FOLLOW THE MONEY

How to Profit from Currency Trends

THE MIND CRAVES
STORY
Trade Narrative Matters!
ORGANIZED STORIES
…create TRENDS
What’s the yen’s story?
 2015 shorts
COT data swing
China
FOMC
short squeeze cycle
End of fiscal year
Cant’ take China out of the story…
Who could forget this day in August?
It’s the day we ALL became
currency traders…
Amazon wasn’t immune
(and they’re gonna take over everything…)
The dollar put in new lows.
(seems so quaint now…)
Ok. Something did rally…euros!
 What is the dollar’s story for 2016?
• Will the FOMC raise rates? When? How much?
• Oil? Iran. Oil-based destabilization has not happened.
Weak dollar is good for crude strength…
• China soft landing? See FXI
• Germany’s DAX recovering. See EWG
• Rule of Thumb: Elections are bad for a currency
Fed Fund Futures Math tells a story…
Who benefits from a U.S. dollar slide?
The two most popular pairs in forex…
The two largest markets…
The most common way to sell or buy U.S. dollars…

Euro and Yen

What is the U.S. Dollar Index?
A futures contract that is…
A fixed composition of
57.6 % euro
13.6% yen
11.9% pound
9.1% loonie
4.2% krona (Swedish)
3.6% franc (Swiss)
Crazy Correlations make for a confusion
Gold is the world’s new savings account
My Three C’s
Every Great Idea and (Trade!)…
How do you see inside the price action?
I start my day off with this view.
Let’s talk about the one things that
DEFINE CURRENCY TRADING
CONTRAST

CONTRAST

CONTRAST
CONTRAST
CONTRAST
CONTRAST
This explains pairs trading…
(heatmap from OANDA)
My daytrading view
 Most Recent Central Bank Decision
• These banks aren’t really all that different
• The market discounts what they hear, the data they see, and the tone of the
“street”
• The banks don’t really know what to do…(and that’s ok!)
• Let’s take a look at last night’s Reserve Bank of Australia
• I had a profitable long AUD/USD trade that we took in the room on FOMC
Wednesday
• I put a standing “eject button” order on it.
 Every trade is built on these 4 beliefs:
• Trends follow story & price (story-sentiment-more story-
momentum-even more story-trend) Sentiment + Momentum =
Trend
• Knowing the Story opens up more opportunity in related
markets ("theme trading") Dropping a pebble into a pond - 360
degrees ripples
• Choosing the strategy comes ONLY AFTER identifying the
market trend (aka cycles or phases via GRaB & Wave)
• Know Your Catalyst! Economic Calendar and Price Movement
Ranges
 Know the “MVP”
Margin: What’s it take to control one lot?

Volatility: What’s the Price Movement Range?

Price: What’s the pip/point/tick value?

By default U.S. forex brokers offer a maximum of

approximately 50:1 leverage (or 2% margin) accounts.
Here’s a few examples…
 MVP on AUD/USD
Margin on AUD/USD is 2,700.00, 10.00 per pip
ROI based on Daily Price Movement Range is 40.74%
AUD/USD Swing Buy
 Most Recent AUD/USD
0.7550 to 0.7630: 2 lots at 75 pips x 10.00 = 1500 is 27.78%
0.7550 to 0.7695: 2 lots at 140 pips x 10.00 = 2800 is 51.85%

Then I hit the “eject button” before the RBA

EUR/USD Swing Buy
 MVP on EUR/USD
Margin on EUR/USD is 2,600.00, 10.00 per pip
ROI based on Daily Price Movement Range is 44.23%
 Most Recent EUR/USD
1.1255 to 1.1395: 2 lots at 140 pips each x 10.00 = 2800 is 53.85%
1.1255 to 1.1490: 2 lots at 235 pips each x 10.00 = 4700 is 90.38%

1/3 position left now…I’m in safety net mode now…

U.S. Dollar Index Swing Short
What would signal a USD/JPY reversal?
• What does the yen have to do?
• What’s the most common way traders buy yen?
• Where would we see it? (Hint: It may not show in the equities market or the Dow)
• What would the yen have to do?
• What would the levels be?
• What would be trade look like?
• What strategy would I use?
The Dow has been good for comm-dolls
(So what’s a comm-doll?)
I’M STOKED
This is gonna rock your world ;)
WHAT TO TRADE
How to Profit from Currency Trends
WHEN TO TRADE
How to Profit from Currency Trends
 HOW TO MANAGE IT
FOR THE MOST PROFIT
How to Profit from Currency Trends
 Build a Watchlist: What to Trade

