SP500 Index To Stage A Turnaround?

Yesterday the S&P500 Index made a very dramatic reversal at the end of the trading session. Today it has formed a very curious setup at precisely that same reversal point. The sellers look exhausted and it seems like a turnaround might be in the cards for the afternoon session. My favorite indicator the Relative Strength is showing bull divergence which is even more evidence for the bullish scenario. If the high of that big bull candle is broken then the bull sentiment will be confirmed.

UPDATE:

The first setup did not materialize any meaningful momentum. However this setup right now has very good potential. If the top of that "pinbar" breaks it's high it will be another bullish bias setup. Triple divergence has formed and this is looking like a very likely scenario that the S&P500 might reverse direction here. If this bad boy breaks to the upside the first resistance area has been marked on the screenshot bellow.

Euro Yen Forex Currency Pair Analysis

It is not exactly news to anyone that is involved in the markets the stratospheric heights to which the Japanese Yen has risen. The trend is absolutely relentless, but in the last week a long overdue retracement appeared and gave the Yen some relief. Today after doing my chart scans I noticed a very cool looking price action on the GBP/JPY and the EUR/JPY forex pairs. Both pairs are very highly correlated and if there is a signal on one pair usually there will be something very similar on the other. Sometimes you can use one as a proxy for the other. I have posted two charts bellow so you can see how evident these correlations are. I am a big believer and fan of rejection bars and today we have some very nice formations. If you notice the four hour charts for both pair are showing very large pin-bars. Not only that, but my favorite RSI divergence is showing very clearly between the swing highs. The GBP/JPY formations is larger and more prominent. A very clear rejection at a very nice price pivot zone. Remember confirmation of bearish momentum is only valid if the low of the candle formation is broken through. Have Fun!

What to Include in a Forex Backtest Spreadsheet

One critical step on your Forex journey is going to be backtesting. Once you find a system or method which you like, you are going to need to run through historical data and see how your method would have performed on real trades over the past few weeks, months or years (depending on the timeframe you’re planning to trade). It is recommended you do at least a couple hundred of backtest trades for any given system to establish a really good idea of how the Forex system will perform in those market conditions. Market conditions do change, so a backtest still doesn’t give you all the information you need, but it can sure give you a good lead in to your demo testing. If you record a lot of important information you can also learn specific things that work and don’t work and how you can refine your system to statistically improve your profits.

On a Forex backtest spreadsheet you will want about six columns. The first will state whether each trade was a buy or a sell. The second column should list the date, and the third column the reason for the trade. The fourth and fifth columns should be the entry and exit prices respectively. The last column will be the sum of pips you gained or lost from each trade. The column where you list the reason you entered the trade can be a good place to take specific notes along with the triggers which caused you to enter. Those notes will come in handy later, so be detailed, especially on trades you lose. Later you can look back and find patterns which will help you to refine and eliminate losses.

Write your Forex trading rules at the top of your spreadsheet. They will help you focus and also remind you of what your rules were on this backtest when you look back on it later. If you make changes as you go to your system, note those changes and the historical dates on which you implemented them.

Some statistics to calculate from your data, which will be useful to you, include net pips from your entire Forex backtest, along with the values of your average win and average loss. You’ll want to tally how many wins and losses you have, and what your win percentage and win to loss ratio is. Remember that the spread will cost you some profit on every trade, and breakeven trades are technically at a very small loss as a result. You can calculate an adjusted net which takes these losses into account. Take note of your biggest losing streak, and how many losses in a row you endured. Also find out your average net winning trades per month, week, day, or whatever is an appropriate unit of time for you to overview your trading. Another good quotient to add up is your net profit divided by your maximum loss. This will tell you how many of your largest losses you could endure before blowing all your profits.

Forex backtesting can be pretty overwhelming at first, but eventually you’ll get used to it and get into a rhythm. And it can be incredibly rewarding—it can make the difference between whether you blow your account in real life or become a profitable trader.

Crude Oil Price To Tumble?

