Some of my thoughts + Trading System

Hi guys,

I’ve attached an ugggggly drawing of what i know to be breakout types.

Some break straight out.

Others break out and sort of consolidate before they go down or up

Other break out in a fine curve to their new direction.

Take a look at the ugggllyy drawing i’ve attached.

Trading on breakouts like this is an extremely reliable trading method, but as always there is more than one scenario so heads up.

I wount be too surprized if we hold into a tight trading consolidation untill NFP in 1 hour.

Regards,
E. Lang


Non-Farm Payrolls Preview - How Bad Can It Be?

We are expecting the December Non-farm payrolls report tomorrow morning and now more than the ever the amount of jobs added or subtracted by US corporations last month could determine where the US dollar is headed next. After having sold off significantly at the end of November, the US dollar is on its way to recuperating all of its losses. Whether it is able to do take the EUR/USD below 1.30 will be dependent on if we see a sub 50k print in payrolls.

With a skyrocketing stock market at the end of 2006 and low oil prices, the negative ADP print caught the market off guard along with the weakness in the other employment reports that followed. This surprise has forced many banks to lower their NFP forecasts, but before becoming too concerned, there are many reasons why payrolls could remain positive. As usual, non-farm payrolls is one of the most market moving indicators for the US dollar and the level of payroll growth in the economy last month will help to determine if a soft landing scenario is in full play.
Examining the NFP Leading Indicators

Arguments for a Sub 100k Print
[ul]
[li]First Negative ADP Since April 2003[/li][li]Drop in Monster.com Employment Index[/li][li]Drop inHudson Employment Index[/li][li]Employment Component of Manufacturing ISM Remains Contractionary[/li][li]Payrolls Derivatives Auction Settles at 82.2k[/ul]There are number of �leading indicators� for the non-farm payrolls report that we watch very closely and most of them paint a very grim picture of the labor market. The biggest surprise was the 40k drop in the ADP survey. Even though the ADP survey has had a poor track record of forecasting the absolute number of payrolls, it has had a very good track record in forecasting the direction of payrolls. Since January 2003, there have only been 3 months where the ADP report forecasted an increase in jobs while non-farm payrolls actually dropped in the same month and that was over 3 years ago (as shown in the chart below). In addition, the Hudson Employment Index posted a 2.6 percent drop while the Monster.com employment index fell 8 points in the month of December. The employment component of the manufacturing ISM report also points to another month of job losses in the manufacturing sector. As a result, the payrolls derivative auction indicates that traders are expecting jobs to increase by only 82.2k, which compares to the market’s downwardly revised forecast of 100k[/li]Not Bad Enough for a Negative Payrolls Report

However, even though the ADP report has done a great job of forecasting the directionality of payrolls, the December NFP may actually buck the trend and remain positive. The following factors support a positive reading:
[ul]
[li]Jobless Claims Improved in December[/li][li]Employment Component of Service Sector ISM Accelerated[/li][li]Challenger Reports a Drop in Layoffs[/li][li]Mild Weather Should Prolong Construction Projects[/ul]Jobless claims for the month of December averaged at 314k, which was less than the 327k average in November and suggests that companies may not be firing aggressively enough to warrant a drop in overall payrolls. The US economy is also mostly service oriented and today’s service sector ISM report revealed an improvement in its employment component. The sub-index increased from 53.3 to 51.6, which indicates that companies in the service sector are continuing to add jobs. Finally, the planned job cuts according to employment consulting firm Challenger, Gray and Christmas fell by 29 percent in the month of December compared to the prior month. The mild weather should also keep construction programs going and delay any major layoffs in that sector. Therefore even though non-farm payrolls could easily come in below 100k, it should not be negative. We expect payrolls to be somewhere between 50k-70k. [/li]What is Expected

Here is what the market is currently expecting:
Change in Non-Farm Payrolls: 100k Forecast, 132k Previous
Unemployment Rate: 4.5% Forecast, 4.5% Previous
Change in Manufacturing Payrolls: -15k Forecast, -15k Previous
Average Hourly Earnings: 0.3% Forecast, 0.2% Previous
Average Weekly Hours: 33.9 Forecast, 33.9 Previous
If construction sector jobs do hold steady, then the biggest potential sector where job growth could be hit would be in the retailing sector. From the initial holiday retail sales reports, sales have been modest and weak job growth would explain the weakness in consumer demand.
What does this mean for the US Dollar?

