Category Archives: Uncategorized

Daily Recap – Stop Loss Choices

When trading the financial markets, all traders must bear in mind what is called risk management. Financial market traders can get their accounts wiped out and lose their equity fast if they don’t adhere to the rules. Risk management rules include stop loss and take profit prices, as well as other capital preservation methods. Today we will focus on one of the most important, which is the stop loss.

Stop loss orders vary and can be based on different factors, not necessarily just the price. Stop loss orders are placed to protect accounts and open positions in case the market reverses against the trader and the positions incur a huge loss. So how to determine the best stop loss level for any specific trade? To place a stop loss traders must bear in mind several factors and then make a decision as to which stop loss is the most appropriate for this specific trade. These factors include technical levels, volatility, support and resistance levels, time frame, as well as the characteristics of the currency pair traded itself. Some different types of stop losses are:

1- Equity Stop
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One of the ways to determine a stop loss price is the equity stop where a trader would decide to risk a certain amount of money or a percentage of his/her account on a specific trade. If the trade loses and the account falls below the specified level then the trade is closed and the loss is realized.

2 – Technical Stop
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This is one of the most commonly used stop loss levels. Traders analyze the market technically and give a thorough look to support and resistance levels previously created in the market, whether caused by consolidation or a Fibonacci level, then place their stop loss orders around this level, bearing in mind the volatility of the traded pair.

3 – Volatility stop
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Traders keep an eye also on the Volatility Index (VIX) to determine if the market conditions require an exit strategy to protect the account, such as on days when there is fear in the market, and thus violent price action.

4 – Event Stop loss
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If a trader has a plan that is based on a certain scenario an unexpected event could take place which could have an influence on the trade. In this scenario, traders would decide the stop loss based on the specific event circumstance.

Stop losses are a method to protect traders’ accounts and almost always, it’s better to be stopped out from a trade rather than losing the entire account equity and fighting the market. As goes the famous trading golden rule, it’s better to stay alive and live to fight another day.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Google Boosts Equities

After a very volatile week last week, many traders where a bit skeptical on how the market was going to pan out entering Monday’s trading day.

The global equity markets seem to have come back after heavy losses in the beginning of the week last week. One of the bigger stories today is the news of Motorola’s Mobility unit being purchased by Google, sparking a jump in equity markets and a drop in the USD. News also of Empire Manufacturing Data coming out weaker than expected at -7.72 vs. prior -3.76 added more bearish pressure to the drop of the greenback. Traders look like they are cutting back on their risk exposure.

The jump in global equity markets helped the EUR/USD hit 1.4475with a low at 1.4250. The Dow Jones Industrial average and the S&P 500 rose up 1.9% (213.88 points) and 2.18% (25.68 points) respectively.

Commodity markets benefited from the weaker dollar as oil rallied up $2.50 to settle up $87.70 a barrel. Gold prices rose up $19.13 to settle at $1,764.99 a troy ounce.

This week watch out for some big news during the European Session tomorrow. All eyes will be on the meeting between the EU leaders, with Germany’s Prime Minster Merkel and France’s President Sarkozy discussing the euro debt crisis. It will be interesting to see the language they use and what their respective outlooks are. On the US front, housing starts data and industrial production data will be released. On Wednesday the Producer Price Index, where we can see a change with core inflation, will be released. Thursday will be a busy day with the release of the Consumer Price Index data, Jobless Claims, Existing Home Sales, and the Philadelphia Fed Survey. Stay on your toes traders!

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Ugly…

Fears of a global economic slowdown were amplified today as stock markets in the US and Europe fell by more than 4%.  The Dow was down 512.76, or 4.31%, the S&P was down 60.27 or 4.78% and Nasdaq took the cake, down 136.68 or 5.08%.  That’s not all.

Unemployment claims for the US were released at 8:30AM EST, and projected at 404K. They did beat expectations by a bit, coming out at an even 400k.  However, last week’s figure, which was positive at first, when reported as 398K, the first time claims have been below 400k since early April, was revised this week back to 401K, meaning jobless claims have been 400,000 or more for 16 straight weeks.  Ugly.  Tomorrow we will get the new unemployment rate, expected to stay at 9.2% and the non-farm payroll change, expected to show a net gain of 89,000 jobs.  With private sector job growth still slow, and government jobs being shed at all levels, we wouldn’t be surprised to see a disappointing report tomorrow on both fronts.