The price of crude oil has been in a sideways movement since early August. Currently crude is trading in the middle of a range and price has come up against a strong barrier. On the posted screenshot bellow, the resistance pivot has been market by an orange box. Two rejection candle bars have closed and are signaling a possible move south into the lower part of the trading range. If the low of the second pin-bar is violated we may see bearish momentum materialize. Overall on the daily and weekly charts oil is stuck in a sideways chop, however the last few trading days the intermediate trend is down. So this situation can be considered a pullback to resistance withing the short term downtrend. I am sure everyone knows the tired old cliché "the trend is your friend"! Enjoy!

Relief Rally for the Euro Currency?

The Eur/Usd currency pair has been under significant downward pressure for the last few trading days. Today was the first sign of the bulls coming into the market and taking over the reigns. I usually check the daily closes at 5 pm EST to see if I can spot any unopened presents the forex markets may have left for me. Today I got a nice surprise. A few days ago I mentioned in one of my posts [Euro Big Support] that the 1.3400 zone is a very significant pivot and that it may be smart to wait for bullish price action before joining the frenzy. Today on the daily chart a very nice long rejection bar has formed. The tail is very nice and long which to me says a lot of short covering was taking place and a lot of stops were hit. You can see the 1.3400 was rejected with force and the market closes above the open. This is a very bullish sign and we also have bullish divergence that has formed from the 12th of September low to today's low. Lets do a quick recap. We have a huge support from the 1.3400 price level, we have a very significant rejection bar and we have Relative Strength showing seller weakness. I would say we have a good solid case for a possible reversal. Before you get all giddy with excitement, remember that bullish momentum is confirmed IF and only IF that long doji bar breaks its top by a few pips. Enjoy!

Dow Jones Index Pull Back?

If the top of that rejection candle breaks its high we can see a nice retracement on the Dow. The Index has fallen straight down for two days without a single sizable pullback anywhere in sight. I just caught this setup by glancing at the one hour charts and it looked very appealing. The rejection bar is situated right on the yesterday's low and it looks a lot like stop hunt to me. We also have RSI DIV between the two swings indicating a lack of seller participation. We are also currently sitting on the low that was formed during the early August panic selling crash. The Dow Jones Index is still in a range bound market. Since we are at the bottom of the range it may be wise to fade the support for now until we get a clear break in either direction.

Gold Price at Major Support!

At the close of today's trading session I did my usual routine checks of the major market instruments and this Gold chart made me smile just a little bit. Gold has been in a very clear sideways range since about August. Today price reaches a very significant support zone at $1720. On the chart bellow, I have marked two instances during the month of August where price respected the $1720 area very clearly. So we have a nice location, but not much else. Yes we have a rejection bar with a tail on it, but for my personal taste it leaves much to be desired. I would like to see much larger rejection bar, something that signifies a "stop hunt" and a show of force by the bulls. Today we saw a very muted response to that major support. I would sit on the sideline for now and wait for a much more convincing scenario. I think the $1700 level will be a major battle zone level and a much better area to look for a continuation of the long term trend.

If that 4-hour bar breaks to the upside the first target will be $1765. I have marked it on the chart as the first minor resistance. So keep your eyes open for the next few days, we are at a cross road for the yellow metal. Let the games begin!

Euro Drops to Massive Support Zone

As I am writing this blog post the Euro is sitting on a very key pivot price area. As I have outlined in the market screen shot bellow, the 1.3400 has proven to be a very contested zone. In December of 2010 and through to February of 2011 the 1.34 price area was used a both support and resistance several times. The Euro finally managed to wiggle its way out of that area with a lot of effort. Today for the first time since mid February we are testing the 1.34 and if history is any indicator we might see this zone produce a much needed support for the Euro currency. It is wise to wait for the close of today's trading session before making an educated guess as to what may be in store for this currency pair. Me personally, I am waiting for a rejection bar to form to confirm any buying interest or taking any positions in the market. Remember, patience is a virtue and is rewarded very well in this business. Enjoy!

Tripple Low with Positive Divergence on the S&P Index.

