Let’s look at the levels that might be in play over the RBNZ
There’s not a lot of expectation surrounding this one so it could be a bit dull on the trading front. The chances of a policy change are remote and there’s not many folks seeing any substantial language change. Still, you never know in this game so we should always be prepared.
Firstly there’s heavy offers noted in the 0.6950/60 area but they could well disappear or get filled at market close to the announcement at 20.00 GMT.
Looking at the charts, the H4 ma’s could provide decent coverage if the announcement is as expected. The 100 H4ma sits at 0.6941 and the 55 H4ma is down at 0.6889.
NZDUSD H4 chart
The only worrying thing is that the 100 ma is quite close to market so it may not stand up to any whipsaws around/over the release. The same might also be said for the 55 ma, if the price falls towards there over the next few hours. There’s also the 6th Nov low around the old 50.0 fib of the Aug 2015 swing up at 0.6872. Further out, 0.7000 looks to be a better level to watch, and lean against, as does the strong looking double bottom at 0.6815/20. It would take some big news to break those but if they go, we could have some fun. A break higher has a fair bit of traffic but a break down has a lot of empty space to run into.
NZDUSD daily chart
As is the customary advice at ForexFlow, let the prices do the talking and judge the headlines against the chart levels.
Philosophy: “Don’t be a Dick for a tick”
Read how Ryan got into trading here
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nice. i wish the market will move abit.
Hello Ryan Can You Tell Me What Should Be Our Risk Reward Ratio…If I Am Risking 30 Pips What Should Be My T/p For Perfect 15 pips or 30 pips…means 1:0.5 in case of 15 Nd 30 and 1:1 in case of 30 Nd 30…what is best to be successful traders…??
Hi Ali.
The best thing for successful traders is to win more than you lose. I don’t really follow risk/reward ratios as I just focus on making sure I don’t lose money. Of course, if you’re risking 100 pips to try and make 10, that’s not a good strategy.
What you need to do is plan the trade first, get your tech levels, and then check the RR. What’s the point in having a ‘reward’ of 100 pips if there’s a huge amount of technical levels/support/resistance 60 pips away that might stop you hitting that target?
So you means we can risk 100 and make 100 pips if there are not support and resis levels ahead…If there are support and resis levels then we should reassess our position and target what we can easily get am I right ?
Pretty much. Concentrate on the levels first and then work out your RR.
For example, if you want to buy something and there is a big support/tech level 30 pips below, either try and get in close to that level, and/or put a stop just under it. That way you keep your risk low because the chances are that if it is a big support level and it breaks, it’s going to move much further down because that’s how levels like that can react. It also might then become resistance so now, not only are you offside by a lot of pips but you have a new wall in front of you just to get back to break even.
By trying to trade close to good levels, you can automatically improve your RR because you’re naturally reducing the risk side of the trade. But, I repeat, the RR calculation should be the last thing to look at when you want to trade.
Yes you are absolutely right…But question is that whenever we try to buy or sell something just 10 to 15 pips away from certain Support or resis level then chances of breaking that Support and resis are high…yes if that hold then we might make dozens of pips by taking small risk but here according to your example we have more changing hitting our s/l which is just close to Support or resistance…am I right ?
A level will break or hold irrespective of whether we trade 1 pip, 5 pips, or 50 pips away from it. We have no control over it. So, what we do is say to ourselves “If I trade against this level, how much do I want to risk?”.
So again, it’s all about your money management. If you want to buy at market and the strong level is 50 pips below, and maybe your stop is 10 pips under that, then you know your risk is 60 pips. If your profit target is then 40 pips, you have a low RR (i.e lose more than you might make). You have to judge whether you go with that or maybe wait to see if the price goes nearer the strong support level. Of course, you may risk waiting and not getting your entry and the price then goes up. There’s nothing we can do about it but that’s why we have to have discipline. You either are a trader who takes the 60 pips risk or you’re a trader who takes waits for a better entry so the risk is 20-30 pips.
You have to decide how you want to trade. I’m a trader who would usually wait for a better entry, even if it meant I missed out on the trade because I didn’t get the entry. That doesn’t bother me because there’s always another opportunity.
Lastly, the other way to play it would be to start buying 50 pips above the strong level, but reduce your trade size by a lot and add on the way down. You can calculate it so that you split what you would have risked on one trade 50 pips away over 3/4/5 trades down to the support level. That way, if it does go up, you have something on it, even if it’s a reduced amount.
Now I completely understand Ryan if I am risking 60 pips target should be 50 to 60 pips because money I am risking is close to money which I am making all this include risk management and condition of markets if things not well then I should close it manually if I am risking 60 and making 40 then this is not good RR Because I am risking more and making less…
Thanks for complete clarification…
No. Your target amount is not based on your risk amount. Your target is based on where you think the price will stop moving in your direction. Your entry is where you think you have the least risk.
https://uploads.disquscdn.com/images/5d601a36adc19b25f3094d416122d54b64e329524a41d2cdd354fde09ce473a5.png
Let’s use a real example of how I would plan a trade. Look at this cable chart. The price is in the middle of two lines 1.3085 & 1.3175. Firstly, I don’t guess where I think the price is going and then trade. Guessing isn’t trading, so I won’t say to myself “I think it’s going up to 1.3175” and just buy it with a stop under 1.3080, say at 1.3070. That’s risking 70 pips to try and make 50 pips.
I don’t care where the price might go, all I care about is whether 1.3085 is a good place to buy, or if 1.3175 is a good place to sell. So I wait. Maybe the price moves to 1.3090 and now I want to trade because I can buy at 1.3090, close to the support at 1.3080, and have my stop at 1.3070 for a 20 pip risk. Now I think, “I want to achieve 1.3175” because that’s the next main resistance is so if it gets there, there’s a good chance that that is where the price stops. I don’t think about 1.3200 or 1.3250 because it won’t go there unless it goes through 1.3175. And so now my trade is risking 20 pips for a possible 85 pips profit. A good risk reward but the RR has come after I have defined the levels i want to trade at.
That’s what you must do. Define your entry/exit levels and then calculate the RR after. If the RR is poor then you need to adjust your trade or look for better levels. The RR is just a gauge so you can see how much risk your are taking for your reward. It’s not a trading strategy.
I saved your This Info in my Forex Text Book Now I understand exact mean of RR And
Yes it is a gauge not trading strategy but I was wrong here I always risk 30 pips and make 15 pips in each trade which is so poor as well as it’s guessing not trading..In your example yes price today gone at 1.352 and then reversed almost at 1.3090 it was almost 23 pips risk and 60 to 70 pips reward because for Cable rout for diving was clear means not support till 1.3080…So it was very impressive RR…
Now you’ve got it Ali 😀
Much Thanks Ryan, teaching with example make the points fully clear. Wish you best.
Thanks Koorosh.