CADJPY

On the CADJPY pair, the focus this week is a consolidation in form of a weekly descending channel. The tag of war between bulls and bears within the channel is evident as prices have been contained within the support and resistance boundaries. However the main players are the bears who have taken prices lower and lower for the past 2 years.. The past week closed off with a pin bar.

SUMMARY.

Pin bars are potential reversal signals. In order to come up with a bearish bias, we need to see the pin bar confirmed by a candlestick that closes below such as an engulfing or a bearish marubozu. Until then, we patiently observe the charts for further price action.

GBPNZD

On the GBPNZD pair, the daily timeframe shows an ongoing fairly strong uptrend trading within an ascending channel. Bulls are the dominant market participants signified by the trend which is up. Prices have been resisted at the upper boundary as well as being supported at the lower boundary. Most recently a doji formed followed by a bullish marubozu.

SUMMARY.

Price action suggests that bulls are determined to push prices much higher. Nevertheless, we have to monitor and see how price will behave upon reaching the channel’s resistance. Otherwise the rally may be headed towards the major resistance.

EURAUD

EURAUD

A close look at the pair on the daily timeframe reveals a clear ascending price channel that has continued to hold grounds. More significantly, the price channel falls within a long-term uptrend, making it a strong pattern to trade off. From the charts, we find that prices have respected the lower support line of the channel, with prices reversing to the upside for the last 6 months.

SUMMARY.

The price is currently almost touching the support line of the channel. At this point, we watch for price action reversal patterns such as a bullish pinbar/double bottom/engulfing, both in the daily and the lower timeframe of the 4hr in order to go long. We do not open any position(s) before we have entry confirmation to the upside.

CADCHF

CADCHF

This week we revisit this pair that we covered about two weeks ago in our weekly analysis. Zooming at the daily chart, we find that the clearly cut-out descending price channel has continued to hold grounds, with prices trading within the support and resistance lines of the channel for the last eight months. What makes the current level more significant for us, price action traders, is the fact that it falls within the near-term resistance level.

SUMMARY.

We stay put, hold our guns, as we wait for reversal price action patterns/candles such as a bearish pinbar/bearish engulfing candle/hammer to inform our bearish bias. Once the pattern(s) forms, coupled with an entry confirmation, we pull the trigger aiming towards the downside.

GBPUSD

This week we will look at the British Pound vs The US Dollar (GBPUSD) which we had covered a fortnight ago. At the time, price had just closed above the mother candle, indicated by the breakout candle. Our bias was bullish , ensuing the breakout.

SUMMARY.

Bulls caused a rally ,halting at the upper boundary of the descending channel. This boundary acted as resistance. Remember in the previous analysis, we mentioned that the major trend is bearish. Furthermore we are in a descending channel. Therefore we monitor the pair closely to see whether the bearish trend will resume.

USDCHF

Looking at the daily chart of The Dollar vs The Swiss Franc (USDCHF), we can see the formation of a descending triangle. Price is forming lower highs being resisted by the upper boundary as well as  lows being supported by the lower boundary of the triangle. During the past week we have seen bullish strength coming in, leading to a breakout of the channel.

SUMMARY.

Following the break out of the price pattern, we watch closely to see if  there will be a confirmation, after which we will follow price.

You got a cup of coffee set up on your table for today’s hangout? Maybe a bite to it? I’m doing mine without a bite. Because coffee is best taken without an accompaniment, in solitude, or at least that’s my way. But you’re right, we are not here today to talk about coffee rules, but to cover one of the most imperative aspects of any trader approaching Forex as a business.

A trading plan is the ‘business plan’ for us, traders. The most cognizant definition of a trading plan is ‘a well written guide that is prepared when the market is closed to inform your actions when the market is open.’ That kicks the beginning of the real talk! Any trader without a properly documented trading plan that guides all their trading actions when the market is open is doomed to fail. It is the surest tool that keeps us disciplined while trading the forex markets. We dwell in a business where we are constantly influenced by greed and fear, both emotions that are hard to battle without strict discipline. Any professional out there will tell you outrightly that without adhering to a properly laid down business plan and rules, you have low chances of survival in business. Unfortunately or fortunately for us traders, we can’t grow, leave alone survive, without following one.

