The Currency Cross Trader
Trading Handbook
World Currency Watch
98 S.E. 6th Ave, Suite 2
Delray Beach, FL 33483
1-866-584-4096
Fax: (561) 272-5427
Website: www.worldcurrencywatch.com
Email: [email protected]
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and $250,000 in fines.
LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve
learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on
what you read here. It’s your money and your responsibility. WORLD CURRENCY WATCH expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. And all WORLD CURRENCY
WATCH’s (and affiliated entities’) employees and agents must wait 24 hours after an initial trade recommendation is
published on the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation.
The Currency Cross Trader
Trading Handbook
Table of Contents
I: Mission Statement and Overview.........................................Page 2
II: Why Choose The Currency Cross Trader............................Page 4
III: Here’s What’s Coming Your Way........................................Page 8
IV: Method Behind the [Currency] Madness..........................Page 10
V: What You Need to Know to Get Cranking.........................Page 11
VI: Contact Us.......................................................................Page 14
VII: Additional Sources of Market Information......................Page 15
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I. Mission Statement and Overview:
Why Trade Spot Forex?
Mission
The goal of The Currency Cross Trader is to help you make money in the spot currency market.
We aim to do that by providing you with actionable, highly-disciplined and narrowly-focused currency trading ideas. Our aim is to achieve even larger gains than if we were just trading “the majors.”
After all, sometimes some of the best choices and best percentage gainers are “crosses.”
Our trades are grounded both in solid fundamental and technical analysis.
Our fundamental view utilizes a global macro analytical approach in an attempt to pinpoint
money flow over the intermediate-term. In the forex market, we view “intermediate term” as a few
days to several weeks.
Ultimately, we aim to produce consistently profitable intermediate-term trading recommendations
with optimal risk/reward characteristics.
This service was designed to satisfy two primary criteria for our Members:
Easy to understand. We don’t use complex technical holy grail black box indicators or mumbo
jumbo. We explain our recommendations in simple language, using simple technical analysis
tools and reasons you can understand. We believe that if you understand the good, solid reasons
for making a currency trade, you will find the service engaging and educational — as well as
profitable. We want you to enjoy this service so we can keep you as our customer.
Easy to trade. You don’t have to be a “screen junkie” to make this service work for you. We don’t
expect you to hover around your email or trading screens in order to immediately enter each
new recommendation. If you are there, and a trade comes in, great. But we use very generous
profit targets. So even if you get to your email hours after the trade has been recommended,
there still should be plenty of opportunity to enter the trade, with plenty of opportunity remaining.
Overview
The forex market presents investors with powerful profit opportunities:
There’s always a bull market in currencies. Likewise, there’s always a bear market in currencies, too.
This is due to the fact that when one currency goes up, it means it is going up against another
currency. Hence, that other currency is going down against it. What’s the benefit of this? Well,
for one, you’re not overly dependent on the trend in one or two areas — as you usually are with
the stocks, such as the performance of the S&P 500 or NASDAQ.
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Another great benefit is that the currency market is non-correlated to the stock market. Some
currencies tend to move with or against the Dow. But others tend to move inversely to it and
some have very little correlation at all. So you can always trade independently of the stock market… and provide true diversification for your overall portfolio. Finally, since currency trends exist in short-, intermediate-, and long-term timeframes, there’s always plenty of action and plenty
of opportunity to profit. We happen to believe the intermediate-term is the best timeframe to
garner profits in currencies, especially the currency crosses.
Small moves. Big profits! Leverage available in the forex market allows your profits to add up very
quickly. But leverage is a double-edged sword. A small move against you could also result in large
losses. That’s why it’s important to cut your losses early and let your winners ride. And because
we are targeting trends that can last from days to months, it’s important that you do not trade
with too much leverage. Too much leverage often means risk levels must be very tightly maintained. By reducing leverage and targeting greater profits, we believe it will allow you a better
opportunity to stay with a powerful trend. Let’s be more specific on leverage here… this merits
a conversation. Most retail forex brokers allow investors leverage of 100 times the amount of
money required for deposit, and even higher. This is attractive to speculators because the high
ratio of leverage can increase buying power (for example at 100:1 leverage, $1,000 has buying
power of $100,000). Winning trades can be very profitable.
