The long candle I pointed out on the 15-minute chart was a “result” of the news release of the Canadian CPI. I put the word in quotes because I don’t trade the news. I trade rigorously off technical indicators. I do believe that news can sometimes threaten an otherwise reasonable trade—the market is so emotional. But the Canadian CPI doesn’t explain why the dollar is largely up against many currencies this morning. Dead cat bounce, anyone? Or something more meaningful? It doesn’t matter. Watch the charts. Trade the charts. Don’t get locked into belief systems that have nothing to do with the charts.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Friday, October 16, 2009
USDCAD--am I trying to be contrarian?
There’s much to write about this morning. But I thought I’d stay with USDCAD since the USD is so reviled right now. Then too, as everyone knows, there’s an inverse relationship between commodity prices and the USD—if commodity prices rise the buck goes down. CAD (the Loonie) is a commodity currency. So the sensible position is to short USDCAD.
Yesterday I wrote that I bought, not sold, the pair at 1.0255. As of late yesterday it was up 80 pips. Overnight it languished in that zone and is now edging up slightly.
If a new trader asked me if they should go long this pair my advice would have to be no, given the egregious downtrend and the negative sentiment that weighs heavily upon the USD’s head. But I explained why I bought:
1) Its lows were attractive as support meaning I could have a tight stop
2) Bullish divergence on the 3-hour chart
3) Bullish candle coming off the bottom
4) Rounding bottom pattern on the 15-minute chart
All patterns are formed because of psychology. The rounding pattern goes from lower lows to the same lows then onto higher lows. It hints that the sellers are losing their dominance. How dollar bears could lose their dominance at a time when everyone, it seems, hates the dollar, is an interesting question.
TICS data is coming out today. “Capital drain promises more pain for the dollar,” was the quasi-poetic headline in the Wall Street Journal this morning—although the word poetry seems oxymoronic when written in the same sentence as the WSJ. So this trade could be taken out on that data alone. But my stop is set to a small profit so if I’m at risk of not being able to finance my next vacation from this trade, I’m also at no risk for losing money.
Bulkowski wrote about rounding patterns in his book, Encyclopedia of Chart Patterns. This one isn’t perfect—I’d prefer to see a steeper drop into the bottom and not the long, slow bleed that the world or Washington is inflicting. Gee, I thought Bush was gone but that’s right, it’s still the same old, same old—can anyone spell Paulson, Bernanke, and Geithner?
Looking at the 15-minute chart below you can see I’ve drawn a trend line into the drop—this is what Bulkowski calls the lead-in. I traced the rounded bottoming. Throwbacks to the trend line are not uncommon. This pair does throwback. It then marches, hopefully not frog marches, up from there. I don’t like the dip below the trend line that recently occurred. Remember, too, this is only a 15-minute chart. It’s sometimes useful for timing entries but it’s not a harbinger of a long-term future. The pair just reached 130 pips in profit so I lightened my position, taking some of my profits. As I said, TICS news may be bad for the dollar. We’ll see.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Yesterday I wrote that I bought, not sold, the pair at 1.0255. As of late yesterday it was up 80 pips. Overnight it languished in that zone and is now edging up slightly.
If a new trader asked me if they should go long this pair my advice would have to be no, given the egregious downtrend and the negative sentiment that weighs heavily upon the USD’s head. But I explained why I bought:
1) Its lows were attractive as support meaning I could have a tight stop
2) Bullish divergence on the 3-hour chart
3) Bullish candle coming off the bottom
4) Rounding bottom pattern on the 15-minute chart
All patterns are formed because of psychology. The rounding pattern goes from lower lows to the same lows then onto higher lows. It hints that the sellers are losing their dominance. How dollar bears could lose their dominance at a time when everyone, it seems, hates the dollar, is an interesting question.
TICS data is coming out today. “Capital drain promises more pain for the dollar,” was the quasi-poetic headline in the Wall Street Journal this morning—although the word poetry seems oxymoronic when written in the same sentence as the WSJ. So this trade could be taken out on that data alone. But my stop is set to a small profit so if I’m at risk of not being able to finance my next vacation from this trade, I’m also at no risk for losing money.
