Forex Charting Tutorials

It is a fact that few win and most lose money in forex trading. Why do so many traders consistently lose over time? The reasons are myriad, but I will give a few examples that cause forex traders the loss of their money.

1. They are impatient…. They sit at the pc all day and jump into positions without taking the time to analyse where the market has been, where it is now, and where the market is telling us that it wants to go. They use a Market Order instead of placing a strategic Limit Order at long term support or resistance. They will enter a position in a currency pair that is ranging, or consolidating, in the middle of that range. They waver between a long bias to a short bias because they are trading blindly on the short time frames. If they are lucky, they guess right, and boast of their gain on the Forex Forums. When they guess wrong, and get their rear end handed to them, they are eerily silent on those same forums.

2. They overtrade…..too many positions and not enough Money Management, exposing their balance margin to risk of loss. Smart money never loses in the long run. Smart money never risks loss of margin. Smart money makes few trades at relatively safe and logical entries, that have a good risk to reward. Smart money protects its gains with a reasonable stop loss and low leverage. Smart money waits to enter at their price or stands aside. Smart money moves their stop loss to break even as their position moves into profit, then trails the stop loss with the trend, thus protecting their profit.

3.  They ride a loser too long and exit a winner too quick…….Smart money knows where the trend will most likely go and holds that position until it exhausts itself. Smart money uses a safe lot size for an entry and adds to the position over time on dips and retraces. Smart money will book partial profits and play with “house money” for the ride up to exhaustion of trend.

4. They chase the market. By the time you see a good move on your charts’ short time frame, it is usually too late to catch it. They enter with a market order and the price goes against them after a small pip gain.

5. They count money gained or lost instead of pips. Forex trading is all about pips, not money. Entry is everything. Enter at a good price. Buy cheap or don’t buy. Find out where the buying interest is and where the selling interest is. Dont go against the market. You can’t win. Buy where the market is buying and sell where the market is selling. I cannot stress this fact too much.

6. They trade the news. They make the entry at news time hoping that good news will make the pair go up (or down). They have no idea that the market just uses news to collect your stop losses. Your broker is a legal bookie and is betting against your position most times. The deeper pockets always win. You can tell if the market is going to cover their position if the news may spike against their position. Watch the money flow before the news. Buy the rumor, sell the fact. Most news releases have a temporary spike in price and then the market returns to what it was doing anyway. News is rarely trend changing.

We saw some USD and Yen carry pair selloff at the end of this week. However, it is the end of week, the end of the month, and the end of the 2nd Quarter, also, so we will continue to monitor Market Sentiment.  We saw quite a bit of CHF buying. We saw Commodities buying. Oil is outrageous. Rumors of War (Israel vs Iran nuclear facilities). The Nigerian militants are doing their best to sabotage their supplies, and nothing is done to prevent it. Iran is using Hamas, Fatah, Al Sadr, etc, to provoke Israel, and the U.S. to act. Syria is doing its best to back the militants also.

Appeasement won’t work. We saw that with Hitler before WW2. These regimes only know one thing. Power and contol by terror. By de-stablizing the Mideast they increase their power, influence and control. The PLO has received billions of USD and yet their people starve, and have no home. A city or state could have been built for them to live in comfort with money that the PLO has received. They don’t want peace. They only want concessions in their negotiations and refuse to budge. They are laughing in secret as Israel makes concessions for peace.

Israel has no choice if she is to survive. Iran is ruining its economy and starving its people while wasting their budget on arms. The Taliban does the same, while making billions on the drug trade with poppy growing the only hope of survival for the Afghan people. The West offers no alternative income opportunities to these farmers.

The West should be implementing modern farming techniques and free market of produce, by the use of simple passive hydroponic systems, and rain water collection. Entrepreneurism would overcome Taliban corruption and influence. Women and children would have a chance to gain an education, and to prosper. The future would indeed be bright.

