Index

market interest, 172–173 benchmark interest rates, • A • price action, 173 81–82 active trades tactical trading bid/cover ratio, 96 fi nancial markets and, considerations, 172–174 bids, 64 288–290 technical levels, 174 big fi gure, 64 market monitoring and, trading by the numbers, BIS (Bank of International 286–290 171–172 Settlements), 21, 47 news and data trading fundamentals, Bloomberg.com, 85, 103, 118 developments, 287–288 169–170 BOE (Bank of England), 137 rate alerts, 286–287 Australia, data reports, bond market active trading. See day 138, 170 forex market connection, trading Austrian dollar (Aussie), 169 32 adding to longs, 54 average daily trading range, government yields, 99 adding to shorts, 54 198–199 interest rates and, 107 ADP national employment Average Directional Index monitoring, 289 report, 125–126 (ADX), 242 The Book of Five Rings ADX (Average Directional averaging into positions (Musashi), 325 Index), 242 account size, 274 BRC (British Retail algorithms, 43 defi ned, 272 Consortium), 137 anticipation example, 273 breakout levels alternative outcome reversal setup, 276 identifying, 278 scenarios, 114–116 signs against, 274–275 time frame of, 280 event outcomes, 310 signs for, 275–277 trading retest of, 279–280 overshoots/false breaks, trade time frame, 273–274 breaks 162–163 , 274 defi ned, 277 ascending triangles, 213 duration of, 281 Asia-Pacifi c session • B • in entering positions, 278 Chinese news in, 24 false, guarding against, market moves, 25 backing and fi lling 280–281 opening of, 24 defi ned, 146 GBP/USD, 161, 162–163 trading in, 24–25 COPYRIGHTEDEUR/USD, 146, 148 MATERIALof sloping trend lines, assets taking advantage of, 148 237–238 market overlap, 29 Bank of England (BOE), 137 , risky versus safe, 99 Bank of International 205–206 AUD/USD. See also Settlements (BIS), 21, 47 in take-profi t objectives, currency pairs bar charts, 207 295 Australian events and base currencies, 53 trading, 277–281 data reports, 170 bear fl ags, 212 trading with stop-loss correlations, 168 bearish divergences, 223 orders, 278–279 defi ned, 51 bearish engulfi ng lines, 219 trend lines, 293 liquidity, 172–173 Beige Book, 131–132 USD/CHF, 161, 162–163 USD/JPY, 155

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British currency policy, 91 intervention, 91–94 Chicago Purchasing British Retail Consortium Monetary Policy Managers Index (BRC), 137 Committees (MPCs), 86 (PMI), 130 brokers. See forex brokers policy statements or China budget and defi cit guidance, 84–85 data reports, 138–139 forecasts, 134 public speeches, 85 growth outlook, 139 bull fl ags, 212 rate decisions, 84 news and data, 24 bullish divergences, 223 short term interest rate click-and-deal trading, 282 bullish engulfi ng lines, 219 infl uence, 83 closing positions business sector, 121 transparency, 84 market triggers, 301 business-level data reports, watching, 84–85 at right time, 302–303 130–132 changing market squaring up, 301–302 buying/selling conditions, failure to stop losses, 300 online, 282–283 adapt to, 317–318 taking partial profi ts, 299 retests, 280 chart analysis, 203 taking profi ts, 298–299 simultaneously, 49–50 chart formations. See also trailing stop losses, 300 when price is right, 303 basics, 211–214 CME (Chicago Mercantile • C • candlestick patterns, Exchange), 27 cable, 156 214–215 Come into My Trading Room Canada, data reports, consolidation and (Elder), 326 137–138 continuation patterns, commodity currencies, Canadian dollar (Loonie), 211 165–166, 167 166 defi ned, 210 Commodity Trading candlestick charts, 208–209 , 215–217 Advisor (CTAs), 43 candlestick patterns double tops and bottoms, concerted intervention, 93 defi ned, 214 211, 212 confi rmation, 206–207 features, 245–246 engulfi ng lines, 219 congestion zones formations, 214 fl ags, 212–213, 214 defi ned, 238 interpretation, 215 hammers, 217 in support and resistance trading on, 245–246 head and shoulders levels identifi cation, capital expenditures, 121 (H&S), 211–212 238–239 carry trades inverted H&S, 211–212, 213 consensus expectations defi ned, 177, 193 reversal patterns, 211 defi ned, 112 strategies, 193–194 shooting stars, 217, 218 role of, 112–113 cash market. See interbank spinning tops, 217, 218 consolidation market trading on, 210 counter-trend ranges, 275 CCI (consumer confi dence triangles, 213–214, 215 defi ned, 238 index), 126 tweezers top and bottom, zones, 204 central bankers 219, 220 consolidation and doves, 87 Chicago Mercantile continuation patterns, governments and, 45–48 Exchange (CME), 27 211 hawks, 87 consumer confi dence index infl ation and, 107 (CCI), 126

