Month: January 2011

By Anton Eljwizat

A bullish movement of the GBP/AUD cross hasn’t received much support as of late. Below, I will demonstrate that the GBP/AUD pair has already commenced a downward trend for today, as a bearish cross has taken place on the Slow Stochastic. In addition, the Relative Strength Index indicates that the price of this cross currently floats in the overbought territory, signaling downward pressure, and the cross may tumble another 40-110 pips in the coming 2 days. Traders are strongly advised to take advantage of the trend at an early stage. Therefore, why not open short positions at an excellent price?

The next support level is located at the 1.5970 level.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The dollar strengthened during a quiet FX session in Asia as Shanghai equities fell by approximately 3% in the aftermath of Friday’s surprise reserve ratio hike by the PBoC. But the Nikkei-255 was unaffected and is unchanged at the time of writing. EURUSD traded 1.3310-1.3415, USDJPY 82.68-83.01. Friday’s batch of US economic data was mixed, which contributed to a volatile session. Retail sales grew by only +0.6% (cons. +0.8%), and the University of Michigan confidence reading fell unexpectedly to 72.7 (prev. 75.5). However, industrial production rose by +0.8% in December, well ahead of the +0.5% consensus. Crucially, core CPI for December was stable at +0.8% y/y (cons. +0.7%). As a result of the data, our US economists see no reason to change their Q4 GDP forecast, and continue to expect a +3.5% annualised pace. Fed Governor Tarullo said he sees no reason to either increase or decrease the size of the Fed’s $600 bn program of asset purchases. Boston Fed President Rosengren seemed to agree saying “there will be a time when these aggressive actions need to be reversed, but first we need to get the economy on a much more solid footing”. Richmond Fed President Lacker, an FOMC voter this year, said he was “very concerned” that trouble in the municipal bond markets could cause “broader distress”. Tarullo added that the Fed will look closely at the exposure of banks to municipal bonds. Treasury Secretary Geithner called on China to allow the yuan to appreciate more rapidly, noting that this would help to contain Chinese inflation. The US is on holiday today, and there are no US data releases scheduled.
EUR

Fitch cut Greece’s sovereign debt rating to BB+, outlook negative, from BBB- on Friday, citing its “heavy public debt burden” which renders “fiscal solvency highly vulnerable to adverse shocks”. All three of the main ratings agencies now rate the sovereign as sub-investment grade. Greek Finance Minister Papaconstantinou repeated that Greece will not restructure its debt. Slovak Finance Minister Miklos repeated his opposition to the Greece rescue package which was activated in May, saying that “debt restructuring would be a better solution for Greece”.
ECB President Trichet urged European governments to make “enormous efforts to bring down their debt”. He said that Ireland and Greece must respect the programs they committed to. He repeated his view that a credible strong dollar is in the world’s interest.
German Finance Minister Schaeuble noted that there were practical limitations to the value of loans the European Financial Stability Facility could provide, and that the headline figure of €440 bn “cannot be fully utilised”. (This has long been the view of our European rates strategists). Schaeuble said “we have to and will solve this problem”. Chancellor Merkel did not seem to be in favour of a quick fix without additional conditions, and instead insisted that if Europe’s financial rescue infrastructure is to be enhanced, then this should be done as part of a “complete strategy that must absolutely include closer economic coordination”. French Finance Minister Lagarde said that several dimensions of the problem are currently being looked into, including the size of the facility, the transition from the current temporary facility to the permanent one in 2013, as well as “the possibility of acquiring bonds on the secondary market”. Portugal’s Prime Minister Socrates said that a “joint response” to the debt crisis is being prepared, and suggested it may be ready in time for the next EU Council meeting in February.
ECB Governing Council member Nowotny said that member states may need to refinance about €924 bn this year, and that given markets are “nervous” this issuance could lead to some “uncertainties” in Q1.
The final German CPI estimate for December was confirmed at +1.2% m/m and +1.9% y/y. In a weekend article in a German newspaper, ECB President Trichet said the ECB “are always concerned if inflation rises and are following developments very closely” but he said that the higher inflation figures for December can be largely accounted for by rising energy prices. Trichet went on to say that interest rates are currently at the right level, but that the ECB will always take the decisions necessary to ensure price stability. ECB Governing Council member Weber said that CPI risks in the Eurozone are now “broadly balanced” but that these risks “could well move to the upside”.
JPY

