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Archive for the ‘British pound’ Category

A lesson on trading with the stochastic indicator on the GBP/JPY by:  James ‘Big Dog’ Boyd.

The stochastic is a great tool to monitor the trade to see how much room we have left to go up or down. The stochastic again tells us the bullish or bearish sentiment in the trade. In this example we look at both bearish and bullish examples on the GBP/JPY.

GBP/JPY Chart #1

Caption #1: 1- GBP/JPY short at a diagonal level of resistance on April 6th. 2 – MACD confirms rollover, stochastics crosses to the downside. 3 – GBP/JPY pair selling off at resistance.  Indicator Settings: MACD Hist setting = 6,13,9 and Slow Stochastics setting = 5,3.

GBP/JPY Chart #2

Caption #2: GBP/JPY confirms a stochastic “pinch” after 5 days (April 13th).  Once the stochastic pinches we have 2 options… 1) Exit the trade.  2) Make sure the stop is appropriate.

When the stochastic is oversold, buyers in this case buy the GBP/JPY.

 ***KEY*** Watch the width between the 2 lines of the stochastic. When the GBP/JPY falls, monitor the trade by looking at the separation between the stochastics (you may have not hit your stop loss at this point). If the 2 lines are still apart they have potentially some room to drop. If they pinch, BULLS are buying the GBP/JPY back. If that’s the case, invoke # 2.

GBP/JPY Chart #3

Caption #3: GBP/JPY confirms that it is going to hold the higher low. Stochastic crosses back up representing that bulls are coming back into the trade.

If the stochastic cross back down, you have a greater chance in getting stopped out.

REMEMBER, when the stochastic pinches like in photo #2, we have 2 options — 1) Exit the trade 2) Make sure the stop is appropriate.

 

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Friday 04/18/08

  • Asia – Look at the inverted head n shoulders on FXI
  • Europe – Great Britain giving out pounds – look for institutional traders to step in
  • US – James look into the Financial futures crystal ball and tell me what you see?
  • James how do I trade the financials and the JPY?
  • $ up and commodities down.why??? – Interest rates may not fall as much as the market had been pricing in?
  • $CRX.X what does that tell us, POT,MON, EOG, PCU, IWM -UYM
  • Look at commodities/ w JPY
  • FX Pup Lesson on Stochastics
  • Have a great weekend

Audio commentary Link

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Tuesday 04/15/08

  • To quote from Andrew Busch, currency strategist for BMO Capital Markets: Happy Tax Day! Most likely, this will be the lowest tax rate you will be paying for the rest of your life…….
  • AUD rally then retracement overnight on rumors and then spends the rest of the nigh selling off
  • $CRX.X, GLD, SLV, OIL make the commodity picture increasingly more bullish based off of demand – $ gets whacked
  • UK housing meets up with Browns Approval ratings and gets sold
  • EUR rallies on Poor German News?
  • SKF – Up but CHF and JPY still not selling off??
  • US PPI and what that means for CPI tomorrow? Want to see commodities follow through to get long Commodity equities and currencies
  • FX pups postponed, James Boyd is MIA

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gbpjpy1.jpg The pair finally broke from its triangle – down, as I long expected. Freaking heck that took long enough. Usually went it goes sideways for a good while it breaks out and acts like a teenager with long pent-up energy – it goes bananas. I circled previous times like this in the last several months. It should be good for a good many hundreds of pips so enjoy the ride!

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fishjump.jpg Remember we were talking about the EUR/GBP last week, and the stair-step pattern that is especially evident with the Bollinger Bands? Well the pair closed above the upper band yesterday. So let’s say we got in and let the experiment begin.

This really isn’t a “paper” trade – we don’t have many clearly defined rules, etc. – but we are doing this for several reasons. We noticed a pattern in the pair and want to see this thru to an extent and watch what happens if we participate in it, having seen it ahead of time. We are learning more about Bollinger Bands. We get to test how we would consider exiting based on the pattern’s past. We get to fool around with different exit options.

eurgbp1.jpg

For example, let’s say we want to have an emergency exit. There’s all sorts of ways to do a stop loss, but for simplicity’s sake of choosing one we’ll say we get out if the pair goes below the low of the day before the entry day’s candle. That’s 0.7475 so we’ll say 0.7465. We’ll worry about topside exits later as it gets going (like I said, quite different from how a paper trade would be…)

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eurgbp.jpg I’ve fooled around plenty with Bollinger Bands, but they aren’t part of my regular trading routine. Nonetheless, I often poke my nose around what various things are up to, and notice a nice pattern on EUR/GBP.

The trend is up, and the bands have been stair-stepping up. It’s a great pattern, with the bands being at a support/resistance area (I drew my own lines that I felt were a bit more accurate). And it’s a pattern that seems soon due for another step up.

The last 3 times the break in resistance was signaled by a close above the band. There’s a lot of BBands traders who love this kind of stuff. Personally I think the best method would be to use that close above the band accompanied with a buy signal in whatever your method is.

Let’s see where this goes. We’ll try a little experiment with the ol’ bands and see what happens after the next close above the top band. And remember – our saving grace as traders is commitment to a method, or system. It’s understandable if you are still learning what the indicators do. But that should be a short road. The longer road that gets you somewhere is using one of them a lot. You start out not that great with it, but get better and better and that’s where profits lie.

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gbpjpy.jpg Looks like we are getting a bounce lower off a small resistance level on the GBP/JPY, unsurprisingly. All is well with the downtrend.

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