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consumer price index (CPI), commodity, 165–166, 167 price action, 141 123, 132 counter, 53 as relative values, 54 consumer sentiment, 127 higher-yield, 78 selection, understanding, consumer-level data interest rates and, 78–81 321 reports, 127–129 lower-yield, 78 in take-profi t objectives, consumption, 120 safe haven, 29 295 contingency planning, as trading vehicle, 11–12 technical levels, 110 267–268 currency fi xings U.S. dollar (USD), 51 contingent orders. See also defi ned, 27, 40 USD/CAD, 51, 166–169, orders month-end, 27 172–174 defi ned, 71 quarter-end, 27 USD/CHF, 51, 156, 158–163 as if/then orders, 71 setting the rate at, 27 USD/DKK, 176 OCO, 71–72 in trade-related hedging, 40 USD/JPY, 149–156 conventions, this book, 2–3 currency forecasts, 104 USD/NOK, 175–176 conversion, currency, 58 currency futures markets, volatility, 256, 281 core positions, trading 27–28 currency policies around, 192–193 currency markets currency stance versus, core reading, 123–124 asset market overlap, 29 88–89 correlation coeffi cients, forward, 38 defi ned, 87 167–168 fundamentals as driver of, Eurozone, 90 counter currencies, 53 12–13 Great Britain, 91 counter-trend consolidation geopolitics and, 97 Japan, 90–91 ranges, 275 intervention, 91–94 in long-term trends, 192 CPI (consumer price index), speculation in, 21 responsibility for, 89–91 123, 132 staying on top of, 320 Switzerland, 91 credit stepping back from, 321 United States, 89–90 default swaps (CDS), 96 technicals as driver of, 13 currency prices ratings, 95 currency pairs bid, 64 risk, gauging, 95–96 base currencies, 53 divergence cross-currency pairs counter currencies, 53 between, 243–245 AUD/USD, 51, 168–174 cross-currency, 51–53, offer, 64 defi ned, 51, 176 176–180 online brokerage EUR, 51, 180 defi ned, 50 display, 64 JPY, 51, 179–180 EUR/DKK, 176 routine fl uctuations, 272 popular, 176 EUR/JPY, 156, 176–177 spreads, 64–65 reasons for trading, EUR/NOK, 175–176 understanding, 63–64 177–178 EUR/SEK, 175 currency rates Sterling crosses, 51 EUR/USD, 51, 142–149, information affect on, trading, 176–180 157, 161 12–14 cross-rate movements, 178 fi ve digits, 57 interest rates and, 60 cross-trade opportunities, focus, 312 currency reserve 179 GBP/USD, 51, 156–158, management currencies 160–163 activities, 47 base, 53 major, 51, 141–163 defi ned, 45 buying and selling minor, 165–174 market prominence, 46 simultaneously, 49–50 NZD/USD, 51, 168, 171–174 currency reserves, 88

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currency traders current account balance, 134 industrial production and event/data, 190 current market capacity utilization, 131 fl ow, 38 buying at, 271–272 infl ation, 121, 132–133 forward, 38 selling at, 271–272 international, 135–139 option, 38 stop-loss orders, 69 ISM, 130 proprietary, 38 Japan, 136–137, 152 successful, habits of, labor-market, 124–126 309–313 • D • low-impact, 118 technical, 190 Danish krone, 176 market-moving, 124–135 currency trading. See also data monthly employment, 125 trades fi nding, 118 New Zealand, 138, 171 in Asia-Pacifi c session, history, 122–123 personal income and 24–25 prior-period, 123 spending, 127–128 on auto-pilot, 194–196 data reports regional Federal Reserve breakouts, 277–281 ADP national employment, indices, 130–131 defensive, 318 125 retail sales, 128 defi ned, 9–10 alternative outcome structural, 121–122, with discretion, 44 scenarios, 114–116 132–135 with an edge, 320–321 assessing from trading Switzerland, 160 in European-London perspective, 122–124 trade, 121, 133–134 session, 25 Australia, 138, 170 United Kingdom, 137, 158 fl oor, stepping onto, 38 Beige Book, 131–132 U.S., 124–135 in interbank market, 37–38 business-level, 130–132 weekly initial key daily times and Canada, 137–138, 169 unemployment events, 27–28 China, 138–139 claims, 126 leveraged nature, 2 consensus expectations day trading long-term, 191–194 and, 113 defi ned, 10, 44 mechanics of, 49–73 consumer sentiment, 127 as liquidity source, 44–45 medium-term, 189–191 consumer-level, 127–129 trading volumes and, 45 mistakes, 315–318 core reading, 123–124 dealing price, 64 in North American data miss, 114 debt auction results, 96 session, 25–26 durable goods orders, debt to GDP ratio, 95 online, rise of, 20 128–129 defensive trading, 318 preparation for, 310–311 Eurozone, 135–136 defi cits as serious business, 10 for EUR/USD, 144–145 as percent of GDP, 95 short-term, 187–189 expectations and, 111–112 structural, 192 as speculation, 9 GDP, 121, 133 as structural theme, 109 for spot, 20–21 government debt and trade, 121 statistics, 20–21 budget and defi cits, defl ation, 81 volumes, 20 134–135 delta hedging, 41 week, opening of, 23–24 headline reading, 123, 124 descending triangles, 214 currency values high-impact, 118 Directional Movement economic growth as housing market Indicator (DMI), 226, determinant, 107 indicators, 129 242 government infl uence discipline, trading, 196–200 on, 88

