Forex: U.S. Dollar Weakness Persists, British Pound At Risk For Reversal
By David Song, Currency Analyst
19 January 2011 13:30 GMT
DailyFX Rss Feeds Share
Talking Points
* Japanese Yen: Mixed Against Majors
* British Pound: Jobless Claims Weaken For Third Month
* Euro: Portugal Sells EUR 750B in 12-Month Bills
* U.S. Dollar: Housing Starts Slump, Building Permits Surge Higher
The U.S. dollar continued to lose ground against its major counterparts on Wednesday, and the greenback may continue to push lower during the North American trade as the economic docket reinforces a weakened outlook for future growth. The EUR/USD extended the advance from earlier this week to reach a fresh monthly high of 1.3524, but we may see a corrective retracement unfold over the next 24 hours of trading as price action struggles to hold above the 50.0% Fibonacci retracement from the 2009 high to the 2010 low around 1.3500. In turn, the euro-dollar may consolidate going into the end of the week, and the pair may trend sideways ahead of the EU Summit in February as investors weigh the prospects for future policy.
Nevertheless, Portugal auctioned EUR 750B in 12-month bills yielding 4.029%, which compares with the 5.281% offered back in December, and the drop in borrowing costs should help to curb the risk for contagion as European policy makers take unprecedented steps to manage their public finances. However, as the region faces an uneven recovery, the uncertainties surrounding the economic outlook may continue to bear down on the exchange, and the European Central Bank could be forced to delay its exit strategy further as it aims to encourage a sustainable recovery. As European policy makers maintain a lackadaisical approach in addressing the sovereign debt crisis, the euro remains at risk of facing additional headwinds over the coming months,
The British Pound advanced to a high of 1.6036 as the economic docket reinforced an improved outlook for the U.K. economy, and the exchange rate may continue to push higher over the near-term as the recovery gathers pace. Claims for unemployment benefits unexpectedly slipped 4.1K in December amid forecasts for a flat reading, while the claimant count rate held at 4.5% for the seventh consecutive month. As growth and inflation accelerates, the British Pound may continue to retrace the decline from back in November, and the Bank of England may see scope to start normalizing monetary policy later this year as interest rate expectations gather pace. However, the recent rally may taper off over the coming days as the relative strength index approaches overbought territory, and we should see a small reversal in the exchange rate as long as the RSI holds below 70.
As market participants diversify away from the greenback, the U.S. dollar may continue to selloff going into the North American trade, and the recent weakness underlying the reserve currency may carry into February as the fundamental outlook remains clouded with uncertainty. Housing starts in the world’s largest economy slipped 4.3% in December to an annualized pace of 529K amid forecasts for a 0.9% decline, while building permits jumped 16.7% to 635K to mark the biggest advance since June 2008. As the region copes with a depressed housing market, the Fed is widely expected to support the real economy over the medium-term, and the central bank may see scope to expand monetary policy further as growth and inflation remains subdued.
Sunday, January 13, 2008
10 Steps
1) Knowledge Acquisition Great traders are voracious learners. Most professional occupations have a learning curve. Doctors, lawyers, criminals, etc.. often study years to refine their craft. Novice traders often believe they are immune to such time intensive studies. Don't fall prey to such ignorance - study the markets, put in serious chart time, read and learn from those that are winning.
2) Money Management This one is simple. Trading more then 2-5% of your account on any one trade is account suicide. Let's assume you start out trading a $1000.00 mini-account. Your system has a 30 pip stop loss. The maximum you should risk on any one trade is a dollar per pip. The market will forgive a lot of things - bad trades, bad days even bad weeks but without the capital to withstand the drawdown your trading career with be short lived.
3) Simplistic Strategy Have you ever noticed Forex scam sites often provide a unique system that only they have? Additionally - these systems are only known by a hand full of successful traders. Your system should do just the opposite. I use pivot points, psychological levels and trend line breaks because large institutions follow these levels. As a retail trader your goal should be to pick up the pennies in front of the steam rollers. Keep Occam in mind when adopting any trading system. Leave the over complicated systems to the guys at Long Term Capital.
4) Trade During Prime Time One of the biggest benefits of the currency markets is its hours. It's open 24 hours a day 5 days a week. This is great for trend analysis but not for trading. Don't let these extended hours fool you. Only the biggest players trade during the prime hours... so should you. Keep in mind that only 14% of all trades occur outside of non-financial institutions. That's where the retail trader lives. Since we only trade the EURUSD we only trade between 2:00am and 11:00am EST. This time period covers the European open and close, the open of the US session and the overlap between the US session and the European session.
5) Follow Your Trade Plan You don't know where the market is headed. Don't guess. Hope isn't a strategy. Once you adopt a trading strategy that fits your trading style stick to it. Leave your ego at the door when you begin your trading day. This is one of the most difficult things to overcome. The old adage plan your trade and trade your plan is very important. When you trade outside your plan you will lose.
6) Double Your Demo Account Almost every Forex trading platform offers demo accounts. When you can double your demo account you are ready to trade real capital. Additionally - after your double your demo account trade the first few months of you real capital using micro-lots where each pip equals a small dollar amount. This will help ease the emotional impact of trading real capital.
7) Trade with the Trend All those little axiom's about the trend exist for a reason - the trend is your friend... trade with the trend until it bends... trade the trend or lose in the end - you get the idea. These exist for a reason. They are true. Use long term trend analysis to determine market direction. When you trade with the trend your chances of success are greatly enhanced.
8) Set Realistic Expectation What's realistic? If you can return 5-8% a month you are doing great. While this may seem like a relatively small goal very few traders can achieve this month after month. If you set unrealistic goals - say 20% a month you better be sitting beside John Arnold because that's about the only way your going to see that kind of return.
9) Post Trade Analysis When the trading day is over take a few minutes to analyze what happened. Did you follow your trading plan? Was your analysis accurate? Why? Why not? At the end of the week spend some quality time looking over the trades you placed during the previous week. How many trades did you take? Are you over trading? Many traders find it advantageous to keep a journal of their trades and their thought process for taking or not taking the trade. In a very short time you will see patterns emerge that will aide you in fine tuning your trading.
10) Predetermined Profit Targets and Stops Setting your stop loss is a must. Intra-day traders usually use a 20-40 pip stop. After you've adopted a system and spent hours watching the chart you will know where your stop should be. Once you've settled in on a stop never move it. One more time - never move your stop! Remember that capital accumulation is secondary to capital preservation. On the other side of the equation set profit targets prior to entering your trade. Utilizing pivot points will always provide you with realistic profit targets.
1) Knowledge Acquisition Great traders are voracious learners. Most professional occupations have a learning curve. Doctors, lawyers, criminals, etc.. often study years to refine their craft. Novice traders often believe they are immune to such time intensive studies. Don't fall prey to such ignorance - study the markets, put in serious chart time, read and learn from those that are winning.
2) Money Management This one is simple. Trading more then 2-5% of your account on any one trade is account suicide. Let's assume you start out trading a $1000.00 mini-account. Your system has a 30 pip stop loss. The maximum you should risk on any one trade is a dollar per pip. The market will forgive a lot of things - bad trades, bad days even bad weeks but without the capital to withstand the drawdown your trading career with be short lived.
3) Simplistic Strategy Have you ever noticed Forex scam sites often provide a unique system that only they have? Additionally - these systems are only known by a hand full of successful traders. Your system should do just the opposite. I use pivot points, psychological levels and trend line breaks because large institutions follow these levels. As a retail trader your goal should be to pick up the pennies in front of the steam rollers. Keep Occam in mind when adopting any trading system. Leave the over complicated systems to the guys at Long Term Capital.
4) Trade During Prime Time One of the biggest benefits of the currency markets is its hours. It's open 24 hours a day 5 days a week. This is great for trend analysis but not for trading. Don't let these extended hours fool you. Only the biggest players trade during the prime hours... so should you. Keep in mind that only 14% of all trades occur outside of non-financial institutions. That's where the retail trader lives. Since we only trade the EURUSD we only trade between 2:00am and 11:00am EST. This time period covers the European open and close, the open of the US session and the overlap between the US session and the European session.
5) Follow Your Trade Plan You don't know where the market is headed. Don't guess. Hope isn't a strategy. Once you adopt a trading strategy that fits your trading style stick to it. Leave your ego at the door when you begin your trading day. This is one of the most difficult things to overcome. The old adage plan your trade and trade your plan is very important. When you trade outside your plan you will lose.
6) Double Your Demo Account Almost every Forex trading platform offers demo accounts. When you can double your demo account you are ready to trade real capital. Additionally - after your double your demo account trade the first few months of you real capital using micro-lots where each pip equals a small dollar amount. This will help ease the emotional impact of trading real capital.
7) Trade with the Trend All those little axiom's about the trend exist for a reason - the trend is your friend... trade with the trend until it bends... trade the trend or lose in the end - you get the idea. These exist for a reason. They are true. Use long term trend analysis to determine market direction. When you trade with the trend your chances of success are greatly enhanced.
8) Set Realistic Expectation What's realistic? If you can return 5-8% a month you are doing great. While this may seem like a relatively small goal very few traders can achieve this month after month. If you set unrealistic goals - say 20% a month you better be sitting beside John Arnold because that's about the only way your going to see that kind of return.
9) Post Trade Analysis When the trading day is over take a few minutes to analyze what happened. Did you follow your trading plan? Was your analysis accurate? Why? Why not? At the end of the week spend some quality time looking over the trades you placed during the previous week. How many trades did you take? Are you over trading? Many traders find it advantageous to keep a journal of their trades and their thought process for taking or not taking the trade. In a very short time you will see patterns emerge that will aide you in fine tuning your trading.
10) Predetermined Profit Targets and Stops Setting your stop loss is a must. Intra-day traders usually use a 20-40 pip stop. After you've adopted a system and spent hours watching the chart you will know where your stop should be. Once you've settled in on a stop never move it. One more time - never move your stop! Remember that capital accumulation is secondary to capital preservation. On the other side of the equation set profit targets prior to entering your trade. Utilizing pivot points will always provide you with realistic profit targets.
The 5 Steps to becoming a trader
Step One: Unconscious Incompetence.
This is the first step you take when starting to look into trading. you know that its a good way of making money because you've heard so many things about it and heard of so many millionaires. Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be? Price either moves up or down - what's the big secret to that then - lets get cracking!
Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. You take lots of trades and lots of risks. When you enter a trade it turns against you so you reverse and it turns again .. and again, and again.
You may have initial success, and thats even worse - cos it tells your brain that this really is simple and you start to risk more money.
You try to turn around your losses by doubling up every time you trade. Sometimes you'll get away with it but more often than not you will come away scathed and bruised You are totally oblivious to your incompetence at trading.
This step can last for a week or two of trading but the market is usually swift and you move onth the next stage.
Step Two - Conscious Incompetence
Step two is where you realise that there is more work involved in trading and that you might actually have to work a few things out. You consciously realise that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit.
You now set about buying systems and e-books galore, read websites based everywhere from USA to the Ukraine. and begin your search for the holy grail. During this time you will be a system nomad - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator you'll be ecstatic that this is the one that will make all the difference.
You will test out automated systems on Metatrader, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today. You'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them because you are so sure you are right.
You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount because you've studied and you don't make that, you know as much as they do and they must be lying. But they're in there day after day and their account just grows whilst yours falls.
You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and overtrade your account even though everyone says you are mad to - but you know better. You'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either.
You might even approach a 'guru' like Rob Booker or someone on a chat board who promises to make you into a trader(usually for a fee of course). Whether the guru is good or not you wont win because there is no replacement for screen time and you still think you know best.
This step can last ages and ages - in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer 3 years. This is also the step when you are most likely to give up through sheer frustration.
Around 60% of new traders die out in the first 3 months - they give up and this is good - think about it - if trading was easy we would all be millionaires. another 20% keep going for a year and then in desperation take risks guaranteed to blow their account which of course it does.
What may suprise you is that of the remaining 20% all of them will last around 3 years - and they will think they are safe in the water - but even at 3 years only a further 5-10% will continue and go on to actually make money consistently.
By the way - they are real figures, not just some ive picked out of my head - so when you get to 3 years in the game dont think its plain sailing from there.
Iv had many people argue with me about these timescales - funny enough none of them have been trading for more that 3 years - if you think you know better then ask on a board for someone who's been trading 5 years and ask them how long it takes to become fully 100% proficient. Sure i guess there will be exceptions to the rle - but i havent met any yet.
Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now its in your blood
One day - im a split second moment you will enter stage 3.
Step 3 - The Eureka Moment
Towards the end of stage two you begin to realise that it's not the system that is making the difference. You realise that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right You start to read books on the psychology of trading and identify with the characters portrayed in those books and finally comes the eureka moment.
The eureka moment causes a new connection to be made in your brain. You suddenly realise that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins.
Because of this revelation you stop taking any notice of what anyone thinks - what this news item will do, and what that event will do to the markets. You become an individual with your own method of trading
You start to work just one system that you mould to your own way of trading, you're starting to get happy and you define your risk threshold.
You start to take every trade that your 'edge' shows has a good probability of winning with. When the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realise that the trade is bad you close it . The next trade or the one after it or the one after that will have higher odds of success because you know your system works.
You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures knowing that one bad trade does not a poor system make.
You have realised in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what as you know the probabilities stack in your favour.
You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile. You weren't ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market.
Step 4 - Conscious Competence
You are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it looses and when you're on a loser you close it swiftly with little pain to your account
You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips - generally you are breaking even and not losing money. You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently.
You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on.
This lasts about 6 months
Step Five - Unconscious Competence
Now we’re cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level. You are running on autopilot. You start to pick the really big trades and getting 200 pips in a day doesnt make you any more excited that getting 1 pips.
You see the newbies in the forum shouting 'go dollar go' as if they are urging on a horse to win in the grand national and you see yourself - but many years ago now.
This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account.
You're a star in the trading chat room and people listen to what you say. You recognise yourself in their questions from about two years ago. You pass on your advice but you know most of it is futile because they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two, but a few will.
Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.
Finally you grow out of the chat rooms and find a few choice people who you converse with about the markets without being influenced at all.
All the time you are honing your methods to extract the maximum profit from the market without increasing risk. Your method of trading doesnt change - it just gets better - you now have what women call 'intuition'
You can now say with your head held high "I'm a currency trader" but to be honest you dont even bother telling anyone - it's a job like any other.
I hope youve enjoyed reading this journey into a traders mind and that hopefully youve identified with some points in here.
Remember that only 5% will actually make it - but the reason for that isnt ability, its staying power and the ability to change your perceptions and paradigms as new information comes available.
The losers are those who wanted to 'get rich quick' but approached the market and within 6 months put on a pair of blinkers so they couldnt see the obvious - a kind of "this is the way i see it and thats that" scenario - refusing to assimilate new information that changes that perception.
Im happy to tell you that the reason i started trading was because of the 'get rich quick' mindset. Just that now i see it as 'get rich slow'
If youre thinking about giving up i have one piece of advice for you ....
Ask yourself the question "how many years would you go to college if you knew for a fact that there was a million dollars a year job at the end of it?
Take care and good trading to you all.
Step One: Unconscious Incompetence.
This is the first step you take when starting to look into trading. you know that its a good way of making money because you've heard so many things about it and heard of so many millionaires. Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be? Price either moves up or down - what's the big secret to that then - lets get cracking!
Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. You take lots of trades and lots of risks. When you enter a trade it turns against you so you reverse and it turns again .. and again, and again.
You may have initial success, and thats even worse - cos it tells your brain that this really is simple and you start to risk more money.
You try to turn around your losses by doubling up every time you trade. Sometimes you'll get away with it but more often than not you will come away scathed and bruised You are totally oblivious to your incompetence at trading.
This step can last for a week or two of trading but the market is usually swift and you move onth the next stage.
Step Two - Conscious Incompetence
Step two is where you realise that there is more work involved in trading and that you might actually have to work a few things out. You consciously realise that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit.
You now set about buying systems and e-books galore, read websites based everywhere from USA to the Ukraine. and begin your search for the holy grail. During this time you will be a system nomad - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator you'll be ecstatic that this is the one that will make all the difference.
You will test out automated systems on Metatrader, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today. You'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them because you are so sure you are right.
You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount because you've studied and you don't make that, you know as much as they do and they must be lying. But they're in there day after day and their account just grows whilst yours falls.
You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and overtrade your account even though everyone says you are mad to - but you know better. You'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either.
You might even approach a 'guru' like Rob Booker or someone on a chat board who promises to make you into a trader(usually for a fee of course). Whether the guru is good or not you wont win because there is no replacement for screen time and you still think you know best.
This step can last ages and ages - in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer 3 years. This is also the step when you are most likely to give up through sheer frustration.
Around 60% of new traders die out in the first 3 months - they give up and this is good - think about it - if trading was easy we would all be millionaires. another 20% keep going for a year and then in desperation take risks guaranteed to blow their account which of course it does.
What may suprise you is that of the remaining 20% all of them will last around 3 years - and they will think they are safe in the water - but even at 3 years only a further 5-10% will continue and go on to actually make money consistently.
By the way - they are real figures, not just some ive picked out of my head - so when you get to 3 years in the game dont think its plain sailing from there.
Iv had many people argue with me about these timescales - funny enough none of them have been trading for more that 3 years - if you think you know better then ask on a board for someone who's been trading 5 years and ask them how long it takes to become fully 100% proficient. Sure i guess there will be exceptions to the rle - but i havent met any yet.
Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now its in your blood
One day - im a split second moment you will enter stage 3.
Step 3 - The Eureka Moment
Towards the end of stage two you begin to realise that it's not the system that is making the difference. You realise that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right You start to read books on the psychology of trading and identify with the characters portrayed in those books and finally comes the eureka moment.
The eureka moment causes a new connection to be made in your brain. You suddenly realise that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins.
Because of this revelation you stop taking any notice of what anyone thinks - what this news item will do, and what that event will do to the markets. You become an individual with your own method of trading
You start to work just one system that you mould to your own way of trading, you're starting to get happy and you define your risk threshold.
You start to take every trade that your 'edge' shows has a good probability of winning with. When the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realise that the trade is bad you close it . The next trade or the one after it or the one after that will have higher odds of success because you know your system works.
You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures knowing that one bad trade does not a poor system make.
You have realised in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what as you know the probabilities stack in your favour.
You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile. You weren't ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market.
Step 4 - Conscious Competence
You are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it looses and when you're on a loser you close it swiftly with little pain to your account
You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips - generally you are breaking even and not losing money. You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently.
You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on.
This lasts about 6 months
Step Five - Unconscious Competence
Now we’re cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level. You are running on autopilot. You start to pick the really big trades and getting 200 pips in a day doesnt make you any more excited that getting 1 pips.
