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Sunday, May 30, 2010

5 Way For Non-Farm Payrolls Trading

The release of the American Non-Farm Payrolls is a circus in the forex market. Here are a 5 notes to watch out for in every Non-Farm Payrolls release during the financial crisis:
  1. New traders – stay away: Trading during this volatile period is very risky. Take a break and enjoy the weekend.
  2. Action before the release: Strange moves begin in the markets well before the release at 13:30 GMT. This usually reflects the expectations – expectations which aren’t necessarily met, and they can lead to a counter reaction afterwards. Jittery trading intensifies with the release of the Canadian employment figures, an hour and a half before the American ones.
  3. Friday effect: Strong moves in a certain direction – either dollar strength or dollar weakness, can be seen hours after the release, usually in the last hour of the London session – between 16:00 to 17:00 GMT. This is the move that will determine the close of the week, and thus have a real long term effect. This is the full reaction.
  4. Technical barriers can be broken – support and resistance lines, uptrend support or downtrend resistance lines can be breached around the release of the NFP. This is usually only temporary – the graph returns to normal after a while, and these lines are respected again.
  5. Initial reaction is wrong: the initial reaction to the release is in the wrong direction: the knee jerk reaction is usually “normal”: good data yields dollar strength and bad data yields dollar weakness. This is very temporary! We are still in the global crisis, and the risk factor rules. So, minutes after the “normal” reaction, the risk factor kicks in and eventually the opposite happens: good data yields dollar weakness (risk appetite), while bad data yields dollar strength (risk aversion).
These are my tips. I’ll be happy to hear more.

Source: Forex Crunch

Thursday, May 27, 2010

Super Easy Engulfing Candle

An Engulfing candle is a candle whose length completely encompasses the previous candle with a close above the high or below the low candle. If the close is above the high of the previous candle then it is a bullish engulfing candle and that signals a buy, while if the close is below the low it is a bearish engulfing candle that’s signals a sell:

The arrow is pointing to a bullish engulfing candle that if bought would have produced a winning trade.

Engulfing candles are the result of a sharp turn in the direction of price as compared to the previous bar. So in the case of a bearish engulfing candle price was previously moving up, and at the open of the next bar price tries to continue its upward movement but cannot not sustain it and it quickly moves down and closes below the low of the previous bar signaling a trade.

Now to see this pattern in action let’s look at a hourly chart of Eur/Usd

EUR USD Hourly Chart

At each of the numbered points on the chart we see a bearish engulfing candle followed by a hard move down. This is a very reliable pattern that is central to my own trading. Incorporating this into your trading will only serve to increase your profits.




A special note about the third trade:

If you notice the first two bearish engulfing candles followed bullish candles, but the third one followed another bearish candle. This is common and is still a valid trading signal.

Well that’s all for today. I hope you all take this technique and increase your profits. Until next time.

Happy Trading

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Quoted from Forex Crunch