Bulkowski wrote about rounding patterns in his book, Encyclopedia of Chart Patterns. This one isn’t perfect—I’d prefer to see a steeper drop into the bottom and not the long, slow bleed that the world or Washington is inflicting. Gee, I thought Bush was gone but that’s right, it’s still the same old, same old—can anyone spell Paulson, Bernanke, and Geithner?
Looking at the 15-minute chart below you can see I’ve drawn a trend line into the drop—this is what Bulkowski calls the lead-in. I traced the rounded bottoming. Throwbacks to the trend line are not uncommon. This pair does throwback. It then marches, hopefully not frog marches, up from there. I don’t like the dip below the trend line that recently occurred. Remember, too, this is only a 15-minute chart. It’s sometimes useful for timing entries but it’s not a harbinger of a long-term future. The pair just reached 130 pips in profit so I lightened my position, taking some of my profits. As I said, TICS news may be bad for the dollar. We’ll see.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Thursday, October 15, 2009
GBPUSD and USDCAD—not a natural coupling, I know, but those are the two I’m going to write about now.
GBPUSD is hovering in a narrow range for the last several hours, resting, one supposes, from its feverish rise from yesterday’s low of 1.5921 and Tuesday’s low of 1.5708. Currently, it’s at 1.6270 and still over-bought.
With little action and since it blew easily past all near term resistance levels, I decided to look at the monthly chart. Monthly charts help put “big” moves in perspective. Looking at the chart you can see it fell from a high of 2.1104 in 2007 to 1.3655 in March of this year. What a drop! Its high this summer was 1.7072, not even 50% of the drop. For the last four months it has ranged from 1.5707 to 1.7072. With a high today of 1.63 it achieved just over 50% of this range. One wouldn’t be shocked to see it get back to the top of the range but right this moment there’s little in the way of clues as to whether it’s going to attempt that. Also note that it fell beneath its uptrend line last month and hasn’t yet recovered. It has edged just above a symmetrical triangle on the hour chart. Future movements may depend on USD’s performance. Here’s the monthly chart:
GBPUSD is hovering in a narrow range for the last several hours, resting, one supposes, from its feverish rise from yesterday’s low of 1.5921 and Tuesday’s low of 1.5708. Currently, it’s at 1.6270 and still over-bought.
With little action and since it blew easily past all near term resistance levels, I decided to look at the monthly chart. Monthly charts help put “big” moves in perspective. Looking at the chart you can see it fell from a high of 2.1104 in 2007 to 1.3655 in March of this year. What a drop! Its high this summer was 1.7072, not even 50% of the drop. For the last four months it has ranged from 1.5707 to 1.7072. With a high today of 1.63 it achieved just over 50% of this range. One wouldn’t be shocked to see it get back to the top of the range but right this moment there’s little in the way of clues as to whether it’s going to attempt that. Also note that it fell beneath its uptrend line last month and hasn’t yet recovered. It has edged just above a symmetrical triangle on the hour chart. Future movements may depend on USD’s performance. Here’s the monthly chart:
Speaking of the USD, I bought USDCAD this morning at 1.0255. Why, someone that was even reasonably well adjusted might ask since everyone knows the USD is a loser. And it has no friends, either, it seems, certainly no friends in high places.
A look at the three-hour chart shows quite a respectable drop from the September 28th high of 1.0993 to a low of 1.0208. I went to the long term charts after that drop as well and found I really liked that low. It has paused there before, both going down and going up. That means I can have a tight stop. What else. On the three-hour chart I saw bullish divergence. I also liked the way it bounced off the bottom on the next candle. On lower time frames than this, I noted a rounding pattern which is generally bullish—it tells me selling has slowed. So here I am, up 80 pips or so and my stop set at a small profit. It’s sputtering a bit, now. Again, let’s see what tomorrow brings. Here’s the three hour chart.