But as I mentioned, leverage is a double-edged sword. Since a small amount of money can purchase
proportionately larger amounts of currencies, a movement in the wrong direction could wipe out
an investment account that is not adequately funded, and even cause much deeper losses.
Keep in mind that I will suggest amounts to risk. I’d advise not going above the risk limits that
I suggest. You will not want to risk more than 5% of your trading capital at any one time. I’ll be
even more specific within each actual recommendation. But for now, use this as a general guideline. There will be losing trades. They all won’t be winners. However, if the risk is defined properly, then your account will be just fine until our next “win.”
As “efficient” as markets can get. The spot forex market achieves near perfect competition. It’s the
most liquid and largest financial market in the world. It trades electronically 24 hours a day, 5 ½
days a week.
Currencies keep you diversified. As stated above, we believe currencies are vital to a well-diversified
global portfolio. Currencies generally have a low correlation with stocks and bonds, so they are
vital for decreasing risk in a portfolio. At times, currencies may be used to hedge against downside risks in stock and bond markets.
Low relative capital investment. Because of the generous availability of leverage in the currency
market, one can produce a very significant total dollar return with a relatively low amount of
starting capital compared to what is required for stock and bond investment.
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II. Why Choose
The Currency Cross Trader?
What can you expect from The Currency Cross Trader weekly research trade alert? Good question! Here’s your answer:
Clear Reasoning
Technical analysis can easily become confusing, especially when weaving it in with the varying
fundamental backdrops of each currency. But not to worry: we make our analysis easy to digest. And
if you don’t understand a trade, we’ll always be here to answer any questions you may have.
Here are the technical tools we apply to the currency market:
Trend line analysis
Timeframe analysis
Support and resistance levels
MACD
Moving Averages
Divergences
Slow Stochastics
Inter-market analysis
This is what we use. And we keep it simple. If there is something you don’t understand, and care
to know about, please ask and we will be happy to explain.
Actionable Trades
We make clear guidelines for entering a trade. We will use two types of orders to enter a trade:
market and entry orders. The advantages of each type of order differ, but we will consider them all in
constructing our recommendations.
A market order says to simply enter into the trade now at whatever the price is when your order hits the
market. It will usually be very close to the current quote that you see when you click to enter the order.
An entry order says to enter into the trade when the market hits the limit entry price.
Depending on the trade, these order types are designed to increase the odds that:
You don’t miss the sweet spot of the trend,
Your risk/reward ratio is optimal, and
You have time to place your order.
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The ample reward-to-risk characteristics we typically require to make a recommendation allow you
to profit from them.
Simple, Honest Track Record
Our tracking is honest, and we do our best to reflect conservative, reasonable entry prices. Example: If GBP/JPY is trading at 149.00 when I give the order to ‘BUY GBP/JPY at the market.’ Then,
by the time the order is processed and emailed to you the market has moved to 14930, our tracking
price will reflect 149.30.
Plain Recommendation Terminology
Below is a sample recommendation with accompanying terminology for a typical forex trade we
issue.
As you know, an exchange rate simply means the price of one currency in terms of another. Before
World War II, the currency of reference was the pound, so all currencies were priced relative to it.
Following the war, the U.S. dollar replaced the pound as the currency of reference. This means that
in the exchange rate, the dollar (USD) was the first in the quote. For instance, you say dollar/yen
(USD/JPY) or dollar/Swiss franc (USD/CHF).
But old habits die hard. While most currencies in the world were priced as their value for one
dollar, we had three exceptions: the pound (GBP), the Australian dollar (AUD) and the New Zealand dollar (NZD). When you seek a price of one of these three currencies, they go first in the
equation — even when they’re paired with the U.S. dollar. For example, it’s Australian dollar/U.S.
dollar (AUD/USD) and New Zealand dollar/Japanese yen (NZD/JPY). Once the euro (EUR) was
invented, the European Central Bank decided to make its currency larger in value than the dollar.
