USDSEK is an exotic pair. SEK is the Swedish Krona. Yesterday was the NFP Report release day. USDSEK has been in a strong uptrend for the last few days it has risen more than 2000 pips. Did you read the previous post on AUDUSD sell trade that made 200 pips profit with a 20 pips stop loss. If you have been reading my blog posts, my trading strategy is focused on catching 100-200 pips with a small stop loss of 10-20 pips. USDSEK is an exotic pair that can be used for making good pips. Many traders are not trading this pair. The more pairs you add to your portfolio, more trading opportunities you get. Take a look at the following screenshot of USDSEK H4 Chart.
You can see in the above chart, a strong USDSEK uptrend. Exotic pairs can provide very good trend trading opportunities. Unlike the major pairs, exotic pairs can trend for a long time. Major pairs can also trend for a long time. Prime example is that of EURUSD which loves to trend in one direction for many many days. What I meant was these trends are driven by some economic fundamentals affecting that currency pair. So you should keep an eye on the fundamentals. Did you watch this video documentary-A day in the life of a millionaire forex trader?
In the last few days there has been many geopolitical events that can play havoc with the markets. For example US attacks Syrian Airbase with missiles. This caused crude oil price to rise by 2% in just one single day. But all the gains have almost been lost with the NFP Report release. Markets are fickle. Political events can move the markets violently in the short term. But then market corrects itself and the long term fundamentals prevail. Now whatever happens, it will get reflected in the price action that you can study on the charts. Candlesticks patterns are very important when it comes to price action trading. Trend can change anytime. Trading trends take a lot of guts. The best strategy is to trade trends naked. Watch this webinar recording that shows how you are going to trade price action naked.
In the above screenshot you see the 2 small candles made on the aqua line which is the EMA21. This was my entry. The first candle is a doji candle with open and close at 8.8323 while the open was 8.8327. 4 pips difference between the open and close. So we can say it is approximately a doji candle. Doji candles can be be good signals. But there is always a risk involved when you open a trade. So the best option is to keep the risk as small as possible. The low made by the first doji candle was 8.8236. So I placed a pending buy limit order at 8.8246 with stop loss at 8.8220. So the risk is 26 pips. You never know how long the trend can continue. Once you have the trade in profit move the stop loss to breakeven. This way you never lose even if the trend reverses suddenly without any warning. Read this post in which I explain my candlestick trading strategy that makes 200-400 pips with a small stop loss of 20 pips.
The best method to check the trend is with the daily candle. If the previous daily candle is bullish you can simply assume that today’s daily candle will also be bullish. MACD is also a good momentum indicator. So I use both. I have to close this USDSEK trade on Monday the price right now is 9.0679. USDSEK has moved around 2300 pips in the past 8 days. It seems USDSEK has hit a resistance. You can see the last candle was an inverted hammner. This can be a signal for the trend reversal. So I will close this USDSEK trade with a profit of 2300 on Monday. Did you download this Pinbar Strategy plus the indicator?
Hedge funds and big banks are using quantitative trading strategies. They have highly paid maths and physics PhDs. The job of these highly paid quants is to apply artificial intelligence, machine learning and deep learning and predict the market. If this can be done with a high degree of accuracy you can well imagine how much money can be made. These quants are sworn to secrecy to never disclose their algorithmic trading systems. So we have no idea how these people are trading. Most of these hedge funds and bug banks use neural networks. Neural Networks are a powerful tools that have revolutionized the field of artificial intelligence.Read this post in which I explain how you can predict the weekly high, low and close using neural networks.
Now just a quick note on making entry using pending orders, sometimes the pending order doesn’t get filled. This happens when the price doesn’t go down as much you had anticipated. Never worry about that if you pending order doesn’t get filled. When this happens look for another opportunity that you will get soon. The basic idea behind using pending order is to lower risk as much as possible. Many traders use ZigZag indicator in their trading. Watch these videos on how to use ZigZag indicator in trading.
Another thing that I want to clarify is that pip value is different for different currency pairs. Exotic pairs have a low pip value. So making 2000-3000 pips with USDSEK with a standard lot means you only made around $2K to $3K. In our case profit comes out to be $2683. Pip value for USDSEK comes out to be around $1.102 with an ask price of 9.0679. So don’t feel too happy that you made 2000 pips with USDSEK or 3000 pips with USDSEK. But at that same time, this small pip value means that your 26 pip stop loss would only mean a loss of around $26 if you are trading with a standard lot. Compare this with a major pair like EURUSD, GBPUSD where you are trading with a standard lot and a stop loss of 26 pips means your risk is $260. So trading exotic pairs is not that risky. Your risk when trading exotic pair like USDSEK is 10 times lower than a major pair like EURUSD or GBPUSD. In nutshell making 3000 pips with USDSEK is like making 300 pips with EURUSD or GBPUSD. Read this post on a GBPUSD swing trade that made 76% return in 2 days.
Now coming back to the topic of neural networks, I have developed this course on Neural Networks for Traders. In this course I teach you how you can use neural networks in your trading. There are many people who are selling neural network software for trading at an exorbitant price of something like $1K to $2K. So you can well imagine ordinary traders are also using neural networks in their trading. With this course you don’t need to buy expensive neural network software. You can develop your own neural networks that you can use in trading.
Now coming back to trading exotic pairs like USDSEK, the dynamics that drive these exotic pairs are the same that drive the major pairs. The only difference is the spread. This is due to the trading volume. Major pairs like EURUSD, GBPUSD, USDJPY etc have a high trading volume which results in lowering the spread. Exotic pairs like USDSEK have low trading volume so the spread is high. Spread is a measure of liquidity. However adding more currency pairs to your trading portfolio will give you more opportunities to trade. This is something good as you will be making more pips.Keep on reading my day trading blog for more updates on currency trading.