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Todd GordonTodd Gordon• Senior Technical Strategist
• FX trader, Gain Capital Asset Management
• Author, Strategy of the Day
• Regular contributor to CNBC’s Fast Money
• Popular Twitter contributor
• FOREX.com booth # 6314
Beirut 2010Beirut 2010
Forex trading involves significant risk of loss and is not suitable for all investors.
Forex trading involves significant risk of loss and is not suitable for all investors.
What We Will CoverWhat We Will Cover
Part 1 – Introduction and services we providePart 1 – Introduction and services we provide
Part 2 – The 3 dimensions of tradingPart 2 – The 3 dimensions of trading
Forex trading involves significant risk of loss and is not suitable for all investors.
Part 1Part 1
IntroductionIntroduction
Forex trading involves significant risk of loss and is not suitable for all investors.
Buying BreakoutsBuying Breakouts
Forex trading involves significant risk of loss and is not suitable for all investors.
Buying BreakoutsBuying Breakouts
Forex trading involves significant risk of loss and is not suitable for all investors.
Buying BreakoutsBuying Breakouts
Forex trading involves significant risk of loss and is not suitable for all investors.
Buying BreakoutsBuying Breakouts
Forex trading involves significant risk of loss and is not suitable for all investors.
Buying BreakoutsBuying Breakouts
Forex trading involves significant risk of loss and is not suitable for all investors.
Trading and Ski Racing?Trading and Ski Racing?
Forex trading involves significant risk of loss and is not suitable for all investors.
Forex trading involves significant risk of loss and is not suitable for all investors.
SStrategy trategy OOf f TThe he DDay ay SStrategy trategy OOf f TThe he DDay ay ** **The following are my actual trades as recommended through SOTD. The following are
successful examples, though unsuccessful trades can and will occur.
Due to timing, S.O.T.D. recommendations and actual executions will vary slightly. Additionally, the spreads inherent in my performance are generally at more favorable rates than that
available to the typical retail investor. As such, you may not be able to achieve similar results as illustrated in this presentation.**
Forex trading involves significant risk of loss and is not suitable for all investors.
SStrategy trategy OOf f TThe he DDayayResultsResults
Forex trading involves significant risk of loss and is not suitable for all investors.
TwitterTwitter
www.twitter.com/ToddGordonForex•General market commentary•Trading, position, SOTD updates•Occasional attempts at humor
www.twitter.com/ToddGordonTrade•Trading, position, SOTD updates• Ideal for SMS text alerts
5213 followers
989 followers
Forex trading involves significant risk of loss and is not suitable for all investors.
GAIN Capital Asset ManagementGAIN Capital Asset Management
Money management firm established in 2000Money management firm established in 2000
Clients are both institutional and individual Clients are both institutional and individual investorsinvestors
Focuses solely on spot trading in G-7 currenciesFocuses solely on spot trading in G-7 currenciesUSD, EUR, JPY, GBP, AUD, NZD, CADUSD, EUR, JPY, GBP, AUD, NZD, CAD
Approximately $70M under managementApproximately $70M under management
Forex trading involves significant risk of loss and is not suitable for all investors.
Part 2Part 2The 3 Dimensions of TradingThe 3 Dimensions of Trading
Forex trading involves significant risk of loss and is not suitable for all investors.
3 Dimensions of Trading3 Dimensions of Trading
# 1 – Intermarket analysis# 1 – Intermarket analysis• Identifying individual currency movementIdentifying individual currency movement
• Identifying leading/lagging asset classesIdentifying leading/lagging asset classes
# 2 – Identifying trading opportunities# 2 – Identifying trading opportunities• Disciplined pattern recognitionDisciplined pattern recognition
• Precise, pre-planned trading strategiesPrecise, pre-planned trading strategies
# 3 – Account management# 3 – Account management• Appropriate deployment of trading capitalAppropriate deployment of trading capital
• Understand, acknowledging capital at riskUnderstand, acknowledging capital at risk
Forex trading involves significant risk of loss and is not suitable for all investors.
3 Dimensions of Trading3 Dimensions of Trading
#1- Intermarket analysis#1- Intermarket analysis
Forex trading involves significant risk of loss and is not suitable for all investors.
Identifying Currency LeadershipIdentifying Currency Leadership
USDUSDEUR
JPY//
Forex trading involves significant risk of loss and is not suitable for all investors.
Identifying Currency LeadershipIdentifying Currency Leadership
USDUSD JPY
//
EUR
Forex trading involves significant risk of loss and is not suitable for all investors.