For the US dollar, how non-farm payrolls fares will be extremely important. The EUR/USD is trading not far from its one month low while the GBP/USD has already broken that level. Both currency pairs are very vulnerable to a further correction after having broken through a trendline support. We would need to see job growth in excess of 100k to validate a push through 1.30 in the EUR/USD. If job growth is anywhere between 50-70k or less, the EUR/SUD could see a much needed bounce as the market begins to price in the possibility of weaker US growth in 2007. The labor market is the backbone of the US economy. Weak job growth poses a big threat to consumer spending. Even though the Federal Reserve is currently worried about inflation, at the rate that oil prices are moving lower, it should not remain a problem for long and growth will soon become the central bank’s bigger concern. However with both service and manufacturing sector ISM reports expanding in the month of December, if job growth surprises to the upside instead, economic fundamentals would support a continuation of 5.25 percent rates and a move below 1.30.

The non-farm payrolls figure is expected to be 100k increase for the month of december, but the market is starting to factor in a much worse number.

One of the major investment houses ratcheted their figure down almost 50% just this week based on the ADP figure.

There seems to be an interior figure of 75-85k that the market is focusiing on.

[B]50k would be the surprise on the downside and 100k to the upside[/B]

GBP/USD Short

After all the reads and all the TA today on this, i upped the ante a bit, and even though i was pretty sure of the outcome, i stillll placed my stop loss.

2 reasons, first being that there may be whiplash, second… well because there is allllways more than one probable scenario.

I’ve set my target and locked in my profit, all i am going to do is just wait for this trade to play out.

The actual next target is cluster resistance of .9178, but i cam going to close it at 9200 (hopefully) as we will most likely start feeling some jitter there.

Have a hap hap happy weekend.

Regards,
E. Lang



Before the US session my open short trade was up +132 pips. I decided to lock in guaranteed profits of 86 pips and now just wait what happens after the news release.

It would be beneficial and even “nice” for everyone, if you explained the methodology behind your trades, rather than just commenting on their results.

I am sure i as others could learn from you, as you and others from me.

Regards,
E. Lang

Dear Pippers and Pippettes,

Please feel free to take a look at the attachment before if you are interested in my modest sentiment.

I think thats all for today.

I hope you all have a great day and an even better weekend.
Read some books, watch some movies, go out paintballing and go-karting, go clubbing, live your life !!!

See you on monday!

Regards,
E. Lang


Wow my friend just sent me this video this guy done well

http://rapidshare.com/files/10333797…_NFP_TRADE.wmv

He said his news analyst and him decided NFP would be dollar positive. Everybody was saying dollar negative.

Very interesting stuff.

I’ve got my own method of deciding how which way the news is going to go… i get a coin and toss for eads or tails.

Point is a lot of the pros dont try and guess the market, a lot stay out all together, do you think you can beat the pros?

So as beginners my suggestion is concentrate on learning the basics support / resistance, good money management. Get yourself a system back test is and get used to trading and making regular profits.

the only reason i can think of for soley going after news trades is trying to make a killing on 1 trade. A better place would be a casino you’d have more fun there.

If the news goes against you and you are not using a guaranteed stop then its likely you will loose more then you wanted anyway.

MR. ELANG!

First I would like to thank you for your time each day to post your ideas and strategic ways of taking on each trade. I have learned A LOT from just reading and watching each day for your new posts, more so than reading from books because I believe prime examples (visually) are far more valuable.

I would like to ask about how you set your targets? I am, of course, a newb and I have been having trouble on setting targets to mark out scenarios and set profit spots. Also when you use Fib retracements and pivot points, which do you use to base your support and resistances? I get confused when I read your strategies and you use many different levels of support and resistance by different indicators because I do not understand why you choose to use certain ones. Anyway, thanks again for your advice in advance and have a great weekend.

ahefner33

I uploaded my chart:
http://www.babypips.com/forums/showthread.php?p=1979#post1979

Hi mate, are you talking about my post?

From what I know with some good new analysis you can trade the news. As far as I can tell the guy in the video wanted to exit before the news but he got some good analysis so he remained in the market with a 10 pip stop.

I know news trading is dangerous and I do not endorse it. What I see happened here is that this guy had an open trade, he received good analysis and adapted to the situation. To me he seems like a professional trader because he is not scared away by a news report he rolls with the punches and adapts to his situation.

By watching this video I just saw a guy stay cool, calm and collected through a major news announcement. This is a rare quality and to me it shows that this guy knows his stuff.

Anyway I have tracked down who the guy actually was and he made a post saying he is not a news trader but he saw an opportunity and took it. That to me a real trader is someone who sees an opportunity and takes it, somebody who can adapt to market conditions in seconds. He said he was looking to scalp a few pips before the report but then he changed his mind when he received new information.

I may be wrong but I really think this guy made an awesome trade.