If the top of that bullish engulfing candle breaks we may be in for a possible retracement to the upside. Right now the S&P is sitting at a very nice support zone that held last week on September 12 very nicely. The location of this reversal price action pattern is absolutely perfect. Bullish momentum will be confirmed IF ad only IF the top of that bullish bar breaks to the upside. You all know I absolutely love to see double and triple divergence and this is a great example.

Tips for Trading Forex at Night

For a lot of us (especially in the US), the best times to trade Forex fall at the worst times of day—either during work hours or while we’re asleep at night. Fortunately for those who trade the dailies in the US, the start of the new candle tends to happen in the afternoon, but that often means that trades will span overnight on this and other timeframes. What do you do if your trading schedule is this inconvenient? Suggestions online usually range from “quit your job” to “move to Europe.” This is hardly feasible for most of us. Most of us are going to be faced with examining an option which is more viable but still challenging: trading Forex at night.

For many people, trading overnight is just a given since position traders who trade longer term charts like weeklies are going to be in trades for many days on end. These timeframes move slowly though and are easier to keep an eye on during the daytime than other trades on faster timeframes. What if you trade the dailies or hourly charts? You could be stuck making critical trading decisions in the dead of night.

Unfortunately many FX traders arrive at the solution, “I’ll just not sleep.” This is the road to disaster though. You cannot function without sleep. You need sleep to be healthy and also to keep your mind sharp and fresh. Trading on a sleep deficit is like trading inebriated. It’s just a really bad idea; it’ll destroy your health and your finances. So you have to sleep. How do you balance sleep with currency trading at night?

The trick is to set up alerts in such a manner that you can maximize your rest, minimize the complexity of your decision-making process, and maximize your returns. You want to only have your alerts wake you up at critical junctures, and you want those junctures to be clear cut. Making difficult, complex decisions in the dead of night will rob you of sleep and also harm your judgment, resulting in losses. The alerts should wake you up in order to make simple, straightforward decisions.

One technique you can use to trade during the night is to set alerts at pivot zones. Different techniques will be appropriate for different Forex systems, but if for example you exit trades partially based on support and resistance, then you will want to identify important pivot areas and set alerts in those areas. Choose a sound to signal when a trade is moving toward profit and another sound to signal when it is moving away. That way if you hear the “good” sound in your sleep you can roll over and go back to sleep (or get up and trail your stop). If you hear the “bad” sound you can get up and choose whether to exit. By letting the sound itself give you information, you can optimize your sleep. Also make sure to have the alert beep at you more than once so you don’t miss it in your sleep the first time.

Trading the foreign exchange market at night is one of the most challenging real life integrations you can do, but with some tweaking you should be able to make it work for you. You don’t have to move to another country or quit your job to trade during the day if you can learn how to trade at night and get adequate sleep!

Australian Dollar Bullish Case!

A few days ago I posted a forex video overview of several currencies and the AUD/USD forex pair was one of them. At the time of that video on the daily AUD/USD candle chart we had 2 reversal bars with long tails. Today we have another very interesting bar formation that has just closed. If you note on the chart bellow we have a bullish pin bar that has a very strong positive close. There is a nice tail on the bar indicating a very strong rejection of the monster 1.0200 price pivot zone. If you also take note the Relative Strength Index has posted a very nice positive divergence. If you have ready my blog for any length of time you know I love to see divergence formations because they are an indication of possible trend reversals. Bullish momentum will be confirmed IF we get a break of the high of that reversal rejection candle. Having said all that, there are many supporting factors for a bullish scenario for the Aussie currency. We have a very strong support, nice bar and a very clear RSI signal that a reversal may be imminent. Enjoy!

Momentum change for the S&P Index?

I just caught this situation on the 1 hour charts. Nice divergence formation and a very large bearish engulfing bar signaling a possible break downwards. If that bar breaks its lows it will confirm a shift from bullish to bearish momentum.

