Lesson for the day

Forexmentor.com Forex Trading Price Action

After last week’s spectacular rout in the carry trade, and its spill-over effect on the ten or so associated currencies, we seem to be settling into a period of relative calm (before the storm?) after subsequent retracements.

Take the USD/CAD pair, for example. The demand (or support) trendline in place on the daily chart is holding quite nicely, as price plays with the 30 EMA. So, technically, from a position trading point-of-view, we’re still in an uptrend. That said, we have had some nice day trading opportunities to the down-side (read, short trades) – just simply by paying attention to the relationship of price to the 200 EMA in the various timeframes.

By that I mean for a good part of Sunday and Monday (at least up to the point of writing this piece on Monday, as at 8:27 pm ET) price was below the 200 EMA on the hourly, 15 minute, and 5 minute charts and, every time price poked its head above the 200 EMA on the 1 minute chart, it represented a good short trade (like whacking a mole every time it rears its head above ground).

So, lesson for the day: Whenever you see a definable trade in place, with price respecting the 200 EMA on the higher-level charts, look for price to behave differently on the 1 minute chart, and take appropriate action. Simple as 1-2-3, or should we say Ka-Ching – take it to the bank! Stay tuned at www.forexmentor.com for more of these gems.

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