I was browsing Kathy Lien's book, "Day Trading the Currency Market" today in the bookstore.  The book was just released on December 2nd, 2005 so it may very well be the newest book related to Forex out there.  I know Kathy from her articles on the market that are on dailyfx.com and tradingmarkets.com.  I believe her official title is Currency Strategist.

The book is a little over 225 pages and contains the standard chapters on fundamental analysis, historical events in Forex, and technical analysis.  It was refreshing to see some new content unrelated to other forex books such as the chapters on What Moves the Currency Market in the Long Term, What Moves the Currency Market in the Short Term, What are the best times to trade for individual currency pairs, trade parameters for different market conditions, and profiles of the major currency pairs.  She also includes her recommended trading systems, one of which I am about to mention:

Here are her strategy rules for entering a Long Position:

1.    Locate a currency pair trading well below its intraday 20 SMA on a 10- or 15-minute chart.

2.    Next, enter a long position several pips below the figure (no more than 10)

3.    Place an initial protective stop no more than 20 pips below the entry price

4.    When the position is profitable by double the amount that you risked, close half of the position, and move your stop on the remaining portion of the trade to breakeven.  Trail your stop as the price moves in your favor.

Reverse the strategy rules for a short position.

There are conditions for using this strategy, the most important being that no major economic numbers should be released during this setup.  

She states that this strategy should work best for pairs with tighter trading ranges, cross, and commodity currencies.  This strategy does work for the majors but under quieter market conditions. 

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No. 1 :

This sounds like a standard "revert to the mean" type trade, that may be greatly helped by using a "revert to the mean" type indicator like Bollinger Bands, which is an indicator centered around a 20 period Moving Average. The biggest risk in these trades is entering too early; by using the Bollinger Bands you may get a better idea of when best to enter. I like to wait until price has completely rejected the upper or lower band, but remember that this move is only technically predictable back to the center line, not necessarily to the band on the other side. Visit John Bollinger's website for more details...

Submitted by Brian • 2005-12-27 23:02:38

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