Having a business plan is one thing, being informed of the right content and rules therein is another. And this will be our focus today. Now you’re welcome to serve your second cup of coffee.

1. Methodology

So what exactly is your methodology? This is the question I always pose to any new traders I meet out there, and you are not escaping it today. In case you ever meet anyone purporting to be a forex/stocks trader, please do the job for me, look straight into their eyes and shoot, ‘what exactly is your methodology? If they stutter or fumble with words, please be advised. Enough of my counseling! 

The first content of your trading plan methodology is to lay down the type of trading system/analysis upon which you base your trading decisions. Is it technical/price action trading (reading the chart patterns)? Or Fundamental trading (trading mainly based on economic-news events)? The latter is not an option for me, and for us at Fourthstreet Consultants. We trade purely based on price action, which is by studying and analyzing naked charts. This is because after all is said and done, everything about the forex/stocks market, including news events is discounted on the chart price movements. Price action is based on the fact that history repeats itself. Some chart patterns that have happened before, could be five weeks back, two years ago, or ten years back, will happen again, and again. Therefore, it is upon us to learn and master these unique chart patterns and trade them to our advantage. At least that is how I am able to foot my coffee bills for our hangouts here. That said, your trading plan must explain your methodology in detail. For price action traders like us, it should document your approach to the markets based on the following:

  1. Trend following
  2. Counter trend trading 
  3. Range bound trading  
  4. Breakouts 
  5. Candlestick formations

This list doesn’t end there, but it covers the main price action methodologies.

The next aspect that your trading plan must contain as far as methodology is concerned is the specific instruments/pairs that you will be analyzing and trading. This helps you follow up and grasp the patterns of the price movements of the instruments over the long run, which is paramount for the growth of your trading skills.

Listing the timeframes that you plan to be applying for your trading is also an integral part of your methodology. Will you analyze prices charts based on the 1 hour, 4hours, daily, weekly, or monthly time frame? Our Comprehensive Forex course equips you with a strategy we call ‘the top down approach,’ which is tailored to help you make informed trading decisions on the shorter time frame, that are aligned with the long term trend. Again, you’re welcome to join us here for this and more trading mentorship.

Lastly, your methodology should define your entry and exit guides. This is where stop losses and take profits come into play. The forex market platforms offer you with parameters to control your losses as well as set targets for profits without being necessarily online or logged in your trading account. You analyze, set the targets, and go about your other biashara (Swahili word for business).

2. RISK MANAGEMENT

Risk management is the backbone of forex trading. It is the only aspect that ensures your survival in the business of forex/stock/indices trading. It is only by managing your risk exposure that guarantees us of catching the next big move. I covered this and more extensively in an earlier article titled Forex trading as a business, you can catch up with it here when you have some time.

Your business plan must define your total risk based on your trading capital. It should expound the specific percentage of capital that you should risk per trade, and as such, the maximum number of trades you can have open at any one moment. As a general rule, you shouldn’t risk more than 1% of your capital per trade, and a total of 5% of your total capital in all your open trades. These rules are to be followed to the letter to achieve consistent returns in the long run. Our forex course expounds on this topic in videos, and goes further to show sample trades and how to employ the right risk management on a live forex account.

Additionally, your trading plan must inform how to avoid trading correlated instruments. This helps to limit risk exposure. By diversifying your portfolio, you stand to outlive losses and achieve success in your trading results.

At this point, please do the Indian headshake, that way I can confirm that you follow. Okay, let’s keep at it.

3. Record Keeping/ Trading Journal

In business, we talk of keeping inventories. From records of stock supplies, to sales, to profits & losses, to miscellaneous, among others. In forex trading, we keep inventories by filling and maintaining a trading journal. This is a comprehensive document whereby you pen down your trades, right from the specific instrument that you trade, to the entry price, to the reason (set-up) for taking the trade, and the exit price of the trade. You note that I haven’t mentioned listing down your risk to reward ratio because this is like the SI unit of placing a trade position. See what I did there?

