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Sunday 16 April 2017
16.Best forex strategy - Good morning Asia strategy
Forex strategy - Good morning Asia strategy
A fair number of traders prefer to trade the U.S. and Europe sessions of the forex market because they feel that the market tends to be more exciting at those times. These traders consider the Asian session boring and quiet most of the time.
However, many part-time retail traders who are based in the United States and Europe miss out trading opportunities in the U.S. and Europe sessions because of work or business commitments. The only time they can trade happens to fall within the perceived boring and quiet Asia session.
Thankfully, now we all know that the forex market is open 24 hours a day. When there are trade-related activities, there are opportunities.
This time period can provide numerous opportunities for traders located in different time zones across the world, whether they are part time or full time. I hope that it will greet you like the bright morning sun.
Time Frame for forex strategy
The good morning Asia strategy works with the daily candle (D1). This means that each candle represents 1 day of price movement.
Indicators for forex trading strategy
We use only pure price action, and no indicators are used for this strategy.
Currency Pairs
This strategy applies only to the USD/JPY.
Strategy Concept
Opening hours of the Asian market begin after the U.S. market closes. The direction of the Asian market tends to take its cue from the previous day’s performance on the U.S. market because the U.S. market is the largest economy in the world.
If the U.S. market closes with a bullish sentiment, the Asian market usually starts the day bullish. If the U.S. market closes with a bearish sentiment, the Asian market usually starts off bearish.
During the early-morning Asian hours, the best currency pair to take advantage of this phenomenon is none other than the USD/JPY, as the Japanese yen is the only Asian major currency.
This strategy allows you to position yourself just before the opening of the Asian market—hence the name good morning Asia.
The entry time for this strategy is right after the U.S. market closes at 5 P.M. If the previous daily candle is a bull candle, we ride along the momentum to go long on Asia opening. If the previous daily candle is a bear candle, we follow the bearish flow with a short on Asia opening.
We take the low or high of the previous candle as the stop loss. The risk to reward for this strategy is 2:1. If the stop loss is 80 pips, the profit target is 40 pips.
Long Trade Setup forex strategy
For this strategy, the opening and closing of the daily candle correspond to 5 P.M. New York time, which is the closing time of the U.S. market.
Here are the steps to execute the good morning Asia strategy for long:
- Ensure that the previous day’s candle is a bull candle (i.e., the closing price of the candle is higher than the opening price). (See Figure 10.15.)
FIGURE 10.15 Previous Day’ s Candle Must Be a Bull Candle
FIGURE 10.16 Set Stop Loss and Profit Targets
- Enter at the opening of the next candle. This is the entry price.
Monday 3 April 2017
Forex trading strategy 15: GUPPY BURST
Best forex strategy for M5 with GDP/JPY
The first step in developing a mechanical trading system is to understand and describe market behavior. The next step is to figure out the rules for entries and exits. The guppy burst seeks to exploit trading profits when the market is quiet.
There is a window of around three hours between the close of the U.S. market and the opening of the Asian market. The forex market is relatively quiet during this time and tends to move in a gentle yet predictable manner.
The market then springs to life again when the Asian market opens. The guppy burst seeks to identify the trading range during this 3-hour window and anticipate a potential breakout of the trading range.
To take full advantage of this potential breakout, I have selected one of the most volatile crosses, the GBP/JPY, commonly known as the guppy among forex traders.
Forex trading Time Frame
The guppy burst method works with the 5-minute candle (M5). This means that each candle represents 5 minutes of price movement.
Indicators
We use only pure price action; no indicators are used for this strategy.
Currency Pairs
The guppy burst method applies only to the GBP/JPY.
Forex Strategy Concept
After the trading range is identified, we place pending long and pending short orders. The entry price for the pending long is at the resistance level while the stop loss is located at the support level. The entry price for the pending short is at the support level while the stop loss is at the resistance level.
The profit target is set at twice the amount of the stop loss. As an example, if the stop loss is 50 pips from the entry price, the profit target will be 100 pips. This is a risk to reward ratio of 1:2.
Long Trade Setup for forex strategy
The reference candle for this strategy is the one that corresponds to 5 P.M.
New York time, which is the closing time of the U.S. market.
Here are the steps to execute the guppy burst strategy for long:
- Identify the trading range in the first three hours after the U.S. market closes by referencing the highest high (resistance) and the lowest low (support) in these three hours. (See Figure 10.1.)
- Place a pending buy stop order with entry price at the highest high (resistance).
Forex strategy 14- SIAMESE TWINS
In late 2007, China overtook Japan to become Australia’s largest trading partner. In 2009, China became Australia’s largest export market, consuming commodities such as iron ore, coal, gas, and wool in record amounts.
