the market begins to make new highs (Fig. 2). Look familiar?
This is the way 95% of all Forex traders trade – by trying to pick tops and bottoms. But what if there was a simple tool designed to get you on the right side of the market? One that could tell you the right time to buy and the right time to sell Forex currency pairs. Enter the Buy/Sell Line, the most powerful trading tool we employ at Specialist Trading and the foundation for virtually every Forex trading strategy we teach. If there were only one technique I could use for the remainder of my trading career, it would be this.
So just what is the Buy/Sell Line? It’s the 50-period simple moving average, that’s it. But in order to use this tool properly you must first plot the moving average and then ask yourself this question prior to each and every trade. Regardless of the strategy, regardless of the direction or time frame, always ask yourself before you pull the trigger – “Where is price in relation to the Buy/Sell Line?” You’ll only come up with two possible answers: 1) if price is above the Buy/Sell Line you’ll only be taking buy signals, and 2) if price is below the Buy/Sell Line you’ll only be taking sell signals. That’s it. This tool is so simple but extremely powerful and has literally saved me hundred of thousand of dollars throughout my trading career.
So how could this technique have helped us in the previous scenario? Let’s take a look at the same GBP/USD chart but this time with the Buy/Sell Line added (Fig. 3).
Now we ask ourselves “Where is price in relation to the Buy/Sell Line?” and we notice that the currency pair price has always been above the 50-period sma. Therefore we had no business in the world originally considering going short the GBP/USD. Had we simply followed the Buy/Sell Line rule from the start and looked to be buying instead of selling opportunities, we could have easily locked in some nice gains to the upside in the following weeks.
To see how well this tool transfers onto different time frames and in different directions, I’ve included snapshots of a 15-minute chart of the EUR/JPY (Fig. 4), and a current Monthly chart of the USD/CHF (Fig. 5).
To summarize, in order to use the Buy/Sell Line properly always ask yourself this question before you pull the trigger “Where is the currency pair price in relation to the Buy/Sell Line?” If price is above the Buy/Sell Line you’ll only be looking to go long, and if price is below the Buy/Sell Line you’ll only be looking to go short. I’m confident that once you begin to employ the Buy/Sell Line properly, you will take your Forex trading to the next level.
In my next article I will share with you a technique that is designed to fine-tune your currency pair entries. In columns to follow we’ll ultimately put it all together and reveal the foundations to some of our most consistent Forex strategies at Specialist Trading. Good luck and good trading.