Here is the video again for anybody that missed it.

http://rapidshare.com/files/10333797…_NFP_TRADE.wmv

Hi Groovenator:

I agree that a true professional is calm during big wins, big loses and can quickly adapt to an unexpected situation. A professional can do that because they have self confidence for one, and because they trade in a disciplined manner. Trading in a disciplined manner, means you possess enough self discipline to stick to your own rules.

With all that said, if a person really does adhere to their self imposed trading rules, they in turn provide themselves with the latitude to make a conscious decision to step outside their little box and snatch a ‘just happened to be there at the right time’ gold ring every now and then.

I have survived the full blown college of hard knocks in trading FOREX. The biggest lesson I have learned is that to succeed one must be totally dedicated to following a set of proven trading rules. If one isn’t disciplined, they are in fact merely gambling. Gamblers don’t win nearly as often as professional traders. The gamblers high is gone as soon as the money is gone. I now walk a line that provides me with a professional trader’s high, which is KNOWING that you’ll always come out well ahead because you have discipline.

Good example was the last two days shorting GBP/USD. It was easy to take the +200 pips one day and another +100 the next. In the past I’d have placed anywhere from ten to 30 lots in one shot on the pair and let it ride. Made big money a time or two doing that with other pairs in the past. Also, lost half my account more than a time or two doing the same thing because of margin calls.

Be professional = be wealthy.

Sermon’s over, thanks for listening/reading.

Hello all,

Just found this thread…am excited to learn more about it, and to even try it. Any thoughts or suggestions? Otherwise, I have just been reading everything and am going to follow the latest directions from Elang.

Thanks,

BearPaw

Good day everyone,

Quick recap.

GBP/USD:

The rise from 1.8833 (start) to 1.9846 (termination) spawned consolidative price action in the range of 1.9433 (low of consolidation range) to 1.9749/6 (high of consolidation range)

On the UPSIDE our initial aim was to break over the consolidation channels’ high of 1.9749/6 in order to resume the rally from 1.8833

On the DOWNSIDE our aim was to break below the consolidation channels’low of 1.7433… and that we did, which developed a decline taking us all the way down to 1.9260

On the downside there were two major levels of S that should have been watched, those were 38.2% and 50.0% retracement of 1833 to 9846.

The initial prediction and history says that most rallies and declines with intentions of resuming their direction will normally only retrace to levels of 38.2, 50% and in some cases with weak retracements only to 23%

You should feel comfortable with price retracements to the 38.2 level, it is normal.

Retracements to 50% should raise the question as to whether this rally will come back, your bias however should still be in the initial direction of the trend, if you are a mid-term trend trader.

Retracements moving from 50% to 61.2% are in the danger zone, around here you should have pretty much lost all hope and terminated most of your positions, waiting for more signals to confirm a new trend direction with a break of 61.2%

As we know it, the fall from .9750 treminated around the 50% Fibonnacci zone as the mass expected. The oppinion in such a case was that the rally would naturally begin to resume for a break of consolidation channel low now S (9450-ish) and eventually the consonlidation channels high now R (9450)

The bounce of 9260 moved upwards supported by an ascending trend line and round the 9320 price on monday the 8th of January (yesterday to the alcoholics) the price broke out of that trend line downwards after which i sold expecting it to fall back down to test 9260 once more.

It was the most logical scenario at this point, however the logic of a good TA (Technical Analysts) is sometimes no match for the global emotional jungle that is the forex world, so what happened ?

Perfect break, followed by a +40 pips decline and then all of a sudden we have a massive bullish engulfing candle which takes us right back above the trend lines… well, obviously some big players ain’t likin the poundin on the pound if you know what i mean, so they slip they fall and they accidentally hit the GBP/USD buy button for 100,000,000,000 lots and weee we’re back up 40 pips and over the trend line.

We don’t care why it happend, my broker says some soviet name bought in on it and that was the reason, i say i don’t care because i had my stop set at .9344 so i was only out about 25 pips.

It is EXTREMELY reliable to place stops above trend lines when you are trading a trend line breakout. You almost always know that if the price pops back above the trendline decicively, that things aren’t going your way. (BEARISH Scenario)

It is more likely for the price to break and pop back up to test the trend line before heading down (BEARISH Scenario).

Before we delve into the present now, please note several things.

ONE: The price is currently located around 32.8% Fib. Retracement of 9750 (High) to 9260 (Low)
TWO: This also happens to be around the 9450 area which is a major R/S
THREE: RSI on H4 is nearing 70

Around this level there are (now were, because things progressed as i was typing this) …so there were a few possible scenarios.

  1. The price broke over 9450 DECISIVELY… did it ? No… check M15, it broke and closed the candle in a perfect shooting star, followed by a bearish engulfing… which equals what ?.. thats correct a perfect Evening Star pattern.