According to Australia’s Department of Foreign Affairs and Trade, Australia’s total trade with China in 2010 was $105 billion, almost 24% more than the previous year. It was the first time that Australia’s two-way trade with a single nation topped the $100 billion level. Forty years ago, two-way trade between China and Australia was less than $100 million.
For this reason alone, Australia’s economy tends to move in tandem with China’s economy. When hina reports good numbers on the Purchasing Managers Index (PMI), gross domestic product (GDP) or the trade balance, Australia’s currency tends to rise. Similarly, when China reports disappointing figures, the Australian dollar tends to fall as well.
This strategy seeks to take advantage of the movement of the AUD/ USD by taking cue from China’s reported figures and monetary policies. It is especially useful since we are not able to freely trade the Chinese currency (yuan) yet.
Time Frame
The Siamese twins method works with the daily candle (D1). This means that each candle on the chart represents 1 day of price movement.
Indicators
No indicators are used for this strategy.
Currency Pairs with forex trading strategy
This strategy is applicable only to AUD/USD.
Strategy Concept with forex trading strategy
When China announces good data, such as high GDP and high PMI numbers, the AUD tends to strengthen for two reasons.
- China will start to import more raw materials from Australia. This increase in business gives rise to a stronger AUD because China has to pay for such materials in AUD.
- Good data from China tend to increase speculation on higher-yielding currencies. This is because China is largely seen as a major global player, and good numbers from China tend to have a knock-on effect on the world economy. This positive effect on the global economy encourages the appetite for risk, which in turn strengthens the AUD because its interest rate remains one of the highest among the G20 nations.
We take a long position on AUD/USD immediately after China announces better-than-expected data. Similarly, we take a short position on AUD/USD immediately after China announces worse-than-expected data.
I call this strategy Siamese twins because the economies of China and Australia are joined at the hip. When China does well, the Australian economy flourishes, and vice versa.
Long Trade Setup with forex trading strategy
Here are the steps to execute the Siamese twins strategy for long:
- Look for any major news from China. On November 30, 2010, we see how China cut the banks’ reserve requirement ratio for the first time in three years. This frees up more cash, which encourages banks to lend.
The effect is seen as positive because it spurs economic growth in China.
- Go long on AUD/USD immediately. (See Figure 9.23.)
- Set the stop loss below the previous low.
- The trade will have two profit targets with a risk to reward ratio of 1:1 and 1:2 respectively. (See Figure 9.24.)
From the long example in Figure 9.25:
Entry price = 1.0000
Stop loss = 0.9600
Profit target 1 = 1.0400
Profit target 2 = 1.0800
China cuts bank reserve requirement ratio for the 1st time in 3 years (30 Nov 2011)
FIGURE 9.23 News Release
- Forex strategy - SIAMESE TWINS
Forex trading strategies 13b: COMMODITY CORRELATION (PART 2)
FOREX TRADING STRATEGY GOLD, XAU/USD- COMMODITY CORRELATION (PART 2) - a day trading strategy
The correlation coefficient is a number that describes the extent to which two instruments are correlated to each other. The number oscillates between –1 and +1.
Commonly mistaken as a momentum oscillator, the correlation coefficient is instead a number that moves from periods of positive correlation to periods of negative correlation. Located on one end of the spectrum, +1 is considered a state of perfect positive correlation between the two instruments. If the number is anywhere between 0 and +1, the two instruments move in the same direction but with varying degrees of positive correlation.
On the other end of the spectrum, –1 is considered a state of perfect negative correlation between the two instruments. If the number is anywhere between 0 and –1, the two instruments move in the opposite direction but with varying degrees of negative correlation.
For much of 2011 and 2012, the correlation coefficient for gold and the dollar index was between –0.6 and –0.8. This means that if the dollar index was up, there was a 60% to 80% probability that gold prices would come down.
In contrast, if the dollar index was down, there was a 60% to 80% probability that gold prices would go up.
Here we explore how to trade spot gold using the U.S. Dollar Index as a reference. The U.S. Dollar Index is an exchange-traded index that represents the value of the U.S. dollar in terms of a basket of six major foreign
currencies. These are:
Commonly mistaken as a momentum oscillator, the correlation coefficient is instead a number that moves from periods of positive correlation to periods of negative correlation. Located on one end of the spectrum, +1 is considered a state of perfect positive correlation between the two instruments. If the number is anywhere between 0 and +1, the two instruments move in the same direction but with varying degrees of positive correlation.
On the other end of the spectrum, –1 is considered a state of perfect negative correlation between the two instruments. If the number is anywhere between 0 and –1, the two instruments move in the opposite direction but with varying degrees of negative correlation.