Unfortunately Western nations have allowed greed and corruption to consume their policies, and feed the flames of resentment. We ignore the African genocide by these militants, and bury our heads in the sand.

 We have allowed criminal loan policies (predatory lending) while packaging these bad loans and selling them to investors, knowing that they were no good. Politicians do nothing for the people, but fight the opposite party agenda. They allow big money to finance them, and line their pockets, while the people are suffering.  We need a change. But it won’t come, no matter who gets elected. It will be business as usual.

 The only way peaceful change can occur, is if all Americans (U.S. citizens eligle to vote) would register and vote to oust all current members of government and elect true progressives whose loyalty is to the people who elected them, and not to a political party, or to maintaining the status quo.

Protectionism legislation will kill the U.S.  What foreign money will invest in the U.S. with this type of legislation?  Any punishment to the big oil companies (windfall profit tax) will be passed on to the people, and make a bad situation worse. Political correctness is an absurb policy. The Media is unabashedly biased and only report what promotes their agenda.

 U.S education is a joke. The generations of graduates are getting progressively weaker in the fundamentals of Math and Science, and are NOT being taught personal responsiblity for their actions. They are taught to cast blame elsewhere, like race, for instance. They are given easy credit and NOT taught to save, or to balance a budget. They are overwhelmed and inundated by the MTV type influence of wanting instant gratification, by too easy credit, and not by hard work, diligent study, sacrifice, and saving for hard times, or for their future.

The NAACP and Jesse Jackson/Al Sharpton crowd do nothing to promote personal responsiblity, or entrepreneurism in their communities, yet they line their pockets, while promoting racial discord, which further empowers them. Obama is trying to distance himself from them to get elected (outward appearances). He will say anything to get elected, just like any other politician. Business as usual.

All fiat based currencies are doomed to fail, eventually. You cannot live by debt. We will move to a one-world- currency in the future.

 We, as currency traders, can exploit the situation, by strategically buying and selling the affected currencies at relatively safe levels using the long term time frames. As long as there are separate currencies, and interest rate differentials, Forex investing will prosper over equity and bond investments.

We must keep informed as to fundamental events and sentiment. We must monitor sentiment and money flow. Follow where the money is flowing. Never trade against the long term market, but cover your positions when necessary, when contra-trend movement is detected. Corrections and retracements are a part of the natural ebb and flow in any market.

STRATEGY: Look for long trending pairs. Look for the areas on your monthly and weekly charts to see patterns of buying interest and selling interest. Buy where the market is buying. Sell where the market is selling. Smart money never loses.

Keep it simple…..

Enjoy the weekend and spend some time studying your long term charts looking for possible set ups.

Look for swing highs and lows to place limit orders.

Cable daily chart shows a break of the red 200 sma, at the 1.99 area. Moms are showing brearishness. Upside to 2.000 is probable. We will look for selling interest before shorting this pair.

USD/JPY daily chart shows profit taking at the end of week/end of month. I am looking for a buy opportunity around the 105.75 if I see a rejection of this downmove or the weekly 5 sma low around 105.

Eur/gbp chart shows end of week profit taking down to bottom of the range. We see the white 5 sma low, the 50% fib, and the white trendline acting as support.

GBP/CHF daily chart shows a beautiful range trade set up until a break out occurs. I see profit taking now which will set up a great selling opportunity next week. Long term trend is down. Sell rallies in this pair at strong resistance.

EUR/CHF daily chart shows price approaching a double bottom formation We are holding a short position from the rejection of the 61 fib near the 1.6240 area. Our TP is just above the double bottom.

The 4 hour chart shows profit taking for the end of week/month. We will look for a sell opportunity after rejection of the move up.

EUR/JPY is retracing to a good buying area. Red trendline and 23 fib looks good. We are holding our long positions and adding to them when we see rejections of any down moves. Collecting daily interest. We also cover our long positions with a sell order on large retracements with a trailing stop loss.

AUD/USD daily chart shows a long term uptrend. We continue to buy dips and add to our daily interest payments.