4Xlounge Forex Wake Up Call (market updates)

In today’s Live Trading Session we discussed a short-term trading strategy implementing the 4Xlounge Short-Term Market Barometer and the Technical Dashboard Console. Esentially we aim to look for trades in the same direction as the long-term trend, and identifying the best time and to enter the market. Join us for our Live Support Session next Wednesday at 1:00 pm EST. Have a great weekend.

4Xlounge Round Table Trading Signals

This article is a follow-up to our previous Market Barometer feature; “Market Barometers (Details)“. As our first article mentioned, our 4Xlounge Market Barometers are one of our most popular and one of our most misunderstood trading tools. Remember, our Market Barometers are designed to be used as a “trading tool” and not a “trading system”.

Tool vs System

We are often asked; “what is the difference between a trading system and a trading tool?”. The difference is pretty simple. A “trading tool” is designed to help the trader analyze the market and provide valuable data. A “trading system” is designed to identity entry price points for trades and provide a general over-view of market conditions. You need both to be successful. Using a “trading system” with a “trading tool” will results in a higher win percentage.

Golden Opportunity

Our Market Barometers, in addition to providing valuable trend data, can also spot key turning points or break-out levels in the market. The 55/45 setup (refer to the picture below) is one of the most powerful Market Barometer data signals. The Market Barometers CANNOT stay in between the 55 and 45 levels forever. Sooner or later (usually sooner), the market makes a move. Whenever you see a Market Barometer with all 8 lines in between the 55 and 45, you know that the market is about to make a very large move (relative to the size/scale of the Market Barometer).

Short Term Market Barometer

Size and Scale

Understanding the relationship between the various Market Barometers is critical. In short, understanding how the 5 minute trends feed the 15 minute trends, how the 15 minute trends feed the 30 minutes trends, etc… All the way up to the monthly charts. Understanding the “trends within trends” is key to understand the forex market.

Our members will frequently ask something like; “is the EURUSD trend up or down?”. My reply, which usually confuses them is; “what time frame?” Trends are relative to time or scale. Let’s take a quick look at the GBPUSD. All 3 charts were captured within a few minutes of each other (see below). If someone were to ask you; “is the GBPUSD trend up or down?”, you could say both and be correct. It depends on the time frame and scale. If we put all 3 of these charts together, we would end up with something like:

“The GBPUSD has a long term upward trend. The recent 15 minute trend to the upside is an extension of the long term trend, but the 1 hour downward resistance levels are still holding“.

GBPUSD 15 Minute

GBPUSD 60 Minute

GBPUSD 240 Minute

Making Sense of Scale

Once you can get your head around the concept of “trends within trends”, our Market Barometers will provide some critical market data. Our Market Barometers are “accurate” within their respective scale. When the Short Term Barometer is over-extended, this means that the short (or shorter) term trends are over extended. The longer term trends can still push, but the short term trends must consolidate before the longer term trends can make the next push. The inverse is also true. If the Long Term Barometer is over extended, the shorter time frames must contract with the longer time frames until the longer time frames have had a chance to consolidate.

There is one key exception to this rule: News. News releases can push the market beyond “normal” extended levels. This is why we do not trade around or near news.

Big and Bigger Picture

Play It Safe!

As always, do NOT increase your risk. Keep your leverage at recommended levels and follow the rules of entry for each system. Do not bet the farm on any single trade. Never risk more than 2% per trade. Remember, slow and steady gains will win the race. High risk = high loss and eventual margin call. If you have any questions, post them on our forum and I will be happy to answer them.

Shown below the 4Xlounge Big Picture Market Barometer displays the relative strength of each single currency on a scale of 0-100. Those currency lines moving to the upside are considered ‘strong’ while those lines moving lower occur when an individual currency is weakening. Based roughly on ‘weekly’ charts the Big Picture Barometer shows the GBP has begun to appreciate at quite a rapid rate while the JPY continues its steady trend to the downside. Putting the two currencies together, this chart simply shows the GBP/JPY and its significant trend to the upside.

