Inside the Trader's Mindby Jimmy Young

Cashed in a $9.50 Binary for $92.50. Nice start to the week

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  1. Saw the pattern of a bullish USDJPY trading gradually higher in successive trading ranges
  2. Bought the 109.64 09:00 binary option for $9.50 at 08:00 just before the dip below the trading range
  3. Was thinking after it dipped I should have waited for the MACD trap and bought it cheaper or bought a slightly lower strike for the same price
  4. Turned out the MACD trap was set much earlier (see arrow) so that thinking was not right
  5. Got the pop I was looking (USDJPY moving to a new higher trading range) and closed the trade at $92.50
  6. Could easily have waited for $100 (another 10 minutes) but my emotions overtook me (still working on that)

Here is how the chart played out:

 

 

 

 

 

 

 

 

 

 

 

 

 

If you would like a word doc with the details of the trade step by step send me an email at jimmy@eurusdtrader.com

The MACD Trap

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I listened to a YouTube video that said the high frequency traders fool the retail traders by “gaming” the MACD. I found this interesting and decided to look into it.

MACD stands for Moving Average Convergence Divergence.

The typical retail trader uses MACD to get “signals” and has little or no idea what the MACD actually is or does.

Here is what makes up the MACD signal:

  1. The MACD LINE
    1. this is the difference between two exponential moving averages (emas); the default emas are 12 and 26
  2. The SIGNAL LINE
  1. This is a 9 period simple moving average of the MACD line

Here is how it works:

  • BUY when the MACD LINE goes above the SIGNAL LINE
  • SELL when the MACD LINE goes below the SIGNAL LINE

Some traders prefer a HISTOGRAM that plots the variance between the MACD LINE and the SIGNAL LINE

Here is how it all looks at the bottom of the chart:

 

 

 

 

 

 

 

 

The “trap” might possibly be the SELL “signal”:

 

 

 

 

 

 

 

 

Followed by apparent “range buying” and then a bullish continuation:

 

 

 

 

 

 

 

 

You can see how the buying went from the bottom of the range to the middle of the range to the top of the range; and then the breakout…

Great YouTube Videos on Trading Psychology

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I was impressed with Rande Howell on YouTube. Really good stuff. My live trading room responded very favorably when I pointed out Rande to them. Might be worth a YouTube search and watch.

On another note; its amazing how Rande’s YouTube videos have 1,000 plays and “how to make $5,000 in 5 minutes trading blah blah blah has 50,000 plays; are people really this gullible?

Best Forex Strategies for August-December 2017

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  1. The US dollar is down 5-10% so far in 2017 versus AUD NZD CAD GBP EUR and JPY. Expect the USD bearish trend to continue.
  2. Week to weak the USD seems to be up one week and down the next; but when view on a month to month or quarter to quarter basis, the USD bearish trend is clear and consistent.
  3. The fundamentals are confusing, erratic and not helpful. Expect that to continue as well. I choose to ignore the fundamentals except…the news releases.
  4. The Tier 1 news releases (employment, CPI, retail, sales, GDP, monetary policy statement, and Central bank press conferences) are giving strong directional price moves; ignore the news itself and go with the direction of the price action right after the news is released.
  5. Technically, there is good follow through (20-30 pips minimum) each time the USD makes a new 2017 low for the year in any of the major pairs (AUDUSD, NZDUSD, GBPUSD, EURUSD, USDCAD or USDJPY).
  6. There is a lot of sideways price action intra-day; making buying support and selling resistance a solid strategy

Good luck and happy trading

Jimmy Young

No More Free Lunch Around UK Economic News Releases

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I just read (July 8) that the Statistics office (ONS) will no longer prerelease the UK economic data to government departments from July 1st. This should eliminate the “correct” GBP moves in the minutes leading up to major UK economic news releases.
We may have seen a taste of that on Friday July 7th; very little GBP movement before the UK industrial production and then a sizable drop in GBP after the bearish news was released.
It was good while it lasted; once we got within thirty minutes of a key UK scheduled news events the price action was all one way in GBP and there was money to be made.

Chasing the Algorithms – Forex Day Trading in 2017

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Forex day trading has been a big part of my life for the past 35 years. I started out as an Institutional pound/dollar trader at European American Bank in 1982 (before computers and the internet). Since then I have made my living from Forex day trading (Institutional trader 1982-2004; independent trader 2005- 2017).

In my opinion, understanding how computers and the internet are influencing Forex day trading is as important as a good knowledge of technical and fundamental analysis.

Like it or not quality algorithmic trading programs can adapt to changing market conditions faster than us humans and can do so unemotionally (no “worry” hesitation for example) and without the mental biases (such as getting married to a trade idea and ignoring the obvious) that throw us human traders off course.

I can’t prove it but I suspect (based upon what I observe and what I read) that there are algorithms out there that can “sniff out” the big orders and front run them.

And many of the most important economic news releases (some countries but not all) seem to be finding their way into the market before the official release time; the UK key news releases seem to be consistently leaked these days. I base this on the price action observed before during and after the actual release and newspaper / internet articles I have read.

My final observation is bold but it makes sense to me and my gut tells me it’s real. I think the “big guys” whoever they are these days, use a combination of derivatives and cash trades to “influence” a particular currency pair for short periods of time (seconds to minutes and possibly an hour or more).

Here is a simple hypothetical example. Since 07:00BST the GBPUSD pair has moved up steadily from 1.2925 to 1.2975 and its now 09:00BST. Between 09:00 and 09:45 the GBPUSD has been oscillating between 1.2965 and 1.2975 (there seems to be resistance at 1.2975 and support at 1.2965 for short term day trading purposes). At 09:45 the GBPUSD is at 1.2975…

The “big guy” or “big guys” decide it’s a good time to make a “play”. Their first action is to buy 10:00 “one touch” 1.2950 binary puts (that means they make a bet (and get good odds) that the GBPUSD pair will trade at least once at 1.2950 between 09:45 and 10:00.

After they place their large bet at good odds, they go into the cash market and drive the GBPUSD pair down to 1.2950. By doing so they win their “derivative” bet. Some of the profits will be used to close out their short trade in the cash market. If done well they net a handsome profit.

To some of you this might seems too confusing to understand. For others it might seem too simple to work. For others it might scare them off from trading at all (the big guys control the market paranoia).

Savvy traders are asking the right question – how can this help me in my Forex day trading. The answer is you learn how to spot this type of thing and ride the coattails; how exactly to do that is the subject for a follow up article.

 

Jimmy Young

eurusdtrader.com