Therefore, the euro is mentioned first in all pairs where it’s involved, such as: EUR/USD, EUR/JPY,
EUR/GBP or EUR/CHF, etc.
Keep in mind that in addition to trading the majors, we will be focusing a large amount of our
time on the currency crosses so that we can broaden our scope and ensure that we’re getting the
“best” trade picks at the time. Sometimes that pick will not include the U.S. dollar at all.
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HOW IT LOOKS
Here is an example of a Currency Cross Trader trade recommendation, to show how currency
quotes look in action.
The Currency Cross Trader — Issue #6
Buying EUR/JPY:
Buy EUR/JPY at the market as long as the price is at 135.00 or lower. The current quote is
134.79.
Place your stop at 132.00 and your limit price at 138.00
Now let’s translate each line:
The current quote is: EUR/JPY 134.79. This means each euro is worth almost 135 yen.
Order: Buy EUR/JPY at the market. [The recommendation is to buy the EUR/JPY currency cross
at the market as long as it’s at or under 135.00, In other words, don’t buy any higher than the price of
135.00]
Profit Taking: Place your limit at 138.00. [This is the price you set at which your trading station closes
the trade for a profit. Once the trade hits this target, your limit price is hit and it closes out your position.]
Now, the question you might have is: Why would you want to buy at a higher price than the current one? This gives you some room to get into the trade even if you’re not seeing the recommendation as soon as it hits your email box. If you can get in lower, of course do so…unless I’ve instructed
otherwise through the recommendation.
Strict Risk Management, Leverage, and Consistent Follow-Ups
Controlling your risk in these markets is vital in managing your capital, hence the protective stoploss order included in our trading recommendations. This is hugely important when dealing with
leverage in forex trading. Again, that’s because leverage is a two-edged sword. It can magnify your
profits but it can work just as easily against you.
Leverage works like this:
Based on a mini lot (10k-lot size), a 50 pip profit is roughly equal to $50. I say roughly because
each cross could be a little less than a dollar a pip or possibly a little more than a dollar a pip. The
only large exception to this is usually EUR/GBP which can, at times be, roughly $2 a pip of movement.
Do not use “too much” leverage per trade and do not trade “too many” lots at one time. You have
to decide the appropriate level depending on your experience, knowledge, appetite for risk, and account size. But if you’re going to make a mistake, it’s best to err on the low side. This service is about
trading trends. If that is achieved, above-average profits can quickly accrue without taking on too
much leverage.
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You want to make it to where the number of lots that you choose to use, if stopped out,
wouldn’t erase more than 5% of your trading account’s capital. Again, I’ll give “suggested” risk
parameters on each trade and I’d highly suggest not exceeding them.
Also, expect to receive updates on each trade, revised forecasts and any adjustments to our recommended profit targets, stop-loss levels, etc. Our primary goal is, of course, to provide you with
consistently profitable trading recommendations. But we also want to help you better understand
how currencies trade and provide independent research so you can also take advantage of opportunities on your own — based on your individual risk/return criteria.
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III. Here’s What’s Coming Your Way …
You can expect to receive one update each week. And those bulletins should include approximately
2-5 trade recommendations per month, sent via email and included in our Currency Cross Trader
Members-only archive.
Each trading recommendation will include:
Specific Entry Order
Stop-loss Order
Profit Taking Order
Brief explanation for the trade
Currencies We Cover
You will receive recommendations from a universe of the most actively traded cross rates, in the
spot forex along with some trades involving the majors:
Actively traded currency crosses:
EUR/JPY (Euro vs. Japanese yen)
GBP/JPY (British pound vs. Japanese yen)
CHF/JPY (Swiss franc vs. Japanese yen)
AUD/JPY (Aussie dollar vs. Japanese yen)
NZD/JPY (New Zealand dollar vs. Japanese yen)
CAD/JPY (Canadian dollar vs. Japanese yen)
EUR/CHF (Euro vs. Swiss franc)
EUR/GBP (Euro vs. British pound)
GBP/CHF (British pound vs. Swiss franc)
AUD/CHF (Aussie dollar vs. Swiss franc)
AUD/CAD (Aussie dollar vs. Canadian dollar)
EUR/CAD (Euro vs. Canadian dollar)
GBP/AUD (British pound vs. Aussie dollar)
AUD/NZD (Aussie dollar vs. New Zealand dollar)
EUR/AUD (Euro vs. Aussie dollar)
EUR/NZD (Euro vs. Aussie dollar)
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We may include a few majors in the trades when I feel they are the “best” pick at the time.
