Total Profit — 5M Profit Factor — 4.
The professional traders use those numbers to determine the long term trend and the overall market sentiment. When the economy is doing well, more people will have a job and unemployment goes down. This typically also leads to a higher GDP and positive economic data leads investors to believe that a raise in interest rates is likely in the future because of increased spending activity. Interest rates are arguably the most important factor when determining currency rates and rising interest rates typically lead to an appreciating currency because of increased demand for that currency.
The screenshot below shows that, first, the unemployment rate declined blue line marked with 1 which was followed by a rally of the US-Dollar red line market with 2. During the next cycle, unemployment rose blue line marked with 3 and the US-Dollar then started to fall red line marked with 4.
Each time, the unemployment data shifted first and the US-Dollar followed afterwards. Even if you are not a fundamental trader, knowing about such market dynamics can be of great value as the charts suggest. Most Forex traders never pay attention to government bonds and the fixed income market which can be a big mistake. As traders, and especially as Forex traders, you have to pay attention to the flow of money and government bonds can tell you a lot about that.
Investors looking for safe-havens typically invest in currencies such as the Swiss Franc or the Japanese Yen, or government bonds. When investors pile out of stocks, the prices of stocks fall, bond prices rise and the bond yields fall. Bond yields and currencies usually move in the same direction. When the yield goes up, it becomes attractive to invest in that country to get a higher return on your money.
And when bond yields fall, in times of uncertainty, the currency of that country tends to fall as well since the demand for that currency is going down and investors are looking for alternatives. Early , the BUND price started to rise, indicating a higher demand which leads to falling bond yields.
The screenshot below shows why it pays off the monitor the US-Dollar Index. The examples above show why it can pay off to follow the macroeconomic variables. Knowing what the smart money does, how the big players are positioned, when risk is perceived as high or low, knowing where the money flows and how the economy does is essential for Forex traders.
Smart Money must accumulate enough positions before trading in their true direction. This is usually when the market chops around going nowhere and is a bad time to be trading. Stop hunts are also known to happen here. The "SM Consolidation Grid" has been created with that in mind.
When price is believed to be in Consolidation mode, this indicator will paint little boxes over price as a warning to not be trading at this time. The "SM Hunter Bars" were created to reveal the true direction Smart Money has to go in order to collect their profits. It is important to watch how price behaves after a Hunter Bar is formed to make sure it is not a fake out bar a strategy all of its own.
At the end of the day, these are just tools to identify the key three market principles above, and ideas on how to use them. However, I encourage you to get creative and watch these tools yourself to find your own ideas on how to get the best out of them.
See screenshots for examples of each tool, how it can be used, and how it looks on different timeframes. These boxes are useful in highlighting major sessions throughout the day when smart money is most active. Matthew outstanding support, but for me the concept of indicator is not clear, since it has an alert to buy or to sell.
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