Detroit Forex Seminar 8-31-13

Metro Detroit Forex Seminar

Presented By:Dan Weiand & Rick Turner

Forex Early WarningThe low Cost Leader in Forex Trade Alerts

Agenda

Resources3 Rules

Forex BasicsParallel and inverse

TrendsSupport and Resistance

Multiple Timeframe AnalysisENTRY Management

Profit Taking Money ManagementProcess of becoming a Forex Trader

Reference Materials

All online at Forexearlywarning.com

Reference Materials

35 Lessons

In Order To Trade The Spot Forex

You need to know the direction of the Trend.

You need to have a valid entry point

3 Simple Rules

There are some very Simple things a forex trader can try to understand that will increase their trading accuracy from the more common 90% failure rate to as high as 90% positive trading accuracy in the matter of a few weeks.

Reference: Lesson 18

Currency Transaction Basics

Exchanging currency at the Border

Currency KioskTrade 10,000 USD for CAD at exchange rate of 1.05

Don’t spend the money.

If exchange rate moves down to 1.04.

Exchange CAD back for USD now have 10,100

Same asSelling the USD/CAD Online

Currency KioskTrade 10,000 USD for CAD at exchange rate of 1.05

Don’t spend the money.

If exchange rate moves up to 1.06.

Exchange CAD back for USD now have 9,900

Same asSelling the USD/CAD Online

Currency Pairs

If you Buy a currency pair online you want it to go up

If you Sell a currency pair online you want it to go down

Cash Transaction SAME AS

Online Transaction

Cash is Unleveraged 1:1 Online 50:1 Leverage+

Anatomy of the Transaction

Exchange rate shows how many USD needed to Buy or Sell 1 EUR

PIP “Price Interest Point”= .0001 Yen based = .01

PIP Value is based on 3 Factors

1) The currency pair2) Size of the trade3) The exchange rate

Calculating PIP Value

1)EUR/USD2)10,0003)1.4600

1) 10,000 x .0001 = 1 USD per PIP2) 100 pip movement would = 1x100= $100 USD profit or Loss

Conversion to USDNot required since USD is in pair

1)GBP/NZD2)20,0003)1.99451) 20,000 x .0001 = 2 NZD per PIP2) 2/1.9945 = 1.00 GBP per PIP3) 100 PIP movement = 100 x1.00 = $100 GBP profit/loss

Conversion to USD$100 x current GBP/USD rate=Profit/loss in USD1.5567 x 100 = $157.65 USD profit/loss

1)EUR/GBP2)20,0003).8580

1) 20,000 x .0001 = 2 GBP per PIP2) 2/.8580 = 2.33 EUR per PIP3) 100 PIP movement = 100 x2.33 = 233 EUR profit/loss

Conversion to USD233 x current EUR/USD rate=Profit/Loss in USD233x1.3364=$311.38 USD

1)GBP/JPY2)350,0003)152.60

1) 350,000 x .01 = 3500 JPY per PIP2) 3500/152.60= 22.94 GBP per PIP3) 100 PIP movement = 100 x22.94 = 2,240 GBP profit/loss

Conversion to USD2,240 x current GBP/USD rate=Profit in USD2,240x1.5567=$3,487.01

How Do Currency Pairs Move?

Currency Pairs ONLY move up or down based on??

Individual currency strength & weakness

Basics

CAD Weak

USD Strong

Buy the USD/CAD

Basics

CAD Strong

USD Weak

Sell the USD/CAD

USD/CAD

Strength and Weakness

The individual currency pushing is STRONG

The Individual currency being pushed is WEAK

USD/CAD

Time to Learn

Parallel and Inverse – 2 WeeksSupport and Resistance – 3 months (If full time)MTFA – 1 year

Parallel and Inverse

USED 2 WAYS

At Analysis&

At Entry

8 Individual Currencies

USD US Dollar CHF Swiss Franc EUR Euro GBP British Pound JPY Japanese Yen CAD Canadian Dollar AUD Australian Dollar NZD New Zealand Dollar

• GBP is Weak• CHF is strong• Sell the GBP/CHF

Parallel An Inverse AnalysisReference: Lesson 8 Forex Article

Parallel and inverse analysis is the study of how individual currencies influence the movements of currency pairs.

