Dollar Update
I have been a trader/fund manager for years and in a world where your competition is fierce, to stay ahead of the game you must be able to anticipate where prices are likely to turn and where they are going with a high degree of accuracy. This quest begins with the ability to understand the basic concepts of supply and demand and market trends. Next, you must know how to properly quantify supply (resistance) and demand (support) in any and all markets and time frames. This allows you to objectively assess your true profit margin. Once you have that, you then know your risk and reward and can make objective decisions as to whether you have an ideal trading opportunity or not.
In an Online Trading Academy article three weeks ago I suggested buying the dollar for a longer term swing trade and selling the Euro and Pound to do it. I have received many emails asking about these trading ideas so I thought it would be a good idea to write an update piece to respond. While market talk shows have been giving plenty of reasons why buying the dollar is not a good idea, you have to understand that the fundamental information while likely true, is a completely separate conversation from how you make money trading the dollar (or any market for that matter). Fundamental information DOES NOT create price movement. Price movement creates fundamental information. I also wrote an article in SFO Magazine in December of 2007 explaining the problems with the dollar. Three weeks ago however, the supply and demand equation shifted and the key to consistent profits is identifying this shift as it is happening which leads to low risk high reward trading, not days, weeks later when taking that trade is high risk and low reward.
The long Dollar suggestion came when the Dollar index was at 72.00; it's now above 74.00. The Euro short against the Dollar suggestion came when the Euro was at 1.5800; it's now around 1.5400. The Pound short against the Dollar suggestion came when it was at 1.9800; it's now around 1.9500. These trades are now hundreds of pips in the money so your protective stops should be such that you are either not risking a loss at this point or at a point where you are locking in some gains. Hold these short positions until these markets reach demand or you get stopped out for the nice gains these trades have at this point.
Why not show the charts of these trades in this piece? Simple, I am very interested in two things. First, I am interested in growing the fund for my clients. Second, I am very interested in helping Online Trading Academy students reach their trading goals. I am NOT interested in giving away the edge that I and our students at Online Trading Academy enjoy and given the fact that many people read these articles and pass them on to friends, we must be careful. Having an edge in anything is crucial. If you don't have an edge, don't compete. Lastly, if you had just put in the time and investment to learn trading, you would not want the information you just learned to be published in an article.
This piece was not meant to impress you. It was rather meant to impress upon you the importance of anticipatory analysis. Whether you are trading your own account or managing accounts for others, anticipatory analysis based on the pure laws of supply (resistance) and demand (support) and trends are the key to low risk / high reward trading. Email me anytime for more information or if you have any trading or fund questions.
Have a great day.
- Sam Seiden, sseiden@tradingacademy.com
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Sam brings over 15 years experience of equities, forex, options, and futures trading which began when he was on the floor of the Chicago Mercantile Exchange. He has traded equities, futures, interest rate markets, forex, options, and commodities for his personal interests for years and has educated hundreds of traders and investors through seminars and daily advisory services both domestically and internationally. Sam has been involved in the markets since 1991 both on and off the floor of the Chicago Mercantile Exchange. He has served as the Director of Technical Research for two trading firms and regularly contributes articles to industry publications. Sam is known for his trading, technical research, and educational guidance.