FOREX PRO Weekly July 22-26, 2013

[Sive Morten]

Sive how often do you pay attention to the 3 period rule? And what time frames does this rule hold importance in?

I try always to take it into consideration, since it could safe a lot of money to you. It works on any time frame, but it's more reliable on higher time frames. Periods are counted depending on your time frame. If you take a signal or pattern at hourly chart - then it will be 3 hours, if on weekly - then it will be 3 weeks.

Enjoy your vacation, Master Sive.

Remember one day you should come spend that in Mexico !!!

Thanks, Buddy. To be honest, I already have thought about it... I also have relatives in LA, so that could become a bright trip.

 

[minimax]

Hi,

my oppinion that situation changed a lot and at least temporary top could be forming, it it not already done

Good trading to all!





10.00 CET > BAT?

 

[Lolly Tripathy]

EurUsd 4hr timeframe

 

[papao]

Hi Sive and thank you for your weekly update.
I'm asking you a question, but please answer only if and when you have time and first of all enjoy your vacation.
I just started exploring the options (and i understand they are a very sophisticated instrument). Just a little idea: as we trade (probably most of time) using stop loss and take profit, we have a predetermined risk reward ratio. Let's say we are going long, with a stop loss 100 pips below the entry and a take profit 200 pips above. If we trade fx spot market, futures (but also stocks, bonds etc) we have a RR of 2:1. But.. if we buy a deep out of money call (because the gamma and the delta which isn't fixed) when the underlying goes up we benefit also from the increasing delta (just like we had a position that auto increase itself) and also when the underlying goes down we benefit from decreasing delta (again, just like if the position were auto decreasing). So trading out of money options seems a easy way to improve the risk reward ratio. Do you think this make sense or not? I suspect that the time decay of options is offsetting that advantage of variable delta.
Thank you and have fun time

EDIT: just to explain a little better my idea: i'm not talking about buying options and hold it until expiration. I'm thinking about trading options using signals on the underlying market in order to benefit from the variable delta of the options before the expiring date (so buy a deep out of money call instead going long the underlying or buy a deep out of money put instead shorting the underlying. And when we have an exit signal from the underlying (because of the stop loss or the taking profit) we liquidate the option position).

 

[minimax]

EurUsd 4hr timeframe

View attachment 10323

Hi Lolly, more or less agree but with small deviation as it looks like to me atm

 

[TOURADA]

Allo i think like is more a ascending triangle

 

[Triantus Shango]

enjoy your time off, sive.

whenever you get the chance, no rush, could you please tell us whether or not DOM (depth of market) for the interbank market is available to retail traders?

for those who don't know, your broker's DOM isn't a reflection of what's going on between the FX banks, which are the players who actually control this market. the broker's DOM, as far as i understand it, only shows volume on the broker's internal network, i.e. it is client generated volume (retail clients for those brokers who only have retail clients) and therefore totally useless if one wants to see major market shift building up.

there are venues where clients are also both retail and institutionals, such as LMAX, RJOBrien(UK), Dukascopy, and on the institutional venues of SAXO Prime, FXCM (FXCMPro) and GAIN Capital (GAIN GTX) not the retail venues such as FXCM, Gain Capital/FOREX.com (SAXO retail does not even bother showing a DOM).

the reason i mention this distinction between venues originating a DOM only from retail volume versus retail + institutional volume is because my guess would be that institutional traders (be it a hedge fund or an individual high net worth trader) might have access to interbank DOM, and if so, then their trading volume on the broker's DOM might reflect indirectly the interbank patterns.

 

[Sive Morten]

enjoy your time off, sive.

whenever you get the chance, no rush, could you please tell us whether or not DOM (depth of market) for the interbank market is available to retail traders?

for those who don't know, your broker's DOM isn't a reflection of what's going on between the FX banks, which are the players who actually control this market. the broker's DOM, as far as i understand it, only shows volume on the broker's internal network, i.e. it is client generated volume (retail clients for those brokers who only have retail clients) and therefore totally useless if one wants to see major market shift building up.

there are venues where clients are also both retail and institutionals, such as LMAX, RJOBrien(UK), Dukascopy, and on the institutional venues of SAXO Prime, FXCM (FXCMPro) and GAIN Capital (GAIN GTX) not the retail venues such as FXCM, Gain Capital/FOREX.com (SAXO retail does not even bother showing a DOM).

the reason i mention this distinction between venues originating a DOM only from retail volume versus retail + institutional volume is because my guess would be that institutional traders (be it a hedge fund or an individual high net worth trader) might have access to interbank DOM, and if so, then their trading volume on the broker's DOM might reflect indirectly the interbank patterns.

Hi Triantus, yes you can get DOM but it will be expensive. Such software as Reuters Dealing and Bloomberg have a pages of real-time real interbank markets with DOM, and not only on EUR and USD.
Alternatively, you can get futures DOM on EUR/USD (that you probably know). Although it can't include all huge size of spot Forex, but it also representative enough to make judgement about trading volumes. They are just smaller but shows the same dynamic as spot numbers.

 

[Sive Morten]

Hi Sive and thank you for your weekly update.
I'm asking you a question, but please answer only if and when you have time and first of all enjoy your vacation.
I just started exploring the options (and i understand they are a very sophisticated instrument). Just a little idea: as we trade (probably most of time) using stop loss and take profit, we have a predetermined risk reward ratio. Let's say we are going long, with a stop loss 100 pips below the entry and a take profit 200 pips above. If we trade fx spot market, futures (but also stocks, bonds etc) we have a RR of 2:1. But.. if we buy a deep out of money call (because the gamma and the delta which isn't fixed) when the underlying goes up we benefit also from the increasing delta (just like we had a position that auto increase itself) and also when the underlying goes down we benefit from decreasing delta (again, just like if the position were auto decreasing). So trading out of money options seems a easy way to improve the risk reward ratio. Do you think this make sense or not? I suspect that the time decay of options is offsetting that advantage of variable delta.
Thank you and have fun time

EDIT: just to explain a little better my idea: i'm not talking about buying options and hold it until expiration. I'm thinking about trading options using signals on the underlying market in order to benefit from the variable delta of the options before the expiring date (so buy a deep out of money call instead going long the underlying or buy a deep out of money put instead shorting the underlying. And when we have an exit signal from the underlying (because of the stop loss or the taking profit) we liquidate the option position).

Hi Papao,
yes such strategy is really exist, when you purchase a lot of cheap options and make real money if market will approach to strike. I do not know, may be you know that already, but pricing model of options mostly depend on implied volatility and as option costs cheap, it means that the probability of reaching some particular level is anemic. Other words, if you will follow this strategy for a long time you will be flat or even with loss.
Here probably makes sense to do couple of small add-ons to your strategy.
First, you have to track historical volatility and compare it with implied volatility every time when you intend to take the trade. Implied volatility you can extract from market option price by using some option pricing model (for instance Black model). Thus, to get more confidence that market will approach to strike of your option, you probably need to buy when volatility stands near the lows. How to calculate historical volatility - you can read in our Forex Military School.
Second, as I see you're really interested in options, try to read Buying and Selling Volatility: Kevin B. Connolly: 9780471968849: Amazon.com: Books
and if you're interesting in advanced application of typical strategies - Options as a Strategic Investment: Lawrence G. McMillan: 9780735204652: Amazon.com: Books

 

[pragmatic]

Hi everyone!
Does somebody know if the indicators for MT4 work on tablets: Android, Windows or Apple. I want to purchase a tablet and I have some indicators for MT4 that I can't trade without: DOSC, MACDP, Exponential MACD. Will they work with the MT4 application if I just copy them?