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Strategies to Effectively Anticipate
and React to Currency News
Kathy Lien
Directors of Currency Research
GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex
Trading, GFT Futures, FX360, GFT Global Markets Asia Pte. Ltd. (Company Registration Number 200717665N), GFT
Global Markets UK Limited regulated by the FSA, GFT Australia (ABRN 103 508 461, AFS License 226625),and GFT
DMCC, Registered & Licensed as a FREEZONE Company under the Rules and Regulations of DMCCA, License
Number DMCC‐31136 . For Australia, a PDS is available at www.gft.com.au. Please read before making any decision
to deal in GFT products. The contents hereof is available or accessible for informational purposes only and is not to be
regarded as an offer or a solicitation to deal in any investment product or to enter into any legal relations, nor an advice
or a recommendation with respect to such investment product. Each investment product is offered only to and from
jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences,
derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable
for all investors. It is possible to lose more than the initial investment. © 2009 Global Futures & Forex, Ltd. All rights
reserved.
This presentation should not be relied on as a substitute for extensive independent research before making your
investment decisions. Global Forex Trading is merely providing this for your general information. The views of this
author are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. In addition,
any projections or views of the market provided by this presenter may not prove to be accurate. Global Forex Trading,
the currency research team and the presenter will not be responsible for any losses incurred on investments made by
readers and clients as a result of any information contained in this presentation. Global Forex Trading and the currency
research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or
other expert assistance is required, the services of a competent professional should be sought. CD08A.014.102609
Disclaimer
Agenda
Proactive vs. Reactive Trading
Learn How to Predict Economic Data
What is proactive trading all about?
Proactive Trading
Being ahead of the game.
Proactive Trading
Benefits
1. Lower Risk
2. Instant Gratification
3. If You Are Wrong, You’re Out
Disadvantages: It’s difficult!
Proactive Trading
The Key: Trade Pure Event Risk
Tier 1 vs. Tier 2 Data
Proactive Trading
AVOID
• Non-farm Payrolls
• Central Bank Rate Decisions
• Anything without Forecasts
TRADE
• Retail Sales
• CPI / PPI Numbers
• Employment Numbers for Other Countries
Tier 1 vs. Tier 2 Economic Data
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Avoid Data From: Japan & Switzerland
Tier 1 vs. Tier 2 Economic Data
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Rule #1
Enter a position no longer than 20 minutes
before a major news release.
How to Trade Proactively – Rule #1
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Trading AUD Retail Sales
29 September, 2009
Australian Retail Sales s.a. (MoM) – Aug.
8:00 PM ET
Expectations: 0.5%
Previous: 1.00%
Our Call: Stronger Retail Sales numbers
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Source: DealBook® 360
Trading AUD Retail Sales
Rule #2
Place stop at 30 pips.
How to Trade Proactively – Rule #2
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Source: DealBook® 360
Trading AUD Retail Sales
Trading AUD Retail Sales
Source: FX360.com
Rule #3
Buy back ½ of the position when the
currency sells off by the amount risked
(30 pips), move stop on remaining
position to break even.
How to Trade Proactively – Rule #3
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Source: DealBook® 360
Trading Australian Retail Sales
Rule #4
Trail stop on remaining position by
2 bar high, 3X risk or 20 SMA.
How to Trade Proactively – Rule #4
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Source: DealBook® 360
Trading Australian Retail Sales
Tricks of the Trade
How to Trade Proactively
How to Trade Proactively
Source: Bloomberg
Canadian GDP (July)
30 September, 2009
8:30 AM ET
0.5% Expected
0.1% Previous
Trading Canadian GDP
Our View:
Weaker Canadian GDP
WHY?
Trading Canadian GDP
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Anticipating News
What are the clues?
Retail Sales and Trade
Leading Indicators for GDP
Source: FX360.com
Trading Canadian GDP
Source: FX360.com
Source: DealBook® 360
Trading Canadian GDP
16 September, 2009
5:00 AM ET (August Figures)
U.K. Jobless Claim Change
25.0K Expected 24.9K Previous
ILO Unemployment Rate
8.00% Expected 7.80% Previous
U.K. Employment Figures
Our View:
Stronger Labor Picture
WHY?
U.K. Employment Figures
U.K. Employment Figures
http://www.markiteconomics.com/MarkitFiles/Pages/PressCenter.aspx
IVEY PMI = Canadian Employment
Another Correlation
Source: Bloomberg
Trading Canadian Employment
Source: IVEY http://iveypmi.uwo.ca/English/Welcomeeng.htm
U.K. Employment Figures
Source: FX360.com
Source: DealBook® 360
U.K. Employment Figures
Anticipating News
24 September, 2009
U.S. Existing Home Sales (August)
10:00 AM ET
Expectations: -2.70%
Previous: 7.20%
Our Call: Weaker Existing Home Sales
Our View:
U.S. Existing Home Sales = WEAKER
Risk Aversion Follows!!!
