The major risk here is a large bounce between entry orders. That would have me stopped out at a loss for both orders. However, I did put my orders out of the range of medium volatility. I only want the order triggered if there is a clear movement long or short.

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As always I will keep you updated with how the trade goes in the comments.
Happy Trading!

A stop protects against loss, similar to insurance. I usually use a trailing stop when I am trading the Euro or other forex instrument. Here is the main reason that a trailing stop is like insurance.

Asset Protection

When you are trading with live money and attempting to generate a return, you have assets in the market and money on the line. A trailing stop is the insurance that protects the asset. With something like auto insurance, the policy protects the asset which is the car. Asset protection is important for peace of mind. It’s important to trade like a robot but that can be hard to do if your emotions are at play. When you have car insurance, you should feel more comfortable if an accident were to happen. You will be properly compensated if you were not at fault. Similarly in the markets, if you take the wrong side of the trade, a trailing stop will prevent the loss of your entire account; it will provide asset protection.

How Does a Trailing Stop Work?

When I first enter a trade, I attempt to calculate the amount of volatility I expect to see. I want to put my stop right at the edge of the expected volatility so that I don’t get cut out of my trade just because of wide swings. Then I calculate my max desired loss. If my max desired loss is within the range of expected volatility, then I don’t take the trade because it would just be a waste of money. If I see that I can handle the expected volatility and stay within my max desired loss I set my trailing stop at that price and set it to trail about every 10 pips. That means for every 10 pips that I win, my trailing stop will move and lock in those pips so that I cannot lose those 10 pips again. If the price drops down to my trailing stop, I will get cut out at a smaller loss than when I first set up the trade.

Insurance is a great way to protect yourself and your assets. You’ve worked hard for them, don’t let an accident take them away. A trailing stop is insurance to protect your trade and similar to auto insurance, the trailing stop can protect your assets from too much loss.

Do you use trailing stops when trading?

Long EUR/USD at 1.4372

The thought process behind this trade is simple. Investors are coming back after the sell off last week and that usually pushes the Euro higher. Not only that but the 200 EMA is showing as a support level. I placed my stop relatively close but far enough away to avoid any shenanigans at 1.43. I’m considering a trailing stop but I will leave it for now. As always, I will let you know how the trade goes in the comments.

Happy Trading!

Summer showing tight trading range

There is not enough volume to push the pair one way or the other and it’s been forming this really tight wedge over the summer months. Basically, the price has been bouncing back and forth in a tight range that is getting tighter. This is a good thing and a bad thing. On the positive side it presents an easy way to range trade. You simply go long at 1.41ish and go short at 1.45ish. I don’t range trade because I don’t have any practice doing it. I’d rather trade breakouts or breakdowns, when the price finally gets out of the range. The tighter the range gets, the more likely a strong breakout is. I’ll do a post sometime soon about trading breakouts but let’s get to today’s trade.

Short at 1.438

So anyway, today’s trade is a pretty sweet set up. London has been trading for a few hours already and the Euro is under pressure because German GDP growth failed to meet expectations. If you didn’t already know, Germany is one of the strongest countries in the European Union, so if they are showing negative signs, you can bet there are more to come from some of the other weaker countries in the EU.

I placed a short Euro trade at about 1.438. I am expecting further drops once the US and Canadian currency markets open around 8 am EST. As always, I will let you know how the trade goes in the comments.

Happy Trading!

My current Alexa ranking is 526, 722 and one of the goals of the challenge is to drop below 200, 000.

Thank you for visiting to day and I hope you will continue to come back each day for my new feature: Daily Charts!

Technical Analysis is not very difficult to learn. If you can spot patterns and like looking at pictures, then you can learn technical analysis.

The best technical indicators are used to make reading charts easy. Indicators take price information and create a simple picture of the price overlaid onto the chart.

One of the most popular technical indicators are candlesticks. Candlestick charts are widely used for their ease of use. When you look at a candlestick chart, you can easily see where the price opened in relation to the day before, where the price closed that day, and whether the price closed up or down for the day.

Although every trader is different, many traders will use moving averages to determine if a stock or currency pair is bullish or bearish. The typical average number line used is the 200 moving average.

Combined with basic fundamental analysis, technical analysis is a great way to tackle the markets.

Unlike the stock market, the currency trading market does not require a trader to pay a commission to place a trade. This will come as a welcome sign of relief to those who have grown accustomed to the vast amount of money they must fork over to their brokers which go towards clearing, exchange and government fees. In the foreign exchange market you also do not have to worry about having a large sum of money in your account to sell your currency pairs. This concept of selling as you may already know is commonly called shorting in the equities world. You can buy or sell at will in the currency trading arena.

It is so amazing to be able to participate in this market right now. You can do so from the comfort of your very own home. As long as you have a computer that is connected to the Internet you are in business. You can begin trading with as little as 300 dollars. I will show you how to turn this 300 dollars into some serious money in no time at all. This should be a lot easier to do given the advantages that you know the forex market has over its competitors.

