May 26, 2015Daily Analysis

5/26 Analysis: Minimizing Losses

The USD (blue line) is the strongest currency and getting stronger while the Japanese Yen (yellow line) is the weakest. This should be obvious just by looking at the Currency Strength Indicator.  However, and this is where developing your skills over time and being able to interpret what you are seeing is so important, even though the YEN is the weakest, it’s not getting weaker. Look at how the line is drifting upward, we instead want to see this going steeply downward.

So at this point in the London session, there are no trades that meet our criteria. So the important thing about this indicator is not only does it allow you to pick out the highest probability, lowest risk trade set ups on a regular basis but it also tells you when to stay out of the market which is just as critical for your overall performance.

However, let’s fast forward just 17 minutes into the London session…

Now, look at the USD (blue line), its strong and getting stronger but the steep line up at the far right indicates momentum in the market. The AUD (orange line) is weak and getting weaker with a really steep line going down on the far right.

The steepness of those lines on the far right IS your trigger because it’s an indication of what’s happening right NOW in the market.

  • AUD/USD SELL

Let’s look at the trade and I’ll point out the advantage of trading strength against weakness.

This large price bar matches the move we saw on the Currency Strength Indicator (above). I entered about half way down. What happened was the pair did initially continue down but then reversed and went sideways for an hour and a half before finally stopping me out.

What’s important to note here is that because of the initial momentum and picking the correct currencies to trade, I was able to only lose 4.3 pips even though my initial stop loss was set at 24 pips. So, we are often times able to maximize our gains while minimizing the losses. When you do that consistently over time, you will be a profitable trader.

Watch the entire video analysis below:

You can see that our Currency Strength Indicator is an effective tool for staying out of the market when there isn’t a strong trend present and also for minimizing losses when a trend reverses. 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.