DAY & SWING TRADING THE CURRENCY MARKET

Technical Trading Strategy: Multiple Time Frame Analysis

-t o trade successfully on an intraday basis, it is important to be selective
- Although many traders prefer to range trade, the big profit potentials tend to lie in trades
that capture and participate in big market moves
- The most common form of multiple time frame analysis is to use daily charts to identify
the overall trend and then use the hourly charts to determine specific entry levels.
Technical Strategy: Trading with Double Bollinger Bands
- One of the most useful technical indicators in my experience is Bollinger Bands.
-Traditionally, Bollinger Bands are used as overbought and oversold indicators, but given
the trending nature of currencies, there are more efficient ways to use the bands. T
- The better technique would be to add another set of Bollinger Bands—the 20- period,
one-standard deviation
Using Double Bollinger Bands to Pick Tops and Bottoms
- Having two sets of Bollinger Bands on your chart is a much more effective way to pick
a top or bottom in currencies
- The general rule of thumb, we don’t buy a bottom until the currency pair has traded
above the first standard deviation Bollinger Band
- Along the same lines, we do not sell a top until the pair trades below the first standard
deviation Bollinger Band.
- it can help avoid prematurely picking a top or bottom which can mean major losses in a
trending environment
Strategy Rules for Long Trade
1. Look for the currency pair to be trading between the lower first and second standard
deviation Bollinger Bands.
2. Look for a close above the first standard deviation Bollinger Band.
3. If so, BUY at close of candle or 5pm NY Time.
4. Stop 50 pips below first standard deviation Bollinger Band.

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5. Close half of position when it moves by amount risked; move stop on rest to initial
entry price (breakeven).
6. Close remainder of position at two times risk or trail the stop.
Strategy Rules for Short Trade
1. Look for the currency pair to be trading between the upper first and second standard
deviation Bollinger Bands.
2. Look for a close below the first standard deviation Bollinger Band.
3. If so, sell at close of candle or 5pm NY Time.
4. Stop 30 pips above first standard deviation Bollinger Band.
5. Close half of position when it moves by amount risked; move stop on rest to initial
entry price (breakeven).
6. Close remainder of position at two times risk or trail the stop

Using Double Bollinger Bands to Determine Trend versus Range

- When the pair is trading between the two lower or upper Bollinger Bands, it is in trend,
- when it is trading between the first standard deviation Bollinger Bands, it is in range
- When the currency pair is in trend mode, it is best to look for opportunities to join the
trend. When it is in the range zone, picking tops and bottoms is preferred.
Using Double Bollinger Bands to Join a New Trend
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Strategy Rules for Long Trade
1. Look for the currency pair to close above the first standard deviation Bollinger Band.
2. Check to see if the last two candles were below the first standard deviation Bollinger
Band.
3. If so, buy at close of candle or 5pm NY Time.
4. Initial stop at +65 pips.
5. Close half of position at +50 pips; move stop on rest to initial entry price (breakeven).
6. Close remainder of position at +195 pips.

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Strategy Rules for Short Trade
1. Look for the currency pair to close below the first standard deviation Bollinger Band.
2. Check to see if the last two candles were above the first standard deviation Bollinger
Band.
3. If so, sell at close of candle or 5pm NY Time.
4. Initial stop at +65 pips.
5. Close half of position at +50 pips; move stop on rest to initial entry price (breakeven).
6. Close remainder of position at +195 pips
- We encourage you to lay the Bollinger Bands on your charts and look for more
examples of these strategies in action. There are many ways to use the double Bollinger
Bands for forex trading. Both of these strategies are for daily charts, but different
strategies and rules can be used for intraday trading using the bands
Technical Trading Strategy: Fading the Double Zeros

