Currency Pairs - What does that mean?

When you trade in the Forex Market, you will trade "Currency Pairs". This is the source of a lot of initial confusion for new traders. "Why Pairs? Why can't I just trade Dollars, or Euros or Francs?" is a question you hear often. The answer is easy, every exchange on the Forex Market (or at any border exchange kiosk for that matter) involves two different currencies. You are trading US Dollars for Canadian Dollars, British Pounds for Euros, Euros for Japanese Yen, Australian Dollars for Mexican Pesos or one country's currency for another's. This exchange is done on the Forex Market by trading currency pairs. For instance, when you are trading the EUR/USD pair, you are exchanging Euros and US Dollars. If you believe that the Euro is going to strengthen against the US Dollar, you buy the pair. If you believe that the US Dollar is going to strengthen against the Euro, you sell the pair.

In each pair, the first pair is the primary currency, or the currency against which the other is denominated. This means that in any quote for the EUR/USD, the EUR number is always 1. So if the quote for the EUR/USD is 1.3547, that means that it takes 1.3547 US Dollars to purchase 1 Euro. If you are following the USD/JPY and the quote is 112.58, that means that it takes 112.58 Japanese Yen to purchase 1 US Dollar. For the GBP/CHF, if the quote is 1.5128, it takes 1.5128 Swiss Francs to purchase on British Pound. You get the idea.

When you are "buying the pair" you are, in effect, borrowing the second currency to buy the first. So, if you are buying one standard lot of the EUR/USD, and the quote is 1.3547, you are borrowing USD $135,470 in order to purchase €100,000. Your hope is that the Euro will strengthen and you will sell your Euros and get more US Dollars for them. For example, if the pair rises to 1.3850 and you sell your position, you will get USD $138,500 for the €100,000 you bought. After repaying the loan of USD $135,470, you will net USD $3,030, which is your profit for the trade. To give an example of how the other side would work, if you think that the Australian Dollar is going to weaken against the Japanese Yen, then you would sell the AUD/JPY pair. Suppose that the quote for the pair was 71.60 (meaning that 1 Australian Dollar cost 71.60 Japanese Yen), you would borrow 100,000 worth of Australian Dollars and purchase ¥71,600,000. If the AUD did weaken and the price for the pair fell to 69.90, you would sell your Yen and pay off the loan to your broker and have ¥1,700,000 in profit, which would be converted to whatever currency you trade in and credited to your account (in US Dollars you might get $17,000, in Euros you might get €13,000).

Now, when you borrow money from your broker to buy or sell a currency pair, you will pay or receive interest on the loan, depending on the difference between the two countries' interest rates. This is called Carry or Roll For a more exhaustive discussion of the Foreign Exchange Market from Wikipedia, click here.

I hope that helps clear up some confusion on why currency is traded in pairs. As always - Happy Trading!

Why I'm Still Investing in Stocks

This is a re-post of something I wrote in January. I find that it is still true, so, I bring you a golden oldie:

Most reasonable minds agree that we are currently in the midst of the biggest economic decline of our generation (and perhaps the one before, depending on how old you are at the moment). Things are bleak. Unemployment is high and going up. You can't open a paper these days without being met by an article about a company that's cutting jobs. Not just mom and pop companies, the big ones too: IBM, GE, Microsoft, pick a bank. Good jobs are getting scarce. The Dow is playing with 8000 and may drop by another 25% (seriously, it could happen). Foreclosures are at record highs and not just the sub-primes, prime jumbo mortgages are running at about a 7% default rate (according to Tuesday's WSJ).

What can be done? Who knows? Politicians will spend our money, people will get unemployment and go on welfare, we will scrimp and save and then, slowly, when no one is watching things will begin to turn around, little by little, and life will, over the course of a year or two, return to normal. We will all forget the bad times and people (who, as a rule, are stupid), will begin to act in the same ways they did before, over extending themselves, using too much credit, buying houses they can't afford. To put it simply, we will return to being Americans.

But, in the mean time, I'm investing in stocks . . . a lot. Prices are low. They may go lower, but right now they are low. I see one of two things happening in our country. One possibility is that history will repeat itself, and after a period of decline, we will pull out of the darkness and our economy will boom. This recovery is usually led by the markets. Stocks begin to rise before we all acknowledge that the worst is over. This is how it has happened in the past. The other alternative is that the markets go to zero and all meaningful productivity stops. We lose everything. We become Haiti. Everyone is broke and the country is irreparably broken. If this happens, no savings plan (whether in your bank or under your mattress) will help you. The dollar will be worthless because there will be no country to back it up. This second option, while possible, is very unlikely (in my opinion) and something that, unless you are going to build a compound and be able to raise your own food, is not worth preparing for. So, I'm buying stocks of good companies that are being drug down by the market in recession, and preparing for the turn around that will come and make me much, much, much better off.

