Signal for CAD GDP m/m

8:30 AM EDT      

CAD GDP m/m – Change in the value of all goods and services produced by the economy.
USD/CAD or EUR/CAD

There are a bunch of pieces of US data coming out at the same time, but they are low impact items so I am not expecting them to have much influence on the CAD trade but you can try the EUR/CAD if you want to be safe. Watch the spread on the EUR/CAD.
In January this came out at -.3 and -.6 with a 20 pip spike, small retracement, and continuation to 30 pips in a couple minutes. In February we saw .1 and 0 with an 11 pip spike and quick retracement. In March we saw 0 and 0 with a 4 pip spike.
If we get a good deviation it should be fine, but it is not terribly likely we will see enough deviation for a good trade, so set your lot sizes accordingly or maybe just pass on it.

Things to watch
This trade should be fairly clean… there is no other news at the same time

Previous Releases -
Mar 2012 – no dev
Feb 2012 - +0.1… too small
Jan 2012- We had a -0.3 deviation, causing a 21 pip spike… not bad… but not amazing…. didn’t get much continuation.

What to expect – Trigger sizes

0.0-0.2 = Don’t trade 
We will probably get a small “blip” and a hard retrace…. we don’t want to take a trade in these circumstances.

0.3 = Small trigger
We should see a reasonable spike….and should be able to make some money!

0.4+ = Large Trigger
Now we are talking!!!! We should see a nice size spike with good continuation… we can put some decent size money on this.

Divergences

Hiden Divergences 

Divergences not only signal a potential trend reversal; they can also be used as a possible sign for a trend continuation. Always remember, the trend is your friend, so whenever you can get a signal that the trend will continue, then good for you!
Hidden bullish divergence happens when price is making a higher low (HL), but the oscillator is showing a lower low (LL).

This can be seen when the pair is in an uptrend. Once price makes a higher low, look and see if the oscillator does the same. If it doesn't and makes a lower low, then we've got some hidden divergence in our hands.

Lastly, we've got hidden bearish divergence. This occurs when price makes a lower high (LH), but the oscillator is making a higher high (HH). By now you've probably guessed that this occurs in a downtrend. When you see hidden bearish divergence, chances are that the pair will continue to shoot lower and continue the downtrend.

Regular Divergences

regular divergence is used as a possible sign for a trend reversal. If price is making lower lows (LL), but the oscillator is making higher lows (HL), this is considered to be regular bullish divergence.

This normally occurs at the end of a down trend. After establishing a second bottom, if the oscillator fails to make a new low, it is likely that the price will rise, as price and momentum are normally expected to move in line with each other.
Below is an image that portrays regular bullish divergence.

Now, if the price is making a higher high (HH), but the oscillator is lower high (LH), then you have regular bearish divergence.
This type of divergence can be found in an uptrend. After price makes that second high, if the oscillator makes a lower high, then you can probably expect price to reverse and drop.
In the image below, we see that price reverses after making the second top.

As you can see from the images above, the regular divergence is best used when trying to pick tops and bottoms. You are looking for an area where price will stop and reverse.
The oscillators signal to us that momentum is starting to shift and even though price has made a higher high (or lower low), chances are that it won't be sustained.

Real Life Examples

You can use the same indicator settings from the life example pictures. They are tested and they work.

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This is system based on the 3 Simple Moving Average- SMA 30, SMA 50, SMA 100.
http://www.learnforexlive.com/members-area/3SMA-system/index.php 

Head and Shoulders Patterns

A head and shoulders pattern consists of a peak followed by a higher peak and then a lower peak with a break below the neckline. The neckline is drawn through the lowest points of the two intervening troughs and may slope upward or downward. A downward sloping neckline is more reliable as a signal.

The extent of the breakout move can be estimated by measuring from the top of the middle peak down to the neckline. This target is then projected downwards from the point of breakout.

Volume Confirmation

• High volume on the first peak,
• Moderate volume on the middle peak,
• Low volume on the third peak, and
• A sharp increase in volume on the break below the neckline.

Trading Signals

Go short at breakout below the neckline.

Place a stop-loss just above the last peak.
After the breakout, price often rallies back to the neckline which then acts as a resistance level. Go short on a reversal signal and place a stop-loss one tick above the resistance level.

Never trust a head and shoulders pattern where the neckline is clearly ascending (the second trough being higher than the first). Also, the more level the neckline, the more reliable the pattern.