4Xlounge Big Picture Market Barometer - February 16, 2012

Taking a closer look at the GBP/JPY we can now consider the 4Xlounge Technical Dashboard Console, which measures that pairs strength on a variety of different time frames, and ultimately producing the Global Trend Value, which represents the overall strength of that pair. The Global Trend Value measured on a scale of 0-100, currently indicates a reading of ‘73’, which is considered quite strong. In fact, on ‘overbought’ reading typically occurs as the Global Trend Value reaches a level of between 95-99. So while the current chart tells us the trend is quite strong, this pair certainly has more room to the upside, as the trend is most likely to continue higher before eventually reversing to the downside. Furthermore it is important to note that due to the fact that this indicator is painted green, we know the market is moving higher. If on the other hand this indicator was painted red, this would indicate the market would be moving lower.

4Xlounge Technical Dashboard Console - February 16, 2012

Implementing a different tool, the 4Xlounge X-Meter acts as a ‘speedometer’ of the market, and essentially tells us ‘how fast’ the currency pair is currently moving to the upside or downside. Shown below, the 15-minute X-Meter displays that currency pair’s rate of change on a slightly longer-term time frame and does not react to incremental movements in the market. In fact, long-term reversals typically only occur when the 15-min X-Meter registers a reading of between 12-15, and currently only reads 9. However we can clearly see the X-Meter has continued to accomplish higher high prices and tells us the trend to the upside as accelerated recently.

4Xlounge X-Meter - February 16, 2012

Finally looking to the following (daily) chart, we can see the GBP/JPY has recently experienced a rather dramatic ‘break-out’ to the upside as it was able to cross above its long-term down-trending resistance line going back several months. Furthermore we can see it has been quite some time since this pair was able to trade at such lofty levels, and in turn illustrates how this trend now greatly favors those traders with ‘long’ positions, and may have severely those ‘short’ the market. With that said, the next logical resistance level might not emerge until the market is able to test the 78.6% Fibonacci retracement level higher up on the chart.

GBP/JPY - Daily chart - February 16, 2012

Putting this all together, the various 4Xlounge tools clearly show a strong trend to the upside the GBP/JPY is now experiencing, as the daily chart tells us there is little reason to suspect resistance may emerge, at least on a near-term basis. Of course the market can reverse at any time, and we can never completely eliminate the possibility of this reversal. However through the interpretation of the aforementioned indicators we simply hope to identify the current trend in the market and in turn give our trading accounts the best probabilities of growth over time.

We wish you the best of luck in all your trading endeavors.
Sincerely,
Adam Rosen
adam@4Xlounge.com

4Xlounge Fundamental Xtras

Earlier today it was reported that the Unemployment Rate declined in Australia to a current 5.1% level. Over the long-run as the unemployment rate drops the RBA is more likely to raise interest rates as we are also more likely to see equity prices rise as well as the AUD currency. Join us this Friday for our Live Trading Session from 8-10 am EST.

Australia Unemployment and 12-month moving average

Australia Unemployment and ASX

Australia Unemployment and RBA

Australia unemployment and AUD/USD

Shown below the 4Xlounge Technical Dashboard Console displays 17-of the most actively traded currency pairs, with its relative strength measured by the Global Trend Value; the figure to the right of each pair. Trends to the upside are painted green, while those to the downside are painted red. Generally speaking as the trend strengthens the Global Trend Value will rise. However ‘extreme’ conditions may emerge when the Global Trend Value rises to a value of 95-99. During the JPY trading session on February 14, the NZD/JPY achieved a Global Trend Value of 99 indicating this pair may have reached an extreme level on the chart, and a possible long-term reversal point.

4Xlounge Technical Dashboard Console - February 15, 2012

Taking a look at the NZD/JPY from a somewhat different point of view the 4Xlounge Bigger Picture Market Barometer illustrates the relative strength of each single currency on a scale of 0-100. As those currencies moving upward are considered strong, those moving to the downside may be considered weak. However every so often a currency may achieve an extreme market condition as its line crosses above ‘70’ (Overbought) or below ‘30’ (Oversold). Below the Bigger Picture Market Barometer shows the NZD (red line) has recently crossed above ‘75’ while the JPY has come very close to the ‘30’ level. It is important to mention that the following chart simply tells us the NZD/JPY has a very strong trend to the upside. However historically as currencies tend to reverse as they pass above ‘70’ and below ‘30’, traders may anticipate the NZD/JPY could soon experience a long-term reversal.