Just like any other business, keeping a record of all your trades in your trading journal helps in the evaluation of performance over time. You are able to note the pairs/instruments that are least profitable and the methodology strategies that yields the highest rate of return. This way, you get to grow in your trading career, as you can always twitch where necessary to achieve better results. 

4. Psychology/Emotional Balance

I intentionally listed this aspect as the last component of your trading plan. Many a times, traders tend to underestimate how much having the right psychology and emotional balance can influence their trading results, yet it is what defines our long term success, almost ultimately. Throughout our lives, we have been programmed to avoid and hate losses. On the contrary, in trading we encounter losses frequently. I refer to them as ‘our cost of doing business.’ You cannot avoid losses in forex trading, and anyone who takes that path ends up in total ruin. As such, our job is to manage losses through setting up controls such as stop losses, trailing stop losses, and price levels available in our trading platforms.

It is your responsibility as a trader to call yourself to a meeting, understand how strong you can control your emotions of loss and fear. For instance, I advise new traders to keep off the markets for a week or so whenever they encounter a consecutive number of losses, instead of jumping back and trying ‘to make up’ for your losses. The latter only worsens the situation, as your mind won’t be in the right space to make sound decisions and for you to FOLLOW YOUR TRADING PLAN.

Everyone is different and only you can examine and put forth the best approach to help you maintain an emotional balance at all times, regardless of the trading results.

This is where we call it a day. You can master this and other aspects of Forex Trading with out top rated Forex Course. Please feel free to visit our blog on our website for our previous coffee hangouts, Okay, I mean the previous articles on other informative trading topics. Thanks ☺.

GBPAUD

Early this month we looked at The Great Britain Pound vs The Australian Dollar (GBPAUD). We are doing a follow up on the previous analysis where an ascending channel had formed. A bullish engulfing candlestick pattern formed at the bottom of the channel. After the said formation, we had bullish bias and we were patient for price action to confirm this bias.

SUMMARY.

Coming after the bullish engulfing was a period of consolidation within which indecision candles formed, namely a hammer and inverted hammer. During the past week we see a bullish candlestick with a wide spread, closing above the consolidation area confirming our bias of a bounce off the lower boundary of the pattern. We continue to monitor this pair in order to know whether bullish strength will remain dominant within the channel.

NZDJPY

Following up on a previous analysis on the weekly chart of The New Zealand Dollar vs The Japanese Yen (NZDJPY). The analysis was done in the month of June where we saw a descending triangle breakout and retest. At the time, the retest that happened is marked in red. Price went on and further retested the lower boundary of the pattern highlighted in yellow.

SUMMARY.

Our chart pattern breakout led to lower prices where we see a strong downtrend depicted by the steep gradient of the trend. We continue to watch this pair for further price action to confirm whether the downtrend will persist.

GBPUSD

On this week’s analysis looking at The British Pound vs The US Dollar on the daily timeframe.. We are going to analyze the candlestick formation within a descending channel. This pair has been on a very much sustained downtrend. Therefore it goes without saying that we’re in a bear market. At the moment we’re at a strong support zone. A mother candle has formed at the support zone, followed by multiple inside bars. The last days’ candlestick has broken out  above the mother candle.

SUMMARY.

A close above the mother candle is an indication that the bulls may be coming into this market, invalidating the bearish mother candlestick. Whenever inside bars form, a close either above or below the mother candle will most likely indicate an opportunity.  However we should keep in mind that we’re in a bear market. Price action will give us confirmation whether bulls will reverse prices or they will just cause a minor retracement probably to the upper trendline of the channel before bears resume with the downtrend.

CADCHF

On the weekly chart of The Canadian Dollar vs The Swiss Franc, there’s a formation of a triple top, which broke out last week. This weeks’ candlestick after the breakout candle is a dragonfly doji.

SUMMARY.

Succeeding the breakout of the triple top, our bias is bearish. The upper shadow of the doji shows that price rallied to the neckline but got resisted. This is a sign of a pullback which is visibly seen on a lower timeframe such as the daily. Sellers later came in and pushed price lower but bulls fought back and price closed on the highs. Since doji’s show indecision, we have to wait for further price action to confirm lower prices.

