Items Tagged With sell

While the last few months have witnessed rising talk of forex reserve diversification, China seems intent on preserving the status quo. Representatives from China's Central Bank recently announced that the nations foreign exchange reserves, which are already the largest in the world, would likely grow by at least $100 Billion in 2006. This is due both to the soaring current account surplus and the vast sums of foreign capital that continue to be invested in China. Further, the bulk of these new reserves will likely be held in USD-denominated assets, which are valued for their liquidity. Forbes reports:

Xinhua quoted Cao as saying that it would be unwise for China to sell off its dollar assets because they are still the most reliable assets in the world.

Keep An Eye On Momentum

http://www.investopedia.com/articles/forex/05/MomentumMACD.asp

This article states the obvious yet brings up a simple setup that I never thought about.  The basic premise is that momentum precedes price.  Any momentum indicator can be used but this article uses MACD as an example.

1.    Define a MACD segment.  Segment #1 below.

2.    Measure the highest bar of segment #1.  In the above case, the highest bar was .004.

3.    Wait until the next segment forms; segment #2 above.  If a bar from segment #2 falls below -.004, downward momentum has exceeded previous upward momentum.
Segment #2 consists of 10 bars.  The values are in order from left to right (-.001, -.004, -.006, -.007, -.008, -.008, -.008, -.006, -.002, -.0008)

The third bar from the left is -.006, showing greater momentum than during anytime in segment #1. Sell at the close of this bar (price=1.7579.)  Exit the position at your discretion but a good time to do so might be when momentum slows.  Momentum stalls 2 consecutive bars at bar #7.  MACD value is -.008.  Exit at the close of this bar (price=1.7381)

The profit is close to 200 pips.  Like every other setup, this will not always be successful and should be used in conjunction with other confirmation tools. 

What I like most about this setup is its simplicity.

While the last few months have witnessed rising talk of forex reserve diversification, China seems intent on preserving the status quo. Representatives from China’s Central Bank recently announced that the nation’s foreign exchange reserves, which are already the largest in the world, would likely grow by at least $100 Billion in 2006. This is due both to the soaring current account surplus and the vast sums of foreign capital that continue to be invested in China. Further, the bulk of these new reserves will likely be held in USD-denominated assets, which are valued for their liquidity. Forbes reports:

Xinhua quoted Cao as saying that it would be unwise for China to sell off its dollar assets because they are still the most reliable assets in the world.

In January, a credit rating agency pronounced Iceland’s current account deficit unsustainable, arguing Iceland’s currency, the Krona, would need to depreciate significantly in order to shift the balance of trade back in favor of Iceland. In a follow-up report, the rating agency provided more context for its earlier comments, by identifying growing levels of Icelandic debt and surging imports. Economists have been quick to point out that similar crises in Turkey and Thailand ultimately drove 50-60% decreases in the value of their respective currencies. The Financial Times reports:

Two notable sell-offs in the krona in the last month have presaged wobbles in other emerging currencies and there were signs again of weakness…in the currencies of countries with large current account deficits.

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.

Earlier this week, a credit rating agency downgraded Iceland’s government debt, calling the country’s current account deficit unsustainable. Iceland’s national currency, the Krona, instantly plummeted 10% as currency traders rushed en masse for the exits. This, in turn, sent a shock wave throughout global forex markets, causing all emerging market currencies to decline. As the currencies affected by the crisis seemed unrelated, analysts pointed to hedge funds to explain the ripple effect. Apparently, several prominent emerging markets funds were forced to sell their positions in other parts of the world in order to offset their losses in Iceland. The Financial Times reports:

The icy blast spread, prompting the Brazilian real to fall 3 per cent, the South African rand more than2 per cent, the Indonesian rupiah and Polish zloty1.5 per cent and the Mexican peso and Turkish lira 1 per cent.

I've started trading my new trading system which I've simply named FP-1.   I've been spending a lot of time tweaking it over the last couple of days.  I've made it quite simple to indicate a buy and a sell opportunity.  The red circle indicates a sell and the green circle a buy.  If you see a blue circle, this is a losing exit.  If you see a yellow circle, this is a winning exit.

 I just went went short on the EUR/USD where the last red circle is.