4Xlounge Bigger Picture Market Barometer - February 15, 2012

Looking to the actual price charts the following daily chart shows the NZD/JPY has in fact enjoyed a steady trend to the upside with little signs of faltering. It is important to note that the NZD/JPY has recently traded just shy of the 78.6% Fibonacci level, which represents the last Fibonacci point where traders may anticipate the currency pair to turn back to the downside, if its long-term trend (to the downside) will remain intact. Furthermore we should make note of the fact that so far, the current candlestick contains a ‘long candlestick wick’ at the top, which in some cases can be considered a sign of weakness as the ‘buyers’ are not able to sustain this pair’s strength. Of course if before the end of the trading day the NZD/JPY is able to return to the highs of the day, the candlestick wick will not be evident. In short, if the market is able to close at the end of the day, closer to the lows of the day, this could be interpreted as an additional bearish signal.

NZD/JPY - Daily chart - February 15, 2012

Putting this all together, the Technical Dashboard Console as well as the Bigger Picture Market Barometer both indicate signs of a possible reversal on a long-term basis. However it is important to mention that most of the time we should make every effort to trade only in the same direction as the long-term trend. With that said, every so often as the market reaches an extreme level we should also consider the possibility of long-term reversals as these trades can provide us with a superior risk/reward scenario. In either case, we should strive to identify as many other signs of confirmation before taking the eventual trade, so that trade simply has the best probabilities of success.

We wish you the best of luck in all your trading endeavors.
Sincerely,
Adam Rosen
adam@4Xlounge.com

]]> http://4xlounge.com/2012/02/4xlounge-technical-review-nzdjpy-february-15-2012/feed/ 0 http://4xlounge.com/2012/02/fundamental-xtras-bank-of-japan-february-14-2012/ http://4xlounge.com/2012/02/fundamental-xtras-bank-of-japan-february-14-2012/#comments Tue, 14 Feb 2012 16:31:42 +0000 rosena33 http://4xlounge.com/?p=3482

4Xlounge Fundamental Xtras

In a regularly scheduled meeting earlier today the Bank of Japan left their key benchmark interest rate unchanged as expected near 0%. Historically Japan’s interset rates tend to move in the same direction as stocks found in the Nikkei 225 average. Join us this Wednesday for our next Live Support Session at 1:00 pm EST.

Bank of Japan and 12-month moving average

Bank of Japan and Nikkei 225

4Xlounge Forex Wake Up Call (market updates)

In today’s Live Trading Session we discussed a number of trading strategies including a ‘swing trading’ approach making us of the Med. Market Barometer, which is desinged to take advantage of the longer-term trends that emerge in the Forex market. Join us on Monday 8-10 am est for our next Live Trading Session. Have a great weekend.

4Xlounge Fundamental Xtras

Earlier today the European Central Bank (ECB) met as they announced interest rates would be left unchanged at 1.00%. Historically, ECB interest rates exhibit a positive correlation to equity markets such as the DAX & CAC as well as the EUR currency. Join us for our Live Trading Sessions every Monday and Friday from 8-10 am EST.

ECB and 12-month moving average

ECB and DAX & CAC

ECB and EUR/USD

4Xlounge Fundamental Xtras

Today the Bank of England met as they decided to leave their benchmark interest rate unchanged as expected by most at 0.5%. Historically the BOE’s interest rates tend to move in the same direction as the FTSE equity index as well as the GBP currency. Join us this Friday from 8-10 am EST during our next Live Trading Session.

Bank of England Interest Rates and 12-month moving average

Bank of England Interest Rates and FTSE

Bank of England Interest Rates and GBP/USD

4Xlounge Fundamental Xtras

In their latest scheduled meeting the Reserve Bank of Australia (RBA) left the benchmark interest rate unchanged at 4.25% while many expected a reduction. Over the long-run the RBA’s interest rates tend to enjoy a positive correlation to the ASX equity index as well as the AUD/USD currency pair. Join us for our next Live Support Session this Wednesday at 1:00 pm EST.

RBA and 12-month moving average

RBA and ASX

RBA and AUD/USD