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discretionary trading elections, 97, 110 move decision, 147–148 funds, 44 : Key to patience, 148 divergences Market Behavior (Frost price gaps, 145 bearish, 223 and Prechter), 324 price jumps, 145 bullish, 223 emerging markets prolonged tests of defi ned, 223 defi ned, 21 technical levels, 147 price and momentum, with hyperinfl ation, 80 tactical trading 223–224, 243–245 stock performance, 99 considerations, trading off, 243–245 emotion, taking out of 147–149 DMI (Directional Movement trading, 196, 197–198 trading behavior, 145 Indicator), 226, 242 employment trading by the numbers, doji. See also chart indicator, 119 143 formations as structural theme, 109 trading fundamentals, defi ned, 215 engulfi ng lines, 219 142–145 double, 216–217 entry points, identifying, 263 trading GBP/USD signifi cance of, 216 EUR crosses, 180 alongside, 157 double tops and bottoms, EUR/DKK, 176 trading tick by tick, 145 211, 212 EUR/JPY event outcomes, double value dates, 61 example of, 176–177 anticipating, 114–116, doves, 87 as USD/JPY infl uence, 156 310 dovish, 113 EUR/NOK, 175–176 event/data traders, 190 durable goods orders, European Central Bank executing trades 128–129 (ECB) live, 65–67 mandate, 81 orders, 67–73 press briefi ngs, 139 execution traders. See fl ow • E • responsibilities, 90 traders easing interest rates, 82 European-London exiting trades. See closing economic data and session, 25 positions events, 104 Eurozone expansionary monetary economic growth data reports, 135–136 policy, 82 as currency value debt crisis, 94, 95 expectations determinant, 107 defi ned, 142 alternative outcome cycles, 192 EUR/SEK, 175 scenarios, 114–116 rates (GDP), 95 EUR/USD. See also currency consensus, 112–113 as structural indicator, 121 pairs consensus expectations themes, 107–108 backing and fi lling, 146, 148 and, 112–113 economics data reports and, 144–145 data miss, 114 business sector, 121 defi ned, 51, 142 forecasts and, 113–114 consumption, 120 leading indicators, 147, 161 leverage and, 252–253 for currency traders, liquidity, 143–144 managing, 198–199 119–122 margin of error on pricing in of, 291 labor market, 119–120 technical levels, 148–149 realistic, 318 structural indicators, reality check, 111–116 121–122

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Expert Advisors (EAs) stocks, 31–32, 290 regulating body, 267 back-testing, 196 U.S. Treasury yields variable spreads, 266 defi ned, 194 relationship, 289 Forex Insider, 190 emotion and, 196 fi nancial stability forex market. See also inputs for driving, 195 Great Financial Crisis currency trading possibilities, 195 (GFC) and, 94 as big picture market, 77 as rule-based trading metrics, 95 bonds and, 32 systems, 194 theme, 109 defi ned, 9, 19 expiring options, 27 fi nancial stops, 260 getting up to speed in, 102 exponential moving fi nancial transactors hours of operation, 19, average, 227 defi ned, 39 22, 60 extreme-point rule, 226 in forex market, 41 importance of, 41 importance of, 39 participants, 39 fi nancial websites, 79 spot in, 60 • F • fi scal balance, 122 stocks and, 31–32 false breaks, 280–281 fi xed spreads, 265 success in, 2 Federal Open Market fl ags. See also chart technical analysis in, 13 Committee (FOMC), formations trading characteristics, 184 115, 131 bear, 212 FOREX.com, 104 Fibonacci retracements bull, 212 forward currency market, 38 automatic drawing defi ned, 212 forward traders, 38 tool, 220 illustrated, 213 forward transactions, use buying based on, 264 measured move objective, in hedging, 40 calculation of, 220–221 213 four-day rollovers, 61 defi ned, 219–220 fl exibility, 310 fundamental analysis, illustrated, 221 fl ow information, 190 technical analysis in support and resistance fl ow traders, 38 versus, 185–186 levels identifi cation, 239 follow-through, 206 fundamental data reports, fi ll rate, 66 FOMC (Federal Open 117 fi nancial institutions, Market Committee), fundamental themes, currency trading 115, 131 106–110 desks, 23 foreign exchange market. fundamentals fi nancial levels, stop-loss See forex market basis of, 12 orders placed on basis forex brokers as currency market driver, of, 260 business models for, 12–13 fi nancial markets. See also 265–266 defi ned, 12 currency markets choosing, 265–267 bonds, 32, 289 commission-free, 266 gold, 30, 289 fi nancial risks of, 266–267 • G • monitoring, 288–290 fi xed spreads, 265 G7, 47–48, 89 oil, 30–31, 289–290 live streaming prices, 65 G20, 47, 48, 89 other, watching, 313 phone trades with, 67 risk, 256–257 risk sentiment, 29 practice accounts with, 34

