Fri Jul 25, 9:00pm (GMT +7:00) : USD : High Impact Expected : New Home Sales

Source Census Bureau (latest release)

Measures Annualized number of new private-sector residential buildings that were sold during the previous month;

Usual Effect Actual > Forecast = Good for currency;

Frequency Released monthly, about 25 days after the month ends;

Next Release Aug 26, 2008

FF Notes While this is monthly data, it's reported in an annualized format (monthly figure x12). Tends to have more impact when it's released ahead of Existing Home Sales because the reports are tightly correlated;

Why Traders
Care It's a leading indicator of economic health because the sale of a new home triggers a wide-reaching ripple effect. For example, furniture and appliances are purchased for the home, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction;

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Fri Jul 25, 8:55pm (GMT +7:00) : USD : Low Impact Expected : Revised UoM Inflation Expectations

Source University of Michigan (latest release)

Measures Percentage that consumers expect the price of goods and services to change during the next 12 months;

Usual Effect Actual > Forecast = Good for currency;

Frequency Released monthly, around the end of the current month;

Next Release Aug 29, 2008

FF Notes The 'Previous' listed is the 'Actual' from the Preliminary release and therefore the 'History' data will appear unconnected. There are two versions of this data released about 15 days apart – Preliminary and Revised. The Preliminary release is the earliest and thus tends to have the most impact;

Derived Via Survey of about 500 consumers which asks respondents where they expect prices to be 12 months in the future;

Acronyms University of Michigan (UoM);

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Strategy Examples 3

Strategy 3: CounterTrend 1 (“Gann OFR”)

Trading against the trend is difficult and risky, and yet, when properly controlled, can be profitable. That is why the setup for a Gann OFR trade requires several conditions. First, price must be testing key support or resistance. A pattern used in the "OFR 30 system" needs to develop, then price must break the Gann HiLo line. When a position is taken, Gann OFR employs two profit targets as well as a trailing take-profit stop.

Gann OFR uses these Indicators on the 30-Minute Chart:

Pivot Calculator - Daily
FXS Adaptive Mvg Avg (5,2.0,0)
Gann Hi/Lo Activator - Gann HiLoA(7)

Chart 1: This CounterTrend Strategy uses three indicators.

Trend

An UP Trend is shown when price stays above a rising black Gann HiLo line, testing the Hi Band and sometimes exceeding it.

A DOWN Trend is shown when price stays below a falling black Gann HiLo line, testing the Lo Band and sometimes dropping below it.

Trade Entry

The steps for a Gann OFR buy or sell trade are listed below. Trade entry occurs when the currency retests the Gann HiLo line. After buy entry conditions occur, Gann OFR will buy if the market drops to the Gann HiLo line. When sell entry conditions occur, then GannOFR will sell if the market rises to retest the Gann HiLo line.

CT1 Gann OFR Buy Entry Rules:

1. Price tests key pivot support level and
2. Closes outside of the Lo Band and
3. Followed by a Close back inside the Lo Band.
4. Price must then close above the Gann HiLo line.
5. Buy on a retest of the Gann Hi Lo line.

In Chart 2, on October 10th a Sell Entry occurs at #5 in the EURJPY at 166.13.

CT1 Gann OFR Sell Entry Rules:

1. Price is trading near key pivot resistance and
2. Closes outside of the Hi Band and
3. Followed by a Close inside the Hi Band.
4. Price must then close below the Gann HiLo line
5. Sell on a retest of the Gann HiLo line

Trade Exit

It is not possible, in advance, whether a small or larger profit will develop. So two profit targets are used. Half profit can be taken at or beyond the FAMA Band (Hi Band for Buy Trades; Lo Band for Sell Trades). The second profit target is the next key support or resistance beyond the FAMA Band. The Gann HiLo line is used a trailing stop to keep losses small and also to let profits run, per below exit rules.

Profit Targets

1st Profit Target: Opposite FAMA Band
In a buy trade, exit half the position at the FAMA Hi Band or above.
In a sell trade, exit half of the position at the FAMA Lo Band or below.

2nd Profit Target: The Next Key Pivot Line
A buy trade can target the next key Pivot Resistance above the Hi Band.
A sell trade can target the next key Pivot Support below the Lo Band

Price Closes beyond Trailing Stop

The Gann Hi/Lo Activator (‘Gann HiLo’) is used as a Trailing Stop. If the strategy position is long, then the strategy exits if price closes below the Gann HiLo line. If the strategy is short, then it exit the position if price closes above the Gann HiLo line.

Chart 3. A Sell Trade takes half profit at the Lo Band, then exits the other half on a strategy Buy signal.

The example in Chart 3 shows a sell trade at 166.13, near R2(Daily) Resistance. Half profit was taken at 165.63, at the Lo Band. The second half of the position was closed at 165.61, when a Gann OFR buy trade occurred. Profit on the trade was 51 pips (166.13-165.62 [average exit price]).

