EUR/USD hovers at 1.4400. S&P 500 hovers at 1000

A good release for the pending home sales was just announced.

Clocking in at 3.6% versus the expected 0.6%, i was expecting a bigger response.

These days, any good news regardless of EUROPE or US, will usually send this pair higher.

While the opposite will send this pair lower usually due to the risk aversion.

Today nothing much happened.

As i discuss in a previous article, due to the fact that we are now at 1.4400, i am expecting some ranging at this region while the market decides what it wants next.

We have been ranging for around 24 hours now after hitting this region.

The trend line from my previous article is currently in play.

Observe how the price reacts to this line. I have circled it for you.

Any bullish momentum will need to clear this line first while any failed attempt may send this pair down to the bottom trend line, currently around 1.4300

S & P 500, is now hovering around 1000. A major resistance.

In view of both the EUR/USD and S&P500 being at major resistance lines, i am expecting further ranging around the region.

Trade safe.

EUR/USD hovers at 1.4400. S&P 500 hovers at 1000

EUR/USD bulls breakout. Caution advised.

After weeks of being in the 1.4200 region, the bulls won and we have hence moved to the 1.4400 region.

On the daily, the channel i drew previously is now in play again.

The upper trend line happens to be 1.4400.



Look at how the lower trend line turns out to be the closing for the past 2 days.

S & P 500 is still rallying and apparently the bulls are here to stay.

The market sentiment is good and everyone seems to have forgotten about the crisis.

However being a cautious trader, i will advise caution and proper money management.

1) S & P 500 is at a major resistance. The 1000 mark.
2) EUR/USD is at 1.4400, a major resistance.
3) 1.4400 is the channel's upper trend line today.

Being at 1.4400, i expect the EUR/USD to react around this region for sometime before any further move.

If the pair manage to clear this region, this may open up to the previous high on DEC 18 2008, 1.4719.

However, any adverse news which trigger risk aversion may drive the pair back to 1.4200.

EUR/USD bulls breakout. Caution advised.

The Koala System Review - Week of 27 July 09

The Koala system had a good week.

There was a big drop and climb within the week.

Had circled good entries on the chart.

However we had ranging conditions too which i marked on the chart with a rectangle.

If you find yourself losing too much for comfort, i advise having proper money management. You can read my article about it here.

The Koala System Review - Week of 27 July 09

Understanding margin, leverage and margin call is important

In a previous article, we discussed about proper money management.

Today, let us go deeper into what a forex margin account is all about and why is it important to understand.

Margin is simply using borrowed money to buy or sell a security.

In forex, when you are buying or selling a position, your broker is actually lending you money so as to place your order in the market.

A standard lot in forex is $100 000.
Micro lot is $10 000.

If such money is required, i doubt there will be many retail investors.

Next comes leverage.

Leverage in forex margin accounts simply means the number of times your deposit the broker is willing to lend you.

Having a high leverage can be good or bad as it may amplify both profit and loss.


Example 1.

Your account has $100.

Leverage is 1:200.

Therefore, to place a micro lot of $10 000 in EUR/USD,

you need $10 000 / 200 = $50.


Great! You may feel since the broker is kind enough to help you on your road to riches.

However, not every trade will be profitable and since you are on borrowed money, the broker will not allow the account to fall below the minimum margin.


Example 1 Part 2

After setting the margin aside, you have $50 left.

Since you entered a micro lot, for the eur/usd, per pip = $1 USD.

With the $50 left, this means that you can sustain a maximum of $50 loss before your available money is used up.

Now, with the available money gone due to a losing position, what happens next?

As i mentioned earlier, since the broker is lending you money, the broker will not allow the position to carry on if they lose their own money too!

Since you do not have enough available money to sustain the loss, the broker will close the position and salvage their own money.

This is known as a margin call.

A 50 pip move in either ways is very common in forex and hence understanding your margin and leverage is important so that you can plan for a position with proper money management.

Remember, we are here to survive for the long run.

Do not allow forex to be a short lived endeavour.

Part 3 is about Tom, a story of a margin call.

Understanding margin, leverage and margin call is important

EUR/USD bulls in full force

Anything can happen in forex.

On july 28 and 29 the pair dropped, likely due to risk aversion from poor economic releases.

After which, the pair pushes up the next two days.

Ending the week at the top resistance region.

This shows me apparent bullish momentum. The attempt to push the pair down was met and counteracted with strong reactions.

The daily chart below shows how quick the bear attempt was subdued.



I have identified a lower trend line from May 18 and have included in the chart.

If the bulls continue to chip at the 1.42 region, it is likely to break down, opening the pair to 1.44.

Taking the clue from S&P500,


We see it recover fast from the recent risk aversion and it is currently pounding the 1000 mark too.

Let's take a look at the current situation

• A sharp bounce from a drop for the EUR/USD
• A close of the week at the resistance region for the EUR/USD
• A sharp bounce from a drop for the S&P500
• A close of the week at the resistance region for the S&P500

It is apparent what the current sentiment is.

The market is bullish.

As usual i advise caution and proper money management.

A number of important economic releases next week including the NON FARM PAYROLL for US.

Will be watching those closely and the market's reaction for further insights.

Cheers and trade safe.

EUR/USD bulls in full force