Top Trade Idea For November 24th, 2014 – GBP/NZD

Since late September, GBP/NZD (‘the pound’ against the New Zealand dollar) has fallen 1400 pips. We feel that this trend will continue and will discuss a trade for expected move lower. The recent move higher provides an opportunity to trade it short.

This eight-hour GBP/NZD chart starts at the early November 2014 high of 2.0812 and ends with the recent move higher from 1.9617. Importantly, the chart also includes an Elliott wave count from the 2.0812 high.

Having mentioned we’re in a downtrend (especially when viewed on a “2-day” chart), price action in the direction of the trend generally occurs in five waves, and the chart shows an initial five black circle waves lower from the 2.0812 high to the 1.9617 low. Within that move, the chart shows the five smaller blue waves within wave ‘black circle three’.

Price action against the trend (i.e. higher) occurs in three waves, and so far, we’ve seen a possible two wave countertrend move higher from the 1.9617 low marked as waves black circle ‘a’ and ‘b’.  If the b-wave is complete, we’d expect the third leg of this correction to find resistance between 2.0100-2.0225. If the b-wave is still in progress, we’d expect the third leg to find resistance above the previously nominated zone.

Therefore, we’re looking to sell GBP/NZD at 2.0090 or higher. Our stop will be at 2.0690 (above the 78.6% retracement of the move between 2.0812-1.9617). Our single ‘take profit’ target for this trade is 1.9290. Therefore we’re looking to risk 600 NZD pips to make 800 pips. The risk/reward for this setup is a reasonable 1.33.

Short Setup for GBP/NZD

• Trade: Sell at (or above) 2.0090.
• Stop Loss: Place the stop at 2.0690.
• Take Profit: The single ‘take profit’ is 1.9290.
• Trade Management:  If price reaches the first target of 1.9490 without triggering the entry, cancel all orders. Further, if the entry is triggered and price reaches 1.9490, lower the stop to 2.0090

About Todd Gordon Founder – TradingAnalysis.com

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  Todd Gordon is the Founder of  TradingAnalysis.com, and a cast member of CNBC’s Money in Motion. TradingAnalysis.com provides actionable market analysis and clear trading strategies in the currency, commodity, and equity markets for the amateur and professional trader alike. Most recently, Todd served as managing partner for 2 ½ years at Aspen Trading Group , a trading and research company focused in the foreign exchange markets. Prior to that he served a 6 year stint as the Sr. Technical Strategist for FOREX.com, while at the same time trading for GAIN Capital Asset Management, the parent company of FOREX.com. The fund specialized in trading in the G-10 currency markets and managed over $25 million.

  Valued as one of the most respected Elliott Wave practitioners in the industry, his international following comes from his ability to translate the wave theory into clear and concise trade strategies. His highly enthusiastic, easy-to-understand presentation style and TV presence has sent him to regions including the Middle East, Europe, Asia, Australia, and the US, and appeared on CNBC, Bloomberg, Sky News, BNN, and Fox news . His research clients value his clear and concise analysis as he preaches, and demonstrates, discipline by consistently applying the written analysis to trading in his personal accounts. Todd lives by the mantra Plan Your Trade, Trade Your Plan.

NO complex charts… NO baffling analysis... NO complicated methods... in fact nothing to learn at all!

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Forex trading for beginners

Trading currency in the foreign exchange market (forex) is fairly easy today with three types of accounts designed for retail investors: standard lot, mini lots and micro lots. Beginners can get started with a micro account for as little as $50.

Before you start jumping in you should familiarize themselves with the market and terminology of the forex market, and if you've already been trading stocks online it should be easy to get started.

Below is a list of terms you should learn.

PIP:   The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point. A common exception is for Japanese yen (JPY) pairs which are quoted to the second decimal point.

BASE CURRENCY: The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency.

CROSS CURRENCY PAIR: A pair of currencies traded in forex that does not include the U.S. dollar. One foreign currency is traded for another without having to first exchange the currencies into American dollars.

CURRENCY PAIR: The quotation and pricing structure of the currencies traded in the forex market: the value of a currency is determined by its comparison to another currency. The first currency of a currency pair is called the "base currency", and the second currency is called the "quote currency". The currency pair shows how much of the quote currency is needed to purchase one unit of the base currency.

QUOTE CURRENCY: The second currency quoted in a currency pair in forex. In a direct quote, the quote currency is the foreign currency. In an indirect quote, the quote currency is the domestic currency. This is also known as the "secondary currency" or "counter currency".

Now that we've reviewed basic terminology, let's look at some of the differences between trading stocks vs. currencies. In currency trading you are always comparing one currency to another so forex is always quoted in pairs. Sometimes authors of currency research will refer to only one half of the currency pair. For example if an article is referring to the euro (EUR) trading at 1.3332 it's assumed the other currency is the U.S. dollar (USD).

When looking at the quote screen for the first time it may seem confusing at first, however, it's actually very straightforward. Below is an example of a EUR/USD quote.

The quote example shows traders how much one euro is worth in US dollars). The first currency in a currency pair is the "base currency" and the second currency is the "counter currency" or secondary currency.

When buying or selling a currency pair, the action is being performing on the base currency.

For example traders bearish on euros, could sell EUR/USD. Now, when selling EUR/USD, the trader is not only selling euros but is also buying US dollars at the same time. Thus the pair trade.