Bellow I have included a zoomed out chart to point out a key price area. I have marked a prize pivot in orange color. That zone has been visited for the first time since the end of August. The location of the bar is very good and has a solid backing from that resistance pivot. So here we have area, we have a nice bar formation and divergence indicating a weakening of the bull momentum. Let see if the downward momentum materializes.

Forex Video Analysis on Euro, Aud and Nzd.

On September 11th I uploaded a video review on the Euro. At the time we were down about 500 pips for the prior week and the currency pair barely had any pull backs. I mentioned that is is common to have a descent sized retracement back to prior support/resistance price area after such a sharp drop. Today the Euro has bulled back and is currently trading at 1.3873 as I am wring this blog post. The 1.3800 zone was my first obstacle to any retracement, but that has broken and the next major pivot is the 1.3900 to 1.4000 area.

The New Zealand Dollar is in a very curious area and has tried to break down 4 time with no success. If you note on the chart bellow, today a very large rejection candle has formed with a nice tail. At this point it looks like that bears are loosing control and a reversal may be in the cards for tomorrow or Monday.

The last time the Australian currency visited the 1.02000 price pivot there were big fireworks. That price zone has proven iron clad many times and until it breaks it is advisable to fade it. In the past two days the Aussie has tried to head for the 1.02000 area and has been rejected quite strongly. A nice rejection candle has formed today and tomorrow if we see a break of the high of that bar the bull may materialize.

If you would like to view a more in depth analysis with extensive commentary you may download my video analysis:

DETAILED VIDEO OVERVIEW: Forex-Overview-September-15th

Download Instructions:

I use Filesonic as my file host. If you do not have a premium account you can download for FREE using the slower download button.

Crude Oil back to old resistance!

The crude oil market has been in a sideways range for the past few days. Crude oil is back to a very solid resistance price zone. I spotted a nice situation developing. I marked on the chart bellow a nice rejection candle. It has a nice tail on it and there is divergence developed between the two highs. As we all know divergence is a sign of weakness so it may be a good idea to look for counter move on crude. Short momentum will be confirmed only if the low of that bar breaks. Like I always say, wait for the break of the bar for any directional bias confirmation. Happy Trading!

Short S&P Trade Possibility.

I just noticed this interesting trade opportunity on the S&P index. Price made its way back up to yesterdays high and formed a nice double swing high with a very nice divergence. The chart I posted is a 30 minute time frame and the last bar that closed had a very nice long tail on it. Sellers took over in a very aggressive manner and now it will be interesting to watch if we make it to the first major support zone. The location of the setup is very promising. Let see how she goes. Enjoy!

Stock Market about to tank?

I was watching the close of the market today and a very interesting situation presented itself. Two days ago I pointed out that the S&P was near the low of the range and that we might rally into Tuesday and Wednesday [Monday Analysis]. Well we did get the upside action and now the market is sitting on a price pivot level as I have indicated on the chart bellow. At the close of today's trading session a very nice two swing with divergence appeared. A huge pin bar formed on the last hour of trading which to me says that everyone was dumping into the close and stops got taken out in droves. This sets the stage for possible downside action into the overnight session or probably into tomorrow. So with that said it will be interesting to monitor the markets after hours to see if we go south. I have Also illustrated on the second chart the first minor and major obstacles to any downside movements. What also struck me as quite interesting was the volume participation. The turn over of contracts in the last hour of trading before the close spiked by almost ten fold from the average during the day. This also tells me there may be major repositioning for tomorrow's trading session. Enjoy!!

New Zealand Dollar about to jump?

The daily candle chart for the New Zealand Dollar is showing a very nice rejection formation. Two lows have formed at a very significant price reaction zone. The 0.8200 round number had been proven to be a very contested price area one 3 occasion during the past few months. A large pin bar candle formation has appeared which is telling me the 0.8200 zone haS been rejected and we may be changing direction in the next few days. As I always say only look for bullish momentum to build if the high of that bar is broken by a 3-5 pips. A nice bullish divergence is showing between both swings which is always a good thing when looking for price reversal. Happy Trading!!