You see the newbies in the forum shouting 'go dollar go' as if they are urging on a horse to win in the grand national and you see yourself - but many years ago now.
This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account.
You're a star in the trading chat room and people listen to what you say. You recognise yourself in their questions from about two years ago. You pass on your advice but you know most of it is futile because they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two, but a few will.
Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.
Finally you grow out of the chat rooms and find a few choice people who you converse with about the markets without being influenced at all.
All the time you are honing your methods to extract the maximum profit from the market without increasing risk. Your method of trading doesnt change - it just gets better - you now have what women call 'intuition'
You can now say with your head held high "I'm a currency trader" but to be honest you dont even bother telling anyone - it's a job like any other.
I hope youve enjoyed reading this journey into a traders mind and that hopefully youve identified with some points in here.
Remember that only 5% will actually make it - but the reason for that isnt ability, its staying power and the ability to change your perceptions and paradigms as new information comes available.
The losers are those who wanted to 'get rich quick' but approached the market and within 6 months put on a pair of blinkers so they couldnt see the obvious - a kind of "this is the way i see it and thats that" scenario - refusing to assimilate new information that changes that perception.
Im happy to tell you that the reason i started trading was because of the 'get rich quick' mindset. Just that now i see it as 'get rich slow'
If youre thinking about giving up i have one piece of advice for you ....
Ask yourself the question "how many years would you go to college if you knew for a fact that there was a million dollars a year job at the end of it?
Take care and good trading to you all.
Sunday, December 30, 2007
Weak New Homes Sales Pushes the US Dollar Lower
By dailyFX
The U.S. Dollar continued to lose ground in the currency market as it fell against nearly all of the majors following data New Home sales which fell to its lowest in more that 12 years. The USD/CHF saw the biggest loss as the pair dropped from to 1.1292 from 1.1391 which represents a 2.2 percent drop on the day. The Euro gained ground against the US dollar for the sixth consecutive trading day while the GBP/USD currency pair hit a high of $2.00, but retraced back to trade within the $1.99 range. The only currency that did not appreciate against the US dollar was the New Zealand dollar which climbed into the 0.77 trading range.
The release of the New Home Sales data by the Commerce Department had a crushing effect as sales unexpectedly fell by 9 percent hitting a 12 year low, indicating that the worse of the credit and housing crisis is yet to be over. The release shed light on the continuing weakness of the housing market as inventory of new homes continue to accumulate with prices on a steady decline, causing growth prospects to be lowered for 2008. New Home Sales have decline by 25.4 percent for the year, and is expected to be the biggest decline since 1963. Amid the disappointing New Home Sales figures, the Chicago Purchasing Managers Index told a different story as it rose above expectation, showing significant accumulation of strength within the manufacturing sector. As a result, we anticipate the housing market to continually deteriorate until it hits rock bottom, and do not expect to see any signs of improvement for the housing industry until then.
The stock markets showed minor gains through a volatile trading session amid negative housing data, with 14 out of the 30 DJIA components declining, led by General Motors Corp losing 3 percent, followed by Citigroup which saw prices decline by 1.2 percent. The S&P500 followed the DJIA by welcoming a 1.35 point advance, bouncing back from the plunge in yesterday’s session which was ignited by the assassination of Pakistan Prime Minister Benazir Bhutto. The stock markets were resilient in today’s session as they struggled with the disappointing fact that the housing market has yet to bottom out, and were able of fight off a second day of decline.
US Treasuries enjoyed a second day of gains as new housing data sent yields plummeting and prices soaring. The past two days of negative data has sent risk adverse investors to seek shelter behind risk free assets as political unrest along with sluggish growth prospects deferred investors from jumping into riskier investments. The confusion and potential danger of the current economic and political situation has caused many to speculate that the Federal Reserve will lean towards another rate cut in January, further helping to increase the demand for US Treasuries. Due to the current economic situation along with the volatile securities market, many investors are moving their funds into the safe haven of US Treasuries, and we expect the trend to linger into the beginning of the 2008.
By dailyFX
The U.S. Dollar continued to lose ground in the currency market as it fell against nearly all of the majors following data New Home sales which fell to its lowest in more that 12 years. The USD/CHF saw the biggest loss as the pair dropped from to 1.1292 from 1.1391 which represents a 2.2 percent drop on the day. The Euro gained ground against the US dollar for the sixth consecutive trading day while the GBP/USD currency pair hit a high of $2.00, but retraced back to trade within the $1.99 range. The only currency that did not appreciate against the US dollar was the New Zealand dollar which climbed into the 0.77 trading range.
The release of the New Home Sales data by the Commerce Department had a crushing effect as sales unexpectedly fell by 9 percent hitting a 12 year low, indicating that the worse of the credit and housing crisis is yet to be over. The release shed light on the continuing weakness of the housing market as inventory of new homes continue to accumulate with prices on a steady decline, causing growth prospects to be lowered for 2008. New Home Sales have decline by 25.4 percent for the year, and is expected to be the biggest decline since 1963. Amid the disappointing New Home Sales figures, the Chicago Purchasing Managers Index told a different story as it rose above expectation, showing significant accumulation of strength within the manufacturing sector. As a result, we anticipate the housing market to continually deteriorate until it hits rock bottom, and do not expect to see any signs of improvement for the housing industry until then.
The stock markets showed minor gains through a volatile trading session amid negative housing data, with 14 out of the 30 DJIA components declining, led by General Motors Corp losing 3 percent, followed by Citigroup which saw prices decline by 1.2 percent. The S&P500 followed the DJIA by welcoming a 1.35 point advance, bouncing back from the plunge in yesterday’s session which was ignited by the assassination of Pakistan Prime Minister Benazir Bhutto. The stock markets were resilient in today’s session as they struggled with the disappointing fact that the housing market has yet to bottom out, and were able of fight off a second day of decline.
US Treasuries enjoyed a second day of gains as new housing data sent yields plummeting and prices soaring. The past two days of negative data has sent risk adverse investors to seek shelter behind risk free assets as political unrest along with sluggish growth prospects deferred investors from jumping into riskier investments. The confusion and potential danger of the current economic and political situation has caused many to speculate that the Federal Reserve will lean towards another rate cut in January, further helping to increase the demand for US Treasuries. Due to the current economic situation along with the volatile securities market, many investors are moving their funds into the safe haven of US Treasuries, and we expect the trend to linger into the beginning of the 2008.
Tuesday, December 25, 2007
Key Themes for 2008 - What do Economists Expect for the New Year?
2008 promises to be another interesting year. With significant variance in the range of forecasts on offer and fast changing perceptions of risk, financial markets could be in for a prolonged period of volatility. Key themes for 2008 include, have central banks averted a massive rise in corporate defaults or will further cash injections be required as losses continue to be disclosed? Will the US housing market recover? Will the UK housing market collapse? Is the UK retail sector in for a tough period? Are we in for another bout of strong M&A activity? Will commodity markets and emerging market equities come off the boil? Are markets too complacent about inflation risk, so will bond yields rise in the major economies? Answers to these questions will become clearer through economic data releases and policy action/ statements as the year unfolds. - Trevor Williams, Chief Economist at Lloyds TSB Financial Markets
Weekly Bank Research Center 12-24-07
Bold Action: Central Banks Likely to Succeed
Bold Action: Central Banks Likely to Succeed
Coordinated central bank actions to ease liquidity strains in money markets in our view will ultimately have significant positive implications for financial markets and the economy. Yet financial markets have yawned at the moves. If we’re right, despite near-term risks, opportunities are emerging in US equity and credit markets. Liquidity pressures emerged here and in Europe from two sources. One is the overhang of uncertainty about the value of collateral and the economic outlook. A second is the reintermediation of the banking system, which still has further to go. Banks and securities firms have become risk averse, hoarding cash and demanding a premium to lend in the interbank market. At the beginning of this week, that premium was running about 100 bp.
Full Story
Euroland - On a knife-edge
Niels-Henrik Bjørn Sørensen, Senior Analyst, Danske Bank
Both the German ifo index and the FLASH PMIs for Euroland fell a little in December after some signs of a renewed rise in November. It is still the clash between relatively strong economic figures and the long shadow of the credit crisis that is affecting business confidence. While actual economic numbers have been fine, albeit with a few exceptions, the credit crisis intensified in November and December, and it is probably this development that has pulled confidence a little further down. The general picture of business confidence is that growth is around or a little above trend . in other words, a situation where the ECB, under normal circumstances, would be close to tightening monetary policy, especially if the inflation risks were as high as they are at present.
Full Story
Key Themes for 2008
Trevor Williams, Chief Economist at Lloyds TSB Financial Markets
2008 promises to be another interesting year. With significant variance in the range of forecasts on offer and fast changing perceptions of risk, financial markets could be in for a prolonged period of volatility. Key themes for 2008 include, have central banks averted a massive rise in corporate defaults or will further cash injections be required as losses continue to be disclosed? Will the US housing market recover? Will the UK housing market collapse? Is the UK retail sector in for a tough period? Are we in for another bout of strong M&A activity? Will commodity markets and emerging market equities come off the boil? Are markets too complacent about inflation risk, so will bond yields rise in the major economies? Answers to these questions will become clearer through economic data releases and policy action/ statements as the year unfolds.
