This is a video summary of the Live Forex Trading Room session on October 3, 2007.

Today’s Summary, by Sunil Mangwani:

Two trades today worth mentioning, taken in the Live Trading Room by ourselves and our subscribers. Both based on Divergences.

I want to go over the procedures we follow in the room, and the different methods we use to confirm the price action. As I mentioned before, we do not lay too much emphasis on the indicators - we concentrate on price action. Price action is never random - it always leaves its clues, and its up to YOU to decipher them.

We noticed a Hidden Bullish Divergence on GBP/JPY 30 min charts - price was forming higher lows, and stochastics lower lows. A classical example of a Hidden Bullish Divergence. We can use a lot of different tools to confirm our trade. In this case we used an Andrew’s Pitchfork plotted in a different way. When price came down and found support at the lower line of the pitchfork, this was the signal for our entry.

For this Hidden Divergence trade, where do our targets lie? We used Fibonaci Expansions to find out. The 127% level was the area where the price stopped exactly. Many ways to skin a cat, as they say, but all of them very effective. 150 points of profit on GBP/JPY when the trade completed. An excellent trade.

The other trade which we are still in the process of observing is the CAD/USD. We have been looking at it with a Bullish bias for some time now, waiting for price to give us a confirmation. The trigger for our trade was a similar Hidden Bullish Divergence - higher lows in price, lower lows in stochastics. In this case, we used Fibonacci Fans to confirm the support level for our Hidden Divergence. It is an excellent trigger for the trade.

One of the supports for the fans was also created by a Regular Bullish Divergence. This is one of the situations where you have a lot of odds going in your favor. We advocate aggressive trades in this case - enter as soon as you get a confirmation, jump into the trade, and start taking profits. This does not mean you are not confident about your system - with an aggressive trade, you are jumping in the market, and taking your profits because you KNOW the trade is going to be good. Lock in your profits and wait for price to move further. We remain confident on this trade and expect the market to go higher, with two different Fibonacci tools giving good targets.

One thing I want to touch on before I close - on USD/JPY, we have been looking at a breakout from a Symmetrical Triangle on the daily charts. We are expecting longish moves on this pair, and were waiting for confirmations to enter into a Long trade. We will follow this pair in our subsequent recaps.
Enjoy the video!

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