• Individual Currencies In Play with Economic Calendar

• Heatmap Contrasts FinViz.com, SimplerForex.com/heatmap
• Individual Strength and Weakness Stories
• Daily Trends aka Directional Bias
• Weekly Trends
• Forextra Trends
• Causations
• High Impact/Heavily Weighted Stock News/Earnings/Volatility
 The Scenarios: When to Trade
Samples of the psychology that triggers volatility

• Before an Economic Events • Rhythm of the Day

• Uptrends • Weekly Trends
• Downtrends • 200 period SMA/C
• Choppy Distributions Markets • Between the Greens
• Sideways Consolidation • Clearing Range
• No Directional Bias • Sentiment Shifts
• Accelerated Markets • Economic Reactions
• Trending Intraday Sessions • Earnings
• Forextra futures Volatility • Stock related Volatility
Entries: Stocks, Futures, Forex, & Options
• Swing Buy
• Swing Short
• Distribution Fade Buy
• Distribution Fade Short
• Wave/CCI or Wave Reversal Buy (intraday)
• Wave/CCI or Wave Reversal Short (intraday)
• Between the Greens Intraday
• Between the Greens End-of-Day
 AND NOW FOR A
LITTLE SOMETHING
DIFFERENT.
What’s your trade’s narrative?
 “Trade Story” or Narrative
• This is Shakespeare on the Markets
• Characters
• What’s the Challenge
• Potential for a Solution
• Develop a Plan
• Put the plan in Motion
• What if it goes Well?
• What if it goes Wrong?
 THE MARKET CAN
ONLY DO 3 THINGS…
Accelerate, Stall, and/or Reverse
TWO WAYS WE ENTER
On Momentum or On Exhaustion
The Indicators
• 34 period EMA on the high, the close, and the low
• 20 period SMA on the close
• 200 period SMA on the close
• 13 period EMA on the close
• 21 period EMA on the close
• 55 period EMA on the close
• 89 period EMA on the close
• GRaB Candles
 CHARLES DOW
Thanks because everything I do is trade because of (some) of your work.
LEGACY!
 Swing Buy: Enter on Pullbacks
• Consistent Green GRaB Candles
• A smooth and established 12 to 2 o’clock 34 EMA Wave angle
• It the 34EMA Wave respected? (Clarity Criteria min 2 out of 3)
• Is it a daily or intraday? Does it follow the daily trend?
• Is it over-accelerated? BTG? Define this.
• What’s the catalyst? Catch-the-Wick? This is part of the narrative or “trade story”
• Higher Highs, Higher Lows (“swagger”, attention getter)
• Pressing Validity
• Point of Validity
 Swing Short: Enter on Bounces
• Consistent Red GRaB Candles
• A smooth and established 4 to 6 o’clock 34 EMA Wave angle
• It the 34EMA Wave respected? (Clarity Criteria min 2 out of 3)
• Is it a daily or intraday? Does it follow the daily trend?
• Is it over-accelerated? BTG?
• What’s the catalyst? Catch-the-Wick?
• Lower Lows, Lower Highs (“swagger”, attention getter)
• Pressing Validity
• Point of Validity
 Distribution Fade Buy
• A mix of Green, Red, and Blue GRaB Candles
• Sideways 4 to 6 o’clock 34 EMA Wave angle
• Is it a daily or intraday? Does it respect the previous daily trend
• What’s the catalyst? Catch-the-Wick?
• Fatigue? Floor?
• Variance?
• Slow Stochastic 21/1/3 at or below 20
• Point of Validity
 Distribution Fade Short
• A mix of Green, Red, and Blue GRaB Candles
• Sideways 4 to 6 o’clock 34 EMA Wave angle
• Is it a daily or intraday? Does it follow the daily trend? Previous trend?
• What’s the catalyst? Catch-the-Wick?
• Fatigue? Ceiling?
• Variance?
• Slow Stochastic 21/1/3 at or above 80
• Point of Validity
 Psychological Levels/Numbers
“00” - Most Important
“20” - Minor
“50” - Major
“80” – Minor

