With most major currency pairs in prolonged consolidations, I thought I’d provide a list of the Forex trading books on Amazon.com (listed here in no particular order) that are currently within the top ten bestselling books in the foreign exchange category:

- Currency Trading For Dummies - Solid and comprehensive introduction to the world of currency trading.
- Forex Patterns & Probabilities - Excellent strategy book by accomplished forex trading educator, Ed Ponsi.
- Essentials of Foreign Exchange Trading - My book!
- The FX Bootcamp Guide to Strategic and Tactical Forex Trading - Great strategy guide by fellow educator and blogger, Wayne McDonnell.
- Currency Trading and Intermarket Analysis - Unique and very useful approach to forex trading written by a top forex strategist, Ashraf Laidi.
- Day Trading and Swing Trading the Currency Market - Updated edition of Kathy Lien’s classic.
- Beat the Forex Dealer - Provides a different spin on forex trading based upon dealer-inspired techniques.

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

Dollar-strengthening price action on AUD/USD has once again descended back down to a key uptrend support line extending from the March lows. This line has already been touched three times since its inception, and the current bearishness has created a fourth. For more technical analysis on this currency pair, please click here for Thursday’s (7/02/2009) Chart of the Day.

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

Pin bars are essentially the equivalent of hammers and shooting stars in the candlestick world. These single-bar price action indicators can be exceptionally effective confirming factors for potential market turns in the forex market. Used in conjunction with other trade decision factors, most notably support and resistance, pin bars can give valuable hints of market directional bias. The basic concept of a bullish pin bar, or a hammer candle, is a long protruding bar pointing down, with the period open and close very close to each other near the top of the bar. These occur after bearish price runs. The basic concept of a bearish pin bar, or a shooting star candle, is a long protruding bar pointing up, with the period open and close very close to each other near the bottom of the bar. These occur after bullish price runs. Two pin bars are highlighted on the accompanying forex chart. Not only is the shape of pin bars important - the placement is also crucial. In order to be effective, these bars should follow well-defined directional runs. Pin bars, AKA hammers and shooting stars, represent a potential exhaustion in previous momentum, as well as a potential triumph of bulls over bears (for hammers), or bears over bulls (for shooting stars).

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

Some thoughts on using technical market analysis to determine risk management in forex trading. Perhaps the greatest strength of technical analysis is that it allows traders to quantify precisely, and thereby help control, the risk factors inherent in trading. The most obvious risk control application of technical analysis is stop loss placement. Technical analysis employs a simple and elegant rationale for determining the location of stop losses. When the reasons for getting into a trading position are no longer valid, that position should be abandoned, usually at a loss. The purpose of a stop loss, after all, is to cut losses while those losses are still manageable.

For example, in a breakout situation where a trade is entered on a price breakout above a certain resistance line, if price falls back significantly below the line, the reasons for entering that trade would no longer be valid. Therefore, the stop loss should be placed at some pre-determined point directly underneath the line, where the break will have proven itself to be either false or premature. A failed breakout, as described above, is certainly a good reason to get out of a trade with a manageable loss.

Another example of risk management from a technical analysis perspective is as follows. For a trader who has entered a long position on a pullback to an uptrend support line, if on one of the subsequent pullbacks price breaks below that uptrend line by a significant amount, a good location for a stop loss would be at some pre-determined point directly below the trendline. A breakdown below the ascending trendline would mean that price is no longer pulling back and continuing the uptrend, but might perhaps be reversing its trend. If this is the case, the original reasons for getting into that trade (uptrend continuation) will have begun to be invalidated, and a properly placed stop-loss below the line can potentially prevent a great deal of pain.

Risk management with the use of technical analysis is both logical and straightforward. By using technical analysis to help dictate stop losses, a forex trader is allowing the market to determine when to cut losses. This is much more reasonable than setting stop losses merely according to an arbitrary number of pips or some random point of pain.

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

Price action on USD/CAD has tentatively poked out above a key downtrend resistance line extending from the fourth test of the 1.30 price region back in March. This tentative break places the current downtrend in potential jeopardy. For more technical analysis on this currency pair, please click here for Tuesday’s (6/30/2009) Chart of the Day.

UPDATE: As of Wednesday (7/01/2009) morning, dollar-weakening price action has shown yesterday’s trendline break to be a false one. As of this writing during the New York morning session, price action has retreated and descended back down to the 1.1450 support price region.

