Crude Oil Technical Analysis

This analysis is of light sweet crude oil CME Group

Crude oil has been following its upper channel and been edging upwards since July. While daily fluctuations are common for oil due to political developments, long term technical analysis seems more stable for oil. The MACD indicator has produced bullish signals twice without a bearish one, signalling a strong upward trend. Stochastic seems to be more volatile; it has produced 8 bullish and bearish signals since July, at least 3 of which have been unsuitable for profitable trades. However, it reasserts the bullish trend as it has been edging upwards throughout August. Right now the slow Stochastic sits at 92.92, signalling that the price may be overbought. However, RSI is at 67.92, suggesting that the price may not be overbought until another week or more.

The bullish trend is stronger on the weekly chart. This can be seen as MACD produced a bullish signal at the start of August, and since oil has been trading sideways since 2011, it might be able to reach between 100 and 107 by the end of this year. The Stochastic indicator is also ascending, and its overbought signal may not come until a few months.

Fundamental: Crude oil is facing pressures both on the upside and the downside. Bullish reasons include:

-          Crude oil demand is seasonal and has risen significantly in the summer

-          Sanctions on Iran’s oil continue to be enforced

Pressures that are forcing a lower price are:

-          Domestic crude oil production has increased in the Bakken and the Eagle Ford regions

-          The US Dollar is being strengthened. Since oil is globally priced in the USD, a rising dollar  decreases oil prices in the US relative to other countries

However, there isn’t any latest news that’s going to significantly affect oil prices in either direction. Oil prices were slightly affected by UN’s decision to exit Syria after a failed 4 month vision. Worries about the Middle East’s political situation are keeping prices high but that is being done so without any new updates.

On the European side, the Bundesbank statements indicate that there are still disagreements about the Euro crisis. Last week, it seemed that an agreement would be made soon, and this disappointment has caused a small sell-off of oil. News from Europe could be important for crude oil.

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A Day in the Life of a Professional Forex Trader

Traders who become successful enough to produce consistent profits graduate up to trade professionally and develop daily routines. However, this routine is quite different than most amateur traders would imagine; a large number of professional forex traders execute a handful of trades every month and frequently take time off the market.

This article explains the routine of a professional forex price action trader, which is a simplistic strategy only focusing on price movements and candlesticks. For all those who aspire to become full-time traders, this article shall serve to give a better idea of a professional’s daily routine.

          Start the day with a healthy body and mind

Professional traders keep a profitable mindset before starting their trading day. In order to do this they must control their negative emotions and stick to their trading plan. This is best done when both the mind and body are healthy, which will in turn result in healthy trades.

It is important to wake up early in the morning and start the day with a healthy breakfast. This is because you may have enough time to do your research and still not miss the day’s most important trading hours.

Next, professional traders work out to get the blood flowing and feel oxygenated. It is not mandatory that one must exercise in order to be a pro trader, but it is highly recommended as exercise leads to a healthy and effective brain. The mind and body are dependent on each other.

          Analyze the Markets

Before professionals start to trade the market, they check for open trades in order to adjust the limits and stop losses. They record all the closed trades in the trading journal which may have hit the limits overnight. Keeping your trading journal updated is important as important as you keep reflecting on your performance and make improvements for the future.

Once the work for the previous day is done, traders start to check the markets – specifically, their favorite pairs. Professionals check their pairs 2-3 times a day at predefined times. These times differ for every trader, but usually professionals check the markets in the morning, mid-day and in the evening (after the NYSE or European closing time). The best time to trade for forex is the overlap between Japanese and British working hours, as well as the overlap between the US and British working hours.

        How a Professional Trades the Market

There is no one way to trade the market,each professional has his own trading strategy and sticks to it. This means that traders don’t need to spend hours watching the chart, but only look for their trading signals and trends to open a trade. A professional focuses only on a few pairs as he is looking to execute specific trades. The more focused the approach, the more effective the trades. Once a new trade is opened, the trader records it in his trading journal and continues. Professionals Remove Themselves From the Market

Amateur traders mistakenly believe that professionals sit and stare at the charts all day long. Sometimes taking time off the market is recommended because looking at the charts for hours promotes one to execute trades which were not part of the trading plan. If you make a few quality trades over the long term, you don’t need to make small intra-day trades.

