7
ForeX trading
using interMarket anaLysis
F
igure
1.1.
source: vantagepoint intermarket analysis software (www.tradertech.com)
CurrenCies tend to have good long-term trends. the Canadian dollar
Chart illustrates the trending nature of CurrenCies.
source: vantagepoint intermarket analysis software (www.tradertech.com)
CurrenCies also have good short-term moves. although CurrenCies
often have extended trends, the same Canadian dollar Chart in figure
1.1 shows they also tend to have tradable Counter trends that appeal
to the aCtive trader who moves into and out of positions.
F
igure
1.2.
t r a d e s e c r e t s
8
Volatility is necessary for a trader to make money in any market, and
the forex market usually provides more than enough volatility because
there are new developments that affect the forex market every day.
not Too Volatile.
Forex markets can have abrupt price movements,
but as a 24-hour market where price
changes are always flowing
through the system, forex markets rarely make the type of price move
seen in stocks or futures. Stocks can plunge or soar 10 percent or more
on some overnight earnings
report or other announcement,
leaving
gaps on price charts when an exchange opens. A $3 change on a $30
stock is not that unusual, but a 10 percent move in a currency—for
example, 12 cents if the euro were at $1.20—is quite unlikely.
In addition, while emerging markets may incur some extreme currency
price movements, the major currencies are not like Enron, Worldcom,
or dotcom stocks that fly all over the chart or even plummet and, like
Refco, declare bankruptcy. If forex trading appears too volatile and
risky, it may be a pleasant surprise for traders to learn that the forex
market is probably more stable than the equities markets.
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