Identifying Currency LeadershipIdentifying Currency Leadership
EUR JPY/
Forex trading involves significant risk of loss and is not suitable for all investors.
Which Currency To Trade?Which Currency To Trade?
EUR/JPY USD/JPY
EUR/USD
Forex trading involves significant risk of loss and is not suitable for all investors.
Indentifying LeadershipIndentifying Leadership
Forex trading involves significant risk of loss and is not suitable for all investors.
Indentifying LeadershipIndentifying Leadership
Forex trading involves significant risk of loss and is not suitable for all investors.
““Market trends anticipate economic trends.”Market trends anticipate economic trends.”
-John Murphy
Inter-Market AnalysisInter-Market Analysis
Forex trading involves significant risk of loss and is not suitable for all investors.
AUD/JPY & Dow Overlay
Forex trading involves significant risk of loss and is not suitable for all investors.
USD/JPY & US 10-yr Yield
Forex trading involves significant risk of loss and is not suitable for all investors.
EUR/USD NOW Trades With EquitiesEUR/USD NOW Trades With Equities
Forex trading involves significant risk of loss and is not suitable for all investors.
USD/CAD & Crude OilUSD/CAD & Crude Oil
Forex trading involves significant risk of loss and is not suitable for all investors.
AUD/USD & High Grade Copper
Forex trading involves significant risk of loss and is not suitable for all investors.
3 Dimensions of Trading3 Dimensions of Trading
#2 - Identifying trading #2 - Identifying trading opportunitiesopportunities
With Elliott Wave and FibonacciWith Elliott Wave and Fibonacci
Forex trading involves significant risk of loss and is not suitable for all investors.Forex trading carries a high level of risk and is not suitable for all investors.
ELLIOTT WAVEELLIOTT WAVE
A A DisciplinedDisciplined Approach To Approach To Pattern Recognition and Risk Pattern Recognition and Risk
ManagementManagement
*Paul Tudor Jones ..calls Prechter and Frost's standard text *Paul Tudor Jones ..calls Prechter and Frost's standard text on Elliott "a classic," and one of "the four Bibles of the on Elliott "a classic," and one of "the four Bibles of the business" --business" --
““...and...and The Elliott Wave Theorist The Elliott Wave Theorist both give very specific and both give very specific and systematic ways to approach developing great reward/risk systematic ways to approach developing great reward/risk ratios for entering into (trade)ratios for entering into (trade)""[19]
* http://en.wikipedia.org/wiki/Paul_Tudor_Jones* http://en.wikipedia.org/wiki/Paul_Tudor_Jones
Forex trading involves significant risk of loss and is not suitable for all investors.Forex trading carries a high level of risk and is not suitable for all investors.
Ralph Nelson ElliottRalph Nelson Elliott(1871 - 1945)
Forex trading involves significant risk of loss and is not suitable for all investors.Forex trading carries a high level of risk and is not suitable for all investors.
BASIC 5-WAVE PATTERNBASIC 5-WAVE PATTERN
Wave 1Wave 2
Wave 3
Wave 4
Wave 5
1
2
3
4
5
Forex trading involves significant risk of loss and is not suitable for all
investors.
Forex trading involves significant risk of loss and is not suitable for all investors.
BASIC 5-WAVE PATTERNBASIC 5-WAVE PATTERN
Wave 1Wave 2
Wave 3
Wave 4
Wave 5
1
2
3
4
5Wave 1
- Fundamentals poor- Investors fully, bearishexpecting new lows-Heavy short selling - 5 wave subdivision
Wave 2 -Investors fully bearish, certain of new lows- Heavily retraces W.1- Fundamentals horrible, doom and gloom- Volumes light, as sellers dry up - 3 wave subdivision
Wave 3- Strong, deliberate, and extended price action- Fundamentals increasingly better- Investor confidence greatly improved- 5 extended subdivisions
Wave 4-Fundamentals temporarily peak, then pullback- Often shallow, yet prolonged consolidation
Wave 5- Investors extremely optimistic-Fundamentals return, but often not to W.3 levels- Price momentum less than W.3
Forex trading involves significant risk of loss and is not suitable for all
investors.
Forex trading involves significant risk of loss and is not suitable for all investors.