Full Story
2007 a Year to be Remembered: 2008 Looks Murky
Steve Chan, Economist, TD Bank Financial Group
This time of year is chock-full of prognostications on the year ahead. Last week, we stepped into the fray by providing our updated view on how the increasingly murky economic story will unfold in 2008 (see TD Economics’ Quarterly Economic Forecast at www.td.com/economics). In this edition of the Weekly Bottom Line, we take a look back at a year that was – to say the least – memorable. Just as the 1987 stock market crash, the 1998 Russian debt default and 9/11 have gone down in infamy, 2007 will be remembered as the year that the rain of liquidity (much of which was tied to the U.S. sub-prime boom) turned into a drought. The outbreak of the so-called credit crunch this past summer has prompted investors to look at risk through a new lens with enormous implications for the trajectory of prices of bond, equity, commodities and foreign exchange.
Full Story
Eight Things to Watch in 2008
John E. Silvia, Ph.D. Chief Economist, Wachovia
As this tumultuous year draws to a close we thought it appropriate to outline some key themes we see for the coming year. Much of this draws from our Annual Outlook, which is available on our web site. This year is ending with lots of talk about the possibility of recession. The R word first made its way back into the economic discussion back in late February, when Alan Greenspan addressed a group of investors in Japan and stated that he saw a one in three chance of the U.S. economy falling into recession in 2007. By the end of the year, he had upped his odds to a 50-50 chance of a recession in the next year.
Full Story
Other Pre-screened Independent Contributors
J-Chart
J-Chart is an innovative charting and bias-neutral market analysis tool. Based on its proprietary theoretical concept and display of market price action, J-Chart provides a much clearer and unique insight into the market than conventional charting methods. This innovative charting and market analysis tool is designed to visualize market price action that constructs unique price patterns called "Equilibriums". Based on its "non-fixed time frame" concept and "Kinetic Equilibrium" application, J-Chart users are able to forecast markets' future movements with high accuracy.
J-Chart Weekly Newsletter
2008 promises to be another interesting year. With significant variance in the range of forecasts on offer and fast changing perceptions of risk, financial markets could be in for a prolonged period of volatility. Key themes for 2008 include, have central banks averted a massive rise in corporate defaults or will further cash injections be required as losses continue to be disclosed? Will the US housing market recover? Will the UK housing market collapse? Is the UK retail sector in for a tough period? Are we in for another bout of strong M&A activity? Will commodity markets and emerging market equities come off the boil? Are markets too complacent about inflation risk, so will bond yields rise in the major economies? Answers to these questions will become clearer through economic data releases and policy action/ statements as the year unfolds. - Trevor Williams, Chief Economist at Lloyds TSB Financial Markets
Weekly Bank Research Center 12-24-07
Bold Action: Central Banks Likely to Succeed
Bold Action: Central Banks Likely to Succeed
Coordinated central bank actions to ease liquidity strains in money markets in our view will ultimately have significant positive implications for financial markets and the economy. Yet financial markets have yawned at the moves. If we’re right, despite near-term risks, opportunities are emerging in US equity and credit markets. Liquidity pressures emerged here and in Europe from two sources. One is the overhang of uncertainty about the value of collateral and the economic outlook. A second is the reintermediation of the banking system, which still has further to go. Banks and securities firms have become risk averse, hoarding cash and demanding a premium to lend in the interbank market. At the beginning of this week, that premium was running about 100 bp.
Full Story
Euroland - On a knife-edge
Niels-Henrik Bjørn Sørensen, Senior Analyst, Danske Bank
Both the German ifo index and the FLASH PMIs for Euroland fell a little in December after some signs of a renewed rise in November. It is still the clash between relatively strong economic figures and the long shadow of the credit crisis that is affecting business confidence. While actual economic numbers have been fine, albeit with a few exceptions, the credit crisis intensified in November and December, and it is probably this development that has pulled confidence a little further down. The general picture of business confidence is that growth is around or a little above trend . in other words, a situation where the ECB, under normal circumstances, would be close to tightening monetary policy, especially if the inflation risks were as high as they are at present.
Full Story
Key Themes for 2008
Trevor Williams, Chief Economist at Lloyds TSB Financial Markets
2008 promises to be another interesting year. With significant variance in the range of forecasts on offer and fast changing perceptions of risk, financial markets could be in for a prolonged period of volatility. Key themes for 2008 include, have central banks averted a massive rise in corporate defaults or will further cash injections be required as losses continue to be disclosed? Will the US housing market recover? Will the UK housing market collapse? Is the UK retail sector in for a tough period? Are we in for another bout of strong M&A activity? Will commodity markets and emerging market equities come off the boil? Are markets too complacent about inflation risk, so will bond yields rise in the major economies? Answers to these questions will become clearer through economic data releases and policy action/ statements as the year unfolds.
Full Story
2007 a Year to be Remembered: 2008 Looks Murky
Steve Chan, Economist, TD Bank Financial Group
This time of year is chock-full of prognostications on the year ahead. Last week, we stepped into the fray by providing our updated view on how the increasingly murky economic story will unfold in 2008 (see TD Economics’ Quarterly Economic Forecast at www.td.com/economics). In this edition of the Weekly Bottom Line, we take a look back at a year that was – to say the least – memorable. Just as the 1987 stock market crash, the 1998 Russian debt default and 9/11 have gone down in infamy, 2007 will be remembered as the year that the rain of liquidity (much of which was tied to the U.S. sub-prime boom) turned into a drought. The outbreak of the so-called credit crunch this past summer has prompted investors to look at risk through a new lens with enormous implications for the trajectory of prices of bond, equity, commodities and foreign exchange.
Full Story
Eight Things to Watch in 2008
John E. Silvia, Ph.D. Chief Economist, Wachovia
As this tumultuous year draws to a close we thought it appropriate to outline some key themes we see for the coming year. Much of this draws from our Annual Outlook, which is available on our web site. This year is ending with lots of talk about the possibility of recession. The R word first made its way back into the economic discussion back in late February, when Alan Greenspan addressed a group of investors in Japan and stated that he saw a one in three chance of the U.S. economy falling into recession in 2007. By the end of the year, he had upped his odds to a 50-50 chance of a recession in the next year.
Full Story
Other Pre-screened Independent Contributors
J-Chart
J-Chart is an innovative charting and bias-neutral market analysis tool. Based on its proprietary theoretical concept and display of market price action, J-Chart provides a much clearer and unique insight into the market than conventional charting methods. This innovative charting and market analysis tool is designed to visualize market price action that constructs unique price patterns called "Equilibriums". Based on its "non-fixed time frame" concept and "Kinetic Equilibrium" application, J-Chart users are able to forecast markets' future movements with high accuracy.
J-Chart Weekly Newsletter
How 2007 Changed the Foreign Exchange Market
• ECB President Trichet Voted Financial Time’s Person of the Year
• British Pound Falls to Record Low Against the Euro
How 2007 Changed the Foreign Exchange Market
For the financial markets and the foreign exchange market in particular, 2007 was a year that gave everyone a much needed reality check. Over the past 6 years, the financial markets have become irrationally exuberant. Record low volatilities in the foreign exchange market sparked a vigorous appetite for risk, one that caused money market and state funds, which are suppose to be extremely conservative to be exposed to subprime risk. The hunt for yield and the belief that the good times would continue tempted many managers to look to increase their returns by investing in mortgage backed securities. The availability of cheap and easy money also led many mangers to leverage their bets which escalated their risk. Unfortunately the problems in the subprime sector blew up in 2007 and everyone learned the consequences of taking excess risk, the hard way. The lesson that money managers and investors learned in 2007 is to be more selective with their investments, be less exposed to risky assets and more conservative with leverage. For the foreign exchange market, this will have a direct impact on carry trades. The primary reason why carry trades have thrived over the past few years is because volatility fell to a record low. They have now doubled from their June 2007 levels which means that carry trades will no longer be easy one way bets. The multi-decade highs that we have grown accustomed to will be much more difficult to achieve as everyone becomes more careful with their investments and strive not to repeat the mistakes made in 2007. Also, with the US dollar falling to a record low against the Euro, currencies have become water cooler talk. The general public has become much more aware of how currencies can affect their daily way of life and this is a lesson that will remain with them for the foreseeable future. Countries around the world and the financial markets have become much more intertwined, or in other words globalization has also been taken to another level this past year. Sovereign wealth funds have become a force to be reckoned with. Between the U.A.E, Singapore, Norway, Saudi Arabia, Kuwait and China, there are as much as $2 trillion to spend. Their shopping spree has led to some of the biggest deals this year with the latest being Singapore’s $4.4 billion investment into Merrill Lynch. Saudi Arabia also just announced that they are setting up their fund which is a big reason why we expect this trend to continue. As many of these government funds invest in US financial firms, it will help the US dollar and bring the world much closer together. The FX market is closed on Tuesday and Wednesday. Although there are some housing and manufacturing numbers on Wednesday, there are no major US reports until Thursday.
ECB President Trichet Voted Financial Time’s Person of the Year
The Financial Times voted ECB President Trichet as their Person of the Year and we at DailyFX have always loved Trichet for his candid no nonsense comments on monetary policy. He has never wavered to political pressure and has always tried to prepare the markets months in advance for any potential change to interest rates. As the ripple effects of the US subprime problems caused a major liquidity crisis in the credit markets, the ECB was the first central bank to respond with a massive liquidity injection. According to the FT, for a central bank that is not yet 10 years old, the ultimate compliment was paid when the venerable US Federal Reserve and Bank of England followed suit. Trichet’s reputation was the only one to be enhanced by the latest turmoil. This morning, he continued to remind the markets that the ECB will be focusing on inflation and their desire to contain it will not be distracted by the interest rates cuts from the US and Federal Reserve. When Trichet speaks, we all listen and that says a lot for a central bank who’s credibility has been questioned repeatedly since their inception.
