FOREX CURRENCY TRADING: BOX PLAYS--ON DAYS WHEN THE STOCK MARKET IS DEAD IN THE WATER, LOOK TO THE EURO FOREX CURRENCY TRADING

MEASURING THE LENGTH OF THE MOVE BEFORE IT OCCURS

The one thing I can say for certain about the markets is that they will never move straight up or straight down forever. A market can definitely rip higher for long time, but at some point it will have to rest and consolidate, and sometimes it will even come back down to earth and reverse all of those spectacular gains. Just as a runner can only sprint for a limited amount of time before their body gives out, a market can only move so far before it needs to pause, take a rest, and build up its energy reserves for the next major move.

Box Plays find situations where a Forex currency trading market is taking a break before getting ready for its next major thrust, whether it is the next spurt higher or the next spurt lower. One of my favorite markets in which to use this play is the Euro Forex currency trading. This works on either the Euro Currency futures (EC) available on the CME, or in the Forex currency trading (EURUSD). Let's quickly review once again how they work. This setup works on the Pound, Yen and Franc Forex currency trading as well.

On both the CME and in the Forex currency trading markets, the Euro moves in increments of 1/100 of a cent. On the CME, this move is called a tick, and is worth $12.50 per contract, making a full one cent move worth $1250.00 per contract. In the Forex currency trading markets, this move is called a pip (price interest point) and is worth $10.00, making a full one cent move worth $1000.00 per contract. There is also a mini-forex contract available where each pip is worth $1.00, and a full one cent move here would be worth $100.00.

There are arguments on both sides on which market is better. With the futures, the spreads are a little tighter, the commission is the same as trading a regular futures contracts, but there are no guaranteed fills. With Forex currency trading, the spreads are a little wider, but the commissions are free, and the fills are guaranteed. I am a redundancy freak, so I trade both. If for some reason I have a problem with the futures contract, then I can hedge my position in the Forex currency trading market. In general, I will day trade the Euro in the Forex currency trading markets, and swing trade the Euro in the futures markets. A trader that already has a futures account is already set up to trade the Euro. For an individual who has never traded currencies, and is interested in doing so, the best idea is to open up a mini Forex currency trading account to get the proverbial feet wet. For more information on how to do this and set up an account, visit www.razorforex.com.

Ok, back to the box play. I'm looking for a period of horizontal consolidation with at least two tests of the highs and two tests of the lows. Once I get these two tests, then I'm looking to buy a breakout of the box, or sell a breakdown of the box. My target on these trades is the width of the box. These plays can be done on all time frames. An individual who is primarily a day trader can execute this setup utilizing 1, 2, 3, 5 and even 15 minutes charts. An individual who also likes to swing trade can look for these setups on the 60 minute and daily charts. I trade these as both swing and intraday Forex currency trading plays, with each time frame independent of itself. This means I could have a 60 minute box play going on with one set of parameters, and a 5 minute box play going on with a totally different set of parameters. Also, since the Euro Forex currency trading actively trades 24 hours, these box plays can be setup at anytime. They are generally dead between 4:00 p.m. to 8:00 p.m. Eastern, with the action picking up with the opening of the Japanese markets, and then the European and London Forex currency trading markets. The best time frame to trade them in is from 8:30 a.m. Eastern to 10:30 a.m. Eastern as this is when the most volume pours into this market. From 11:00 a.m. Eastern to 12:00 Noon is also good as this is around the close of the London Forex currency trading markets, and a lot of traders around the world close out their positions at this time. The box plays, however, can be played at anytime.

I like to try to get some sleep each night, but on those nights when I get shafted by the wait staff (i.e., I order decaf coffee after dinner but they give me caffeinated, so I end up lying in bed staring at the ceiling), I can at least get up and check if a Forex currency trading box play is forming overnight.