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-O ne of the most widely overlooked areas of trading is market structure. Developing a
keen understanding of market structure and its dynamics can help day traders to gain an
unbelievable advantage. Developing a feel and understanding for market dynamics is key
to profitably taking advantage of shortterm fluctuations
- This technique is very efficient for intraday traders as it allows them to get on the same
side as the market maker.
- When trading intraday, it is impossible to look for bounces off every support or
resistance level and expect to be profitable. The key to successful intraday trading
requires more selectivity and only entering at those levels where a reaction is more likely
- Double zeros represent numbers where the last two digits are zeros. Examples of double
zeros would be 118.00 in USDJPY or 1.1100 in the EURUSD
- The reason why this occurs is because traders are humans, and humans tend to think in
round numbers.
- This trade is most profitable when there are other technical indicators that will confirm
the significance of the double zero level.
Further Optimization
- Round numbers are important because they are significant levels but if the price
coincides with a key technical level, a reversal becomes more likely.

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Technical Trading Strategy: Waiting for the Deal
Strategy Rules
Longs:
1. Early European trading in GBPUSD begins around 1am NY Time, and we look for the
pair to make new range low of at least 25 pips above the opening price (the range is
defined as the price action between the Frankfurt and London power hour of 6 GMT to 7
GMT NY Time).
2. Look for the pair to reverse and penetrate the high.
3. Place an entry order to buy 10 pips above the high of the range.
4. Place a protective stop no more than 25 pips away from your range high, or 35 pips.
5. If the position moves lower by 50 pips, close half of the position, move stop on rest to
breakeven, and target three times risk, or 105 pips on the remainder.

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Shorts:
1. GBPUSD opens in Europe and trades more than 25 pips above the high established
during the Frankfurt to London power hour.
2. Wait for the pair to reverse and penetrate the low. TECHNICAL TRADING
STRATEGY: WAITING FOR THE DEAL 119
3. When that occurs, place an entry order to sell 10 pips below the low of the range.
4. Place a protective stop no more than 25 pips away from your range low, or 35 pips. 5.
If the position moves lower by 50 pips, close half of the position, move stop on rest to
breakeven, and target three times risk, or 105 pips on the remainder.

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Technical Trading Strategy: Inside Days Breakout Play
- An inside day is defined as a day where the daily range has been contained within the
prior day’s trading range
- The more inside days, the higher the likelihood of an upside surge in volatility, or a
breakout. This type of strategy is best employed on daily charts, but the longer the time
frame, the more significant the breakout opportunity.
- The key is to predict a valid breakout and not get caught in a false breakout move.
Traders using the daily charts could look for TECHNICAL TRADING STRATEGY:
INSIDE DAYS BREAKOUT PLAY 124 breakouts ahead of major economic releases for
the specific currency pair.
Strategy Rules Long:
1. Identify a currency pair where the daily range has been contained within the prior
day’s range for at least two days (we are looking for multiple inside days).
2. Buy 10 pips above the high of the previous inside day.
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3. Place stop and reverse order for two lots at least 10 pips below the low of the nearest
inside day.
4. Take profit when prices reach double the amount risked or begin to trail stop at that
level
Strategy Rules
Long:
1. Identify a currency pair where the daily range has been contained within the prior
day’s range for at least two days (we are looking for multiple inside days).
2. Buy 10 pips above the high of the previous inside day.
3. Place stop and reverse order for two lots at least 10 pips below the low of the nearest
inside day.
4. Take profit when prices reach double the amount risked or begin to trail stop at that
level
Short:
1. Identify a currency pair where the daily range has been contained within the prior
day’s range for at least two days (we are looking for multiple inside days).
2. Sell 10 pips below the low of the previous inside day.
3. Place stop and reverse order for two lots at least 10 pips above the high of the nearest
inside day.
4. Take profit when prices reach double the amount risked or begin to trail stop at that
level.