Finance Minister Noda said that Prime Minister Kan has ordered him to watch FX markets carefully and to cooperate with the BoJ. He said he is ready to act decisively on FX if needed.
Newly appointed Minister for the Economy and Fiscal Policy, Yosano, said that Japan could lose international trust, and long-term rates could rise, if bond issuance continues to exceed revenues. Yosano went on to say that it is inappropriate for cabinet ministers to comment on the yen’s level, and that Japan should not rely excessively on BoJ monetary easing to end deflation.
CHF

SNB Chairman Hildebrand said that FX policy is still unchanged at the SNB, despite valuation losses incurred as a result of currency movements. He also agreed with earlier assessments that Swiss franc strength would negatively affect growth, echoing the conclusions of a currency summit in Switzerland on Friday.
SNB Vice-Chairman Jordan said it is the job of the SNB to ensure price stability and that it “will do everything in its power to fight deflation or inflation”.
CAD

Prime Minister Harper said that his government remains concerned about the growth in household debt. The Bank of Canada is due to announce its policy decision on Tuesday, and the consensus expects no change to the policy rate.

TECHNICAL OUTLOOK
GBPUSD pressure on 1.5911.
EURUSD BULLISH Resistance at 1.3500 holds, while initial support is at 1.3089.
USDJPY NEUTRAL Motion is sideways; 83.67 and 82.31 mark the near-term directional triggers.
GBPUSD BULLISH Pressure on 1.5911, break here would expose 1.5965; support at 1.5719.
USDCHF BULLISH Trading below 0.9784, break of this level would expose 0.9852. Support is at 0.9605.
AUDUSD BEARISH The pair found support at 0.9804 ahead of 0.9753; resistance at 1.0020.
USDCAD BEARISH Outlook remains bearish; focus is on 0.9849/25 area ahead of 0.9712. Resistance is at 1.0004.
EURCHF BULLISH Positive tone continues targeting 1.3004; initial support at 1.2686.
EURGBP BEARISH Broader focus is on the downside at 0.8313 ahead of 0.8285 while resistance is at 0.8499 Friday’s high.
EURJPY BULLISH Momentum is improving; targeting 111.53 ahead of 112.19. Support is at 108.69.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Yan Petters

Last week’s most significant trend in the market was surely the bullish euro. The euro gained no less than 580 pips vs. the dollar, completing its highest weekly gain since May 2009. The euro also strengthened about 400 pips against the Japanese yen, and about 200 pips vs. the British pound.

The euro’s bullish trend was mostly due to the Spanish, Italian and Portuguese debt auctions. Analysts were surprised to see the strong demand for the debt purchase, especially considering the fact that these countries are viewed as the ones most likely to eventually seek a financial bailout from the euro-zone. This has showed that the market still has a great deal of confidence in the euro-zone and in its currency.

For the near future, the risk of seeing another member of the euro-zone seeking a financial bailout seems somewhat reduced. This has potential to further support the euro against the dollar. Nevertheless, investors will now pay more attention to the economic releases from Germany, which holds the largest and strongest economy in the euro-zone. If Germany will not manage to deliver positive data, the euro’s bullishness could be corrected.

Today, U.S. banks will be closed in observance of Martin Luther King Day, and a relatively weak news day is expected.

The most significant economic release looks to be the Canadian Foreign Securities Purchases report, which is scheduled for 13:30 GMT. This report measures that total value of domestic stocks, bonds purchased by foreigners during November. If the end result will reach expectations for 10.42B, the CAD may be supported.

Source: ForexYard

The euro gained about 580 pips against the U.S. dollar in last week’s trading session, following strong debt sales in Spain, Italy and Portugal. This has increased risk-appetite in the market and as a result weakened the Japanese yen and supported crude oil. Disappointing economic releases from the U.S. have also added to the greenback’s weakness.

Economic News

USD – Dollar Tumbles on Disappointing U.S. Economic Data

The U.S. dollar saw a sharp bearish trend against its major currency rivals during last week’s trading session. The dollar dropped more than 550 pips vs. the euro, and the EUR/USD rose above the 1.3400 level. The dollar saw a sharp decline against the British pound as well, and the GBP/USD pair gained about 400 pips.