Halfway across the globe, and only one day after the Swiss National Bank (SNB) stepped in to try and devalue the Swiss franc, Japan stepped up to the plate today as the yen was trading around a four month low versus the dollar around 76.25, the same levels it was at following the earthquake in March.  Japan intervened to devalue its currency, but  most analysts predict that the spike in the yen’s value today will be short lived.  It is worth noting that haven’t spiking down on the SNB’s actions yesterday, the franc has already gained back most of what it lost.

The rest of Europe did not fare any better today either, with yields on Italian government bonds continuing to climb well above 6% and Italian PM in hot water domestically and internationally after claiming today, with very little credibility, that their economic fundamentals were fine.  Yeah, right.

After absorbing some much stress in trying to keep Greece afloat in recent months, many of Europe’s banks are holding their breath, and the world is clearly anxious about a major economic crisis in the eurozone.

As actions from the governments of Japan and Switzerland, 2 of the world’s most popular safe haven currency nations show, the global markets are jittery, and safe haven assets are strong.

 

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Gold and Swiss Franc Surge

Gold shined the brightest today, hitting an all time high of $1670 and its precious metal trading partner silver also climbed north towards $42 and could potentially set a new record high before the end of the week if this rally continues. The AUD/USD which usually follows gold like a puppy follows it owner broke free today and headed south while gold went north. Technical traders will see that the pair is in a double bottom attempt and a break above 1.0790 will complete the pattern, if that doesn’t happen the Aussie-Dollar could fall until it finds support around 1.0450.

The USD/CHF hit a fresh record low at .7610 but was then boosted by a SNB (Swiss National Bank) rate cut. The pair is currently trading about 90 pips off its low. With the Franc beating up the Greenback and with lingering problems in the EU many traders anticipated a major drop in EUR/CHF. Apparently the single currency didn’t get the memo and absolutely hammered the swissy in overnight trading, one time spiking up 300 pips in a period of less than 3 hours.

It is interesting to note that about a year ago, in an attempt to stall the Swiss franc’s rising strength relative to the euro, the Swiss National Bank started buying up francs.  That was when the franc was trading at around 1.36 to the euro.  Now at 1.099, the SNB is holding some huge losses, and the move today to lower interest rates to again try and curb the franc’s bull run should not be a surprise to anyone.

The USD/JPY had a pretty dull trading day. The pair danced sideways between 76.78-77.23. The GBP/USD took advantage of dollar weakness and pushed higher to 1.6431. Both the ECB and the BOE are expected to keep rates unchanged in their August meetings.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Record Highs Left and Right

Its only midweek and yet the last 72 hours have been filled with multiple record highs and lows. The AUD has broken out against the USD and finally climbed above 1.10 along with its pacific trading partner the NZD which has set a new record high vs. the greenback every day this week save for today’s pull back. The aussie and its high risk/high yield commodity currency partner the kiwi have both been on an absolute tear vs. the George Washington, both boosted by a rally in Gold prices and of course the ever looming US debt crisis which has yet to be resolved.

Gold touched a new record high today at $1628 while investors fled risk in pursuit of safe haven investments. US stocks shed close to 200 points as the Dow fell to a 12302.55 close. Oil also took a beating causing the CAD lose ground compared to the dollar – weak US economic numbers to blame.

On a side note, I think I may have noticed a pattern in this week’s trading. Correct me if I am wrong but doesn’t it seem as though during the US session the dollar remains strong and holds onto support levels while during the Asian and into the European session the USD bears get the best of the greenback?  As always comments, suggestions and even corrections are welcome.

 

VT Trader forex trading platform charts below show indicators from our customized suite of technical analysis tools and charting software.

The AUD/USD chart features DeMark’s Projected Range Indicator and the NZD/USD chart displays Ehlers MESA Indicator.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Risk Aversion Rules the Day

Risk aversion was the overall theme of today’s trading. China raised its interest rates for the third time this year in an attempt to derail inflation. The EUR was under pressure most of the day today as traders worldwide reacted to Moody’s downgrade of Portuguese debt. Both EUR/JPY and EUR/USD traded lower today, both pairs losing 100 plus pips in the last 24 hours. The EUR has now had two consecutive losing days after a week long rally.

On a side note GBP/USD Broke 1.60 today for a brief moment in time until climbing back above 1.60 just before the close of the day.

Stay tuned for tomorrow’s ECB interest rate announcement.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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