A look at the three-hour chart shows quite a respectable drop from the September 28th high of 1.0993 to a low of 1.0208. I went to the long term charts after that drop as well and found I really liked that low. It has paused there before, both going down and going up. That means I can have a tight stop. What else. On the three-hour chart I saw bullish divergence. I also liked the way it bounced off the bottom on the next candle. On lower time frames than this, I noted a rounding pattern which is generally bullish—it tells me selling has slowed. So here I am, up 80 pips or so and my stop set at a small profit. It’s sputtering a bit, now. Again, let’s see what tomorrow brings. Here’s the three hour chart.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
GBPUSD
My short was stopped at breakeven. In the overnight session many of the currency pairs have soared, including GBPUSD.
Am I sorry I didn’t stay in my long trade from two days ago that made me 265 pips? After all, I’d be up 462 pips at the high this morning. Well that would be nice, yes. But remember how I exited that trade? I set a profit target that looked reasonable given that the pair might be ranging. The profit target was achieved while I slept. Near the top of what could have been the range I tried a short. When it was possible I moved my stop to breakeven. There’s nothing I did wrong given my information and my interpretation of my information. I didn’t lose money. All one can do is play the market where it is with the information that is available at the moment. Clearly, something has changed. Ergo, I need to change. But that change wasn’t evident yesterday morning. So am I sorry? No. That trade is yesterday’s trade. Today is a new day.
I wrote yesterday that the blue lines I’d drawn on the three-hour chart should act as strong resistance (1.6126/60) and that I’d short at these levels. A look at the charts this morning at 4:40AM EST says, “Not yet.” GBPUSD is pushing higher; momentum is strong. The high is 1.6198.
A three-hour chart I posted in this blog on October 2d had an orange line at 1.62, indicating this would be a “difficult” level. It has poked its nose above this level as I write. Now I need to see what happens next. If momentum starts to slow down, if candles begin to show indecision on lower time frames, I may sell. If not, I can’t buy until there is some sort of retracement. Regardless, the chart will eventually provide a clue. Here’s the three-hour chart:
As I wrote the above, the five-minute chart is starting to show some hesitation. I’ll be watching it.
Here’s the three hour chart.
Am I sorry I didn’t stay in my long trade from two days ago that made me 265 pips? After all, I’d be up 462 pips at the high this morning. Well that would be nice, yes. But remember how I exited that trade? I set a profit target that looked reasonable given that the pair might be ranging. The profit target was achieved while I slept. Near the top of what could have been the range I tried a short. When it was possible I moved my stop to breakeven. There’s nothing I did wrong given my information and my interpretation of my information. I didn’t lose money. All one can do is play the market where it is with the information that is available at the moment. Clearly, something has changed. Ergo, I need to change. But that change wasn’t evident yesterday morning. So am I sorry? No. That trade is yesterday’s trade. Today is a new day.
I wrote yesterday that the blue lines I’d drawn on the three-hour chart should act as strong resistance (1.6126/60) and that I’d short at these levels. A look at the charts this morning at 4:40AM EST says, “Not yet.” GBPUSD is pushing higher; momentum is strong. The high is 1.6198.
A three-hour chart I posted in this blog on October 2d had an orange line at 1.62, indicating this would be a “difficult” level. It has poked its nose above this level as I write. Now I need to see what happens next. If momentum starts to slow down, if candles begin to show indecision on lower time frames, I may sell. If not, I can’t buy until there is some sort of retracement. Regardless, the chart will eventually provide a clue. Here’s the three-hour chart:
As I wrote the above, the five-minute chart is starting to show some hesitation. I’ll be watching it.
Here’s the three hour chart.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Wednesday, October 14, 2009
GBPUSD
GBPUSD
So after yesterday’s successful trade, how will I approach GBPUSD today?