Visit the Euro Currency Room for resources dedicated specifically to the Euro.
British Pound Falls to Record Low Against the Euro
In the fifth consecutive day of weakness, the British pound fell to a record low against the Euro and a 4 month low against the US dollar. With most traders out for the holidays, the trends that began last week have continued well into this week. No one is willing to stick their hand out and start picking a bottom in the British pound this late in the year. Instead many traders are probably happy to end the breakeven and will take this opportunity to collect themselves before start over again in January. As UK economic data continues to show signs of weakness, there are no buyers left in the market. This morning, Hometrack reported 0.3 percent decline in house prices in the month of December, which is the biggest drop in 3 years. They also predict that the number of closings will fall by 17 percent and that prices will rise by just 1 percent next year. The housing market has been the back bone of UK growth for many years and now that this sector of the economy is crumbling, growth could suffer greatly in 2008.
Visit the British Pound Currency Room for resources dedicated specifically to the Euro.
Rally in Stocks Drives the Yen Lower and Australian, New Zealand and Canadian Dollars Higher
Since Friday, the Dow has rallied 300 points and that strength has helped to take the Australian, New Zealand and Canadian dollars higher against both the Japanese Yen and US Dollar. Commodity prices are basically unchanged on the day which indicates that the fluctuations of these currency pairs are largely driven by risk appetite. Of course that too is distorted given the lack of liquidity across the financial markets today. Either way, the Dow and USDJPY are breaking their 100-day SMA which suggests that these gains should continue for the remainder of the week. There are Japanese data scheduled for release Monday and Tuesday night. These reports which include the BSI manufacturing index, the corporate service price index and supermarket sales will not be market moving. Also, the BoJ minutes will simply reinforce what the market knows already, which is that interest rates in Japan will remain low for a very long time.
Visit the Japanese Yen Currency Room for resources dedicated specifically to the Euro.
Tell us what you think on the Canadian dollar Forum.
• ECB President Trichet Voted Financial Time’s Person of the Year
• British Pound Falls to Record Low Against the Euro
How 2007 Changed the Foreign Exchange Market
For the financial markets and the foreign exchange market in particular, 2007 was a year that gave everyone a much needed reality check. Over the past 6 years, the financial markets have become irrationally exuberant. Record low volatilities in the foreign exchange market sparked a vigorous appetite for risk, one that caused money market and state funds, which are suppose to be extremely conservative to be exposed to subprime risk. The hunt for yield and the belief that the good times would continue tempted many managers to look to increase their returns by investing in mortgage backed securities. The availability of cheap and easy money also led many mangers to leverage their bets which escalated their risk. Unfortunately the problems in the subprime sector blew up in 2007 and everyone learned the consequences of taking excess risk, the hard way. The lesson that money managers and investors learned in 2007 is to be more selective with their investments, be less exposed to risky assets and more conservative with leverage. For the foreign exchange market, this will have a direct impact on carry trades. The primary reason why carry trades have thrived over the past few years is because volatility fell to a record low. They have now doubled from their June 2007 levels which means that carry trades will no longer be easy one way bets. The multi-decade highs that we have grown accustomed to will be much more difficult to achieve as everyone becomes more careful with their investments and strive not to repeat the mistakes made in 2007. Also, with the US dollar falling to a record low against the Euro, currencies have become water cooler talk. The general public has become much more aware of how currencies can affect their daily way of life and this is a lesson that will remain with them for the foreseeable future. Countries around the world and the financial markets have become much more intertwined, or in other words globalization has also been taken to another level this past year. Sovereign wealth funds have become a force to be reckoned with. Between the U.A.E, Singapore, Norway, Saudi Arabia, Kuwait and China, there are as much as $2 trillion to spend. Their shopping spree has led to some of the biggest deals this year with the latest being Singapore’s $4.4 billion investment into Merrill Lynch. Saudi Arabia also just announced that they are setting up their fund which is a big reason why we expect this trend to continue. As many of these government funds invest in US financial firms, it will help the US dollar and bring the world much closer together. The FX market is closed on Tuesday and Wednesday. Although there are some housing and manufacturing numbers on Wednesday, there are no major US reports until Thursday.
ECB President Trichet Voted Financial Time’s Person of the Year
The Financial Times voted ECB President Trichet as their Person of the Year and we at DailyFX have always loved Trichet for his candid no nonsense comments on monetary policy. He has never wavered to political pressure and has always tried to prepare the markets months in advance for any potential change to interest rates. As the ripple effects of the US subprime problems caused a major liquidity crisis in the credit markets, the ECB was the first central bank to respond with a massive liquidity injection. According to the FT, for a central bank that is not yet 10 years old, the ultimate compliment was paid when the venerable US Federal Reserve and Bank of England followed suit. Trichet’s reputation was the only one to be enhanced by the latest turmoil. This morning, he continued to remind the markets that the ECB will be focusing on inflation and their desire to contain it will not be distracted by the interest rates cuts from the US and Federal Reserve. When Trichet speaks, we all listen and that says a lot for a central bank who’s credibility has been questioned repeatedly since their inception.
Visit the Euro Currency Room for resources dedicated specifically to the Euro.
British Pound Falls to Record Low Against the Euro
In the fifth consecutive day of weakness, the British pound fell to a record low against the Euro and a 4 month low against the US dollar. With most traders out for the holidays, the trends that began last week have continued well into this week. No one is willing to stick their hand out and start picking a bottom in the British pound this late in the year. Instead many traders are probably happy to end the breakeven and will take this opportunity to collect themselves before start over again in January. As UK economic data continues to show signs of weakness, there are no buyers left in the market. This morning, Hometrack reported 0.3 percent decline in house prices in the month of December, which is the biggest drop in 3 years. They also predict that the number of closings will fall by 17 percent and that prices will rise by just 1 percent next year. The housing market has been the back bone of UK growth for many years and now that this sector of the economy is crumbling, growth could suffer greatly in 2008.
Visit the British Pound Currency Room for resources dedicated specifically to the Euro.
Rally in Stocks Drives the Yen Lower and Australian, New Zealand and Canadian Dollars Higher
Since Friday, the Dow has rallied 300 points and that strength has helped to take the Australian, New Zealand and Canadian dollars higher against both the Japanese Yen and US Dollar. Commodity prices are basically unchanged on the day which indicates that the fluctuations of these currency pairs are largely driven by risk appetite. Of course that too is distorted given the lack of liquidity across the financial markets today. Either way, the Dow and USDJPY are breaking their 100-day SMA which suggests that these gains should continue for the remainder of the week. There are Japanese data scheduled for release Monday and Tuesday night. These reports which include the BSI manufacturing index, the corporate service price index and supermarket sales will not be market moving. Also, the BoJ minutes will simply reinforce what the market knows already, which is that interest rates in Japan will remain low for a very long time.
Visit the Japanese Yen Currency Room for resources dedicated specifically to the Euro.
Tell us what you think on the Canadian dollar Forum.
Sunday, November 04, 2007
GFT Daily Market Commentary
Forex Market Commentary for November 5, 2007 by Cornelius LucaGFT Daily Market Commentary
The dollar fell across the board on Friday despite an exceptional, if unsustainably strong, non-farm payrolls report. The dollar is out of control, so stay short with a tight stop. However, it should first enjoy a temporary reprieve.
Euro/dollar
Euro/dollar rallied on Friday to reach yet a new lifetime high. The pair is very overbought, but stay with it until there is some proof it will go down.
Immediate resistance is seen at 1.4533. Above it, strong resistance is seen at 1.4580. Next resistance is at 1.4665. Distant
Immediate support is at 1.4455. Below 1.4405, euro/dollar still has support at 1.4315. Only a break below 1.4195 would signal a more sustained decline.
Oscillators are rising.
NEAR-TERM: Mixed to slightly higher
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen fell to a three-day low but made little progress. Expect mixed trading to persist.
Initial support comes at 114.20 from a 50-point pivot that targets 113.70 and 114.70. Below 113.20, strong support is at 112.90 from a 50-point pivot that targets 113.40 and 112.40. There is a distant pivot low at 111.60 which is also a 50-point pivot, which targets 112.10 and 111.10.
Above 115.05 there is strong resistance at 115.50 from another 50-point pivot, which targets 115.00 and 116.00.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Mixed
Sterling/dollar
Sterling/dollar exploded on Friday to a 26 ½-year high of 2.0573. The pair is severely overbought, but hold long positions with a tight stop.
Initial resistance is at 2.0915. The next level is 2.1025.
Immediate support is seen at 2.0840. Next level is at 2.0755.
Oscillators are rising.
NEAR-TERM: Mixed to slightly higher
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/Swiss franc
Dollar/Swiss closed the week down after sinking to another over 2 ½-year low of 1.1493. Hold short positions in this oversold pair until there is a confirmed bottom.
Below 1.1493, support is at 1.1455. Below 1.1410, there is support at 1.1365.
Initial resistance is at 1.1590. Above 1.1655, there is resistance at 1.1740.
Oscillators are falling.
NEAR-TERM: Mixed with more downside risk
MEDIUM-TERM: Mixed
LONG-TERM: Bearish
Forex Market Commentary for November 5, 2007 by Cornelius LucaGFT Daily Market Commentary
The dollar fell across the board on Friday despite an exceptional, if unsustainably strong, non-farm payrolls report. The dollar is out of control, so stay short with a tight stop. However, it should first enjoy a temporary reprieve.
Euro/dollar
Euro/dollar rallied on Friday to reach yet a new lifetime high. The pair is very overbought, but stay with it until there is some proof it will go down.
