Currency Futures Trading Having a Battle Plan

Discussion in 'Financial Futures' started by Rae, Sep 14, 2009.

  1. Rae

    Rae

    When you step into the currency futures market are you executing from an offensive plan of attack or are you trading based on the current price action? Think of you yourself as a combat soldier for a moment. Are you entering the battle zone with an idea of where the enemy is and how you might engage the enemy, or do feel like you’re being ambushed by the enemy?

    If you feel the market is ambushing you, than maybe you’re not thinking ahead. Remember, for me trading is about trying to anticipate where the market might be and how I might engage the market at some point in the future. Think again like a combat soldier. You get intelligence from superiors on where you think the enemy is or will be, and then as a leader of your unit you create a plan on how you want to engage the enemy.

    Currency Futures Trading is similar in my opinion and this why. As a currency trader you want to anticipate the market and create contingencies on potential market movement. Here is an example of a report I wrote for Monday September 14, 2009, which could be considered intelligence and should not be construed as a way to engage the enemy (trade triggers).

    “If a currency trader want to be short the Japanese Yen then a break below the 24-bar moving average (blue) on the 60-minute chart could trigger a short position. In this scenario a currency trader is looking for the Japanese Yen to pull back to the 5-day moving average (1.0940). If the Japanese Yen were to run back through the 24-bar moving average by x amount ticks, then this could be a cue to abandon the short position.”

    Remember, if you are thinking like a combat soldier, then this briefing (currency technical report) on the potential enemy whereabouts is in my opinion very valuable. Let’s take a look at the battlefield (see 60-minute chart below).

    [​IMG]

    This chart shows a break below the 24-bar moving average (blue), which was a battle scenario I created the day before. How a currency trader enters the market based on the intelligence comes down to personal preference. Now, let’s take a closer look at the Japanese Yen by assessing the 5-minute chart (below).

    [​IMG]

    Again, you can see where the price went through the 24-bar moving average and how it held below the average on a retest of the average hours later. Also notice that the 5-day moving average is still well below the price of the Japanese Yen. Thought the closing price of 1.1003 today and a projected opening price around the same price as the close would put the 5-day moving average somewhere near 1.0963, which is very close proximity to the low of Monday’s Action (1.0979).