2Bull Forex Blog

The really big profits come from catching and holding the big long term currency trends which can last for weeks, months or years and this article is all about turning these trends into triple digit profits…

If you look at any forex chart, you will see long term trends and here is a simple forex trading strategy for turning them into profits.

Learn How to Use Breakouts

The first point is most new trends and continuations, start from new market highs.

If you want to make money then you need to buy breakouts.

Most traders make the mistake of waiting for prices to pullback to get in at a better “price” but the move doesn’t in most instances it continues, so you must learn to buy breakouts - if you want to get on the side of the big trends.

Valid Breakouts

Not all breakouts have the same odds of success and you need to be selective in your choice to catch the best ones.

Generally, a breakout is valid if the breakout point, has been tested several times
(the more times the better) and if this has occurred in different time frames which are spaced wide apart, that adds to the validity of the resistance.

You are generally looking levels the market participants consider important and when the level breaks look to go with the breakout. You don’t just buy though, you need to check momentum.

Confirmation

Momentum indicators are discussed in our other articles but they simply allow you to gauge the strength of momentum and if its rising then chances are the breakout is valid and will continue. You only need one or two to confirm and our favourites are the RSI and stochastic. There visual indicators and easy to learn and apply.

Applying the Stop

Applying the stop is easy it’s under the breakout as the previous resistance broken will now act as support.

The Key to Making Triple Digit Gains!

Is how you trail your stop remember if you have had a valid breakout chances are it will last a long time weeks or months and you need to stay in the trend. Most traders get so excited when they have a profit; they want to lock it in and protect it and move their stop up to quickly. They then get knocked out of the trade by random volatility, get a marginal profit next, then they see the trend sail on over the horizon, piling up thousands of dollars in profit and their not in!

Keep your stop back and trail it slowly.

You need to give the market room to breathe and accept drawdown in the short term and keep your eyes on the bigger long term prize, when you bank.

A good way to do this is by using key moving averages.

Generally dips to the 20 day are areas you can load up more trades in the direction of the trend and the 40 day MA, is a good area to have your stop in line with nearby trend line support as its outside of random volatility and will keep you in the trend.

Sure you give a bit back at the end but if you got 50% of every major trend you would be very rich.

A Simple, Time Efficient Way to make Triple Digit Profits

The above is a simple way to make money from long term trends and I know traders who make 100% annual gains doing the above. Another advantage of this type of trading is it takes less than 30 minutes a day. You also don’t have to worry about watching prices all the time and you don’t have to trade often.

Long term trend following can be very profitable if you follow the above tips and there easy to do.

What are the best currencies to trade? Here we will answer this question and also look at a few over looked currencies and in particular one of the best for novice traders.

Here we are going to look at the best currencies against the US Dollar.

Perhaps the most important consideration is turnover and liquidity of the currency traded. and these currencies also offer the tightest pip spreads which reduce your cost of doing business. You can trade the majors for just 2 or 3 pips and the currencies with the highest volume against the dollar are.

- The Euro
- The Japanese Yen
- The British Pound
- The Swiss Franc

Any trader should consider the above 4 and the euro and the yen are favorites for most traders and will work well for swing traders or trend followers.

I trade the euro, yen and Pound but not the Swiss Franc - nothing against it, it’s a great trending currency but it tracks the euro to a degree now as the country has become more integrated with Europe so I have picked the euro.

Two other great currencies to trade are, the Australian and Canadian Dollar.

They don’t have the volume of the big 4 and spreads are a little wider but for trend followers they offer some excellent trends and with both being commodity currencies, they have given some great trends over the last few years with the recent surge in commodity prices.

If I was to pick a currency that is good for novices, it wouldn’t be the euro or the yen - but the Canadian dollar.

It works well on any technical system and offers reliable trends and the major advantage is it lacks the frequent volatility spikes you see in the big two

Of course any list of best currencies to trade is going to be subjective but if you are a novice trader or trading the majors and want a change, check out the Canadian dollar - it really is a great currency to trade.

An essential element of your forex trading education is using valid support and resistance to time your trading signal. Here we are going to walk you through a live example of how to use it properly.

The currency we are going to look at on our forex charts is the Japanese yen.

If you look at the yen daily chart, you will see a very valid resistance level at the 108.00 level and since March of this year there have been numerous tests of it, over 20 and yet the dollar has failed to close above it supported by momentum.

This resistance is very valid because there have been so many tests. Resistance or support gain validity

- The more times they are tested and hold
- The more different time frames and the wider apart they are
- The traders who trade the market and the news sees the level as significant

Watch the level then confirm the Trade

The way to trade it is to wait for the rise but DON’T sell until you see momentum turn down and two great indicators for timing your trade are the stochastic and the Relative Strength Index. Simply wait for the level to be tested and wait for them to turn down.

Never just assume a level will hold, wait for confirmation via momentum indicators.

Once this occurs you can be short and you know when you’re wrong - if prices close above resistance.

This simple method of trading into valid resistance or support works and providing you time your entry correctly with momentum indicators, it can make a lot of money.

We have used this simple strategy to clear thousands of pips profits, this year and we have kept it simple, nothing complicated about it but it doesn’t mean it simple strategies can’t make money they can.

