For any of you that are unfamiliar with the term Cable it is often used in reference to the GBP/USD pair.  I found this explanation for it online:

Transatlantic cables are cables that have been laid along the ocean floor to connect North America and Europe. Before the advent of radio, the only means of communication across the Atlantic Ocean was to physically connect the continents with a transatlantic telegraph cable, which was operative in 1867. The exchange rate between the United States dollar and British pound is still colloquially known as “cable” by financial marketeers on account of the fact that the rate was originally transmitted via a transatlantic cable.

I am not sure if this is the actual reason but sounds reasonable to me so I will go with it anyway.

I recently read a book buy S&P trader Larry Levin called emotion free trading, this is only a short book and makes some really valid points about trading and some new ways for me to approach it. One of the things that really got me thinking was just how much Larry stresses taking profits, limiting risk and mange your risk and emotions.

His ideas here really got me thinking about trading the lower time frames and how I have always struggled with it and thus I trade the higher time frames instead. Larry talks about moving stop losses to break even as soon as is feasible. Now this has always been an issue for me as I see so many times price come back and retest my entry level and then go on to reach my profit target.  But what Larry says is very valid, better to get stopped out than take a loss.  This is extremely true as the only thing we have any control over in trading is our risk and by doing this we can mange our risk very aggressively.

When I think about it, how many great traders have stated that the best trades go your way straight away and never look back and that made me think hey if you apply this to your trading you are only targeting the best trades and that is what I have started doing.

I figure since the Cable is the main currency that I trade then I will start a new category named after it and start recording my research here.  My testing that I have done on ForexTester2 to date is looking very promising.  The testing that I am doing is based on trading the cable on the 15 min time frame and using Pivot Points for support and resistance. I have only covered 18 months worth of data but am happy with the results so far. This is still a lot of ground to cover as we are talking 390 days of trading so far.

This is still not enough for me to commit money to yet but my plan is to finalize my testing and then go live with the new strategy if it continues to show the same and consistent form.  I have attached a chart of the equity curve to date for your perusal and as you can see the results do look very good so far.

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Trade Well

Perry

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Why Load the Boat?

In all trading we identify opportunities through our analysis which we anticipate favor a price movement in one direction. One of the most challenging parts of trading the news can be getting filled where you want.  What makes this trade so special is the fact that this is the premise behind the trade.

Although this is a trade that does not happen very often it is a trade that offers some of the greatest risk to reward ratios I have ever experienced in day trading. The thing with news trading is it is notorious for wide spreads and poor fills.Now we need to consider why this is so, so that we can understand the advantage that this trade offers over other strategies.

Forex is a zero sum game, what this means is that for every buyer there has to be a seller or there is no trade. This is exactly what happens around these major announcements, many players are extremely risk averse at these times and therefore remove all there standing orders that they have in place and sit on the sidelines until after the volatility generated around news time has died down. The outcome of this is a major reduction in liquidity and therefore the chances of finding someone to take the other side of your trade are significantly reduced.

Many traders attempt to trade the news and fail miserably, this is because they don’t understand what is taking place at the time of the release. The number one biggest mistake a fledgling news trader can make is to try and capture the breakout of the release. They access the release and then place their order to then see it get filled 40 plus pips later. The best explanation for this is covered in this post The Structure of Forex Brokers, I recommend you read it first and then continue with this post.

This trade has a specific set of rules and things to look for and after you understand what is actually happening you can begin to see the enormous opportunities that exist. For this example I will use the same one I used for my News Trading for Easy Money Post. As I stated in that post, prior to news announcements especially the NFP price will often oscillate in a tight range prior to the release, when this happens it is quite easy to identify where the orders will be but is not a pre-requisite for the trade.  All I am really looking for are the most recent highs and lows.  I am talking about the last hour or two on the 5 min chart,  this chart shows what I am talking about.

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This is KEY for it is these highs and lows  that the bold breakout traders will place there orders outside of in anticipation of capturing the breakout.  It is also quite common for these same traders to place an order on both sides of this range in essence straddling the range in preparation for grabbing the breakout which ever way it goes.  It is these orders that I am targeting with the spike,   it is why the spike forms and therefore there is someone there to take the other side of the trade.

This is what makes this trade so appealing to me, the fact that my odds of getting in early on the move and getting filled are remarkably increased due to this phenomenon. In this example the forecast was -119k and the actual release was -11k, this is great news for the US economy and therefore the GBP/USD pair should see a significant fall in price.  In the next chart you can see the spike clearly and it is this spike that I endevour to catch.

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The previous high was 1.6664 and the high of the spike was 1.6672, 8 pips and then price reversed and proceeded to drop like a brick, price dropped over a 100 pips in the next 30 minutes.  If you fail to catch this first move then you simply stand aside and await the first retrace, once this forms you use one of the other strategies to look for your next entry.

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I stated earlier in the post that this trade does not happen that regularly but when it does I hope you can now see the opportunity this trade offers.  Please note that prior to the release it is best to drop down to the one minute chart as you get a much clearer view of the price action and can fine tune your entry.

This style of trading is not for the faint hearted and again I can’t stress the importance of back testing, this all happens pretty fast and you need to be on the ball to interpret the release and take action in seconds.  The most important thing is getting the announcement on time.

Most forums are useless for this style of trading as by the time you get the number it is to late.  Many brokers have instant news providers now and if not there are plenty of providers out there.  The best value for money that I have found is a website called TradeTheNews.com, they offer both a text platform and an audio platform.  The audio is the best choice as you get to hear the release rather than have to read it but this is all dependent on your budget, but as a whole once mastered the text is quite adequate.

I should have some videos up soon that will demonstrate clearly how to do the various news trades and I will elaborate more on trade management as well and profit taking,  I am also doing one demonstrating how I back test  these strategies which I feel will be immensely beneficial to many of you.

Perry

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We have recently seen some major breakouts in the markets.  These kind of moves can offer some great trading opportunities after such long periods of range bound activity.  The following charts of the GBP/USD and EUR/JPY have been in a trading range for a minimum 7 months or more depending on how you interpret things.

GBP/USD Daily Chart

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GBP/USD Weekly Chart

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This is a significant technical event and when witnessing these events it is  important to take notice, this is a particularly bearish chart and well worth considering how you will deal with this situation and whether it fits within your trading plan. This situation can offer some very high risk to rewards and it is well worth consideration positioning yourself or at least looking for some low risk entry points to position yourself to be able to capitalize on the anticipated move.

EUR/JPY Weekly Chart

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A very similar view here with the EUR/JPY I currently have a position short on this pair and am anticipating a retrace back to the original breakout level and if it unfolds that way I will be looking to add to the current position.

Perry

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