Forex Case Studies 2015
Content
FOREX CASE STUDIES REAL TRADE EXAMPLES
Welcome W elcome!! What is a day day like like in the life of a pro pro forex forex trader?
If you are interested in finding out how professional forex traders successfully trade step by step, this is the e-book for you! Forget about vague and boring theory. Here, Here, you will see real trade examples and strategies based on real market situations. e purpose of this e-book is to share some of the best tips, techniques, and observations that have worked for successful traders. You will see how experienced traders analyze the market, what signals they are looking for, and how they determine the entry and exit points of a trade.
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Case study 1
Trading EUR/USD EUR/USD Ahead Ahead of FOMC Meeting, Eurozone CPI Release Eric Dale is a seasoned currency trader. His trade setups are based on sound fundamental and technical analyses. On January 4, Eric notices that technicals are signaling some real downside risk in EUR/USD. e preliminary technical analysis prompted him to consider consider a sell (short) position in the pair.
Fundamental Analysis In order to assess the macro-economic or fundamental scenario, Eric opens the economic calendar. He finds that two major economic events are due today:
Eurozone CPI At 9:00 GMT, Eurostat is scheduled to release Eurozone’s Consumer Price Index (CPI) report for December. CPI is considered the best gauge for inflation over a specific period of time. Aer some more research on the economic release, Eric comes to know that analysts are expecting a decline in Eurozone’ Eurozo ne’ss CPI to 0.7% in December as compared to 0.9% during the same duration a year before. Generally speaking, a high CPI reading (close to 2%) is seen as bullish bul lish for EUR/USD and vice versa.
US Monetary Policy Meetin Meetingg At 14:00 GMT, Federal Reserve is due to announce a Federal Open Market Committee (FOMC) decision on the pace of monthly asset purchase program and benchmar benchmarkk interest interest rate aer a two-day monetary policy meeting. Eric again opens some news websites and finds that analysts are, almost unanimously, expecting tapering in monthly asset purchase program worth $75 billion b illion and no change in benchmark interest rate.
Fundamental conclusions Aer thorough research, Eric concludes that the fundamentals are reinforcing his preliminary technical analysis about the potential downside risk in EUR/USD. He plans to conduct an in-depth technical analysis to make a final decision.
Case study 1
Technical Analy Analysis sis A long shooting-star candle on the daily chart gave g ave Eric a preliminary indication for the potential p otential downside risk in near future. Aer applying Fibonacci extension levels on the daily chart, Eric comes to know that the price took retracement retraceme nt from 261.8% fib level resistance as demonst demonstrated rated in the following fol lowing chart.
Analysis e current market price is 1.3800; Eric knows that the price will face huge resistance near 1.3891 because now it is a confluence of 261.8% fib level and the shooting star resistance. So he makes his mind to open a sell position around 1.3800 if the Eurozone’s CPI comes worse than expectations or in line with expectations. e data is due just a few minutes later. later.
Eric sells EUR/USD Eurozone’s CPI data comes worse than the forecast. Eurostat report shows that CPI declined to 0.5% in December, more than the market expectations. Eric sells EUR/USD at 1.3800 with 0.10 lot and places stop loss at 1.3900, he sets his initial target around 1.3670. e current leverage of Eric’ Eric’ss account is 1:400 so $34.50 will be in use for this trade. Eric risked $100 on this trade as his stop loss was exactly 100 pips. EUR/USD began falling following the CPI release but aer 40 pips slide Euro halted the downside movement as investors turned their focus to FOMC announcement.
Eric earns $130 as Fed announces tapering At 14:00 GMT, the Federal Reserve announces a $10 billion cut in the monthly asset purchases program, trimming it down to $65 billion and leaves the interest rate unchanged. e US dollar appreciates aer the US central bank decision and consequently, the EUR/USD accelerates the downside movement. Fortunately, a mere couple of hours aer the Fed announcement, EUR/USD hit 1.3670 and Eric gets 130 pips Take Profit (TP), with a dollar value of $130.
Case study 2
Earning a Second Income with the Popular Investor Program Robert Dumont is a decent forex trader. Recently, he found a way to make additional income by letting beginner traders copy his trades. He opened a trading account here and started trading (minimum deposit was $50). Aer 3 months, he was qualified to join the Popular Investor program. Once he got 10 people to copy his trades, he became an official Popular Investor and started making making $10 per month per person who copied him with an average balance of $100.
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250
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500
749
750
999
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1499
1,500
3999
4,000
7999
8,000
9999
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$150 $300 $500 $650 $750 $1,000 $2,000 $2,500 $5,000 $5
$300 $600 $1,000 $1,300 $1,500 $2,000 $4,000 $5,000 $10,000
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Example of 3 positive p ositive time time frames
e Popular Investor payments depend on two factors: average daily qualified copiers and the number of profitable time periods out of the four investment periods (Last Month, Last 3 months, Last 6 months and Last 12 months). Two profitable investment periods or less means that the Popular Investor In vestor gets paid according to the “Basic” amount. ree profitable periods or more means that the Popular Investor gets paid according to the “Top” amount. More info about the Popular Investor program is here
Case study 3
Identifying the “Buy” Opportunity in USD/JPY through through MACD Divergence Paul Anderson is an experienced technical trader. His technical analysis is based on different technical indicators and price action signals. On February 5, Paul’s trading system generated a couple of bullish signals about USD/JPY. He decided to conduct an in-depth technical analysis on the pair for a potential p otential buying opportunity.
Positive Divergence Paul was excited to see some strong positive divergence within the four-hour timeframe. MACD was showing Higher Low (HL) while the price had printed a Lower Low (LL), (L L), as demonstrated in the following chart.
A strong bullish signal is generated when the price prints LL but the oscillator (such as MACD, RSI or CCI) fails to follow the price movement and shows HL. Similarly, a strong bearish signal is generated when the price prints HL but the oscillator shows LL. Divergence is considered one of the most authentic tools for technical analysis.