Taking a Break

Greetings All- I just wanted to post a note saying that I am taking a break for a bit and will continue regular trade ideas in July. Sorry for the short notice, but it could not be helped. Hopefully, you've been following the trades well enough to be able to see developments as they come. If not, page back through the older posts to see how support and resistance trading works.

Happy Trading

What I'm Watching Now - EUR/CHF

You can see that the Euro/Swiss has been trading in a pretty tight range for the last several weeks (see Daily Chart to the right). I expect that the pair will break out of the consolidation pattern it is now in and will move strongly in one direction or the other. I'll probably trade it on the hour chart, but will be watching it closely in multiple time frames. If I see something develop, I'll post it here.

Happy Trading!

Trade Result - USD/CHF +60

Ok, it took three tries, but I finally got some pips out of this trade. The first break out opened at the end of the 0400 EDT bar yesterday. It immediately went up and we moved to break even at +30 pips. Then it moved down during the same bar (0500 EDT) and took us out at break even. I believed this pair had some movement in it so I entered on the next close above the upper channel line at the end of the 0700 EDT bar yesterday. It took a bit longer to get to break even and was eventually stopped out without a gain. I came close to hitting my 20 pip trailing stop on this one during the 1200 EDT candle, but missed it by 1 pip. Not to be dissuaded, I entered long again when the 0500 candle this morning closed above the upper channel line. I was long at 1.0676. The pair rose strongly, and By the close of the 0700 candle, I had moved to break even and saved +60 pips. I thought this might be the move I was looking for, but the next hour's candle took us out for the +60 pip gain. I'm tired of this pair and am putting it away for awhile. I'm going to be satisfied with 60 pips and wait for the next opportunity. In writing this report I realize that I was trying too hard to make pips on this pair. I should have probably stopped after the first trade and definitely should have stopped after the second trade. It is hard sometimes not to try to get the price of a pair to do what we want it to do. As much as I've learned, I sometimes still get caught in the greed trap. Live and learn I guess.

Happy Trading!

Trade Idea - USD/CHF

The Dollar/Swissy is consolidating after a long slide. It has traded in the channel for 12 or 13 hours now and may go lower yet. I'm ready for a break either way and will buy or sell on a close above or below the marked channel lines (the blue solid lines). The other lines on the buy side are areas of resistance. If the pair breaks up I expect that these lines of resistance may be were the pair hesitates or turns. If the pair goes long, and closes above the resistance lines, I might look to add positions. Such breaks would be very bullish indications of what the pair intends. My ultimate long target would be the 800 sma. On the short side, there is some resistance around 1.0450. We'll see. I'll keep you posted.

Happy Trading!

Trade Result - GBP/JPY +40

For the original trade idea, click here. This trade tried to do what we wanted it to do. In fact it looks like it is setting up to try again. This trade opened after the close of the 2000 EDT bar yesterday. We were short the pair at 158.27. After ducking back inside the channel briefly, the pair fell seriously starting just before and then through the start of the European session. It finally hit its low of 156.87 during the 0600 EDT bar this morning. That marked our largest profit of the trade (+140 pips) and moved our trailing stop to +40 pips. We were stopped out when the pair moved sharply up starting with the 0900 EDT bar this morning. Not the trade I'd hoped for, but I'll take a profit any time. I'm going to watch this pair and may enter again if it closes below the bottom channel line again.

Happy Trading!

Trade Result - EUR/CHF +0

For the original trade idea, click here. This pair did what it was supposed to do, then did what it often does. First, it broke strongly out of the box at the end of the 0900 EDT candle yesterday. We were long the pair at 1.5150. The pair moved up well on the next candle and we moved to break even at +30 pips just after 1130 EDT. Then it simply fell back inside the box. We were stopped out at break even just after 2000 EDT for no gain. The pair fell back to the 800 sma (which is what they often do). I'll be watching this pair for another set up. We know it is going to move away from the 800. It is just a matter of when, and in what direction.

Happy Trading!

ps. The GBP/JPY trade is open and not looking to bad. We moved to break even and have saved 20 pips so far with our trailing stop. I'll keep you posted.

Trade Idea - GBP/JPY

This pair has moved up strongly over the last day or so. It is consolidating before it decides which way it is going to go. I'm prepared to buy or sell on a close above or below the channel lines. The stop will be the other side of the channel. We will move to break even at +100 pips. I'll keep you posted.

Happy Trading!

Trade Idea - EUR/CHF

As you can see from the chart to the right, the Euro/Swiss pair has been moving along its 800 sma for several days now. It will likely break away from the 800 either up or down at some point in the near future. Remember that this trade works a bit differently. I will buy or sell on a close above the upper or lower channel lines on the hour bar. I will close the trade if it closes back inside the channel and look for another entry signal. So the stop loss is hard to pin down. I'll probably use the 800 as my stop loss, but I will close the trade if it closes back inside the box. The stop is just kind of a safety. I'll also move to break even at +30 pips and put a trailing stop on after that. We'll see what happens.