Equity futures were bidding up early and now that the US equity markets have opened, the Dow and S&P are slightly up. This usually does not bode well for the oft-maligned USD. Looking at my three-hour point and figure chart (P&F), I see that there is still a bit of room for GBPUSD to rise if it ranges within the area I’ve highlighted. I’ve pasted a picture of that chart below the candle one. The pair is in a downtrend on the shorter time frames. The three-hour candle chart has interesting features. First, the pair didn’t quite achieve a minor resistance level. It could rise to the blue lines that I’ve marked as a strong resistance zone but it hasn’t happened yet. Second, the candles have upper shadows. These are more apparent on a one-hour chart (not shown). Third, it has broken a steep, short-term uptrend line. This is not a big deal because it could be dropping down a bit to catch its breath before it pushes up. But it isn’t showing great strength as represented by RSI or candle size. The candles aren’t tall like the first one that pushed off yesterday’s morning’s bottom. Finally, it could be forming a Gartley pattern that, if it develops, will be bearish. I sold which is marked by the little triangle. I’ve already moved my stop to break even. We’ll have to see what unfolds. In any case, here are both the three-hour candle chart and the three-hour P&F chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
So after yesterday’s successful trade, how will I approach GBPUSD today?
Equity futures were bidding up early and now that the US equity markets have opened, the Dow and S&P are slightly up. This usually does not bode well for the oft-maligned USD. Looking at my three-hour point and figure chart (P&F), I see that there is still a bit of room for GBPUSD to rise if it ranges within the area I’ve highlighted. I’ve pasted a picture of that chart below the candle one. The pair is in a downtrend on the shorter time frames. The three-hour candle chart has interesting features. First, the pair didn’t quite achieve a minor resistance level. It could rise to the blue lines that I’ve marked as a strong resistance zone but it hasn’t happened yet. Second, the candles have upper shadows. These are more apparent on a one-hour chart (not shown). Third, it has broken a steep, short-term uptrend line. This is not a big deal because it could be dropping down a bit to catch its breath before it pushes up. But it isn’t showing great strength as represented by RSI or candle size. The candles aren’t tall like the first one that pushed off yesterday’s morning’s bottom. Finally, it could be forming a Gartley pattern that, if it develops, will be bearish. I sold which is marked by the little triangle. I’ve already moved my stop to break even. We’ll have to see what unfolds. In any case, here are both the three-hour candle chart and the three-hour P&F chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Keep a Journal
Yesterday morning I wrote that I bought GBPUSD amidst all the bad news of its decline. I did so because it dipped to polarity (actually a bit below) but there were signs it was not going lower. The trade hit its target this morning at 1.6001. I bought at 1.5736. My profit was 265 pips. Not bad for a trade that looked fairly obvious.
It’s important to point out, though, that while the pips came fast and easy, they didn’t come by magic. They didn’t come by luck. They didn’t come because of some obscure method which has been whispered down through the ages and for which I paid $15,000 to learn.
The pips came because I do the work. I study my charts. I draw my significant lines. I calculate confluence zones. They came because I’ve built a strong habit of needing to see at least three reasons to take a trade. These three things can come from various things—support and resistance, candle or bar behavior, patterns, fib levels, Elliott Wave, anything that I have reasonable faith in as a technical analysis tool. But there has to be at least three present.
I’ve long jotted down the reasons I was taking a trade in my journal. The journaling keeps me honest and it’s the number one piece of advice I offer to traders. Keep a journal. Print the screen shot. Then you have something to go back to and study if you find your trades aren’t working out. It’s also a nice record of when they do. When you write down the reasons for taking a trade your trades will get better over time. You can no longer fool yourself about what and why you’re doing. It’s true that these days I take some trades where I don’t write first. As I go along my eye seems to get better. Or maybe it’s just reflex based on the rigor I practiced during the last few years. Regardless, I still jot down the reasons for the majority of my trades. And so should you.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
It’s important to point out, though, that while the pips came fast and easy, they didn’t come by magic. They didn’t come by luck. They didn’t come because of some obscure method which has been whispered down through the ages and for which I paid $15,000 to learn.
The pips came because I do the work. I study my charts. I draw my significant lines. I calculate confluence zones. They came because I’ve built a strong habit of needing to see at least three reasons to take a trade. These three things can come from various things—support and resistance, candle or bar behavior, patterns, fib levels, Elliott Wave, anything that I have reasonable faith in as a technical analysis tool. But there has to be at least three present.
