The Forex Chronicles

EUR/USD Price Action in 2019 Highlights Importance of EMA (200)

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Moving Average Trend Benefits

If you ask a technical trader which indicators they like to use when trading the forex markets, you can be certain that many of them will use moving averages.

That’s because these simple indicators give you an instant snapshot of the current trend in the markets.

It doesn’t matter if you are using the simple, exponential, volume or weighted moving average. If the indicator is moving higher, then the market is in an upward trend, and if it is moving lower, it is obviously in a downward trend.

The 200-Day Moving Average

You can use many different period settings for whichever moving average you like to use to immediately identify the short, medium and long-term trend at any given time, but one of the most useful and most widely used indicators that many longer term traders like to use is the 200-day moving average.

It is largely down to personal preference whether you use the simple or exponential moving average, but they both highlight the long-term trend really well.

I personally use the 200-day exponential moving average, or EMA (200) for short, and have always found it to be really useful when trading currencies and stocks.

It’s often significant when the price breaks through this EMA (200), and is equally significant when many of the shorter-term moving averages cross above or below this indicator because it will often indicate a change of trend.

However it can often act as a strong support or resistance level, particularly after the price has risen or fallen sharply in a short space of time, and in this article I thought I would demonstrate this by showing you the daily price chart of the EUR/USD pair:

EURUSD Daily Price Chart 2019

Strong Resistance in 2019

As you can see from the chart above, the price of the EUR/USD has been slowly trending downwards for much of 2019, but there have always been some mini-rallies along the way.

More importantly, you will see that on most occasions the price has not only struggled to break through this key indicator (shown in red), but has run into strong resistance and been actively driven lower every time it came close to this indicator, except for one occasion when it briefly traded slightly above particular indicator.

Conclusion

Therefore the point that I want to get across in this article is that traders pay close attention to the 200-day exponential moving average, and as a result of this, any resulting price moves almost become self-fulfilling once the price starts to move away from this key level.

On many occasions it will act as strong support or resistance, as was the case here with the EUR/USD, where you could have made some good returns going short each time the price got close to the EMA (200), but it can also signal a change of trend when it is finally broken, in which case you can also potentially make some good returns because you can get in at the start of a new trend.

So it is always worth adding the EMA (200) to your daily price chart if you like to trade this time frame.

eToro Trading Update – October 2019

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Steady Gains – Up 2.21%

October was turning out to be another excellent month for my eToro trading account (account ID = SteadyProfits) as I was up over 4% at one point, but unfortunately some of my share holdings dropped back towards the end of the month after reporting their latest Q3 figures.

As a result of this, my account only finished 2.21% up for the month of October, which is still fairly good, but obviously not as good as it could have been.

SteadyProfits eToro Trading Performance October 2019

The end of October also brought me to a significant milestone because as you can see from the stats page above, I have now been trading on eToro for 12 months.

I actually picked the worst possible time to start trading and investing in stocks because November and December 2018 were terrible months for the world stock markets, but things have picked up in 2019 and after ending 2018 down 8.74%, my account is up 13.71% so far in 2019, giving me a fairly healthy gain overall.

My aim now is to finish 2019 up more than 15% in total, and I am fairly confident of doing so because I think November and December could be a lot more profitable this year.

Trading Performance / Portfolio Update

In terms of trading, October was quite a busy month. I started off by banking a profit of just over 5% when I sold my Barclays shares, and a few days later I sold my GVC shares that I bought at just under 750p for 820.8p, for a profit of 9.61%.

In addition, I also sold some of my longer-term holds that have finally moved into profit after trading significantly lower in previous months, including Aviva and a portion of my IAG shares.

Finally, I managed to generate an excellent short-term gain by trading GlaxoSmithKline. Having bought at 1631p and 1652.4p a few weeks ago, I closed out both trades when the price moved to 1702.4p just over a week later.

With regards to new trades, I have mainly been buying some of the large-cap giants of the FTSE 100, such as BP, Shell and HSBC, because these have all been pushed down to bargain prices in recent weeks, largely because of weaker Q3 performance, but they all pay a dividend of more than 6% per year and are unlikely to drop much further.

I have also started scaling into the iShares FTSE 100 tracker (ISF), making my first purchase when the FTSE 100 dropped to around 7250, and will add more if it drops back towards the 7000 level.

The only share that continues to disappoint and act as a drag on my portfolio is Imperial Brands, but I’m not going to sell at such a crazy low price, and will simply bank the 10%+ dividend while I wait for it to recover.

Dividends Received

There were no dividend payments this month, but the trading profits more than compensated for this, and the good news is that there are some significant dividends due in November.

BP, Shell, Imperial Brands and IAG are all going ex-dividend this month, and as you may be aware, eToro pay their dividends on these ex-dividend dates instead of the official payment date.

Copiers

In the month of October I had one more person choose to copy all of my trades, which means that I now have a grand total of two copiers on eToro.

