how to trade forex

Trade Entry – Which Time Of Day Is Best?

Forex Kong 12 Comments

These days placing a trade in the early morning of the U.S Equities session brings with it, a high percentage chance – of just getting your face blown off.

Understand that the vast majority of what the industry defines as “dumb money” refers to those trades placed “before the bell” – as well those placed within the first hour after.

The “smart money” is generally buying or selling during the final hour of trading.

Pulling this apart – it makes pretty good sense. Newbie traders driven purely by emotion, catch wind of a news story overnight, or perhaps on the early morning financial news and “rush to get in” with fear of missing the move. Like lambs to the slaughter more often than not, price drops out from under them, fear sets in, perhaps even panic, and shares are then dropped / sold – only to be picked up on the cheap by the “smart money/big boys” just moments before the close.

Wash.Rinse.Repeat – and so the market goes.

For the most part, I view the “entire trading day” during the U.S session, as being nothing more than a meat grinder for retail traders, who generally enter at the wrong time, and in turn – are easily shaken out of their positions.

  • Do you find it difficult to resist the urge to buy in the early morning?
  • Do you think you could learn to condition your behavior, and consider buying the close?

USD on day 3 in a row literally “flat as a pancake” as Thursday is now in sight. I’m “still” holding a number of pairs (10 pairs actually) with little concern – short of being bored to death. I’ll keep my eyes open late afternoon and have little expectation of “anything big” happening here today.

Forex_Kong_Face_Book

Forex_Kong_Face_Book

Forex Monthly Candle Sticks – Worth A Look

Forex Kong 40 Comments

Have you ever taken the time to “zoom out” on your charts, and have a look at things from a “monthly perspective”?

Same formations. Same patterns etc, only in that “each candle” represents an entire months trading information, as opposed to the 1 hour, 4 Hour ,daily or even weekly charts you may regularly peruse.

Monthly charts provide a “macro view” to say the least and are “extremely important” to take into consideration.

You’ve now come to understand “a reversal” formation, as well the “pin bar”, and can now likely pick out  a “swing high” or “swing low” in price action – at a moments glance. You’ve also come to recognize the “value” in identifying these “patterns of reversal” – as they provide for some pretty outstanding trade entries.

Now consider the implications when identifying such reversals on a “monthly time frame”.

Price action has moved higher in a “succession of higher highs and higher lows” for literally months, but now suggests reversal in a “monthly variance in price”. Imagine.

That’s huge, and the implications are vast.

When an asset has “swung high” or “reversed” on a monthly time frame, you can throw your hourly charts out the widow as…..the implications of the move to follow will be reflected in “months” of reversed price action, not merely in a couple of hours or even days.

Do you have the account balance to “hold” through a move like that? Do you “doubt” the reversal pattern? The same pattern you’ve come to rely on daily, hourly? (patterns, and areas of support and resistance become much “more reliable” the larger the time frame – not less.)

The SP 500 is “a hair” shy of “monthly reversal”.

That’s huge.

Forex, Gold, The Fed, USD – Trades Next Week

Forex Kong 9 Comments

With all the talk of “collapsing emerging market” currecies, and the now “global move” towards risk aversion, we are starting to get a good idea as to how the Fed’s massive liquidity injections ( which spilled out of the U.S over the past 5 years ) have fueled spending / investment in these countries – and now the effect of that “hot money” being pulled back out.

As you’ve come to understand, huge amounts of freshly printed U.S Dollars invested “elsewhere” in search of better returns ( as if you can imagine..U.S banks / investors groups would rather invest in an “emerging economy” that their own “sinking” econmomy) are now pouring back into U.S holdings accounts in fear of much further downside risk.

The Fed’s commitment to tapering ( or at least until they freak and double QE) has triggered a rise in interest rates “planet wide” as many of these “emerging economies” now scramble like mad to adjust.

Keep you eyes on gold and silver for buying opportunities ( I like EXK as well ANV ), as well be prepared for some “serious letting of air” in U.S Equities as from a technical perspective we’ve not even made a dint yet, and the fundamental trade is pretty much clear as day.

Fed sticks to tapering – and planet goes down hard. Fed boots up QE ( and more ) band-aid gets put back on. I’m really curious to consider “how far they will actually let things slide” , as even another 1000 SP points doesn’t really look to scary on a weekly chart. Things could easily fall much further over the coming months.

Forex wise, we’ve finally come into the shift and volatility needed to pull “serious profits” in a very short time as these things always move “much further and faster” when moving to the downside.

A complacent buyer is one thing……..but a “freaked out seller” is another animal all together.

We gorillas stand to do very well in times of “correction”.