The dollar tumbled last week after reports showed that the U.S. economy is recovering at a slower pace than previously estimated. Initial Jobless Claims in the U.S. rose last week for the first time since November. The number of first-time claims for unemployment benefits jumped in the first week of 2011 by 35,000 to 445,000 individuals, well above expectations for 405,000 claims.

The U.S. Preliminary Consumer Sentiment survey unexpectedly fell in January. The Thomson Reuters/University of Michigan index of consumer sentiment dropped to 72.7 from 74.5 a month earlier. The index failed to reach projections of 75.5, indicating that U.S. consumers still lack confidence regarding their financial outlook.

As for the week ahead, many interesting economic releases are expected from the U.S. Traders are advised to focus on the Long-Term Purchases, Building Permits, weekly Unemployment Claims, Existing Home Sales and the Philadelphia Manufacturing Index. If the end results of the reports will provide disappointing data as well, investors will see it as another indication that the economy is sluggish, and the greenback might see further bearishness as a result. Traders should note that U.S. banks will be closed today in observance of Martin Luther King Day.

EUR – Euro Rallies Following Strong Debt Sales in Portugal, Spain and Italy

The euro advanced against all its major currency counterparts during last week’s session. The euro strengthened the most since May 2009 against the U.S. dollar, gaining about 580 pips in a week. The euro also gained about 400 pips against the Japanese yen, and about 200 pips against the British pound.

The euro strengthened last week after auctions of Portuguese, Spanish and Italian debt generated more demand than expected. Those nations are considered to be at risk to seek financial bailout in the future due to the ongoing sovereign debt crisis. The strong debt sales have boosted demand for euro, as it enhanced investors’ confidence regarding the stability of the 17-nation currency. In addition, Germany’s Chancellor Angela Merkel provided further support for the euro, after pledging to do whatever is necessary to ease the sovereign debt crisis.

It currently seems that the market is showing signs of renewed confidence in the euro-zone’s economies, and as a result in the euro itself. Considering the somewhat surprising turn of events, large volatility could be expected in euro-trading in the near future, which will provide forex traders opportunities to see unusual profits.

Looking ahead to this week, a batch of data is expected from the euro-zone. Special attention should be given to the German ZEW Economic Sentiment and the German Business Climate reports as these are likely to have a large impact on the euro. Traders should take under consideration that if the major reports will fail to reach expectations, the euro may erase its profits from the past week.

JPY – Yen Falls as Risk Appetite Increases

The Japanese yen fell against most of the major currencies during last week’s trading session. The yen fell about 400 pips vs. the euro, and the EUR/JPY pair has reached as high as the 110.97 level. The yen also saw a 250 pip gain against the British pound, and the GBP/JPY cross is trading near the 131.50 level.

The yen fell against most of its major currency counterparts last week because of higher risk-appetite in the market. The higher than expected demand for the European debt sales has boosted optimism regarding the euro-zone’s stability. This has strengthened currencies that are considered to be relatively risky such as the euro and the pound, and has also supported commodities such as crude oil. At the same time, this has also reduced demand for the yen as a safe haven.

Looking ahead to the this week, the most significant news releases from the Japanese economy look to be the Tertiary Industry Activity on Tuesday and the All Industries Activity on Friday. Positive data will show that the Japanese industry is expanding, and is likely to support the JPY.

Crude Oil – Crude Oil Closes a Bullish Weekly Session at $91.60 a Barrel

Oil prices strengthened during last week’s trading session, and a barrel of crude oil reached as high as $92.37. Crude began last week’s trading around $88.00 a barrel, and gained over 400 pips. Crude is currently trading near $91.50 a barrel.

After seeing a minor technical correction on Thursday, crude climbed once again on Friday after U.S. Retail Sales and Industrial Production rose in December, indicating that fuel demand in the world’s largest energy consumer is likely to strengthen. In addition, estimates that Chinese consumption of energy will increase by 4.8% in 2011, after rising 11% in 2010, have also supported oil prices.

As for the following week, traders are advised to follow the leading economic releases from the U.S. and the euro-zone, as they usually have a large impact on crude prices. Traders should also focus on the U.S. Crude Oil Inventories report, which is scheduled for Thursday, as this release tends to have an immediate impact on the market.

