Sometimes Beginner Forex Traders Trade Better Than Professionals!

Category: Forex Market Analysis and Signals | Thursday, December 27th, 2007

We had some good movements in the forex market today. It seems the holidays stagnancy is over but we are at the end of the week and the market sometimes becomes slow. The market should start working at full steam from the next week. Those traders who have been in holiday, will be back and want to recover the money they have spent. Let’s see.

Tip of the day:

Sometimes Beginners Trade Better Than Professionals!

I have a good friend in England. We know each other through the internet. She has been working with me almost in all of the online business projects that I had. I talked about forex to her almost when I had finished some training courses and had read many forex related e-books, articles … and knew a lot about forex theoretically and had started working with the demo account.

I sent her some resources and when she knew what forex is about, she signed up for a demo account and started practicing. I told her that it was too early because she knew nothing about the technical analysis but she said she just wanted to give it a shot.

The result was amazing!

Most of the her trades were ended to profit. When I asked her how she was doing it, she answered that she just looked at the chart, and bought when the price went up and sold when the price went down.

That was true. As she knew nothing about technical analysis, she didn’t try to hit the top and bottom of the market. She also didn’t have any greed and fear because she just wanted to try and trading was like playing a game for her.

You may have experienced this too. When you start trading while you still know a little about technical analysis, you don’t try to hit the top and bottom of the market but when you learn about the trends, double tops, double bottoms, head and shoulders, patterns, candle sticks and …, you try to catch the reversal signals and hit the top and bottom of the market and it is the time that you start losing.

Hitting the top and bottom of the trends is possible but for the experienced traders who have been looking at the charts and the way they move, for several hours per day and for many years.

Beginners should wait for a confirmation when they see that a reversal signal is forming and should prevent the big losses by having a proper stop loss.

Fundamentals:

The Chicago Purchasing Managers’ Index (PMI) will be announced at 9:45am today. Click Here to learn about PMI.

Ok! Let’s analyze the currencies.

1. British Pound against US Dollar (GBP-USD)

This currency pair has been Bullish for the past two days but as the weekly chart is still Bearish strongly, I didn’t dare to go long. Please note that we should look for the best and most clear signals to enter to a trade. For me a reversal signal in a Bearish market is a candle stick with a long shadow that has cut the Bollinger lower band with the next candle stick that is formed inside it and also inside the Bollinger channel.

Here is the weekly chart:

2. US Dollar against Japanese Yen (USD-JPY)

As I mentioned in the last report, The USD-JPY is in the position that may go up and down and it is not a good time to take any trading position. It went down during the previous day and now it is testing the 61.80% Fibonacci level that is working as a support.

The weekly has been moving around the Bollinger middle band which is a risky time:

3. Euro against US Dollar (EUR-USD)

It couldn’t break the 38.20% Fibonacci level that has been working as the support and so bounced up.

Daily Chart:

4. US Dollar against Swiss Franc (USD-CHF)

As mentioned in 26 December, it went down. As you know this currency pair acts against the EUR-USD.

Weekly chart:

5. US Dollar against Canadian Dollar (USD-CAD)

Still un-successful to break the 38.20% Fibonacci level which is acting as the support.

The same thing in the weekly chart:

The charts are telling me that it will go done but I don’t like to accept that the Canadian dollar will become stronger again. My emotions have started interfering and I should not consider them. I wait. If it breaks the 38.20%, I will go short as an intraday trade.

6. Australian Dollar against US Dollar (AUS-USD)

It went up and broke the 23.60% Fibonacci level as I mentioned yesterday.

The weekly still moving around the Bollinger middle band.

7. New Zealand Dollar against US Dollar (NZD-USD)

Good for those who kept their long positions. It went up as predicted.

The weekly chart says that the Bulls are getting stronger:

8. Euro against Swiss Franc (EUR-CHF)

Bears are trying to take the control. The price is testing the support:

9. British Pound against Japanese Yen (GBP-JPY)

It went up during the day and then went down:

All the movements around the Bollinger middle band. Those who trade when the price is around the middle band should know that they are taking a lot of risk.

This is a dangerous currency pair. You can never find any other currency pair with a daily candle stick that is more than 700 pips long!!!

