how to trade currency

Currency War Reality Check

Forex Kong 2 Comments

Don’t kid yourself – there is a war going on. I’m not talking about some little skirmish over an Island, or a dispute between two neighboring nations over Immigration – I’m talking about a major, high level tactical war being fought right in front of your very eyes  – only by way of dollars and cents…..with no guns required.

The Pentagon has run its simulations with top advisors from the financial and economic community (not high-ranking Generals and Majors) with the task of “flushing out potential attacks” and “plotting counter moves” with all the other good stuff one would imagine being included in a full scale Hollywood blockbuster. The guns have been replaced with financial instruments, the good guys and the bad guys are now your own government officials and central bankers – and the entire thing plays out in a digital war zone littered with crashed financial institutions, broken down bank accounts, highly manipulated markets and human casualties (financially speaking) in numbers I care not consider.

This is a currency war people – and it does not end well for those unwilling to accept it, and in turn prepare for it.

This headline just out of Venezuela: Venezuela devalued its currency for the fifth time in nine years as ailing President Hugo Chavez seeks to narrow a widening fiscal gap and reduce a shortage of dollars in the economy. The government will weaken the exchange rate by 33 percent to 6.3 bolivars per dollar, Finance Minister Jorge Giordani told reporters today in Caracas.

So……you just woke up and gold is up 33% – and your local loaf of bread just went through the roof. You don’t think this is what’s going on planet wide? How about the Yen recently? Have you checked the current value of the Pound?

Don’t be surprised to find a similar situation in the U.S  – a lot sooner than most care to believe.

No country is willing to sit idle and allow the U.S to continue on its rampage of “easing” and continued flooding of U.S dollars without at least a fight. Unfortunately for many, the Chinese are about “10 moves ahead” with a war plan so complex and intricate it will make your head spin. (A lot more on that later).

In times of war you need to be a soldier – you need to navigate the trenches, and you need to protect yourself and your family.

At best – take interest in what’s going on in the currency world as this is the battle ground….this is where the fight will be lost or won.

Angry Birds – And Where We're At

Forex Kong 14 Comments

With the recent purchase of a new Ipad 5 and subsequent purchase of the popular game “angry birds” (I bought the outer space version) it’s fair to say that my trading has suffered as a result . Now , with consideration of “going pro” it’s unlikely I will be able to commit the hours necessary, as well focus on trading so – angry birds it is.

Hardly…….but a real hoot all the same.

Market wise it appears that once again we are offered new opportunities to short USD on it’s rise over the past few days. I see absolutely no fundamental change here whatsoever, and as boring / repetitive as it may seem – I will again look to load short USD against a miriad of the majors.

Zooming out a touch, gold is still flat as a pancake and of particular interest the “TLT”  20 years treasury bond fund sits at a precarious position. A falling dollar as well falling bond prices can most certainly suggest money flowing into stocks (as we’ve been seeing) but is also reflective of higher interest rates, and in turn – pressure on borrowing and tougher times ahead for corporations.

When corporations suffer……stocks sell hard.Watch the bonds, watch the dollar and in series – stocks are the last to go.

Im back at it here full time as always everyone. Let the games begin!

Short Term Trade Tip – Horizontal Lines

Forex Kong 9 Comments

Obviously my short-term trade set up is a thing of beauty, and relatively soon – will be made available to the rest of you. But aside from that, I want to pass along a simple little tip – that could provide you an “edge” here in the meantime.

When you drill down to smaller time frames such as a 1H chart (1 hour candle formations) or even a 15 minute, or 5 minute – take out your crayola crayon (and not your laser pointer) and draw a line THROUGH THE MIDDLE OF THE CONGESTION/SQUIGGLES. It will be this “price level” that is currently at play – and not the “highs and lows” of the given time frame.

For the most part anything smaller than a 1 Hour chart is frankly just “noise” so the highs n lows are really not as significant as the middle ground where price is centered. Once these lines have been drawn – a trader can then focus on a “realistic price” to consider for entry or even stops etc, as the volatility short-term will spike/fall and give you all kinds of levels – not exactly relevant to your trading. On a 1 hour Chart 30 – 50 pips on either side of this “central price” is completely normal, and isn’t enough to even get my heart beating – in consideration of dumping a trade.

If you don’t understand the given volatility on the time frame you are viewing – you will get killed.

Take out a crayon and not a laser pointer – and plot the “middle of the squiggle “.

As simple as it seems – this can easily be the difference in catching many, many more pips in any given trade, based on the fact that you have not skewed your lines of S/R to reflect the highs and lows of smaller time frames….but the center – where price is currently fluctuating.

Thanks Kong!