Technical News

EUR/USD

The EUR/USD pair gained about 580 pips during the past week, and is currently trading near the 1.3350 level. However, as the 4-hour chart’s RSI seems like it is about to fall below the 70-line, the pair might see a bearish correction today. Going short with tight stops seems to be the right strategy today.

GBP/USD

The GBP/USD pair has recently seen three failed attempts to breach through the 1.5890 level. Now, a bearish cross is taking place on the daily chart’s Slow Stochastic, suggesting that a downward reversal may be impending. Going short appears to be the right choice today.

USD/JPY

The USD/JPY pair has been trading within a restricted range for a couple of weeks now. Currently, as both the RSI and the MACD on the daily chart are providing bullish signals, the pair looks to test the 83.60 level. If the pair will cross the resistance level, it has potential to reach towards 84.50.

USD/CHF

After peaking at the 0.9780 level about two weeks ago, the pair is slowly correcting its gains, and is currently trading near the 0.9650 level. A bearish cross on the Slow Stochastic on both the 4-hour and the daily charts indicates that the pair might proceed with the bearish correction today.

The Wild Card

Gold

Gold prices have mostly fallen for the past week, and an ounce of gold was trading for as low as $1,353. Currently, as a bearish cross takes place on both the daily chart’s MACD and Slow Stochastic, the bearish move looks to extend today, with potential to reach $1,340 an ounce. This might be a great opportunity for forex traders to join a very popular trend.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

In Brief

EU finance ministers are due to discuss increasing the size of the ECB bailout budget today.

The UK housing market enjoyed a modest recovery in December, according to Rightmove.

It’s a public holiday in the US making it a quiet day for the dollar.

In Depth

EU

Good morning! The GBPEUR exchange rate has risen to 1.1976 this morning ahead of a meeting between EU finance ministers. Politicians from Brussels and across the EU are due to discuss  increasing the size of the ECB (European Central Bank) bailout budget.

ECB President Jean-Claude Trichet for instance believes the budget is too small to support nations including Portugal and Spain in the event they seek assistance. German Chancellor Angela Merkel though is reluctant to increase the bailout fund. She believes indebted EMU members ought to support themselves, while increasing the bailout fund would damage Germany’s credit rating.

This conflict is causing confidence in the euro to tank this morning.

UK

In the UK meanwhile, house prices rose 0.3% in December according to figures released by Rightmove this morning. This compares to a 0.3% decrease in prices the month before, and thereby indicates a modest recovery in the property market. This has buoyed sentiment toward sterling this morning.

The outlook for the UK is not entirely sunny this morning though. The national debt has ballooned to £1.5 trillion following the addition of the bank bailout figures to public sector sums, rising from under £1 trillion. This is statistical only: the Coalition’s budget plans already take these numbers into account. But they highlight (once again!) the urgent need to cut public spending.

US

Today is a public holiday in the US meanwhile economic data is scant.

The markets though are already focused on the upcoming meeting between Chinese Premier Jintao and US President Barack Obama in Washington. Topics of discussion are due to include China’s monetary policy (thought to be undermining US competitiveness on the global market) and human rights abuses. The results of these talks could strongly affect the US dollar – so stay tuned.

Coming Up

The British consumer confidence survey for December is due tomorrow. In addition the Bank of Canada’s interest rate decision is scheduled to be announced on Tuesday too.

By Peter Lavelle with specialist money transfer service Pure FX.

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that futures speculators trimmed their short positions of the US dollar against the other major currencies while increasing their short bets of the euro. Non-commercial futures positions, those taken by hedge funds and large speculators, were overall net short the US dollar by $7.38 billion against other major currencies as of January 11th. This is a decline from the total short position of $12.4 billion on January 4th, according to the CFTC data and calculations by Reuters which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

EuroFx: Currency speculators added to their short positions of the euro against the U.S. dollar to their highest level in over six months. Euro positions were short by 45,182 contracts from a total of 24,201 short positions registered on January 4th. The January 11th level was the largest short position in the euro since June 2010.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar.

GBP: Speculators decreased their British pound sterling short positions to a total of 5,090 short contracts on January 11th. The previous week had short positions of 14,133 contracts. Pound sterling contracts have continued to be short for seven straight weeks dating back to November 30th.

JPY: The Japanese yen net long contracts decreased after two straight weeks of increases as of January 11th with a total of 24,736 long contracts. Yen positions had totaled 39,065 net long contracts reported on January 4th.