Inverted Head and Shoulders

With inverted head and shoulders the neckline is drawn through the highest points of the two intervening peaks. A downward sloping neckline signals continuing weakness and is less reliable as a reversal signal.
The extent of the breakout move can be estimated by measuring from the top of the middle trough up to the neckline. This target is then projected upwards from the point of breakout.

Volume Confirmation

• High volume on the first trough,
• Moderate volume on the second trough,
• High volume on the second peak,
• Low volume on the third trough, and
• A sharp increase in volume at the breakout.

Trading Signals

Go long at breakout above the neckline.

Place a stop-loss one tick below the last trough.
There is frequently a correction back to the neckline, which then acts as a support level. Go long on a reversal signal and place a stop-loss one tick below the support level.

Never trust an inverted head and shoulders pattern where the neckline is clearly descending (the second peak being lower than the first). The more level the neckline, the more reliable the pattern.

Important Economic News

Release	Rccommended Pair	Monthly
GBP Manufacturing PMI	GBP/USD	Released monthly, on the first business day after the
AUD Official Bank Rate	AUD/USD	First Tuesday of the Month, excluding January
USD Non-Farm Payroll	EUR/JPY	Released monthly, usually on the first Friday after the month ends
GBP Services PMI	GBP/USD	Released monthly on the third business day after the
CAD Employment Change	USD/CAD	Released monthly, about 8 days after the month ends
AUD Employment Change	AUD/USD	Released monthly, about 10 days after the month ends
GBP CPI	GBP/USD	Released monthly, about 15 days after the month ends
GBP Retail Sales	GBP/USD	Released monthly, about 20 days after the month ends
AUD Retail Sales	AUD/USD	Released monthly, about 30 days after the month ends
CAD Retail Sales	EUR/CAD	Released monthly, about 50 days after the month ends
German ZEW	EUR/USD	Released monthly, on 2nd or 3rd Tuesday of the current
NZD Official Bank Rate	NZD/USD	Scheduled 8 times per year

Release	Rccommended Pair	Quarterly
AUD PPI q/g	AUD/USD	Released quarterly, about 22 days after the quarter
GBP GDP Preliminary q/q	GBP/USD	Released quarterly, about 24 days after the quarter
AUD CPI q/q	AUD/USD	Released quarterly, about 25 days after the quarter
NZD Employment Change q/q	NZD/USD	Released quarterly, about 35 days after the quarter
GBP GDP Reviled q/q	GBP/USD	Released quarterly, about 55 days after the quarter
AUD GDP q/q	AUD/USD	Released quarterly, about 65 days after the quarter

After Spike Trade

After Spike trading is something that I have been developing for some time.
I have analysed many many trades to work out when and where to enter after the initial spike starts to retrace…and I’m certain that although there are similarities between all the different pairs, each pair has its own characteristics, and behaves slightly differently. It’s imperative therefor that each trade plan for each news event is customised to take into account the pair you are trading….. for example GBPUSD can retrace heavily, especially on a CPI trade. Where as CADJPY doesn’t retrace much on US news… they provide different opportunities.

Being a Spike trader!

I received an email from a blog reader yesterday who is a manual day trader and is considering becoming a news spike trader and is looking for some advice….

Here’s my reply ……..

I have done both manual day trading and been a news trader, I gave up manual trading a while back… I wasn’t very successful at it, the main issue being that I spent hours in front of my laptop waiting for a perfect setup, and it was sods law that the perfect setup always presented itself 5 mins before I had to pick my daughter up from school, or I would get into a trade and then it wouldn’t go anywhere so I had to sit up all night to watch it. I had some successes and if I persevered with it I do believe I could have made a success of it. But I would never have made nearly as much money as I do from news trading.
One of the things that I love and hate equally about news trading is the times of the trades…. I am on GMT +0 My daughter goes to school so I am left in the house in peace and quiet, so any trades that happen between 9.00 and 3.30pm are perfect for me, the problem comes when we have Australian news that hits at 00.30 or even 04.30 its nasty business when you have 3-4 of them in a week. I am definitely sleep sensitive, and without a decent 8 hours sleep I am a Zombie! So at times its hard. I think its ageing me prematurely….. in the last few years I reckon I have aged about 50 years!

