Wednesday, September 12, 2007

Currency Trading Strategy - The Doji On The Daily

Even though day traders are more interested in a currency trading strategy that focuses on intra-day movements, consulting the daily time frame chart is still very important.


Because this is the time frame often consulted by professional traders and fund managers, some representing large institutions. Key levels of support and resistance on the daily chart can be significant and should be taken note of when considering charts on lower time frames.

The Doji On The Daily

The currency trading strategy described here takes advantage of a setup that occurs frequently through the month on a variety of currency pairs.

After each day is complete, preferably using GMT as the guide no matter where you live in the world, examine the previous day's candle on the daily chart and see whether it is the doji formation.

A doji candle typically has a very small body. Look for a doji candle with 50 pips or less between the high and low for the day.

You can now focus in on this day's price action on the lower time frames. Is the doji candle around a strategic support or resistance level? Does it also match up with a Fibonacci retracement level such as the 50 or 62% mark on a 4 hour or 1 hour chart?

Then this could be a reversal point and the current day's action could offer some nice opportunities for trading.

How To Trade The Doji On The Daily

The currency trading strategy you choose to trade this setup will depend on your personal trading style. Here are 3 possibilities

1. The Breakout

If you believe price is going to reverse at this point then set an entry order 5 pips the other side of the high or low of the doji candle and get taken in when price moves.

Of course, there may be a false breakout and your stop could be taken out. That's trading!

2. The Re-Test

If you want a more cautious currency trading strategy then wait for price to break the high or low of the doji candle (you can mark the high and low on the 1 hour chart or 15 minute chart to get a closer view of the action) and see if the candle on the 15 minute chart closes above or below that level.

Price could then continue on for 20 pips or so. However, often, not always, but often, price will come back to retest the previous level of support or resistance before continuing on. Take advantage of this characteristic by putting your entry order in at that level or one or two pips near it just in case price doesn't quite reach the previous day's high or low.

Price will now take you in on the trade when it retraces. This method gives you an optimum entry point and you can take your first profit early when price reaches the new high it recently formed before re-tracing. You might want to leave another one or two lots in the trade to take advantage of a price run if price decides to continue on after that.

3. The Straddle

This currency trading strategy is for those who only want to examine the charts briefly at the start of a new day, set their orders, walk away and let it run.

The straddle technique involves setting an entry order 4 or 5 pips above the previous day's high and setting another entry order 4 or 5 pips below the previous day's low.

No stop needs to be set as one trade will cancel the other in the event price moves in one direction and then reverses and goes in the other.

As the doji candle on the daily is 50 pips or less, that would be the maximum risk in this case. Obviously you would need to have the equity to be able to support a larger risk like this.

Now whichever way price moves, you will get taken in. The risk of being whipsawed out is there but the higher probability is that price will continue on once it has broken the previous day's high or low.

Check Daily

So if you want to develop a variety of methods and techniques in your overall currency trading strategy, look for the "Doji On The Daily". It frequently offers fine trading opportunities no matter which style you use to trade.

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Investing - Enjoy the Precious Metals Commodities Ride

Our rather pessimistic articles of late on the housing bubble, the ominous warnings from a long list of financial experts and their suggestions on how to best weather the impending financial hurricane have been refuted by none other than the well read author of our "Crazy Man" articles (see "A Crazy Man's Rant or Right On? You be the Judge" and "Crazy Man's Rant - He's Crazy Like a Fox!") who sees things completely differently. Who is right - the eternal optimist with a different take on the economic environment or the big bad bears? Below are his comments.

"I have been beset, of late, by a number of anomalies in what I read and know about the economy and how they translate into an imminent housing collapse and how those linkages to other major segments of the economy would cause general economic bedlam.

Be that as it may, I am convinced that we are in the early stages of a multi-year secular commodities bull market.

I am equally convinced of "peak oil" and the merits of energy investments whether they be for reasons of supply, geopolitical or for environmental reasons.

I am also convinced of the large and continuing incremental demand for base metals and other commodities by the growing economies of Asia centered around China and India.

And, finally, I am totally convinced that this demand for base metals and other commodities will continue to escalate even if recession becomes the order of the day in the United States and other developed western economies because of the explosion of savings and demand by the growing middle class of Asia.

I am puzzled, however, as to why you are so convinced that housing demand and prices are on the brink of tanking.

