FX TRADING STRATEGy
from which our trading decisions will be made. This chart is usually an intra-day chart with somewhere between 12 and 20 bars per day. This will vary greatly market to market and we select the tick value visually – changing the ticks per bar until we can best “see the music”.
What we are looking for is a chart in which the movement of price is such that we can see potential trades. A potential trade would be one that provides a price difference between the high and low of the movement of sufficient size that capturing 70 to 80% of that move would provide an acceptable profit. Generally, we want to see at least 500 or more pips (preferably more) in a potential Forex trade.
To assist us in this endeavor we prepare our chart as follows:
1. We create a weekly chart and add our primary SRVs (SRVs are horizontal lines of support and resistance).
2. We copy that chart, change
data to daily and add additional SRVs (the daily chart SRVs we call secondary and the weekly SRVs we call primary).
3. We copy the daily chart, and
start the process of selecting various tick bar settings until we are happy with the way the music of the market looks. Once we have our trading chart, we copy it and create one other chart with about 1/10 th
66 FX TRADER MAGAZINE January - March 2012
the number of ticks per bar – this chart is used in trade management.
Let’s look at a chart of the EUR/ JPY for the first week of November, 2011.
Tis chart is interesting for several reasons, not the least of which it shows the market immediately after an intervention by the Bank of Japan. Note the drop from the Sunday evening high to the low on Tuesday morning - a truly breathtaking ride down. And of course, the ride up early Sunday
had been just as breathtaking. Such fundamental events can have a profound effect on the market - temporarily.
But notice how quickly the market stabilized into a pattern of movements more suited to trading. Note in particular how the movement of price over the remainder of the week seemed to be affected by the horizontal lines (SRVs). It should be noted here that we placed these lines Sunday afternoon, a couple of hours before the market opened for trading. We
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