I’ve long jotted down the reasons I was taking a trade in my journal. The journaling keeps me honest and it’s the number one piece of advice I offer to traders. Keep a journal. Print the screen shot. Then you have something to go back to and study if you find your trades aren’t working out. It’s also a nice record of when they do. When you write down the reasons for taking a trade your trades will get better over time. You can no longer fool yourself about what and why you’re doing. It’s true that these days I take some trades where I don’t write first. As I go along my eye seems to get better. Or maybe it’s just reflex based on the rigor I practiced during the last few years. Regardless, I still jot down the reasons for the majority of my trades. And so should you.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
Tuesday, October 13, 2009
Sometimes you need to ignore the news
I am convinced that most traders would be better off if they’d turn off CNBC, stop scanning news, and start trading their charts based on plain old, classical technical analysis. Oh sure, you want to be aware of and careful around major economic news announcements. But otherwise the noise from news can result in information overload at best and distract and keep you out of good trades at worst.
Here’s an example.
Yesterday one bit of constant news was that the pound was taking a beating along with the weak dollar. The pound dropped to a four-month low against the dollar and a six-month low against the Euro. This morning I woke up around 3 AM EST as I sometimes do. It’s a nice time to trade—so quiet and peaceful here in Florida while London is gearing up. While flipping through the shorter time frame charts, I noticed the pound had slipped beneath a daily support line I had drawn. Here’s the daily chart showing where the level has proved to be both support and resistance, something that’s known as polarity. I have removed my trade from view so as to give a clear look at the chart alone.
Am I a contrarian? Some will think so. I’m not. Much of the time the crowd is right, after all. I am quite sure I’ll be shorting the pound soon. But this was a nice little trading opportunity. So I took it.
Here’s an example.
Yesterday one bit of constant news was that the pound was taking a beating along with the weak dollar. The pound dropped to a four-month low against the dollar and a six-month low against the Euro. This morning I woke up around 3 AM EST as I sometimes do. It’s a nice time to trade—so quiet and peaceful here in Florida while London is gearing up. While flipping through the shorter time frame charts, I noticed the pound had slipped beneath a daily support line I had drawn. Here’s the daily chart showing where the level has proved to be both support and resistance, something that’s known as polarity. I have removed my trade from view so as to give a clear look at the chart alone.
Many traders, influenced by news and the belief that the pound was in real trouble would stay away or worse, jump in with a short. On the shorter time frame though, 15-minutes and then 5-minutes, I noticed some interesting things.
Looking at the 15-minute chart below, one can see the lower shadows indicating the market was rejecting those lower levels. You can also see divergence between price and RSI. The divergence was more pronounced on the 5-minute chart. The pair had experienced a significant fall, causing a lot of news. It was swooning below its daily support line. Yet the pair has been in an uptrend since early in the year. I bought, of course. It’s another of those trades where, yes, there is risk it could continue down, but I could set a tight stop. So here we are at 1:15 PM EST with 154 pips of profit. I’ve lightened by half my position and the rest is stopped at a point that will provide a 6o pip profit. I may move it up soon. The point is this—don’t be afraid of a falling pair if you can find reasons to buy on a shorter time frame. Most falls are not free falls forever. It just doesn’t work that way. To be honest, I expected to grab 50 pips or so from this trade before it started falling again. So it has done better than expected. To be honest a trade like this can fail. I’ve certainly had them do so and will try to remember to post the next one that does. But that’s why you set a tight stop. Here’s the 15-minute chart:
Looking at the 15-minute chart below, one can see the lower shadows indicating the market was rejecting those lower levels. You can also see divergence between price and RSI. The divergence was more pronounced on the 5-minute chart. The pair had experienced a significant fall, causing a lot of news. It was swooning below its daily support line. Yet the pair has been in an uptrend since early in the year. I bought, of course. It’s another of those trades where, yes, there is risk it could continue down, but I could set a tight stop. So here we are at 1:15 PM EST with 154 pips of profit. I’ve lightened by half my position and the rest is stopped at a point that will provide a 6o pip profit. I may move it up soon. The point is this—don’t be afraid of a falling pair if you can find reasons to buy on a shorter time frame. Most falls are not free falls forever. It just doesn’t work that way. To be honest, I expected to grab 50 pips or so from this trade before it started falling again. So it has done better than expected. To be honest a trade like this can fail. I’ve certainly had them do so and will try to remember to post the next one that does. But that’s why you set a tight stop. Here’s the 15-minute chart:
Am I a contrarian? Some will think so. I’m not. Much of the time the crowd is right, after all. I am quite sure I’ll be shorting the pound soon. But this was a nice little trading opportunity. So I took it.My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
Yesterday I posted that I bought AUDUSD when it hit the bottom of a channel. I commented that it was an easy trade at the channel bottom. That trade worked in that it not only went back to the top of the channel but has since broken above. It’s up 112 pips as I write this.