Individual Currency = The Country

Currency Pair = the Transaction

Individual Currency IS NOT a Pair

8 Individual Currencies

USD US Dollar CHF Swiss Franc EUR Euro GBP British Pound JPY Japanese Yen CAD Canadian Dollar AUD Australian Dollar NZD New Zealand Dollar

28 Pairs

USD US Dollar CHF Swiss Franc EUR Euro GBP British Pound JPY Japanese Yen CAD Canadian Dollar AUD Australian Dollar NZD New Zealand

Currency Pairs Should Be Grouped As Individual Currencies

EUR/USDGBP/USDAUD/USDNZD/USDUSD/CADUSD/CHFUSD/JPY

EUR/USDEUR/JPYEUR/CHFEUR/GBPEUR/CADEUR/NZDEUR/AUD

EUR/JPYGBP/JPYAUD/JPYNZD/JPYCHF/JPYUSD/JPYCAD/JPY

For Analysis

USD JPYEURGBP/USDGBP/JPYGBP/CHFEUR/GBPGBP/CADGBP/NZDGBP/AUD

The Market Is The Indicator

Pairs move only by Individual Currency Strength and Weakness

Parallel and Inverse analysis is the only way to measure Strength and Weakness

Technical IndicatorsDo Not Measure Individual Currency

Strength and Weakness

Why are they on charting platforms?

Technical Indicators

Strength and Weakness Examples

The individual currency pushing is STRONG

The Individual currency being pushed is WEAK

EUR/USD

Strong USD

Strong EUR

EUR/USD

Not Strong or Weak

Strong Vs Strong

EUR/USD

Weak VS Weak

EUR/USD

Slingshot

Slingshots

Your best and safest trade

Fastest movement in a direction

Groups of Individual Currencies

EUR/USDGBP/USDAUD/USDNZD/USDUSD/CADUSD/CHFUSD/JPY

EUR/USDEUR/JPYEUR/CHFEUR/GBPEUR/CADEUR/NZDEUR/AUD

For Analysis

USD JPYEURGBP/USDGBP/JPYGBP/CHFEUR/GBPGBP/CADGBP/NZDGBP/AUD

EUR/CADEUR/USDEUR/AUD

EUR Weak on All Pairs

EUR/NZDEUR/JPYEUR/CHFEUR/GBP

CAD/JPYUSD/JPYAUD/JPY

Strong on All Pairs

NZD/JPYEUR/JPYCHF/JPYGBP/JPY

EUR/JPY

Slingshot

On the Charts

Drivers Changing

Strength and Weakness DRIVES the Market.

Change in DRIVERS is a change in which individual currency is strong and which is weak

When Do The Drivers Switch??

During the Intraday consolidations

Usually after the Main session

Sometime News events

When Do drivers Lesson 14 - Best Times To Trade The Forex Market

When do drivers change?

Separate The Pairs

NOT EUR/USD

EUR USD

Always think of them Separate!!

Parallel and inverse

If you can identify what parallel and/or inverse group is DRIVING the market, you can successfully trade almost everyday there is movement.

Definition:

Trend on a currency pair is a long series of movements and market dynamics on both sides of the pair that favors movement in one direction.

Trends

TrendsEUR/JPY

EUR/JPY

EUR/JPY Oscillation

Choppy

EUR/JPY

Choppy

Mine Mine Mine!!

Free Trend Indicators

F.A.S. – Fresh Cross. Angle. Separation.

Fresh trends = Lower Risk and Higher Risk Reward Ratio

Over extended trend = Higher Risk and Lower Risk Reward Ratio

Trend Cycles and Fresh Crosses

Free Trend Indicators

Strong Uptrend Strong Downtrend

Trends

No Trend

Price Chart Without Trend Indicators

You can see direction with just price

Price Chart With Trend Indicators

Trend indicator point to a direction

Noisy price chart

Same Chart – No Noise

Noise VS Clear Direction

Noise Direction

Support and ResistanceLesson 10 - Forex Support and Resistance and Price AlarmsArticle 2 - Effective Use of Price Alarms

The forex market is a support and resistance market.

All trends start and end at support and resistance.

All reversals and retracements start at support and resistance.

