how to trade currency

Seeing Any Cracks People? – Copper Demolished

Forex Kong 3 Comments

For as many years as I’ve been trading and analyzing markets I’ve been told time and time again….watch copper.

If you want to get a good bead on global growth / demand just make the simple connection between “that” and the obvious need for copper.

You can’t build a building without it, you can’t build a car without it, and you can´t produce anything “electronic” without it so…..I guess that about covers it.

It’s been widely correlated with “China’s growth” as a general bellweather for continued expansion and development.

Nice chart below. I guess the default of China’s Chaori Solar Energy may have caught a couple of peoples attention. Smart people anyway.

Copper_Forex_Kong_March_2014

Copper_Forex_Kong_March_2014

The Aussie Dollar ( my synthetic “short China” play from a few days ago ) getting hammered as we speak.

And who’s saying that saying a keen eye on the fundamentals doesn’t do much for their trading?

Not me.

China Tanks – But No Trouble In U.S?

Forex Kong 13 Comments

The biggest story in the financial markets this morning is the weakness in Chinese assets.

The Chinese Yuan sold off aggressively, experiencing one of the largest one-day declines since December.

Chinese stocks were hit hard with the Shanghai Composite dropping more than 2.8%. Although a significantly weaker trade balance triggered the selling, China’s central bank has been actively allowing the Chinese Yuan to weaken.

Chaori Solar Energy was allowed to default on its corporate bonds ( as suggested some days ago ) and is currently in the process of “selling its solar farms” in order to pay up.

Markets “appear” calm here this morning in a general sense but don’t get too comfortable as this has got some pretty far-reaching implications.

Emerging Markets “EEM” continues its downward trajectory, as the Japanese Yen looks to steady / make a move higher.

Shakey ground here “globally”……but of course – no trouble in U.S Equities.

How’s “short AUD” looking now suckas??

Day Trading Blues – Look To The Fundamentals

Forex Kong 7 Comments

With all the data flying around each day – it’s near impossible to put everything in neat little compartments, all organized and understood. We see markets rise on “bad news” and sell off with the good, then do the complete opposite only a week later. We’ve got the “fear of war” one day, then the “celebration of peace” the next. The market is a meat grinder, and unfortunately – you are the beef.

So when the short-term / intraday day action isn’t providing much opportunity – what’s a trader to do?

How can you feel that you’re “moving forward” when the day-to-day grind is doing nothing but frustrating you, and possibly grinding your account to dust?

Step back. Re focus, and look for the things that “you can make sense of” – and start working out from there.

A simple example of what “I’m doing” while I sit idle in a number of trades that are essentially “going nowhere fast”. I ask myself…..Kong….what “do” you know? Where can you focus your energy as to keep this thing moving in the right direction.

I immediately turn to the fundamentals.

Do you agree with me ( after everything you may have read / researched as well ) that China is set to slow in the following year / years?

I can’t be bothered to go over this again but encourage you to read this simple breakdown, then get back here.

We’ll outline some trade ideas next.

5 Ways China Slowdown Will Ripple Across Globe.

Forex Entries – What Are You Looking At Kong?

Forex Kong 17 Comments

Keep in mind everyone – this is a blog that requires “eyeballs” in order to be of any use to anyone so…..please forgive the occasional shameless plug. It’s a dog eat dog world out here in the “financial blogosphere” where “catchy headlines and the promise of riches” go head to head with good ol straight up “honest advice” on a daily basis.

Snake oil salesmen run rampid through these jungles, though few of them wearing the proper footwear.

So…..what are you looking at Kong? What makes the difference from one day to the next, that has you enter a trade or not? How do you know “when” to push the button? And how is it that ( more often than not ) you appear to enter markets at almost the “exact” right time?

Truth is……aside from my custom technology “The Kongdicator” which essentially tracks pure price action ( providing signals when a very specific set of criteria has been met ) the largest contributing factor is really just straight up old fashion patience, coupled with a solid grasp on “each currencies role” in the grand scheme of things.

The one thing the Kongdicator “can’t do” is rule out the amount of time that a particular asset will trade sideways / flat. This is where conviction and knowledge come into play as….you’ve got the level ( or around about the right level/price ) but can’t really know “how long” price may remain there.

Take this week for example where many forex pairs have literally – “barely budged”. Does this mean your trade entry was wrong? Not at all! Only that the amount of “sideways / churn” was near impossible to account for.

This also lends credence to the idea of ” trading in smaller orders around the horn” as…..you tie up less capital on your initial entry, you’ve resigned yourself to the fact that it “may not be perfect”, you’ve kept plenty of gasoline in the tank and you’re able to sleep through days and days of the dreaded “sideways” – without really getting to worked up about it.