Professionals also remove themselves from their live trades. This is because watching your profits constantly rise and fall can create anxiety and may promote you to double down. Removing yourself causes you to remove your emotions from the live trade.

Once the trading day is over, professionals take a good night’s sleep. There is no reason to lose your sleep over your trades because anxiety affects your winning mindset. Carry on the rest of your life; meet friends, go to the gym, have fun and do your chores. A good professional trader lives a well-rounded life.

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AUD/USD Technical Analysis

Fundamental: AUD/USD pair has been trading at 1.045 and is looking to move up after the losses it suffered last week. Pressure on the US Dollar is affecting commodity currencies, which has brought the Australian Dollar down. USD has gained traction lately on positive economic data, and the chances of a monetary stimulus in the US have dimmed.

There is nothing significant on the economic calendar for AUD for the coming week, so all eyes are on the US Dollar.This week we’ll find out housing data, jobless claims and data on durable goods which should move the pair.

In the H4 timeframe, the pair has been moving in an upward channel since May. While its oscillations were fairly predictable between mid-June to the end of July, it became much wider since the start of August and seems to be trading downwards and sideways. The price has an immediate support level at 1.043, and if crossed, it could fall till the next support level at 1.0328, after which the channel would have been effectively broken and a shorting opportunity would begin. There is a bearish bias on pair so one must remain cautious for a breakthrough of the support level.

This bearish bias in H4 timeframe is confirmed by studying the MACD and Stochastic. MACDhas been bearish since the 7^th of August, which corresponds with the price fall. It continues to be in the negative and a reversal doesn’t seem likely. The Stochastic indicator confirms the bias as it recently displayed a bearish signal. With the trending and the contrarian indicator pointing at the same direction,traders should look out for an opportunity soon .

The hourly timeframe shows the price movement in the month of August. The AUD/USD pair has been moving in a bearish channel, indicating that a downward trend may catch on to the 3H chart as well. It is likely that the price will touch the upper channel and then move downwards, but the trend line is to face some resistance in the near term as it is already hovering over the support level of 1.045. Looking at the RSI Indicator, we see a similar movement as the graph seems to hover at 50 for now.

Look out for news and breakouts in the near term as it may signal a trend, possibly a bearish one.

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How to Develop a Profitable Forex Trading Mindset

Developing a successful trading mindset is perhaps the most important step to being profitable in the long term. Most traders fail to master their own psychology and lose money by succumbing to their emotions. After all, there is a famous saying in the trading world: “Bulls make money, bears money, but pigs get slaughtered.” This saying displays greed, a failure to develop a profitable mindset. This article explains how your psychology is the key to winning the forex game in the long run.

Most traders believe that trading by indicators will give them profit no matter how they react to the graphs, they are unaware of the importance of their own mindset. Successful traders are highly aware of their emotions and control their fears and greed to execute their trades in a robotic manner. If you are not making money in the market, then it is most probably your mindset that is affecting your trades.

Control Your Expectations

The modern world has made people find quick fixes to their problems; all they want to do is get rich as fast as possible. In the forex world, this leads to one having unrealistic expectations. You have to realize that it is highly improbable that you would be able to earn millions from your $1000 account in a few months. Instead, focus on managing your risk and only trade with money which you can stand to lose. Try not to cover your losses by doubling your positions and don’t get attached to your trades.

Slow  & Steady Wins the Race

Forex tends to attract high frequency traders due its 24/6 activity and tremendous liquidity. Active trading gives hope to traders that they will return a tenfold amount on their equity every month. Even though you may win big at times, active trading with a greedy mindset gets pigs slaughtered in the end. Develop a slow and steady approach instead; trade on 4H and daily charts to get a bigger picture and execute a few quality trades instead. Technical analysis tends to be more correct on longer charts with minimum noise. If you average slow monthly returns, you will compound your profits and reap the benefits later.