Immediate resistance is seen at 1.4533. Above it, strong resistance is seen at 1.4580. Next resistance is at 1.4665. Distant
Immediate support is at 1.4455. Below 1.4405, euro/dollar still has support at 1.4315. Only a break below 1.4195 would signal a more sustained decline.
Oscillators are rising.
NEAR-TERM: Mixed to slightly higher
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen fell to a three-day low but made little progress. Expect mixed trading to persist.
Initial support comes at 114.20 from a 50-point pivot that targets 113.70 and 114.70. Below 113.20, strong support is at 112.90 from a 50-point pivot that targets 113.40 and 112.40. There is a distant pivot low at 111.60 which is also a 50-point pivot, which targets 112.10 and 111.10.
Above 115.05 there is strong resistance at 115.50 from another 50-point pivot, which targets 115.00 and 116.00.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Mixed
Sterling/dollar
Sterling/dollar exploded on Friday to a 26 ½-year high of 2.0573. The pair is severely overbought, but hold long positions with a tight stop.
Initial resistance is at 2.0915. The next level is 2.1025.
Immediate support is seen at 2.0840. Next level is at 2.0755.
Oscillators are rising.
NEAR-TERM: Mixed to slightly higher
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/Swiss franc
Dollar/Swiss closed the week down after sinking to another over 2 ½-year low of 1.1493. Hold short positions in this oversold pair until there is a confirmed bottom.
Below 1.1493, support is at 1.1455. Below 1.1410, there is support at 1.1365.
Initial resistance is at 1.1590. Above 1.1655, there is resistance at 1.1740.
Oscillators are falling.
NEAR-TERM: Mixed with more downside risk
MEDIUM-TERM: Mixed
LONG-TERM: Bearish
Friday, November 02, 2007
US Dollar Rebounds, Dow Falls 360 Points: How are Traders Positioned for Payrolls?
- Is the Swiss National Bank Endorsing Carry Trades?
- Australian, New Zealand and Canadian Dollars All Hit By Carry Trade Liquidation
US Dollar Rebounds, Dow Falls 360 Points: How are Traders Positioned for Payrolls?
The US dollar rebounded significantly today partly in reaction to Wednesday’s Federal Reserve interest rate decision and partly in anticipation of tomorrow’s non-farm payrolls report. Once again, bond traders got it right. Yesterday, even though bond yields increased the stock market rallied and the US dollar sold off. The reaction in the equity and currency markets suggested that traders thought the Fed was more dovish than hawkish while the reaction in bonds suggested otherwise. Today, the equity and currency markets have finally caught up with the bond market, with the Dow down over 300 points and the US dollar up across the board. Now that should be the correct reaction given the Fed’s slightly more hawkish leaning yesterday. The combination of strong GDP growth and the prospect for a sizeable increase in payrolls has many journalists calling yesterday’s interest rate cut the last. Economists beg to differ however and Fed fund futures indicate that there is still a greater than 50 percent chance for a December rate cut. In the immediate future, equity and currency traders are both positioned for a strong payrolls report. With the market so divided, NFPs could decide not only who is right, but also whether the US dollar has hit a bottom. The market is currently looking for 82k jobs to have been created in the month of October. However following the sharp increase in the ADP report and the drop in layoffs according to Challenger, the whisper number is far higher (125-130k). If job growth is anywhere near 125k, expect a sharp dollar rally, but if it is below 90k, speculation of a December rate cut will return. The arguments in favor of strong payroll growth far outweigh the arguments supporting weak growth. Not only did private sector payrolls increase materially last month and layoffs dropped, but the Hudson Employment index, Monster.com Employment Index and Help Wanted Ads all jumped. We do not get the service sector ISM report until Monday, which is after payrolls, but the employment component of the manufacturing ISM report hit the highest level since April. The only reasons why payrolls could be weak is the rise in jobless claims and fall in consumer confidence. If the labor market is really recovering, confidence would not be the weakest in 2 years. There are still a lot skeptics out there who do not believe that the US economy has seen its worst and it all boils down to what non-farm payrolls will mean for interest rates. If there is a reason for traders to believe that the Fed will continue to lower interest rates, then the current recovery in the US dollar will turn on a dime. Nothing is certain until we see payrolls and even then we need to watch how the market reacts to it.
Is the Swiss National Bank Endorsing Carry Trades?
The liquidation of carry trades has sent the Swiss franc higher against the US dollar, Euro and British pound, but carry trade related flow may not be the only reason why the Swissie is stronger. After falling to a 21 month low, Swiss manufacturing activity rebounded last month. It is now at 60.7, well within expansionary territory. Tomorrow, consumer prices are due for release and we expect the weakness of the Swiss franc to drive CPI higher, but that may not be enough to prompt the Swiss National Bank to raise interest rates. SNB board member Thomas Jordan said today that even though they remain vigilant on franc weakness, they do not see any signs of the franc stoking inflation and rate differential still favors carry trades. Is Jordan telling the markets that it is ok to keep selling francs for carry trade purposes? Perhaps, but when it comes to central bankers, they have been trained to give as little information in as many words as possible. There was no Eurozone data released this morning, but manufacturing PMI will be due for release tomorrow. We will be using PMI as a leading indicator for German factory orders next week.
Australian, New Zealand and Canadian Dollars All Hit By Carry Trade Liquidation
The Australian, New Zealand and Canadian dollars were hit by US dollar strength, carry trade liquidation and softer commodity prices. Even though we are looking for further appreciation in the commodity currencies over the medium term, today’s move marks a turning point for many of these currencies. The sell-offs have been strong and if non-farm payrolls are as good as we expect, there could be continuation. There will be better opportunities to buy these currencies once they have stabilized. Economic data from Australia was better than expected; retail sales and manufacturing PMI both increased significantly. The trade deficit however widened, but that should take backseat to the other data. Canadian employment will be released tomorrow. After the sharp rise in September, employment growth is expected to slow.
British Pound Hit By Dollar Weakness Not Softer Economic Data
Although it would be easy to say that the weakness in the British pound today was attributed to the softer manufacturing PMI and CBI Distributive Trades report, that is not the case. The pound actually rallied after the numbers even though manufacturing conditions were the slowest in a year and distributive trade, which is a reflection of retail sales dropped from 12 to 10 last month. Construction sector PMI is due for release tomorrow and that is expected to be weak as well, but the price action of the British pound will be determined by US non-farm payrolls and not UK economic data.
Dow Meltdown Leads to Carry Trade Liquidation
With the US stock market falling 360 points, it would be surprising if the Japanese Yen crosses did not melt down today. The correlation between these assets remains strong and we expect further weakness in the Dow to lead to further weakness for carry trades.
- Is the Swiss National Bank Endorsing Carry Trades?
- Australian, New Zealand and Canadian Dollars All Hit By Carry Trade Liquidation
US Dollar Rebounds, Dow Falls 360 Points: How are Traders Positioned for Payrolls?
The US dollar rebounded significantly today partly in reaction to Wednesday’s Federal Reserve interest rate decision and partly in anticipation of tomorrow’s non-farm payrolls report. Once again, bond traders got it right. Yesterday, even though bond yields increased the stock market rallied and the US dollar sold off. The reaction in the equity and currency markets suggested that traders thought the Fed was more dovish than hawkish while the reaction in bonds suggested otherwise. Today, the equity and currency markets have finally caught up with the bond market, with the Dow down over 300 points and the US dollar up across the board. Now that should be the correct reaction given the Fed’s slightly more hawkish leaning yesterday. The combination of strong GDP growth and the prospect for a sizeable increase in payrolls has many journalists calling yesterday’s interest rate cut the last. Economists beg to differ however and Fed fund futures indicate that there is still a greater than 50 percent chance for a December rate cut. In the immediate future, equity and currency traders are both positioned for a strong payrolls report. With the market so divided, NFPs could decide not only who is right, but also whether the US dollar has hit a bottom. The market is currently looking for 82k jobs to have been created in the month of October. However following the sharp increase in the ADP report and the drop in layoffs according to Challenger, the whisper number is far higher (125-130k). If job growth is anywhere near 125k, expect a sharp dollar rally, but if it is below 90k, speculation of a December rate cut will return. The arguments in favor of strong payroll growth far outweigh the arguments supporting weak growth. Not only did private sector payrolls increase materially last month and layoffs dropped, but the Hudson Employment index, Monster.com Employment Index and Help Wanted Ads all jumped. We do not get the service sector ISM report until Monday, which is after payrolls, but the employment component of the manufacturing ISM report hit the highest level since April. The only reasons why payrolls could be weak is the rise in jobless claims and fall in consumer confidence. If the labor market is really recovering, confidence would not be the weakest in 2 years. There are still a lot skeptics out there who do not believe that the US economy has seen its worst and it all boils down to what non-farm payrolls will mean for interest rates. If there is a reason for traders to believe that the Fed will continue to lower interest rates, then the current recovery in the US dollar will turn on a dime. Nothing is certain until we see payrolls and even then we need to watch how the market reacts to it.
Is the Swiss National Bank Endorsing Carry Trades?