Happy Trading!

Trade Result - USD/JPY +149

This trade got a bit more after yesterday evening's update. As you can tell from the chart to the right, it fell pretty well last night during the 2000 and 2100 EDT bars, then came back up and took as out at our adjusted stop loss. All in all a good trade. I'll take the pips.

Happy Trading!

Trade Update - USD/JPY

This trade has gone well. Click here for the original trade idea. We entered the trade at the close of the 2000 EDT bar last Thursday (May 28) at 96.50. After teasing us by going back up inside the channel after opening, the pair fell steadily starting at the beginning of the Friday morning European session and has fallen pretty well since, until the end of trading on Friday the 29th and trading today. We have saved 100 pips using a trailing stop and are still in the trade. We came close to being stopped out at the close of the 1900 EDT bar today, but it has pulled back since the end of that bar. I'll keep you posted on progress.

Happy Trading!

Note- Since I posted this update, the pair has fallen 60 pips very quickly. I'm moving my stop to 30 pips above the current price, now 94.91, and will see what happens. I don't understand the big move, but don't want to lose its benefit in a wild retracement.

Trade Result - CAD/JPY -20

We kind of got whipsawed on this trade. There were two trades, as the pair moved down through support, then reversed and went up through resistance. We opened the trade short at the end of the end of the 2000 EDT bar yesterday at 86.70. the pair moved sideways for several hours then moved up and took us out at the upper resistance line at 87.10 for a loss of -40 pips. That bar closed above the blue line so I opened a long trade at 87.11 at the end of the 0145 EDT bar early this morning. Pair moved up nicely and we moved to break even fairly quickly. However, just after the start of the European session, the pair started falling and we were stopped out just before 0330 EDT with a +20 pip gain. The total for this trade was -20 pips (sigh). We'll hope for better next time.

Also, the USD/JPY is open and profitable. I'll be watching it and let you know how its going.

Happy Trading!

Trade Idea - CAD/JPY

I know what you are thinking. Two trades in a row with the Yen? It is true the last two trades are somewhat correlated, but not as much as you might think. Check out their charts and you'll see. Anyway, as for this trade. You can see that the pair has tested the high (blue horizontal line) several times over the last couple of days. if it breaks up can closes above that line, I'll buy. If it breaks down below the support line and heads lower, that will likely mean that the high is safe for now and we'll see some retracement from the recent run up. Either way I'm in. I'll move to break even at +30 pips. Note that this is the 15 minute chart and I'm trading on that. If it goes up, there is no telling how high it will go so I'll just ride it as long as it keeps going. If it goes down, my profit target is the green baseline. I'll keep you posted.

Happy Trading!

Trade Idea - USD/JPY

It looks to me like the USD/JPY pair is getting ready to make a move. It will break out of the channel it is in and either run away from the 800 sma or push through it and go higher. Which one? Who knows? I'll buy on a close above the upper channel line and sell on a close below the lower line, both on the hour chart. I'll move to break even at +50 pips and we'll see where it goes from there. If it goes up, there is some resistance at the 99.50 level and I'd look at that as a profit target. If it goes lower, it could go as far as 94.00. Either way, there are a lot of pips to catch. I'll keep you posted.

Happy Trading!

Trade Result - AUD/USD -32

This pair started by giving us a head fake, then turning around and moving in our direction. This is actually two trades, the first a loss of -62 pips and the second a gain of +30 pips for a net of -32 pips. The first trade opened at the end of the 0700 EDT bar yesterday (May 27). I was short the pair at 0.7825. The pair reversed immediately and took us out at the stop loss at the top of the channel for a -62 pip loss. The odd thing about this reversal was that it was with mostly red (or down bars), which I find to be a bearish signal. Even after being stopped out, I thought this pair wanted to fall. We were short the pair again at the close of the 1400 EDT bar, and again (coincidentally) at 0.7825. The pair fell pretty steadily this time reaching a low of 0.7742 before reversing. We moved our stop to break even at +50 pips and I put a 10 pip trailing stop on the trade. We got stopped out just after 2015 EDT at 0.7795 for a gain on the second trade of 30 pips. Total for the trade -32 pips. While this trade did not work out like we'd hoped, the set up was sound and trades like this will win more than they lose. As one of my Alaska friends likes to say "Sometimes you get the bear, sometimes the bear gets you."

Happy Trading!

I'm Watching This - USD/CAD

This pair has shed better than 1300 pips in the last month. The Loonie has been a commodities currency and, traditionally, as gold, oil and natural gas go, so goes the Loonie. But this strengthening of the CAD is not called for as far as I can see in the market. Oil is way off of its highs of last year and natural gas has taken a huge beating in the market. Gold is up, but not overly high. I think this pair is ripe for a correction, perhaps a 1,000 pip correction and I'm going to be watching it.

Happy Trading!