Major U.S. Dollar pairs:
EUR/JPY (Euro vs. Japanese yen)
USD/JPY (U.S. dollar vs. Japanese yen)
GBP/USD (British pound vs. U.S. dollar)
USD/CHF (U.S. dollar vs. Swiss franc)
USD/CAD (U.S. dollar vs. Canadian dollar)
AUD/USD (Australian dollar vs. U.S. dollar)
NZD/USD (New Zealand dollar vs. U.S. dollar)
A “cross-rate” is the price of one foreign currency versus another foreign currency. That is, the
U.S. dollar is not involved in the trade. So if we wanted to short the euro versus the Japanese yen, we
would put out a recommendation to sell EURJPY. So what you think, if you’re shorting (selling) the
EURJPY currency cross pair, you’re betting that the euro will depreciate/fall against the yen. In other
words, you’re expecting the pair to head lower on the charts.
Pricing in the Forex Market
Foreign exchange rates are priced in pips. A pip is typically the smallest price change that a given
exchange rate can make. A pip of movement is the final digit to the right in your currency pair. If
the quote went from 134.00 up to 134.01, then the pair increased by 1 pip. If the pair went from
134.00 down to 133.99 then the pair decreased by 1 pip.
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IV. Method Behind the
[Currency] Madness
We integrate three critical elements of a successful intermediate-term trade. If we correctly pinpoint these criteria, more often than not we will realize our share of effective trades and pull excellent
profits from the currency market.
First, we build a foundation based on global macro trends — the direction and destination of
money flow. Keeping an eye on the flow of capital between countries and global financial markets is
crucial towards developing a fundamental framework. This is what drives currencies.
Second, we seek to understand the market’s mood. I’m sure you’ve heard it before, “Perception is
everything.” It’s no different with currencies. Investor sentiment plays a large part in how prices fluctuate. Without keeping a finger on the pulse of the market sentiment, you could easily find yourself
frustrated if prices move adversely to fundamentals.
And last, we do our best to pinpoint trades where our risk is minimized and our potential reward
is maximized. This basically means timing is hugely important.
And we use a polished group of technical indicators in our decision-making – ones we are comfortable using because they have proven successful for us in the past.
Please be aware that The Currency Cross Trader is a trend-following service. That means we plan
to hold positions over the course of several days and up to several weeks. Thus, we’ll not be issuing
short-term recommendations that revolve solely around technical set-ups typically. We are most comfortable trading with fundamental, sentiment and technical reasoning together.
One- and Two-Lot Trading Strategy
In the spot forex market, traditional mini lots are 10,000 units. That’s 10,000 of the base unit to
be exact. The base unit is the first of the two currencies named in a pair. So, for example, a lot of
USD/JPY is 10,000 U.S. dollars worth of Japanese yen. A lot of EUR/USD is 10,000 euro worth of
U.S. dollars.
Much of the time our goal is to capture intermediate-term trends. In this case we need our stops
to be wide enough to compensate for the noise and give us time to achieve our profit targets.
But other times we need to focus on limiting our risk AND maximizing our reward in a choppy
market. So without limiting our profit potential, we sometimes use a multiple-lot approach on
shorter-term trades. This allows us to sell portions of our position as the trade develops. For longer
term setups, by contrast, we will typically maintain a single position.
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V. What You Need to Know
to Get Cranking...
Be prepared. We don’t want you to miss out on important market updates, bonus analysis, weekly
commentary, and most importantly, trading recommendations. So make sure you’re set up to receive
emails from the following address: [email protected].
Also, be aware that each recommendation issue will be posted to The Currency Cross Trader
Archive that’s accessible through the The Currency Cross Trader homepage. Only members have
access to this archive. Your permanent username and password are provided on each of your advisory
emails.