229_9781118018514-bindex.indd9_9781118018514-bindex.indd 332332 55/31/11/31/11 33:31:31 PMPM Index 333

GBP/USD spreads, 135 holidays, value dates and, defi ned, 51, 156 government debt auctions, 61–62 as EUR/USD leading 135 horizontal support and indicator, 147, 161 Great Financial Crisis (GFC) resistance, 204, 238 false breaks of technical debts/defi cits in wake housing market indicators, levels, 161 of, 122 129 overshoots/false breaks EUR and, 46 anticipation, 162–163 fallout, 94 position size reduction, 162 global market • I • price action behavior, interconnectedness, 13 ICE (Intercontinental 160–161 global recession, 94 Exchange), 28 spike reversals, 161 lessons, 78 Ichimoku charts. See also tactical trading growth. See economic technical analysis considerations, growth defi ned, 227 162–163 illustrated, 228 trading alongside EUR/ for intra-day trading, 240 USD, 157 • H • lines, 227–228 trading by the numbers, hammers, 217 in support and resistance 157 hawkish, 113 levels identifi cation, trading fundamentals, hawks, 87 239–240 156–157 head and shoulders (H&S), trading signals, 228–229 UK data reports, 158 211–212 icons, this book, 6 GDP headline reading, 123, 124 IFO survey, 136 debt ratio, 95 hedge funds. See also if/then orders. See defi cits as percent of, 95 leveraged funds contingent orders growth rates, 95 defi ned, 43 IMM (International reports, 121, 133 hedging versus, 39 Monetary Market), geopolitics quantitative approach, 43 27–28 currency markets and, 97 hedging indirect bidders, 96 defi ned, 96 for currency options, infl ation elections, 97 40–41 as structural indicator, 121 as structural theme, 110 defi ned, 39 theme, 107 GFC. See Great Financial delta, 41 information Crisis for international trade currency forecasts, 104 GfK survey, 136, 137 purposes, 39–40 currency rates and, 12–14 global investment fl ows, option-related, 111 economic data and 41–42 in technical analysis, 111 events, 104 global-micro funds, 44 trade-related forms, 40 expectations and, 111–116 going short, 54 highs/lows, in support as fi nancial market gold, 30, 289 and resistance levels driver, 12 government bond yields identifi cation, 238 fl ow, 190 risk and, 99 hit bids, 37

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information (continued) cycles, 192 adapting to online trading, fundamentals, 12–13 differential, 59, 80 188–189 gathering and easing, 82 defi ned, 187 interpreting, 13 expectations, 79 intuitive feel requirement, news sources, 103 importance of, 78 188 in perspective, 105–111 nominal, 80–81 jobs. See employment; real-time market news outlook period, 79 labor market sources, 103–104 real, 80–81 joint intervention, 93 rumors and, 105 relative, 79–81 JPY crosses, 179–180 short-term price rollovers and, 59 response, 111–112 themes, 106–107 social networks, 104 international data reports, • L • sourcing, 102–105 135–139 labor market in take-profi t objectives, International Monetary economic data, 119–120 294 Market (IMM), 27–28 importance of, 119 technicals, 13 intervention reports, 124–126 themes, 105–111 benefi t of, 93–94 leverage unaware of, 318 checking rate, 92 defi ned, 55, 252 Institute for Supply concerted, 93 gains/losses amplifi cation, Management (ISM) currency market, 91–94 55 Chicago Purchasing defi ned, 91–92 ratios, 55, 56 Managers Index joint, 93 risk management and, (PMI), 130 unilateral, 92 252–253 employment indices, verbal (jawboning), 92 as trading tool, 252 126, 130 inverted H&S, 211–212 as two-edged sword, 12 manufacturing report, 130 ISM. See Institute for Supply leveraged funds nonmanufacturing Management CTAs, 43 report, 130 issuances, 96 defi ned, 43 prices paid index, 133 Ivey Purchasing Manager hedge funds, 43–44 interbank market. See also index, 138 quantitative approach, 43 forex market leveraging defi ned, 35 minimum use of, 320 development of, 36 • J • overleveraging, 317 inside, 36–37 Japan, data reports, limit orders. See also size of, 36 136–137, 152 orders spot trading in, 37 Japanese Candlestick defi ned, 69 trades, 36 Charting Techniques entry, 292 trading in, 37–38 (Nison), 208, 324 margins of error, 259 , 36 Japanese Ministry of stop-loss orders versus, Intercontinental Exchange Finance (MOF), 90–91 258 (ICE), 28 Japanese yen (JPY), as safe liquidation policies, 253 interest rates haven currency, 29 liquidity benchmark, 81–82 jawboning, 92 AUD/USD, 172–173 currencies and, 78–81 jobbing the market defi ned, 22, 254 currency rates and, 60 EUR/USD, 143–144