Trade Idea - AUD/USD

Greetings All! I was in New Orleans for the last week or so and did not have the opportunity to do much trading. But I'm back now and in the saddle again.

I'm looking at the AUD/USD pair which has been trading in a channel for the last several bars. I will take the usual channel trade with this pair, buying or selling the pair upon a close above or below the channel lines on the hour bar. I'll move to break even at +50 pips and put a trailing stop on. If it breaks lower, it could go to the 800 sma (at the bottom of the chart). If it breaks higher it could go to the next resistance level on the daily chart at about 0.8500. Either way, we'll be ready.

Happy Trading!

Trade Updates - USD/CAD and EUR/CHF

I'm going to be out of town and out of touch for a week or so and won't be posting. Apologies to those regular readers who have come to count on the trade ideas. I will be back in the saddle starting Sunday or Monday the 24th and/or 25th of May.

As for the two trades which opened on Friday. Both stopped out for me at break even and I will report more on those when I return. Sorry for the short notice, but it could not be helped.

Happy Trading!

Trade Result - AUD/USD +80

This trade did well. Not as well as we might have hoped, but well enough (for the original trade idea, click here). The trade picked up an additional 20 pips since the updated this morning. The total was +80 pips. We'll be watching this pair to see if it falls below the blue line, and if it does we might take it again. For now though, I'll take my 80 pips and smile.

Happy Trading!

ps. The USD/CAD trade is open now. It is not looking great, but I'm still hopeful. Time will tell.

Trade Idea - USD/CAD

The Dollar/Loonie has moved up off of its lows over the last few days and pierced some significant resistance (green line on chart to the right) in the last day or so. The pair seems to be catching its breath a bit and preparing for another move. Which way? I don't know and don't care. We'll buy on a close above either the upper or lower channel band. I'm going to move to break even at +30. Also, watch out for a head fake (see January 13 post for more information on that), these narrow bands can do that. It is almost like they have to squat to launch themselves sometimes. I'll keep you posted on progress.

Happy Trading!

Trade Update - AUD/USD

For the original trade idea, click here. This trade opened yesterday at the close of the 0800 EDT bar. I opened a position at 0.7602. The pair fell pretty quickly after breaking the support line, and we moved to break even just after 1300 EDT. I put a 20 pip trailing stop on the trade and it has since saved about 60 pips (the trade is up +117 at this writing). It is moving toward a longer term support line and if it closes below, I will add another position. I'll use the same stop for convenience. I'll keep you posted.

Happy Trading!

Trade Idea - EUR/CHF

The chart to the right shows the recent activity (or lack thereof) of the EUR/CHF in 15 minute bars. I believe we can all agree, this is a channel. Now, this pair is not the most volatile of the pairs we regularly look at, but this channel is too long to ignore. I'll trade this on a close above or below the channel lines on the 15 minute chart. I'll move to break even at +30 pips and put a 10 pip trailing stop on the trade at that point. If we are lucky, a channel this long will yield a significant move. I'll keep you posted.

Happy Trading!

Trade Idea - AUD/USD

This pair looks like it is setting up for a possible break of the most recent resistance line (red line on the chart to the right). If it closes below that line on the hour chart, it is a sell for me. I'll move to break even at +50 pips and consider adding to the position if it gets down around the blue resistance line before stopping us out. I'll keep you posted.

Happy Trading!

Trade Result - USD/CHF +0

This trade broke out like we expected, but then did nothing. It opened at the end of the 2000 EDT 15 minute bar yesterday and fell quickly to the break even point (+30 pips). It then rose quickly and took us out at break even about 2115 EDT yesterday. Not much to talk about. This pair may be setting up another channel and I'll be watching it. Hope you scored some pips.

Happy Trading!

Trade Idea - USD/CHF

As you can tell from the chart to the right, this pair has been consolidating in a fairly narrow channel since last Friday. We can expect it to break out at some point and when it does we'll be ready. We'll vary the usual trading strategy for a break out trade. I'll enter on a break out on the 15 minute chart this time and move to break even at +30 pips. If it goes north, it could reach the 800 sma, if it falls I'll target the lows at around 1.0850. I'll keep you posted.

Happy Trading!

Trade Result - EUR/GBP +60

For the original trade idea, click here. This trade opened when the 0800 hour bar closed above the upper channel line on Friday, May 8. I was a bit late getting in so I opened my position a little higher than I would have liked at 0.8945. The pair moved to break even at +30 pips just after midnight on Sunday night (actually, early Monday morning) and I put a 10 pip trailing stop on the trade. I was stopped out after a big run up about 1125 EDT Monday at 0.9005 for a +60 pip gain (its actually better than that as these are "super pips" worth about 1.3 times the value of normal pips!). Its a nice win. As you can see from the chart, the pair has since fallen back inside the channel so we did about as good as we could do on this breakout.

Happy Trading!