For much of 2011 and 2012, the correlation coefficient for gold and the dollar index was between –0.6 and –0.8. This means that if the dollar index was up, there was a 60% to 80% probability that gold prices would come down.
In contrast, if the dollar index was down, there was a 60% to 80% probability that gold prices would go up.
Here we explore how to trade spot gold using the U.S. Dollar Index as a reference. The U.S. Dollar Index is an exchange-traded index that represents the value of the U.S. dollar in terms of a basket of six major foreign
currencies. These are:
Euro (57.6%)
Japanese yen (13.6%)
UK pound (11.9%)
Canadian dollar (9.1%)
Swedish krona (4.2%)
Swiss franc (3.6%)
Japanese yen (13.6%)
UK pound (11.9%)
Canadian dollar (9.1%)
Swedish krona (4.2%)
Swiss franc (3.6%)
The price action of the dollar index gives us an idea of how the U.S. economy is performing compared to other major world economies.
On August 15, 1971, the United States unilaterally terminated the Bretton Woods system of having the U.S. dollar pegged to gold at USD35 an ounce. At the same time, the U.S. dollar became a reserve currency.
The U.S. Dollar Index was started in March 1973. Its beginning value was 100.000.
Historically, from 1967 until 2012, the Dollar Index averaged 98.51, reaching a historical high of 164.72 in February 1985 and a low of 70.698 on March 16, 2008, during the global financial crisis.
On August 15, 1971, the United States unilaterally terminated the Bretton Woods system of having the U.S. dollar pegged to gold at USD35 an ounce. At the same time, the U.S. dollar became a reserve currency.
The U.S. Dollar Index was started in March 1973. Its beginning value was 100.000.
Historically, from 1967 until 2012, the Dollar Index averaged 98.51, reaching a historical high of 164.72 in February 1985 and a low of 70.698 on March 16, 2008, during the global financial crisis.
Gold prices, however, have steadily been climbing. The end of 2011 marked the eleventh straight year of gold’s spectacular bull run, hitting a record high of USD1920 an ounce on September 16, 2011.
This strategy seeks to exploit the inverse relationship between the Dollar Index and the price of gold. According to the World Gold Council, “While holding all else equal, gold tends to rise when the US dollar falls.”
In November 2010, Federal Reserve chairman Ben Bernanke announced a second round of quantitative easing (QE2) by injecting USD600 billion into the financial system. The added supply of US dollars in the system caused gold prices to hit record highs within a month.
In September 2012, in a move widely touted as “QE3,” the Federal Reserve said it would expand its holdings of long-term securities with open-ended purchases of USD40 billion of mortgage debt a month. The announcement caused the price of gold to hit a 7-month high. With central banks worldwide taking unprecedented measures to ensure ample liquidity in the global financial system, the inverse relationship between the Dollar Index and gold prices looks set to continue.
Let’s see how this strategy works.
This strategy seeks to exploit the inverse relationship between the Dollar Index and the price of gold. According to the World Gold Council, “While holding all else equal, gold tends to rise when the US dollar falls.”
In November 2010, Federal Reserve chairman Ben Bernanke announced a second round of quantitative easing (QE2) by injecting USD600 billion into the financial system. The added supply of US dollars in the system caused gold prices to hit record highs within a month.
In September 2012, in a move widely touted as “QE3,” the Federal Reserve said it would expand its holdings of long-term securities with open-ended purchases of USD40 billion of mortgage debt a month. The announcement caused the price of gold to hit a 7-month high. With central banks worldwide taking unprecedented measures to ensure ample liquidity in the global financial system, the inverse relationship between the Dollar Index and gold prices looks set to continue.
Let’s see how this strategy works.
forex trading strategy time Frame
The commodity correlation strategy works with the daily candle (D1). This means that each candle on the chart represents 1 day of price movement.
forex trading strategy indicators
We use the ATR indicator.
forex strategy currency Pairs
Use spot gold or XAU/USD only, with the price action of the Dollar Index as a leading indicator. Strategy Concept
The price action of the Dollar Index is used as a reference to trigger a trade on the XAU/USD. Technical levels of support and resistance on the Dollar Index chart are used to spot long and short trades on XAU/USD. If a candle
closes below support on the Dollar Index chart, a long trade is triggered on the XAU/USD the following day. Similarly, if a candle closes above resistance on the Dollar Index chart, a short trade is triggered on the XAU/USD
the following day.
The risk to reward ratio is set as 1:3. A bigger target is employed to allow the trade to run its course.
closes below support on the Dollar Index chart, a long trade is triggered on the XAU/USD the following day. Similarly, if a candle closes above resistance on the Dollar Index chart, a short trade is triggered on the XAU/USD
the following day.