229_9781118018514-bindex.indd9_9781118018514-bindex.indd 334334 55/31/11/31/11 33:31:31 PMPM Index 335

NZD/USD, 172–173 market analysis as gauge of price peak conditions, 254 focus points, 185 movement speed, 245 thinner-than-usual, 294 research routine, 185 listening to, 241–245 USD/CAD, 172–173 routine, developing, in multiple time frames, 243 variance, 22 231–232 price divergences, volatility and, 254–255 technical versus 223–224, 243–245 long positions, 54 fundamental, 185–186 in ranges and trends, long-term macroeconomic time for, 185 224–225 trading market interest short-term, 265 carry trade strategies, AUD/USD, 172–173 signifi cance of, 222 193–194 defi ned, 22 studies, 224 core positions and, ever present source of, 23 for timing entry/exit, 245 192–193 NZD/USD, 172–173 momentum and trend defi ned, 191 USD/CAD, 172–173 analysis, 203 example, 191–192 market risk, 187 momentum oscillators. See macro elements market volatility, 255 also technical analysis identifi cation, 192 Market Wizards: Interviews defi ned, 222 losses with Top Traders limiting, 315 (Schwager), 326 Convergence/ taking, 198 MarketWatch.com, 85, Divergence (MACD), lots 103, 118 225, 242, 265 defi ned, 20 mark-to-market, 56 overbought levels, margin requirements measured move objective, 222–223 and, 56 212 oversold levels, 222–223 medium-term directional in range environments, 224 trading Index • M • approaches, 190 (RSI), 224 MACD (Moving Average defi ned, 189 stochastics, 225 Convergence/ intraday price moves, monetary policy Divergence), 225, capturing, 190 basics, 81–87 242, 265 price movements and, 191 benchmark interest rates major currency pairs, 51, trending ranges, 190–191 and, 81–82 141–163 mergers and acquisitions bias, 82 margin balances (M&A), 41–42 communications, monitoring of, 253 MetaTrader software, 44 interpreting, 86–87 opening, 56 minilots defi ned, 81 ratios, 56 defi ned, 20 developments, following, margin calls, 56 margin requirements 77–78 margins and, 56 easy, 82 forex market, 12 momentum expansionary, 82 online brokerages, 20 analysis, 242 incremental changes, 83 requirements, knowing, 253 defi ned, 222 objectives, 82 USD/JPY, 150 four-hour readings, 243 quantitative easing, 83–84 using sparingly, 199

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monetary policy (continued) nominal interest rates, opportunities. See also restrictive, 82–83 80–81 setups unconventional easing, nondealing desk model, 266 cross-trade, 179 83–84 non-farm payrolls (NFP), identifi cation assessment, Monetary Policy 125, 126 304 Committees (MPCs), 86 North American session identifying, 231–250 monitoring afternoon, 26 lost versus cost, 200 during active trading, morning, 26 option traders, 38 286–290 trading in, 25–26 option-related hedging, 111 fi nancial markets, 288–290 U.S. economic data options news and data release, 26 expiring, 27 developments, 287–288 volume, 26 portfolios, maximizing with rate alerts, 286–287 Norwegian krone, 175–176 return, 41 monthly employment NZD/USD use in hedging, 40 report, 125 correlations, 168 orders Moving Average defi ned, 51 contingent, 71–72 Convergence/ liquidity, 172–173 dealing spread, 258–259 Divergence (MACD), market interest, 172–173 defi ned, 68 225, 242, 265 New Zealand events and expiration, noting, 284 moving averages, 226–227 data reports, 171 inputting correctly, 283 MPCs (Monetary Policy price action, 173 large, as rumors, 105 Committees), 86 technical levels, 174 levels, updating as prices multiple-time-frame trading by the numbers, progress, 294–296 technical analysis 171–172 limit, 69, 258 defi ned, 232 trading fundamentals, margins of error, 259–260 longer time frames, 233 170–172 need for, 68 shorter time frames, 236 one-cancels-the-other trend lines across time (OCO), 70–71 frames, 234 • O • in online currency trading, offers, 64 72–73 oil market, 30–31, 289–290 partial take-profi t, 68 • N • one-cancels-the-other placing, 258–260, 283–284 National Futures orders (OCO), 70–71 position, 284 Association (NFA), 267 one-day rollovers, 61 risk of using, 258 New York cut, 41 online currency trading, 20 stop-loss, 69, 258, 260 New York expiry, 27 online trades stop-loss, automatic, 66 New Zealand, data reports, automatic stop-loss take-profi t, 68 138, 171 orders, 66 technical levels and, 259 news and events. See defi ned, 65 trailing stop-loss, 70 information orders and, 72–73 types of, 68–72 news sources, 103–104 preset amounts, 66 unwanted, canceling, 284 NFA (National Futures spreads and, 72–73 uses for, 68 Association), 267 trade success/failure, 66 organization, this book, 4–5

