This week I am currently based in sunny Orlando, Florida to teach the brand new introductory 3-day Market Timing class. I’m getting to know a whole new group of students and introducing them to the power of learning and fully understanding a core rule-based strategy and how it can become a solution for any motivated individual’s short term income and long term wealth goals. As is often the case, there have been plenty of great questions asked by the group, most of whom are completely alien to the concepts we are sharing with them, especially since most of these ideas and techniques are never spoken about or even mentioned in any textbook, webinar or hotel seminar event. With this in mind this reminded me of the amount of questions I get from my regular readers of this article.
While I always do my very best to answer each question as it comes along, there are always a few which I like to save for articles now and then, typically because they are such solid questions and the answers are sure to benefit all of my readers. This week I would like to publically answer some of the very best questions I have received over the last few weeks. I hope you enjoy them.
Hello Sam. I often see price levels of Supply and Demand where sometimes there are many candles in the area and other times very few. How can I interpret this in my trading and is it really important to pay attention to? Many thanks, David G.
Hello David, you ask a great question and I will do my best to keep my answer as simple as possible for you. What you are referring to is one of the Odds Enhancers we use in the ongoing XLT program. While I can’t go into too much detail in this article as there is more to talk about, we always like to increase our chances of a successful trade by looking only at levels with the very best structure and location. When prices have not spent very much time at a level of supply or demand, we are getting an objective clue that there was much competition to buy or sell (depending on the level) in the area. Think about it like this: If you only had a very limited time window to buy something which you always wanted at a very cheap price, then you would probably want to be one of the very first in line wouldn’t you? The time prices spend at levels works in the same way David and tell us objectively that prices didn’t hang around because they couldn’t due the huge imbalances between the competitive buying and selling taking place. This is where we should be looking to get into the trade too.
Hi Sam, thanks for your regular articles. I really enjoyed your last piece about Foreign Exchange companies charging a huge spread when we get currency for our trips abroad. I was shocked when I realized how much they make! Is there anything I can do to keep more for myself as I travel regularly and don’t want to keep getting ripped off? All the best, Mary T.
Hello Mary. I’m glad that you enjoyed the article. I too was a little shocked when I realized just how much my currency was really costing me for my travels and did a little digging around to find a decent solution. I can only speak right now for the banks in the UK as this is where I am based but what I did was to go to my bank and ask them for a spot-rate exchange when I withdrew cash from ATMs around the world. At first they said that this would be difficult but when I said that I would move to another bank who would provide me with the service I was looking for they soon accommodated my wishes and set me up with a Debit card which allows me to withdraw money from worldwide cash points at the Spot FX rates. I suggest you go ask your bank the way I did. It can be done. Hope this helps.
Dear Sam. I know that you have mentioned and talked about the different ways to trade Currency and I am very interested in getting into FX Options but I am not sure where to begin. Can you shed some light on this for me as I am very new to Options on FX? I appreciate the help, Marcus A.
Thanks for a great question Marcus. While Options can seem a little daunting at first my answer is actually pretty simple. Before you even start trading Options you must make sure that you have a solid working understanding of what true supply and demand levels look like on a price chart. When you know this it all then comes down to knowing which strategy to use in time with the market. However, I would never trade Options on Spot FX, as these would be only offered through individual brokers at their prices. You should only ever trade Options via a central marketplace like the CBOE (Chicago Board of Options Exchange) in a fair and transparent environment. The best FX vehicles would be to trade Options on the Euro FX Futures or another popular choice is the FXE ETF. Here is the chart of the FXE compared to the EURUSD:
As we can see, the charts are practically identical, save for the huge number of gaps on the FXE chart due to the fact that this ETF only trades during the open market hours of the day and not 24 hours like the EURUSD. With this in mind, it would be safe to trade as an Option in the longer term as you would be protected from the volatility by the option. Always ensure that you have a good solid education in options before jumping in though!
Hello there Sam. I know that you have mentioned before that you like to trade more markets than just FX but what do you think is the very best advantage in trading the FX markets, especially Spot FX as when you talked about FX Futures in a previous article, it seemed like you preferred that market to the Spot market. Is this right? I hope you can clear this up for me. Many thanks, Gabby S.
Thanks for your question Gabby. You are right to say that it seemed like I preferred the Futures FX markets to the Spot FX Markets but only for Intraday trading, as I can eliminate the cost of the spread in the futures by buying at the bid and selling at the ask, thus giving me much tighter stops and entries. However for the longer term swing trades and set and forget style positions, I would always choose FX Spot and this is for 2 main reasons. The first is that I have more choice in Spot FX than I do in Futures, which allows me to look for some truly unique trades with attractive risk to reward profiles. Secondly, the lowest margins can be found in FX spot and they stay the same from open to close of the trade, allowing me very low maintenance on my positions. It’s not that one market is better than the other overall, it’s more about what market is better for your personal style.
I hope these questions and answers were useful to you and thanks to all who mailed in. Keep them coming!
Take care and be well,