The risk to reward ratio is set as 1:3. A bigger target is employed to allow the trade to run its course.
Long Trade Setup with forex strategy
Here are the steps to execute the commodity correlation strategy for long:
1. Identify the support of the Dollar Index chart on the daily time frame.
2. Identify a candle that closes below the support. (See Figure 9.17.)
3. Enter long on gold (XAU/USD) at the opening of the next day’s candle.
4. Set the stop loss at twice the ATR as the previous candle, which is 2,664 pips (1,332 × 2).
5. Set the profit target at a risk to reward ratio of 1:3. In this example, the profit target is 7,992 pips (2664 × 3). (See Figure 9.18.)
2. Identify a candle that closes below the support. (See Figure 9.17.)
3. Enter long on gold (XAU/USD) at the opening of the next day’s candle.
4. Set the stop loss at twice the ATR as the previous candle, which is 2,664 pips (1,332 × 2).
5. Set the profit target at a risk to reward ratio of 1:3. In this example, the profit target is 7,992 pips (2664 × 3). (See Figure 9.18.)
From the short example in Figure 9.19:
Entry price = 1291.23
Stop loss = 1264.59
Profit target = 1371.15
Stop loss = 1264.59
Profit target = 1371.15
FIGURE 9.17 Identify a Candle that Closes Below Support
FIGURE 9.18 Set Stop Loss and Profit Target
The risk for this trade is 2,664 pips, and the reward is 7,992 pips if the profit target is hit. The risk to reward ratio is 1:3, which yields a tidy 9% return if we take a 3% risk.
FIGURE 9.19 Trade Hits Profit Target
Short Trade Setup with forex strategy
Here are the steps to execute the commodity correlation for short:
1. Identify the resistance of the Dollar Index chart on the daily time frame.
2. Identify a candle that closes above the resistance. (See Figure 9.20.)
3. Enter short on gold (XAU/USD) at the opening of the next day’s candle.
4. Set the stop loss at twice the ATR as of the previous candle, which is 8,044 pips (4,022 × 2).
5. Set the profit target at a risk to reward ratio of 1:3. In this example, the profit target is 24,132 pips (8,044 × 3). (See Figure 9.21.)
2. Identify a candle that closes above the resistance. (See Figure 9.20.)
3. Enter short on gold (XAU/USD) at the opening of the next day’s candle.
4. Set the stop loss at twice the ATR as of the previous candle, which is 8,044 pips (4,022 × 2).
5. Set the profit target at a risk to reward ratio of 1:3. In this example, the profit target is 24,132 pips (8,044 × 3). (See Figure 9.21.)
From the short example in Figure 9.22:
Entry price = 1857.81
Stop loss = 1938.25
Profit target = 1616.49
Stop loss = 1938.25
Profit target = 1616.49
The risk for this trade is 8,044 pips, and the reward is 24,132 pips if the profit target is hit. The risk to reward ratio is 1:3, which yields a tidy 9% return if we take a 3% risk.
FIGURE 9.20 Identify a Candle that Closes Above Resistance
FIGURE 9.21 Set Stop Loss and Profit Target
Strategy Roundup with forex strategy
Part of the commodity correlation strategy seeks to take advantage of the positive correlation between oil prices and the CAD/JPY currency pair.
Using oil prices as a reference, trades are triggered on the CAD/JPY. This strategy is especially suited to traders who would like to trade oil but prefer not to experience the volatility associated with it.
Using oil prices as a reference, trades are triggered on the CAD/JPY. This strategy is especially suited to traders who would like to trade oil but prefer not to experience the volatility associated with it.
FIGURE 9.22 Trade Hits Profit Target
Part 2 of the commodity correlation strategy seeks to take advantage of the negative correlation between the Dollar Index and gold prices.
Using the Dollar Index as a reference, trades are triggered on XAU/USD
With the Federal Reserve announcing its plans to keep interest rates low until the middle of 2015, the inverse relationship between the U.S.dollar and gold prices looks set to remain. This strategy is ideal for gold traders all around the world because it provides an objective way to take an entry for gold, using the Dollar Index as an important reference.
Part 2 of the commodity correlation strategy seeks to take advantage of the negative correlation between the Dollar Index and gold prices.
Using the Dollar Index as a reference, trades are triggered on XAU/USD
With the Federal Reserve announcing its plans to keep interest rates low until the middle of 2015, the inverse relationship between the U.S.dollar and gold prices looks set to remain. This strategy is ideal for gold traders all around the world because it provides an objective way to take an entry for gold, using the Dollar Index as an important reference.