The liquidation of carry trades has sent the Swiss franc higher against the US dollar, Euro and British pound, but carry trade related flow may not be the only reason why the Swissie is stronger. After falling to a 21 month low, Swiss manufacturing activity rebounded last month. It is now at 60.7, well within expansionary territory. Tomorrow, consumer prices are due for release and we expect the weakness of the Swiss franc to drive CPI higher, but that may not be enough to prompt the Swiss National Bank to raise interest rates. SNB board member Thomas Jordan said today that even though they remain vigilant on franc weakness, they do not see any signs of the franc stoking inflation and rate differential still favors carry trades. Is Jordan telling the markets that it is ok to keep selling francs for carry trade purposes? Perhaps, but when it comes to central bankers, they have been trained to give as little information in as many words as possible. There was no Eurozone data released this morning, but manufacturing PMI will be due for release tomorrow. We will be using PMI as a leading indicator for German factory orders next week.
Australian, New Zealand and Canadian Dollars All Hit By Carry Trade Liquidation
The Australian, New Zealand and Canadian dollars were hit by US dollar strength, carry trade liquidation and softer commodity prices. Even though we are looking for further appreciation in the commodity currencies over the medium term, today’s move marks a turning point for many of these currencies. The sell-offs have been strong and if non-farm payrolls are as good as we expect, there could be continuation. There will be better opportunities to buy these currencies once they have stabilized. Economic data from Australia was better than expected; retail sales and manufacturing PMI both increased significantly. The trade deficit however widened, but that should take backseat to the other data. Canadian employment will be released tomorrow. After the sharp rise in September, employment growth is expected to slow.
British Pound Hit By Dollar Weakness Not Softer Economic Data
Although it would be easy to say that the weakness in the British pound today was attributed to the softer manufacturing PMI and CBI Distributive Trades report, that is not the case. The pound actually rallied after the numbers even though manufacturing conditions were the slowest in a year and distributive trade, which is a reflection of retail sales dropped from 12 to 10 last month. Construction sector PMI is due for release tomorrow and that is expected to be weak as well, but the price action of the British pound will be determined by US non-farm payrolls and not UK economic data.
Dow Meltdown Leads to Carry Trade Liquidation
With the US stock market falling 360 points, it would be surprising if the Japanese Yen crosses did not melt down today. The correlation between these assets remains strong and we expect further weakness in the Dow to lead to further weakness for carry trades.
Tuesday, September 18, 2007
Basic Tenets of the Elliott Wave Principle
“The Wave Principle” is Ralph Nelson Elliott’s discovery that social, or crowd, behavior trends and reverses in recognizable patterns. Using stock market data for the Dow Jones Industrial Average (DJIA) as his main research tool, Elliott discovered that the ever-changing path of stock market prices reveals a structural design that in turn reflects a basic harmony found in nature. From this discovery, he developed a rational system of market analysis.
Under the Wave Principle, every market decision is both produced by meaningful information and produces meaningful information. Each transaction, while at once an effect, enters the fabric of the market and, by communicating transactional data to investors, joins the chain of causes of others’ behavior. This feedback loop is governed by man’s social nature, and since he has such a nature, the process generates forms. As the forms are repetitive, they have predictive value.
Elliott isolated thirteen “waves,” or patterns of directional movement, that recur in markets and are repetitive in form, but are not necessarily repetitive in time or amplitude. He named, defined and illustrated the patterns. He then described how these structures link together to form larger versions of the same patterns, how those in turn are the building blocks for patterns of the next larger size, and so on. His descriptions constitute a set of empirically derived rules and guidelines for interpreting market action. The patterns that naturally occur under the Wave Principle are described below.
The Five Wave Pattern
In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4, as shown in Figure 1. The two interruptions are apparently a requisite for overall directional movement to occur.
At any time, the market may be identified as being somewhere in the basic five wave pattern at the largest degree of trend. Because the five wave pattern is the overriding form of market progress, all other patterns are subsumed by it.
Wave Mode
There are two modes of wave development: impulsive and corrective. Impulsive waves have a five wave structure, while corrective waves have a three wave structure or a variation thereof. Impulsive mode is employed by both the five wave pattern of Figure 1 and its same-directional components, i.e., waves 1, 3 and 5. Their structures are called “impulsive” because they powerfully impel the market. Corrective mode is employed by all countertrend interruptions, which include waves 2 and 4 in Figure 1. Their structures are called “corrective” because they can accomplish only a partial retracement, or “correction,” of the progress achieved by any preceding impulsive wave. Thus, the two modes are fundamentally different, both in their roles and in their construction, as will be detailed in an upcoming section.
The Complete Cycle
A five-wave impulse (whose subwaves are denoted by numbers) is followed by a three-wave correction (whose subwaves are denoted by letters) to form a complete cycle of eight waves. The concept of five waves up followed by three waves down is shown in Figure 2. The eight-wave cycle
shown in Figure 2 is a component of a cycle of one degree larger, as shown in Figure 3. As Figure 3 illustrates, each same-direction component of an impulsive wave, and each full cycle component (i.e., waves 1 + 2, or waves 3 + 4) of a cycle, is a smaller version of itself.
It is crucial to understand an essential point: Figure 3 not only illustrates a larger version of Figure 2, it also illustrates Figure 2 itself, in greater detail. In Figure 2, each subwave 1, 3 and 5 is an impulsive wave that will subdivide into a “five,” and each subwave 2 and 4 is a corrective wave that will subdivide into an a, b, c. Waves (1) and (2) in Figure 3, if examined under a “microscope,” would take the same form as waves and . Thus, waves of any degree in any series always subdivide and re-subdivide into waves of lesser degree and simultaneously are components of waves of higher degree. We can use Figure 3 to illustrate two waves, eight waves or thirty-four waves, depending upon the degree to which we are referring.
The Essential Design
Now observe that within the corrective pattern illustrated as wave in Figure 3, waves (a) and (c), which point downward, are composed of five waves: 1, 2, 3, 4 and 5. Similarly, wave (b), which points upward, is composed of three waves: a, b and c. This construction discloses a crucial point: that impulsive waves do not always point upward, and corrective waves do not always point downward. The mode of a wave is greatly determined not by its absolute direction but by its relative direction. Aside from four specific exceptions, which will be discussed later in this booklet, waves divide in impulsive mode (five waves) when trending in the same direction as the wave of one larger degree of which it is a part, and in corrective mode (three waves or a variation) when trending in the opposite direction. Waves (a) and (c) are impulsive, trending in the same direction as wave . Wave (b) is corrective because it corrects wave (a) and is countertrend to wave . In summary, the essential underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, at all degrees of trend.
Neither does Figure 3 imply finality. As before, the termination of yet another eight wave movement (five up and three down) completes a cycle that automatically becomes two subdivisions of the wave of next higher degree. As long as progress continues, the process of building to greater degrees continues. The reverse process of subdividing into lesser degrees apparently continues indefinitely as well. As far as we can determine, then, all waves both have and are component waves.
Variations on the Basic Theme
The Wave Principle would be simple to apply if the basic theme described above were the complete description of market behavior. However, the real world, fortunately or unfortunately, is not so simple. The rest of this chapter fills out the description of how the market behaves in reality.
Wave Degree
All waves may be categorized by relative size, or degree. Elliott discerned nine degrees of waves, from the smallest wiggle on an hourly chart to the largest wave he could assume existed from the data then available. He chose the names listed below to label these degrees, from largest to smallest:
Grand Supercycle
Supercycle
Cycle
Primary
Intermediate
Minor
Minute
Minuette
Subminuette
Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor and sub-Minor waves. It is important to understand that these labels refer to specifically identifiable degrees of waves. By using this nomenclature, the analyst can identify precisely the position of a wave in the overall progression of the market, much as longitude and latitude are used to identify a geographical location. To say, “the Dow Jones Industrial Average is in Minute wave v of Minor wave 1 of Intermediate wave (3) of Primary wave of Cycle wave I of Supercycle wave (V) of the current Grand Supercycle” is to identify a specific point along the progression of market history.
When numbering and lettering waves, some scheme such as the one shown below is recommended to differentiate the degrees of waves in the stock market’s progression:
Wave Degree 5s With the Trend 3s Against the Trend
Supercycle (I) (II) (III) (IV) (V) (A) (B) (C)
Cycle I II III IV V A B C
Primary
Intermediate (1) (2) (3) (4) (5) (a) (b) (c)
Minor 1 2 3 4 5 A B C
Minute i ii iii iv v a b c
Minuette 1 2 3 4 5 a b c
“The Wave Principle” is Ralph Nelson Elliott’s discovery that social, or crowd, behavior trends and reverses in recognizable patterns. Using stock market data for the Dow Jones Industrial Average (DJIA) as his main research tool, Elliott discovered that the ever-changing path of stock market prices reveals a structural design that in turn reflects a basic harmony found in nature. From this discovery, he developed a rational system of market analysis.
Under the Wave Principle, every market decision is both produced by meaningful information and produces meaningful information. Each transaction, while at once an effect, enters the fabric of the market and, by communicating transactional data to investors, joins the chain of causes of others’ behavior. This feedback loop is governed by man’s social nature, and since he has such a nature, the process generates forms. As the forms are repetitive, they have predictive value.
Elliott isolated thirteen “waves,” or patterns of directional movement, that recur in markets and are repetitive in form, but are not necessarily repetitive in time or amplitude. He named, defined and illustrated the patterns. He then described how these structures link together to form larger versions of the same patterns, how those in turn are the building blocks for patterns of the next larger size, and so on. His descriptions constitute a set of empirically derived rules and guidelines for interpreting market action. The patterns that naturally occur under the Wave Principle are described below.
The Five Wave Pattern
In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4, as shown in Figure 1. The two interruptions are apparently a requisite for overall directional movement to occur.
At any time, the market may be identified as being somewhere in the basic five wave pattern at the largest degree of trend. Because the five wave pattern is the overriding form of market progress, all other patterns are subsumed by it.