Trade Result - GBP/JPY +34

For the original trade idea, click here. This trade opened for me at the end of the 15 minute bar at 0415 EDT yesterday when it broke the upper support line and closed at 148.70. It moved down nicely and closed below the second support line at 0530 EDT at 147.73. At that point I was in for a 2/3 position. At about that time as well, the first position was +100 pips so I moved that position to break even and used that stop as my stop for the second position. I put a 20 pip trailing stop on the positions at that time. The trade stopped out at 147.70 after a nice run down and a subsequent retracement. The total for the trade was (1/3 x 100 pips) + (1/3 x 3 pips) = 34 pips total for the trade. Some of you may have done better, depending on how you took your positions and what stops you used, but I am counting 34 pips on our total. I'll take that.

Happy Trading!

Trade Updates - GBP/JPY and EUR/GBP

Both of these trades are currently open and have moved to break even (for the GBP/JPY trade idea, click here. For the EUR/GBP trade idea, click here). The Euro/Pound trade has saved 30 pips so far using a 10 pip trailing stop. The Pound/Yen trade has not saved any pips yet, but I am hopeful. It has broken both support lines and, if it continues down, could make it to the 800 sma. I'll keep you posted.

Happy Trading!

Trade Idea - EUR/GBP

The Euro/Pound pair has been trading in a tight range since the recent run up. I'm prepared to buy on a close of the hour bar above the upper channel line and sell on a close of the hour bar below the lower channel line. This is a typical "Channel Trade" of the type we have done dozens of times before. I'll move to break even at +30 pips (because it is the EUR/GBP and volatility is low with this pair). The initial stop will be the other side of the channel from where we enter. I'll keep you posted as things develop.

Happy Trading!

Trade Idea - GBP/JPY

The Pound/Yen pair has been trending up for quite awhile now. I would like to be ready for a correction when it comes. We all know how volatile and fickle this pair can be, so I'm going to structure this trade a bit differently than usual. Below is the 15 minute chart of this pair which shows two entry lines. My plan is to sell a 1/3 size lot upon the break of the first support line.

Below is an hour chart of the pair showing the second entry line (red) and the base line (the green one, which is our target). When we have entered a 1/3 size lot on the 15 minute chart, I am going to enter another 1/3 size trade if the pair closes below the entry line on the hour chart. When, if ever will I enter the last 1/3 of the trade, you ask? If the pair closes below the 800 sma, I will enter the last 1/3 of the trade and hopefully ride it down to the base line.

The reason I am structuring this trade this way is that the initial stop is going to be at 151.00 and that is a huge stop loss. If we get in on the first 1/3 of the trade and then it goes back up and stops us out (like the AUD/USD just did), we will be out less than 100 pips (at least where things are now). If we get to open the second trade, the stop will move to the original entry price, so we again will have limited risk. I will move the stop for both trade to the second entry line if the trade gets +50 pips. If we get to the 800 sma, I'll post ideas about where the stop should do. For now, we wait.

Happy Trading!

Trade Result - AUD/USD -63

For the original trade idea, click here. This trade opened just like we expected it would. But that is the only thing it did like we expected it would. After closing below the blue entry line at the end of the 2100 EDT bar on Tuesday, May 5, it immediately turned around and headed back up. We entered at 0.7355 and were stopped out yesterday just before noon EDT at 0.7480. As we traded a half sized lot because of the large stop size, I'm counting half the pips lost in the total. Total loss for the trade was 125/2 or -63. I still think this pair will fall. I will keep my eye on it. Until then, we'll look for other opportunities.

Happy Trading!

Trade Result - USD/JPY +58

This trade worked out like I'd planned, just not as soon as I'd planned. Still, I'll take 58 pips any day of the week. This trade opened at the end of the 1200 EDT hour bar on May 4 (yesterday), at 99.00. The trade went down for a bit and looked like it was going to do quite well, then retraced and actually went back up inside the channel for a few hours early this morning. It started moving sideways, up a few pips and then down a few pips until about 3 hours ago. The pair started falling during the 1900 EDT bar and kept on going until it touched the base line, and hitting my limit order. This trade didn't make as much as I'd hoped due to the steepness of the base line, but hey, there are some things we cannot control. Our job is to react to the price and follow where it takes us, not to try to make it do our bidding. So we took 58 pips instead of 88. Its still a win!

Happy Trading!

UPDATE- If you are still in this trade, the pair has fallen through support and has moved down an additional 40 pips. I might put a trailing stop of maybe 20 pips and see where it goes (were I still in the trade, that is).

Trade Idea - AUD/USD

I've been watching this pair for a while now. I think it is getting ready to fall and if it does, it could go 200-300 pips. I will sell the pair if it closes below the blue entry line on the hour chart. I'll move to break even at +50 pips of profit and probably put a trailing stop on the trade. If it gains momentum, it could fall to the 800 sma and, if it goes on, to the green base line. The green line is a continuation of the previous up trend. The stop on this trade will go above 0.7480 (about 100 pips at the current price). If that is too rich for you, trade a smaller lot size.

