Trading - Forex Trading Strategies - Cashing in On Short Term Currency Trends
Trading - Forex Trading Strategies - Cashing in On Short Term Currency Trends
Trading - Forex Trading Strategies - Cashing in On Short Term Currency Trends
TRADING Strategies
Cashing in on short-term
CURRENCY TRENDS
Stochastic refresher
refresher, right).
Step 1: Identify a trend. Compare the
moving averages on the 10-minute and
hourly charts. A trend is in effect when
price is consistently above/below the
moving averages on both charts.
Step 2: Pinpoint entry. Once youve
identified a trend, look for the following
two conditions at the same time on the
10-minute chart: 1) the market is no
more than 20 points above (to buy) or 20
points below (to sell) the moving average; and 2) the fast stochastic line crosses above the slow stochastic line below
20 (to buy) or crosses below the slow
stochastic line above 80 (to sell).
These conditions indicate: 1) the currency is currently in a short-term
uptrend or downtrend; and 2) the currency has paused or pulled back (reflected by the higher low stochastic reading
and the fact that price is within 20 points
of the moving average) and is poised to
turn (because the fast stochastic line is
crossing back above or below the slow
line).
Step 3: Ride the trend. Set a trailing
stop after the initial trade entry. On a
long position, enter a stop-loss order 10
points below the 200-period moving
average on the 10-minute chart. In the
case of a short position, place the initial
stop 10 points above this moving average. As the trade goes in your favor, raise
(for a long trade) or lower (for a short
trade) the stop to protect profits. For
simplicitys sake, the following examples use a trailing stop 25 points from
each new top or bottom. The charts in
the next section illustrate the application
of this strategy in two currency pairs.
0.9950
0.9925
0.9900
0.9875
0.9850
Stochastic crosses below 20
0.9825
0.9800
0.9775
80
Although
the basic
probabilities
work against
traders who try
to exploit
trends, the
potential
rewards can be
worth the risk.
40
5:40 9:10 13:10 17:10 20:30 23:50 3:10 6:30 9:50 13:10 17:00 20:20 23:40 3:00 6:20
6/26
6/27
6/28
Source: Gain Capital
124.8
124.0
123.2
122.4
121.6
120.8
120.0
119.2
118.4
117.6
60
30
120.25
120.00
119.75
119.50
119.25
Stochastic crosses above 80
119.00
118.75
90
60
30
Quoting currencies