Blow Off Top – Retail Bagholders

Forex Kong 10 Comments

I’m throwing this out there now – more so as a warning to newcomers.

My “risk barometer” being the SP 500 / Dow Jones Industrial Average is cranked about as high as one can imagine – given the current global state of affairs. We are now looking at levels not seen since the highs, prior to the massive crash in late 2007.

One can only assume that right around now, every retail investor on the planet has heard of the “massive upswing in markets” and has just as likely received word from their local shyster (ooops… broker) that now is a fantastic time to buy – as to not “miss out” on the opportunity to make a quick buck.

Looking a few days / week out – one could very well see what I refer to as a “blow off top”. A market phenomenon where large numbers of retail investors chase prices in a frantic scramble to “get in” before the opportunity has passed and the ship has sailed. Unfortunately this is right around the same time that Wall Street is unloading its last few shares (at insane premiums) to the poor unsuspecting newbies – blinded by greed, stumbling over themselves to snap up whatever shares they can.

I’m not suggesting their isn’t money to be made (seeing market leaders such as Apple down 55 bucks looks like a buy opp to me too) but I am putting out a strong reminder that – this is how the markets work. You are the last to buy (at the top) and then will generally hold (until you can’t stand it any longer) only to then sell at the bottom. The big boys will “buy your fear” and “sell your greed” all day long – as retail investors continue to do what humans will do.

Does this at all sound familiar?

Take heed….watch these markets like a hawk here at the highs….thank me later.

Risk On – How To Trade For Profits

Forex Kong 6 Comments

I am often a day or two early – but rarely RARELY a day or two late.

When assessing “risk behavior” one needs to look across the board at a number of currency pairs, and evaluate which are indeed exhibiting strength – broadly. A “quick jump”  in a single currency pair is absolutely no indication of a change in trend, and a silly little tweet or headline from a newbie blogger – even less.

No single currency trades in a vacuum , and with each and every move in one – there is an equal and opposing move in another. Identifying those currencies associated with “risk” and those associated with “safety” is paramount in formulating  a fundamental trading plan. 

I never trade a commodity related currency against another – and rarely (if ever) trade a safe haven against another. (Although as of late with the “devaluation war” in full effect – I am actively pitting one against the other – yes.)

Simply put – money flows out of risk related currencies and into the safe havens in times of risk aversion…and the opposite (into risk related currencies and out of safe havens) during times where risk is accepted.

This evening I will leave this with you – to  discern which is which, and invite your questions or comments in putting this very important piece of the puzzle in it’s place.

Kong gets loooooong risk.

 

Looking To Trade – Need Catalyst

Forex Kong 9 Comments

As a fundamental element of my trading plan – I need to stay active. I rarely leave profits sitting on the table for more than a day, and equally – can’t stand sideways directionless action. My short-term trade technology has proven incredibly reliable once again as I have been 100% cash nearly 10 days now (Permit and Bonefishing in Punta Allen – please google it) and literally haven’t missed a pip. The majority of currency pairs (with a few exceptions) are sitting at nearly the exact levels as a week ago, while equities and PM’s have more or less treaded water.

This soon will change.

Thursday’s, with their barrage of U.S economic data have often provided swing points in markets – and I suspect that this week will be no different. With a bit of news out of Canada tomorrow as well the GBP unemployment rate, my current “tech” should have me on one side of the fence or the other, sometime late tomorrow evening / possibly early Thursday morning.

As difficult as it is to believe at times, and as little sense as it makes (considering the general state of “things”) I still favor further upside in coming weeks, but am a touch more cautious than I may have been prior. Obviously nothing moves in a straight line – so the usual zigs n zags are expected…as we likely “grind” higher.

Some signs of life also being seen in the PM’s and related mining stocks and etf’s.

I will continue to monitor commods vs USD as well JPY, and should the USD continue in another leg down – getting long GBP also looks like a promising trade. The JPY pairs have obviously had their “day in the sun” and I would be reluctant to push much further without seeing a reasonable pullback/correction before continuing (in general) short JPY against the lot. I’ve seen no real change fundamentally as the currency wars continue – with everyone taking their turn at bat. Perhaps Thursday’s U.S data will be the catalyst to push things firmly in one direction or the other.

Mixed Signals – Opportunity Or Not?

Forex Kong Got something to say?

I don’t like getting caught in sideways market action. Nothing bothers me more than seeing my hard-earned dollars tied up in the zigs n zags of a given trade – ranging sideways and going nowhere fast. As much as I understand this to be a common (far too common actually) and normal aspect of trading – sideways is a killer psychologically as “dead money” starts to weigh heavy on the brain. Trading capital is tied up as other opportunities present themselves, and a trader is left with his/her hands tied – unable to act.

