Boris and Kathy's FX Blog www.bktraderfx.com
12/05/2006
Today's Email Alert:
High Probability Setup
We are off to Vegas and hope to see some of you there this week-end. As you can imagine we’ve been very busy and haven’t had much chance to trade. We’ll be back at our desks next week and hope to start sending you trade ideas again.
In the meantime lets take a look at something we were watching today – which is one of our favorite setups because it is such a high probability trade. The funda retrace setup.
See Chart
Overnight we had very positive news on the yen as a slew of Japanese officials commented on the possibility of December rather than January hike. This was big news. In fact one of the key to understanding the yen is that the currency trades much more on official commentary rather than economic data. That’s why so many traders – both technical and fundamental have such a hard time handicapping the unit. It doesn’t follow logic – it follows rhetoric.
In any event the overnight news caused a major move down. But how to trade it? Especially if you only came into the market during the US session and were afraid of bottom ticking the pair. Enter one of our favorite setups – the funda retrace. With fundamental news at our back we waited patiently for the pair to bounce. It did, after the better than expected ISM Services. At this point however, we let the technicals do the talking. We had a buy bias on the yen – but weren’t about to guess the turn. Instead we waited for counter trend move to exhaust itself on the hourlies. At 1 PM EST (18:00 GMT) the pair finally printed a red candle. Going short on the close would have gotten you into the trade at 115.00. Risk was to 115.40 because if the pair had rallied that far up chances were that the market turned pro-dollar once again speculating that US data would be positive rest of the week. Looking at the chart you can see that we would have made our T1 at 114.80. Whether the trade makes it to T2 near the day’s lows remains to be seen. But as a high probability low risk setup – the funda retrace is one of our favorite trades. The key however is to let the price action govern your entry rather than blindly following your directional bias.
High Probability Setup
We are off to Vegas and hope to see some of you there this week-end. As you can imagine we’ve been very busy and haven’t had much chance to trade. We’ll be back at our desks next week and hope to start sending you trade ideas again.
In the meantime lets take a look at something we were watching today – which is one of our favorite setups because it is such a high probability trade. The funda retrace setup.
See Chart
Overnight we had very positive news on the yen as a slew of Japanese officials commented on the possibility of December rather than January hike. This was big news. In fact one of the key to understanding the yen is that the currency trades much more on official commentary rather than economic data. That’s why so many traders – both technical and fundamental have such a hard time handicapping the unit. It doesn’t follow logic – it follows rhetoric.
In any event the overnight news caused a major move down. But how to trade it? Especially if you only came into the market during the US session and were afraid of bottom ticking the pair. Enter one of our favorite setups – the funda retrace. With fundamental news at our back we waited patiently for the pair to bounce. It did, after the better than expected ISM Services. At this point however, we let the technicals do the talking. We had a buy bias on the yen – but weren’t about to guess the turn. Instead we waited for counter trend move to exhaust itself on the hourlies. At 1 PM EST (18:00 GMT) the pair finally printed a red candle. Going short on the close would have gotten you into the trade at 115.00. Risk was to 115.40 because if the pair had rallied that far up chances were that the market turned pro-dollar once again speculating that US data would be positive rest of the week. Looking at the chart you can see that we would have made our T1 at 114.80. Whether the trade makes it to T2 near the day’s lows remains to be seen. But as a high probability low risk setup – the funda retrace is one of our favorite trades. The key however is to let the price action govern your entry rather than blindly following your directional bias.
posted by BKTrader # 12/05/2006 07:19:00 PM 
Archives
09/2006 10/2006 11/2006 12/2006 01/2007 02/2007 03/2007 04/2007 05/2007 06/2007 07/2007 08/2007 09/2007