Additionally, any round number has importance as well

(“decade” level 10’s…10, 20, 30, etc., “century” 100.00)
Wave/CCI or Wave Reversal Buy (intraday)
• Consistent Red GRaB Candles
• A smooth and established 4 to 6 o’clock 34 EMA Wave angle
• It the 34EMA Wave respected? (Clarity Criteria min 2 out of 3)
• Is it a daily or intraday? Does it follow the daily trend?
• What’s the catalyst? Catch-the-Wick?
• Fatigue? New highs.
• Point of Validity
• CCI (20 period) as a filter for entry
Wave/CCI or Wave Reversal Short (intraday)
• Consistent Green GRaB Candles
• A smooth and established 12 to 2 o’clock 34 EMA Wave angle
• It the 34EMA Wave respected? (Clarity Criteria min 2 out of 3)
• Is it a daily or intraday? Does it follow the daily trend?
• What’s the catalyst? Catch-the-Wick?
• Fatigue? New highs.
• Point of Validity
• CCI (20 period) as a filter for entry
 Between the Greens Intraday
• All the criteria of a swing
• Preferably the 5 or 15 minute time frame
• 13 period Exponential Moving Average on the Close
• 21 period Exponential Moving Average on the Close
• 55 period Exponential Moving Average on the Close
• Point of Validity
 Clearing Range
• European “Clearing” – Mark the high and low of the one hour between the
Paris/Frankfurt open to the London open
• Dow “Clearing” – Mark the high and low of the 30 minutes between the 9:30am
and the 10am ET
• Unlike most of my trading strategies where I prefer exhaustion entries, clearing
entries are momentum entries
• Use a 12/26/9 MACD Histogram to confirm the momentum breakout/breakdown
through the clearing range high or low
• For each clearing, be aware of the average to high hourly price movement range
to avoid momentum entries in a potentially exhaustive clearing
 Between the Greens End-of-Day
• All the criteria of a swing
• Is the market over-accelerated?
• 13 period Exponential Moving Average on the Close - Greens
• 21 period Exponential Moving Average on the Close - Greens
• 55 period Exponential Moving Average on the Close – S/L
• Point of Validity
 Directional Options
• Fairly complex, 3-dimensional vehicle
• Go Shopping
• Which Strike?
• How much time? Expiration
• Catalysts!
• Don’t pay for volatility
 PREDICTABILITY
When you know the narrative, the markets are pretty predictable.
 Daily Price Movement Range
• How do you get the Volatility Analysis?
• Autochartist.com – sign up for trial…volatility analysis
• What is the typical average PMR?
• What is the high PMR?
 Hourly Price Movement Range
• Prime Time
• Overlaps
• What is the typical average PMR?
• What is the high PMR?
 Fuel in the Tank
• How much of the pip movement range has already been traded?
• Are there catalysts for increased price movement?
• What is the 68% range?
• How likely are we to be in the 32% “rare air”? (Look at the calendar)
 Time of Day Matters
• Who’s Awake?
• Who’s at Lunch?
• Who’s Heading Out of the Office?
• Who’s Heading In to the Office?
• The Wall Street Bell
• The Clearing
• The Fix
• Who’s on Holiday?
WHY WILL YOUR TRADE
REALLY WORK?
What is the catalyst for movement?
This is key to understanding your trade story or narrative.
 NARRATIVE
How do you prove the trade story before you enter the trade?
 The Catalyst
• Economic Data
• Price Movement Ranges
• Time of Day
• Central Banks
• Earnings
• OPEC
FOLLOW THE MONEY
If…Then…it’s CAUSATION not correlation
 IF/THEN Scenarios with Forextra
• Dow/S&P/Nasdaq
• FXI, MCHI
• Nikkei
• Gold
• Fed Fund Futures
• Bonds
• U.S. dollar
• Japanese yen
When is your trade a loser?
“risk management”

Point of Validity
When is your trade a winner?
“reward management”

The Profit Target

 How do you manage a winner?
Transitioning from risk to reward management.
• My capital versus house money
• Ratcheting
• Breakeven: It’s a winner!
• Finish Lines: Profit Targets
• Safety Net: How much do I have to give back?
• Don’t Smother: Daily, Hourly, and Expected Price Movement Ranges
• 60-Second Stop
• Eject Button
• Psychological Levels
 MVP: Margin, Volatility, Pips
• What is the margin needed to control the contract/lot?
• What is the volatility analysis (daily or hourly?)
• What is the dollar value per pip, point, tick?
Follow the Directional Bias
• Counter-trend trades should be limited to a time frame no longer than the 60, but
preferably 30-minute time frames or less…
• Liken it to “swimming upstream”
NOW IT’S YOUR TURN
Yup… It’s participation time.
Now what?
• Study the videos
• Join me in the daily live chats
• Be awesome
• Rock your trades
• Tell you friends
• We’re gonna make the world better one winning trade and
trader at a time.