This has added an extra level of responsibility, but is one that I am relishing because it is a great feeling to know that my trading is potentially helping other people make money from the markets.

Final Thoughts

Overall it ended up being a slightly disappointing month with my profits tailing off in the last few days of the month, but I’m still fairly happy with my trading performance overall.

I managed to close out some very profitable trades on GVC and GlaxoSmithKline, and bought some excellent stocks at knock-down prices in the form of BP, Shell and HSBC.

Plus to cap it all off, I gained one more copier, and have some juicy dividends to look forward to in November, as well as a potential Christmas rally towards the end of the year, which we didn’t really benefit from last year. So 2019 could turn out to be a very profitable year.

Follow Me on eToro

If you would like to follow my journey on eToro, simply open an eToro account and search for SteadyProfits to view my live trading results and to see my latest trades.

Past performance is not an indication of future results. This content is for information and educational purposes only and should not be considered investment or portfolio management advice. 81% of retail investors accounts lose money when trading CFDs with this provider.

GBP/USD Struggles To Break Through 1.30 Resistance Level

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Long-Term Depreciation

Any of my readers who live in the UK will know just how much the pound has fallen in value against the dollar in the last few years.

In fact it has fallen sharply against many other currencies as well, as you may well have noticed if you have spent your holidays in another country just recently.

Take the Thai baht, for example. One pound used to get you over 50 baht, but as of right now it won’t even buy you 40 baht.

Recent Price Action

The good news is that the pound has started to recover as hopes were raised that we might finally get a Brexit agreement, and not crash out of the European Union without a deal, as previously feared.

The story seems to change every day, but at the time of writing, it now looks like we won’t be leaving the EU on 31 October and there will either be a delayed leave date to scrutinise the Brexit deal more closely, or a general election to resolve any differences between the main parties and get a clear majority.

As a result of this, the pound has rallied off its lows and having traded just under 1.20 at the start of September and as low as 1.22 at the start of this month, it has now pushed on towards the significant 1.30 level.

I say significant because traders seem to play close attention to the reaction of the price when it reaches these key levels on the charts, and will then make their trading decisions accordingly.

Strong Resistance

At the moment the price of the GBP/USD appears to be struggling to break through this 1.30 level, as you can see from the daily price chart below:

GBPUSD Daily Chart - October 2019

On 17 October it posted a high of 1.2990 before falling back down again to close at 1.2873, and then on the following three trading sessions it posted daily highs of 1.2988, 1.3013 and 1.3001 respectively, but failed to actually close above 1.30 on each occasion.

More significantly, after last night’s parliamentary vote where they approved the Brexit deal but voted to ask for an extension from the EU, the GBP has started to turn downwards once again as the chances of an orderly departure in the coming weeks essentially disappear and uncertainty reigns once again.

Future Price Moves

Looking at the price chart above, you can see that the short-term 20-day exponential moving average has already crossed above the 200-day moving average, and if the price can stay around these levels for the next few weeks, it looks inevitable that the 50 and 100-day EMA will also cross above the 200-day EMA.

Therefore from a purely technical perspective, you would think there is real potential for the price to eventually break above the 1.30 level and start to trade within a new trading range of 1.30 – 1.40 rather than 1.20 – 1.30.

It wouldn’t take much of a catalyst to make this happen either because if we do finally come to an agreement in the coming months, or do actually leave on 31 January 2020, as some people are predicting, the pound has the potential to rise quite sharply, and I would predict that it could even move back towards the 1.50 level at some point in the next year or two.

eToro Trading Update – September 2019

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A Very Good Month – Up 6.11%

September turned out to be an excellent month for me because my eToro trading account finished the month up 6.11%, making it the second most profitable month so far since I first opened an account back in November 2018.

It could actually have been a lot better because at one point I was up around 8.5% for the month, but one of the shares in my portfolio issued a profits warning towards the end of the month (more about that later).

I don’t necessarily aim to make huge profits every month. I am quite content to see my account tick along with 1 or 2% gains every month, which is why I chose SteadyProfits as my username, but it’s obviously still nice to see your portfolio grow in value quite substantially in a short space of time.

SteadyProfits eToro Stats - September 2019

Popular Investor

Another reason why September was a really good month from a personal point of view is because I was finally accepted into eToro’s Popular Investor program.

This basically means that I can start to be rewarded with a small monetary payment each month if I continue to be profitable in the future and have many people copying my trades.

Trading Performance / Portfolio Update

With regards to my trading, I didn’t place a great deal of trades in September. However there were some significant transactions.

For example, I made the tough decision to sell all of my holdings in GVC. I kind of regret doing this now because I still feel that these shares will be back above 1000p in the not too distant future, but after buying at an average of around 717p and seeing the price fall to around 500p at one point, I took the decision to take a small profit and hopefully buy back below 700p.

Unfortunately this hasn’t gone to plan because the price is now trading close to 750p, but that’s the risk you take sometimes.

Earlier in the month I did manage to bank a more significant profit of 6.2% when I sold a portion of my IAG shares that I bought for 419.7p at 445.1p.

