@fxflow

THE FAQ of FLOW

1. What is Flow Trading?
It is an intra-day method of trading that tries to identify the key
fundamental themes affecting trade at the moment and then utilizes
the natural price structure of the market to enter and exit trades
in sync with the dominant flow.

2. What Are the News Triggers That Move

Currency Prices?
Currency prices are almost always driven by interest rate
considerations. If investors have a bullish outlook and believe that
economic growth will spur the country’s Central bank to raise rates,
the currency will generally rally. Conversely if investors are
bearish and believe that rates will be lowered the currency will
decline. This is a simplistic but generally accurate model of
currency movements. To that end here are the key factors that affect
currency price.

1. Economic data
2. Rhetoric from monetary officials
3. Central Bank policy announcements
4. Geo-political events

In addition to those flows, currency movements can sometime be

affected by non-market sensitive events such as corporate
repatriation or M & A flows or Central bank reserve diversification
programs.

Generally if prices are moving in an illogical manner that cannot be

explained by the known newsflow it is most likely driven by these
non market sensitive factors. Regardless of the motives, a flow
trading respect price first and foremost and uses a highly
disciplined approach to exit trades even if the fundamental
structure appears to be supportive.

3. Does Flow Trading Use Technical Analysis?

No.
Flow trading does not use any technical analysis. No Indicators. No
Elliot Wave. No Fibonacci. No Pivot points. No Pitchforks. No
Gartley patterns. Nothing. Flow trading uses only news and price
action for its inputs.

4. What Pairs Do You Generally Trade?

I focus on EUR/USD and GBP/USD primarily and will occasionally trade
AUD/USD and USD/JPY

5. What Hours Do You Trade?

I generally trade between 2 AM EST - 12 Noon EST, but will
occasionally put on a trade in Asian session if there is some
meaningful newsflow.

6. How Many Flow Trades Are There Per Day?

The number of trades can vary depending on how intensely you follow
the market, but I generally execute between 4-8 trades per day

7. What Are The Basic Rules of Flow Trading?

Much like a football or soccer field, flow trading breaks up the
theater of action into 4 zones of 25 points each
From 00-25
From 25-50
From 50-75
From 75-00

Flow trading believes that price is naturally attracted to round

numbers - the 00’s and their half way points the 50’s
The basic assumption of the flow trade is that once price clears
the 25 barrier it will generally rally to 50 (i.e. in EUR/USD a run
through 1.4125 will open the way to 1.4150 ) or a move through 75
will generate enough momentum to run to 00 level.

In a typical Long flow trade, some piece of fundamental news must

surprise to the upside triggering a run through the 25 or 75. I will
buy on limit at 25 targeting 45 with a stop at 00 or buy on limit at
75 targeting 95 with a stop at 50.

The basic risk to reward ratio of a flow trade is nearly 1:1 (+20/-
25). The reason I exit at 45 and 95 instead of 50 or 00 is because
the 50 and 00 levels are sometimes heavily defended and I want to
assure myself of successful execution.

8. What’s the Difference Between TO and

THROUGH?
Flow trading is primarily a momentum methodology that tries to
capitalize on runs towards the 50 and the 00 levels (The Classic TO
method). However it can also be used in a counter trend fashion
using the 50 and the 00 levels as points of support or resistance
(The Variant THROUGH method).

In a typical Long Through trade, price retreats after staging a

rally falling THROUGH the 50 or the 00 level at which point I may
decide to buy that support with a stop at 25 and target at 70 or
stop at 75 and target at 20.

9. Why Don’t You Ever Express Your Long Term

Views on FX?
Because I don’t have any. I believe long term forecasting is futile
and I prefer to focus on the immediate flows.
10. What Resources Should I Use to Stay in
Touch with The News?
You can use G-20 calendars at
http://www.fx360.com/calendar
http://www.forexfactory.com/calendar.php
http://www.fxstreet.com/fundamental/economic-calendar/

Both Bloomberg and CNBC stream on the internet

@FXMarketAlerts provides great eco data