Month: July 2013

Big Price Moves On Low Volume – How?

Forex Kong 10 Comments

If you think about price itself being the “mind” of the market – consider that “volume” is the heart.

Try to think about volume as the amount of people behind a given move, or even the “emotional excitement” (or lack there of) surrounding  moves in a given asset. Volume measures the level of commitment in a move, and lets you know how many people are behind it.

When an asset makes a considerable move in price on very low volume ( as USD has now done over the past two “holiday” days ) we deduce that very few traders /investors  are actually involved (relatively speaking) – and that the movement lacks the commitment one would like to see when looking for momentum.

Simply put – if there are only buyers (and in this instance to “few” sellers) an asset can make considerable leaps in price with little actual participation. One could argue that on low volume days markets aren’t exactly balanced, so it’s not at all uncommon to see dramatic movements in price – even though fewer people are actually involved. Counter intuitive yes. Glad you’ve now got it under your belt? Excellent.

A valued reader asked me just today,  if I was considering throwing in the towel on my USD shorts. A valid question considering the giant leap in price we’ve seen here today. Hopefully,  now that you as well have the ability to factor “volume” into your analysis – you’ll be able to ride out a couple of these instances and stick to your guns / trust your instincts and not let the market push you around.

All good in Kingdom Kong – I haven’t even blinked.

Have a great weekend everyone.

Kong…..gone.

 

Japanese Candle Sticks – Get To Know Them

Forex Kong 7 Comments

Every trader has their own “favorite type” of technical analysis to apply when viewing charts, and that’s great. However it’s been my experience that having only one “go to analysis tool” is generally not enough to get an accurate read on things – technically speaking.

You need to see things from several perspectives and apply your knowledge of at least a couple different methods of analysis in order to make sense of it all.

I follow price action almost exclusively – and have very little in the way of other “indicators” on my charts short of the “Kongdicator” (my proprietary short term tech tool) which “does” essentially follow pure price action.

Japanese candles are a very large part of my “graphical / visual” evaluation of markets action as with a simple glance, one is able to deduce:

  • The high of the given time frame
  • The low of the given time frame
  • The opening price of the given time frame
  • The closing price of the given time frame

*and even more importantly – the “difference / variance” in price over time – purely in a visual context.

So when you see a candle ( your eyes get so used to identifying them over time) that suggest to you “hey! in the last 4 hours price has jumped dramatically (or perhaps the inverse) – you take notice!

Google’em – there are piles of excellent websites outlining Japanese Candles – and how to use them!

$USD Weakness – Here's Your Chance

Forex Kong 20 Comments

I wish things moved a lot faster at times too, as that I wouldn’t continue to sound like a broken record here….but it is what it is.

You may find yourself watching the daily levels on a given stock market index as means to gauge how things are going, or perhaps you watch bonds. Unfortunately for me, the U.S dollar with its predominant role as the world’s reserve currency is something I need to remain focused on. It does get a little boring at times – no question about that BUT! If you’ve tuned in over recent months – the accuracy of trade entries and market timing has been strong enough to keep in beers and tacos through some pretty rough patches.

Here we sit.

As suggested yesterday my eyes are keenly focused on USD, and in turn every other asset class as these days “even more than ever” – a lot hinges on where we see the dollar going. In fact – EVERYTHING hinges on it these days.

Hopefully I can find more interesting things to talk about in coming days, as USD looks to be doing exactly what I expected it to do here at these levels. USD is reversing and if today’s action is any indication – of the correlations / options I laid out yesterday – Stocks look set to reverse along with it.

I’ve held a number of short USD trades for several days now as my “round 1” entries where at least a couple of days early. I’ve traded very small and have every intention of just letting this run it’s course – and adding to existing positions as my direction confirms.

You are going to see some very, very , very strange moves in Forex markets here on this turn as a number of “cross currents” come into play – that will challenge any measure of logic. Imagine USD heading lower as well stocks in what would appear to be a risk off move…coupled with AUD and NZD moving higher? That is nuts.