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FX Now Daily Newsletter Guide

This is a guide to help explain the FX NOW: Daily Analysis & Insight Email newsletter produced by CASHMECHANICS.com. FX NOW is a daily newsletter with technical research for 6 different FOREX pairs: EUR/USD, GBP/USD, USD/CHF, USD/CAD, AUD/USD, EUR/JPY and the widely used S&P 500 for market sentiment. The analysis in these emails is designed for the part time trader with limited time to do research and still be able to have trade ideas for daily swing trades. We send this analysis to you daily, at the close of the NY Session. Included everyday is one trade that is our Daily Pick to help you prioritize which charts to look at. This guide will explain the setup of the chart, how to read them, and when to use them for your trading. This guide will help you understand which trade setups are optimal for part time swing traders. These emails are there to point out potential trading opportunities and describe the trend and momentum for the currency pairs, NOT a recommendation or advice to make these trades. It is suggested that you use these charts in conjunction with your own analysis to achieve the best trading results. CLICK HERE TO SUBSCRIBE TO FX NOW Chart Setup: These charts will always be a 1 hour chart spanning about 3 days worth of price action and give you swing trade ideas typically good for a few hours to a few days. It will always be accompanied by our observations with the chart in the same format everyday for a quick snapshot. AUD/USD DEC. 22st 2011 Trade Idea: Long Entry: 1.0114 Stop: 1.0093 Target Zone: 1.0177-1.0196 Risk Reward: 4.0 Comment: Bullish broader trend with confirming CCI reading suggests possible moves higher.

Sample Chart with Breakdown of Components

Chart Components: 1. 2. 3. 4. 5. Pivot Level (Center Blue Line) Triggers Use as Levels for Stops (Red Lines) Targets (Green Lines) 55 Hour Moving Average 20 Period CCI (Indicator on bottom of chart)

Pivot Level- This is the primary level we use to determine a bullish or bearish trend for the day. Price above the pivot level is considered bullish; if price is below is considered bearish. This is our first consideration of many to determine direction, but because of its simplicity, its very easy to understand and not subject to interpretation. Triggers- This is the level we suggest to use for stops. Use the lower of the two levels for Long positions, and the higher of the two levels for Short positions as your stop levels. Example from the chart above: We would want to go Long AUD/USD based on the chart above at the entry price of 1.0114 and place a Stop Loss order at 1.0093. Targets- This is the level we suggest to use as price targets to take profits on trades. We give 2 targets based on our proprietary trading system, and allows for clients to scale out of their trades. If youre only trading 1 lot, use just the 1st target level. Example: After taking a Long position in AUD/USD at 1.0114, we suggest taking profits on half your position at the 1st target level, and holding the rest of the position for the 2nd target. Also a suggested money management technique is moving your stops to your breakeven level (entry point) after reaching your 1st target level. If the 2nd level never is reached, you do not lose any money on the 2nd half of your trade. 55 Hour Moving Average- We use a 55 hour Exponential Moving Average for 2 major reasons. Firstly Moving Averages work very similarly to Pivot Levels in the sense that they are a very simple and quick gauge of bullish/bearish trend. Very simply, price above the moving average line is bullish, while price below it establishes a bearish trend. Secondly it provides us with a dynamic level of Support/Resistance. In our example above, the 55 hour Moving Average is approaching the 1.0093 level that we have designated for our stop, providing support along the way as it moves up. This second use of moving averages is up to different interpretation, so we describe our views in our comment section when applicable. 20 Period CCI- The Commodity Channel Index (CCI) is an oscillator indicator, much like the widely used Stochastics, or RSI that many traders are familiar with. Just like the moving averages, CCI is subject to each traders interpretation, it is used only secondary to the Pivot levels. Many times they will simply confirm the trend giving us more confirmation. However, when they are contradicting we will point this out and explain our thoughts based on that. CLICK HERE TO SUBSCRIBE TO FX NOW