You then plan to “add” to your position as things move in your favor, and have far less concern if things “don’t” – as your original position is relatively small.

Fine tuned entries as best you can – sure…….but “small entries over time” is equally a fantastic addition to your trade arsenal, keeping you in the game longer, allowing the market to “do its thing” and hopefully allowing you to sleep at night.

Hope it helps.

All entires looking good here as of this early morning so…unless something “incredible” changes here this afternoon – these trades will again be “added to” as they move further into my favor.

Forex Markets – A Disturbance In The Force

Forex Kong 33 Comments

Something is going on, and I don’t like it.

With the Nikkei down “another” -360 points here as of this morning, the Yen has barely budged, while the U.S Dollar has gotten absolutely hammered overnight as well!

What happened to the safe haven flows seen yesterday? Is this your “garden variety routing” where nearly everything you “expect to happen” doesn’t happen ( a very normal part of trading ) or perhaps indication of something larger?

The ECB has been “talking down” the EURO overnight, yet here again – the EUR as well GBP and even The Swiss Franc (CHF) have all surged higher in the face of a beaten down U.S Dollar!

I wish I could simply just look at it as a “ripple” or a normal day-to-day type thing, but I’ve been at this far too long. Something doesn’t look right – and I don’t like it. I don’t like it one bit.

An extra “zig” or and extra “zag” in our charts ( as well the every changing fundamental back drop ) can be expected in these times of unprecedented Central Bank intervention but when I see something “blatantly” out-of-place, a move “so contrary” to what I believe “should” be happening – I immediately switch up my thinking.

If I don’t know what’s going on, there’s only one place I choose to be ( at what ever costs ) – and that’s in cash, happily sitting on the sidelines, looking for a time when I “do” know.

Today being Thursday we can generally look for “a move” in markets, as the U.S Data hits the street here around 8:30 a.m.

I will be watching like a hawk. Or a dove, no wait…..a hawk….no dove.

No no no…..all gorilla here.

Stay tuned for an intra day update.

 

Forex Chart Survival – Short Term

Forex Kong 8 Comments

Short term trading in forex.

You all want to learn how to do it. You all like the action, the excitement, and maybe even (as I do) the challenge. It’s most likely that most  of you continue “trying this” in attempt to make fast money, leveraged to the hilt and looking for that “big trade”. Well….you won’t find it trading short-term smaller time frames, let me tell you that.

The big trades are found on the long-term charts when a move is caught on weekly and monthly turns. Trouble is, you get stopped out on a 50 -100 pip move against you trying to “nail it on a 15 minute chart” – before you’ve even given the trade a chance.

In my view, if your account/trade can’t absorb a loss of an “entire candle” on the time frame “above” the one you are trading ( so a measure of ATR which is the “average true range” to get an idea ) you’ve really got no business trading it.

So for example….you see on a 4 H chart where an average candle might be 160 pips, and you’re trying to trade with a -25 pip stop? No chance. You will be ground to a pulp time and time again.

Everyone has to do this math on their own as everyone’s account size is different, but it cannot be overlooked. You need to trade significantly smaller with much wider stops to even survive the daily noise on 15 minute charts and lower. That’s just to stay in the game over a 24 hour period!

I can go on and on about this, and “do plan to” at a later date ( possibly through a series of videos I’m working on) but as it stands…and considering the volatility these days – the best possible advice I can give today is:

Trade smaller and trade wider. You might just survive.

Forex Trades – Right Here – Right Now!

Forex Kong 7 Comments

Some general observations:

The overnight surge in GBP looks a tad “suspect” to me, so I’ll be watching for opportunity to “get short GBP” in any of several pairs including GBP/USD as well GBP/JPY and even GBP/NZD, pretty much “right here – right now”.

The Australian Dollar has also “seen its day” with a couple of days of retracement, but with absolutely nothing but “empty space” down below. I expect AUD to turn, and continue its way lower……much lower. Short AUD/JPY reload more or less….”right here – right now”.

The U.S Dollar has pulled back “a bit” providing for further “long opportunities” if you are still in that camp. Keep in mind that USD has changed it’s course creating higher highs since early January so….regardless of near term squiggles – I’ll be looking for a stronger USD moving forward.

Long oil idea from weeks ago has certainly been a performer (as much as I scrapped the trade a couple of days in ) and good ol gold “appears” to have caught a bid.

Another day ( ho hum ) with SP 500 / risk – trading flat as a pancake.

Wish I had more to share.