EURAUD

On the weekly chart of The Euro vs The Australian Dollar, we can see the complete formation of an ascending triangle. Price has been trading within the triangle since August last year. Moreover, two months ago we had a false breakout whereby a candlestick closed above the triangle, but the next one reversed prices all the way down to the lower boundary. This is why it’s important to wait for confirmation after a breakout to avoid false breaks. Recently we see another close above the triangle.

SUMMARY.

Ensuing the recent breakout, we again have to wait for further price action to confirm bullish strength. A confirmation on the lower timeframes such as the daily would give as a clear indication of whether price will continue going higher or lower.

CHFJPY

On this week’s weekly analysis, we’re looking at The Swiss Franc versus The Japanese Yen. Bears have been very dominant for one year, as we’ve seen a waterfall of price. The descending channel is a vivid indication of the bearish superiority. However 7 weeks ago, bulls pushed price higher and we had a breakout. Previously, before the breakout, price was resisted by the upper boundary of the channel as well as being supported by the same boundary after the breakout.

SUMMARY.

Our bias on this currency pair is bullish following the breakout. However we wait for price action as usual to confirm this. A dominant bull candle would be a good indication of future higher prices.

I must admit, it has been a while since I penned down an article, and what better topic to pick up than to demystify some of the biggest misconceptions about the Forex/Financial markets. It is okay for one to be inquisitive and doubtful, especially being quite a unique class of financial investment for many, but how you act upon getting the information and clarification is of utmost essence. Stick with me in this one, let’s indulge. In this article, as is always my thing, we are going to have a chat, one of those sessions where all you get to do is sip your coffee as I do the talking. 

Is forex trading legitimate? We are talking about the most liquid financial market in the world where more than 5.3 trillion dollars is exchanged every day. In economics, we call it an ‘over the counter’ business. This means than no one institution, no one retail company/Individual, no one country can control the forex markets. It is this high liquidity and stability that causes volatility, i.e. prices of different currencies and commodities moving up and down frequently and continuously. Oh, that last sentence is broken down for you like I am explaining to a five year old to ensure that all you do in this coffee chat is nod, and not ask questions. So that is how enormous the forex market is. It’s a conglomeration of buyers and sellers, everyone putting in their share (capital) on the table, and then trading taking place 24 hours, five straight days in a week, i.e. Sunday midnight to Friday midnight. These are details you can verify in our era of unlimited access to information.

Having said that, everything boils down to how you approach the forex markets, how knowledgeable you are about trading, your ability to analyze the markets for the best trading opportunities, i.e. the best buying and selling positions. I took you through how to approach forex as a business in our previous coffee hangout, that is how to trade forex as a business 

Moving on, did you know that your local bank performs forex trading every day? That your bank has forex traders on desks who trade forex (buy and sell currencies) on behalf of the bank? You may have walked into your bank to buy or exchange currencies, even better, you probably had to negotiate to get a good rate, especially if it was a considerable amount. This is the most realistic and open act of forex trading I can put across today. Your local bank has a team of dedicated forex traders who watch market prices daily, both local and international currencies, in order to trade and make money for the bank by taking advantage of the exchange rate variations. Every small tick in the price, up or down is an opportunity for them to buy or sell and bank some profits out of the margins. And good for them, we have entrusted our savings with them thereby guaranteeing them of liquidity. That part there my friend, is forex trading for you in its purest form.

That being said, the next big question for you would be; can I trade forex for a living? Allow me to tell you a little about myself. I started Forex trading 11 years ago. I have been trading fulltime up to date. I wake up to it every day, and I live off trading. The forex trading online course that we offer at Fourthstreet Consultants that comes with one on one training sessions is only an extension of our skills attained over many years, sharing our wisdom and mentorship to those willing to take up one of the most rewarding careers, when undertaken with utmost knowledge and skill. However, that is my story in a nutshell, and it’s not our hangout agenda for the day. If you wish, we can plan for another coffee hangout to talk about my journey, my career, the highs and the lows, then you get to know more about myself.