As I see it the recent increase in short term interest rates are not that unsettling (John Mauldin, in his most recent article entitled 'When Will the Fed Stop?' supports my contention making the point that from an historical basis the Fed funds rate is not that high given the fact that from 1946 through 2000 the median fed fund rate was over 6% and yet the U.S. economy grew rapidly during that period) and the almost permanently static longer term interest rates continue to make housing a tremendously affordable proposition. In addition, institutional lenders continue to bend over backwards to accommodate buyers.

Your "Our Worst Nightmare" articles on the housing market (see "Our Worst Nightmare - The Puncture of the Current US Housing Bubble" and "Our Worst Nightmare - The Bubble Has Burst") are sensationalist and misleading. Housing is a hard commodity. It is real, concrete, can be seen and used. Compared to paper representing bonds and equity shares, it is tangible just as all other commodities are. So if we are really in a commodity secular bull cycle, why should we despair over the suggested imminent collapse of the housing market? Where is the nightmare? Moreover, if the FED continues to be accommodative in terms of money supply, interest rates and credit generally, why should the buoyant housing market fall apart prompting all the other elements of the economy dependent upon it to do the same? Again I ask: where is the nightmare?

As I see it, official employment figures indicate a strong economy and the CPI index is not in the least inflationary. Also, surveys of consumer and producer confidence stand almost at multi-year highs. Knowing that Robert Prechter preaches that public attitudes and social mood lead to behavior and activity - not the other way around as we almost all believe - this public optimism bodes well for a continuation of the current economic reality. With an always accommodating FED policy of M3 annual growth in the money supply of almost ten percent, all should be sweetness and light for continuing consumer led demand and economic growth. As I see it, all your 'ominous warnings and dire predictions' are also way off base and are alarmist at best.

You go on and on in your "Ominous Warnings and Dire Predictions" articles (see "Ominous Warnings and Dire Predictions of the World's Financial Experts Part 1 and 2 of a 6 part series) about all kinds of things but:

a) fail to address why so many people are so optimistic given the obvious inflationary consequences of growth in the money supply, bubble-like housing prices and a loss of affordability because of rising house prices.

b) fail to express concern that official numbers relating to the Consumer Price Index, unemployment, GDP and other measures of economic reality are largely bogus and

c) fail, most importantly, to mention the unfunded liabilities of Social Security IOU's, Medicaid, Medicare and its new drug plan, Freddie and Fannie Mae and the Pension Guaranty Corporation which purportedly backstops underfunded private and public sector defined benefit pension plans.

Now I may be talking out of both sides of my mouth here but I also feel strongly that this lengthening list of economic fundamentals are, indeed, alarming and can not continue indefinitely without a blow up. Politicians and central bankers along with their cheerleaders in the brokerage, banking and mutual fund industries, assisted by a largely ignorant and culpable popular news media, will, however, do their best to leave the toiling masses largely ignorant of economic realities for as long as possible.

Inevitably though, when the 'dam breaks' or the 'deck of cards' collapses, it will be quick and calamitous in its magnitude and impact. That is why I am well positioned in precious metals (gold and silver bullion, mining company shares and some well placed long term precious metals warrants to reap the major benefits of leverage these assets continue to give my portfolio) but somewhat less so in base metals and energy. That is my comfort zone which allows me to sleep soundly because it is the best way to protect my hard earned equity and prosper from the fallout of the coming financial collapse. The only thing I do not know is the extent of this future financial dislocation or its timing. What the heck, life wouldn't be very interesting if we could predict the future with absolute certainty, now would it?

For what it is worth, and I have been laughing all the way to the bank of late, I believe we are in a genuine commodities bull market and, as such, see no need to spend much time paying attention to the daily ebbs and flows of the market for these investments. I have done my research and analysis and taken a position. I periodically review the performance of my investments, fine tune them on occasion and then get on with my life confident that the markets will develop as we know they are destined to with our assets safe and growing. If there is a fiscal hurricane approaching as you suggest I am confident my portfolio is secure. (See "Warning! Fiscal Hurricane Approaching! Is Your Portfolio Secure?").

Call this the standard 'buy and hold' approach if you will, but it isn't. Traditional buy and hold investing makes a fetish out of percentage asset allocation between market sectors, stocks and bonds, picking individual stock winners and pruning losers all in the name of 'balance and diversification.' Lighten up and enjoy the commodities ride."

The bottom line conclusion appears to be for investors to strategically position themselves in a wide variety of assets including precious metals, mining shares and long-term warrants.

