I love trading the forex market because there are great opportunities that pop up every week for currency traders.
I also enjoy how simple trading the forex market really is.
Many traders worry that currency markets are incredibly complicated.
They tell me it’s hard enough to keep up with news coming out of the U.S. – so how are they supposed to stay abreast of what’s going on in several other countries?
But I tell them that they don’t have to keep up with what’s going on in other countries because macro-economic analysis is almost entirely useless when it comes to short-term trading.
Knowing the ins and outs of European trade and monetary policy won’t help you decide when to enter or exit the market.
Yet, technical analysis is a far superior tool when it comes to making trading decisions.
Figuring out what the Fed might do at its next meeting, or how an energy crisis might affect the euro is what I call “cocktail talk.”
It’s fun to discuss and it can make for an interesting conversation over some drinks – but ultimately, it’s just entertainment.
If it wasn’t entertaining, news channels would be out of business.
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And I don’t know about you, but I don’t want my trading to be entertaining. I want it to be profitable.
Luckily, technical analysis cuts through the noise so you can shine a light on what really matters – like price action.
After all, you’re not trading news or economic events. You’re trading prices.
That’s why I’m focusing on a great opportunity in the Polish zloty and Japanese yen currency pair (PLN/JPY).
Take a look at the chart below…
Since mid-April, PLN/JPY has been tracing out a large head and shoulders reversal pattern.
(The head and shoulders pattern is one of my favorite setups. Check out what happened the last time I spotted this pattern.)
This pattern has three key defining features – the left shoulder, the head, and the right shoulder.
The pattern is complete once prices break and close below the neckline (blue line) that connects the bottom points of the left and right shoulders.
To determine a target for this pattern we’ll use the final component, which is the neckline measurement.
The neckline measurement is taken by drawing a straight line from the top of the head to the neckline (left vertical line).
The length of this line is how far we can expect prices to travel once the pattern is complete… which in PLN/JPY comes in around 25.50 yen.
That would be an almost 10% move, which would be amazing to see in any currency pair.
I spot these kinds of trading opportunities in the forex market every week. And because of the leverage that’s available to forex traders, it makes these opportunities potentially lucrative as well.
The next time I spot another great trading setup in the forex markets, I’ll be sure to let you know.
Happy trading,
Imre Gams
Analyst, Market Minute
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