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

This is a very common affliction, especially among technical traders. Paralysis by analysis can occur when traders have too many studies on their charts and seek endless confirmations before taking any action. This is the polar opposite of traders who initiate trades recklessly based on “gut feeling” alone. Paralysis by analysis may be the lesser of the two evils, but both of these afflictions can be extremely detrimental to forex traders.

There is a lot of good in being cautious and conservative when deciding to take trades, but becoming paralyzed by the decision-making process can be totally counterproductive. Having all of the latest and greatest indicators on your charts can be exciting, but will it really help you become a better trader? Maybe, but probably not.

A good remedy against paralysis by analysis is a combination of solid risk control and money management. Technical analysis is very helpful in setting risk management measures like a logically-placed stop loss that’s not too tight and not too loose, and a good reward-to-risk ratio. And money management is an absolute essential for any trader who wants to be successful. With these prudent measures in place, traders need not be paralyzed by the trade entry process. A trader will never come anywhere close to 100% correct, even with 50 indicators, oscillators, trendlines and squiggly lines pointing in the same direction at the same time. But that’s perfectly okay, as long as risk and money management are in good order.

This is not at all to say that traders should ever just jump into trades without first doing their proper analysis. As mentioned, that is an evil in and of itself. But there are many traders that are utterly unable to pull the buy/sell trigger unless all of the many stars in the galaxy are perfectly aligned. This almost never happens.

Stick to the essentials and only what works best for you over time. When a good opportunity presents itself according to your careful analysis, take it. But always have strict risk controls and money management guidelines in place.

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

Price action on GBP/USD has continued progressing sideways within the converging triangle consolidation that has been in place since the beginning of the month. This continued consolidating price action occurs within the context of a steep uptrend (extending from the late April lows) that has not been broken as of yet. For more technical analysis on this currency pair, please click here for Monday’s (6/29/2009) Chart of the Day.

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

Here are some key support/resistance price areas to watch for (breaks/bounces/targets) in the forex market during the upcoming trading week of June 29 to July 3, 2009:

EUR/USD - Support 1.3890 / Resistance 1.4135
USD/JPY - Support 94.85 / Resistance 96.55
GBP/USD - Support 1.6185 / Resistance 1.6660
USD/CHF - Support 1.0590 / Resistance 1.1020

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

EUR/USD (a daily chart of which is shown) continued its sideways consolidation this past week, even after having broken out above a short-term downtrend resistance line (in red) extending from the 1.4335 uptrend high. This trendline break was significant, but on the day after the breakout occurred (in the beginning of the past week), price retraced all the way back down to around the point of break. Closing out last week, the pair then rebounded off the trendline, now treating the line as support where before it was resistance. EUR/USD is currently still entrenched within a textbook uptrend, and the recent bearishness as represented by the noted short-term downtrend line can be viewed simply as a normal correction/retracement within the prevailing uptrend. Unless price breaks down substantially below the 1.3750 region, the pair can continue to be considered as moving within an overall uptrend. Furthermore, the potential head & shoulders reversal pattern that recently grabbed the attention of many forex traders has, for now, been effectively invalidated. For the upcoming trading week of June 29 to July 3, a strong breakout above last week’s high of 1.4135 would lend strength to the bulls’ hopes for an uptrend continuation. In this event, the next major resistance target to the upside would be a re-test of the 1.4335 uptrend high. A further breakout above that key resistance level would confirm an uptrend continuation. To the downside, the noted 1.3750 price region should provide major support for the current uptrend.

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX

USD/JPY (a daily chart of which is shown) broke down below a triangle-like configuration early last week, pulled back to re-test the lower triangle border, and then descended once again. This can be viewed as a potential breakout-pullback-continuation progression that carries some significant bearish potential. Of course a continuation in the direction of the breakdown would only be confirmed on a significant break below last week’s 94.85 low. If this occurs, a key downside support target resides around the 93.50 price region. Any breakdown below that level could target further major support in the 91.00 region. To the upside, the lower border of the noted broken triangle should continue to provide dynamic resistance amidst the current bearishness in the pair.

- James Chen, CTA, CMT

* I will be key speaker at FXstreet.com’s International Traders Conference in Barcelona, Spain in October 2009 - for more information, please go to: www.traders-conference.com .

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX