Why do forex charts look like this (link supplied)?

Question

I am wondering is there an explanation for these immediate sell offs shown at the begining of the day:

http://finance.yahoo.com/currency/convert?from=EUR&to=USD&amt=1&t=5d

Are these common?

Answer 1

No, yahoo just has bad charts. Get better charts using cmsfx and their VT trader platform has much better charts.

I have zero idea what the other posters are talking about. There is no relevant volume in FX that is reported since its all over the counter bank to bank transactions and I dont know what regression analysis you would need to figure out that gaps in a 24/hour continuous market mean that your charts suck, not that some kind of mystery one sided profit taking is going on.

Answer 2

I have a couple of thoughts, but would need to run a regression analysis to test how much each of them contributes to the early dipping you see.

1) Profit-taking from the night before, although you only had a half-cent movement, so this would be on very large blocks of contracts.

2) The large price rise at the start of the trading day leads to speculation that price will fall, which leads to short-selling, which is viewed immediately in the market and causes prices to drop.

3) Automated position closing. I know many stock traders (which I identify with more) set up their accounts to dump their shares if the price drops more than 5% or some other level. Short-sellers (who expect the dollar to drop relative to the euro) may have their accounts automatically close their positions after such a rise - this may account for the steep sell-off. Consider that this is the first week in quite some time that the dollar appreciated noticeably.

Those are just some thoughts. I stay out of ForEx because the insiders (import-export companies) will always have me beat on information, whereas in the stock markets I can at least take a more-informed risk.

Answer 3

my friend....visit my blog www.gbp-usd.blogspot.com

we can talk about forex there...just send me messages there.

Answer 4

Yeah this is why I just use a Forex trading system.

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Use the demo account for 59 days and if you see you can make profit you keep the system and invest your real cash. If there's no profit to be made you get a refund and try another system; there's literally no risk when buying one.

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