The FX market is traded by some of the world’s richest individuals including Bill Gates and Warren Buffett. You now have access to the same opportunities as they do. What is stopping you from getting on the road to financial freedom? You can start now. You do not have to wait. You have already begun the journey by choosing to educate yourself on the pros of the Forex market.

I personally love the fact that you can trade whenever you want to with the Forex. You see, in the stock trading world you are flagged if you are deemed to be a daytrader. In other words if a trader of stocks chooses to trade every day, he or she must have an account balance of 50,000 dollars to do so. There are no such restrictions when it comes to trading FX. If you work at night, you may trade in the daytime. If you work during the day, you may trade at night. You simply trade according to the schedule that works best for you.

I want you to think about money for a moment. Who uses it? The whole world does in some form or another. Another advantage that the forex market has is that there will always be a need for money. You are simply trading one currency for another in the currency market as the 4x is commonly reffered to. The Forex market is not going anywhere. It is here to stay. The only question is then who will be a part of it? We need money to buy the things we use everyday and so do those who live in the other parts of this world.

Another advantage that 4x has over stocks is the advantage of trading focus. Instead of having to choose between over 4,000 stocks you can deal with 4 main currency pairs. Any good business person knows that focusing on too many things is a recipe for financial disaster and this can hold equally true in the stock market. A stock trader also must grapple with the time issue doing research on all those potential stocks presents. It is also much easier to become familiar with four things as opposed to 4,000 things. Focus is the name of the game and 4x trading makes it much easier to do so.

The ball is now in your court. Will you take it and make the decision to win with currency trading? forex is indeed the winner’s game and those who win consistently know how to play it well.

What is Support and Resistance?

In its most basic form, support is the floor and resistance is the ceiling. In trading, a support level is the level at which the price cannot break. Instead of breaking through this support price, it will tend to bounce off. A resistance level is the same idea, just in the opposite direction as support.

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What Determines a Support Level?

A support price level is generally created by a pattern of failure. As trades occur and price moves up and down, there is an invisible line being created as the low that the price cannot break. Normally, a support level is created after three failed attempts of the price to break lower. The price that forms support is a psychological barrier that bears cannot break. Once the level of support is determined, traders will take positions based around that level and be ready to long or short on either side.

When Will Support Be Broken?

After the asset price attempts to break a low and fails three times, the support is said to strengthen. However, looking at it from another angle, the support could also be weakening if the bears are determined to break the support level. If the support level is broken, it will generally become the new ceiling, or resistance.

What Determines a Resistance Level?

A resistance price level is also created by a pattern of failure to the upside. It is a price that the bulls cannot break. Each time the price moves up and fails to break higher, a resistance is formed. This psychological level will also be a basis for traders to create long and short positions directly above and below the resistance level.

When Will Resistance Be Broken?

Resistance strengthens after approximately three failed attempts to break a high. However, if the bulls gain enough momentum, the resistance level would get weaker as they attempt to break higher. If the resistance level is broken, it will generally become the new floor, or support.

What Technicals Show Me Support and Resistance?

The best technical indicators to use for support and resistance are Pivot Point levels and Fibonacci Retracements. Pivot points are easily calculated using open, close, high, and low values for the stock from the previous period.

How to Calculate Pivot Points

Pivot points are relatively simple to calculate and begin with the center pivot or PP.

Each level creates a price range based on the previous day, week, or month; however, if you calculate your own pivot points, you can set the interval to equal whatever you like.

Using Fibonacci Retracements as Support and Resistance

Fibonacci Retracements can easily be used to draw support and resistance levels because they will automatically extend beyond the levels you choose. There is no need to calculate Fibonacci levels; your charting software should do this for you already.

It is important to understand where a support or resistance level may be when using other technical indicators to trade. Your indicators may tell you to go in long but if you are near a resistance level, there will be traders will automatic shorts ready to kill your trade. Pay attention to these levels and you will be a better trader.

In order to do this I plan to keep an eye on the Euro. I am familiar with its volatility and typical movements and I can usually figure out what move it will take based on economic news that is released. I already missed the first big short of the year but I’m sure there will be more trades to come. Feel free to follow on Twitter as I often post my trades and the outcomes. Are you interested in learning how to trade forex with technical analysis?

A round up is a great way to kick off the New Year. Here are some great posts from fellow finance bloggers.

Start Automatic Investing in 2012 is up at The College Investor.

Girls Just Wanna Have Funds posts 6 Reasons Why Renters Win.

Frugal Zeitgeist posts Luxury Perks of the Rich.

The Frugal Toad posts Smoking Cigarettes Is Hazardous to Your Financial Life.

The Economics of Store Returns is up at Money Mamba.

I was also included in the Yakezie Carnival at One Cent at a Time and at Prairie EcoThrifter.

Happy NEW YEAR!