October 6, 2015Daily Analysis

10/6 Analysis: Timing Is Critical

Timing Is Critical

Today, I’m going to show you why timing is so critical to your trading success. A couple minutes into the London open, the NZD (purple line) which has been strong all day is now moving steeply up indicating current momentum in the market. The GBP (red line) which has been weak for some time has a steep line down also indicating momentum.

This is exactly what we look for.

BUT…only 60 seconds later, this is our indicator…

Now, the NZD and GBP are very steep which means there is a ton of momentum happening right now in the market. If we look at the price chart, we see this…

100615 LondonTrade

So the 2nd red line indicates when it was real obvious on our indicator that this move was happening. It’s the 2nd screenshot from above. From here, price went down 20 pips. If you consider the spread, you probably would not have hit your 20 pip profit target and this would be a losing trade.

However, if you would have entered even half way down this price bar when we first identified the move, the pair went down 30 pips from that point and it would have been a winning trade.

The difference? TIMING.

Watch the entire video analysis below:

[00:00 – 06:15]

[slide]              [yellow high turning down, green / orange weak turning up]

                        Hello, I’m James Edward from CompleteCurrencyTrader.com. Welcome to today’s Currency Strength Analysis training video and, today, I have an example which will demonstrate (I hope) the importance of timing and quick decision making. This is the indicator available on my Web site at the London Market Open today, so that’s 8 A.M. London time.

And, if you do your initial analysis, which, remember, is looking for strong currencies which are continuing to strengthen and matching those against weak currencies which are continuing to weaken. Right now, at the Open, you don’t have any valid entries because the strong currencies are (actually) turning back down to weakness and the weak currencies are turning back up to strength. So in this situation right at the start of the Open, you shouldn’t really do anything.

Your job is just to sit there and watch what happens next and anticipate potential moves in the Market. Now, if I fast forward–

[slide]              [2nd view: 6 min rt, orange / red / green basement, lilac / purple / blue up]

(continues)… through to just six minutes, we get this situation develop[ed].

So what you have now is the (red) British Pound (GBP) is the most obvious one for me because it’s been weak over the last hour leading up to the Open and, within the first six minutes of the Market, right now, it is turning down very, very steeply.

There are quite a lot of currencies that are suddenly moving quite steeply: you have the (purple) U.S. Dollar (USD), the (yellow) Japanese Yen (JPY), (orange) AUD, (pink) Euro (EUR), (blue) Swiss Franc (CHF), as well, but right at the top (here) [indicates] you have the (lilac) New Zealand Dollar, so those are the two stand-out currencies for me. The (lilac) New Zealand Dollar moving up very steeply and is, now, the absolute strongest currency and the (red) British Pound (GBP) which is moving down to weakness very steeply and is, now, the absolute weakest currency.

Now, remember, this is six minutes after the London Market has opened and this would’ve been your first sign [points generally along right] that something is happening and you have a potential trade entry.

And if I fast forward it through–

[slide]              [3rd view: 7 min rt, lilac shoots up, green / red / purple / yellow down]

(continues) … just one more minute, this is how it developed. Over that six to seven minutes after the Open, this is the pattern that you see. And, right now at the seven minute point (or the end of the six-minute point) it is even more obvious.

So the (red) British Pound (GBP) has really moved down to weakness here and look how steep and far out on its own the (lilac) New Zealand Dollar is. So over that period between–

[slide]              [previous 2nd view: 6 min rt, orange / red / green dive, lilac / purple / blue up]

(continues)… the six-minute price bar and–

[slide]             [3rd view: 7 min rt, lilac shoots up, green / red / purple / yellow down]

(continues) … the seven-minute point in the Market, you have that development between the initial signal that something is really happening–

[slide]              [previous 2nd view: 6 min rt, orange / red / green dive, lilac / purple / blue up]

(continues)… and this point where you have absolute confirmation. That is why it is important–or, if I go over to the chart you’ll see why it is important–to remain focused, recognize these moves as soon as they start to happen, make a very quick, sound decision based on the information that’s available to you and pull that trigger as soon as you are happy that it is a valid burst of momentum that is getting you into a break-out trade after the Open.