CHF: Swiss franc long positions edged lower after four straight weeks of rising long positions. Swiss franc positions fell to a total of 10,818 long contracts as of January 11th after totaling a net of 13,032 long contracts on January 4th.

CAD: The Canadian dollar positions increased for the third consecutive week as of January 11th. CAD long positions registered 47,757 contracts after totaling 38,340 net longs on January 4th. This is the highest level for Canadian dollar contracts since May 11th 2010.

AUD: The Australian dollar long positions dipped for a second consecutive week. AUD contracts decreased to a net amount of 53,497 long contracts as of January 11th from 62,513 long contracts on January 4th.

NZD: New Zealand dollar futures positions dipped to a total of 9,620 long positions as of January 11th. NZD large speculator long positions had risen two straight weeks to a total of 10,731 long contracts on January 4th.

MXN: Mexican peso long contracts rose higher as of January 11th to 83,572 net long positions after dipping to a total of 74,310 longs the week prior.

COT Data Summary as of January 11th, 2010
Large Speculators Net Positions vs. the US Dollar

EuroFx: -45182
British pound sterling: -5090
Japanese yen: +24736
Swiss franc: +10,818
Canadian dollar: +47,757
Australian dollar: +53497
New Zealand dollar: +9,620
Mexican peso: +83,572

Go to the Commitment of Traders CME raw futures data

Further COT Resources from around the web:

• Forecast The FX Market With The COT Report

• The Only Indicator You Will Ever Need

By Cedric Welsch

More and more currency traders are now beginning to develop a huge interest in the idea of short term trading. Currencies tend to fluctuate in their values very easily and thus giving a wide margin of opportunity for forex traders to acquire profits in a really short span of time – this is what is referred to as short term trading.

There are a number of ways to choose from in order to take advantage of short term currency trading and create even more profits from several different time periods.

The so called method of day trading is the process wherein a trader opens up a certain transaction on a given day of trading and then also ends that transaction in the same day of trading. While the so called method of swing trading on the other hand tends to work exactly the opposite way, because the results of a swing trade are determined after a certain number of trading days have gone by.

A somewhat different form of day trading is what is well referred to as scalping. It is a method that some traders put to use in order to gain tiny bit amounts of profits during several periods of time within the same day of trading.

When doing short term currency trading, it is very important for any trader to be able to conduct certain kinds of analysis towards the market trending otherwise it will be difficult to make any significant trading progress. The good news however, is that there are already specific tools designed out there to help in the process of analyzing the market for short term trading purposes.

There is one important trait that successful traders have in them, and it is the trait of having a broad perspective when it comes to determining which direction the market trending maybe leading to. This extremely important trading quality is very helpful in foreseeing different market trending possibilities in the trading days to come. Thus, helping the trader make an even more sound decision which then obviously result to a wide number of opportunities for making bigger profits later on.

Trying to foresee the forex market trending over a certain number of days is absolutely different from that when you foresee the market trending for a really brief span of time period. When dealing with really short periods of market trending, it is important to develop some strategies that will make trading much profitable.

If you are interested in making huge amounts of profits with short term currency trading, there is no doubt that the first important trading quality you must develop is being good at analyzing the market trends. When you become really good at analyzing the forex market, then you have the advantage over other players.

About the Author

Listening to forex analysis news is the trait of a good investor. While receiving forex daily news is the habit of a wise trader.

By Cedric Welsch

When professional currency traders want to find out about the absolute rate value of multiple currencies, they resort to the help of a calculator – one that is really designed to convert currencies.

The foreign exchange market is very well known for its tremendous volatility in nature. And so it is very important for currency traders that they are able to compute rates between currencies in real time and at a more accurate way.

Currency converters are considered to be really valuable for many traders, in fact its function doesn’t end in just converting rates, anyone who knows how to use it can take advantage of what it could offer especially when having financial transactions during a foreign trip or travel.

In order to fully understand how to use a currency converter, one has to really get pretty well familiarized with it. For instance, most currency converters can easily be utilized where there is a computer and an internet connection. In other words, these converters perform their function online.

Although there are currency converters online that do need a payment in order to function, if you do a thorough search, you should find some that are available to use at zero-cost requirement.

And while you might find it very convenient to use currency converters that are easily accessible online, some converters need to be downloaded first and then installed on your computer device in order to function.

