USD/CHF Trade Idea

Last post I talked about the USD/CHF pair looking like it could move up with an ultimate profit target of has high as 1.22. I opened my trade at 1.0780 yesterday about noon. I am looking for it to push through some resistance at about the 1.1125 level and move up to the neighborhood of 1.1350 before trying to consolidate. I've got a trailer on of about 100 pips so I am in for at least 250 pips of profit and potentially a lot more if things go right. I'll keep my fingers crossed.

I'm also looking for a comeback for the EUR/GBP. The EuroPound pair has had a nice run lately up better than 1800 pips since October 19. It has been retracing for the last day or so and looks to push back up as the Euro strengthens in the international marketplace and the Pound weakens. Its trading at about 0.9325 now. I look for the first profit target at about 0.9425 with an ultimate target of 0.9600. I'll keep you posted if the trade opens (if it moves up through my resistance line and closes above it on the hour chart).

Happy Trading!

EUR/USD Trade Result and New Trade Idea

It seems that, although my inclination of a lower Euro is alive and well, the market has other ideas. Luckily (well, not really luck) I'm ready to go either way with a channel breakout trade like I've been following in my last few posts. The EUR/USD broke upward out of the channel last night about midnight and, after a bit of consolidation, resumed its upward movement just after the open of the London session. All in all, about 300 pips. Not bad, considering it moved in the opposite way I thougt it would.

Another trade I'm watching is the USD/CHF. Its been trading in a downward direction from 18 month highs for the last week or so. I've drawn a trendline following the tops of its hourly trading range and would expect it to break upward at some point to retrace some of what it has lost. I'd look for it to go as high as 1.2050 and then if it continues to show strength on to perhaps 1.2200 (my profit target).

Happy Trading!

Day Trading at Work

If you are a professional and also a trader you know how tough it can be to try to work and trade at the same time. I have yet to figure out the perfect system, but I have worked it out so that, at least during the end of the London session and the beginning of the NY session and not miss out on too much. The problem with trading the Forex is that its a 24 hour market and there are three main cycles the Asian session starting about 7 or 8 pm EST (including Australia, New Zealand, Japan, China, and Hong Kong), the London session starting about 2 or 3 am EST (Great Britain, Germany, Switzerland), and the New York session (U.S., Canada, Mexico, South American countries). Generally, after noon or so, the markets quiet down until the Asian session, so one could watch the markets from 7 pm through until noon the next day. Of course, that is not reasonable. If you are going to work and trade, you have to set some limits.

I start by getting up at 5 am. This allows me to see what has been happening in the early hours of the London session and set up trades for the New York open or monitor trades which opened overnight. I spend 2 hours getting my charts in order and monitoring trades then I go to work. If I am in the office, I open my trading platform and note where my trade positions and orders are. I never set up a trade that I have to watch in real time while at work. I've tried that before and as soon as I set up such a trade, things would go haywire at work and my concentration would be scattered. No. Only trades with wide stops that I can check occasionally to make sure things are working as planned or to close them out if they are not. I try to check the charts at least every half an hour or so just to make sure I'm on track. Once you are used to the system, a quick glance is all it takes to see where you are.

I try to get home between 6 and 7 pm. I like to spend a little time with my daughter (she's 5) before she goes to bed. Once she's tucked in I'll check the Asian session start and see if I need to do anything or how the session start is affecting my trades. All in all I spend about 3 hours a day on trading Forex. This leaves the bulk of my time to practice law (which I enjoy and would not want to give up). I hope this helps you see that trading and professional advancement need not be mutually exclusive.

Happy Trading!

Trading Ideas

In the "you never know how things are going to run" column, last Friday (12/05/08) I posted a trade idea based on a converging triangle pattern in the EUR/USD and stated that I would take the trade whichever way it broke, but that I thought it would break downwards. It did breakout, but up, not down. Its one of those times I don't mind being wrong as it turned me just about 100 pips. The pair broke out on the 8th at the end of the 2 pm bar (I was trading on the hour time frame), dipped back down the rose out of the triangle and hit my trailing stop at 93 pips up. It's moved down a bit off its high and I've adjusted the upper border of the triangle (still converging). I still suspect that the pair will move down at some point and break the trading range, still, I'll take the trade either way.

Another breakout idea, the EUR/CHF has been trading in about a 100 pip range for almost a week. I'd look for a breakout above 1.5650 or below 1.5535. Buy or sell as appropriate. I use the traditional method for placing stops and put them 10 pips or so above or below the most recent high or low prior to the breakout. I move to break even when I've got 25 pips, then put a trailing stop on (usually a 10 pip trailer, more if I'm trading a really volatile pair). I'll report on the trade when I've got more information.