Gann OFR Buy Exit Rules:
Exit a BUY Position if

1. A Profit Target is reached OR
2. Price closes below the Gann HiLo line

Gann OFR Sell Exit Rules:
Exit a Sell Position if

1. A Profit Target is reached OR
2. Price closes above the Gann HiLo line

Initial Stop Loss Order:
Controls trade risk. Establish before the trade. (See "Risk Controller".)

Risk Control

Go to Risk Controller. Input risk preferences to determine:

1. Stop Loss Order
2. Maximum Position Size

Use the Trade Strategy Worksheet to control, monitor and record the trade.

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Strategy Examples 2

Strategy 2: Two Timeframes ("TC Experts")

This strategy uses the TC Expert indicator in Two Timeframes. The 1-Hour TC Expert is used to determines trend. The TC Expert on a 10-Minute Chart is used for Trade Entry and Exit.

When the 1-Hour TC Expert is bullish, for example, then Trend is UP, and the strategy will buy when the 10-Minute TC Expert turns bullish. The strategy exits a buy trade when the 10-minute Expert turns bearish, or when price closes below a Gann Hi/Lo line that is used as a trailing stop.

Indicators used in this strategy & their inputs:

1-Hour Chart: TC Expert (7,18,36,7)
10-Minute Chart: TC Expert (7,18,36,7)
Gann Hi/Lo Activator - Gann HiLoA(7)

Chart 1. The TC Expert is composed of two separate indicators.

Trend

Trend is the direction of the TC Expert on the 1-Hour Chart. When the Schaff TC Expert is applied to the chart, two indicators appear, both a black Schaff Trend Cycle (‘STC’) and a green Schaff Trend RSI (‘STR’).

Chart 2. Trend changes are highlighted by the the red and blue vertical lines, after which the TC Expert indicator turns bearish and bullish, respectively.

Trend is UP when the TC Expert is bullish. The TC Expert is bullish when both the black STC and the green STR are rising above the lower red-dotted Buy line shown in Chart 2.

Trend is DOWN when the TC Expert is bearish. The TC Expert is bearish when both the black STC and the green STR are falling below the upper red-dotted Sell Line.

Trade Entry

The strategy uses the TC Expert and a Gann HiLo line on a 10-Minute Chart to time when to enter a trade. When Trend is UP the strategy will buy when price is above the Gann HiLo line and the 10-Minute TC Expert turns bullish. If Trend is DOWN the strategy sells when price is below the 10-Minute Gann HiLo line and the 10-Minute TC Expert turns bearish then the strategy sells.

Chart 3. With a DOWN Trend in place, a Sell Entry occurs on the 10-Minute Chart at 9:20 at 2.0387.

TC Expert Strategy: Buy Entry and Sell Entry rules:
BUY when 1-Hour Trend is UP and

1. The 10-Minute TC Expert turns bullish and
2. Price is above the Gann HiLo line

SELL when 1-Hour Trend is DOWN and

1. The 10-Minute TC Expert turns bearish and
2. Price is below the Gann HiLo line

Trade Exit

Various exit tactics are used, depending on how price could develop.

Trend Indicator Changes Direction
If the 1-Hour Trend changes direction then exit the trade.

Trade Entry Indicator Changes Direction
If the 10-Minute TC Expert changes direction then exit the trade.

Price Closes beyond Trailing Stop
The Gann HiLo line is used as a Trailing Stop on the 10-Minute Chart. If the strategy position is long, then exit if the 10-Minute price closes below the Gann HiLo. If the strategy is short, then exit if price closes above the Gann HiLo.

The chart below follows the GBPUSD trade shown in Chart 3.

Chart 4. The sell position exits when the 10-Minute TC Expert turns bullish.

The sell trade entered on October 3 at 9:20, at 2.0387, exited at 16:40, at 2.0313, when the 10-Minute TC Expert turned bullish (with both the STC and STR rising above 25). The result is a profit of 74 pips.

TC Expert Strategy: Buy Exit and Sell Exit rules:

Exit a BUY Position if one of the following situations occur

1. Trend changes to DOWN, or
2. The 10-Minute TC Expert turns Bearish, or
3. Price closes below the Gann HiLo on the 10-Minute Chart.

Exit a SELL Position if one of the following situations occur

1. Trend changes to UP or
2. The 10-Minute TC Expert turns Bullish or
3. Price closes above the Gann HiLo on the 10-Minute Chart.

Initial Stop Loss Order: Controls trade risk. Establish before the trade. (See "Risk Controller".)

Risk Control

Go to Risk Controller. Input risk preferences to determine:

1. Stop Loss Order
2. Maximum Position Size

Use the Trade Strategy Worksheet to control, monitor and record the trade.

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Strategy Examples 1

Strategy One: Momentum 1

Momentum 1 is a short-term trend momentum strategy. Short-term means that this strategy can enter and exit several trades a day. It is a trend momentum strategy because it buys only when the Schaff Trend Cycle (‘STC’) is rising and sells only when the STC is falling. The strategy exits a trade when trend or price momentum slows down.

For example, MOM 1 will buy into an uptrending market as it accelerates. And it will exit that trade when the speed of the uptrend slows down. The reverse holds true for a sell trade. MOM 1 will sell into a downtrend as it accelerates. It will exit a sell trade when the speed at which prices are falling slows down.