Dudley Baker is the owner/editor of Precious Metals Warrants a market data service which provides you with the details on all mining & energy companies with warrants trading on the U. S. and Canadian Exchanges. As new warrants are listed for trading we alert you via an e-mail blast. You are provided with links to the companies' websites, links to quotes and charts, tips for placing orders.

Forex - Widening The Broker's Spread

Brokers in the foreign exchange (FOREX) market are paid with the "spread". The spread is the difference between the ask and the bid price of the currency pair. Sometimes this spread widens, causing the brokers to receive more as compensation and the trader to receive less from their trading profits. Why does this happen and, furthermore, is it legal?

Can The Broker Increase The Spread At Will?
Instead of getting commissions such as stock brokers receive, retail brokers in the FOREX market receive the spread. Obviously, the wider the spread between the price at which the traders buy (ask) and the price at which they sell (bid), the more money the broker gets paid. Can a broker open the spread at will? The answer is simply yes. However, competition in the market places an important constraint on the brokers willingness to do so. A knowledgeable trader is naturally drawn to brokers with the lowest spreads, all other things being equal. After all, who wants to give up profits unnecessarily? Why pay one broker more then necessary when you can get the same services from a different broker with lower spreads?

Why Does The Spread Increase?
Certain periods more than others experience wider spreads in the FOREX. Wider spreads are especially prevalent when there is a release of a major economic news report. Some of these reports are released on a regular basis, such as the Non-farm Payroll Report (NFP). The NFP is typically released on the first Friday of every month. On occasion, it may be released on the second Friday instead. Followed by traders worldwide, this report is quite significant as it deals with the employment figures for the United States in various industrial sectors. The demand for trading certain currencies during this time is huge.

The currencies impacted most by the NFP are the three major currencies of the worldEuro, Dollar and Pound. As a general rule of economics, when the demand increases, the price also increases for the commodity being traded. Currencies are no exception. In addition to reasons of increased demand, the brokers also may be motivated to increase the spread to take advantage of a great opportunity to gain additional revenue on a regularly recurring basis. Then too, the brokers have a vested interest in minimizing their own exposure to loss in the marketplace based on positions they take from time to time.

Is It Legal To Widen Spreads?
Generally speaking, it is legal for a broker to widen its spreads at will. However, it also depends on what the broker has advertised to the trading public. In other words, if the broker has advertised that its spreads are always the same, even during major news releases, then the broker may be committing a deceptive trade practice by doing something other than what was advertised. If this is the case, then the trader may have recourse if he or she detrimentally relied on the misleading advertisement and suffered damages therefrom.

Before one jumps through this seemingly open door of justice, however, it is quite advisable to read the fine print. Pertinent provisions are usually contained in the user agreement accompanying the application for a trading account. If the broker states in its user agreement that spreads can be changed without notice in the sole discretion of the broker, then your path to the courthouse may have been short-circuited. Since the FOREX market is still generally unregulated, so much of what may seem otherwise illegal has not been fully addressed by legislation or the courts, and may not be for some time to come. Trader beware!

If you are ready to change your future by stepping into the exciting world of trading FOREX, go to for more information. Author Sandy Robinson, J.D. is part of the Winning Traders Association, an educational organization founded by John Beiler, President. The organization consists of a network of committed trainers and motivated traders willing to provide support to those interested in trading foreign exchange. Many of the members work from home.

Sandy Robinson, J.D., Copyright 2007

Make Money Fast In FOREX Trading

Here we are going to look at making money fast in currency trading and some tips to do it.

Much of this advice is not conventional but most currency traders dont make money fast!

Here are your tips

We are going to assume you trade already, and you have a method you are confident in, and can apply with discipline.

With simple changes in trades taken and money management we will show you how to increase your capital gains.

The trading tips below will work well for traders who want to catch the big profits from the big currency trends that last months or years and will help you make money fast in forex trading.

1. Accept Volatility and Risk

All good FOREX traders understand that volatility and risk mean big money making potential.

You can't have a profitable FOREX trading method without taking risk, you need to risk more to gain more. .

Risk though is misunderstood by most currency traders and they try and limit risk so much that they actually have no chance of making any profits.

They always get stopped out.

The perfect example is the day, or intra day trader, trading in one session with a tight stop.

If you are after a big gain give the trade room to breathe and place a stop that takes into account market volatility.

Also dont trail your stop to quickly leave it far enough behind not to get stopped out by volatile reactions within the long term trend.

