The Forex Skills to Pay the Bills! Omar Eltoukhy’s Weekly Forex Analysis

Written by Marc Walton

I recently retired as a professional trader. I now focus on teaching others to trade my funds. My team and I have coached 1000's of home based forex traders. Along with trading psychologist, Rich Friesen & a former student of mine, turned full-time trader & now a mentor: Pierre du Plessis

August 21, 2013

Guest forex mentor & trainer, Omar Eltoukhy shares his detailed analysis for members of our forexmentorpro.com group. Omar was originally one of our student members who has graduated to becoming a full time, pro forex trader and now enjoys teaching others. Here is his post from last Sunday 18th August.

skills to pay billsHi Boys and Girls!! Yes, I’m back!!

Marc Walton is currently bound and gagged in a linen closet and I have managed to wrangle my way back to the pages of this blog!! So while he figures out how to untie himself and contact the local authorities, I’ll be guiding you again this week 🙂

Doing these blog posts for the last couple of weeks has really given me a chance to sit and think long and hard about what I have learned in my trading experience that is most important towards making good trades……..aka…..”the skills to pay the bills”.

For those of you just starting out on your adventures in forex trading, the amount of information to learn can seem very overwhelming indeed!!

Do a search on “forex methods” and you will find everything from the standard indicator education to much more exotic items such as harmonics and using fractals in your trading. What’s important and what’s not?? Well, on some level everything out there is important to learn, either because it works and you should use it or because it doesn’t and you should avoid it. But if I wanted to focus on the most important aspects of trading it would come down to a short list of educational items:

Horizontal Support and Resistance: This is my bread and butter and in my opinion the single most important skill to learn about. It affects every market, forex and otherwise, and getting good at this skill will help you in whatever you trade. It is based on the fact that certain price areas make the market react, and price areas that were important in the past tend to be important again in the future. Although it takes learning and practice, mastery of this area will give you the trader the confidence to understand the structure of any market and the “spooky” ability to figure out what price might do next.

Fibonacci: Learning which areas to place fibs will pay you dividends in your ability to find important support and resistance areas. This mathematical ratio works not only in trading but applies to almost every aspect of the natural world as well. Do some research on this last fact and prepare to be amazed. Although it can be tricky at first to figure out which areas to fib, once you get the hang of it, the areas found through fibs will certainly help you understand support and resistance and what the market may do next.

Trendlines: Yes, another type of support and resistance (picking up on the theme here?) which illustrates what price does as it moves in an overall direction. Trendlines can be as important to price action as any other type of s/r and can provide us both important information and great places to take trades from. Again, this skill takes some practice to get better at, but the rewards for being good at it are like pips in the bank.

EMAs: These dynamic areas of support and resistance give us an excellent window into where price might react to on a moving basis and where price might return to as an average (200 EMA is a perfect example of this). On the bigger scale, the 55 and 200 EMA can contain the market and show direction. On the smaller scale, the 8, 10 and 21 EMAs can be used as places for entries, pullbacks, and shorter term direction. The skill here comes on finding which EMAs are important on which timeframes to the type of trading you are doing. Once again, practice makes perfect!

Market Theory: Understanding the fundamental reasons why the market moves the way it does will give you much more confidence in figuring out what to do next. Keep in mind price action is merely a reflection of the aggregate psychology of the participants and getting to the bottom of why people do the things they do will make you a more powerful trader. Knowing which state the market is currently in and how it reacts during different phases will allow you to adjust your trading strategy based on current markets rather than simply always second guessing what’s going on or sticking to a t0o-rigid plan of action since the market is dynamic.

Understanding the Numbers of Trading Results: Knowing how reward/risk ratio and win % interact within a system to produce certain results is an essential skill to have as I mentioned before in my post where I talked about how a losing system can still make money. Understanding the different metrics we can track during our trading will give you a much clearer picture if a system is worth trading, or simply whether certain aspects of your own trading may need improvement.

MyFxbook and similar sites do a fantastic job of tracking all these metrics for you, but it still very important that you as a trader are able to transform these numbers into actions you can use to enhance the results.

Risk and Risk Management: Understanding exactly how much you are risking with each trade within any given session/day/week is vital to keeping your capital alive long enough to build your account. Knowing how to abate risk when you can will certainly help your trading. Master the risk, and the market no longer owns you. You will be able to sustain any move the market can throw you and know you will come out alive on the other side.

Trade Management Options: Knowing different techniques of managing the trade during different conditions will help you capture the best move possible out of every trade. Some times you should let your order run (bigger trending markets) and other times, it’s very wise to aggressively manage your stop (as in smaller, ranging markets). By exploring different options, you will have more ability to tailor your trade the market conditions and make every trade work the best for you.