On the hourly chart below you can also see where I took a second position this morning when it dropped back to the top of the channel. Why did I feel OK taking a second position?
One reason is that the pair is in an overall uptrend. Trading is about probability and if a pair is in an uptrend the likelihood is that the trend will continue. It’s the line of least resistance as I believe Jessie Livermore said. A second reason is that this was a smaller trade size and I had the first, larger one in profit enough to cover any small loss I might take on this one. My initial stop loss was just below the upper channel line although I have now moved it to breakeven. Third, I liked the way that RSI didn’t drop too much on the pullback. That said to me that momentum was still there. . Fourth, and finally, the bearish candle ended at the channel top with no upper wick and the following bullish candle was strong. The two together may form some sort of double bottom. I’m still not thrilled with the break of the trend line yesterday on the short tern chart but for now this is the right position to be in. Here’s this morning’s hourly chart:
On the hourly chart below you can also see where I took a second position this morning when it dropped back to the top of the channel. Why did I feel OK taking a second position?
One reason is that the pair is in an overall uptrend. Trading is about probability and if a pair is in an uptrend the likelihood is that the trend will continue. It’s the line of least resistance as I believe Jessie Livermore said. A second reason is that this was a smaller trade size and I had the first, larger one in profit enough to cover any small loss I might take on this one. My initial stop loss was just below the upper channel line although I have now moved it to breakeven. Third, I liked the way that RSI didn’t drop too much on the pullback. That said to me that momentum was still there. . Fourth, and finally, the bearish candle ended at the channel top with no upper wick and the following bullish candle was strong. The two together may form some sort of double bottom. I’m still not thrilled with the break of the trend line yesterday on the short tern chart but for now this is the right position to be in. Here’s this morning’s hourly chart:
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
Monday, October 12, 2009
AUDUSD allows a quick long entry
Here on the hourly chart you can see how the AUDUSD allowed for a buy. When I see these setups I trade them. The risk is small. The range of this channel is only 60 pips so if it bounces back down from the top you won’t make a lot of pips. But depending on your philosophy, 20, 30, or so pips may be good. I’d prefer more. That means I’ll keep my stop at just over breakeven and lighten by a third at 50 pips. Remember, this pair is in an uptrend and broke above the psychological .90 level last week. I don’t like it breaking below trend lines on shorter term charts but we have no real evidence it’s heading down at this point. This could be a bull flag which would result in greater highs. Take the easy trades like this where you can set a tight stop. Trading is hard work and it’s nice to catch an easy one sometimes.
Here’s the trade on the hourly chart.
Here’s the trade on the hourly chart.
This type of trading may not be for you and in any case, as I've written often, this isn't a trading recommendation but rather a blog of how I trade.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
EURUSD--Where to from here?
What's next for EURUSD?
The run up that brought lots of profits from March through September is on pause. While this past Friday’s close was 1.4733, the close three weeks ago was 1.4712. A sideways market.
From the point of view of a classical technical analyst, the pair is in an uptrend. No trend line has been violated; no serious level of support breached.