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Technical Trading Strategy: Fader
- In fact, even if prices manage to break above a significant level, a continuation move is
not guaranteed.
- , false breakouts appear more frequently than real breakouts. Sometimes prices will test
the resistance level once, twice, or even three times before breaking out
- The fader strategy is a variation of the ‘‘waiting for the real deal’’ strategy
Strategy Rules Longs:
1. Locate a currency pair whose 14-day ADX is less than 20. Ideally, the ADX should
also be trending downward, indicating that the trend is weakening further
2. Wait for the market to break below the previous day’s low by at least 15 pips.
3. Place an entry order to buy a few ticks above the previous day’s high.
4. After getting filled, place your initial stop no more than 20 pips away.

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5. Take profit on half of position when prices increase by the amount you risked; move
stop on remaining position to breakeven. 6. Trail the stop on the remaining position
Shorts:
1. Locate a currency pair whose 14-day ADX is less than 20. Ideally the ADX should
also be trending downward, indicating that the trend is weakening further
2. Look for a move above the previous day’s high by at least 15 pips.
3. Place an entry order to sell a few ticks below the previous day’s low.
4. Once filled, place the initial protective stop no more than 20-pips below your entry.
5. Protect any profits by selling half of the position when it runs 20 pips in your favor. 6.
Place a trailing stop on the remainder of the position.
- Figure 13.1 shows a daily chart of USDJPY with the ADX below 20 and pointing
downward. This is the first signal that a trade setup is in place.

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Technical Trading Strategy: 20-Day Breakout Trade
-T rading breakouts can be both a rewarding and frustrating endeavor as breakouts have a
tendency to fail.
- The rules behind this strategy are specifically developed to take advantage of strong
trending markets that make new highs that then proceed to ‘‘fail’’ by taking out a recent
low and then reverse again to make another new high
Strategy Rules
Longs:
1. Look for a currency pair that is making a 20-day high.
2. Look for the pair to reverse the same day or next to make a two-day low.
TECHNICAL TRADING STRATEGY: 20-DAY BREAKOUT TRADE 136
3. Buy the pair if it takes out the 20-day high within three days of making the two-day
low.
4. Place the initial stop a few pips below the two-day low.
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5. Take profit on half of the position when it moves by the amount risked; move stop on
rest to breakeven.
6. Trail stop on the remainder of the position.
Shorts:
1. Look for a currency pair that is making a 20-day low.
2. That day or the next the pair rallies to make a two-day high.
3. Sell the pair if it trades below the 20-day low within three days of making the two-day
high.
4. Risk up to a few ticks above the two-day high. 5. Take profit on half of the position
when it moves by the amount risked; move stop on rest to breakeven
. 6. Trail stop on the remainder of the position

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Further Optimization
- The false breakout strategy works best when there are no significant economic reports
scheduled for release that could trigger sharp unexpected movements

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- Then we look for the previous 20-day low to be broken within the following three days
it occurs 24 hours after the two-day high is made
Technical Trading Strategy: Channels
-Channel trading is a less exotic but popular trading technique for currencies. The reason
why it can work is because currencies rarely spend much time in tight trading ranges and
have the tendency to develop strong trends.
Here are some rules for using this technique to find long trades:
1. First, identify a channel on either an intraday or daily chart. The price should be
contained within a narrow range.
2. Enter long as the price breaks above the upper channel line by 10 pips. TECHNICAL
TRADING STRATEGY: CHANNELS 140
3. Place a stop at the lower channel line. 4
. Exit the position when it moves by double the amount risked. The short rules are the
reverse.

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Technical Trading Strategy: Perfect Order
- To optimize the perfect order strategy, traders should also look for ADX to be greater
than 20 and trending upward.
The perfect order seeks to take advantage of a trending environment near the beginning
of the trend:
1. Look for a currency pair with moving averages in perfect order.
2. Look for ADX pointing upwards, ideally greater than 20.
3. Buy five candles after the initial formation of the perfect order (if it still holds).
4. Initial stop is the low on the day of the initial crossover for longs and the high for
shorts.
5. Exit the position when the perfect order no longer holds.

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- The perfect order is a strategy that can be high profit but low probability and low
frequency. This means there could be numerous stop outs before a long trend emerges.

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