Support and Resistance

SupportA support level is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level.

ResistanceA resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds another resistance level.

Source: wikipedia

Entry Points

Targets

Stop levels

Short term Support and Resistance

M5, M15, H1 Timeframes (Intraday S&R)

Long Term Support and Resistance

H4, D1, W1, MN Timeframes

The Difference between Long Term and Short term S&R is you profit potential or “Room to Move”.

How much room to move between Long and Short term??

My personal rule is it must be AT LEAST 100 pips!

FEW is around 100-125 MINIMUM

What if you do not have 100 pips?? Road Block!

DO NOT consider the trade!

Move on and find another trade OR

Wait till that level is cleared.

Wait until the level is cleared. Temporary Road Block

Support and ResistanceVisual Examples of Support and Resistance

http://www.flickr.com/photos/forexearlywarning/

Entry = Short term Support & Resistance

Profit Target = Long term Support & Resistance

Stop Loss = Short term S&R for Beginners = Longer term S&R for Experienced Veterans(Bigger Stops)

http://www.forexearlywarning.com/forex-lessons/forex-profit-taking

S&R Numbers are REPETATIVE on ranging and oscillating pairs

Trend Indicators converging: an indication of a currency pair stalling at support or resistance

Price alarmsUsed to monitor Short term S&R for possible entry

Your Job

Yes , work is involved

Know the condition of the market by examining charts systematically to assist in planning and entries

MTFA- Multiple Time Frame Analysis

Lesson 11 - Multiple Time Frame Analysis of The Spot ForexArticle 4 - Multiple Time Frame Analysis

Multiple time frame analysis (MTFA) is the inspection of very basic forex trend indicators and forex charts, starting with the largest trends and time frames, and working backwards down through successively smaller time frames to see how the smaller time frames and trends feed the larger time frames.

Lesson 11 - Multiple Time Frame Analysis of The Spot ForexArticle 4 - Multiple Time Frame Analysis

When the smaller time frames are in agreement with the larger trends you can enter a spot forex trade in the direction of the trend with very good safety.

If no trend exists on a particular currency pair the smaller time frames and trends will, at some point, build an uptrend or downtrend.

Simply put:

You are looking for the BEST and SAFEST direction to trade a currency pair

MTFA Timeframes

W1- Weekly Long term TrendD1 – Daily Intermediate term TrendH4 – 4 hourly Short Term Trend

Main Direction Timeframes

MTFA – What to observe

Is it Trending or Oscillating?

Is it Choppy Ranging?

How FRESH or OLD are the Trends?

This is your Direction

Is it Choppy Ranging?

This means don’t trade it!

How FRESH or OLD are the Trends?

This is your assessment of RISK

The higher time frames trends and the direction of the major trend always

overrule the lower time frames.

What is the Largest time frame with Trend??

“When the smaller time frames are in agreement with the larger trends you can enter a spot forex trade in the direction of the trend with very good safety.”

New trends in the smaller time frames enable us to enter the

trends in the larger time frames if a currency pair is trending.

Are all or most of the pairs in a group of 7 going the same way or doing the same thing????

Important!!

MTFA- Smaller Timeframes

If you have a Large trend like W1 you could wait for a fresh trend on D1 or H4 back in the direction of the W1. Direction. Direction. Direction.

W1D1H4H1M30M15

What is a smaller time frame?

Depends on the trend or oscillation you are trading.

If you are trading the H4 trend,You could wait for a fresh H1 trend to get in H4 trend

MTFA for Parallel & Inverse

http://finance.groups.yahoo.com/group/4xtrendtraders/

FEW Analysis Heatmap

JPY Weak AUD Weak CAD Mixed

What Do I Do Now?

I have analyzed currency pairs using MTFA.

I found a currency pair in a strong uptrend.

Parallel & Inverse verifies the Direction.

The difference between short term and long term resistance is 300 pips.

I have a price alarm set at short term resistance.

How Do I Enter Trades?

You enter trades with the Forex Heatmap®

In the MAIN trading session

The Forex Heatmap®

Visual map of Parallel and

Inverse at entry

The Forex Heatmap®

Main Goal at the beginning is to Learn to:

Master it!

When Do I Enter Trades?