It cannot be emphasized enough that the foreign exchange market is extremely volatile in nature, and so professional traders must constantly be on their toes checking on the latest updates and market trends.

In fact, traders who are equipped with much larger resources do not mind paying high amount of fees in order to take advantage of technological mediums that can provide real-time data for their analysis.

It is also very important to understand that currency conversion calculators do vary in type and design. Therefore, these calculators are not always similar in their functions. Obviously, the computing of rates is kind of straightforward in procedure. However, the difference in design tends to be significant when data output is presented to the user.

The most basic function of a currency converter is to get the value of one currency and then convert that into the value of another currency. There are of course converters that have the ability to convert one value into several different currency values in real time, while other calculators are limited to one value conversion at a time.

About the Author

Want to get more out of trading? Go read forex news updates. Who says you can’t find reputable brokers? Find out who they are here: forex reviews

By Bob Moore

Successful traders are constantly searching for the ‘perfect’ set-up to win a trade. One such opportunity happened on Friday, January 7, 2011. And all the better, the opportunity can be replicated by trading instrument of choice and occurs time-and-time again.

Of course, to have the impetus to timely act on a trade, the trader needs to verify the opportunity by considering multiple vantage points. By combining the principals of Taylor Trading Method with Value Area Trading and overlapping Trade Triggers Buy/Sell signals, the trader can consider multiple vantage points to quickly and reliably conclude if the trade presenting itself is a worthwhile trade to act upon.

Even though the ETF, SPY (which is managed to replicate the S&P 500), has been used to describe the intricacies of Friday’s trade, many trading instruments could have been substituted in the SPY’s place to take advantage of the same trade.

The trading opportunity that occurred on Friday, January 7th actually started to develop on Thursday, January 6th. Thursday was a Taylor Trading Method Buy Day. According to Taylor Trading Rules, the Buy Day is the first day of the Taylor Trading 3-day cycle in which lows for the cycle are to be established.

On Thursday, SPY, along with many other trading instruments, opened above its close the day before gyrating above and below its Value Area (VA) High. (The Value Area of an instrument is unique for each trading day and is the price range in which 70% of the instrument’s trading volume took place the day before.) The SPY traded above its VA High at 10:30 US EST verifying that SPY traded a sufficient amount of time above its designated VA.

Then, Market sentiment began to change abruptly in which the SPY traded below its VA High at 11:00 and 11:30 US EST ½-hr Bars triggering VA 80% Rule to the downside. (According to VA Rule, if a trading instrument declines below its VA High for (2) consecutive ½-hr Bars then there is an 80% chance it will decline at least to its VA Low by close of next trading day.) In addition to the VA Rule being triggered, the Taylor Trading Method Buy Day Low was established between 11:00 and 11:30 US EST at a level of 127.01.

The rest of the day was non-eventful with the SPY trading within its VA and churning a slight recovery from the late morning decline. It is the non-eventful afternoon, however, that cued the trader to consider his/her trading opportunities for the next day:

1. The trader understood, according to Taylor Trading Rules, that if the Markets declined below Thursday’s Buy Day Lows on Friday, the Sell Day, there is a good chance of rallying back up to the Buy Day Lows by at least Monday, the Sell-Short Day.
   The trader also understood, according to Value Area Rules, there is an 80 % chance of reaching Thursday’s VA Lows to fulfill the VA Rule triggered on Thursday but not yet fulfilled.
   Equipped with the above knowledge, the trader would patiently wait on Friday to see if Taylor Trading Method and Value Area rules played out.

The SPY traded in a choppy fashion near the open on Friday signaling red-color coded Taylor Trading Daily Extremes for the day. By late morning, it had not only declined below Thursday’s Buy Day Low of 127.01 but had reached Thursday’s VA Low of 126.75 to fulfill VA Rule triggered but not fulfilled on Thursday (as per VA Rule).

The trader was certainly sensing a Buy opportunity was about to unfold. The Markets were reacting to (3) negative news events: US job creation for December weaker than anticipated, Portugal debt concerns, and US bank-home loan foreclosure judgments that were not in favor of banking industry. The Markets were having a tantrum disturbing the natural evolution of a Taylor Trading Method Sell Day.