Wave Mode
There are two modes of wave development: impulsive and corrective. Impulsive waves have a five wave structure, while corrective waves have a three wave structure or a variation thereof. Impulsive mode is employed by both the five wave pattern of Figure 1 and its same-directional components, i.e., waves 1, 3 and 5. Their structures are called “impulsive” because they powerfully impel the market. Corrective mode is employed by all countertrend interruptions, which include waves 2 and 4 in Figure 1. Their structures are called “corrective” because they can accomplish only a partial retracement, or “correction,” of the progress achieved by any preceding impulsive wave. Thus, the two modes are fundamentally different, both in their roles and in their construction, as will be detailed in an upcoming section.
The Complete Cycle
A five-wave impulse (whose subwaves are denoted by numbers) is followed by a three-wave correction (whose subwaves are denoted by letters) to form a complete cycle of eight waves. The concept of five waves up followed by three waves down is shown in Figure 2. The eight-wave cycle
shown in Figure 2 is a component of a cycle of one degree larger, as shown in Figure 3. As Figure 3 illustrates, each same-direction component of an impulsive wave, and each full cycle component (i.e., waves 1 + 2, or waves 3 + 4) of a cycle, is a smaller version of itself.
It is crucial to understand an essential point: Figure 3 not only illustrates a larger version of Figure 2, it also illustrates Figure 2 itself, in greater detail. In Figure 2, each subwave 1, 3 and 5 is an impulsive wave that will subdivide into a “five,” and each subwave 2 and 4 is a corrective wave that will subdivide into an a, b, c. Waves (1) and (2) in Figure 3, if examined under a “microscope,” would take the same form as waves and . Thus, waves of any degree in any series always subdivide and re-subdivide into waves of lesser degree and simultaneously are components of waves of higher degree. We can use Figure 3 to illustrate two waves, eight waves or thirty-four waves, depending upon the degree to which we are referring.
The Essential Design
Now observe that within the corrective pattern illustrated as wave in Figure 3, waves (a) and (c), which point downward, are composed of five waves: 1, 2, 3, 4 and 5. Similarly, wave (b), which points upward, is composed of three waves: a, b and c. This construction discloses a crucial point: that impulsive waves do not always point upward, and corrective waves do not always point downward. The mode of a wave is greatly determined not by its absolute direction but by its relative direction. Aside from four specific exceptions, which will be discussed later in this booklet, waves divide in impulsive mode (five waves) when trending in the same direction as the wave of one larger degree of which it is a part, and in corrective mode (three waves or a variation) when trending in the opposite direction. Waves (a) and (c) are impulsive, trending in the same direction as wave . Wave (b) is corrective because it corrects wave (a) and is countertrend to wave . In summary, the essential underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, at all degrees of trend.
Neither does Figure 3 imply finality. As before, the termination of yet another eight wave movement (five up and three down) completes a cycle that automatically becomes two subdivisions of the wave of next higher degree. As long as progress continues, the process of building to greater degrees continues. The reverse process of subdividing into lesser degrees apparently continues indefinitely as well. As far as we can determine, then, all waves both have and are component waves.
Variations on the Basic Theme
The Wave Principle would be simple to apply if the basic theme described above were the complete description of market behavior. However, the real world, fortunately or unfortunately, is not so simple. The rest of this chapter fills out the description of how the market behaves in reality.
Wave Degree
All waves may be categorized by relative size, or degree. Elliott discerned nine degrees of waves, from the smallest wiggle on an hourly chart to the largest wave he could assume existed from the data then available. He chose the names listed below to label these degrees, from largest to smallest:
Grand Supercycle
Supercycle
Cycle
Primary
Intermediate
Minor
Minute
Minuette
Subminuette
Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor and sub-Minor waves. It is important to understand that these labels refer to specifically identifiable degrees of waves. By using this nomenclature, the analyst can identify precisely the position of a wave in the overall progression of the market, much as longitude and latitude are used to identify a geographical location. To say, “the Dow Jones Industrial Average is in Minute wave v of Minor wave 1 of Intermediate wave (3) of Primary wave of Cycle wave I of Supercycle wave (V) of the current Grand Supercycle” is to identify a specific point along the progression of market history.
When numbering and lettering waves, some scheme such as the one shown below is recommended to differentiate the degrees of waves in the stock market’s progression:
Wave Degree 5s With the Trend 3s Against the Trend
Supercycle (I) (II) (III) (IV) (V) (A) (B) (C)
Cycle I II III IV V A B C
Primary
Intermediate (1) (2) (3) (4) (5) (a) (b) (c)
Minor 1 2 3 4 5 A B C
Minute i ii iii iv v a b c
Minuette 1 2 3 4 5 a b c
Welcome to LiteForex…
To register click
http://www.liteforex.org/
Intro:
The LiteForex project offers you the unique opportunity to enter the Forex market with just ONE DOLLAR. All transactions on LITE group accounts are effected in US cents, so you can trade by 0.1 lots with margin rates of 1 % at a leverage of 1:100 or with margin rates of 0.5 % at a leverage of 1:200.
COMMISSION-FREE FOREX TRADING
Straighthold Investment Group allows you to make currency transactions on the Forex market with minimal expense - you pay no commissions, just spreads.
INTEREST INCOME
We also pay competitive interest income on the balance amount not invited in trading on a monthly basis.
UNBEATABLE FIXED BID/ASK SPREADS
We offer unbeatable fixed spreads starting from 3 points. So, constant spread size doesn’t depend on market activity.
INSTANT EXECUTION
For placing trade orders we employ Instant Execution technology. In this case on-line traders don’t need to request quotes before entering the Forex market. They just open and close positions at the price they see on the monitor.
NO DEALING DESK
The technology of auto-hedging helps to almost completely eliminate the need for a dealer in transactions. All orders are automatically executed. Besides, the processes of account crediting and debiting are highly automated and use the most popular electronic payment systems.
Account registration’s manual step /Manual untuk pendaftaran account liteforex
Go to the link below: /Pergi ke link di bawah:
http://www.liteforex.org/
*Click Live Trading/klik live trading
*Click Open Account/klik open live account
*Click Accept Term and Agreement/klik I accept terms of agreement….
*Fill in your details info/isi maklumat diri mengikut IC (masukkan bin/bte di ruang nama)
*Change Leverage to 1:200/tukar leverage 1:200
*Click OPEN ACCOUNT/ klik open account
Download Platform at/download platform di:
http://www.liteforex.org/downloads/sig4setup.exe
For deposit purpose, click here/link depost:
https://secure.liteforex.org/eng/deposit.php
Link for withdrawal/link withdraw:
https://secure.liteforex.org/eng/withdrawal.php
metatrader mobile’s link/link metatrader mobile:
http://www.liteforex.org/downloads/sig4mobilesetup.exe
Deposit thru Bank WIre can be made thru Malaysia’s Liteforex IB. Contact me for detail.
Deposit melalui Bank boleh dibuat melalui IB Malaysia litefx. Beliau
akan membuatkan deposit ke akaun trade anda melalui wire transfer.
Register now at
http://www.liteforex.org/
many credits to zueryna…
To register click
http://www.liteforex.org/
Intro:
The LiteForex project offers you the unique opportunity to enter the Forex market with just ONE DOLLAR. All transactions on LITE group accounts are effected in US cents, so you can trade by 0.1 lots with margin rates of 1 % at a leverage of 1:100 or with margin rates of 0.5 % at a leverage of 1:200.
COMMISSION-FREE FOREX TRADING
Straighthold Investment Group allows you to make currency transactions on the Forex market with minimal expense - you pay no commissions, just spreads.
INTEREST INCOME
We also pay competitive interest income on the balance amount not invited in trading on a monthly basis.
UNBEATABLE FIXED BID/ASK SPREADS
We offer unbeatable fixed spreads starting from 3 points. So, constant spread size doesn’t depend on market activity.
INSTANT EXECUTION
For placing trade orders we employ Instant Execution technology. In this case on-line traders don’t need to request quotes before entering the Forex market. They just open and close positions at the price they see on the monitor.
NO DEALING DESK
The technology of auto-hedging helps to almost completely eliminate the need for a dealer in transactions. All orders are automatically executed. Besides, the processes of account crediting and debiting are highly automated and use the most popular electronic payment systems.
Account registration’s manual step /Manual untuk pendaftaran account liteforex
Go to the link below: /Pergi ke link di bawah:
http://www.liteforex.org/
*Click Live Trading/klik live trading
*Click Open Account/klik open live account
*Click Accept Term and Agreement/klik I accept terms of agreement….
*Fill in your details info/isi maklumat diri mengikut IC (masukkan bin/bte di ruang nama)
*Change Leverage to 1:200/tukar leverage 1:200
*Click OPEN ACCOUNT/ klik open account
Download Platform at/download platform di:
http://www.liteforex.org/downloads/sig4setup.exe
For deposit purpose, click here/link depost:
https://secure.liteforex.org/eng/deposit.php
Link for withdrawal/link withdraw:
https://secure.liteforex.org/eng/withdrawal.php
metatrader mobile’s link/link metatrader mobile:
http://www.liteforex.org/downloads/sig4mobilesetup.exe
Deposit thru Bank WIre can be made thru Malaysia’s Liteforex IB. Contact me for detail.
Deposit melalui Bank boleh dibuat melalui IB Malaysia litefx. Beliau
akan membuatkan deposit ke akaun trade anda melalui wire transfer.
Register now at
http://www.liteforex.org/
many credits to zueryna…
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