229_9781118018514-bindex.indd9_9781118018514-bindex.indd 336336 55/31/11/31/11 33:31:31 PMPM Index 337

outlook period, 79 practice accounts proprietary traders, 38 overleveraging, 317 benefi ts of, 33 Purchasing Manager overtrading, 199–200, 317 in experimenting with Indexes (PMIs), 136, 137 styles, 15 pyramiding, 273 opening of, 32 • P • opening multiple, 34 paper trading, 33 while reading this book, 33 • Q • partial take-profi t orders, 68 practice trades, executing, quantitative easing, 83–84 pattern recognition. See 65–73 also chart formations price action, 22 defi ned, 203 price channels • R • function of, 210 defi ned, 240 rate alerts, 286–287 pay offers, 37 drawing, 240–241 RBA (Reserve Bank of personal consumption, 120 identifying, 240 Australia), 167, 169 personal consumption using, 241 reader assumptions, this expenditure (PCE), 133 price gaps, 145 book, 3–4 personal income and price jumps, 145 real interest rates, 80–81 spending, 127–128 pricing in, 113–114, 291 realistic expectations, 318 phone trades, 66–67 pricing out, 114 realized P&L pip calculator applications, producer price index (PPI), defi ned, 57 59 132 FX trading platform pips profi t and loss (P&L) calculation, 58 defi ned, 57 calculating, 57–58 real-time market news examples, 57–58 currency conversion for, sources, 103–104 P&L calculation with, 58 regional Federal Reserve 57–58 defi ned, 55 indices, 126, 130–131 position orders, 284 leverage amplifi cation of, relative interest rates, positions 55 79–81 averaging into, 272–277 in margin calculations, closing, 17, 298–303 58–59 (RSI), 224 in contingency planning, realized, 57, 58 Reminiscences of a Stock 268 scenarios, 198–199 Operator (Lefèvre), 325 deciding where to unrealized, 56, 58 re-quoting, 66 enter, 196 profi ts Reserve Bank of Australia entering, breakouts partial, 299 (RBA), 167, 169 and, 278 protecting, 257–258, 312 resources, 323–326 holding, 200 taking out of trading resting, 301 overnight, 292 account, 322 restrictive monetary policy, short-term, 292 taking regularly, 321 82–83 size determination, 261–262 taking too soon, 298–299 restructurings, 94 positive attitude, 297 tightening stop-loss retail sales reports, 128 PPI (producer price index), orders to protect, 132 295–296

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retests daily rates, 63 short-term trading breakout level, trading, defi ned, 59 analysis demands, 189 279–280 examples, 62 defi ned, 187 buying/selling, 280 four-day, 61 guidelines, 188–189 defi ned, 279 one-day, 61 jobbing adaptation to retracements summary, 63 online trading, 188–189 defi ned, 205 three-day, 61 jobbing the market, Fibonacci, 219–221, 239 weekend, 61 187–188 Reuters.com, 85, 103, 118 RSI (Relative Strength take-profi t orders and, 301 reversal patterns, 211 Index), 224 trade management and, 286 risk rules-based trading simple moving average, 227 capital, 12, 184 systems, 43 social networks, 104 in cash terms, 262–263 rumors, 105 sovereign credit ratings, 135 credit, 95–96 sovereign debt default, 94 forms of, 251 speculation gap, 256–257 • S • based on expected event/ managing with rewards, safe haven currencies, 29 data outcomes, 288 199 The Secrets of Economic in currency market, 21 order use, 258 Indicators (Baumohl), currency trading as, 9 out-of-position, 264 326 as an enterprise, 10 trade plan in terms of, setups interest rate, 106–107 263–265 analyzing for position trading volume, 21 risk management size, 261–262 speculators applying to trades, candlestick patterns for, defi ned, 39, 42 261–265 245–246 function of, 42 gaps, 256–257 defi ned, 231, 262 types of, 42 importance of, 251 market analysis for, 231 spike reversals, 154, leverage, 252–253 momentum for, 241–245 155, 161 liquidity and volatility, multiple-time-frame spinning tops, 217, 218 254–256 technical analysis for, spot margin, 253 232–236 defi ned, 20 rules of, 319–322 reversal, 276 trading, in interbank in trading plan, 12 support and resistance market, 37 risk sentiment levels identifi cation for, trading for, 20–21 defi ned, 29, 98 236–240 trading volume, 21 gauges of, 98–99 symmetry with channels spot market, 60 gauging, 98 for, 240 spreads volatility and, 98 trade strategy for, 246–250 defi ned, 64–65 risk-on/risk-off, 98, 99 shooting stars, 217, 218 fi xed, 265 rollovers short positions, 54 interest rate, 80 applying, 62–63 short-covering conditions, in online currency trading, basis of, 59 255 72–73