RSI & CCI Paul noticed that both the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) were retreating from oversold territories. territories. is was the second major signal for a potential bullish reversal in USD/JPY.
Case study 3
An RSI reading below 30 is considered an indication of oversold sentiment while a reading above 70 shows overbought sentiment among traders. Similarly, a CCI reading below -100 gives an oversold signal while a reading above +100 shows overbought sentiment. In the oversold market, price mostly takes bullish reversal and vice versa.
Fundamental Analysis Aer getting adequate bullish signals from technical analysis, Paul then checked out the economic calendar. He found that no major event was due on February 5. A few medium-level economic reports about the US economy were, however however,, scheduled for release on that day day..
ADP Employment Employment Change e report shows the number of people who got employed in the US over a specific period of time. It is a monthly report which stirs moderate volatility in US Dollar (USD). On February 5, the report gave g ave the downbeat reading of 127K; analysts had predicted 180K new jobs in Jan January. uary.
Markit Services PMI e report, released by Markit Economics, measures the performance of the US services sector during a particular time period. On February 5, the report showed a 56.7-point reading in January; this was broadly in line with the expectations.
ISM Non-Manufacturing PMI e report, released by the Institute of Supply Management (ISM), shows the performance of the US services sector over a specific period of time. On February 5, the report posted the upbeat reading of 54.0; market was expecting a 53.7-point reading in January Jan uary compared to 53.0 in the month month before.
Paul went long and earned $150 Based on the strong bullish signals from technical analysis and mixed US economic e conomic reports, Paul finally opened a long (buy) position in USD/JPY at 101.00. He kept the stop-loss at 100.50 and the take profit at 102.50. His lot size was 0.10, i.e., he risked $50 for a $150 potential profit. Aer two days, his analysis turned out to be correct and he enjoyed 150 pips or a $150 profit.
Case study 4
Ident dentif ifying ying a ‘Sell’ Opportunity in USD/CHF through USD/CHF through Trendline Resistance Abdullah Khan has been trading currencies for a long time. His technical analysis is mainly focused on trendline support/resistance levels and price patterns. In addition, he also keeps an eye on fundamental events. On February 12, he realized some serious downside risk in the USD/CHF which prompted him to conduct an in-depth technical analysis for the pair.
Technical Analy Analysis sis Abdullah drew trendlines on the daily chart which showed a downward slope channel in the pair. e slope channel further revealed that the price faced rejection at the channel resistance three times in the recent past.
To confirm the bearish sentiment on the pair, Abdullah inserted Fibonacci levels on the daily chart. He then came to know that both the 50% fib level and the channel resistance were at the same point: 0.9027.
Case study 4
When two or more resistance or support levels combine at the same point, such point is known as confluence. Confluence support and confluence resistance are considered the best levels for entry. Based on the repeated rejection around channel resistance and the confluence resistance, Abdullah concluded that his technical analysis as very bearish for the pair.
Fundamental Analysis Switzerland’s Consumer Price Index (CPI) for the month of January was due on that day. Analysts had predicted 0.1% reading against the same reading the month before. e actual outcome came exactly in line with the expectations. In the US basket, the monthly budget statement was due for release. Economists were expecting a $27.50 billion deficit for the month of January. However, the actual deficit came out to be $10.42 billion. Since the US budget statement is considered a medium-level economic report, high volatility was not expected in USD/CHF.
Abdullah sold USD/CHF and earned $100 Based on the strong bearish signals from the technical analysis and a relatively calm fundamental outlook, Abdullah decided to open a short (Sell) position in USD/CHF at 0.9027. He placed the stop-loss at 0.9057 and the take profit at 0.8927. His lot size was 0.10, which means he risked $30 for a potential p otential $100 profit. e analysis turned out to be correct and Abdullah got his target within 24 hours.
Case study 5
Long-Term Trade Opportunity Identified by Inverse H&S Pattern Sarah Robertson is an experienced independent trader. Her trades are based on different price patterns and extensive fundamen fundamental tal research. On February 27, Sarah observed the Inverse Head & Shoulder (H&S) pattern in NZD/USD which gave her a potential buying opportunity in the pair.
Inverse H&S Pattern Inverse H&S is one of the most famous and reliable price patterns among traders. e pattern consists of a head, two shoulders and a neckline. e neckline is derived by joining the peaks of the two shoulders. A breakout through neckline confirms the authenticity of the H&S pattern. Traders tend to buy an asset if the price breaks the neckline of the inverse H&S pattern.
Sarah decided to wait until the price breaks the neckline, which was around 0.8347. Meanwhile, she decided to go over the fundamental events relating to NZD/USD.
Case study 5
Fundamental Fu ndamental Analysis A nalysis Since the trade opportunity identified by the Inverse H&S Pattern was long term, Sarah decided to study all of the major events which were due in next 2-3 weeks. She came to know that the most significant event pertaining to New Zealand’s economy was the interest rate decision by the Reserve Bank of New Zealand (RBNZ). e event was due on Wednesday, March 12. Sarah conducted some more research to get clues on the RBNZ rate decision. She learned that the RBNZ was expected to increase the interest rate by 0.25% to 2.75%, according to the median projection of different economists surveyed by Bloomberg. Generally speaking, the currency of a country is positively correlated to the interes interestt rate, i.e., if the country increases the interest rate, the currency also tends to appreciate and vice versa. Sarah was very optimistic that if the RBNZ announced an increase in the benchmark interest rate, NZD/USD would rise considerably.