Price Theory

If you've read this blog before, then you know that I am a lawyer by profession, and a trader by avocation. As a lawyer, I've had countless opportunities to see juries in action. You might wonder what juries have to do with trading. Stay with me and I'll explain. Time and time again I've seen a group of 6 or 12 average men and women listen to evidence in a trial, sometimes extremely complex, sometimes simple, and come to the right conclusion. Now its not perfect and I'm sure we can all come up with a few times when the jury system was compromised, but all in all, juries work. The group mind appears to be very capable to sifting through vast amounts of complex information and testimony, throwing out the things that really don't matter, and coming to correct conclusions. It really is fascinating.

Markets run in a very similar way. You have millions of trades every day and each trade is a vote on whether the stock, bond, commodity or currency traded is worth more or less than it was just moments ago. In a very real way, the market is a jury deciding the guilt or innocence (read strength or weakness) in whatever is being traded. This means that the price of any liquid currency or stock is always exactly what it should be (the crux of the Efficient Market Hypothesis) and is perfect based on available information. What makes markets move then? That is a question which could (and probably has) given rise to a vast amount of academic research. My simplistic thought is that markets are living things. There is a constant in-flow of new information that the market reacts to. These reactions are, in very general an simple terms, what move the market.

Why is this important? For many reasons, but what got me thinking about it is that I've started working with MetaTrader4 and am playing with the hundreds of indicators which have been created for it. With very few exceptions, these indicators are simply processed indications of past and present price movements. It seems funny to me that we use processed price to try to divine future prices. I guess I'm more of a purist when it comes to indicators. If price is what we are going to use to try to guess what the prices in the future might be, then any permutation that takes away from the purity of price itself, has to be less helpful. Price tells us all we need to know. Are prices trending? Look at daily and weekly charts. If you can't see a trend, there is not one. Will prices break up or down? Look at how prices have trended, draw support and resistance lines, and wait and see. Indicators like Moving Averages, RSI and MACD only tell you what price has done, not what it will do. They have uses, but truly only in telling us where current price stands compared to historical price. To think otherwise is merely buying in to what brokers, system sellers and others who are only interested in what they can get you to buy, are trying to get you to do.

Want to be different? Want to do better than you've been doing trading with inferior or old information? Here's the secret: Think for yourself. Use price and think for yourself. It really is as simple as that.

Until next time - Happy Trading.

NFP Day

Today is Non-Farm Payroll day. That means that the U.S. Government will release information telling us whether, and how many, jobs were lost or created in November, 2008. Traditionally, this means a pretty big move in the Forex around the time of the announcement (8:30 EST, 13:30 GMT). I've tried all sorts of ideas on how to trade "news" like the NFP, but the bottom line has been that, as a retail Forex trader, I just don't have the access to get into a trade fast enough to beat the big spreads or get fills good enough to really make any money trading news. So, for the most part, I sit it out. I'll see what the market does then look for trades after 9 am or so. It is much safer.

One of the trade set-ups I see developing is a converging triangle formation on the EUR/USD. It is very clear on the weekly chart and pretty clear on the daily. The triangle looks to converge around January 8, 2009, so a trade is likely to take place before that. I will buy or sell depending on whether the pair breaks up or down. My guess is that it will break down and I will look for support at about the 1.1650 level.

Good Trading!

Time and Time Again

The best laid plans . . . To those who are trying to follow this blog, I apologize. I had a personal tragedy in my family which, as the resident attorney, has taken up much of my time. I hope to be more involved in this blog going forward and share with you my thoughts in this down market on how to stay in the game and where I'm putting my money and why.

For the moment, suffice it to say that I am a confirmed Buffetite when it comes to his old saw "Be greedy when others are fearful, and fearful when others are greedy." I'm exercising my greed at the moment and putting some serious $$ in the market. My overall strategy is buy industry groups which will survive this recession (yes, I used the "R" word). Right now that means severely depressed financials, some regional banks like HBAN and BBT and some national powers like BAC and JPM, pharmas like PFE, and some more speculative plays like AOB.

I'm also continuing to work the Forex markets. I'm looking for the USD to continue to strengthen as our economy bottoms, but more than that general feeling, I'm looking at support and resistance for my daily trades.

My next post will be on my support and resistance strategy, which is pretty basic and has worked fairly consistently through the years. I call it my 5 pip strategy, meaning that using 10 to 1 leverage, 5 pips a day ($50 on a $10,000 account) works out to a ridiculous amount of money over the course of a year. Do the math. For those who trade the Forex, do you think 5 pips a day is too much? I'll bet you don't.

See you in a day or two.