[slide]              [B&W vertical line GBPNZD.MS]

(continues) … The reason that’s important is this is the (red) British Pound (GBP) against the (lilac) New Zealand Dollar (N-Zed-D) on the five minute charts. And this price bar [points longest / lowest] coincides with the pattern I’ve just shown you on the indicator. And I’ve market two red lines [abt an inch wide] where the top red line (here) [points top same line] is the Open of the six-minute price bar. So this is exactly six minutes into the Market and this is when the six-minute price bar closed. [indicates lower red line]

So this move, here, [draws pointer along same bar betw two red lines] which is over 20 pips–(it’s over 22 pips in total) happened over a one minute period. Sixty seconds for price to go from here down to there [points] and, during that time, you’d have been watching the–

[slide]              [previous 2nd view: 6 min rt, orange / red / green dive, lilac / purple / blue up]

(continues) … indicator develop from this–

[slide]              [3rd view: 7 min rt, lilac shoots up, green / red / purple / yellow down]

(continues) … to this–

[slide]              [previous B&W vertical line GBPNZD.MS]

(continues) … and you’d have seen this price bar obviously move down 22 pips. And here’s why that is important: if you work on a worst-case scenario, that you entered at the lowest point (which is this red mark [creates cross pt] here), [draws diag line to lowest pt] the price in total has only just barely gone 20 pips. (It is 20 pips exactly by that measurement.)

Now, of course, what that means is with the spread included you may not have quite reached your profit target. You have a 20-pip profit target. You may not have quite got[ten] there. And, you may have actually ended up with either just  slightly less than a break-even trade or you went to just very, very small loss. Remember, you’re using a trade-in stock so, as the price moves down 20 pips, your stop-loss would’ve closed up 20 pips so your stop-loss would be now roundabout your entry point. Then, of course, the Market has reversed and you would’ve been stopped out.

You’d have been stopped out for very small loss, maybe one or two pips. However, if you’d been a bit quicker with your reactions and you’d recognized this move as soon as it started [points top center longest bar] to happen, you could’ve got[ten] in at any point along this top red line and the bottom red line. And, had you done that–had you got in, let’s say the halfway point (here) [diag line to below lowest pt], then, of course, you would’ve very easily reached your profit target because the price from there’s gone 30 pips in total. So you would’ve hit your 20-pip profit.

And that is why it is important and it does make a difference how quick you are–

[slide]              [3rd view: 7 min rt, lilac shoots up, green / red / purple / yellow down]

(continues) … at recognizing these moves. And it should make a difference how quick you are at recognizing these moves like this. [points far rt] This should be the first thing that catches your eye and you should be able to, with experience, make a very quick decision based on the information available to you, decide which one of these currencies best use the probability of success and then, as quickly as you can before the price gets to this really obvious point.

And that makes the–

[slide]              [previous B&W vertical line GBPNZD.MS]

(continues) … difference between you entering somewhere up here [points top 3rd longest line, ctr] or right down here [indicates just below bottom red line] and that can be the difference between a profit and loss. And, remember, anything can happen at any given moment in the Market and, as you can see, here, after that burst of momentum, which pushed the price down this distance, [indicates lower part same bar] the Market did then reverse. So if you are trading that in a break-out strategy and you’re trying to get those 20 pips quite quickly, which is exactly what we are trying to do with a break-out strategy, you do need to be very alert and–

[slide]              [3rd view: 7 min rt, lilac shoots up, green / red / purple / yellow down]

(continues)… paying attention to what is happening over here, and able to make very quick decisions that can get you into those break-out trades as quickly as possible.

[end]

(6:15)

You can see that our Currency Strength Indicator is an effective tool for picking out the highest probability, lowest risk trade set ups while avoiding market conditions that aren’t favorable. If you keep using this tool every day along with our daily Forex analysis, you will increase your win rate and be on your way to becoming a profitable trader long term.

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James Edward
James Edward has been a successful Forex hedge fund manager & educator for over a decade. He founded Complete Currency Trader, a London based firm that has consistently trained individuals to become professional and profitable traders long term using the individual currency strength analysis methodology. CCT is an elite Forex educational firm and has a reputation second to none with over 90 positive reviews and an overall 4.538 out of 5 rating on the third party verification site Forex Peace Army. James’s affable personality, expert knowledge, notoriety for getting results, and steadfast dedication to his clients, has secured his position as one of the most trustworthy, liked, and in demand authorities in the industry.