Thoughts of a trader.

Always, always, always look at the larger time frames when considering a trade. I have several students that need to be reminded of this from time to time, and it is only natural…as humans typically aren’t very patient creatures. This is how people get into bad counter-trend trades, lack of patience.

Even though many people don’t have the position size to trade the monthly charts, they are very important. I want to bring up the NZD/USD for this demonstration, take a look at this monthly chart:

So what does this mean? How is a chart like this useful? It’s simple: Direction.

If we break below the .7000 mark on this chart, I will be looking for shorts for the near to medium term. I will also give those shorts a little more “wiggle room” with my stops. I will understand that momentum has shifted, and I am on the right side of the market.

The fact that this is a potentially monthly signal gives it a large amount of credibility. These types of signals are not very common. In fact, the last time I saw one like this was in this same pair…..right before the meltdown. (I am not calling for a move like that, but more for direction.) A signal like this gives more weight to shorting of the daily or 4 hour charts for the next several months. I also have pointed out that we could possibly go all the way to .6000 if this trade gets moving…..

2010 could be the year to short the Kiwi.

Chris