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variable, 266 trading with, 312 Swiss National Bank (SNB), variance, 65 trading without, 316 91, 159–160 yield, 95–96, 107 trailing, 70, 257, 300 Switzerland, data squaring up structural defi cits and reports, 160 after events, 301–302 surpluses, 192 symmetrical triangles, 213 defi ned, 55 structural reports. See also symmetry, with price stability. See fi nancial data reports channels, 240–241 stability defi ned, 121 system trading, 37 sterling, 156 fi scal balance, 121 systematic models, 111 stochastics, 225, 265 GDP, 121, 133 stock market. See also government debt and fi nancial markets budget defi cits, • T • emerging-market 134–135 take-profi t levels performance, 99 infl ation, 121, 132 objectives, 264–265 forex market and, 31–32 trade, 121 setting, 196 monitoring, 290 trade balance, 133–134 setting dynamically, stop-loss levels, setting, 196 structural themes 264–265 stop-loss orders. See also defi cits, 109 targets, increasing, orders defi ned, 109 294–295 adjustment risk, 296 employment, 109 take-profi t orders, 68 automatic, online geopolitical issues, 110 taking profi ts trades, 66 political elections or defi ned, 298 buy trigger, 73 uncertainty, 110 partial, 299 in contingency planning, support and resistance. See too soon, 298–299 268 also technical analysis Tankan index, 136 current market price breaks, 205–206 technical analysis and, 69 consolidation zones, 204 art of, 207–221 defi ned, 69 defi ned, 204 bar charts, 207 execution policies, 72 horizontal, 204, 238 candlestick charts, in exiting trades, 300 level identifi cation, 208–209 fi nancial, 260 236–240 chart, 203 with foresight, 264 level strength, 205 chart formations, 210–219 limit orders versus, 258 longer-term, 206 confi rmation, 206–207 margins of error, 259 retracement, 205 as currency market driver, moving, 316 short-term, 206 13 necessity of, 300 trading style focus, defi ned, 13, 202 as risk management tool, 205–206 Fibonacci retracements, 319 types of, 205 219–221 sell trigger, 73 surpluses in forex market, 13 technical, 260 structural, 192 forms of, 203 technical levels and, 259 trade, 121 fundamental analysis tightening, 295–296 Swedish krona, 175 versus, 185–186 trading breaks with, Swiss Franc (CHF), 29, 158 Ichimoku charts, 227–229 278–279 momentum and trend, 203

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technical analysis (continued) stop-loss orders placed on trader attributes, 10 momentum oscillators basis of, 260 trades. See also currency and studies, 222–225 USD/CAD, 174 trading multiple-time-frame, USD/CHF, 161 active, 286–290 232–236 USD/JPY, 153–154 applying risk management patience requirement, 203 technical stops, 260 to, 261–265 pattern recognition, 203 technical themes, 110–111 buying and selling philosophy of, 202–207 technical traders, 190 simultaneously, 49–50 prevalence of, 110 technically alert, 311 carry, 177, 193–194 science of, 221–229 technology issues, 267 click and deal execution, support and resistance, themes 282 204–206 economic growth, 107–108 closing out, 298–303 trend lines, 209–210 focus on, 105–111 correctly making, 281–284 trend-identifying fundamental, 106–110 default size, 188 indicators, 225–227 infl ation, 108 double-checking, 322 what it is not, 203 interest rate, 106–107 entry point identifi cation, wide practice of, 202 stability, 109 263 Technical Analysis structural, gauging executing, 65–73 Explained: The strength of, 109–110 exiting, 16 Successful Investor’s technical, 110–111 live, 65–67 Guide to Spotting types of, 106 online, 65–66 Investment Trends three-day rollovers, 61 orders, 67–73 and Turning Points tighter monetary policy, phone, 66–67 (Pring), 324 82–83 rationale, 15 Technical Analysis For Tokyo expiry, 27 sizes of, 20 Dummies (Rockefeller), trade balance timeframe, 15 325 defi ned, 134 view, 190 Technical Analysis of the Japan, 137 trading accounts, taking Financial Markets: A reports, 121, 133 money out of, 322 Comprehensive Guide trade management trading plans to Trading Methods assessing, 304 assessing, 304 and Applications importance of, 285 components, 196 (Murphy), 323 trading plans and, 16 developing, 14–16 technical levels trading styles and, 286 executing, 16–17 AUD/USD, 174 trade strategies impending events and, 293 currency pairs, 110 assessing, 303–306 importance of, 15 EUR/USD, 147, 148–149 carry trade, 193–194 as risk management GBP/USD, 161 news/data alerts, 287–288 tool, 320 NZD/USD, 174 right/wrong identifi cation, starting point, 16 in placing orders, 259 304 as successful trader habit, for setups, 246–250 309