Let's say that you sell the EUR/USD at 1.4022. If the EUR/USD falls, that means the euro is getting weaker and the U.S. dollar is getting stronger. You might have also noticed the quote price has four places to the right of the decimal. Currencies are quoted in pips. A pip is the unit you count profit or loss in. Most currency pairs, except Japanese yen pairs, are quoted to four decimal places. This fourth spot after the decimal point (at one 100th of a cent) is typically what traders watch to count "pips".

Every point that place in the quote moves is 1 pip of movement.  For example, if the GBP/USD rises from 1.5022 to 1.5027, the GBP/USD has risen 5 pips.

Now depending on the lot size (standard, mini, micro) the monetary value of a pip can vary according to the size of your trade and the currency you are trading.

The most common lot size is to trade in increments of 10,000 (mini). A lot size of 10,000 for the EUR/USD is worth $1.00 per lot. If you were trading 3 lots or 30,000, each pip is worth $3 in profit or loss. A full size lot, or standard lot, is 100,000 where each pip is worth $10, and a micro lot size is 1,000, were each pip is worth $0.10.

Some currency pairs will have different pip values. Be sure to check with your broker.

One of the nice things about trading currencies is there is no commissions. Looking at the quote image above, notice the small number of pips between the two quoted currencies: the difference in prices is 2.5.

This is known as the spread. The spread is how the broker makes their money and acts similar to the bid/ask in stock trading. Not all spreads are created equal. The spread differs between brokers and sometime the time of day can cause volume to be light and the spread to increase at some brokers.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , International , Stocks

Referenced Stocks:

Introduction to Candlesticks

History

The Japanese began using technical analysis to trade rice in the 17th century. While this early version of technical analysis was different from the US version initiated by Charles Dow around 1900, many of the guiding principles were very similar:

• The “what” (price action) is more important than the “why” (news, earnings, and so on).
• All known information is reflected in the price.
• Buyers and sellers move markets based on expectations and emotions (fear and greed).
• Markets fluctuate.
• The actual price may not reflect the underlying value.

According to Steve Nison, candlestick charting first appeared sometime after 1850. Much of the credit for candlestick development and charting goes to a legendary rice trader named Homma from the town of Sakata. It is likely that his original ideas were modified and refined over many years of trading eventually resulting in the system of candlestick charting that we use today.

Formation

In order to create a candlestick chart, you must have a data set that contains open, high, low and close values for each time period you want to display. The hollow or filled portion of the candlestick is called “the body” (also referred to as “the real body”). The long thin lines above and below the body represent the high/low range and are called “shadows” (also referred to as “wicks” and “tails”). The high is marked by the top of the upper shadow and the low by the bottom of the lower shadow. If the stock closes higher than its opening price, a hollow candlestick is drawn with the bottom of the body representing the opening price and the top of the body representing the closing price. If the stock closes lower than its opening price, a filled candlestick is drawn with the top of the body representing the opening price and the bottom of the body representing the closing price.

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Introduction to Currency Trading in forex market

The foreign exchange market (forex or FX for short) is one of the most exciting, fast-paced markets around. Until recently, forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of the internet has changed all of this, and now it is possible for average investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts. Daily currency fluctuations are usually very small. Most currency pairs move less than one cent per day, representing a less than 1% change in the value of the currency. This makes foreign exchange one of the least volatile financial markets around. Therefore, many currency speculators rely on the availability of enormous leverage to increase the value of potential movements. In the retail forex market, leverage can be as much as 250:1. Higher leverage can be extremely risky, but because of round-the-clock trading and deep liquidity, foreign exchange brokers have been able to make high leverage an industry standard in order to make the movements meaningful for currency traders. Extreme liquidity and the availability of high leverage have helped to spur the market's rapid growth and made it the ideal place for many traders. Positions can be opened and closed within minutes or can be held for months. Currency prices are based on objective considerations of supply and demand and cannot be manipulated easily because the size of the market does not allow even the largest players, such as central banks, to move prices at will. The forex market provides plenty of opportunity for investors. However, in order to be successful, a currency trader has to understand the basics behind currency movements. The goal of this forex tutorial is to provide a foundation for investors or traders who are new to the foreign currency markets. We'll cover the basics of exchange rates, the market's history and the key concepts you need to understand in order to be able to participate in this market. We'll also venture into how to start trading foreign currencies and the different types of strategies that can be employed.

Forex Trading 101 – ‘Beginners Forex Trading Introduction Course’

This Free Beginners Forex Trading Introduction Course was created to help novice traders understand all the basics of the Forex market and Forex trading in a non-boring format. This beginners course will also cover the basics of price action trading, forex charting, technical analysis, traders psychology and many other important subjects. Upon completion of this beginners forex course you will be ready to start studying my Professional Forex Trading Course.

INTRODUCTION TO FOREX TRADING – CHAPTERS & SYLLABUS

Part 1: Introduction To Forex Trading

Part 2: Forex Trading Terminology

Part 3: Long or Short ? Order Types And Calculating Profits & Losses

Part 4: What is Professional Forex Trading?

Part 5: What is Fundamental Analysis?

Part 6: What is Price Action Trading Analysis?

Part 7: Introduction to Forex Charting

Part 8: What Is A Forex Trading Strategy?

Part 9: Common Forex trading mistakes and traps

Part 10: What is Technical Analysis

Part 11: How to Make a Forex Trading Plan

Part 12: The Psychology of Forex Trading

Part 13: Professional Price Action Forex Trading Strategies

Other Tutorials & Guides:

How To Correctly Set Up Meta Trader Forex Charting Platform

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