This is a video summary of the Live Forex Trading Room session on October 16, 2007.

Today’s Summary, by Sunil Mangwani:

As I have mentioned often - its not the trade that is important, it is the method, and the tools you use to analyze your trade. We have an agenda here in the Live Trading Room - to train our members to analyze the markets in the correct fashion. Once you can do that, you are well set on your way, and correct trades should follow.

Lets jump straight into the intraday activity of today’s session.

We have been following the USD/JPY at a longer timeframe, and having been Long on a swing trade, we still expect the price to go further up. Today on an intraday basis we had entered into a Short trade. When you have a trade which is against the main trend, but you have sufficient confirmations, there is no harm in taking it.

We looked at a Bearish Divergence which took place on the 1h charts, and our targets and entries were all confirmed by using Fibonacci Retracements. We entered our Short at certain levels which we discussed in the room. The price reached the 161.8% retracement level precisely.

There is a similar situation on the GBP/USD. Another Bearish Divergence. This one may not have been as strong as the divergence on USD/JPY, but we plotted our fibs to ascertain our targets, and had additional confirmation from Fibonacci Fans, plotted from a previous swing low. This gave us a double confirmation that price should go into the fans and meet our Fibonacci targets.

We were also looking at the USD/CAD, and there is one point I’d like to mention. The interest rate announcement for the CAD was out today, and while we don’t usually trade the news, just before the news we had the price forming a Bearish Divergence. We also had a 1-2-3 Formation in the making. The initial targets on the 1-2-3 have been reached, and thus technically the price was signaling a potential downmove - not a rally.

After the announcement, the price did in fact make a sharp drop. The point I am trying to make is that the fundamentals are nothing more than an excuse for the technicals to complete. The price will move to fulfill some pattern on some timeframe which you may not be aware of - that is why we recommend waiting until the dust settle post-news. Look for a technical pattern, and enter the market on technicals only. We are technical traders after all, and want the price to tell us what it is doing - we are not here to predict the price.

Enjoy the video!

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