 On the other hand it’s very convenient to know when a trade is coming and be able to arrange your life around it.
Being a news spike trader has its ups and downs… the main positives being, when I trade,  I trade to win…we very rarely take a loss.
How many trades do I do in a year?….. well probably only 20-30… When I win, I win big, as you can see from my videos, I don’t know any other trading methods where you can win €17-18k in a few mins! This is due to the huge risk reward ratio that news trading offers.
The move, and the win,  is almost guaranteed in some trades.  This in itself brings a problem ….and that problem is “Brokers”! I have personally traded with many brokers, in fact I am on 50+ brokers now, and I know people who have done even more…..

Brokers hate us….
Brokers hate traders who win… well most brokers do.  The problem is that 99% of brokers are the counterparty to your trade, even so called ECN brokers, they give you all the flannel about ECN this and STP that, and the reality is that they are the counterparty…at least while they think you will be a losing trader.
Then when they realise that…actually, you do have a trading systems that works, they will put your execution out to the open market, so that they don’t take the other side of your trade and don’t take on any risk. The problem with that is, when you’re entering an order in a “real” market, as news hits, and liquidity dries up, the only place you will be filled is at the end of the spike. After all what idiot is going to be the counterparty to your trade in the middle of a spike? …. No one is…. so you are destined for a bad fill.

Realities of news trading…..
So for that reason, I hop from one broker to another. To begin with I get filled, and make money… then they notice what kind of trader I am,  and subsequently  I  don’t get filled at all… I receive the message “off Quotes” or “trade disabled”  or I get filled at the end of the spike… this is normally the signal for me to find a new broker.  It’s fair to say that I spend probably 75% of my day finding brokers and filling out forms. I hate this, but at the end of the day it’s a necessary evil.

Scam Brokers….
The other reality of being a spike trader is that you WILL be scammed at some point. You will make a  killing on a trade, and go to withdraw and you either get an email telling you that you traded “off Quotes” or some other ridiculous excuse like “the moon was in the wrong position” or it was “too windy”. The bottom line is if a broker says that they accept news traders (like they nearly all do) … if you trade news and you win, then they should cough up. Sadly this isn’t the case…. many brokers are complete SCAM artists… who only want you to lose.
And don’t think that trading with “regulated” brokers will help you…. It won’t, most of the time regulatory bodies don’t care at all about the fact that you were scammed, even though it’s clearly fraud! The only exception here is the NFA…as they have real teeth. The rest are useless, and do not factor in my broker choosing decisions one bit.

 Other people’s perception of what you do …
One thing that bugs me is other people (friends and family) think you are a professional gambler… this is ridiculous… I put it to them that if they have  a “real Job” they are taking a bigger gamble, if their boss has the hump one day, they may get fired, if they run their own business, they may be hit by a recession, or the business may fail and they lose all their money.  Every profession has risks, ours are limited, theirs are not. If I had a terrible day,  I could only ever lose the contents of my trading account, they could lose their home! So who’s the bigger gambler?
Before becoming a spike trader I spent 12 years running my own business in the UK… I would never do this again! I am naturally an entrepreneur, and I’m wired that way, I look for opportunities in everything I do. However,  running my own business taught me that it’s too much of a gamble, I had nothing but staff problems, UK employment law was soooo biased towards the employee, it was ridiculous, the employer worked for the employees, as an employer I spent most of my life trying to find ways to avoid having to employ more people. Customers needed to be kept happy, and the tax man was always looking to see what else he could steal from me. I would never return to that world, it’s a mugs game….. it’s too risky!

Hard work…
So being a spike trader has its ups and downs. But I love it and can’t imagine doing anything else.  Like anything in life, nothing worth having is ever gained without hard work and commitment. I have spent zillions of hours of my life looking at charts, the shapes of spikes, how they retrace, when and how they make new highs/lows. It’s not an easy profession to be in, sometimes we go weeks without a spike,  but there’s nothing better than  getting filled at 35 lots on a 50 pip spike…. It’s very exciting, and will pay the mortgage for months!!!! I wouldn’t recommend people get into spike trading full time, that’s something you will have to decide for yourself. Do you need a regular predictable income… if so forget it! It’s a constant battle to get filled by my brokers….the battle continues…….

Top 10 Broker Tricks

Here are my top 10 “tricks” that brokers play around news events. Making sure you are aware of what can happen, will help you react better in a live trade scenario.

