Forex Technical Analysis Techniques for the Forex Futures Trader
Would you like a simple, common sense way to trade Forex Futures and other futures markets? While not a guarantee or risk-free futures trading strategy, what I will lay out in the next few paragraphs may be an idea for you on how to apply forex technical analysis to the forex futures market.
First, let’s take a look at what kind of markets we are dealing with. This portion of the article is short because we are all aware of what is going on in the market place. My opinion is that the volatility we are currently seeing in the forex futures markets will continue to roll on through the majority of 2010 and perhaps beyond. So, should you pack up and move to a cabin in the mountains, or should we roll up our sleeves and try to figure a way to trade from the hand that has been dealt us?
If you are still reading this article then you agree with me that these are volatile times and volatile markets. In my opinion the way to trade futures and particularly forex futures in volatile times is by utilizing volatility breakout methodologies. There are many ways to do that and many forex futures traders use computerized trading systems to do this. In this path, market data is inputted into a software program and based on history and probabilities, the trading system outputs exact buy and sell points that aspire to take advantage of volatile markets that are breaking out of a trading range. The logic is that what follows consolidation is a break out, either up or down in the markets. Volatility breakout traders hope to ride that breakout for a specific period of time and hopefully make a profit.
For those traders not deploying a computerized system, here is one widely
used approach, Pivot Points.
Pivot Points originated in the pits of the CBOT and were the only thing professional commodity traders could reference to trade off. Pivot Point analysis was created so that a commodity trader could reference where today’s prices were in relation to yesterday’s price (see chart below).
Pivot points basically use the high and low points for a forex futures market and from there determine a pivot point. Then a calculation is made as to projected technical support and projected technical resistance. If a forex futures market breaks out and goes above the initial projected technical resistance point (refereed to as R1) there is a reasonable chance that the market will continue in that direction in these volatile markets. The same goes for the short side if the market goes down through a initial projected technical support level (S1).
This is just one technical analysis tool a forex trader can utilize to help with trade assessment and trade execution. As with all trading tools and futures trading strategies, there are no guarantees in forex futures trading. Remember, there are no “holy grail” secrets and or substitute for hard work. To learn more about Pivot Point Analysis join us at The Futrues Trading Network to see professional traders utilize these and many other analytical tools to navigate the forex futures markets.
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Scot Hicks has been involved in futures trading since 1986. He began his futures trading career on the floor of the Chicago Board of Trade working as runner on the grain floor. Over the years Scot has written articles for several futures magazines and is often sought to train and educate industry professionals.
Opinions Expressed are subject to change without notice. The Futures Trading Network makes no promises or guarantees implied or otherwise that utilizing technical analysis in the forex futures markets will result in profits or limited losses. There is significant risk of financial loss in trading forex futures; therefore you should carefully consider whether such an investment is right for you in light of your financial position.
August 2nd, 2010 at 5:23 pm
[...] four majors, that the bulls were able to pierce the weekly pivotal resistance areas (read “Forex Technical Analysis Technicques,” by Scot Hicks). The question for currency traders now is, can they (bulls) sustain the [...]