Fundamental analysis - important news / interest rates
Technical analysis - charts and indicators.
The book provides strategies for day traders, swing traders, position traders, and mechanical traders. I'm only talking about the ones I'll be doing as a swing trader (1 day to a week long positions).
Important news and things to notice
When (1) interest rates go up, (2) the GDP goes up, (3) NFP (released 1st Friday of each month) goes up, all can cause a currency to strengthen. (4) Trade Balance Figures (imports/exports) effect the currency strengths. (5) Consumer Price Index (CPI) goes up = interest rates go up. Finally, (6) Purchasing Manufacturing Index (PMI) can provide info on currency pairs.
All of that was great to know, but I need to know when these reports are released and where to get them. Trading has to happen minutes to hours after the release of the info to take advantage.
Rule of 20: "If actual exceeds forecast by 20%, trade in that direction." That's with all numerical predictions except PMI (use .5%, and .2% for interest rates). Fyi, .01% = 1 basis point.
Trading Strategies
Disclaimer: I've read plenty of strategies up until this point. I'm picking the ones from this book because it's time to practice. If I read of others later on, I'll adjust accordingly. THIS IS IT for the next few months.
Gawk the Hawk - M15/M30 charts. Go long or short immediately after news release. Prepare beforehand. After entry, set 20 pip stop loss. Set targets at 40 or 60 pips above. That's risk:reward of 1:2 and 1:3. This is actually a Day Trade strategy I like. I'm writing it here just to remember it later.
1. Trend Rider - H1/H4 charts. Indicators:
- Exponential Moving Average (EMA) with period 12 [EMA 12]
- EMA 36
- Average directional movement index (ADX 14)
Going Long: Once EMA 12 crosses above EMA 36, enter when price comes back down to EMA 12. Set stop at EMA 36 (>30 pips). Exit when ADX 14 goes above 40 and hits it again. No predetermined profit. The same goes for going Short, mirroring EMA 36 and EMA 12.
2. Trend Bouncer - H1/H4 charts. Use Bollinger Bands MA 12, 2 standard deviations. Once price touches the band and retraces, enter. Stop loss is the other band. 1:2, 1:3. Easy day, right?
3. 5th Element - H1/H4 charts. Fast EMA: 12, Slow EMA: 26, MACD SMA: 9. Apply to close. Wait for 5 positive bars on MT4 histogram (MACD minus 9-day SMA of MACD) to indicate upward trend, 5 negative for short. Set stop loss at last histogram low. 1:2, 1:3
4. Power Ranger - Using oscillators RSI and Stochastics. >80 overbought (sell), <20 1:1="" 1:2.="" 1st="" 20="" 75="" a="" and="" as="" at="" be="" below="" buy="" cross.="" crosses.="" draw="" enter="" erforming="" et="" for="" from="" go="" i="" irror="" is="" it="" lines="" long="" look="" loss="" m="" mirrored.="" must="" nbsp="" of="" or="" oversold="" p="" price="" profit="" range="" resistance="" s="" set="" short="" shorthand.="" shorting.="" somewhat="" speaking="" stop="" support.="" support="" target="" the="" then="" they="" to="" trade="" uptrend="" when="">
5. Pendulum - In ranges, trade at 10% and 90% of range from support to resistance with profit targets at 50%. Look for retracements. If range is x pips, buy at .1x above support, sell at .1x below resistance. Profit 1 is 50%, profit 2 is 90%.
So that's it. They will all require some practice and familiarity with MT4. I was excited to hear the author speak about doing all this on MT4, securing my resolve to learn these strategies.
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Interest earned or owed on currencies during open positions are called swaps. Positions held after 5pm (EST) are rolled over, subject to swaps.
Forex books 3 days of swaps Wednesday night, so think twice of holding that night.
When oil prices are up, go long on CAD/JPY. When China GDP goes up, AUD goes up (weeks to months later).
"If I can't, I must. If I must, I can."
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Lastly, I started a new book, the MetaQuotes User Manual that is. It's going through the entire platform from toolbars to charts, managing orders, setting up stops, expert advisors (automated trading), and a lot more. As I learn the strategies, I'll be working more on the desktop application as time permits. Exciting times.
I still have to get better at calculating position size. This post is almost an hour late. I'm going to bed.