You cant predict volatility in the day so dont try.

Look longer term take bigger calculated risks and go for bigger profits and trade less.

2. Trade Infrequently

Many traders trade frequently and always like to be in the market, they fear they will miss a move, or that by trading more frequently, they will make money.

There is no correlation between how often you trade and how much money you make, so learn to be patient.

The big moves in FOREX trading, with the best risk to reward, come a few times a year, and you should trade infrequently.

Focus on the trades that make the really big gains and be patient while you wait for them.

3. Dont Diversify

Diversification is a great way to make money slowly not fast you simply are diluting your gains, if you are trading a small forex account.

Focus only on trades that you are confident can make big money in and dont hedge or take other trades. If you think the trade is going to be big back your judgment.

4. Money Management

We are looking at the BIG opportunities that allow us to make big gains, and this is actually, where money management becomes important.

Where taking calculated risks here not just taking risk for the sake of it.

The tips below are a great way of controlling risk

1. Buying options at in or close to the money, they will give you staying power and stop you getting taken out by volatility.

Be careful not to buy out the money options and make sure that you get plenty of time on your side if using this method.

Many traders lose, not because they were wrong about the trend, they simply got stopped out.

Options overcome this problem and will give you staying power.

2. Many traders start trailing their stops to close as we said earlier to lock in a profit, more often than not they get stopped out.

The trade runs on to make thousands more in profit and there not in it!.

Keep your stop in its original position and let the move develop without the temptation to move your stop up.

Youre looking to make money fast, and youre trading selectively so have the courage of your conviction .

Consider this

The fact is in currency trading or any other venture in life that involves making big gains you have to take a calculated risk at the right time and have the courage to go for it.

I read all the time about risk management in trading and some traders become so obsessed with not losing they will actually never win and lose their equity over time.

Dont make the same mistake.


On all aspects of becoming a profitable trader including info free articles, systems and PDF downloads as well as an exclusive Gann Trading Course visit our website at

Timing is Everything With Forex Trading

The most challenging part of getting started with Forex trading is to learn this innovative way of trading. Many potential investors that try to navigate the Forex system unaided end up being frustrated and financially intimidated. There are very simple strategies to becoming successful using the foreign exchange trading system but the first step is gathering all of the necessary information surrounding this type of trading specialty. Securing a reliable Forex trading broker is likely the first and most pivotal step after learning the initial principles.

Unlike many types of trading and futures, foreign exchange trading is not designed to make the client rich quickly. Many people are frightened off by the word that Forex trading is a get rich quick scheme that in large part, doesn't work. This is a financial myth despite all the hype surrounding the foreign exchange trading system. There are steps and gains to be taken in order to secure a future in successful trading. Expect to dedicate a large portion of time to researching and understanding the market in general before setting out with your pocket book ready to invest. Learn all you can about the Forex market in the beginning in order to make the Forex trading path a smooth and triumphant one.

There is no doubt that there are numerous types of orders that can be utilized in order to open and close trades and becoming familiar with them is a must. In the foreign exchange trading business there are charts, graphs and other visuals to help you effectively analyze trends in currency trading. These charts and graphs will assist in making well-informed decisions on what currency to sell. Timing is everything and it goes without saying that when experiencing with the Forex trading system, knowing when to trade can be the pivotal difference between success and failure. Understanding the analysis tools and how to use them efficiently will put any investor on the right track.

As well as proficient trading tools, it is an absolute necessity when using the foreign exchange trading system to understand how to use the software to perform actual trades. The only way to become comfortable with using Forex trading software is to use it and learn how to plot a course through the process. Selecting a good trader is the most imperative tip at this stage because an established trader can help you with the services required as well as giving you in depth tutorials using the foreign exchange trading system.

The most critical tool that will be utilized in the Forex trading system is patience and discipline. As mentioned earlier, foreign exchange trading is not a get rich quick proposal so learning patience and discipline can help you to become profitable in a timely fashion without losing money. Most brokers offer a demo account that can be used to practice and learn the foreign exchange trading system that mimics the real account with the exception of real money being traded. This gives a client insight into the market and its behaviors before actual money is invested. Learn how to make a profit using paper trading on a regular basis before risking your capital with Forex trading.

Troy Degarnham is the author and webmaster of an informative website about Forex Trading Brokers.

Extensive help and tips on systems, software, signals, forex trading, forex brokers, courses, and other secrets to help you gain financial freedom.