On the weekly chart (see below) the upward trend line is steep, perhaps too steep to easily continue. The last time it was this steep was the run-up from 2007 to 2008. We all know what happened then.
On the monthly chart, the fall from the summer ’08 highs did breach a trend line that began in early 2002 and had nine touches before that violation. The pair is struggling with that old upward trend line now. It poked its head above it briefly in September as well as last week but seems to have the willies about taking up residence there. This is in the 1.47 area, the area I have talked about as resistance for several weeks. Until the Euro closes definitively above 1.4865 (a weekly and ideally monthly close), I can trade it sideways and the range (1.4480 to 1.4845) is respectable, allowing for more than a few pips to be earned by agile traders.
Here’s the hourly chart showing the trade I entered last week. The stop is now a profit stop. Note the pair violating the two trend lines. Note the negative divergence with RSI. Finally, RSI is staying at or below 50%. The pair needs to drop below the lower shadows I pointed out on the prior candles in order to continue its drop. It could bounce from here as well. The thing is, if you’re in a short, lighten up a bit or close, depending on your style. I’ve lightened a bit. If it fails from the uptrend line (this is, it bumps its head on it and starts down again, dipping below the lower shadows), one could look for another short entry. Or if it climbs back towards 1.48 one could short. Remember though, you want to trade where your stops can be tight.
The run up that brought lots of profits from March through September is on pause. While this past Friday’s close was 1.4733, the close three weeks ago was 1.4712. A sideways market.
From the point of view of a classical technical analyst, the pair is in an uptrend. No trend line has been violated; no serious level of support breached.
On the weekly chart (see below) the upward trend line is steep, perhaps too steep to easily continue. The last time it was this steep was the run-up from 2007 to 2008. We all know what happened then.
On the monthly chart, the fall from the summer ’08 highs did breach a trend line that began in early 2002 and had nine touches before that violation. The pair is struggling with that old upward trend line now. It poked its head above it briefly in September as well as last week but seems to have the willies about taking up residence there. This is in the 1.47 area, the area I have talked about as resistance for several weeks. Until the Euro closes definitively above 1.4865 (a weekly and ideally monthly close), I can trade it sideways and the range (1.4480 to 1.4845) is respectable, allowing for more than a few pips to be earned by agile traders.
Here’s the hourly chart showing the trade I entered last week. The stop is now a profit stop. Note the pair violating the two trend lines. Note the negative divergence with RSI. Finally, RSI is staying at or below 50%. The pair needs to drop below the lower shadows I pointed out on the prior candles in order to continue its drop. It could bounce from here as well. The thing is, if you’re in a short, lighten up a bit or close, depending on your style. I’ve lightened a bit. If it fails from the uptrend line (this is, it bumps its head on it and starts down again, dipping below the lower shadows), one could look for another short entry. Or if it climbs back towards 1.48 one could short. Remember though, you want to trade where your stops can be tight.
Thinking about the larger picture, even when one is going to trade short-term, is valuable. Is this a simple pause for breath? Or is it the beginning of a reversal? Ah, the age old question and the question that all the hundreds, if not thousands, of trading techniques and approaches seek to answer.The dynamism that accompanied the push up to 1.60 last year is not present on this rise from March. A look at the weekly RSI shows it isn’t reaching the levels it did last year. Looking at it from an Elliott Wave (EW) perspective, this could be corrective. In some types of corrective waves, as Frost and Prechter write in their book, Elliott Wave Principle, “Momentum indicators reveal an ebbing of the market’s power (i.e. speed of price change, breadth, and in lower degrees, volume).”If this is true it’s a bearish scenario.
As I’ve mentioned before, the weekly chart here looks corrective to me. I’ve traced the corrective zigzag in red. If the pair can’t move definitively above 1.4865 then it’s possible the path forward is down, down, down. Note that since I’m currently trading this as a sideways market, the bounce off the 13-EMA has been a buy point in the past. Here’s the weekly chart:
These are not trade recommendations. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. You have to decide on your own approach to trading. Trading is risky. But you know that already.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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