 Stay Organized

It is essential to have a trading plan and a journal so that you may know what you’re doing and then assess your performance. Your view of the markets will be more objective when you’re not trading; consequently your trading plans will be more successful. When you’re about to enter a trade, think before you execute.

 Be Confident

Assess your strengths and adjust your trading style to it. Once you are aware of your edge be confident about it and execute your trades without fear. This will make sure that you don’t gamble as you would only trade when you can assess the situation.However,don’t be over confident and keep greed in check.

Control Fear

While greed may get you slaughtered, fear will make your mind indecisive and make you avoid trades altogether. If your confidence vanishes you might have second thoughts while running your trades.This might lead to you closing trades early.

You Don’t Need Perfection

You have to realize that all of your trades can’t be profitable. Instead, your strategy should be to minimize your losses and maximize your gains, therefore always finishing higher than before.

Let Go of Your Ego

Lastly, it is very important that you don’t relate your wins and losses with your ego. Don’t treat winning trades as ego boosts as it will lead to a false sense of achievement. Similarly, try not to equate losses with your ego as you will start to take the markets personally. Remember, the markets don’t care about your mood and your ego,they will continue in spite of your emotions.

If you keep all these pointers in mind you will be closer to gaining profits consistently in the forex market. Develop a winning mindset to execute winning trades.

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GBY/JPY Weekly Outlook

The GBP/JPY spent the entire week locked in a tight range as the Japanese central bank decided to hold rates steady at zero. Prime Minister Yoshihiko Noda’s coalition government survived a no-confidence motion on Thursday, brought about by six opposition parties, over his proposal to double the sales tax. The JPY faced a week of poor economic reports, with first-half trade deficit jumping to a record high of 2.5 trillion yen ($31.78 billion), amid a surge in fuel bills, and Core Machinery Orders recording a worse than expected decline of 5.6 percent in June. The single bright spot was the unexpected rise in industrial output last month, to a seasonally adjusted 0.4 percent, from -0.1 percent in the preceding month.

The GBP also faced a slew of disappointing economic data last week, with U.K. trade deficit swelling to a record level in June, as exports tumbled during a month in which economic activity was affected by public holidays to mark the Queen's Diamond Jubilee. Earlier on Tuesday, the Office for National Statistics said U.K. Industrial Production fell 2.5 percent in June, the biggest monthly drop since November 2008. The Bank of England also slashed its medium-term growth forecast in its Quarterly Inflation Report on Wednesday.

GBP/JPY continued to gyrate inside the downward sloping trend channel of 120.82/123.77 last week and the outlook for the coming week remains neutral. An upside break-out of the previous pivot high of 123.77/79 will provide strong evidence of the completion of the pull back from 125.82, and will likely signal the resumption of the rebound from 118.82, which got stalled in the past few weeks. On the downside, a break-down below the key support level of 120.82 might make prices retest the June 1 low of 118.82.

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EUR/GBP Weekly Outlook

The EUR/GBP started the week with markets pinning high hopes on the European Central Bank initiating fresh stimulus measures to provide a comprehensive solution to the region’s debt crisis. But after the disappointment on Thursday, when the ECB offered no guidance or assistance in its monthly meeting and statement, traders became restless and hammered the euro below the 0.785 mark against the pound sterling. Mario Draghi said the ECB was likely to undertaking open market operations, such as buying bonds in the secondary markets, but failed to explicitly layout any plans to buy government debt from struggling European countries any time soon.

The GBP also faced a week of disappointing economic data with trade deficit hitting an all time high in June on Thursday. Data from the Office for National Statistics showed, deficit widened more than expected to 10.1 billion pounds ($15.82 billion) in June from 8.4 billion pounds in May, as weak demand for goods hampered exports. Earlier in the week, Industrial Production slumped to its lowest level in 20 years in June, and the Bank of England slashed its growth forecast for the year. 

The counter-trend rally in the EUR/GBP from 0.7755 is possibly finished at 0.7962, the intersection of a falling trend line and the swing bottom created on May 16, both of which have been tested quite a few times. EUR/GBP is all set to resume the broad down-trend, and in the coming week, prices are expected to find support at 0.7755, the break of which can see prices go to the next key support level of 0.7693. On the upside, 0.7900 is a strong resistance, and any upside break-out will turn the bias neutral.