Sarah Earned $200 On March 3, the price broke the neckline, confirming the Inverse H&S Pattern. Aer getting favorable signals from both the technical and fundamental analyses, Sarah eventually opened a long (buy) position in NZD/USD at 0.8350 with 0.10 lot size. She placed the stop-loss at 0.8300 and her target was 0.8550, which means she risked $50 for the potential profit of $200. As expected, RBNZ announced an increase in the benchmark interest rate by 0.25% on March 12 and consequently, NZD/USD rallied above 0.8550. us, Sarah got the Take Profit (TP) worth $200.
Case study 6
Identifying Long-Term Buying Opportunity in Gold for $1000 Profit Jonathan Millet is a seasoned commodity trader Jonathan trader.. His trades are based on long-term fundamental and technical analyses. He keeps the trades open for weeks and months. In January January 2014, he noticed some real bullish strength in the Gold price. Like a professional trader trader,, Jonat Jonathan han planned to conduct thorough technical and fundamental analyses for potential buying opportunity in the precious metal.
Double-Bottom Price Pattern Jonathan found that a classic Jonathan cla ssic double-bottom price pattern was obvious on the weekly chart of the yellow metal. Among traders, the Double-Bottom Pattern Pattern is considered one of the strongest signals for bullish reversal. TechniTechnically, Jonathan was 70% convinced of the buy trade. However, before making an entry, he wanted to see more confirmation confirma tion signals through technical indicators and fundamental analysis.
Case study 6
Parabolic SAR e Parabolic Stop and Reverse method or simply Parabolic SAR S AR is a famous technical indicator. It It generates buy or sell signals through the placement of dots. When the dots show below the candles, it means the bulls have started dominating the price and the upside rallies are likely in the near future. Conversely, if the dots show above the candles, then the indicator generates the opposite i.e., bearish signals.
On January 6, Jonathan noticed that the Parabolic SAR had generated some real bullish signals, reinforcing the double-bottom pattern. In addition, some other technical indicators such as the Relative Strength Index Index (RSI) (R SI) and Commodity Channel Index (CCI) were also showing oversold readings. ese are more signals for potential bullish reversal.
Fundamental Analysis A number of major economic events pertaining to the US economy were due on January 6. Jonathan decided to wait for the outcomes of the the events before opening opening a buy trade in Gold.
Markit Services PMI e services sector Purchasing Managers Index (PMI) released by a private firm Markit Economics showed that the services sector in the US grew by 55.7 points in December compared to 55.9 points the month before. A lesser reading is seen as bullish for Gold.
Factory Orders e manufacturers in the US received 1.5% more orders in November November as compared to 0.5% decline the month before. Analysts, however, were expecting a 1.8% increase in the November orders so the data downbeat the expectations.
Jonathan Jo nathan Goes Long and earns $1000 Aer getting a couple of strong bullish signals through the technical analysis and downbeat US data, Jonathan finally opened a long (buy) position in gold. He bought a 0.10 gold g old lot at $1240 an ounce. He placed the stop-loss around the swing low of the previous daily candle which was $1218; his long-term target was $1330. A couple of days later, later, US non-farm payrolls came in worse than than expectations and gold shot to $1265. is further encouraged Jonathan Jonat han to keep his trade open. When the precious metal reached $1290, he brought his stop-loss at breakeven point, i.e., at the price price of entry entry.. Now Now, Jonathan Jonathan was completely riskrisk-free. free. Fortunately Fortunately,, gold never approached $1240 aer his entry and kept printing new highs until the yellow metal hit $1340 on March 3. us, Jonathan Jonathan achieved his target and earned $1000.
Case study 7
Identifying Buying Opportunity in USD/RUR amid the Ukraine Crisis Samuel Rae is an experienced currency trader. He loves to trade exotic currency pairs. Sam came to know about the Ukraine crisis through the media. Being a vigilant news trader, he soon realized that the Russian ruble might hit fresh all-time lows against the greenback in such a scenario. He decided to buy USD/RUR on dips.
Crimea Referendum A referendum was due on March 16 in Crimea (a Ukrainian territory where almost 70% are Russian-speakingg ) to decide whether the people want Russian-speakin to join Russia or restore the 1992 constitution. Aer conducting an extensive research on the referendum, Sam found that an overwhelming majority of Crimea was likely to vote in favor of Russia. e western countries had already threatened that if Russia recognized Crimea, it would have to face strict sanctions, similar to what it had suffered in the Cold War W ar era. Two things were clear from the news analysis: analysis : • Crimea was expected to vote in favor of Russia • Russia was expected to face sanctions from the western countries countries It was very obvious that the Russian currency and stock markets would react sharply on any sanctions from the west. It was a strong indication that aer the referendum, the Russian ruble could hit new lows against the dollar.
Central Bank Intervention It is generally observed that in a crisis situation, the Russian Central Bank always intervenes into the open markett to support its currency. marke currency. ere was a possibility p ossibility that the Russian bank might cap the USD/RUR aer the referendum. referendum. us, Sam decided not to open a buy position ahead of the referend referendum. um. He wanted to see the actual results of the referendum and then the reaction in the market.
Crimea Joins Russia, USD/RUR Tumbles ings happened exactly as Sam expected. Crimea voted to join Russia and Russia promptly recognized Crimea. e western countries rejected the referendum referend um and started imposing sanctions s anctions on Russia. To avoid the steep fall in ruble, the Russian central bank intervened which consequently appreciated the Russian currency against the US dollar. is was an ideal scenario for Sam because he knew that the bank would not be able ab le to support the Russian ruble for a long time, especially when the US monetary policy was due on March 19. Sam was ready to buy USD/RUR on dips.
Case study 8
Identif yingg Long Identifyin ong--Term Trad radee Opportunity in Silver Silver aer aer China’s Manufacturing Slowdown Michael Harding has been trading commodities for the last 10 years. He loves to identify and trade the long-term trends in the metals for big profits. In February, Mike came to know about the manufacturing slowdown in China which prompted him to look for potential trade opportunities in precious metals.