Indicators used in this strategy & their inputs:

Schaff Trend Cycle - STC(5,7,13)
Simple Moving Averages – Two Lines, SMA(3) and SMA(5)
FXS Trend Oscillator - TrendOscl(2)

Trend

This strategy uses a fast moving Schaff Trend Cycle (‘STC’) on a 1-Hour Chart to indicate Trend. The STC moves between 0 and 100. Trend is the direction of the “fast” STC.

UP: Trend is considered to be UP when the STC is rising or at 100.

Chart 1. Momentum 1 uses three strategy indicators.

DOWN: Trend is DOWN if the STC is falling or is equal to zero.

Trade Entry

The strategy uses two fast moving Trade Entry indicators to fine-tune when to buy or sell: Simple Moving Averages – Two Lines and the FXS Trend Oscillator (‘TrendOscl’).

The moving averages are considered bullish when the faster black SMA(3) is rising and above the green SMA(5), and bearish when the SMA(3) is falling and below the green SMA(5).

FXS Trend Oscillator crosses above and below zero. The green ‘TrendOscl(2)’ line is bullish when it is above zero and rising. It is considered bearish when it is below zero and falling.

Chart 2. A Buy Entry occurs at 1.4186, at 8:00, when all three strategy indicators became bullish.

Here are the Buy Entry and Sell Entry rules:
BUY when Trend is UP and:

1. The black SMA(3) above the green SMA(5) and
2. The green Trend Oscillator line is above zero and rising

SELL when Trend is DOWN and

1. The black SMA(3) is below the green SMA(5) and
2. The green Trend Oscillator line is below zero and falling

Trade Exit

Various exit tactics are used, depending on how price could develop.

Profit Target:

1. Exit Buy Position if price trades at Key Resistance target and TrendOscl crosses below zero.
2. Exit Sell Position if price trades at Key Support target and TrendOscl crosses above zero.

Strategy Indicators Changes Direction:

If the Trend Indicator changes direction then exit the trade. If both of the Trade Entry indicators change direction then exit the trade.

Chart 3. Buy Trade exits after Trend changes to DOWN.

Exit a BUY Position if

1. Trend changes to DOWN

OR
2. Both Trade Entry indicators change to Bearish

Exit a SELL Position if

1. Trend changes to UP

OR
2. Both Trade Entry indicators change to Bullish.

Initial Stop Loss Order: Controls trade risk. Establish before the trade. (See "Risk Controller".)

Risk Control

Go to Risk Controller. Input risk preferences to determine:

1. Stop Loss Order
2. Maximum Position Size

Use the Trade Strategy Worksheet to control, monitor and record the trade.

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Strategy Overview

Structure Your Trades.

Our strategies are composed of four elements: trend, trade entry, trade exit and risk control. Below are brief explanations of each. To see our technical trading tools applied within this framework, take a look at Strategy Examples.

Trend

Trend is the overall direction of prices: up, down or sideways. “Trading with the Trend” may sound simple, but applying this concept to live trading is not as easy as it looks.

How do our tools determine Trend? Pro Charts and Pro Commentary provide powerful trend indicators, signals and forecasts, including two expert indicators that provide automated price commentary and forecasts on every pricebar.

Trade Entry

Once you know Trend, the next tasks involve timing trade entry, when and at what price to get into the market. The highest probability trades are made in the direction of the trend. Selective range trading and counter-trend trades can be profitable.

How do our tools determine Trade Entry? FXS buy and sell signals are based on one or more unique indicators, such as FXS Adaptive Moving Average that adjusts quickly to market conditions or combines effectively to generate limit entry or breakout entry prices.

Trade Exit

Maximizing profit and cutting losses are both necessary. We focus on each separately because this is where traders often make mistakes. The tendency is to close out a profitable position too early and to allow small losses to turn into larger ones.

When you place a trade you won’t know for sure if it will be a winner; and if a winner, which type of order will capture the most profit. Rather than trying to anticipate the best exit for a trade, you need to use competing Trade Exit orders to maximize profits.

How do our tools determine Trade Exit? Pro Charts can be set for multiple, competing take-profit alerts that allow for different types of price moves. These include: Trailing Stops, Profit Targets, Protect Profit Orders and Time-based Exits.

Risk Control

Cutting your losses: To prosper from your winning trades you need to control the risk of the losing trades. To control the maximum amount of equity at risk every trade needs to have a risk control stop loss order. And you want to determine what size position to take in relation to your risk limits. Remember that when you set your sights on hi-probability trades, you are also working to avoid losing trades, which is an ongoing and essential risk control activity.

How do our tools Control Risk? The advanced trading indicators, signals and forecasts on Pro Charts and Pro Commentary help target profitable trades. Key support/resistance levels highlight potential locations for stop loss orders.

The Risk Controller takes you step-by-step through setting Risk Limits, Stop Loss Orders, and determining Position Size. Use our Strategy Worksheet before, during and after the trade as an entry checklist, to monitor exit alerts, control risk and afterwards, to review the trade.

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