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Low Frequency vs. High Frequency Forex Trading

Forex (currency market) is the largest financial market in the world, currently trading $4 trillion daily. These trades happen 24 hours a day, 5 days a week; making it one the most attractive markets for traders. This has led to two types of traders: lower frequency traders with a long-term perspective, and high frequency trader who have an intra-day perspective.

Low Frequency Trading

Low frequency trading involves a trader or an investor taking a long-term perspective in a forex pair(s) and holding that decision for a long period of time. This time period lasts for months, a year, or even more. This strategy is usually taken by professional investors such as hedge fund managers or those who do not have time to be monitoring trades –such as the average John Doe.

Basic strategies used for low frequency trading involves the use of technical analysis with long period charts, such as those which show months and years. Carry trades are one of the most famous strategies; these involve using a pair which provides the most interest rate to the investor. Macroeconomic perspectives and geopolitical forces are also used for low frequency trading.

High Frequency Trading

Intra-day trading is the more famous of the two in the forex market. Traders usually use charts ranging from a tick, 1, 5 and 15 minute ranges. Scalping is common, involving frequent trades which take a profit of a pip or less. Others follow small trends, oscillations, or trade on daily market news. While these profits are minute, traders use leverage ranging from 1:2 to 1:500 to amplify their gains and losses.

Which is better?

Statistics: this question largely depends on the strengths and weaknesses of the trader, but statistics show that high frequency traders make far less profits than low frequency ones.

 Market noise: the forex market involves trillions of dollars of trades every day, most of which are done by large organisations conducting their business and not following market trends. This produces a lot of senseless noise which cannot be understood by traders. When one takes a long-term perspective, market noise is reduced and strategies (especially those involving technical analysis) become more robust.

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Stress: if you are a trader who does not want a lot of stress, low frequency trading is for you. Those who watch markets all day can watch their trades suffer heavy losses and experience high profits, and become concerned by it.

 Gambling effect: there is a large consensus that trading can become as addictive and destructive as gambling, and this is largely true for high frequency trading. You can watch your trades double or triple in size within seconds or minutes, and soon you will try to get those gains again and again.

Spreads: this is perhaps the most important reason why one should prefer quality trades over quantity trades. Whenever you execute a trade, your broker takes a spread (usually between 0.5 to 2 pips for major pairs). High frequency traders are usually chasing a few pips, so every time they close a trade they give up a significant part of their profits. This also results in losses as many trades become impossible to execute. If you are trading long term and aiming for 100-200 pips, 2 pips would hardly be 1% of your profit.

However, this is largely up to you and your abilities as a trader. But considering the pros and cons of each, it is best if low frequency trading is done.

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USD/JPY Technical Analysis

In the 4 hour timeframe, we have seen a resistance level of 78 which, if broken, will give a sell signal. This may allow the price to go as low as 77.66 experienced earlier on the 1^st of June, and 77.50 in extension. Therefore, the bearish channel is reinforced and a bearish outlook shall remain until a breakout of 78.80 is experienced.

The hourly timeframe shows that a narrower bearish channel has already been broken. Earlier, a false breakout was experienced followed by a successful one, which seems to be continuing at the moment. This is being resisted at 78.15. It is important to notice that we could see a triple bottom soon; there have been two bottoms experienced already.  

If this is experienced and a breakout on the upper resistant levels is experienced, we could see a significant reversal.

Stochastics for the 4 hour chart are in a downward trend, currently hovering at 50.75. MACD seems to be bullish but is giving a lot of false signals and is roughly horizontal.

This shows resistance and a slowdown of volatility for the pair. RSI seems to be roughly horizontal as well.

In the hourly view, MACD is in a bearish mode, although this has been continuing for a few hours and might come to a halt by the end of its wave. Stochastics already give a signal towards a reversal, and so does RSI, which means that the MACD might show a bullish signal soon, and that the oscillations currently occurring in the price might continue.

