News trading Forex using Murrey Math lines
As I write this the financial markets are all a buzz about the Fed tapering timeline and the FOMC meeting from today Sept 18Th 2013. I thought that I would take this time to write about news trading forex and share perhaps a different perspective that challenges the theory that news travels fast. Today I am going to be talking about Correlation between currency pairs and I am going to be talking about price levels, Murrey math lines specifically and how to use just the level of price in the markets to speculate around. All you will need to follow the so called smart money is our Multi swing profiler tool and your thinking cap for this exercise. I am going to point out some interesting things that I noticed looking over the charts today.
What Correlation means and what it means to the smaller retail trader:
OK first lets explain correlation because I notice people throwing around this word a lot in the financial community but not a lot of real meat about what it actually means to the small retail trader and speculator. correlation is just like it sounds when 2 or more currency pairs ( or assets of any form ) trade in the same direction over all. We all have someone we feel like we can relate to because we come from a similar background and share similar interests and the markets that are traded by human beings simply reflect that same human experience. I want talk about formulas and coefficients etc because in my opinion the most important concept is just the correlation of markets and human beings.
Correlation often hurts smaller speculators because thinking they are diversified by trading several pairs often they will trade the same direction on correlating pairs and therefore in reality if you find yourself doing this then you are not diversified instead you are just doubling your exposure on the same trading plan. OK now that the bad news is out of the way lets take a look at news trading forex using Correlation and Murrey Math lines to help smaller traders trade like the institutional guys.
Murrey Math lines and simple Correlation uncovers the smart money
OK we all were aware about the FOMC news and that fed tapering would have a dramatic effect on the markets today but the really tough question is not will it have an effect but what direction that effect will drive the markets into. What if there was a way to look for the likely outcome in the numbers and start to form a hypothesis similar to the so called smart money before the news actually comes out? Well I for one think there is a way and lets lay it out and share some charts and fundamental rules.
1. Dollar Down U.S. Markets UP: This might sound kind of counter intuitive but a weak dollar is good for the markets because it means that offshore investors can make large purchases at a discount. OK I know what does that fundamental stuff have to do with a 5 minute binary options trades or even an end of day trade? OK if the Dollar is getting weaker in the FX market what are the indices likely to do?
2. Dollar Down Gold UP: OK if the dollar is not safe then where do HUGE investors put their precious spoils? Well for 3,000 years Gold has been a safe storage of value and I am convinced no amount of market manipulation can change that. We just don't live long enough and the same guys can not stay in the drivers seat long enough politically to really put a hurting on Gold. So there is another foot print for the smart money that you can look for when planning your trade early.
3. EURUSD & GBPUSD Correlate: OK both these currency pairs tend to trade together for the most part and that means another foot print for your planning.
4. Murrey math lines +1/8 can either be the extreme resistance of the day or the start of a LARGE breakout to the up side!
5. Murrey Math lines 0/8 can either be the extreme support of the day or the start of a LARGE breakout to the down side!
Use the News to find volatility and Murrey Math lines extreme levels to speculate on the probable direction of that upcoming volatitlity.
OK lets look at some charts and you can see the GBPUSD breaking + 1/8 Murrey Math line early in the day. Then EURUSD breaking out later and USDYEN Bouncing off the 1/8 Price level and breaking down below that extreme 0/8 line. Another important fact here is that these levels were printed at 8:00PM EST the day before the news and just like people who generally agree often find their way to agreeing on the same conclusion just not at the EXACT SAME TIME you should be getting an idea of how you can get in a bit ahead of the Fed tapering news for forex trading or any other big news as these price levels and price action starts to set things up. Turn the talking heads off and forget predicting the markets instead just look at pivotal price levels on your chart and see what that is telling you and you will likely be entering the markets with the smart money.
[CLICK] image to Zoom In/Out 
OK right here we are seeing all the Murrey math line numbers for the day. Remember we are looking for breaks of either the extreme lows or the extreme highs that stick ( + 1/8 or 0/8 ) on our charts as the day progresses. This will give us a clue as to the direction of the news we hope and also since we are looking at Correlations and markets can not move in perfect sync around the Globe this may give us a hint even earlier on in the day.
[CLICK] image to Zoom In/Out 
Here you can see during the hour of 8:00GMT ( 5 hours or so before the USA markets opened ) GBPUSD has broken out and started on a ride up on the day. Price is telling us that someone with control of a good bit of Capital is going long the British pound and Short the Dollar before the other human beings here in the states can wake up.
[CLICK] image to Zoom In/Out 
OK here we are around 16:25 and you can see USDYEN breaking out in the opposite direction of the Murrey math lines as it bounced off that 1/8 and headed down for good below the 0/8 price level. Remember that every market around the world can not trade in perfect sync even when they correlate or have a negative correlation. So if USDYEN trades the Opposite of the EURUSD and if we see that pivotal level to the upside broken on EURUSD and then we see this pivotal level to the Downside broken on USDYEN then what is the likely direction of the GBPUSD based on these 2 signs where the DOLLAR is WEAK and the counter currency is stronger?
[CLICK] image to Zoom In/Out 
OK just after 17:00 still before the news actually hits the markets we break that white + 1/8 Murrey math line and the two correlating currency pairs are both starting to show a strong bias to breaking out to the upside. While the currency pair USDYEN is showing a WEAK DOLLAR by breaking to the DOWNSIDE. Since we have stated a WEAK DOLLAR is good for offshore money to come into the USA markets what do we now expect from the markets at the end of the day? I hope you are starting to see how understanding these correlations and looking at these artificial price levels can really help you form a solid trading plan that incorporates fundamental analysis,Price action and numbers from our Murrey Math lines indicator to assist you in Forex news trading on the markets using Binary options or trading spot FX.