Manufacturing Slowdown in China On Wednesday, February 19, HSBC Holdings PLC said that China’s manufacturing activity slowed down in February for the third month in a row, a sign that the world’s second largest economy is struggling to maintain steady growth. e HSBC HSB C Manufacturing Manufacturing Purchasing Managers Managers Index (PMI) declined to 48.3 points p oints compared to 49.5 points in January; analysts had predicted a decline to 49.4. A PMI reading above 50 shows expansion in the manufacturing manufactu ring activity and vice versa. versa. Since the Asian nation nation is the largest consumer of the precious metals, investors investo rs always tend to sell gold and silver on negative neg ative developments developments relating to China.
Technical Analy Analysis sis Mike found that silver was testing the crucial resistance area around $21.80-$22.00, i.e., the 76.4% fib level. Moreover, Moreover, the current level was the last major resistance before the swing high of the previous wave. Technically Technically,, price mostly takes deep correction from the last resistance level before the previous high.
Macroeconomic Macroecono mic Scenario China grew at 7.7% in 2013, the slowest pace in more than a decade. Economists believe that the pace of growth is expected to slow down further during the course of the current year. Slow growth in the Asian nation means low demand for silver and other precious metals. Moreover, the Federal Reserve policymakers clearly indicated in the January Jan uary meeting that the central bank wanted to drop the entire Quantitative Easing (QE) program by the end of October this year. e end of the stimulus means stronger US dollar (USD) or, in other words, cheaper silver because the prices of commodities are negatively correlated to the dollar.
Case study 7
Technical Analy Analysis sis Traders were widely expecting another tapering (activities used by the central banks to improve the conditions for economic growth) on March 19 from the US Federal Reserve aer a surprise jump in February non-farm payrolls. Sam bought USD/RUR with a 0.50 lot size at 35.90, which was the 161.8% fib level. He carried out the trade with 15 pips stop-loss just ahead of the monetary policy pol icy decision from the Fed. His target was 36.15, i.e., 25 pips or $125 profit.
Sam Earned $125 e Federal Reserve kept the interes interestt rate unchanged and reduced the QE by $10 billion to $55 billion as expected. USD/RUR shot up and within a six-hour duration, Sam collected the $125 profit. Sam’s patience and and extensive extensive research research is a perfect perfect role model for beginner traders who oen lose in the volatile market.
Case study 8
Mike Concludes Concludes His Analysis & Sells Silver Aer getting strong bearish signals from both the technical and fundamental analyses, Mike decides to go short on silver. He sells the white metal at $21.80 with a 0.10 lot size, keeping the stop-loss at $22.20, well above the 76.4% fib level resistance.
Case study 9
Iden dentif tifying ying the ‘Buy’ Opportunity in GBP/USD Ahead of US Non-Farm PayAngela Ripley is an expert currency trader. Her technical analysis is based on trendline support/resistance, Fibonacci levels, MACD divergence, and overbought/oversold signals through RSI and CCI. Moreover, Moreover, she keeps a close eye on macro-economic events and daily news releases. On February 7, Angela noted the repeated rejection in GBP/USD around 1.6250 that prompted her to conduct an in-depth technical analysis for a potential buying opportunity in the pair.
Technical Analy Analysis sis Like a typical typ ical technical trader, Angela first inserted Fibonacci levels into the chart. She found that 1.6250 was 50% fib support of the last major rally. 50% fib level is considered the most significant support/resistance level among currency curren cy traders; it is observed that price takes a rebound from 50% fib level in almost 65%-70% cases. Angela felt a strong bullish feeling about the pair. However, her technical analysis was incomplete; she wanted to get some more confirmation signals.
Angela conducted swing analysis on the daily chart. She found that 1.6308 was the ‘swing low’ of the previous downward wave. It is pertinent that in about 70%-80% cases, price takes retracement from the very first support level aer the ‘swing ‘swing low’ of the previous wave. In the case of GBP/USD scenario, 50% fib level or 1.6250 was the first support level aer the ‘swing low’ of the previous wave. is was the second strong signal for a long-term bullish reversal in the pair. erefore, erefore, Angela was feeling very ver y much convinced about the buy trade.
Case study 9
Furthermore, Angela found that the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) were also showing showing oversold oversold readings. readings. An RSI reading below below 30 and a CCI reading below -100 are considered oversold signals among traders.
Fundamental Fu ndamental Analysis Aer getting numerous numerous “Buy” signals from the technical analysis, Angela moves onto the fundamental analysis. She found that Britain’s docket was empty for the day; however, in the US, the labor department was scheduled to release non-farm payrolls and unemployment rate reports for the month of January. Upon further research, Angela came to know that analysts were expecting a better non-farm payrolls reading as well as a decrease in the unem ployment rate rate for January January.. According to the median projection of different analysts, non-farm payrolls rose by 150K in January January compared to 113K increase in the month before. e unemployment rate ticked down to 6.7% in January compared to 6.8% in the previous month. She decided to buy GBP/USD in case of worse than expected US job data.
Angela bought GBP/USD and earned $363 In the US morning session, the labor department released the reports showing that non-farm payrolls in the US rose just by 75,000 in January, missing the median projection of analysts by a long shot. Moreo ver,, the unemploy ver unemployment ment rate also rose to 6.9% contrary contrary to the forecast. Angela bought GBP/USD promptly aer the releases; her order got filled at 1.6287. She placed the stop-loss at 1.6230 and the take profit at 1.6650. She bought the pair with a 0.10 lot size which means the values of her risk and reward were $57 and $363, respectively. Just an hour aer the entry, Angela’s trade was in $110 profit. Being a seasoned trader, Angela didn’t didn’t close the order before her target. Eventually aer the one-week patience, she got her target and earned $363.
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www.forexillustrated.com
Welcome W elcome!! What is a day day like like in the life of a pro pro forex forex trader?