TREND WAVESMOTIVE WAVESTREND WAVESMOTIVE WAVES
.i
.ii
.iii
.iv
.v
.a
.b
.c
.i
.ii
.iii
.iv
.v
.a
.b
.c
.i
.ii
.iii
.iv
.v
1
2
3
4
5 • Subdivides into waves of 5Subdivides into waves of 5
• W.2 can’t go below the W.2 can’t go below the beginning of W.1beginning of W.1
• W.4 always retraces less W.4 always retraces less than 100% of W.3than 100% of W.3
• W.4 can’t go below the W.4 can’t go below the beginning of W.3beginning of W.3
• W.3 is often the longest, W.3 is often the longest, never the shortest.never the shortest.
Forex trading involves significant risk of loss and is not suitable for all investors.Forex trading carries a high level of risk and is not suitable for all investors.
Corrective WavesCorrective Waves
• Corrective- possesses a 3-wave structure Corrective- possesses a 3-wave structure that retraces percentage of a prior motivethat retraces percentage of a prior motive• Waves 2,4 and B are correctiveWaves 2,4 and B are corrective
• Subdivision are labelled with letters.Subdivision are labelled with letters.
• Waves are corrective when trending in the Waves are corrective when trending in the opposite direction to the wave of 1 larger degree.opposite direction to the wave of 1 larger degree.
Forex trading involves significant risk of loss and is not suitable for all investors.Forex trading carries a high level of risk and is not suitable for all investors.
CORRECTIVE WAVESCORRECTIVE WAVES
.1
.2
.3
.4
.5
.A
.B
.C
UptrendUptrend DowntrendDowntrend
A
B
C
A
B
C
Forex trading involves significant risk of loss and is not suitable for all investors.Forex trading carries a high level of risk and is not suitable for all investors.
Completed A-B-C CorrectionCompleted A-B-C Correction
Forex trading involves significant risk of loss and is not suitable for all investors.
Fibonacci Ratio AnalysisFibonacci Ratio Analysis
The map legend of Elliott Wave The map legend of Elliott Wave Principle…Principle…
Forex trading involves significant risk of loss and is not suitable for all investors.
0.382 0.618 squared
0.500 2nd N / 3rd N
0.618 Inverse of Golden Ratio
0.707 Square root of 2
0.786 Square root of 0.618
1.000 1.618 x 0.618
1.272 Square root of 1.618
1.618 Golden Ratio (Phi)
2.000 1st N x 2nd N
2.618 1.618 squared
FIBONACCI RATIOSFIBONACCI RATIOS
Forex trading involves significant risk of loss and is not suitable for all investors.
FIBONACCI ANALYSISFIBONACCI ANALYSIS
Retracements Extensions Projections
Forex trading involves significant risk of loss and is not suitable for all investors.
Fibonacci RetracementsFibonacci Retracements
1
2
3
4
5
A
B
C
1
2
3
4
5
A
B
C
1
2
3
4
5.3
.4
.5
.2
.1
1Used to analyze Used to analyze CORRECTIVE WAVESCORRECTIVE WAVES
Forex trading involves significant risk of loss and is not suitable for all investors.
1
2
3
4
5
A
B
C
1
2
3
4
5
A
B
C
1
2
3
4
5.3
.4
.5
.2
.1
1
100%
61.8% 100%
38.2%
Fibonacci RetracementsFibonacci RetracementsUsed to analyze Used to analyze CORRECTIVE WAVESCORRECTIVE WAVES
…….by measuring .by measuring impulse wavesimpulse waves
Forex trading involves significant risk of loss and is not suitable for all investors.
AUD/USD – AUD/USD – 11/11/09 – 5:01 PM 11/11/09 – 5:01 PM ESTEST
“…“…I will be bidding I will be bidding for 2 units of for 2 units of AUDUSD at 0.9220 AUDUSD at 0.9220 with stops for now at with stops for now at 0.9142. If filled and 0.9142. If filled and Aussie shows Aussie shows favorable upside favorable upside action, I will quick action, I will quick trail the stop up trail the stop up behind me…”behind me…”
Forex trading involves significant risk of loss and is not suitable for all investors.
AUD/USD – AUD/USD – 11/12/09 – 4:49 PM 11/12/09 – 4:49 PM ESTEST
“…“…Filled on our AUDUSD Filled on our AUDUSD bids today as the risk bids today as the risk trade was hammered trade was hammered today. EURUSD seemed to today. EURUSD seemed to the downside …Oil the downside …Oil inventories were released inventories were released today and came in higher today and came in higher than expected. And when than expected. And when combined with high risk combined with high risk aversion on the session, aversion on the session, we would expect to see we would expect to see crude breaking significant crude breaking significant support levels…. but support levels…. but support held at $76.50…support held at $76.50…as did Australia's major as did Australia's major export, Copper, hold export, Copper, hold support at around support at around 297.30 .”297.30 .”