Exactly the same trade idea’s setting up for the following week, short of a couple days (perhaps late in the week for a breather / bounce ( and slightly lower USD ). We are clearly in a proven “up trend” in USD both technically and more inportantly fundamentally so…..I will continue to press until proven otherwise. Fed POMO running once on Monday and then “Double POMO” on the 5th then virtually NO POMO for nearly 2 full trading weeks! Let’s see how markets hold up…..or not.

Forex_Kong_Face_Book

Forex_Kong_Face_Book

I’ve been updating / tinkering with my Face Book page as well if anyone is interested in “liking” or following etc…. Forex Kong on FaceBook

There It Is! – Profit Taking All Around!

Forex Kong 19 Comments

Finally! After a pretty grueling couple of days, bobbing in and out, hovering around my trade terminal like a spy drone…There it is! Nearly every single pair / trade well in profit and time to take profits.

You’ll need to pull up charts on many, many pairs to see the end result of trades entered ( then re entered etc ) in NZD/USD, AUD/USD, EUR/USD, GBP/USD, USD/CHF,AUD/JPY,CAD/JPY and a big winner in EUR/NZD to name a few.

Forex_Kong_Blue_Hole_Belize

Forex_Kong_Blue_Hole_Belize

I will plan to take the majority off the table here either this morning, or let a couple of run through the day but……in all – I now look at monthly charts to see just what’s happened here over the past few days and the message is clear.

This is very likely only the “first leg” down in what will shape up to be a “much larger correction” ( as suggested previously ) running into late March – right around the time I expect “full-scale panic” and the printing pressed to start-up again.

Japan already knows it’s in very deep trouble ( and has been forever ) with effects of QE very quickly dissolving. I don’t think they “or” the U.S will have any choice but to kick things into high gear “printing wise that is” come late March.

Trade wise….I’m taking the weekend off, and booking /planning next weekend’s trip to the tiny broken islands off the coast of Belize ( The “Blue Hole” and Ambergris Caye – please google them) as the “math and theory” is already complete for the coming weeks.

These trades and several others will simply be “re entered” at various points along the way as……we’ve finally come over the crest, and find ourselves on the “other side” of the mountain.

A painful and extremely frustrating process but….the next “peaks” are certain to be sold.

Hope everyone else made out OK too!

Kong……..”more than” gone!

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 Market Madness – U.S Labor Force Declines

Forex Kong 5 Comments

Well if trading through yesterday (with hopes of seeing much for profits) wasn’t “pain in the ass enough” – we’ve now got the “every so significant” U.S data out at 8:30 here Thursday morning.

Sure we saw the U.S Dollar “finally pop” late last night as expected, and yes the trades in EUR,GBP, as well CHF and even NZD all came away fine,but depending on exactly “when” you entered and what kind of position size you had in each – a little strength in AUD and you’d likely of just  broken even.

I jumped around like a mad man well into the night, grabbing a piddly 2% and frankly – am not impressed. The forex market is an absolute mess at the moment, with charts looking more like “abstract works of art” – from a classroom full of pre schoolers.

It’s an absolute mess out there, and I can’t really imagine this mornings ” artificial employment data” helping much. We get to hear “once again” some ridiculous number reflecting “improvement”…he.he..he… have you seen what’s happened to the participation rate? Now hovering around the lowest levels since 1978?

Have a look:

Labor Force Participation Rate_1

Labor Force Participation Rate_1

“Real employment” – sadly on a steady decline, as more and more people are simply “giving up” and not even bothering to “look” for a new job.

Labor Force Participation_0

Labor Force Participation_0

How is “this data” being incorporated into the weekly “employment figures” that are supposedly showing an improvement?

News flash – it’s not.

I’ve held a couple, and taken profits on a couple. I’ve re entered a couple and I’m in the red on a couple. The US Dollar most certainly “moved higher” so I hope you all caught some of that, with the biggest gains seen vs the Euro, Pound and Suisse, but in all – the cross winds across multiple currency pairs has chopped / flopped me around pretty good. I’ll see what comes of today, and will likely consider “closing up shop” early as…..staring at this for more that 18 hours in a row can be very hazardous to both your health, and you account!

Fed Announcement – Time To Face The Music

Forex Kong 41 Comments

As you all know, The U.S Federal Reserve Meeting winds up this afternoon with the announcement due out around 2 p.m.

Speculation as to “what the Fed will do or say” is pretty much a fools game at this point as they’ve thrown investors for a loop a couple of times already, having “said they where going to do one thing”….then doing the complete opposite.

I really can’t imagine them “pulling the taper” before the taper has “officially” even started ( as meaningless as the amount is ) but will be on the lookout for any “language” that might suggest the possibility down the road.

My medium term trade plans would see things continue lower through February and into March, before the Fed might “flip the switch” along with the Bank of Japan increasing it’s QE – should things get too wildly out of control.