Brokers
In order to make use of the recommendations you receive with your Currency Cross Trader
membership, you will need to establish and fund a forex trading account. You have two options:
You can use a full-service broker that can set-up your account, give you specific advice concerning
your account, and offer as much assistance as you may need with our recommendations… OR
You can use a retail forex broker to establish an online trading account.
This decision is entirely up to you and should depend on your experience trading in these markets.
If you don’t already have a broker that can efficiently execute forex trades, you may want to contact
one of the brokers we have listed below.
(Please note: We never receive any compensation, directly or indirectly, for any brokerage referral.)
Online Retail Forex Firms:
FXCM (Forex Capital Markets): Contact them at 1-888-503-6739 or at www.fxcm.com
32 Old Slip, 10th Floor
New York, NY 10005
Email: [email protected] or [email protected]
FXCM is one of the largest and most highly regulated retail firms out there.
DBFX: Deutsche Bank. Contact them at 1-888-363-3239 or at dbfx.com
Winchester House, 1 Great Winchester Street
London, EC2N 2DB
Email: [email protected]
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Oanda: Contact them at 1-212-858-7690 or at www.oanda.com
140 Broadway, 46th Floor
New York, NY 10005
Email: [email protected]
Full Service Firms:
Mirus FX TradeAssist
Specialty: Forex, Currency Futures, and Currency Futures Options
Contact: AJ Wustefeld
444 N Wells St, suite 502
Chicago, IL 60610
www.mirusfutures.com
Tel. (800) 496-1683 x2244
Email: [email protected] or [email protected], [email protected], [email protected], [email protected]
MF Global Inc
Specialty: Forex, Currency Futures, and Currency Futures Options
Contact: Ryan Nolan
The Chicago Board of Trade
141 W Jackson, Suite 1800-A
Chicago, IL 60605
Tel. 1-866-879-1342
Email: [email protected]
Foremost Trading LLC
Specialty: Forex trading services. Trading lots from 10K to 1 Million and up even in exotic pairs
Contact: Bob Bunn
28 N. Bennett St.
Geneva, IL 60134
Toll Free: 888-613-6739 (888-61-FOREX)
International: 630-463-4511
Email: [email protected]
Website: http://www.foremosttrading.com
Financial Pacific Inc
Headquartered in the Republic of Panama.
Specialty: Offshore trading. Forex- including 155 currency crossings, FX options, FX Spot and
forwards, World Currency options, Equity, including major US and Canadian, European and
Asian Exchanges, Equity and index Options, Futures, international governments notes, bonds,
structured notes, Mutual Funds, and Hedge Funds.
Contact: Sergio Barrio
Telephone: +[507] 207-0800 (dial 011 first if calling from U.S.)
Ave. Balboa, Edif. BBVA, Piso 16,
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Panama, Republic of Panama
Email: [email protected], [email protected]
Website: www.investingpacific.com
Thinkorswim Inc
Specialty: Equity and Index options, World Currency Options, Forex, Currency Futures, Currency
Futures Options
Contact: Scott Kashian
600 W. Chicago Ave Suite 100
Chicago IL 60657
866-839-1100 Ext 6810
www.thinkorswim.com/kashian
Email: [email protected]
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VI. Contact Us
If you ever have any questions about The Currency Cross Trader, please contact us. It’s always
best to reach us by email. But if there’s an urgent matter you need us to attend to, please feel free to
call. Thanks.
General Inquiry?
[email protected]
1-866-584-4096 or Jesse at 1-561-272-0413 x 115
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VII. Additional Sources of Market Information
Websites for free forex news, economic calendars, charts, and commentary:
The Chart of the Day videos by Sean Hyman.
DailyFX: www.dailyfx.com
Forex Factory: www.forexfactory.com
Trading Economics: www.tradingeconomics.com
Bloomberg News
www.bloomberg.com (specifically … www.bloomberg.com/news/markets/currencies.html )
There is a substantial risk of loss trading in forex (off-exchange retail foreign currency).
The Currency Cross Trader is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to forex should be strictly the money
you can afford to risk.
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