Happy Trading!

PS. The USD/JPY trade is now open and has been bouncing between the entry at about 99.00 and +20 pip mark. I'll move this trade to break even if it gets to +30 (which is a change from the original trade idea so note it if you are following this trade.)

Trade Idea - USD/JPY

The Dollar/Yen pair has been trading in a channel for the last 30 bars or so (on the hour chart). You can see on the chart to the right that it is consolidating from a fairly good run up. The pair has gained about 400 pips from its most recent lows last Monday. It could be catching its breath for a new run up (weakening the Yen further) or it could fall back and give up some of its recent gains (weakening the Dollar). It really does not matter to us, does it? We'll buy on the close of an hour bar above the upper channel line and we'll sell on the close of the hour bar below the lower channel line. Either way suits us just fine. The stop will be on the other side of the channel and we'll look to move to break even after +50 pips. If it breaks up it could go until it hits resistance at about the 100.75 mark (green target line). If it breaks down it could go to the green trend line or stop and turn back at the 800 sma. If it breaks lower, I'll probably get out at the 800 and be happy with my 50-60 pips. We'll see what happens. I'll update you when there is news on this trade.

Happy Trading!

One-Third of the Year Behind Us

There really isn't anything going on in the market that I'm in love with so I've got no trades planned at the moment. It seemed like the perfect time to stop and reflect on what has been a great 4 months for our trading accounts (presuming you've been following the trades suggested here). Through April, we are up 4,334 pips. That is better than I would have thought we'd do if you'd have asked me on January 1. But it highlights an issue I think we should discuss. Namely, the issue of losses. The run up in the first four months of the year has been wonderful, but it is unreasonable to expect that it will continue unabated. I do not have a crystal ball which tells me only which trades will win. If we continue to trade together through the year, it is inevitable that we will have a few big losers. That is just part of trading and something that every profitable trader must learn to deal with. I suggest preparing for it by reading Trading in the Zone by Mark Douglas. It is an easy read an will help you prepare for what is inevitable if you trade enough. We will be profitable at the end of the year, and I believe, based on my experience trading the methods we trade here, that our profit curve will not decrease significantly, but there will be losing trades. Best we prepare before hand.

Happy Trading!

Trade Result - EUR/USD +198

For the original trade idea, click here. This trade went pretty much as planned (for which we are grateful). I gave the particulars of the trade in my update last night so I won't go into that again. I will say that the importance of waiting for the close of a bar before entering a trade was reinforced on this trade. You'll note that two bars prior to our entry bar the pair looked like it was going to break downward (the 0700 EDT bar on Tuesday). I was watching this bar develop and almost jumped the gun and took the trade early (proving that I am capable of breaking my own rules - naughty me). I'm glad I didn't, and the trade worked out very well. The particulars for this trade were as follows:

Enter Long at 1.3050
Exit Position at 1.3248
Profit = +198 pips

Happy Trading!

Trade Result - USD/CHF +301

For original trade idea, click here. If you read my update of last night you know how the trade developed so I won't go into that again. Last night, after some hesitation the pair fell down to our profit target (the green base line) and we took our profits. The totals for the two positions were:

Position 1: Enter short at 1.1549
Exit at 1.1380
Profit = +169 pips

Position 2: Enter short at 1.1512
Exit at 1.1380
Profit = +132 pips

Total Profit on Trade = +301 pips. I'll take that pretty much any time the market gives it.

Happy Trading!

Trade Updates - USD/CHF and EUR/USD - Both are Open

There is a problem with uploading graphics to blogger, so I won't be able to post a chart with this update. We'll hope it resolves soon and I'll let you see how the trades are doing.

USD/CHF - For the original trade idea, click here. I currently have two positions open on this trade. The first I entered when the pair closed below the first blue entry line on the 15 minute chart at the end of the 0845 EDT bar. I was short the pair at 1.1549. The second position I opened when the pair closed below the second entry line at the close of the 1045 EDT bar. I was short on the second trade at 1.1512. At the moment the stop for both pairs is 1.1449 and we are close to being stopped out (but there is always hope!). Total profit for both positions if closed out at the current stop is +163 pips. I'll update when there is more news.

EUR/USD - For the original trade idea, click here. I entered this trade long at 1.3050 when the hour bar closed above the upper channel line at the end of the 0900 EDT bar. We are currently +60 if we are stopped out at the current stop loss. I'll update when there is more news.

Total for both trades if they are both stopped out is +223 pips. Not bad for a day's work!

Happy Trading!

Trade Idea - EUR/USD

The EUR/USD pair has been trading in about a 60 pip channel since yesterday mid-day EDT. This type of tight range is usually an indication of an imminent break out. I'll buy on a close above or below the defining channel lines as indicated on the chart to the right. I'll move to break even if the pair gets to +50 pips and then likely put a trailing stop on (I favor a 20 pip stop in this type of trade. Initial stop will be the other side of the channel. If the pair breaks up, the profit target will be the 800 sma. If it breaks lower, the pair will probably run into support at about the 1.2900 level, but could break through and if it does might fall as low as 1.2400 before finding any substantive support. I'll keep you posted as things develop.

