Having No Confidence Is Better than Being Over-Confident

Category: Forex Market Analysis and Signals | Monday, June 16th, 2008


Hello my friends :)

So I am back to blogging. I have explained why I stopped blogging and why I have started it again here. I hope I can keep on publishing the reports.

I have also published some new articles that you may like to read:
- How I Tripled a $500,000 Forex Account in 6 Days
- What Thomas Edison Can Teach You about Trading Forex
- Vahid’s Daily Forex Market Analysis Will Be Back!

I have linked to all my forex trading articles here. I am trying to write more forex training articles and make a complete training reference for those who are interested. I don’t know how long does it take but I try to write one or two articles per week.


Tip of the Day:

So what is the “tip of the day” for today? Well! I have published three articles in the last 24 hour and two of them are full of tips. Hope you don’t forget to read them (here and here) and let me know what do you think about them by submitting a comment.

As the tip of the day, I just like to warn you about “overconfidence” which is also explained in one of the above articles. Overconfidence is what you have already experienced a lot and you will experience in your forex business (if you have not already experienced it). Overconfidence is more dangerous than having no confidence because when you have no confidence about something, you don’t act. You stay away and watch. When you learn forex step by step and you start working with the demo account, you will make some good trades and this will push you to start trading with a real account.

If you are wise enough to have a proper stop loss in your first trade with the real account, it will be triggered if lucky. Why I say “if lucky”? Because this failure can awaken you and tell you that there are still a lot of things that you have to learn and the forex market is not always the same as when you traded with the demo account. There are several different situations in the market that each of them need a different system. For example when it is trending (it is moving up or down through a clear and significant bias) you have to use a different system than when it is moving sideways (ranging). Sometimes the market is slow and sometimes it is hot and volatile. All these situations need different behavior from the traders. It takes several months of trading with the demo account to become familiar with these different situations and know them when they are just started.

So don’t let a few or even few successful trades make you think that you have learned everything about forex and you can trade with the real account and big amount of money.

Fundamentals: Core PPI at 8:30 AM

Ok! Lets check the currency pairs.

Euro against US Dollar (EUR-USD)

11:14pm GMT

Although appreciation of Euro against USD in the past few weeks looks really strange to the traders and businesses, the weekly chart tells you that “don’t get surprised. It has been going up since 2002. It is not something new.”

But will it keep on going up? Well! It will keep on going up if they let it goes up but it seems European countries are not happy with it. It has already made them lose a lot of money because people show less interest to travel to Europe and buy things for personal use or for importing to their counties. Although USA is not happy because of its economic problems that has caused the value of USD to go down but on the other hand it is good because at least Europeans show more tendency to go to USA for vacation. However they don’t dare to make any investment in USA because the US economy has not become stable yet. Europeans have decided not to let the Euro keep on going up against the USD and so we should not expect to see more big bullish candlesticks in the EUR-USD weekly chart.

Lets take a closer look to the weekly chart:

The 161.80% Fibonacci level is working as a strong resistance since 11th week of the current year. It looks broken but then the price went down to retest it as a support. This means the market has a high tendency to go higher but this is just the governments and banks that are trying to take it down.

Who will win finally? Market or governments?

Well! The same story happened around the 48th week of 2007 but at that time it was the 261.80% that worked as a resistance but it became broken (the lower ellipse on the below picture):

Breaking the current resistance will not be as easy as last year. So there are two stronger possibilities: It will break down or will make a range around the 161.80% level for a longer time.

Here below on the daily chart I am showing the same 161.80% level. Obviously it is already broken up but has been working as a strong support for several days. It has been retested for four times. It is going up now but if it goes down to retest the 161.80% level once again as a support, you have to be ready for a short position. It is highly possible that it breaks down the 161.80% level.

The 4 hours is almost at the beginning of an uptrend but the bulls don’t look strong enough yet. You can say this from the RSI that has made a shallow slope. And it seems that the price is going down to retest the RSI support. I don’t recommend you to go short using the 4hrs chart signal because it is obvious that an uptrend is started. So if it goes down, it will go to retest the support line and then may go up again.

The one hour charts shows the current situation in more details. Both RSI and price have made two higher highs which means uptrend but as you see it is not an strong uptrend - at least by now. Obviously it is going down to retest the RSI support.

There is a symmetrical triangle in the 5 minutes chart and the price is proceeded to the no zone area. It means the market is in an indecision situation and is not clear if it will go up or down. But the bigger time frames show the upward which can happen after retesting the support.

17 June - 2:25pm GMT

Ok! It is time to take a look at the market and see how our last night predictions worked.

So as I told you when checking the daily and 4hrs charts, they showed an uptrend and the price went up reasonably. Although the Bulls still don’t look aggressive enough, if you already have a long position, just keep it and move your stop loss a little higher. It seems it will keep on going up. Forget about taking a short position according to the 4hrs chart. The candlesticks show some Bearish pressure but the RSI has not even retested its support:

The one hours chart has another story. It says that the RSI support is broken down and also the price has broken its support. Currently the price is going up to retest the Bollinger middle band. So if you have not already taken a short position, don’t do it by now. Wait for the price to retest the Bollinger middle band and also the RSI to retest its broken support that is acting as a resistance now and if they failed you can take a short position. If you were lucky to take a short position at about 1.5530 (when the one hour showed bearish signals), just keep it but move your stop loss down to the sell price.



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1 Comment:
post a comment
Comment by Toyogo
2008-07-03 23:52:39

Hi Valid,

I found your webblog only today from google and I think it is a wanderful blogging that you are doing to try to communicate yourself and help with a lot of other traders including myself.

I would like to find out how do you get the chart of value point of 1.4308 (0%) to 1.5163 (100%) for the fibon proj. I’m using Metatrader 4 and I’ve also checked with few other charting platform showing that the high was on 23Nov07 of only 1.4966 and the low was on 20Dec07 of 1.4309 (which is ok as it is only 1pip as compare to your chart). How you do get 1.5163?

Regards,
Toyogo

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