If you are interested in finding out how professional forex traders successfully trade step by step, this is the e-book for you! Forget about vague and boring theory. Here, Here, you will see real trade examples and strategies based on real market situations. e purpose of this e-book is to share some of the best tips, techniques, and observations that have worked for successful traders. You will see how experienced traders analyze the market, what signals they are looking for, and how they determine the entry and exit points of a trade.
Forexillustrated.com
Joining traders from New York • Tokyo • Singapore • Paris • London
Case study 1
Trading EUR/USD EUR/USD Ahead Ahead of FOMC Meeting, Eurozone CPI Release Eric Dale is a seasoned currency trader. His trade setups are based on sound fundamental and technical analyses. On January 4, Eric notices that technicals are signaling some real downside risk in EUR/USD. e preliminary technical analysis prompted him to consider consider a sell (short) position in the pair.
Fundamental Analysis In order to assess the macro-economic or fundamental scenario, Eric opens the economic calendar. He finds that two major economic events are due today:
Eurozone CPI At 9:00 GMT, Eurostat is scheduled to release Eurozone’s Consumer Price Index (CPI) report for December. CPI is considered the best gauge for inflation over a specific period of time. Aer some more research on the economic release, Eric comes to know that analysts are expecting a decline in Eurozone’ Eurozo ne’ss CPI to 0.7% in December as compared to 0.9% during the same duration a year before. Generally speaking, a high CPI reading (close to 2%) is seen as bullish bul lish for EUR/USD and vice versa.
US Monetary Policy Meetin Meetingg At 14:00 GMT, Federal Reserve is due to announce a Federal Open Market Committee (FOMC) decision on the pace of monthly asset purchase program and benchmar benchmarkk interest interest rate aer a two-day monetary policy meeting. Eric again opens some news websites and finds that analysts are, almost unanimously, expecting tapering in monthly asset purchase program worth $75 billion b illion and no change in benchmark interest rate.
Fundamental conclusions Aer thorough research, Eric concludes that the fundamentals are reinforcing his preliminary technical analysis about the potential downside risk in EUR/USD. He plans to conduct an in-depth technical analysis to make a final decision.
Case study 1
Technical Analy Analysis sis A long shooting-star candle on the daily chart gave g ave Eric a preliminary indication for the potential p otential downside risk in near future. Aer applying Fibonacci extension levels on the daily chart, Eric comes to know that the price took retracement retraceme nt from 261.8% fib level resistance as demonst demonstrated rated in the following fol lowing chart.
Analysis e current market price is 1.3800; Eric knows that the price will face huge resistance near 1.3891 because now it is a confluence of 261.8% fib level and the shooting star resistance. So he makes his mind to open a sell position around 1.3800 if the Eurozone’s CPI comes worse than expectations or in line with expectations. e data is due just a few minutes later. later.
Eric sells EUR/USD Eurozone’s CPI data comes worse than the forecast. Eurostat report shows that CPI declined to 0.5% in December, more than the market expectations. Eric sells EUR/USD at 1.3800 with 0.10 lot and places stop loss at 1.3900, he sets his initial target around 1.3670. e current leverage of Eric’ Eric’ss account is 1:400 so $34.50 will be in use for this trade. Eric risked $100 on this trade as his stop loss was exactly 100 pips. EUR/USD began falling following the CPI release but aer 40 pips slide Euro halted the downside movement as investors turned their focus to FOMC announcement.
Eric earns $130 as Fed announces tapering At 14:00 GMT, the Federal Reserve announces a $10 billion cut in the monthly asset purchases program, trimming it down to $65 billion and leaves the interest rate unchanged. e US dollar appreciates aer the US central bank decision and consequently, the EUR/USD accelerates the downside movement. Fortunately, a mere couple of hours aer the Fed announcement, EUR/USD hit 1.3670 and Eric gets 130 pips Take Profit (TP), with a dollar value of $130.
Case study 2
Earning a Second Income with the Popular Investor Program Robert Dumont is a decent forex trader. Recently, he found a way to make additional income by letting beginner traders copy his trades. He opened a trading account here and started trading (minimum deposit was $50). Aer 3 months, he was qualified to join the Popular Investor program. Once he got 10 people to copy his trades, he became an official Popular Investor and started making making $10 per month per person who copied him with an average balance of $100.
Qualified Qualif ied Copiers Copier s
Basic
TOP
Fr om
To
Revenue
Revenue
10
49
$50
$100
50
249
250
499
500
749
750
999
1,000
1499
1,500
3999
4,000
7999
8,000
9999
10,000
>
$150 $300 $500 $650 $750 $1,000 $2,000 $2,500 $5,000 $5
$300 $600 $1,000 $1,300 $1,500 $2,000 $4,000 $5,000 $10,000
Payments
Example of 3 positive p ositive time time frames
e Popular Investor payments depend on two factors: average daily qualified copiers and the number of profitable time periods out of the four investment periods (Last Month, Last 3 months, Last 6 months and Last 12 months). Two profitable investment periods or less means that the Popular Investor In vestor gets paid according to the “Basic” amount. ree profitable periods or more means that the Popular Investor gets paid according to the “Top” amount. More info about the Popular Investor program is here
Case study 3
Identifying the “Buy” Opportunity in USD/JPY through through MACD Divergence Paul Anderson is an experienced technical trader. His technical analysis is based on different technical indicators and price action signals. On February 5, Paul’s trading system generated a couple of bullish signals about USD/JPY. He decided to conduct an in-depth technical analysis on the pair for a potential p otential buying opportunity.
Positive Divergence Paul was excited to see some strong positive divergence within the four-hour timeframe. MACD was showing Higher Low (HL) while the price had printed a Lower Low (LL), (L L), as demonstrated in the following chart.