When I get mixed signals across my intermarket analysis as well my shorter term technical system – I question if perhaps an opportunity has presented itself – or if  I am looking at the initial stages of “sideways” and possible reversal. If a trend is still evident on the longer time frames such as a daily chart as well a 4H chart – I will then come down to the smaller time frames to see where we are at.

Kong’s Awesome Tip

On any time frame chart you are viewing – if price starts in the upper left corner of your screen, and ends in the bottom right -YOU ARE IN A DOWNTREND. If price starts in the bottom left corner of your screen and ends in the upper right YOU ARE IN AN UPTREND. Anything else – and you are sideways.

As simple as this may seem, it serves as an excellent exercise when looking to eliminate sideways action. Even if (to start) you only drill down to a 1 hour chart – and run this simple exercise, it should go a long way in helping you to avoid sideways market action, and possibly identifying potencial trade opportunities.

Todays Markets – Trading What I See

Forex Kong 8 Comments

Stepping away from the markets for a day or two can be a mixed blessing. Sure the sunshine is great, the beer cold and the fishing fantastic – but what about work? These days 2 (or god forbid 3) days away from the markets – and you could just as well be looking at a completely new game! War may have broken out, stocks may have crashed, some nutjob may have launched his own missile, man…..my buddies from the planet Nibiru may have returned to pick up more of their gold! You just don’t know what the hell’s gone on until you start digging back in.

Top of my list – several of my beloved commodity pairs are showing relative weakness against both the USD and JPY. At this point it’s just too early to tell, but as it stands I would still be sitting on my mits here this morning regardless of the holiday, as things have more or less traded as expected – sideways. Price action has more or less remained steady/flat in risk in general, but I give a touch larger weighting to these “dips” as opposed to seeing much of anything “blowing through the roof”. I dare say “getting short risk” has poked its head around the corner – but still have considerable reading to do here today.

The moves in both silver and gold appear “healthy” but as per the usual these days – nothing to write home about.

I will spend the majority of my morning reading/reviewing Central Bank statements/news as well getting back up to speed with the planet at large before making any drastic decisions but in “trading what I see” – current trading conditions look a touch cloudy with a small chance of showers in the afternoon.

Glad to be back everyone – lets get out there and make some money.

 

Over Trading – Not A Good Plan

Forex Kong 5 Comments

Considering the recent run with respect to the short JPY trades , as well recent gains made short USD – Im taking this opportunity (being 100% in cash) to wish you all the best – and get out of dodge.

Markets are nearly some relative near term highs ( with DOW around 13,600 looking like solid resistance ) so I find it highly unlikely that I will miss any “upward action” in coming days. As an active trader, these opportunities rarely present themselves so…..I am “obliged” to take it when I can get it.

Often traders will get caught in the moment when “everything is going up” – push their luck – and do run the risk of overtrading. Too commonly resulting in losses and significant psychological wear and tear.

When stars align and you find yourself sitting with significant profit and absolutely “zero” market exposure….one really can’t look a gift horse in the mouth.

This gorilla is going fishing!

Ill do my best to get a post in tomorrow evening and be back on track for the rest of the week. Good luck everyone!

Learn To Trade – Or Die

Forex Kong 25 Comments

I still hear some of these “old school” guys on the net – talking about “investing”. Good luck with that.

You see – for those of us who got started in this game around the time of the crash in 2008, the word “investing” has more or lost its appeal. Considering the current environment, and the forecast for the future – anyone considering investing in anything (for any extended period) should most certainly have their head examined.

I wish it was still that easy.

I pull up charts on any number of things, going back some 10 odd years or so  – and laugh. These guys still think they know what they are doing because of their experience back in 2005 when it didn’t matter if you bought ” day old cake”. Every morning you woke up – called your broker – and your stock went up.

This is fantasy land now. This will likely never happen again.

If you are not willing to spend an extra hour or two studying the company you just invested in, or following a couple of charts, or tuning in to the current news (and I’m not talking about CNBC) to get an idea of what’s going on day-to-day – I can assure you….you and your hard-earned money will “all too soon” be parted.

You don’t have to become a “day trader” – as I don’t day trade either, but you should at least come to understand that there is nothing wrong with selling when you see a profit – and buying back again when your favorite stock dips. Trust me – you won’t miss a  thing.

Markets today (more than ever) are designed to rid you of your cash – designed with “alien type precision” in fact…..for that very purpose. If you don’t learn to “trade” – I have some very bad news for you.

For all your efforts….and all your hard work……you will most certainly end up with zero.

Learn to trade – or……….