This is a video summary of the Live Forex Trading Room session on October 29, 2007.

Today’s Summary, by Sunil Mangwani:

Mondays usually are slow days and we wait for the technicals to settle down before we think of following up with the last week’s trades or looking at intraday. But on Mondays we do look forward, as we get the technical setups for Gap Trading.

The gaps are not present on forex as much as other markets, as it is a continuous market, but on Mondays the market can open with a gap, and currencies will give you excellent setups. Gap trading techniques are very effective. Lets have a look at one of the currencies which gave us an excellent one today.

The NZD/USD gave us a gap, though not a very large one - usually the larger the gap, the larger the move. We wait for the market to come back down to fill the gap, and went in Short upon a Bearish Divergence, expecting the price to fill the gap, which it did. The gap turns into a kind of channel, and price found support at this level. A nice Short trade on the NZD/USD, without all that much effort, which is the main advantage of gap trading.
Lets go over one intraday trade which we did take before following up with some longer term positions. On the GPB/JPY, during the post London session, we anticipated the breakout of a Triangle Formation. We have some techniques for triangle trading, one of which is called the Head Fake Line, which determines whether the expected breakout is correct. But the fact is - nobody can predict the direction of the breakout.

The bias was bullish, but until the price actually breaks out of the triangle in some way, we cannot confirm it. Once it does, we have the Head Fake Line which we plot in the room, to give us the exact targets and anticipated movement post-breakout. We have also identified a Bullish 1-2-3 Formation, which supported our view of the price remaining Long.

We managed to capture this breakout before the New York session started, and got a decent amount of profit on the GBP/JPY. Post-NY session of course, the GBP/JPY and Yen pairs rely more on the Dow movements, so we do not look at longer term trades, just short-term technical patterns.

Following up on the GBP/USD, since the last 2-3 days, it has broken out of a channel line, and we are anticipating a Bullish Flag Formation. We are expecting more strong upmoves on this pair. But with fundamentals due this week, the interest rate announcements on the 31st, plus the NFP’s on Friday the 2nd, long term positions are a little dicey. Lets restrict ourselves for intraday trades for now.

Enjoy the video!

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