A strong bullish signal is generated when the price prints LL but the oscillator (such as MACD, RSI or CCI) fails to follow the price movement and shows HL. Similarly, a strong bearish signal is generated when the price prints HL but the oscillator shows LL. Divergence is considered one of the most authentic tools for technical analysis.
RSI & CCI Paul noticed that both the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) were retreating from oversold territories. territories. is was the second major signal for a potential bullish reversal in USD/JPY.
Case study 3
An RSI reading below 30 is considered an indication of oversold sentiment while a reading above 70 shows overbought sentiment among traders. Similarly, a CCI reading below -100 gives an oversold signal while a reading above +100 shows overbought sentiment. In the oversold market, price mostly takes bullish reversal and vice versa.
Fundamental Analysis Aer getting adequate bullish signals from technical analysis, Paul then checked out the economic calendar. He found that no major event was due on February 5. A few medium-level economic reports about the US economy were, however however,, scheduled for release on that day day..
ADP Employment Employment Change e report shows the number of people who got employed in the US over a specific period of time. It is a monthly report which stirs moderate volatility in US Dollar (USD). On February 5, the report gave g ave the downbeat reading of 127K; analysts had predicted 180K new jobs in Jan January. uary.
Markit Services PMI e report, released by Markit Economics, measures the performance of the US services sector during a particular time period. On February 5, the report showed a 56.7-point reading in January; this was broadly in line with the expectations.
ISM Non-Manufacturing PMI e report, released by the Institute of Supply Management (ISM), shows the performance of the US services sector over a specific period of time. On February 5, the report posted the upbeat reading of 54.0; market was expecting a 53.7-point reading in January Jan uary compared to 53.0 in the month month before.
Paul went long and earned $150 Based on the strong bullish signals from technical analysis and mixed US economic e conomic reports, Paul finally opened a long (buy) position in USD/JPY at 101.00. He kept the stop-loss at 100.50 and the take profit at 102.50. His lot size was 0.10, i.e., he risked $50 for a $150 potential profit. Aer two days, his analysis turned out to be correct and he enjoyed 150 pips or a $150 profit.
Case study 4
Ident dentif ifying ying a ‘Sell’ Opportunity in USD/CHF through USD/CHF through Trendline Resistance Abdullah Khan has been trading currencies for a long time. His technical analysis is mainly focused on trendline support/resistance levels and price patterns. In addition, he also keeps an eye on fundamental events. On February 12, he realized some serious downside risk in the USD/CHF which prompted him to conduct an in-depth technical analysis for the pair.
Technical Analy Analysis sis Abdullah drew trendlines on the daily chart which showed a downward slope channel in the pair. e slope channel further revealed that the price faced rejection at the channel resistance three times in the recent past.
To confirm the bearish sentiment on the pair, Abdullah inserted Fibonacci levels on the daily chart. He then came to know that both the 50% fib level and the channel resistance were at the same point: 0.9027.
Case study 4
When two or more resistance or support levels combine at the same point, such point is known as confluence. Confluence support and confluence resistance are considered the best levels for entry. Based on the repeated rejection around channel resistance and the confluence resistance, Abdullah concluded that his technical analysis as very bearish for the pair.
Fundamental Analysis Switzerland’s Consumer Price Index (CPI) for the month of January was due on that day. Analysts had predicted 0.1% reading against the same reading the month before. e actual outcome came exactly in line with the expectations. In the US basket, the monthly budget statement was due for release. Economists were expecting a $27.50 billion deficit for the month of January. However, the actual deficit came out to be $10.42 billion. Since the US budget statement is considered a medium-level economic report, high volatility was not expected in USD/CHF.
Abdullah sold USD/CHF and earned $100 Based on the strong bearish signals from the technical analysis and a relatively calm fundamental outlook, Abdullah decided to open a short (Sell) position in USD/CHF at 0.9027. He placed the stop-loss at 0.9057 and the take profit at 0.8927. His lot size was 0.10, which means he risked $30 for a potential p otential $100 profit. e analysis turned out to be correct and Abdullah got his target within 24 hours.
Case study 5
Long-Term Trade Opportunity Identified by Inverse H&S Pattern Sarah Robertson is an experienced independent trader. Her trades are based on different price patterns and extensive fundamen fundamental tal research. On February 27, Sarah observed the Inverse Head & Shoulder (H&S) pattern in NZD/USD which gave her a potential buying opportunity in the pair.
Inverse H&S Pattern Inverse H&S is one of the most famous and reliable price patterns among traders. e pattern consists of a head, two shoulders and a neckline. e neckline is derived by joining the peaks of the two shoulders. A breakout through neckline confirms the authenticity of the H&S pattern. Traders tend to buy an asset if the price breaks the neckline of the inverse H&S pattern.
Sarah decided to wait until the price breaks the neckline, which was around 0.8347. Meanwhile, she decided to go over the fundamental events relating to NZD/USD.
Case study 5
Fundamental Fu ndamental Analysis A nalysis Since the trade opportunity identified by the Inverse H&S Pattern was long term, Sarah decided to study all of the major events which were due in next 2-3 weeks. She came to know that the most significant event pertaining to New Zealand’s economy was the interest rate decision by the Reserve Bank of New Zealand (RBNZ). e event was due on Wednesday, March 12. Sarah conducted some more research to get clues on the RBNZ rate decision. She learned that the RBNZ was expected to increase the interest rate by 0.25% to 2.75%, according to the median projection of different economists surveyed by Bloomberg. Generally speaking, the currency of a country is positively correlated to the interes interestt rate, i.e., if the country increases the interest rate, the currency also tends to appreciate and vice versa. Sarah was very optimistic that if the RBNZ announced an increase in the benchmark interest rate, NZD/USD would rise considerably.
Sarah Earned $200 On March 3, the price broke the neckline, confirming the Inverse H&S Pattern. Aer getting favorable signals from both the technical and fundamental analyses, Sarah eventually opened a long (buy) position in NZD/USD at 0.8350 with 0.10 lot size. She placed the stop-loss at 0.8300 and her target was 0.8550, which means she risked $50 for the potential profit of $200. As expected, RBNZ announced an increase in the benchmark interest rate by 0.25% on March 12 and consequently, NZD/USD rallied above 0.8550. us, Sarah got the Take Profit (TP) worth $200.
Case study 6
Identifying Long-Term Buying Opportunity in Gold for $1000 Profit Jonathan Millet is a seasoned commodity trader Jonathan trader.. His trades are based on long-term fundamental and technical analyses. He keeps the trades open for weeks and months. In January January 2014, he noticed some real bullish strength in the Gold price. Like a professional trader trader,, Jonat Jonathan han planned to conduct thorough technical and fundamental analyses for potential buying opportunity in the precious metal.
Double-Bottom Price Pattern Jonathan found that a classic Jonathan cla ssic double-bottom price pattern was obvious on the weekly chart of the yellow metal. Among traders, the Double-Bottom Pattern Pattern is considered one of the strongest signals for bullish reversal. TechniTechnically, Jonathan was 70% convinced of the buy trade. However, before making an entry, he wanted to see more confirmation confirma tion signals through technical indicators and fundamental analysis.
Case study 6
Parabolic SAR e Parabolic Stop and Reverse method or simply Parabolic SAR S AR is a famous technical indicator. It It generates buy or sell signals through the placement of dots. When the dots show below the candles, it means the bulls have started dominating the price and the upside rallies are likely in the near future. Conversely, if the dots show above the candles, then the indicator generates the opposite i.e., bearish signals.
On January 6, Jonathan noticed that the Parabolic SAR had generated some real bullish signals, reinforcing the double-bottom pattern. In addition, some other technical indicators such as the Relative Strength Index Index (RSI) (R SI) and Commodity Channel Index (CCI) were also showing oversold readings. ese are more signals for potential bullish reversal.
Fundamental Analysis A number of major economic events pertaining to the US economy were due on January 6. Jonathan decided to wait for the outcomes of the the events before opening opening a buy trade in Gold.
Markit Services PMI e services sector Purchasing Managers Index (PMI) released by a private firm Markit Economics showed that the services sector in the US grew by 55.7 points in December compared to 55.9 points the month before. A lesser reading is seen as bullish for Gold.
Factory Orders e manufacturers in the US received 1.5% more orders in November November as compared to 0.5% decline the month before. Analysts, however, were expecting a 1.8% increase in the November orders so the data downbeat the expectations.
Jonathan Jo nathan Goes Long and earns $1000 Aer getting a couple of strong bullish signals through the technical analysis and downbeat US data, Jonathan finally opened a long (buy) position in gold. He bought a 0.10 gold g old lot at $1240 an ounce. He placed the stop-loss around the swing low of the previous daily candle which was $1218; his long-term target was $1330. A couple of days later, later, US non-farm payrolls came in worse than than expectations and gold shot to $1265. is further encouraged Jonathan Jonat han to keep his trade open. When the precious metal reached $1290, he brought his stop-loss at breakeven point, i.e., at the price price of entry entry.. Now Now, Jonathan Jonathan was completely riskrisk-free. free. Fortunately Fortunately,, gold never approached $1240 aer his entry and kept printing new highs until the yellow metal hit $1340 on March 3. us, Jonathan Jonathan achieved his target and earned $1000.
Case study 7
Identifying Buying Opportunity in USD/RUR amid the Ukraine Crisis Samuel Rae is an experienced currency trader. He loves to trade exotic currency pairs. Sam came to know about the Ukraine crisis through the media. Being a vigilant news trader, he soon realized that the Russian ruble might hit fresh all-time lows against the greenback in such a scenario. He decided to buy USD/RUR on dips.
Crimea Referendum A referendum was due on March 16 in Crimea (a Ukrainian territory where almost 70% are Russian-speakingg ) to decide whether the people want Russian-speakin to join Russia or restore the 1992 constitution. Aer conducting an extensive research on the referendum, Sam found that an overwhelming majority of Crimea was likely to vote in favor of Russia. e western countries had already threatened that if Russia recognized Crimea, it would have to face strict sanctions, similar to what it had suffered in the Cold War W ar era. Two things were clear from the news analysis: analysis : • Crimea was expected to vote in favor of Russia • Russia was expected to face sanctions from the western countries countries It was very obvious that the Russian currency and stock markets would react sharply on any sanctions from the west. It was a strong indication that aer the referendum, the Russian ruble could hit new lows against the dollar.
Central Bank Intervention It is generally observed that in a crisis situation, the Russian Central Bank always intervenes into the open markett to support its currency. marke currency. ere was a possibility p ossibility that the Russian bank might cap the USD/RUR aer the referendum. referendum. us, Sam decided not to open a buy position ahead of the referend referendum. um. He wanted to see the actual results of the referendum and then the reaction in the market.
Crimea Joins Russia, USD/RUR Tumbles ings happened exactly as Sam expected. Crimea voted to join Russia and Russia promptly recognized Crimea. e western countries rejected the referendum referend um and started imposing sanctions s anctions on Russia. To avoid the steep fall in ruble, the Russian central bank intervened which consequently appreciated the Russian currency against the US dollar. is was an ideal scenario for Sam because he knew that the bank would not be able ab le to support the Russian ruble for a long time, especially when the US monetary policy was due on March 19. Sam was ready to buy USD/RUR on dips.
Case study 8
Identif yingg Long Identifyin ong--Term Trad radee Opportunity in Silver Silver aer aer China’s Manufacturing Slowdown Michael Harding has been trading commodities for the last 10 years. He loves to identify and trade the long-term trends in the metals for big profits. In February, Mike came to know about the manufacturing slowdown in China which prompted him to look for potential trade opportunities in precious metals.