1.  Spikes that are held back – “Retarded Spikes”
This isnt too common… but it does happen. The main broker that i have seen do this is “MIG Bank”. What seems to happen is the chart starts to spike but the broker holds back about 50% of the spike size for around 10 seconds…. then after this time the platform catches up with what the price realy should be.
This is better explained when watching the video below….. the broker on the left is IBFX and the broker on the right is MIG Bank. You can see that the initial spike is only half as big. Then after around 25 seconds there is a secondary spike as the platform catches up with reality.

2. Spread Widening 
Below is a perfect example of spread widening 2 seconds before some GBP news is delivered. The tick chart on the left is taken from an IkonFX, 4 digit account. The tick chart on the right is from Alpari FS, 5 digit account,  on exactly the same trade at exactly the same time.

The spread suddenly and violently balloons… giving you no time to react.
If you were “Straddle Trading” during this news….. you would have your Buy and Sell hit before the news came out!!…. OUCH!!
If you didn’t have pre news controls in place, and you were Auto clicking… then you would also potentially be in a lot of pain!

3. Frozen Charts
Freezing a chart is a classic trick…. What normally happens is the broker fills the trade… then freezes the chart, in the hope that the trade will retrace beyond your fill price. Then when the platform unfreezes you are in a huge loss!!!
This is a very nasty trick, and needs to be factored into any trade plan.
Below is a live trading example of 2 out of 4 brokers freezing my charts after filling my trade. In this example when the chart had unfrozen, the trades were in massive profit, but if they had started to retrace, then things could have got VERY ugly!!

4. Massive Slippage
I always try to trade with a broker that has “Instant Orders” and not “Market orders” to avoid the possibility that I can be slipped to the end of a spike. With an “Instant order” I can set “maximum deviation from quoted price” or how much slippage I will tolerate.
Some broker such as IBFX who dont have slippage controll are notorious for slipping orders to the worst possible moment. See the video below to see what happened to me the last time i traded with IBFX!

5. Negative Slippage
Negative slippage is where a broker will wait until the worst possible moment to close your trade. So if you trade a spike, and you find your self up 25 pips…then decide to close the trade as the market is starting to retrace. The broker waits around for 5-10 seconds or as long as the the market is moving against you, until actually closing the trade.
This creates the possibilty of losing a lot of money. The worst culprits for this behaviour that i know of is Alpari.

6. Ignoring ALL commands – Stop Loss, Closing Trades, Take Profits
Some brokers will fill your trade, then will refuse to allow the trade to be managed by an EA or a human. So if you want to close the trade you cant, if you want to add a stop loss you cant, if you want to set a Take Profit…. you cant. This exposes the trader to aditional risk, and can be very stressful watching a trade that you cant mange.

7. Delayed Fill Times
This trick is becoming more and more common. When the Auto-clicker or EA fires the order to trade, the brokers server should respond with a ticket ID and a fill price in around 0.5-4 seconds. This then allows your EA or your self, to manage the trade.
On the video below you will see me trading with IBFX when “US Non farm payroll” is delivered. My auto-clicker entered me into a trade when the news was delivered but IBFX took nearly 16 seconds to return a ticket ID, and to top it off, when the ticket ID came back i was filled at the worst possible price!

8.  Fake moves in opposite direction- Spike Manipulation
I have seen on ocasions, some brokers tick charts spike back against the direction of the trade…and sometimes beyond the start of teh spike. If you are highly leveraged or have an EA that will automatically kill a trade if it detects it going into loss, it can be extremely dangerous. I am always vigilant to this sort of behavior and wont trade with a broker who behaves in this way.

9. The Fake Spike

A fake spike is extremely dangerous….. I have seen many tricks before but this  ”trick” is particularly dodgy!!
The method seems to be simple… wait for a the tick chart to start spiking, due to some news hitting,… then add on a further 20 or 30 pips for good measure, leaving the trader filled at a price that is in the middle of nowhere with virtually no hope of ever getting to break even. This seems to happen mostly in a “short” scenario, when the broker can’t affect your fill price in advance by spread widening. If this happens to me.. then the only thing you can do is close the trade at a loss ASAP. Anything else is a gamble… if the spike doesn’t have continuation, a bad situation could get catastrophic!

10. The disapearing trade
Im sure that we have all seen this before. You enter a trade, close out with a profit. The next time you open your platform the trade has disapeared without a trace!

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