As if things aren’t getting wildly out of control already…we’ll really want to watch this correction closely as it “should” mark a significant turning point, with respect to the rest of the world’s expectations, and interest rates “planet wide”.

If the Fed is truly going to commit to “turning off the spigot” of free money / liquidity (which again I have a very difficult time believing) then it would appear that the party is over, and many, many countries ( including the U.S ) may quickly find themselves  – facing the music.

The obvious trade is still “long USD” if indeed the Fed continues in the same direction as stated last month. Should the Fed pull another fast one here ( with perhaps some “tricky language” or a “taper” of the “tapering” ) I will literally drop every open trade in a heartbeat, then re evaluate.

It’s painful “being held hostage” (yoJSkogs!) yet again with the Fed’s movements essentially dictating market direction but……this is the world we live in now, and trader’s just have to accept it, adapt and continue to find strategies that work.

Blame The Emerging Markets – Right!

Forex Kong 5 Comments

The emerging markets are more or less a product of the massive money printing that has been taking place in both the U.S as well Japan.

The reason “emerging markets” are falling is that “funny money” printed in the U.S has previously been “invested” in these emerging countries where one might actually expect a “reasonable return” – as opposed to investment directly in the U.S ( where one can expect “0” return ).

Big American banks take the “funny money” from Ben, and opposed to lending it to hard-working Americans, the money is used to invest in “other countries” where the likelihood of return is much higher.

What we are seeing is the harsh reality ( well I doubt it ) that the “free money” is coming to an end, and large investors are repatriating their “previously invested U.S funny money” back to their bank accounts in the U.S – in a “flight to safety”. It’s the Fed’s doing – not the emerging markets.

Here is my original post from back in September: https://forexkong.com/2013/09/23/emerging-markets-effect-of-qe/

You’ve had plenty of prior warning.

Forex Market Weather Report – Chance Of Rain

Forex Kong 7 Comments

Well the weekend has come and gone, and so far I don’t see that the sky has fallen.

With a cold front only now developing in China, and investor complacency “still” at all time highs, we can likely look forward to a day of overcast conditions, with an equal likelihood of scattered showers and even a bit of sun. Conditions are mixed – obviously.

A few dark clouds looming over gold, with USD “just starting” to poke its head out, coupled with high pressure conditions – soon forcing USD higher.

Large storms developing off both the Atlantic “and” Pacific coasts of North America, with continued hurricanes, tornadoes, and possible earthquakes down through Brasil and Argentina.

Investors and traders are cautioned to stay indoors today, and not look to make any large trips / moves – until conditions clear.

I’m still eyeing the usual as USD has “almost” ( within a penny ) swung low on the daily, suggesting a short-term bottoming – and further turn higher. JPY has also pulled back so…safe havens take a breather. I wouldn’t be doing anything today as a bull or bear – other than continuing to raise cash / stay indoors and trade safe.

 

Deflation Vs Inflation – The Great Debate

Forex Kong 25 Comments

It’s pretty rare that I get excited about something like this as I don’t really spend a lot of timing thinking about – but in this instance, I’m really looking forward to learning more.

We’ve had some discussion in the comments section over the weekend, with a couple of very  knowledgable participants really putting out some great info.

Deflation vs inflation…..the great debate.

I for one have thrown this around on occasion, only to find myself back where I started in the first place – time and time again. I hope I don’t create a “dead-end ” here (as I generally stick to spaceships, quiet time with ants, and the search for evidence of alien life on Earth ) and am certainly “not” an economist, but I hope we can wrangle these guys ( and whom ever else ) to shed a little light, on a an area of economics – often misunderstood.

The basics:

Deflation is a “decrease” in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Deflation increases the real value of money ie…..the currency of a nation or regional economy.

Deflation allows one to buy more goods with the same amount of money over time.

*Thank you Wikipedia!” ( what you think I rattled that off the top of my head?)

Inflation is a persistent “increase” in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.

So…..in a nut shell – looking at the value of a dollar in a given economy, and the reflection of “how much of what” that dollar is able to purchase at a given time  – no?

The questions:

Given the current monetary policy – Is the United States “currently” in an inflationary environment or a deflationary environment? And more importantly ( as we are all much more interested in the future )…..

Where do you see the United States headed next? And….(bumbuddabum bumbumbbumbbumb!!!)

Why?

Woohooo! I’ll do my best to chime in but in all honesty I’ve likely got little to add…other than my own “backward / flipped over / nutty way” of looking at it, which ultimately may not have to do much with economics as it does making money trading forex.

All opinions / views more than welcome!

Let’s get this thing licked! And thank you in advance to JSkogs in particular. A valued reader and contributor here at Kong, and from what I gather – a pretty all around great guy.

Forex_Kong_Google

Forex_Kong_Google