Hello LYN traders,

Just to share my reading on "Day Trading the Currency Market" by Kathy Lien.

---------------------------------------SNIP-------------------------------------------------------------
FADING THE DOUBLE ZEROS
One of the most widely overlooked yet lucrative areas of trading is market
structure. Developing a keen understanding of micro structure and dynamics allows
traders to gain an unbelievable advantage and is probably one of the most reliable
tactic for profiting from intraday fluctuations. Developing a feel for and
understanding of market dynamics is key to profitably taking advantage of short-term
fluctuations. In foreign exchange trading this is especially critical as the primary
influence of intraday price action is order flow. Given the fact that most individual
traders are not privy to sell-side bank order flow, day traders looking to profit from
short-term fluctuations need to learn how to identify and anticipate price zones where
large order flows should be triggered. This technique is very efficient for intraday
traders as it allows them to get on the same side as the market maker.
When trading intraday, it is impossible to look for bounces off of every support
or resistance level and expect to be profitable. The key to successful intraday trading
requires that we be more selective and enter only at those levels where a reaction is
more likely. Trading off psychologically important levels such as the double zeros or
round numbers is one good way of identifying such opportunities. Double zeros
represent numbers where the last two digits are zeros—for example, 107.00 in the
USD/JPY or 1.2800 in the EUR/USD. After noticing how many times a currency pair
would bounce off of double zero support or resistance levels intraday despite the
underlying trend, we have noticed that the bounces are usually much bigger and more
relevant than rallies off other areas. This type of reaction is perfect for intraday FX
traders as it gives them the opportunity to make 50 pips while risking only 15 to 20
pips.
Implementing this methodology is not difficult, but it does require individual
traders to develop a solid feel for dealing room and market participant psychology.
The idea behind why this methodology works is simple. Large banks with access to
conditional order flow have a very distinct advantage over other market participants.
The banks' order books give them direct insight into potential reactions at different
price levels. Dealers will often use this strategic information themselves to put on
short-term positions for their own accounts.
Market participants as a whole tend to put conditional orders near or around the
same levels. While stop-loss orders are usually placed just beyond the round
numbers, traders will cluster their lake-profit orders at the round number. The reason
why this occurs is because traders are humans and humans tend to think in round
numbers. As a result, take-profit orders have a very high tendency of being placed at
the double zero level. Since the FX market is a nonstop continuous market, speculators
also use stop and limit orders much more frequently than in other markets. Large
banks with access to conditional order flow, like stops and limits, actively seek to
exploit these clustering of positions to basically gun stops. The strategy of fading the
82
double zeros attempts to put traders on the same side as market makers and basically
positions traders for a quick contra-trend move at the double zero level.
This trade is most profitable when there are other technical indicators that
confirm the significance or the double zero level.
Strategy Rules
Long
1. First, locate a currency pair that is trading well below its intraday 20-period
simple moving average on a 10- or 15-minute chart.
2. Next, enter a long position several pips below the figure (no more than 10).
3. Place an initial protective stop no more than 20 pips below the entry price.
4. When the position is profitable by double the amount that you risked, close
half of the position and move your stop on the remaining portion of the trade to
breakeven. Trail your stop as the price moves in your favor.
Short
1. First, locate a currency pair that is trading well above its intraday 20-period
simple moving average on a 10- or 15-minute chart.
2. Next, short the currency pair several pips above the figure (no more than 10).
3. Place an initial protective stop no more than 20 pips above the entry price.
4. When the position is profitable by double the amount that you risked, close
half of the position and move your stop on the remaining portion of the trade to
breakeven. Trail your stop as the price moves in your favor.

-------------------------------------------------------------SNIP--------------------------------------------------



Regards,
BULKBIZ

Ok.
So now Eur/Usd went down. so that means USD get stronger isn'nt it? USD now use lesser money to change Euro. Am i rite?

SO now unemployment release, but then Eur/Usd go south.

Jeff so u mean if money wen to bonds / treasuries, USD will get stronger?

Correct coz now have many uncertainty so people will switch to more reliable currency USD and JPY
That what make them increase in value.

Yes. People still see the Treasuries as a safe haven, despite Fed cutting rates and starting to print money (since China ain't borrowing). The stronger the US$ gain now, the greater it'll fall, pretty soon. We know China and Japan are the top holders of US debts, by the time they ask back for the money, will be the time USD to fall very BIG.

Just my view, not necessarily accurate

China has already mentioned they wont be buying too much treasuries in the near future.

Don't expect C and J to claim their money from U sooner or later.
Coz they know the situation and it will not benefit both party if they claim it at current situation.

China wont sell the T bills it has now, just slow down the purchase of T bills. Why would you want to finance a country that has leaky pockets?

hmm... EU seems extremely bearish on the daily and weekly outlook. Perhaps an initial gain to 1.3670/80 first before falling back down?

hmmm..

Jeff, don't worry, just a temporary setback for eU, its going to shoot up to 1.55

Oil News

http://www.cnbc.com//id/28605200

Dunno y, I juz cant get into sleep. My eyes open so big when I lie on my bed. ZZZ I wan sleep

This post has been edited by mphpopular: Jan 12 2009, 02:35 AM

UJ

We break the TL that day. AndI observe. The market only retrace up to 61.8% from the previous BULL move. If it break down the 61.8Fibo (70.09), then we might revisit previous LOW again.

Beside, SToch oversold.

This post has been edited by mphpopular: Jan 12 2009, 11:16 AM


Attached thumbnail(s)

Just to add Devin also points that we now hav a higher high and higher low to create an uptrend channel...

I agree with him on this.

On the side note, by looking at this chart, if u take tht fibo and use as a retracement tool, 61.8% also shows that there is little strength for uj to move upward IF it even move up. The retracement from the drop is just too much. A very short term upward move is therefore probable but not sustainable imho, thus creating a LH. Once the upward move created enough OB on the SToch we might see it nose dive once again.

So just becareful when trading this pair. This is however purely TA base tho.

This post has been edited by WhitE LighteR: Jan 12 2009, 11:35 AM

hi guys, i am interested to be a forex trader. so far i have read a few things but i couldnt understand some of them. how did u guys manage to get to feed on the knowledge and how long did it take to u guys to get into live account? =D thanks in advance for the advice/s.

Hi people, any idea about GBP/JPY ?

Read alot from online and also e-books..
It takes 3-6 month on demo before you can go live... this time should be used for you to test out all those strategy you've read and see which one suit you best. From there you can create one strategy which suit you the best and even create your own if you feel like it. Once you can book consistent profit, only than you are ready to play with real account. Even with real account you need to start slow and small. Coz the psychology of playing with real money is dif... in short.. u will get greedy can kill youself.

It takes ages....decad...joking!!!!!

Just go to www.babypips.com and start learning!! Take the quiz and understand all the trading concept. Trading with real money is not a problem as long as you have money.

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Added on January 12, 2009, 7:26 pmno idea

This post has been edited by bulkbiz: Jan 12 2009, 07:26 PM

vomit blood. profit hit SL on EU...luckily it's a +pip SL...hm...to remain consolidated until ECB's new rates?

LOL, small jeff. I still observing. Found no opportunity. Boring

look into smaller TF, entry upon higher high or lower low. however, this is not for big pips though.

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Added on January 12, 2009, 10:45 pmwarning: equities moving down, treasuries up, bund down.

This post has been edited by small-jeff: Jan 12 2009, 10:45 PM

Someone is asking me what "Leverage" means... how do i going to answer???