10. Euro against Japanese Yen (EUR-JPY)

Wow! It is forming a beautiful reversal signal to go short BUT we have to wait until tomorrow for the last candle stick to be formed completely:

11. British Pound against Canadian Dollar (GBP-CAD)

If you had a short position, now your stop loss should be triggered and your profit should be fixed.

But I don’t go long because when it has been going down strongly, usually it doesn’t change the direction sharply. So I don’t take the risk. Experience

12. Euro against Canadian Dollar (EUR-CAD)

Going up.

Weekly is moving around the Bollinger middle band and also the 50% Fibonacci level. It has been Bearish before that. It means, going up is temporarily and it will go down.

13. Euro against British Pound (EUR-GBP)

It is still Bullish but it seems it is forming a reversal signal but too early to say.

Weekly is strongly Bullish.

14. British Pound against Australian Dollar (GBP-AUS)

If you were short, your stop loss should be triggered by now and your profit should be fixed because it went up.

15. Euro against Australian Dollar (EUR-AUS)

So the descending wedge in an uptrend broke up and the rule worked.

But I don’t go long because the weekly shows that Bears are strong. I wait for the daily to show a good Bearish signal and then will go short.

16. British Pound against Swiss Franc (GBP-CHF)

Still Bearish:

Further Reading:

9 Comments:
post a comment

Comment by rex

2007-12-28 09:58:53

hi,Vahid
I think you have been doing a great job.I have already learnt something from here. I will be back your site frequently. keep up the nice work!
Best Regards

Reply to this comment

Comment by stive

2007-12-28 21:27:44

What do you think about : EUR/SEK, EUR/NOK , EUR/DKK

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Comment by benjamin

2007-12-30 08:08:23

how can u predict the trend of a pair during the start of the market

Reply to this comment

Comment by Vahid

2007-12-30 09:57:35

Hi Stive,

To be honest with you, I had never checked those currency pairs but your email caused me to do that. Although the spread is so high for the EUR/SEK and EUR/NOK but their volatility is really great for swing trading. Their daily and weekly charts are sharp and easy to analyze. So wait for my analysis for these two currency pairs too.

Reply to this comment

Comment by benjamin

2007-12-30 14:23:10

{1} the question is how do i know a currency pair will be bearish or bullish for parrticular day on a daily bar chat

2} u will find out dat in a daily bar chart,at the open of market the bar makes a high(bullish) to a certain point and suddenly reverses to sell(bearish) and closes with a sell..my question is how do i know the point to expect a reversal

Reply to this comment

Comment by Vahid

2007-12-31 12:51:59

Hi Benjamin,

1. The most important indicator that can tell you about the color of the next day candlestick, is the candlestick. If you learn the language of the candlesticks, you can easily predict the color of the next day candlestick. It tells you that if it will be Bearish or Bullish and you can go short or long.

2. To know the price reversal during a day, you have to look at the smaller time frames like 4 hours, 2 hours and 1 hour. They tell you when the price will be reversed but again you have to know the language of the candlesticks and also the technical analysis.

Best regards,
Vahid

Reply to this comment

Comment by suenewbiz

2007-12-31 22:27:23

Thanks for your articles. They are very helpful for me as a new trader.
As an experience trader I really need your opinion about this problem: I bought GBY?JPY at price 228++. And now I suffer of loosing much money on that pair? Do you think it’s good for me to close that pair or make new sell order or just wait untill the price going up again?

I use 400:1 leverage, now my free margin is -555.5.

Tq.

Reply to this comment

Comment by Vahid

2008-01-01 14:56:15

Suenewbiz,

Sorry to hear that you had a bad trade. Working with GBP/JPY is dangerous because if its high volatility and you have made it more risky with a 1:400 leverage. Currently it is testing a support at 221.00 that I think will be broken will go lower but it is also possible that it can not break it and bounce up. Then you can sell it with no loss or at least with smaller loss.

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Comment by Richard A

2008-04-16 09:10:32

Hi Vahid, I’ve only been forex trading for a couple of months and still learning and making mistakes. Can you give me your expert coments on GBP/SEK? I bought at 118779 (avearge) and now it is reaching 116000 Do you think it will reverse soon? Also need your opinions on EUR/GBP & GBP/CHF. Thanks - Richard

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