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in terms of risk, 263–265 trend lines unilateral intervention, 92 trade management and, 16 across time frames, 234 United Kingdom, data trading styles and, 14–15 defi ned, 209 reports, 137, 158 trading without, 316 drawing, 209–210 unrealized P&L updating, 290–293 meaningful, spotting, 235 defi ned, 56 trading range movement over time, FX trading platform average daily, 198–199 291–293 calculation, 58 defi ned, 190 price channel, 240 U.S. data reports, 124–135 trading within, 311 price levels, 237 U.S. dollar (USD) trading record slope, 291 central role factors, 50 average wins/losses, size sloping, breaks of, currency pairs, 51 of, 305 237–238 as global risk barometer, interpreting, 305 strength, 205 97 updating, 304–306 in support and resistance importance of, 50 viewing dispassionately, levels identifi cation, as international trade 306 236–238 currency, 29 trading styles symmetry, 210 for primary currency for categories of, 187 trend-identifying indicators. international reserve discipline and, 196–200 See also technical holdings, 45 EAs and, 194–196 analysis as safe haven currency, 29 experimenting with, 15 Directional Movement U.S. dollar index fi nding, 14–15 Indicator (DMI), 226, defi ned, 28 lifestyle considerations 242 following, 28 and, 184 moving averages, 226–227 U.S. Federal Reserve, 84, 86 long-term, 191–194 triangles U.S. Treasury department, market analysis, 185 ascending, 213 89–90 medium-term, 189–191 defi ned, 213 USD/CAD real-world considerations descending, 214 Canadian events and data and, 184 illustrated, 215 reports, 169 short-term, 187–189, 286 symmetrical, 213 correlations, 168 support and resistance TV business channels, 118 defi ned, 51 and, 205–206 tweezers top and bottom, geography role, 166 trade management and, 219, 220 liquidity, 172–173 285 market interest, 172–173 trading plans and, 14–15 price action, 173 trailing stop-loss orders • U • spot settlement, 169 defi ned, 70 unconventional easing, tactical considerations, in exiting trades, 300 83–84 172–174 in profi t protection, 257 unemployment technical levels, 174 use of, 70 rate, 125 trade settlement, 61 transparency, 84 weekly initial claims, 126

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USD/CAD (continued) Japanese MOF and, view trades, 190 trading by the numbers, 151–152 VIX index, 99 168–169 JPY cross infl uences, 156 volatility trading fundamentals, margin calculations, 150 averaging into positions 166–169 political sensitivity, 150 and, 274 weekend rollover, 61 price action, 152–154 currency-pair, 256, 281 USD/CHF. See also currency short-term trends, 153 defi ned, 255 pairs spike reversals, 154, 155 market, 255 defi ned, 51, 156 tactical trading risk-on/risk-off and, 98 European focus, 159–160 considerations, 154–156 shifting liquidity as EUR/USD leading technical levels, 153–154 conditions and, 254–255 indicator, 147, 161 trade setups, 149 false breaks of technical in trade-related hedging, levels, 161 40 • W • overshoots/false breaks trading by the numbers, wealth effect, 129 anticipation, 162–163 149–150 weekend rollovers, 61 position size reduction, 162 trading fundamentals, weekly initial price action behavior, 149–152 unemployment claims, 160–161 trend-line/price-level 126 spike reversals, 161 breakouts, 155 whisper numbers, 105 Swiss economic U.S. interest rate reports, 160 infl uence, 150 tactical trading U.S. Treasury yields • Y • considerations, 162–163 relationship, 32 yield spreads, 32, 95–96, trading by the numbers, USD/NOK, 175–176 107 159 trading fundamentals, 158 USD/DKK, 176 • V • • Z • USD/JPY. See also currency value dates ZEW survey, 136 pairs defi ned, 60 challenge of, 149 double, 61 defi ned, 51, 149 market holidays and, Japanese asset 61–62 management trends, 152 variable spreads, 266 Japanese data reports, 152 verbal intervention, 92

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