Before a currency trader places an order to enter the market, where did that currency trader get their trading idea? Was it from chart analysis, news, statistical analysis or a gut feel? And once a currency trader enters the market how does that currency trader assess the data on whether to hold, fold or draw? Is the currency trader utilizing a money stop and letting the market determine their fate? Or is the currency trader watching the screen not knowing exactly how to determine if they like or dislike their current position? And doesn�t it seem that when things don�t work out, that in the confines of currency trader�s isolated environment things tend to be magnified? These are just some of the reasons I create trading ideas from visualizing potential market movement. So, that when these scenarios actually play out then I feel less like a chicken with my head cut off and more like a sniper with a good vantage point. Now, think of yourself as a sniper, the currency report as the intelligence, at the actual trade trigger or triggers your weapon. Here is an example of a partial currency report I wrote on Wednesday September 2, 2009 for Thursday September 3, 2009. �The CD 60-minute chart shows that the Canadian Dollar is holding below the 24-bar moving average (blue), which might be a rather weak area of technical resistance in tonight's session. The reason is because the more significant area tonight is the 5-day moving average (.9085). Remember, this is the area where I speculate if the Canadian Dollar bears are going to make a push it might be from this area. Therefore, if a currency trader wanted to get short then a short near the 5-day moving average (.9085) might be a good jumping off point. If the Canadian Dollar ran x amount of ticks above the 5-day moving average then this might be a cue to step out of a short position. Another way to play the downside would be to wait and see if the CD held below the 5-day moving average and then short the Canadian Dollar if it broke back through the 24-bar moving average on the 60-minute chart. In both scenarios a currency trader is looking for the bottom (.8987) of this market to fall out. I would like to make a strategic point in regard to the potential short position. What often appears obvious isn't always that obvious. Now, the double bottom low I pointed on the daily chart might in fact turn out to be a trap door. Remember, a trap door only works if you think that something is solid and decide to walk over it. Well, think of the same idea in regard to the support at and around the 13-week moving average (.8994). If the Canadian Dollar pops from here tonight and runs, then traders might think that the low around .8987 is a strong technical support area. Though look closely at the 60-minute chart and notice the area above .9121. There is not much concentrated volume above that area, which might make a run seem technically stronger then it is. The reason there might not be any real concentration of open contracts in that area. With this technical insight we can create an idea for a possible long play. If the Canadian runs x amount of ticks past the 24-bar moving average on the 60-minute chart, then this could trigger a long position. A currency trader could utilize the same average as a tool to help manage the long from. In this scenario a currency trader is looking for a pop not only above the 5-day moving average, but also above the high of .9121. A currency trader could also wait and see if the Canadian Dollar can get pass the 5-day moving average before entering a long position. In this scenario a currency trader could utilize a break back below the 5-day average or 24-bar moving average on the 60-minute chart as a cue to step out.� Now, let�s take a look at the 60-minute chart that was posted with last night�s Technical Recap, Update and Outlook for Thursday September 3, 2009. You can clearly see that the Canadian Dollar was trading at the 24-bar moving average (blue), which I had considered a rather weak area of technical resistance. And if you follow the report you should be able to get the feel for what I was trying to see in regard to how traders might flow through the technical structure of the Canadian Dollar. Now, let�s move forward and look at the 60-minute chart as it is at about 12:35pm Pacific Time on Thursday September 3, 2009 (see chart below). We can now see that the actual flow of the Canadian Dollar almost played out exactly to last night�s technical assessment. Again, �Past Performance is not Indicative of Futures Results.� With that being said, can you see how visualizing potential market movement may give a currency trader the emotional edge or confidence to execute a trade, like a trading sniper rather then a chicken with it�s head cut off?
A lot of what is traded is out of necessity in the FX market. For those people there is no "idea", it's a forced issue.
This article is meant for speculators not hedgers, which I think most people on this site are...but never the less your point is valid if we are talking about hedgers or global businesses..but I wasn't....the comment was appreciated....I think....j/k..