WHY?
Trading U.S. Existing Home Sales
Anticipating News
What are the clues?
Trading U.S. Existing Home Sales
Source: Bloomberg
Source: DealBook® 360
Trading U.S. Existing Home Sales
German Trade and Current Account Balance (July)
8 September, 2009
2:00 AM ET
11.3B Trade / 10.0B CA Expected
12.2B Trade / 13.3B CA Previous
Eurozone Data
Trading German Trade Data
Our View:
Trade and CA data = STRONGER
WHY?
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Anticipating News
What are the clues?
• Leading Indicators for German Trade
• Manufacturing PMI Increased
Trading German Trade
Source:FX360.com
Trading German Trade
Stronger than Expected
Source: FX360.com
Trading German Trade
Source: DealBook® 360
Trading German Trade
Reactive Trading
Reactive Trading
The FX Market is HUGE.
Prices do not adjust instantly.
Reactive Trading
AUD/USD
AUD Retail Sales - 29 September, 2009
Source: DealBook® 360
Reactive Trading
AUD/JPY
AUD Retail Sales - 29 September, 2009
Source: DealBook® 360
Reactive Trading
AUD/NZD
AUD Retail Sales - 29 September, 2009
Source: DealBook® 360
Reactive Trading
What makes reactive trading so compelling?
1.No guessing of data.
2.Limited exposure to market risk.
Reactive Trading
Reactive Trading Recipe
for Potential Success
Reactive Trading
1. Understand the Calendar
Source: FX360.com
Reactive Trading
2. Know the Expectations
Reactive Trading
Source: FX360.com
3. Watch the Price Action
Source: DealBook® 360
Reactive Trading
Money Management:
The Final Component
Reactive Trading
A reactive strategy requires swiftness.
Reactive Trading
Rule #1
Establish a bias from the data.
How to Trade Reactively – Rule #1
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Rule #2
Choose the currency pair to express the trade.
How to Trade Reactively – Rule #2
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
Rule #3
Wait for technical confirmation on
5-minute chart.
How to Trade Reactively – Rule #3
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
30-point Stop
15-point T1 Target
Trail Rest by 20
Reactive Trading
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author
may not prove to be accurate.
30 September, 2009 8:30 AM EST
CAD – Gross Domestic Product
0.0% vs. 0.10%
Reactive Trading
Trade Idea: Long USD/CAD
1. Risk aversion!
2. Disappointing Canadian growth.
Reactive Trading
Reactive Trading
Source: FX360.com and DealBook® 360
Source: DealBook® 360
Reactive Trading
Source: FX360.com and DealBook® 360
Reactive Trading
16 September, 2009 4:30 AM EST
U.K. Jobless Claims Change
24.4K vs. 25.2K
Reactive Trading
Trade Idea: Long GBP/USD
1. Risk is ON!
2. U.K. Employment Looking Stronger
Reactive Trading
Source: FX360.com and DealBook® 360
Reactive Trading
Reactive Trading
Source: FX360.com and DealBook® 360
Proactive/Reactive
Best of Both Worlds
Proactive/Reactive Trading
1. Enter one lot 10 minutes before event.
2. If event confirms your thesis, add 2nd lot.
3. Move stop to B/E on the whole position.
4. Exit both when price reaches +15 in money on
2nd lot.
Reactive Trading
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a
particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the
market provided by the author may not prove to be accurate.
Trade Idea: Long EUR/USD
Proactive/Reactive Trading
Proactive/Reactive – Best of Both Worlds
Source: DealBook® 360
Proactive/Reactive Trading
Fast and Furious Trading, Part 2
Fast and Furious Trading
What qualifies as short-term trading?
Trend vs. Countertrend
How to Trail
Trading Strategies
Improving Performance
Agenda
Short Term• 10 pips a day
• 20-30 round turns
• Short attention span,
low risk tolerance
• Quantity, not quality
• 5-15 minute charts
Fast and Furious Trading
Long Term• 100+ pips
• Wider target, larger risks
• Patience
• Quality, not quantity
• 60-minute charts or greater
K
Trend vs. Countertrend
• Trend moves tend to develop slowly and require patience
• Countertrend moves are quick
• Countertrend moves require good timing
• Countertrend moves must obey strict money management
• Every trend has countertrend moves as early winners cash out
Fast and Furious Trading
B