Once the evening star was formed it moved down with a break attempt of the trend line, but didn’t succeed to well, obviously there is still a lot buying pressure.

It just so happens that these are very reliable reversal signals, we’ve got the one, two, three factors up there, plus these candle stick signals too.

I can’t shake the notion that we have a top here and we might see a mass retest of 9260.

The thing about evening star patterns is that they sometimes take a while to actualy form a good top, but there are in most cases extreeeemely reliable.

My bias for now is on the downside and i am thinking a break of the up trend line from 9260 with a retest of 9260.

Now… because we are smart people we know the market moves both up and down and sideways, so… we need to prepare ourselves for a possible bullish scenario too.

In this case its pretty obvious: we need to break 9450 decisively then 9474 > 9530 > 9750 (i’ve bolded them because they are majour R/Ss)

Thats all dudes and dudettes, good luck!!

Regards,
E. Lang

PS: CHECK THE CHAARTSSS, they are in order of development!





Hey guys,

Just updating the situation on GBP USD

As you guys can see we broke the ascending trendline, but boy there is a lot of buying pressure still holding the price down.

It is now hovering above BLUE 50 EMA.

It managed to get as far as 9408 after bouncing of 9454 (todays high)… but it is really struggling to get below that 50 EMA, everyone knows if it does it will drop.

Its a tough situation, and you may go crazy if you’re in a position right now, so just set your stop above the last high and wait.

A little patience can go a looong pippage :slight_smile:

Regards,
E. Lang



Wow guys,

Today was a terrible trading day.

Before things developed i was certain in a few possible scenarios, but a lot of contradictions came up and i got confused.

Confused = You don’t know what is going on, hence it’s not possible to have any sort of bias and it is not acceptable to trade.

I closed my position with loss for today, i still believe the GBP/USD may fall and if it does i think it will reach the 9350 level after which it will bounce back up.

If this comes true we will have a bullish Head and Shoulder trend reversal pattern with a neckline around the 9455/60 area with a probable profit projection of 150+ pips - a good place to set buy orders would be around/above this area.

On the downside. The possibilities are a break of the 9350 are and a test of 9260

Thats pretty much it.

I will look forward to tommorrow to recover my loss and make some profit.

Regards,
E. Lang

Good morning guys,

For those of you who had the chance to hold on longer to the trend break short play we made, you could have profited at least 70 pips.

I had a loosing day and too many contradictory signals so i decided not to trade for the remainder of the day.

As i predicted the price break-out (bearish) from the ascending trend line started at 9260 went as far as the 9360/50/40 area after which it reversed.

This was also 50%.

On the upside for now our next targets are: 9454 > 9564 > 9570

On the downside possibilities are that the price bounces of 9545 and declines to retest 50% or the 9340 area and then 9260

As the facts have made it clear we have a right shoulder at 9340 a left shoulder at 9348 and a neckline around the 9454 area.

Head and shoulder reversal patterns are extremely reliable signals, just like the evening star on yesterdays short trade.

In theory probable profits on a neckline break from a head and shoulder pattern should be projected by calculating the distance in pips from the HEAD of the pattern to the neckline > in other words from 9260 to 9454 are about 200 pips > that projected of 9454 is about 9650 as a projection after the break of the neck line (IF it happens)

We only use IFs in TA, there are no certainties.

Thats pretty much it for now.


Good morning everyone,

" Cable’s fall from 1.9454 extends further to 1.9316 and is now pressing trend line support (now at 1.9318) again.

Intraday bias is still on the downside and further decline towards 1.9261 low is in favor as long as cable stays below 1.9423 resistance. On the downside, break of 1.9261 low will indicate decline from 1.9750 has resumed for 1.9177 cluster support.

Meanwhile, on the upside, above 1.9454 will suggest that rebound from 1.9261 has resumed for 1.9564 cluster resistance. "

So basically, either the price bounces of the trendline now, or it breaks through and tests 9260 with a possibility of a break lower or a bounce back up.

Indicators on H4 and D1 all show oversold conditions and i feel its time for a big turn around.

On the upside levels ot watch are: 9421 > 9454 > 9564 > 9750

TODAYS NEWS: Easy-Forex: The Financial Calendar

Regards,
E. Lang


POTENTIAL GBP/JPY TRADE

Entry Criteria:

  1. 5/10 EMA cross
  2. RSI < 50
  3. Stochastics are trending down
  4. MACD is negative

Targets:

  1. Last R turned S at 231.91
  2. Cluster support at 230.97
  3. 228.16

Stop Loss:

  • 234.82

Regards,
E. Lang