Forex trading strategies 13a: COMMODITY CORRELATION (PART 1)
Why are with this Forex trading strategies?
Oil is one of the world’s basic necessities. Among other things, it is needed to run factories, plants, machinery, ships, and cars. A decline in oil prices is a nightmare for oil producers but a dream come true for oil consumers.
The reverse is also true, when oil prices hit record highs. In July 2008, oil peaked at over USD147 a barrel. Those were the days when oil producers were smiling and oil consumers were sweating.
Canada is a country that exports most of its oil. In fact, as one of the world’s top ten oil-producing nations, its economy is severely hit when oil prices decline. Many traders today also utilize the price of oil to predict the movement of the Canadian dollar.
When oil prices are high, the Canadian dollar tends to strengthen.
When oil prices are low, the Canadian dollar tends to weaken. Japan, in contrast, is considered a net oil importer. This causes the Japanese yen to weaken considerably when oil prices are high and vice versa.
Many traders ask me for a “magic” strategy to trade oil. However, I don’t particularly like to trade it because oil prices can be very volatile.
An easier improvisation of trading oil directly would be to utilize knowledge of oil prices to trade the CAD/JPY currency pair. As Canada is a net oil exporter and Japan is a net oil importer, the price of oil becomes a leading indicator for the movement of the CAD/JPY currency pair.
Informations for start with this forex trading stategy
Time Frame
The commodity correlation method works with the daily charts (D1).
This means that each candle on the chart represents 1 day of price movement.
Indicators
We use the average true range (ATR) indicator to set the stop loss for this strategy.
Currency Pairs
This strategy is used with CAD/JPY only, with the movement of oil prices acting as a leading indicator.
Strategy Concept
The price movement on the oil chart is used as a reference to trigger a trade on the CAD/JPY. Technical levels of support and resistance on the oil chart are used to spot long and short trades on CAD/JPY. If candles close above resistance on the oil chart, a long trade is triggered on the CAD/JPY the following day. Similarly, if candles close below support on the oil chart, a short trade is triggered on the CAD/JPY the following day.
The risk to reward ratio is set as 1:3. A bigger target is employed to allow the trade to run its course.
Long Trade Setup with this forex strategy
Here are the steps to execute the commodity correlation strategy for long:
- Identify the resistance of the oil chart on the daily time frame.
- Identify a candle that closes above the resistance. (See Figure 9.11.)
- Forex trading strategies: COMMODITY CORRELATION (PART 1)
FIGURE 9.11 Identify a Candle that Closes Above Resistance
- Forex trading strategies: COMMODITY CORRELATION (PART 1)
FIGURE 9.12 Set Stop Loss and Profit Target
- Enter long on CAD/JPY at the opening of the next day’s candle.
- Set the stop loss at twice the ATR of the previous candle, which is 154 pips (77 x 2).
- Set the profit target at a risk to reward ratio of 1:3. In this example, the profit target is 462 pips (154 x3). (See Figure 9.12.)
- Forex trading strategies: COMMODITY CORRELATION (PART 1)
FIGURE 9.13 Trade Hits Profit Target
From the long example in Figure 9.13:
Entry price = 80.10
Stop loss = 78.56
Profit target = 84.72
The risk for this trade is 154 pips, and the reward is 462 pips if the profit target is hit. The risk to reward ratio would be 1:3, which yields a tidy 9% return if we take a 3% risk.
Short Trade Setup with this forex strategy
Here are the steps to execute the commodity correlation strategy for short:
- Identify the support of the oil chart on the daily time frame.
- Identify a candle that closes below the support. (See Figure 9.14.)
- Enter short on CAD/JPY at the opening of the next day’s candle.
- Set the stop loss at twice the ATR of the previous candle, which is 234 pips (117 × 2).
- Set the profit target at a risk to reward ratio of 1:3. In this example, the profit target is 702 pips (234 ×3). (See Figure 9.15.)
- Forex trading strategies: COMMODITY CORRELATION (PART 1)
FIGURE 9.14 Identify a Candle that Closes Below Support
- Forex trading strategies: COMMODITY CORRELATION (PART 1)
FIGURE 9.15 Set Stop Loss and Profit Target
From the short example in Figure 9.16:
Entry price = 80.34
Stop loss = 82.68
Profit target = 73.32
- Forex trading strategies: COMMODITY CORRELATION (PART 1)
FIGURE 9.16 Trade Hits Profit Target
The risk for this trade is 154 pips, and the reward is 462 pips if the profit target is hit. The risk to reward ratio is 1:3, which yields a tidy 9% return if we take a 3% risk.
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