By no means is this an exhaustive list of trading skills to have, just an outline of some of the most important ones I have found in my experience. Luckily, the training material on this site covers most of them. Now let’s get to the week ahead!!

Forex Weekly Analysis for Week Beginning August 19, 2013

Last week things got a little trickier, but that didn’t mean we didn’t find trades. We had some news come out later in the week the moved the market, but most pairs are still working with the same areas from before. Keep in mind we have the FOMC monthly notes this week, which in the last two months have had a HUGE impact on the market. My goal is to try to have most of my trading done by London close on Tuesday if possible. Of course, we might see many pairs that go NOWHERE until Big Ben and Co. spill the beans on how they are going to mess things up further in the future. Try to manage trades around the Wednesday potential bombshell, either by waiting or managing stops before the news. Make sure and check out the bonus video before the weekly analysis if you want some more info on finding Support and Resistance.

Euro/$: Once again, the areas of importance are 1.3200 below and 1.3400 above. Breakouts of either area would really have me happy, but until then, we have to be aware of the triangle that’s still very much intact and the fact that we have lots around 1.3300 to contend with in between these two areas. Look to smaller timeframes if you choose to trade around 1.33. Otherwise wait until price falls to 1.3200 or rises to 1.3400 before making any decisions. Check video for much more detail.

Gbp/$: Unlike the Eur/Usd, this pair DID break out of its trendline on the weekly charts. Look for a pullback to 1.5500 for a long from the trendline, although 1.5600 is an important area where price closed above on the weekly. We may only stay above this level and then head higher. Check out smaller timeframes if we do not get a significant dip lower to find trades around this area. Finally 1.5270 could come back into play yet again if price falls dramatically to find support. Check out the video for all the details.

Aud: . Deja Vu. Again. Yes price stopped right below .9200 which has been a massively important area. I will look for shorts below this line, OR wait till price pulls up to .9300 and .9325 which is my final line in the sand for this bearish trend downwards. .9040 and .9000 below remain important and can be used for bounce trades if price falls first. Breakouts below .9000 will have me looking for the M2 short once again. Check the video for all the details.

Euro/Gbp: This pair produced a very nice move below .8600 last week which is where I would look to short if price pops up there again. Keep in mind the lower trendine and 200 EMA should stop price from falling too far. Longs from .8500 could be the order of desire on this pair moving forwards. Conservative, patient traders will prefer a breakout of the triangle. All explained in the video.

$/Yen: Much of the time I love finding easy trades on this pair. At the moment, it looks great in hindsight, but finding forward areas to trade has become trickier. Still waiting for a pullback to 99.50 for a short, but price seems to be holding strong below 98.50. That might be a good place to short again, depending on how price reacts if it gets back there. 97.50, 97.00 might be places to short but again tricky to figure that out beforehand. I would avoid taking trades at those two areas unless done on smaller timeframes. Price may fall down to 96.00 which is where I would look for a bounce trade or an M2 breakout. Check video for details.

Euro/Yen: 130.70 has been a beauty of an area to short and I will look there again. Of course, we have now gotten squeezed at the top trendline we have had for a while and an M2 long above would be favored here as long as stop is managed as price comes into 130.70 again. 129.40 is the monthly 200 EMA and seems to be holding price. I would NOT favor a long from this area since it would squeeze us back into the trendline, but a short below could be in order. Check the video for more info.

Aud Yen: The pullback to 90.00 finally happened! Yaaayy. Once again, I will look to this area to trade, preferably a short. We could see a pullback to 91.00 area which would be an excellent short as it is the convergence of a few items. Falls to 86.25-86.00 would have me interested for a long. Out of all the JPY crosses, this one seems to be the nicest to trade at the moment. Check video out for more details.

Cad: Oh CAD. It seems that the trendline long from last week worked out pretty well, but price seems to be getting a bit cramped. I would use EXTREME caution on this pair until we get a breakout above 1.0445 or a swoon down below parity. Price action may give us more clarity later in the week.

New members please note: If I am looking to take a trade long, at for example 1.5000 , I place my order 10 pips above & 10 pips below for a short. This is because price often does not quite reach a major line and you need to allow for spreads.

We are NOT a “tipping service” our aim is to teach you how to trade for yourself. For more up to the minute updates do not forget to drop by the forum

Hope you enjoy the analysis!! See you Wednesday for an update!! Best wishes and happy trading to all!!!

 

http://www.youtube.com/watch?v=fBW2OlKXH4c&feature=share&list=UUh9jKEbExtwL0MnwLBeyoyQ

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