Optimizing the Research: Now that weve covered how to read the chart and understanding its components, were going to explain how to get the most out of this research and using it properly to fit your trading style and risk tolerance. The reason we included this is because we publish trade ideas and levels for 6 currency pairs, it does not mean you should trade all of them every day. Some will be obviously be more profitable than others. The point of this section is to help you identify the best trades. This is also the criteria that we use when selecting our Daily Trade Pick. We highly suggest you do not just follow our research blindly. Do your own research and if you agree with our views, then that makes for potentially much better trades. We generally recommend having at least around $1000-$2500 in your account per every mini lot you plan on trading. That means if you have a $5000 trading account, you should consider trading 2 mini lots as a conservative trader, to as much as 5 mini lots if you are more aggressive. Since we follow the same 6 pairs every day, some trades will naturally be more attractive than others. Were going to show you through actual examples and what we mean by this and how to identify the ones that are probably worth your while to look into further and which ones that might not provide you with the most optimal trading conditions. Heres an example of an Optimal Trade: USD/CAD from Dec 12th, 2011 Trade Idea: Long Entry: 1.0246 Stop: 1.0220 Target Zone: 1.0319-1.0340 Risk/Reward: 4.0 Comment: Broader trend is bullish with confirming CCI suggesting possible moves higher.

This is considered an optimal trade because at the time, the market is trading very close to our entry level. This gives us a good risk/reward ratio on the trade of almost 4:1 and a very tight stop of around 25 pips. We want to maintain stops as small as possible to prevent large draw downs on our accounts. Notice that the moving average and CCI are all agreeing with our bullish views and confirming our views to go long on this trade. This is what we would consider optimal conditions for swing trading. Because of these considerations, it was also our pick for that day. 3

Example of a trade that is NOT optimal: GBP/USD from Dec 21nd 2011. Trade Idea: Short Entry: 1.5699 Stop: 1.5730 Target Zone: 1.5611-1.5585 Risk Reward: 4.0 Comment: Broader trend remains bullish, but mixed CCI reading suggests possible sideways consolidation.

This is what we would consider a less than optimal trade. Firstly, notice that price action is above the 55 hour moving average, which means overall broader trend is still bullish, which contradicts the Pivot Level that tells us to go Short. Also notice the CCI reading as noted in our comment is giving us a mixed neutral reading which suggests sideways chop. One other note here is the choppy and range-bound price action over the previous 48 hour time-frame, which does not give us much sense of direction for price. To recap, there are two major features of a trade that we are looking when considering its suitability. Its risk to reward ratio, generally we want to see trades with risk/reward ratios of 2:1 or larger with 4:1 being optimal. Secondly, we are looking for our secondary indicators (moving averages and CCI) to confirm our views. Use this in conjunction with your own research to improve your swing trades. These swing ideas will usually last a few hours to a few days, which is generally suitable for the trader with just a few minutes a day to do research but still be able to make a few trades a week. Also keep in mind that with a 3:1 risk/reward ratio, even if these trades reach their final targets only 35% of the trades you make (which sounds pretty bad) youll be profitable in the long run. FOCUS ON MONEY MANAGEMENT! Even if we were the worlds greatest research analysts, its not going to help you at all if you do not apply proper money management and blow up your account. In conclusion, this research provided will be useful for part time swing traders to have daily actionable research delivered to you. Designed to be easy to read and understand to supplement your current trades by giving trade ideas and an alternative view on the market based on objective price action. CLICK HERE TO SUBSCRIBE TO FX NOW 4

ABOUT CASHMECHANICS.com Cashmechanics.com is comprised of a small group of professional traders who make their primary income from trading. They have been trading currencies, equities, futures, and options on a full time basis for more than 5 years. Cashmechanics.com LLC is registered with the National Futures Association as an Introducing Broker, Forex Introducing Broker, and Commodities Trading Advisor. The NFA registration number is 0412057. Our goal is to help traders build confidence and consistency in their trading. Cashmechanics provides FOREX brokerage accounts through both FXCM and GAIN Capital (FOREX.com). Trading directly though Cashmechanics automatically earns you a pip rebate on all trades, saving you on transaction fees for all your trades. Trading with Cashmechanics as your broker gets you a discounted rate of $25/month for the FX NOW Signal Service. To open a trading account with Cashmechanics simply Click Here to fill out an Online Application.

RISK WARNING: Off-exchange foreign currency trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with off-exchange foreign currency trading and seek advice from an independent financial advisor if you have any doubts.