How Do I Enter Trades?

The Forex Heatmap®

Monitors 28 Pairs in Real Time

Measures Movement of Currency Strength and Weakness

Lesson 15 - The Forex Heatmap

What the Heatmap Does NOT Do

Does NOT know the direction of or if a Trend exists

Does NOT know strength or quality of the Trend

Does NOT know if the movement has just started

Does NOT know if the pair moved hundreds of pips already,

Does NOT plan a trade for you.

Does NOT know where support or resistance is.

Does NOT know if news drivers are coming out.

What the Heatmap Does Do

Tells you which individual currencies are strong or weak or mixed.

Point you to additional trading opportunities in the same P&I group of pairs that you may have not considered during the planning process.

Anatomy of the Heatmap

Arranged by 8 individual Currencies

All pairs are represented twice

Strong on All Pairs

Separated into 2 Sessions

Current time in GMTNEXT reset to zero (countdown timer)

Refreshes every 30 seconds

Change in price shown in percentage

Visual Bar showing price change direction

% Change and Bar Graph Move Together

Highest % UP and Down

Biggest mover UP (over.25) Gets green Arrow

Biggest mover DOWN(over.25) Gets red Arrow

% change is based on the currency pair price movement

0.25% move up

EUR/USD current rate = 1.3330

1.3330 x 0.25% = 33 pips of movement

33 pip move on EUR/USD

33 / 1.3330 = 0.25%

1.00% move on GBP/CAD

GBP/CAD current rate = 1.6263

1.6263 x 1.00%(.01) = 162 pips of movement

162 pip move on GBP/CAD

162 / 1.6263 = 1.00%

Price Rising = Green Bar

Price Rising = % Rising

Price Drop = Red Bar

Price Drop = % Drop

The only thing that DRIVES price and price movement

EUR Strong CAD Weak

EUR/CAD

CAD STRONG EUR WEAK

EUR/CAD

EUR/CADEUR and CAD are BOTH Strong or BOTH Weak

JPY Strong on All Pairs

EUR/JPY

Slingshots

Slingshot GBP/AUD

Mixed Signals

Simply don’t trade!!

The Forex Heatmap is a GO

or NO Go indicator.

Heatmap Supplemental Trades

Point you to additional trading opportunities in the same P&I group of pairs that you may have not considered during the planning process.

Points you towards that you may not have anticipated based on the trend analysis and trade planning process. (Warning!)

Heatmap Supplemental Trades

Don’t Fall into the trap of only trading Heatmap Signals!!!

Use it for what it was designed for.

Heatmap Scenarios

The GBP/JPY is consolidating and starts a fresh movement, but only the GBP is strong, do you take the trade??

Generally speaking yes because it’s a fresh move starting after a consolidation, check the charts for next resistance point.

Heatmap Scenarios

Some news comes out and a price alarm hits, you see a strong EUR and the EUR/JPY has a fresh moving average cross trend on the H4 chart, do you take the trade??

Yes, if there is no nearby resistance.

Heatmap Scenarios

The EUR/CHF is consolidating but in a strong downtrend, the D1 and W1 timeframes are separated with no support, a fresh down cycle starts through support, the EUR is weak and the CHF is neutral. Do you enter the trade??

Yes, the trend is strong and the pair was consolidating so likely no slingshot is required.

Heatmap Scenarios

You check the heatmap in the main session and the EUR/CAD is a slingshot with EUR strong and CAD weak. You check the H4 and it is separated with no resistance. Do you take the trade??

Yes, most definitely.

Heatmap Scenarios

The AUD/JPY starts to move in the Asian session and moves 225 pips overnight, do you buy it in the main session if the heatmap signals are good??

No, definitely not, too deep into the move, it has been moving for 12 hours, you missed it.

Heatmap Scenarios

If the Heatmap gives you an unexpected or supplemental trade in the main session that is a slingshot look straight at H4 chart, if the trend is good and there is no support or resistance, would you trade it??

Yes. This is a real timesaver because you look at one timeframe to assist with your trade decision.

Heatmap Scenarios

You have a fresh or developing intermediate uptrend (D1) on the USD/JPY with some very minor resistance nearby. In the main session the USD is strong but the JPY is neutral, do you take the trade.