You can trade forex either part time or full time. This is largely dependent on a number of factors, some personal and others capital related. For instance, if you have a fulltime job, it would be best for you to trade part-time. All you would need to do is employ trading techniques which require you to analyze the forex markets and place your trades every close of day. These lessons and skills are all covered in expansive video lessons and well laid out trading strategies available on our online forex course, together with personalized training sessions that we offer at our offices. The beauty of forex trading platforms is that they provide the parameters for you to scale and control your risk and reward, as such, you get to limit how much you can lose or gain anytime you are placing a trade, whether you are present online or not. We teach about end of day market analysis trade executions in our comprehensive forex course. This is where you get to analyze the various currency and commodity markets to place trades based on rewarding opportunities at night towards the close of the day’s trading session. In a previous hangout, I talked about how correlated trading and hunting is, you can catch up on all that here. This article goes ahead to expound that in forex trading, the best trades are the ones that are carefully selected (hunted), and that less is more in trading. This means that you only need a few quality trade set-ups in a month to make your margin as opposed to executing too many trades. Too many trades means more exposure of your capital, and therefore more risk to your portfolio. 

That being said, one can as well take up forex trading full time. And what’s better yet, even for those who do trading as their main job doesn’t need to be stuck on their computer screens the whole day. You only need to screen and analyze the different forex charts for trading opportunities periodically, for example every four hours, or six hours, or for some traders like me, every 12 hours. This gives you the freedom and the space to take care of some other business and/or family while at the same time allowing your trades the space and time that they need to work out as per your edge. However, for it to be fully rewarding and supportive for your daily needs, you would need to invest a significant amount of capital for the reckonings to work out. Just like any other business, investing a bigger capital yields more considerable returns that would sustain you for a fulltime business. Don’t fall in the fantasy and misconceptions that are out there that you can make high returns in forex trading from a small amount of capital. IT NEVER WORKS. 

And this is where we call it a day for our coffee hangout. Thank you for being a decent audience, even when your right of speech was breached ☺.

EURCAD

On this week’s analysis of the Euro vs The Canadian Dollar. We’re looking at a weekly ascending channel. Price has been supported by the lower boundary and resisted by the upper boundary since 2012. The last two candle sticks are long legged dojis, which show uncertainty.

SUMMARY.

Indecision at the bottom of the channel may be an indication that bears are moving out of the market or just a pause in the downtrend. Therefore we need to wait for a confirmation of a break out or a bounce off the lower boundary of the channel.

USDJPY

On  this week’s analysis of the Dollar vs The Yen we have complete formation of a symmetrical triangle.This particular chart pattern, shows equal strength between the bulls and the bears. No one particular participant is dominant until the pattern breaks out. Price has broken out of the lower boundary of the triangle. In the recent weeks, the market has been ranging around the lower boundary, being retested.The lower boundary of the pattern which acted as support before has now turned into resistance. Last week’s candle has closed below all the previous week’s candlesticks in the retest.

SUMMARY.

Following the bearish candle, we’ll be careful to see whether bear power will be sustained. It is possible that price may turn back and into the triangle. Further price action will give us a clear indication of what is highly likely to happen.

EURNZD

This week’s analysis of the Euro Kiwi, is going to be a follow up on the analysis we did a fortnight ago. At the time of our previous analysis, price had just bounced off the neckline after the retest that is highlighted above. Bears came in and further pushed price lower. During the week that has just ended, bulls came in to the market and commenced a price rally.

SUMMARY.

Following the double top breakout, price hit our targets, which is usually the height or distance of the tops. This setup gave us slightly more pips than our expectation.With bulls currently in control. We wait for price action to clarify whether their momentum will take price back to our neckline or bears will continue with their waterfall of price after the bullish retracement.

GBPAUD

Looking at the Pound Aussie, price is trading within a weekly ascending channel. The channel has held price since 2017. We can clearly see the lower boundary acting as a strong support zone. Denoted by how much price trends after a bounce off of it. Our resistance level being the upper boundary of the channel.

SUMMARY.

Currently a bullish engulfing has formed. This candlestick formation is a potential reversal signal. Happening at a support zone, it increases our bullish bias. As always price will guide us to ascertain whether we are going to see higher prices