While resistance holds you keep doing it sell into the level and take profits when the dollar becomes oversold, then wait for the next test.

Follow Reality of Price Change

If the price breaks up and closes strongly above resistance, the odds will favour further strength in the dollar.

Simple and Effective

Sure it’s simple but it can be very profitable and the above is a good example of a low risk, high reward way of trading into valid resistance.

You don’t need to do anything else, than trade the reality of price change on the charts and if you do and you confirm your moves this simple forex trading strategy can make a lot of money.

This post was written on August 2nd!

We may have one more rally but the highs are in and the euro will decline, as the dollar bearish fundamentals have peaked. You don’t need to be clever to see why and work out the potential. Here are all the facts and a potential 700 pip opportunity and that’s a lot of profit!

Many traders think markets some strange force but they don’t they move in line with the long term fundamentals but of course you can’t trade on these, you just know they are going to force the euro lower so we have included the technical levels as well and will indicate under valuation and over valuation for marketing timing purposes.

So why is the era of dollar selling over?

Here are the main reasons:

- Bearish sentiment of investors has peaked
- The market is not just focusing on problems with the dollar but in other countries
- There is a significant improvement in the current account deficit underway
- The Housing market is on the road to recovery and the excess supply should start to decline
- Employment numbers are still poor but coming in better than expected
- Higher yields are needed but the yield disadvantage will narrow as Fed looks to raise rates

The economy still has problems of course but the real key is rates the US has aggressively cut and many other economies have not this leaves plenty of upside potential. While rate rises may not occur in the short term the aggressive cutting is over and the bearish scenario is factored in and the dollar is hammering a base, while the storm clouds gather for the euro.

Euro

Here are the main reasons which point to euro weakness

- Current account balances no longer show the euro is under valued
- In terms of purchasing power parity the euro U.S Dollar rate should be around $1.20
- This shows that the euros rally has really been based on interest rate perceptions
- The ECB will be reluctant to raise rates with economic activity weak
- Labour markets remain tight but economic activity will dictate rate rises

Take the above and what do you have?

The interest rate differential that has driven the euro higher has gone and we will now see a period where the dollar works its way higher.

The Charts

If you check out the weekly chart you will see a clear top in place and the up-sloping trend line which has supported the advance has been penetrated and 1.50 is the initial target. The weekly chart really lets you see the wood from the trees but you need to time off the daily chart.

On the daily chart the resistance is the same as the weekly and we are trading in a range which has been in existence since March. The target at present is the bottom of the range 1.54 and if this gives way 1.50.

We are a little oversold at present but any rallies will get to around 1.57, 1.58 at best and are a sell on falling momentum, if the euro does not rally a close under 1.54 cements the bull argument

Nothing complicated and so far our sale at the pop to the highs is 400 pips up but as with all trends there are more opportunities coming to take advantage of euro weakness and if you can get in then you could enjoy a ride that is very profitable and could see the euro below 1.50 by year end and that’s a lot of profit!

Many traders use numerous indicators - but over the last 22 years I have four favourites and I will share with you here and they have worked for me and they will work for you. Let’s look at them…

Today, good old bar charts have gone out of fashion but I think their essential and use them in conjunction with the indicators below. I don’t use candlestick charts, there is a big myth there better but there not. If you like using them, then do so but the relationship between the daily range open and close is obvious.

Here are the four indicators and you can read more about them in our other articles. There available on most free chart services and will take you around 30 minutes each to learn and then, your all set to start using them on your forex chart and start making bigger profits.

1. The Stochastic

For me this is the ultimate timing tool.

Trading stochastic crossovers with bullish or bearish divergence, into chart resistance or support, from overbought or oversold levels, is simply the best market timing tool. If the stochastic crosses from chart highs or lows the signal is even more powerful.

2. Relative Strength Index

This gives you the strength of the trend and when RSI weakens or strengthens, when the trend is still up or down, especially from over bought or oversold levels, you have advance warning of a contrary move.

When combined with the stochastic, you have a great combo for better market timing.

3. The Bollinger Band

Gives you the volatility of price and you simply need to understand it to make money at forex trading.

I love using pops to the outer band, near chart support and resistance, to look to take profit or, initiate a contrary trend. Also in a strong trending market, dips back to the centre band ( the moving average) are great value areas to look to add extra positions in a strong existing trend.

You don’t time with them - you look for areas in line with support and resistance to trade into.

4. Moving Averages

Simple moving averages are great and I have just mentioned the mid band of the Bollinger band, which is in fact a simple moving average, to buy and sell back to in existing trends.

In strong trends dips to the 18 - 25 day moving average are a great place to load in new trades.

Another excellent time period is the 40 day moving average which acts as the last line in a strong trend with nearby support or resistance. In strong trending moves we like to trail our stop behind this level and it keeps us in the long term trends.

When trading with the above and support and resistance lines you will get market timing for your trading signals.

There are some other useful technical indicators and we like the ADX line and the MACD too - but the above are the four we use all the time. If you spend 30 minutes on each one you will soon have four powerful indicators that you can use in your own forex trading strategy, to seek currency trading success with.

Check them out, there simple, powerful and can work for you too with a little practice.