The trader monitors the SPY for a potential further decline. He/She overlaps Taylor Trading Potential Daily Extreme range of 126.61 – 126.09 over Trade Triggers 3rd Buy Signal range of 126.19 – 126.39 and sets a predetermined Buy Signal at 126.30.

The SPY reaches the Buy Signal ranges in early afternoon trading. The trader places the order to buy SPY at 126.30 shortly before 1:00 pm US EST, at which time the order is soon processed.

The SPY proceeds to rally the remainder of the afternoon eventually trading and closing above Thursday’s Buy Day Low.

The trader, not desiring to carry the trade over the weekend, closes out the trade during the last ½-hr of trading at the SPY level of 127.15 for a nice 0.85 profit.

The trader may have left some ‘profits-on-the-table’ by closing out the trade on Friday, the Sell Day. But to play it safe, that is exactly what Taylor Trading Method suggests to do, as the Smart Money tries to ratchet the Markets higher on the Sell-Short Day, but with increased volatility and the chance of being caught in the swing down that establishes the next 3-day cycle.

About the Author

Bob Moore is with Taylor Trading Plus, an international data-exchange trading service using George Taylor’s Book Method, Value Area trading, Elliott Wave analysis, and Short-Term Trend analysis to identify trading entries/exits in select instruments of Futures, ForEx, Commodities, Metals and Oil, ETF’s, and Stocks. To request visual aids that help with understanding of this article, please go to ‘Contact’ tab at: http://www.taylortradingplus.com.

By Danielle Franklin

Once you decide to leap into forex trading, there are lots of things you need to learn and understand before you actually start trading live. Assuming that you have invested decent amount of time in educating yourself about forex basics, now is the right time to choose a proper forex broker.

Let the Broker Search Begin!

Before you start sorting out good brokers from the average ones, it is important to understand that even the most decent, regulated, professional and user-friendly broker will not make you a profitable trader. Most complaints regarding supposedly unprofessional broker posted on net is actually directly related to the lack of skills of a trader himself. Therefore, I am compelled to emphasize once more that forex education should be on top of your priority list.

Back to broker search! Couple of years ago, the abundance of forex brokers was rather poor. Today it is a completely different picture – the competitive brokers strive to achieve the perfection and welcome new traders to their expanding community.

Among the reliable forex brokers, the web is now full of questionable promises of incredible returns and easy trading. While the truth is that forex is not that easy at all and involves quite amount of risk if you do not possess at least the basic understanding of forex trading.

So, the first thing to look for a broker that:

1. Openly explains the existence of the risks involved in forex trading

The next thing that I find rather alarming is a broker that doesn’t give its physical address, doesn’t provide online support, doesn’t have a direct contact phone number and doesn’t answer emails within two working days.

Therefore, the next thing to search for on the selected broker site is:

2. Comprehensive physical address, live online support (and not offline 24/7, therefore leave a message!), phone number (definitely give them a call with a list of questions – even if you know already found the answers!) and email address.

One way of protecting yourself from fraud and possible misunderstandings with the selected broker is to check whether the forex broker is regulated by recognized regulation authority, such as NFA or CFTC. Regulated forex brokers usually don’t hide their regulation number. On contrary, to show off their reputation and recognition, you are most likely to find the regulation number on the front page of the broker.

Thus, the next thing on the list is to check your broker for:

3. Regulation authority (in most cases listed right where you can see it!)

You might want to check out different trading platforms, both online and download versions, in order to figure out what suits your trading needs. Some brokers offer both web-based and download (generally, metatrader 4 platform), others have only one option available.

Hence, take time trying out free demo accounts, not only in order to practice your trading skills but also to:

4. Figure out which trading platform suits you best.

Wide spreads means bad broker! Generally, the spread on the majors shouldn’t exceed 3 pips. If you notice that your broker is playing games and the spreads are jumping from 2 pips to overwhelming 20, it’s time to move on and search for the better forex broker!

Consequently, the next step is to check for:

5. Trading terms and conditions, spreads, payment and withdrawal process, available trading tools and other features you are interested in.

Make sure to make it absolutely clear what your forex trading account comes with, which extra features have fees, what are necessary terms that needs to be met before you can withdraw your welcome bonus etc. The more questions you ask, the less trouble you will have later on.

Being well informed will provide you with a true vision of forex market and therefore five you a chance to make wise and reasonable decisions.

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