Here we are going to look at two contrary trading tools that most traders never use, yet if you use them as part of your FOREX Trading method you will spot and see the really big trend changes.
These contrary moves are the ones all traders want and these two little known tools will help you Hit them for big profits.
The tools are % Bullish and the Commitment of Traders Report Net Traders Positions Report.
These tools will add a new dimension to your trading so let’s look at them.
We all know that the really big trend changes come when greed and fear have pushed prices to far either up or down.
When prices are pushed to far from fair value they eventually turn around and go the other way.
Here are two tools which will help you spot when a market has been pushed to far and a turn is likely.
We have written more in depth on both of these indicators, so look them up. Here we will introduce you to them and show you how to incorporate them in your trading plan.
1. % Bullish
This is a poll of investors and people involved in FOREX and it assesses the bullishness of the market.
If the number is below 20% prices are probably oversold and if they are above 80%, they are probably overbought.
The fact is if the fundamentals are to bullish a trend change is due and the same applies if they are too bearish.
Keeping an eye on the % bullish number will alert you to big contrary trades forming.
2. Commitment of Traders Report
How would you like to track the really successful investors and see what they do, well that’s what this report does and its free!
Every two weeks the CFTC publishes a breakdown of the holdings of the futures markets (including the major currencies) and these positions are very useful for FOREX traders to.
Hedgers get preferential margin treatment if they disclose their positions – these guys are close the fundamentals and are the smart money.
The other two groups in the report are small and large speculators.
Hedgers are looking simply to protect their position and will move their positions slowly.
They are not influenced by the emotions of greed or fear and when a price moves to far from the fundamentals they will aggressively sell a market top and buy a market bottom.
Speculators both large and small are influenced by greed and fear.
When you see extremes:
Commercials heavily long or short and speculators opposing them – prices will break in favor of the commercials in most cases.
These two indicators will help you spot every major market top or bottom.
Once you spot a position it is then a question of timing your move by using technical analysis.
These 2 contrary trading tools will help you spot the opportunity then it’s to your charts and use your normal tools to get in on the action!