Fundamental: Tonight there will be an announcement from the Bank of Japan regarding interest rates. Although some economists do not expect an extension of the acquisition programme until the next interest-rate meeting, there is a good chance that it might happen at this meeting. This will affect JPY trading for the next day.

There is a strong chance that the USD/JPY pair will strengthen due to the turmoil experienced in Japan’s political environment. The current government may face a No Confidence vote. The opposition party, which may take control, advocates a higher inflation rate target of 2.0%, which increases the expectations of an aggressive Bank of Japan easing. 

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S&P 500 Technical Analysis

The 4-hour view of the S&P 500 shows a bullish equidistant channel starting from roughly May 20. It may be possible that the price hits the resistance levels of 1413 and 1424, but a reversal to the lower end of the channel is also possible. A bullish sentiment is likelier as one can notice that the bullish rallies are oscillating higher and higher while the bearish ones are getting smaller.

In the S&P500 daily chart, we can notice the bullish sentiment by the technical indicators. Stochastics have crossed the 80 line and are going higher after giving a bullish buy signal. MACD has been bullish since early June and continues to go higher. Its sell signals are usually weak and false while the buy signals are proving to be correct. The Relative Strength Index has been going higher and has yet to cross the 70 mark. Look out for an overbought signal in a few days if the rally continues.

If the price channels are taken into consideration, the price has largely been following a trend as it has tuck to the upper price channel since the start of August, coming down to its mid-point a few times, and going back up. It has not touched the lower price channel once since the start of July.

The weekly chart confirms the rally; the index has been rising from May and continues to do so. If the index reaches the upper price channel at 1422, a reversal to the mid-point (1344) or lower end (1266) of the price channel may be seen. MACD recently gave a buy signal and is expected to be bullish for a few weeks. Stochastic has been bullish but is crossing the overbought mark at 80; contrarian traders should look out for a bearish signal in the coming weeks. RSI has been following the price trend and may give an overbought signal in the coming week if the trend is to continue.

Fundamental: Market sentiment has become worrisome as the rally continues as strategists suggest that the rally is unlikely to last and investors should remain cautious. A negative close by the end of the week may be likely, which corresponds with a bearish reversal towards to the lower end of the channel as seen in the technical analysis chart.

The job report on Friday, which caused the rally, is thought to be misplaced as a large number of jobs are only temporary. The hiring boost that occurred may be largely due to seasonal employment. GDP growth has been 1.5% in the second quarter, which is considered largely anemic.

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GOLD Technical Analysis

Gold has largely been falling since its peak in March, and since mid-May it is hovering between a horizontal price channel. Since the start of August, it started ascending from the midpoint and is currently rallying at 1615. A rally till the upper level of the channel at 1631 is possible. MACD has been bullish since the past few weeks, but its lines are coming closer to converge, suggesting that a sell signal may be produced soon. Stochastic produced a buy signal at the start of August, but this was produced at 62, which makes it relatively undesirable. RSI is giving 
similar signals. 

In the weekly chart one can notice the upwards trend experienced till mid 2011, and a fluctuating reversal ever since. RSI has been hovering near 50, not producing any particular trend, which means some resistance at the current level is likely. Stochastic has been in a bullish mode since May, although the small rally currently experienced started only recently. MACD seems to be giving a buy signal and a sign of reversal, but this could easily be a false signal and should be treated with caution. 

Gold has to be taken very cautiously due to its recent year-long decline. When its price is observed on a century long inflation-adjusted chart, one can see its crash in the 1980s, which could also be experienced in the coming years. Buy and hold investors may not like gold as a stable investment for now.

Fundamental: ECB and Fed did not provide any new stimulus programmes, but the price of gold has still maintained above $1600 an ounce. It seems one minute the ECB is prepared to do whatever it takes to save the euro, and the next it fails to take any action.

In the US, the Fed has admitted that economic growth has slowed down. Disappointing news also came from China, where manufacturing dropped to 50.1 in July (PMI). In the UK, the PMI dropped more than expected from 48.4 to 45.4. If these problems are worsened, it is logical to keep one’s money invested in precious metals. However, if market sentiment is positive, one must be cautious towards gold.