I still have many IAG shares in my portfolio and these have performed well this month, up to around 480p at the time of writing, and pay very generous dividends, so I’m happy to continue holding while I wait for them to hopefully move into profit.

Finally, as mentioned earlier, my other stock, Imperial Brands, issued a profits warning towards the end of the month. This reduced some of my profits as there was quite a big fall, but it did at least allow me to make a quick in and out trade for around 2%.

It wasn’t actually that bad a warning. Profits are expected to be flat this year, but they are still paying a dividend of more than 10%, so again I’m happy to hold on to my remaining shares.

The one other stock is my portfolio is Aviva. This is also down slightly on my purchase price, but has risen sharply this month and also pays a very generous dividend, so I am happy to continue holding for now.

Dividends Received

Unfortunately I didn’t receive any dividend payments this month. The portfolio was boosted entirely by capital gains and trading profits.

However the good news is that two out of the three shares currently in my portfolio, IAG and Imperial Brands, are both scheduled to go ex-dividend in November.

So the portfolio will be boosted once again in the near future, particularly in the case of Imperial Brands because the two final quarterly payments, this being the first one, are the biggest of the year.

Copiers

In this section of this update I normally state that I still don’t have any active copiers, but I’m pleased to report that I now have my first copier.

It’s been such a long wait but I finally have someone actively copying my trades, and it really is a great feeling knowing that I can potentially help someone else make some money from the markets.

Final Thoughts

Overall, September was a fantastic month, and hopefully it will continue for the rest of the year and beyond.

I currently hold three stocks in my portfolio, Aviva, IAG and Imperial Brands, but I am still 33.89% in cash, so I’m patiently waiting for the markets to fall so I can pick up some bargains.

As I mentioned on my eToro feed, I was eyeing up BP, Shell and GlaxoSmithKline but none of them fell far enough, and I was also hoping that the FTSE would fall to around 7000-7200 so that I could buy the FTSE 100 tracker for the long-term but sadly the markets kept going up.

I can’t really complain though because I can’t really lose at the moment. If the markets continue going up, my current portfolio should grow in value, and if they fall I have enough cash in reserve to pick up some undervalued stocks for the long-term and make some potentially profitable short-term trades.

Follow Me on eToro

If you would like to follow my journey on eToro, simply open an eToro account and search for SteadyProfits to view my live trading results and to see my latest trades.

Past performance is not an indication of future results. This content is for information and educational purposes only and should not be considered investment or portfolio management advice. 81% of retail investors accounts lose money when trading CFDs with this provider.

Bitcoin Update 27 September 2019 – Breakout Confirmed

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Descending Triangle Breakout

Last week I was discussing the descending triangle that had formed on the price chart of Bitcoin, and highlighted how it was trading in an ever decreasing trading range prior to a possible breakout.

Here is the chart from this previous blog post:

Bitcoin Trading Range in September

Well as expected, the price couldn’t stay in this trading range forever, and it eventually closed below this long-established trading range earlier this week, as you can see below:

Bitcoin Breakout - September 2019

8000 Level Breached

The closing price of the breakout candle was $8693, which is where many people will have opened a short position, and it was no real surprise that the price continued to fall in the following days.

That’s because many traders will have been watching this descending triangle for many months, and will have been waiting to trade any breakout that subsequently occurred.

The price of Bitcoin actually fell below the $8000 level to around $7739 before bouncing back to its current price of around $8050.

So the breakout could have yielded nearly $1000 x the initial stake per point for anyone brave enough to trade this breakout, and even exiting at $8000, which would have been an obvious exit point for many traders, would have generated a profit of $693 x stake per point (minus the spreads).

Disclaimer – Bitcoin and other cryptocurrencies are highly speculative instruments, and it is possible to lose all of your capital.

Of course this breakout is still very much in its infancy, so there is still every chance that the price could drop even lower than its recent low of $7739, generating even more profits for those traders who decided to trade this breakout.

Sentiment

It is often interesting to look at market sentiment for any given market to see how bullish or how bearish traders are in general, and looking at the Bitcoin market on IG.com, 83% of clients with open positions are expecting the price to rise, and 17% are expecting the price to fall.

On eToro 98% of customers are buying Bitcoin at the time of writing, so these two stats would suggest that people are still very bullish on the long-term prospects of Bitcoin despite this downward breakout.

Final Thoughts

As I mentioned before, I don’t actually trade cryptocurrencies myself because of the risks attached and the relatively large spreads, but it is clear that these markets still conform very well to technical analysis because this was a textbook descending triangle breakout that has already yielded an excellent profit and may still fall even further.

With regards to future price predictions, I said in my last post that $8000 was within reach if there was a downward breakout and this has already been taken out. So I’m not really sure how much further it can fall in the near term.

It may well find a base at this new level and start to bounce back, or it could easily drop below $7000 if we have a few days where it closes below the psychological $8000 level. Either way, it should be interesting to watch.