Safe Havens Misunderstood – Don't Be Fooled

Forex Kong 17 Comments

To refer to the U.S Dollar as a “safe haven” makes little sense, even to the  newbie trader/investor who I’m sure by now has at least read / heard something “somewhere” – with respect to USD’s continued depreciation/devaluation and “ever diminishing” buying power.

I don’t have the stat off the top of my head, but remember reading that the U.S Dollar has lost some 93% of its value / buying power over the past….75 – 100 years? As well that the number of “new dollars” created “every year” now surpasses the number of dollars “in existence” over the previous 800 years. That’s what I call devaluation no?

In the current investing environment any “perceived dollar strength” cannot be misunderstood as “actual strength” as…….USD rises when assets priced in USD are sold. Period. End of story.

As stocks (which are priced in U.S Dollars) are sold (by the simple mechanics of markets) a “cash” position is then raised. Investors “seeking safety” aren’t rushing out to “buy dollars”, they are simply selling stocks / assets “priced in dollars” with attempt to “get out-of-the-way” should further downside risk ensue. Do not mistake this ( as the U.S media would have you ) as “dollar strength” or even worse as a “good thing” in that……a move towards USD suggest investors are moving to “cash”.

The general spin in the media these days would have you thinking “hey the Fed is going to continue tapering, stocks haven’t fallen and hey! – Look at the U.S Dollar gaining strength too! Things must really be going well!

This couldn’t be further from the truth.

I had questioned in a previous post – which “safe haven would take the lions share” during the impending correction ( already underway ) and have now seen that indeed “all assets suggested” have begun the slow turn upward. USD as well the Japanese Yen, Gold and even U.S Bonds – all moving higher over the past couple of weeks.

Do you think it’s just by chance?

 

 

Trading Greed – Take Profits Faster

Forex Kong 14 Comments

It’s very difficult trying to “teach” people not to be greedy.

Human nature ( or at least the human nature you “had” before becoming a trader ) pretty much has “greed” wound tightly ’round your genes, and for the most part – that makes sense. Man finds something that he wants / needs, then he wants more, he needs more, and if only driven by the human instinct to “survive” – he looks to “get more”.

What happens when you wake up the morning after your “discovery” and the “more” you where planning to go back for – has disappeared? Overnight – the watering hole has dried up.

Thankfully you took what you could the day before right? Running home to get that “bigger bucket” (to put all that water in) didn’t work out to well for you did it?

You have to learn to take profits when you see them…as in this crazy environment there is absolutely no guarantee they’ll still be there in the morning.

Kong on the scoreboard with 4% returns on trades initiated Monday – now looking at re entry . As well on the CNBC front I’ve actually been pleasantly surprised this week as…..the floating heads have shown considerable restraint ( as I would have expected them to just say  buy, buy , buy ).

Safe Havens – Who Gets The Lions Share?

Forex Kong 22 Comments

As a larger and more pronounced “correction in risk” draws near – we’ll likely get “on more” attempt at new highs – regardless of what’s already underway in currency markets.

It also looks pretty clear to me that this will line up “right on the money” with the ol standard correlation of weaker stocks = stronger dollar, or at least for the initial “zig” of the “soon to be created” series of lower highs and lower lows.

As per the last 6 – 8 months these “zigs n zags” will often see “inverse movement” on smaller time frames, as the “cross winds of influence” push and pull in a generally “confusing manner”.

Sounds like a bunch of hooey doesn’t it? Now try trading it.

To be honest – we really can’t say for certain how things will shake out when / if we do finally get our first “real and true” correction in risk, as it’s been so long, and so much has changed since last time.

For currency traders here’s a mind bender. Do not be surprised at all to see BOTH the Japanese Yen AS WELL the U.S Dollar rise TOGETHER. So if you see the currency pair USD/JPY moving lower – it means that JPY is rising MORE than USD – get it? I thought not.

Otherwise, as suggested by JSkogs ( reader / trader “profesionale”) consideration of where U.S Bonds will go, and of course Gold.

As all four of these assets ( JPY , USD , U.S Treasuries and Gold ) have all at one time or another represented “a play for safety” – it remains to be seen which will take the lions share, when indeed safety is sought.

I for one can’t see the U.S Bonds doing anything but “bouncing”, and am positive that the Japanese Yen will blow people’s faces off, if only for an incredible blast higher.

I’d “like to think” that any USD bounce will be short-lived ( and certainly not a macro change in trend ) and that Gold yes gold…….finally makes its turn.

It will be very interesting for those of us who’ve been trading markets prior to 2008 ( and I can only imagine for those who’ve been trading longer ) to see how this plays out.

I plan on it been equally profitable as well.

Thoughts welcome as always!