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EUR/USD Technical Analysis

The euro dollar pair is following the equidistant chart pattern in the 4-hour view. The trend line has hit the channel 4 times so far, indicating that the pattern is strong, which is also supported by the 3 month long duration. Recently, the line hit the channel at 1.244 and proceeded to fall as expected, albeit meeting some resistance. More resistance is likely to be met at 1.225, and if that is broken, the trend line is expected to fall and meet the next resistance at 1.2159.  However, considering a long term view (of 30-60 days), the pair is expected the meet the 

end of the channel.

In the hourly view, the trend line hit the high resistance level at 1.244, lowered to 1.236 and is meeting another resistance level over there. However, the 4-hour view would suggest that it is likely that the pair would break resistance and follow the downward trend.

MACD shows that the trend is downward, however, it does not seem as strong as the bullish signals it gave earlier on the 3^rd of August. Contrarian indicator Stochastics shows a downward trend as well and currently hovers at 31.50. A bullish or bearish signal is not visible and should only be treated seriously once the 20 or 80 lines are crossed. The Relative Strength Index roughly corresponds with Stochastics as it hovers near the same 30 level. All 3 indicators agree with a downward pattern.

However, it must be noted that this isn’t strong and is meeting with a lot of resistance. The 10 day EMA corresponds with the current price level so a strong downward and upward trend cannot be predicted. Indicators may produce fall signals until resistance points are broken strongly.

This can also be seen by using the same indicators in the 4-hour chart. While the MACD is bearish, it is still following an ascending pattern. The Stochastics are giving a bullish signal as well. This may result in the pair hovering at the upper levels of the channel for some time, but it is unlikely that the channel will be broken. By examining the last time when the pair hit the upper channel, it seems that the trend line seems to hover on the upper levels between 5 and 25 days.

Fundamental: Most industrial production data of the eurozone showed a decline. While the sentiment of the FX market is generally positive, there is some strong resistance and risk appetite has been on hold until the ECB or Fed introduces some measures. If not, a correction may be likely.

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Forex Over Trading

Over-trading is a common mistake by Forex traders and it can be the biggest threat that can kill your trading account. It does not require experience as market participants. Once you commit mistakes, it makes huge impact and differences. What causes bad trades? These can include indecent opportunities, negative environment, being impatient and lack of discipline. Forexover trading mostly happens with those traders without proper plans and lack the determination to set their minds on their plans.

Forex over trading also happens when traders break the rules. Basically, you do over-trading when you get more trades than you suppose to have. Some traders tend to break the rules because of the pressure to earn more money. Money is the root of all evil. You can do unnecessary things to have it. Forex over trading can mislead the cycle in the market. Traders are not able to see their profits if they have consistent over trading. This is the reason why Forex over trading sometimes happen without the trader actually knowing it.

If you do trading daily at lower time frame, you are Forexover trading.  Doing it is not appropriate before you know how to earn income daily. Trading in lower time frame is done by traders who process more information while margins of error are little. Providing a lot of information may mislead the cycle in the Forex market.

The best way to avoid Forex over trading is to make the best plan and share this plan to others. It is like you are on war, you have that courage and a gun but unfortunately you don’t have bullets. Success will be on by planning. When time comes, you will find your balance decreasing. It is the best way compared to those traders who tend to break the rules. It’s like boxers who lose the fight when the best was not given.

Knowledge is also an important aspect in Forex. Having proper Forex education avoids Forex over trading. To avoid Forex over trading, you have to be contented. If you break the rules without knowing, you have to make it right as soon as possible before it becomes a habit. Habitual Forex over trading is a violence attitude that can kill your account. To keep on the right track, you have to follow certain rules. The rules to be considered are the following:

Make a well-developed plan.

Have some market analysis.

Be ready for your setups.

Make a trading journal. You have to track and record trades.

Forex over trading can lose your money. However, you don’t have to be afraid of losing. As traders, you must know why your money loses.  The reasons may be because you are over-trading, you don’t have proper knowledge and well-planned strategy and you are not contented with what you have. You will be

successful if you will follow the proper way. Successful and famous traders experienced failure. For them, trading is worth it when you know how to do it right. 

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