Attacking Currency Trends (eBook)

GREG MICHALOWSKI is the chief currency and trading analyst for FXDD. Prior to joining FXDD, he was an assistant vice president and trader in the treasury/funding area with Citibank in New York, a vice president and interest rate derivatives trader at Citibank in London, and a vice president and trader in the banks funding department at Credit Suisse First Boston. Michalowski maintains a daily market commentary and currency analysis website at fxdd.com. His market comments are quoted in the financial press by Bloomberg.com, Reuters, and the Wall Street Journal, and he has written for various print and online trading publications, including eForex, Equities magazine, forexstreet.com, stocktwits.com, and forexfactory.com. His twitter site, twitter.com/gregmikefx, was one of thirteen cited by SmartMoney magazine as a "go to" source for making money moves.

Acknowledgments xi

Introduction 1

PART I The Foundation for Success 19

CHAPTER 1 Stereotyping the Retail Currency Trader 21

They Think Trading Currencies Is Easy 22

They Have Too Much Fear 27

They Lose Money 29

They Are Too Fundamental (Not Technical Enough) 31

They Don't Know Enough about Key Fundamental Requirements 34

They Fail to Anticipate Trends 45

Don't Be Like the Rest ... Change! 46

CHAPTER 2 The Six Attributes of a Successful Currency Trader 47

What Are You Good at Doing? 47

There Will Always Be Peaks and Valleys 49

1. Skill or Aptitude 49

2. Practice, Practice, Practice 52

3. Know Your Risk 54

4. Create and Execute a Plan 58

5. Control Your Fear 61

6. Be Greedy Enough 63

A Foundation for Success 66

CHAPTER 3 The Mission Statement 67

A Team of One 68

A Two-Part Mission Statement 70

Finding Trades That Satisfy Your Mission Statement 76

The Importance of Staying on Trend 80

CHAPTER 4 What's Your Game Plan? 85

Every Mission Statement Needs a Game Plan 86

Trade the Trends 86

Keep Fear to a Minimum 91

Never Underestimate a Strong Foundation 97

CHAPTER 5 Rules for Attacking the Trend 99

Rule 1: Keep It Simple (but Stay Positive) 100

Rule 2: Have a Reason to Place a Trade 105

Rule 3: Be Picky about Your Tools 107

Rule 4: The "If . . . Should" Rule 115

Rule 5: Look Ahead, but Not Too Far Ahead 117

Rules Rule 120

CHAPTER 6 The Trader's Toolbox 121

Rules for the Tools 122

How to Use Fundamental Analysis 122

The One Thing We Can Agree On: Price 125

The Tools 131

If I Had a Hammer 146

PART II Tools and Strategies 147

CHAPTER 7 Moving Averages 149

What Is a Moving Average? 150

How to Use Moving Averages 151

Time Frames for Analysis 156

Anticipating a Trend 164

Managing a Trend 167

Managing Profits 169

Trade Setups 171

The Push That Gets the Market Going 177

CHAPTER 8 Trend Lines and Remembered Lines 179

Bullish Trend Lines 180

Bearish Trend Lines 183

Channels: Highways to Ride the Trend 186

Flags and Pennants 190

Finding the Golden Ticket 192

Remembered Lines 197

Simple but Eective 204

CHAPTER 9 Fibonacci Retracements: The Hybrid Tool 205

Introduction to Fibonacci 206

Placing Retracements on a Chart 210

Using Fibonacci Retracements 214

Trading Shorter-Term Corrections 227

Using the Tools to Your Best Advantage 231

CHAPTER 10 Preparing for the Trade 233

First Things First 234

Analyzing the Charts 236

A Composite View of the Clues 249

"Is Ita Boy ora Girl, Doc?" 251

CHAPTER 11 Executing the Game Plan 253

The Kicko: The Entry Trade 254

Managing the Trade 256

Finding Clues in the Consolidation Phase 264

A Borderline: Always a Low-Risk, Unambiguous Level 266

Another Trend Reentry 267

The Key Role of Borderlines in Hourly and Daily Charts 271

Attack the Currency Trend 275

About the Author 277

Index 279