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Guest post by  NewstraderFX

Yes-you read that correctly. I’m currently up 550 pips on long EUR/USD and GBP/USD trades. Have a look at my twitter page where I posted the charts.

My theories regarding trading have to do with establishing the bias, understanding market correlations, psychology and economic fundamentals, along with the use of Fibonacci to find entries and exits.

Here’s an example of what I mean:

During this era of financial crisis and unprecedented Federal Reserve actions, stocks and the dollar generally have had a negative correlation. That is to say, in times of duress (risk aversion), investors have gotten out of equities and sought out safety in Treasuries and the USD. We’ve seen this happen several times, specifically after Lehman Bros. collapsed in September 2008 and in the Spring of 2010 when the European Sovereign Debt Crisis intensified.

Likewise, when investors are buying risk, equities rise and the dollar tends to fall. Bernanke set off the latest round of risk acceptance back in August when he gave his first hint that a second round of Quantitative Easing would occur.

So, in my view, it is the strong fundamentals which set the bias and drive markets in a trend. Once the bias is set, it then becomes an exercise in finding entries and exits using Fibonacci levels. But here is the key:

You must enter a trade at the best possible price which, for a long trade, means going long at some point when price has “dipped.” This is very different from “catching a falling knife,” which basically means going long when a strong, negative fundamental exists.

These are only two of my concepts, but they’re essential to trading successfully.

What I would like to do is to invite you to my next free trading webinar on Sunday, January 2, 2011 @ 5:30 pm EST (10:30 pm GMT). Please send an email to [email protected] for an invite.

See you there and Happy New Year!