Forex trading involves significant risk of loss and is not suitable for all investors.
AUD/USD – AUD/USD – 11/13/09 – 1:51 PM 11/13/09 – 1:51 PM ESTEST
“…“…Booking half of our Booking half of our profits on 0.9220 long profits on 0.9220 long AUDUSD at 0.9285 and AUDUSD at 0.9285 and trailing trailing a stop on the a stop on the balance to entry price. balance to entry price. EURUSD is acting very EURUSD is acting very heavy into the 1.4885 heavy into the 1.4885 wave 4 resistance wave 4 resistance mentioned below…In light mentioned below…In light of fairly strong commodity of fairly strong commodity markets, a positive equity markets, a positive equity close, and dollar overlap, I close, and dollar overlap, I will remain long AUDUSD will remain long AUDUSD over the weekend with over the weekend with 0.9220 stops. 0.9220 stops. ””
Forex trading involves significant risk of loss and is not suitable for all investors.
AUD/USD – AUD/USD – 11/16/09 – 2:05 PM 11/16/09 – 2:05 PM ESTEST
“…“…We are still long the We are still long the final piece of AUDUSD final piece of AUDUSD from 0.9220 and I am from 0.9220 and I am actively searching for a actively searching for a final exit spot. I have final exit spot. I have moved stops on the moved stops on the balance to 0.9320 locking balance to 0.9320 locking in 100 pips on the final in 100 pips on the final piece.”piece.”
AUD/USD – 11/16/09 – AUD/USD – 11/16/09 – 3:23 PM EST3:23 PM EST **POSITION UPDATE ****POSITION UPDATE **
“…“…Target #1 0.9400 Met Target #1 0.9400 Met and Held. Closing last and Held. Closing last piece of AUDUSD long at piece of AUDUSD long at 0.9375 for +155 pips. 0.9375 for +155 pips.
Forex trading involves significant risk of loss and is not suitable for all investors.
3 Dimensions of Trading3 Dimensions of Trading
#3 - Account management#3 - Account management
Calculating Stop LossesCalculating Stop Losses
Depending on your conviction in the tradeDepending on your conviction in the trade
• LOVE THE TRADELOVE THE TRADE6-8% of total capital at risk per trade6-8% of total capital at risk per trade
• Strong ConvictionStrong Conviction4-6% of total capital at risk per trade4-6% of total capital at risk per trade
• Average TradeAverage Trade2-4% of total capital at risk per trade2-4% of total capital at risk per trade
• Marginal SetupMarginal Setup1-2% of total capital at risk per trade1-2% of total capital at risk per trade
Forex trading involves significant risk of loss and is not suitable for all investors.
Capital at Risk per TradeCapital at Risk per Trade
Available Capital x 5%Available Capital x 5%-------------------------------- = Maximum Position Size-------------------------------- = Maximum Position SizeCapital Exposure per LotCapital Exposure per Lot
$50,000 x 5% = $50,000 x 5% = $2,500$2,500------------------------------------ =------------------------------------ =52 pips x $10.00 /pip = 52 pips x $10.00 /pip = $520.00$520.00
4.8 lots. 4.8 lots. 5 LOTS5 LOTS
Forex trading involves significant risk of loss and is not suitable for all investors.
Forex trading involves significant risk of loss and is not suitable for all investors.
Planning TradesPlanning Trades
Create a trade journal to develop disciplineCreate a trade journal to develop discipline
Disciplined trade planning prevents an Disciplined trade planning prevents an unplanned, emotional entry into the marketunplanned, emotional entry into the market
Should include:Should include:
Forex trading involves significant risk of loss and is not suitable for all investors.
Position TrackerPosition TrackerJanuary 2010January 2010
Forex trading involves significant risk of loss and is not suitable for all investors.
Elliott Wave PrincipleElliott Wave PrincipleBy Frost and Prechter
Strategy of the Day Recommend Reading
Strategy of the Day Recommend Reading
By Robert Miner
Intermarket Analysis
Intermarket Analysis
By John Murphy
Dynamic TradingDynamic Trading
Forex trading involves significant risk of loss and is not suitable for all investors.
Tel: (877) 367-3946
www.forex.com
Both #6314