Happy Trading!

Trade Idea - USD/CHF

The US Dollar/Swiss is moving up and has a couple of nice moves up over its long term trend line (the green base line). It may try to move down to the long term trend line. If it breaks through and closes below the first blue entry line on the 15 minute chat that is a sell trade for me. I'll put my stop just above the recent high (currently at about 1.1600. I may add a second position if the pair moves below the second blue entry line. This is a shorter term trade so I'll move to break even earlier, at about 30 pips of profit.

Below is a 4 hour chart showing the overall trend. The three large moves up from the base line give us an idea that the pair may move down toward it again.

Happy Trading!

Trade Result - USD/CAD +160

I'm on the road today and tomorrow so just a brief post on this tonight. Since the last post updating this trade, this trade has risen and closed us out with a 160 pip gain.

I'll take those kind of pips any time. It made for a nice week. Hope you all got in on it.

Happy Trading!

Trade Update - USD/CAD is still open

Click here for the original trade idea. This trade is still open and currently at about +200 pips. The pair has moved down well all day and is moving toward some resistance at the 1.2000 level. If the pair gets there, I plan to exit the trade. Otherwise, I'll continue to let the trailing stop do the hard work and the trade will end when it ends. We have 160 pips locked in, so we can't do any worse than that (which is a nice feeling going into the weekend). I hope everyone has a great weekend and I'll update when there is more to report.

Happy Trading!

Trade Update - USD/CAD

This trade is open and has moved to break even. The signal to enter this trade was given when the 1000 EDT hour bar broke the lower support line on news that the Bank of Canada would hold off implementing their "quantitative easing" policy. The pair fell off the cliff on that note and has been moving down a bit since. I did not get to check the trade until a bit after the close of the bar, so I got in at 1.2285 (a bit better than the bar's close). The pair moved to break even for me at about 1430 EDT and has edged down a bit since. The purple line is the price the pair has to hit in order to move my 20 pip trailing stop loss. I'll keep you updated as things develop.

Happy Trading!

Trade Result - EUR/USD +80

It's hard to feel too bad about making 80 pips. I've felt better though, about making fewer pips. This trade went pretty much like I expected, we just had a bit too much volatility during the day. I entered this trade on a break of the inside channel at the close of the 0700 EDT hour bar yesterday (see chart to the right). I did this because I knew I would not have the time to watch it yesterday and I suspected that if it took off it might make it to the 800 sma. I was long at 1.2955. As you can see the trade did pretty well early, moving my stop to break even at +50 pips pretty early, then did not do too much until early this morning. The pair rose enough for us to save 80 pips, hitting a high of 1.3086 just before 0700 EDT this morning before falling back and stopping us out at break even just after 0830 EDT. The pair took off again after that brief retracement and is now almost 200 pips higher than our original entry point. I hope some of you were lucky, or smart enough to stay in the trade. I was not able to watch it so I will have to be satisfied with my 80 pips. I expect that this pair may get has high as the 800 sma, which would end up being a total gain of 250 pips or better. Hats off to you, if you are still in.

Happy Trading!

Trade Idea - USD/CAD

The Dollar/Cad has been bouncing off of the 800 sma for a couple of days now. It has had a nice run up (part of which we got) and may be running out of steam. One of two things will happen (as I see it anyway), either the pair will get the strength to break out above the 800 and stay there, or it will fall through the support line I've drawn on the chart to the right. Either way, we'll be ready. I'll buy on a close above or below the descending triangle lines. I'll put my initial stop above or below recent highs or lows (depending on whether I'm long or short). I'll use the 50 pip move to break even with a 20 pip trailing stop. I'll update tonight if something happens.

Happy Trading!

Trade Update - EUR/USD

For the original trade idea, click here. If you recall, I gave two ways to trade this set up. I said you could trade the inner channel break out, perhaps for a half position, then the outer channel, for another half position. I traded the inner channel with an entire lot as my day was going to be crazy and I did not have the time to be watching the trade. I checked it at lunch time and moved to break even and put a 20 pip trailing stop on the trade. The trade is still open and I am up 60 pips so far. The purple line above the most recent highs is the line where my stop will advance another 20 pips. I'll keep you posted.

Happy Trading!

Hindsight on the USD/CHF Trade

On the chart to the right, note what the price did after I closed my position with a slight loss. For those who were not paying attention before, the green base line below was our profit target. The pair came down and landed square on the green base line during the 0900 EDT hour bar. Barely an hour after I closed the trade it moved in my direction 60 pips. Sigh.

Oh well, I'm sure there's a lesson in this somewhere. If I figure it out I'll tell you.

BTW, the EUR/USD trade is open and profitable. I'll report on it in the morning.