Daily S&P Futures Index Overview

The S&P Index is currently stuck in a channel since the beginning of August. There have been several attempts to break out but so far the channel has held up quite well.
Yesterday at the closing of the trading day an interesting candle bar formation has appeared right at the bottom end of the channel. A bullish doji bar with a nice tail is indicative of buyers taking control of the market. The location of the bar formation is very nicely sitting at the bottom of the the current trading range giving us a very clear long bias for Tuesday September 13th. Before getting all excited and giddy it is a wise decision to wait for a break of the top of the bar before the bull momentum is finally confirmed. I decided to mark the minor and major resistance zones in red boxes so they are clearly visible. Enjoy!!

Trading in Real Life: Why You Need to Demo Test

Have you backtested a fantastic system over hundreds or even thousands of trades, and achieved a high win percentage and otherwise excellent statistics? If so, you may be tempted to go live. Some traders struggle to bring themselves to actually take their Forex systems live, but for others it is impatience and not trepidation which is the enemy. If you are thinking of taking this great system which you’ve backtested live without demo testing, think again. Backtesting and trading in real life are completely different, and you may have quite a bit of work ahead of you to achieve the same kind of results in real time as you did backtesting.

The first thing a lot of us discover while demo testing is that we completely forgot that in real life we do stuff like work, eat, and sleep. Something which worked fine in backtesting may be impossible to fit into our real life schedules, or take some very serious workarounds. You may need to learn to trade using a cell phone if you are at work during trading hours for example. Or what if your Forex trades tend to fall in the dead of night? You’ll need to trade in your sleep, and that means setting a lot of price alerts. Those alerts will have to wake you up at useful times though, and even figuring that out can be like designing an entirely new system. The wrong system of alerts can cause you to lose the same trades you’d have won while demo testing!

Another difference you’ll discover quickly is the role which time plays in your trading psychology. When you move the Forex charts forward a candle at a time and make trading decisions in a few seconds or minutes while backtesting, you don’t have a lot of time to second guess yourself. The same trades though, spread out over a time period of hours, days, or even weeks, can cause a lot of traders to experience a wide range of conflicting emotions. Many times we ask ourselves “What decision would I have made backtesting?” only to discover that we don’t know anymore! It takes a lot of practice to find out how timing is impacting your trading. You may find you need to trade on a different timeframe, or just get a grip on your emotions.

While all this may again sound simple in theory, most traders discover Forex demo testing presents a lot of unexpected situations which need resolution before they can go live. We highly recommend that you demo test until you are profitable for at least 2-4 consecutive months before you go live with your system. There is no reason for you to lose a dime in this business unnecessarily since you can demo test for as long as it takes for you to master your trading, completely free! Your drawdown live should reflect your backtesting figures, but it won’t unless you invest some time and effort demo testing and finding out how to integrate trading into your real life first.

USD/CAD Bearish Scenario?

The Canadian Dollar has formed a very interesting chart pattern today. On the daily chart a bearish pin bar formation has formed. This bar signifies a stop run and a possible reversal may develop tonight or tomorrow during the European or US session. Look for a break of the low of the bar @ 0.9900 for a confirmation of short momentum to develop. The formation also has bearish divergence developed which indicates lack of buyers at the current price levels. This chart pattern has formed at a very significant round number 1.0000 which is a very very significant price level in terms of prior support and resistance. As you can see on the chart That price level has been used more then five times as a support and resistance during the year. Enjoy!

AUD/USD Bullish Setup?

Today at the close of the US trading session I scanned over the charts of all the forex pairs to see if there was any interesting developments and I came across this setup on the Australian Dollar. On the one hour chart there is a beautiful two low with divergence setup. If you notice on the chart bellow there is a monster one hour bullish engulfing candle that engulfs the previous three candles by a wide margin. This is an indication of big buying pressure. There is very clean divergence showing between both swing. We also have a round number 1.3000 acting as support. The 1.3000 area has acted as support and resistance on several occasions in the past and is a very proven level.

1 Hour Chart:

4 Hour Chart: