Eliminating Five Basic Mistakes

There was a webinar titled, "Eliminating Five Basic Mistakes from your Analysis" this week presented by Ian Copsey.  I found this webinar and the corresponding Powerpoint presentation very useful because I have been guilty of these mistakes.  Before I summarize and attach the powerpoint presentation (I also converted it to PDF), who is Ian Copsey??

According to the moderator, Ian Copsey is one of the foremost FX technical analysts in the world,
with over 20 years experience in financial markets. He began his career
in Barclays Bank’s FX trading room in 1982 then moved to head their FX
sales desk in Hong Kong in 1988 where he spent almost 5 years.

Either way the guy has got experience and that's what counts.  

So what are the 5 basic mistakes and also the verdict of whether I'm guilty or not of making such a mistake? 

1. Trend Line Drawing Mistakes  Verdict: GUILTY
• Use 3 touch guideline.  By waiting for 3 touches, the trendline becomes stronger and more reliable 
2. Double Tops and Double Bottoms  Verdict: GUILTY
• WAIT FOR CONFIRMATION which comes on break of peak or trough
3. Head and Shoulders  Verdict: GUILTY
• Wait for Completion of pattern
4. Momentum Indicators  Verdict: mistrial
   
• Momentum studies are not meant to be used in trending markets
• Use ADX/DMI to determine trend then use 2 other methods to determine better trading opportunities
1. More sensitive version of RSI
2. Breaks of momentum trend lines
• After a trend, when should momentum indicators be used?
• When there is a divergence
• a divergence is not a reversal signal and trades should not be based on the fact the divergence has occurred.  Look for other signals such as:
1. A break of trend line
2. break of a pattern
3. break of sequence of high and lows
5. Confirm your analysis  Verdict: GUILTY
• What kind of complementary techniques are available?
1. momentum - used in consolidation and divergence after trends
2. trend line breaks
3. fibonacci projections from elliott wave
4. pattern breaks
5. time cycles

The PDF or powerpoint presentation is really worth the quick 15 minute read.

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Learn:Forex Exclusive Guest Idea

EUR/CAD – April 6th, 2006

 

Our attention is looking away from the USD based pairs with the NFP report due out Friday.

 

Notice the EUR/CAD has been on a month long uptrend with one
correction. We feel it is due for another minor correction. Why? There
are a few things pointing in this direction. First, the candle pattern
(a shooting star). Second, notice the high of the wick yesterday
attempted to test the .618 fib. Fourth, the resistance in this area.
And finally look at the momentum indicator at the bottom…divergence is
forming.

 

 

 

 

 

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A Rob Booker Exclusive Treat

EUR/USD     March 10, 2006

Here is a great Head and Shoulders pattern.  They are super reliable, and fairly easy to trade.  Here is the chart.  We want to sell below the neckline, and go long above the trendline connecting the head to the right shoulder.

 

 

 

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DashboardFX: Forex Weekly Wrap-up

EUR/USD

A virile run mid-morning at the session close, as market participants drove the dollar down to near session lows of 1.1945.  When all was said and done a tight range of 1.1845/1.1955 was fashioned in the major European counterpart and the benchmark currency.

What is interesting to note regarding this week’s price action relative to the previous is that we have two ranges with one large move lower separating them.  That coupled with the cresting off the benchmark S (former R) in the 1.1860 area, which has stymied those bidding the dollar on many occasions in the life of the pair, implies perhaps a solid base pattern of an inverted H&S is in the process of developing with the head all but confirmed on today’s rally in the pair.  The moment of truth for the pattern comes in on the break back into last week’s range followed by a failure to trade through it – thus drafting the second shoulder.  We have cited the major R above as the top end of the shoulder range.

GBP/USD 

Sterling dealers and traders alike have noted vehemently the significance of the MPC minutes slated for next Wednesday.  A prominent reporter in the UK feels an admonishment of a 5-4 split in the minutes could strongly imply a 25bp hike is in the shoe.

As we noted yesterday, “…with such a wide swath these orders clearly have rather lofty targets or expect to average in with size on forays below 1.7340/50.  Irrespective, the activity has garnered attention…” regarding some purported dealer’s activity and it turns out that our summation was incredibly predicative given the proceeding 24-hours of pricing.

USD/CHF 

With no front page news regarding geopolitical unrest, it seems unlikely that the pair will style any type of meaning retracement of the overt trend.  However, we know better to presume the two cannot take place simultaneously, perhaps exacerbating a strengthening in the Swiss franc and weakness in the dollar. 

Some clear top patterns have emerged; but the pair continues to make new highs and the patterns are somewhat eschew.  As we noted recently, “…The drop from the major R we noted in yesterday’s report was rather precipitous and could be ominous indication of more selling pressure to come.  Yesterday daily low of 1.3040/45 will be the moment of truth for those attempting to break the overt trend…” and it seems this statement is rather accurate given the resulting price action.

USD/JPY

The pair continues to rally following our call on the significance of the 1700 figure.  Session highs were recorded at 118.87 following Thursday’s rollover.  It has come in a bit however, leaving a tall wick behind in the vicinity of macro R.  this could be a tell tale sign of some virile selling as specs unwind what have now become very large positions.

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