Happy Trading!

Closing USD/CHF -4

I'm going to close this trade at -4 pips. It just did not develop as I expected it to and now the risk to reward ratio is too small. We'd only have 60 pips or so of profit if it went to our target, but the stop is still 92 pips. So, I'm calling it and logging it into the books as a small loss. This may come back as a channel trade, but I'll have to take a look at that this evening to see what it looks like.

Happy Trading!

Trade Idea - EUR/USD

This pair is consolidating after a recent drop. It has been trading in a 110 pip or so channel for more than 48 bars (hour bars) now. Also, there is a channel within a channel forming (note the dashed lines). This inner channel has been forming for 12 hours with only one breach (in which case, it did not close below the sub-channel line. I will buy on a close above the upper channel and sell on a close below the lower channel. You might consider entering into a half position on a close above or below the sub channel, then filling out your position if it moves above the main channel line. I will probably trade it that way (providing I'm able to watch it while at work today). If it breaks up I will use the 800 sma as a profit target. If it breaks down, it could go as low as 1.2450. I'll keep you posted.

Happy Trading!

Trade Result - EUR/GBP +20

This trade did not go too badly. When we have this kind of pip profit, I always wonder if I should have closed the trade at +50 or +60, but then realize that if I start doing that we will lose the +300 trades as well. Anyway, this trade opened yesterday at the close of the 0800 EDT hour bar. We were short at 0.8865. After a couple of hours of sideways movement the pair moved down through our target for moving to break even and kept going down, reaching a low of 0.8811 just before 2000 EDT last night. The pair then popped back up and took us out for a +20 pip gain. Not what we'd hoped for, but a profit is always acceptable. I'm watching for another set up on this pair and will keep you posted.

Happy Trading!

Trade Updates - EUR/GBP and USD/CHF

For the original Euro/Pound trade idea, click here. For the USD/CHF trade idea, click here. Both of these trades are currently open short. The EUR/GBP trade has moved in the right direction and we've saved 20 pips already. The USD/CHF trade is not doing as well. After a brief flirtation with a move lower, it has moved back up and we are -20 right now. Time will tell how these work out. I'll update tomorrow with charts.

Happy Trading!

Trade Idea - EUR/GBP

As promised, here is the next Euro/Pound trade idea. We had a trade on where the pair moved up out of a wide channel (click here for that post). Then the pair stalled and formed a new, narrower channel much more to my liking. This channel is about 40 pips wide and has been forming for the last 27-28 hours. I'll buy on a close above, or sell on a close below the channel lines shown on the chart to the right. As usual with this pair, I will move to break even at +30 pips and put a trailing stop on. The initial stop loss will be the other side of the channel. I'll keep you posted.

Happy Trading!

Trade Result - GBP/JPY +340

This trade worked out very well (click here for original trade idea). It has stalled around the 800 sma and took us out on a retracement last night during the 2100 EDT hour bar. We entered this trade at the close of the 2000 EDT hour bar on Sunday the 19th. The pair fell pretty well over the next day or so until it hit resistance at the 800 simple moving average where it started bouncing around. This is not unusual as a lot of traders use the 800 as an exit for a trade and you often see trades start to struggle at the 800. The pair finally hit our trailing stop just after 2100 EDT last night. Total win was +340 pips. I'll take that any day.

This trade may be setting up for a box trade (where it bounces around the 800 several times trying to decide which direction it will go). I'm going to keep an eye on it. For now, I'm just going to enjoy the win and have some more coffee.

Happy Trading!

Trade Result - EUR/GBP +20

I'm closing this trade at +20 pips and putting a new trade idea together for this pair. You'll see why when I post the chart in the idea post. For now, let's take the 20 pips off the table and see what happens with then new set up. For the record we entered long at 0.8875 at the end of the 0300 EDT bar yesterday and closed just before 0615 EDT this morning at 0.8895. More on this pair in a bit.

Happy Trading!

Trade Update - USD/CHF

I have not opened this trade yet, even though it has moved through the blue diagonal entry line. The reason is that the move through was horizontal and not vertical. This is a danger with a steep entry line. I like to see a pair commit to move in a direction (other than horizontal) before I buy or sell. In this case, I've drawn a horizontal entry line and I'll sell on a close below it. If you have already entered, don't worry. I'd place a stop above the recent high (at about 1.1745) and wait and see. At this writing, you are up a pip or two so that's not too bad. I just want to see some more commitment from the pair before I get in.

Happy Trading!

Trade Update - GBP/JPY is still open

This trade is still open. Since I posted this morning the Pound/Yen pair has continued to fall. We are +350 pips (approximately) at the moment and have saved 300 pips. Not a bad day when the worst you can do is make 300 pips. As you can see from the chart, the pair fell until it hit its 800 sma (simple moving average) and has been wandering aimlessly along it for the past few hours. I'll be watching this trade and will update you as things progress.

Happy Trading!