Yes, you have a fresh trend on a larger time frame.

Money Management

Very important IF you need it.

Do NOT need it if - The forex trading system you are using does not work and consistently give you positive pips with demo trades

Do NOT need it if - The forex system you are using works at making pips but you are not applying the system correctly or as designed and using it your own way then you will not consistently see positive pips

Loss Management – Keeping you from losing your money slower.

Money Management

Very important IF you need it.

NEED IT - If the forex system you are using works and you are using the system correctly you will consistently see positive pips. Need profit management.

Profit Management - manage the profits and the occasional small losses or break even stop outs

Good Money Management

•Having a system that works•Paper Trading (Demo) - Not as exciting as losing real money•Adjusting your risk to fit market conditions•Gaining Knowledge - Not Gambling - DTH

Knowledge Reduces EGO

If You Do Not Know?

Do NOT Trade with real money!!

Manage an Entry

1. Placement of your initial stop order2. Moving your stop order up to breakeven 3. Closing out or scaling our profitable lots as the trade proceeds into profitability.

Lesson 29 Part 1 - Profit Taking TechniquesLesson 29 Part 2 - Profit Taking TechniquesLesson 7 - Forex Trading Tips

Manage an Entry1. Placement of your initial stop order.

20-40 PipsORLows or Highs on smaller timeframes

Initial Guidelines

Manage an Entry1. Placement of your initial stop order.

20-40 PipsORLows or Highs on smaller timeframes

Initial Guidelines

Manage an Entry

2. Moving your stop order up to breakeven

•Time•Time of Day•Price Alarms•Set pip amount

Manage an Entry3. Closing out or scaling our profitable lots as the trade proceeds into profitability.

Profit Management

Profit Management Rule of Thumb

Close out half of your profitable lots.

Letting the rest of your lots ride to see there the trend takes the pair.

Money Management

Money Management Ratio

Minimum of +2:1 ( can reach +20:1)

Calculated in planning process

Scalpers are -3:1

Consolidation Cycles

Learn to recognize the most common types of consolidation and retracement cycles that occur

Helps with stop placement

Helps to hold on to trends longer

Consolidation Cycles

If a currency pair is consolidating or resting (moving sideways) for a good period of time, then movement starts, it tends to keep moving.

Hold on to trends longer

Profit Taking Based on Time of Day

If you choose to close out a portion of your lots after a strong move you can do so at the end of the USD session in a time window of 11:00 - 12:00 noon EST plus or minus 30 minutes.

Profit Taking Based on TRENDS

If you buy the EUR/JPY, for example, and all of JPY pairs are trending upward on the D1 time frame, then it is best to hold onto your EUR/JPY trade. Why would you exit??

Incorporating the trend into your thinking as to how to exit a profitable trade and using the D1 time frame for these decisions to hold. If you drop down to the H4 time frame you are looking to swing trade only for 2-4 days.

Profit Taking Based S&R

If you spot the next major resistance and the pair you bought is approaching this price or stalling near this price, it would be wise to scale out additional lots or possibly all of your lots.

Profit Taking P&I

If P & I is strong in whole group, Hold Longer.

If P & I is changing, Take profit.

Profit Taking P&I

Use the Heatmap??

Tells you to get in trade but can also tell you when to exit.

After a couple days if the Heatmap has slingshot the opposite direction. Take Profit

Help Avoid Stop Outs

Veteran Traders only!

After you use the “rule of thumb” to take profits,Put your stop on remaining lots equal to the amount of profit taken.

Ref:Lesson 29 Part 2 - Profit Taking Techniques

Deeper stops

“Guaranteed no-loss method of running deeper stops”

Other Profit Taking Techniques

Price alarms and Partial Limit orders

Trend Trader

Ultimate goal as a trend trader is to trade the larger time frames like D1 and W1 and just ride the major trends of the market, when those trends present themselves.

if the market is not trending you must shift your profit taking to shorter term moves

You cannot control the market only your own analysis and behavior towards the current market condition and what is presented to you today.

Trend Trader

You can tell yourself you want to be a trend trader or you can actually do it with micro lots and prove that you are.

In Order To Trade The Spot Forex

You need to know the direction of the Trend.

You need to have a valid entry point

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