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HARRIMAN HOUSE LTD
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First published in Great Britain in 2012
Copyright © Harriman House
The right of Christopher Weaver to be identified as the Author has been asserted in accordance with the Copyright, Designs and Patents Act 1988.
ISBN: 978-0-85719-208-0
British Library Cataloguing in Publication Data
A CIP catalogue record for this book can be obtained from the British Library.
All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publisher. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior written consent of the Publisher.
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Preface
What this book covers
This book covers four different approaches to trend trade the foreign exchange market. These four keys are:
1 Trend lines
2 Channels
3 Fibonacci retracements
4 Symmetrical triangles
We will explore the primary strength of each key, why it is useful, and the different variations of each key. We will then go through two practical strategies for each key and how to use them to execute successful trades.
It is worth noting that all of the strategies in this book can be described as continuation strategies. A continuation strategy is one that is traded in the direction of the trend on the assumption that the trend will continue.
As these keys are general concepts in technical analysis they are not limited to specific currency pairs. For example, one can trade using a trend line for a minor cross currency pair such as the GBP/AUD, with the same confidence as when trading a major currency pair such as the EUR/USD.
These keys and their corresponding strategies are designed to be traded in the foreign exchange spot market. But they are equally applicable to trading CFDs or spread betting.
Who this book is for
As this book does not cover such basics as general trading terminology, the process of placing a trade or navigating through a trading software package, it is assumed the reader is comfortable with trading in general and is therefore looking to enhance their overall trading experience by generating more profit. The application of the techniques in this book should be possible with any standard charting package.
Notes on charts
All the charts in this book were produced using © eSignal.
Introduction
The currency pairs which make up the foreign exchange market provide us with some of the most reliable trading trends. This is due to the high daily liquidity, or volume, of the market. The foreign exchange (forex) market as a whole trades around US$4 trillion every day - far more than all of the major stock markets in the world combined. All of this trading creates strong trends!
For instance, look at the EUR/USD currency pair.
Figure 0.1: major trends in EUR/USD
Of all of the currency pairs that make up the forex market, none is traded as heavily as this one. This means that whatever direction this currency pair is moving in, there is a huge amount of money backing it. It is believed that there is nearly US$1 trillion of trading volume per day on this currency alone. If it is trending up, it will require something dramatic to sufficiently turn the sentiment of the buyers into sellers and shift the trend.
Compare that to an obscure stock listed on a minor stock exchange. The smallest bit of news regarding the company, or the change of opinion by just a handful of stock holders, can turn an uptrend into a downtrend very quickly.
Liquidity is the key in providing reliability for trend trading - this is good news for the forex trend trader.
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