The USD/JPY Continues to Rise, but Can the Trend Continue

This past week has shown a huge positive gain for the USD/JPY pair as there was a very large increase in Core Goods inflation, backing the BoJ's financial measures, only pushing the Yen's value down even further as it continues to fight for that 2% inflation goal and the USD is said to continue higher against the Yen setting record levels and gaining over 20% against the Yen's value.

However, as we look at the USD/JPY chart below, is the dollar looking to go even higher against the Yen?Over the course of just a few days the dollar has made incredible gains, making profits for many traders.

Looking at the chart below  there are several key features that need to be noticed first and foremost.

First, looking at the Bollinger Bands set on this chart, we can see that the last candlestick drawn fell below the first deviation band level, quickly dropping downwards, looking like it found a bit of support at the 104 level before buyers stepped back in and took control of the market.  However, the Bollinger Bands show that this market is looking as though is is very top heavy, with the USD/JPY oscillating between the first and second deviation, and still looking for some sort of support.  This floor may come a bit before the 104 level, as the middle band seems to be near that general vicinity consequently the pair may find a good floor right around where the middle band of the Bollinger Bands rests.   

The interval between the upper bands and lower bands and the middle blue bands indicate the amount of volatility this pair may contain.  The interval between the lower second deviation band and the middle band is much larger than in other parts of the chart, indicating a possibly high level of volatility that this pair may contain.

Notice how wide the band actually is in the most recent areas of the chart which also questions the actual strength of the USD/JPY and whether or not it will hold this level when the markets open on Sunday. This large interval points to a high level of volatility that we see recently with this pair.

Another level that should be noted is the 103.208 level which marked the previous high the market established several months ago and is noted on the chart above by the black horizontal line.  Since as of recently this pair blasted through this 103.208 resistance level and has not really looked to form some sort of support, it may not surprise traders to see a decline to this level in the near future to form a bottom for the continuing push upwards in the future.

Ultimately though, the whereabouts with the pair in the future is unknown, though some factors point upwards while others point to a possible pullback.  However, constantly keeping up with the market is paramount as is analyzing your trades before executing them.  Proper risk mitigation is key in this subject area as the USD/JPY possibly continues higher in the coming days and increases its volatility, becoming overbought and concerning traders. Or this pair may even look to drop down and find support somewhere else, though where exactly is not known.

Managing your risks in any market whether the it continues higher or breaks down is an absolute must for smart trading and lessening your risks you take when investing in currencies.

  

Determine Your Trade Risk Before Placing Your First Trade Of 2014

Every trader has his own tolerance for risk. If you have just picked up Forex in 2014 or are a reoccurring trader who is struggling in the market, smaller lots are recommended. We recommend you start with micro lots or mini lots. When you make profits several weeks in a row, and when you feel comfortable with bigger risks, you can move to bigger lot sizes. As world renowned poet Maya Angelou once said that one is not born with courage. One develops it by doing small courageous things—in the way that if one sets out to pick up a 100-pound bag of rice, one would be advised to start with a five-pound bag, then 10 pounds, then 20 pounds, and so forth, until one builds up enough muscle to lift the 100-pound bag. In some ways courage is needed in trade risk. So it might be awhile until you are ready to trade a standard lot. 

Several factors affect how much of your account size you should be willing to risk. We recommend you risk no more than 2% of your account at first (1% would be better). Risk, in this context does not mean the size of the trade you put on. Rather it is the maximum loss you will tolerate before closing the trade. If you have a $5,000 account, we recommend you hold your losses to $100 per trade. That way, you can lose 50 trades in a row before all your money is gone. You are unlikely to lose more than 5-10 trades in a row, so this should keep you alive for a while. When you have more experience, you can risk a bit more, but at first, keep the losses small. Happy trading in 2014! 

What is the Taper, and How Does it Effect my Trading?

Fears of high volatility and price corrections in the Forex, equities, and bond markets are due to the recent "Taper" speculation set in by Fed Chairman Ben Bernanke. You ask, what is "Tapering" and why is it important? Tapering refers to the method used by the Fed to gradually decrease their monthly purchases in their recent stimulus buyback program, better known as quantitative easing (QE3). QE3 started back in the Fall of 2012, allowing the Fed to purchase $85 billion in Treasury Bonds and Mortgage Backed Securities. The purpose of this stimulus package is to promote growth in the economy by lowering interests rates.

Looking at the markets performance over the past year we can see how QE3 effected the equities.

With the Fed pumping US Dollars into the economy, the market became more comfortable with risk in equities causing this bullish uptrend and high returns. However with a possible "Tapering" ahead, we can assume that a significant correction to the downside may come. As the Fed gradually decreases the supply of US Dollars, investors will want to hold more dollars, causing an increase in demand for US Dollars with a decrease in demand in the equities market. For the Forex market, the USD will play a pivotal role in the speculation. Theoretically we can expect a spike in the USD due to speculation of decrease the supply of US Dollars in the economy (tapering).

Speculators are predicting for tapering to start in the Q1 of 2014. Therefore expect prices to correct themselves now for the events expected to happen later. 

A Strong Foundation is Key

Many new traders to the markets make the mistake thinking that since they read a few articles on trading and now how to read the prices on a chart that it's time to start trading. It may sound crazy, but the mistake happens more than you may think. This one of the contributing factors to why 90% of people who start trading fail. They think that everything is a get rich quick deal, and they end up forgetting how important it is to EDUCATE yourself in the markets. As an up and coming trader it is important that you develop a strong foundation in education for trading and how to analyze the markets.
The two basic types of analysis for understand and predicting price movements are:

• Fundamental Analysis: In Forex, this type of analysis is used to measure the different contributing factors to supply and demand of these currencies. With stocks you look at the measurements of the company, but in Forex you look at the economic reports of different countries. A few may include GDP, inflation, trade balance, political events and more. Events you may see on the evening news can help you to earn money in the Forex Markets. .
• Technical Analysis: Every chart tells a story, and like many believe that history repeats itself. The technical side of trading involves analyzing price patterns and using charting techniques to create profit opportunities. 

It is important to not only educate yourself, but apply what you learn in sync with a demo account that allows you to trade with "play money." By doing this you will be able to realize how the markets work and at the same time continuing your education. 

Example of Technical Analysis

Learn with FXConnection. Coming Soon!

FXConnection offers products & services that allow everyday people to learn how to trade, improve their trading, and stay connected in the Forex Markets through:

• Online Courses
• Coaching Services (1on1 and Group) 
• Social Profiles
• Social Analysis of the Markets
• and more!

 Learn the right way and Stay Connected  to the markets with FXC! Here is just a small part of what is to come. FXConnection coming soon 2014!

One must take risks to earn rewards...

The markets are always full of risk, but doesn't mean you shouldn't take risk. Remember to use proper risk management techniques to minimize magnitude of losses and multiply gains. Don't be like this guy and miss out on trade opportunities...