Manufacturing Slowdown in China On Wednesday, February 19, HSBC Holdings PLC said that China’s manufacturing activity slowed down in February for the third month in a row, a sign that the world’s second largest economy is struggling to maintain steady growth. e HSBC HSB C Manufacturing Manufacturing Purchasing Managers Managers Index (PMI) declined to 48.3 points p oints compared to 49.5 points in January; analysts had predicted a decline to 49.4. A PMI reading above 50 shows expansion in the manufacturing manufactu ring activity and vice versa. versa. Since the Asian nation nation is the largest consumer of the precious metals, investors investo rs always tend to sell gold and silver on negative neg ative developments developments relating to China.
Technical Analy Analysis sis Mike found that silver was testing the crucial resistance area around $21.80-$22.00, i.e., the 76.4% fib level. Moreover, Moreover, the current level was the last major resistance before the swing high of the previous wave. Technically Technically,, price mostly takes deep correction from the last resistance level before the previous high.
Macroeconomic Macroecono mic Scenario China grew at 7.7% in 2013, the slowest pace in more than a decade. Economists believe that the pace of growth is expected to slow down further during the course of the current year. Slow growth in the Asian nation means low demand for silver and other precious metals. Moreover, the Federal Reserve policymakers clearly indicated in the January Jan uary meeting that the central bank wanted to drop the entire Quantitative Easing (QE) program by the end of October this year. e end of the stimulus means stronger US dollar (USD) or, in other words, cheaper silver because the prices of commodities are negatively correlated to the dollar.
Case study 7
Technical Analy Analysis sis Traders were widely expecting another tapering (activities used by the central banks to improve the conditions for economic growth) on March 19 from the US Federal Reserve aer a surprise jump in February non-farm payrolls. Sam bought USD/RUR with a 0.50 lot size at 35.90, which was the 161.8% fib level. He carried out the trade with 15 pips stop-loss just ahead of the monetary policy pol icy decision from the Fed. His target was 36.15, i.e., 25 pips or $125 profit.
Sam Earned $125 e Federal Reserve kept the interes interestt rate unchanged and reduced the QE by $10 billion to $55 billion as expected. USD/RUR shot up and within a six-hour duration, Sam collected the $125 profit. Sam’s patience and and extensive extensive research research is a perfect perfect role model for beginner traders who oen lose in the volatile market.
Case study 8
Mike Concludes Concludes His Analysis & Sells Silver Aer getting strong bearish signals from both the technical and fundamental analyses, Mike decides to go short on silver. He sells the white metal at $21.80 with a 0.10 lot size, keeping the stop-loss at $22.20, well above the 76.4% fib level resistance.
Case study 9
Iden dentif tifying ying the ‘Buy’ Opportunity in GBP/USD Ahead of US Non-Farm PayAngela Ripley is an expert currency trader. Her technical analysis is based on trendline support/resistance, Fibonacci levels, MACD divergence, and overbought/oversold signals through RSI and CCI. Moreover, Moreover, she keeps a close eye on macro-economic events and daily news releases. On February 7, Angela noted the repeated rejection in GBP/USD around 1.6250 that prompted her to conduct an in-depth technical analysis for a potential buying opportunity in the pair.
Technical Analy Analysis sis Like a typical typ ical technical trader, Angela first inserted Fibonacci levels into the chart. She found that 1.6250 was 50% fib support of the last major rally. 50% fib level is considered the most significant support/resistance level among currency curren cy traders; it is observed that price takes a rebound from 50% fib level in almost 65%-70% cases. Angela felt a strong bullish feeling about the pair. However, her technical analysis was incomplete; she wanted to get some more confirmation signals.
Angela conducted swing analysis on the daily chart. She found that 1.6308 was the ‘swing low’ of the previous downward wave. It is pertinent that in about 70%-80% cases, price takes retracement from the very first support level aer the ‘swing ‘swing low’ of the previous wave. In the case of GBP/USD scenario, 50% fib level or 1.6250 was the first support level aer the ‘swing low’ of the previous wave. is was the second strong signal for a long-term bullish reversal in the pair. erefore, erefore, Angela was feeling very ver y much convinced about the buy trade.
Case study 9
Furthermore, Angela found that the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) were also showing showing oversold oversold readings. readings. An RSI reading below below 30 and a CCI reading below -100 are considered oversold signals among traders.
Fundamental Fu ndamental Analysis Aer getting numerous numerous “Buy” signals from the technical analysis, Angela moves onto the fundamental analysis. She found that Britain’s docket was empty for the day; however, in the US, the labor department was scheduled to release non-farm payrolls and unemployment rate reports for the month of January. Upon further research, Angela came to know that analysts were expecting a better non-farm payrolls reading as well as a decrease in the unem ployment rate rate for January January.. According to the median projection of different analysts, non-farm payrolls rose by 150K in January January compared to 113K increase in the month before. e unemployment rate ticked down to 6.7% in January compared to 6.8% in the previous month. She decided to buy GBP/USD in case of worse than expected US job data.
Angela bought GBP/USD and earned $363 In the US morning session, the labor department released the reports showing that non-farm payrolls in the US rose just by 75,000 in January, missing the median projection of analysts by a long shot. Moreo ver,, the unemploy ver unemployment ment rate also rose to 6.9% contrary contrary to the forecast. Angela bought GBP/USD promptly aer the releases; her order got filled at 1.6287. She placed the stop-loss at 1.6230 and the take profit at 1.6650. She bought the pair with a 0.10 lot size which means the values of her risk and reward were $57 and $363, respectively. Just an hour aer the entry, Angela’s trade was in $110 profit. Being a seasoned trader, Angela didn’t didn’t close the order before her target. Eventually aer the one-week patience, she got her target and earned $363.
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