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Keeping it simple – Mid-week update

In this video Kym looks at keeping our analysis simple


Hi, this is Kym speaking. Welcome to a midweek update.

A quick update before I get going. I was on a one to one session today with a new trader and we were running through a strategy. It dawned on me that before long it was very easy to get more complex and show more. At the end of the day, we didn’t need that much more to be running with a very good strategy that works very well, quite methodical, hopefully very easy to follow.

I hope so because he’s running with it now. Very basic rules, the thing is, we try and get too technical.

A few weeks ago I posed a question, does technical analysis work? The answer to that is, yes of course it works. Does fundamental analysis work? Yes, of course it works. Can you put them both together? Of course, they work wonderfully together.

It gets people thinking they need more and more information. There’s only so much that you need to do. The more I speak to people and the more I’m trading, I think that my best trades come from the simplest things.

I’ll give you a couple of examples. I haven’t got everything on this chart, there’s one other thing on this chart which would make my trades absolutely perfect and it really gives me the reasoning behind what I might be looking at. This is a 60 minute chart with a 50 minute moving average.

Really, we can see what’s going on from this chart in terms of the possibilities from simple price action. People want more and more stuff, at the end of the day, you end up going from a 60 minute chart like that to a 60 minute chart like this.

Now, can I learn more from this 60 minute chart? Yes, of course I can. Do I need it all? No, of course I don’t.

Some of it, sometimes, almost gets in the way.

What I propose here is, you look at your strategies and strip-back some of the things that you don’t really need or are just noise. Sometimes we just layer things on, you may have 15 different moving averages and loads of other things layered over. I’ve seen people looking at three or four different things at one go.

I have a layer of things but I rarely look at them. I look at the MACD and the RSI, I look at the average true range every now and again, when a strategy is setting up I’ll have a look at the Cassics.

In the main, I rarely look at anything like that. I may look at the RSI in day to day. I keep it relatively simple. Some of my best trading is simple.

If you look at this chart here, some simple things, the moving average for example.

It’s funny actually, with this particular idea, it’s not new or anything, Charlie covered it a long time ago. I remember him showing it to people. It’s the first touch of the 50.

If you just look at the first touch of the 50, okay, sometimes it may just hang in there, so it’s pulled out, pulled back, it’s reacted straight away back over here to the left hand side. But this morning it ran into the 50, these first touches of 50 are fine. This is just one thing here on a simple chart with a 50 moving average in price.

What else does the 50 moving average tell us?

When price is above it, it’s probably slightly more bullish than bellow it, regardless of what time we’re looking. It’s a good pivotal region in terms of price action. So when price is running across and it’s staying above, generally I prefer to be on the long side. I was short this morning but for one reason, which gave us a nicer trade which turned into a move right down to that 50 moving average.

As it happens, it became a target. Again, it’s just simplicity in terms of looking at price action and targets.

As we scroll through here, we can see lots of things even when it’s choppy. When it’s choppy, what’s it telling me? Probably not to be in the market too much, it’s choppy. I may need to look at a different market.

When it’s more flowing, this is how simple trading is, it’s below its 50 moving average, I could just take sell points going with these lower highs. Yeah, at some point it’s not going to go much further, but at the same time, this is how simple it could be if you put your mind to it.

What I challenge you to do is see what you can take off your charts and how much more simple you can make them. I may have to do it myself now I mention it, but that’s going to be hard.

The reason I have so much on there is because I’m over laying three or four strategies on one chart, so that makes it a little more complex, but in the main, you can get away with just a chart like this.

To prove it, here goes the weekly update…

What we can see, predominantly, Cable is below the 50 Moving average, so is still erring on the bearish side. We have, from the candle stick pattern, put in a bit of a pivot swing over the last three days.

Today it’s just cracked the top of that, so we could see a continuation upwards. If we see the continuation upwards, obviously the 50 moving average makes a reasonable target for us to be looking at, so there’s a chance that we could be pushing up towards that sort of level.

At the moment, my overall short term, because of the higher lows on the hourly, I’m a little bit toward the more bullish side because it’s above its hourly 50.

In the longer term, I’m still relatively bearish on Cable.

Looking at the EUR-USD, we got so close to running into the 50 MA. Now it’s weak, it’s below the 50, we put the pivot swing in. We never managed to get even towards that level this morning, which to me suggests that it’s still weak. Even though there’s positive comments coming out, it’s still relatively weak.

If you can’t do any good when the market and comments are coming more bullish then it’s a weak market and this is what we’re seeing here. So the Dollar remains strong here.

The USD-YEN here is in much more of a consolidating phase. It’s sitting between 1.16 and 1.22. Look at what’s happened to the 50 MA, it’s flattened because the price has flattened here. Still pointing a little bit towards the upside here but we could well consolidate over these days and direction-wise I wouldn’t like to second guess.

There’s a possibility if we see a break of this over the next day or so then we could come down lower. Next points, looking at the horizontals, we could be looking down to 1.1690/1.1700. The key numbers are around 1.16, 1.17 if it starts breaking down that it could head off to.

The Yen seems a tad stronger here against the Dollar, it’s below its 50 so it’s looking a tad stronger at this juncture.

A weaker currency, although it didn’t really give the sell off expected today, is the Aussie Dollar. AUD is just holding down here, there’s a good chance that it will break down towards the 75 area, but we have a lot of support. The demand seems to be coming around this region here.

So we’ve got a demand level, as long as it’s buying around that sort of area. I can see from the order books that we have buy orders sitting at that level, particularly 7550, around that level. The more we sit around here, the more that will be absolved and there’s a chance of working that off. So I remain bearish on the AUD.

I’ll look finally at the Canadian Dollar. Another one which is a bit like the Yen in terms of its movement. We’ve got a whole raft of support sitting there which, where we’ve seen in the past, Dollar buying, and seen the Canadian Dollar roll back upwards.

At this point here, at some stage, we could see this broken. There’s a sort of head and shoulders pattern on there and all sorts, at some point this is likely to break and possibly break at a reasonable distance, we may see a reasonable retrace of that. For me, against the Dollar, it is one of the stronger currencies.

Okay, that’s it from me, I hope you have a great week.

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