I have found few better analogies for the arguments that take place in the trading community over such topics as Elliott Wave, Cycles, etc. than this news story. On Northwest Airlines the pilots lost “situational awareness” and overshot the airport by 150 miles. Why? Because they were apparently arguing about airline policy. Now given that’s probably a great topic to argue about. But it reminds me of the endless arguments that take place among some so-called traders about why the wave count is proving this or why this cycle will absolutely come in at this point or why the USD is dead…Whatever! Sure these can be interesting arguments, at least until we get to the “but you’re not part of the secret society that really understands these things stage.” But just as the pilots should have been doing their job, a trader should do his or her job. Trade the chart. Stop trying to call tops and bottoms. Maintain your situational awareness. The article can be read here: http://www.guardian.co.uk/world/2009/oct/23/northwest-pilots-argument-miss-runway
© 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 23, 2009
EURGBP—Didn't the chart tell us about this move yesterday?
EURGBP dropped down to .9003 which was close enough to my posting yesterday about possibly buying. Nice little beanstalk action this morning “because” of the news from the UK of its GDP contraction. Isn’t it amazing how these unknown events seem to validate what the chart is already saying?
Pennants don’t behave exactly the same way as flags do but one can usually pickup pips if they don’t fail. This one has a lot going for it in that you’re trading with the trend (upwards). Be wary if it comes back to the breakout line. There are two reasons to watch this trade. First, is because the pair achieved my P&F price target I wrote about yesterday. I’d be surprised to see another large move upward. But surprise is not an unknown reaction when you trade. It only means I’ll watch the charts carefully. Second, and more disturbing, is that the Euro may be overvalued. Now that’s no news in any kind of trading—assets get overvalued. But there are negative indications on the Euro chart, at least there were earlier this week. I’ll have a better feel for this over the weekend which is when I do my in-depth analysis. Meanwhile, I’ll enjoy a nice move that was well-told on the charts.
Pennants don’t behave exactly the same way as flags do but one can usually pickup pips if they don’t fail. This one has a lot going for it in that you’re trading with the trend (upwards). Be wary if it comes back to the breakout line. There are two reasons to watch this trade. First, is because the pair achieved my P&F price target I wrote about yesterday. I’d be surprised to see another large move upward. But surprise is not an unknown reaction when you trade. It only means I’ll watch the charts carefully. Second, and more disturbing, is that the Euro may be overvalued. Now that’s no news in any kind of trading—assets get overvalued. But there are negative indications on the Euro chart, at least there were earlier this week. I’ll have a better feel for this over the weekend which is when I do my in-depth analysis. Meanwhile, I’ll enjoy a nice move that was well-told on the charts.
Thursday, October 22, 2009
USDCAD - Can this dog hunt or not?
Obviously USDCAD experienced quite a steep fall yesterday. My trade was up 257 pips when I posted yesterday and it went above that. Should I have closed out at what was the obvious resistance I wrote about? Maybe. Remember though, I’ve found a style that works for me. I don’t have huge losses to blog about because I search hard for good entry points. I wrote two days ago that I had lightened my long in this pair at 200 pips profit. The rest of the trade was profit stopped at 100 pips which is what I made yesterday. I’m not crying.
But then the question is what to do next. As you see from the hourly chart below, I went long again with two buys. Why? One reason is that it looks to me as though the market is still expanding. Neither price nor RSI has broken their uptrend lines. I wrote yesterday about the deadly nature of orthodox broadening tops. The pair did fall out of what looks like one. But notice that it has now climbed back in (Can I have another chance, Mommy?) instead of hitting its head on the lower line and falling away. That could be a bull flag which would lead to more upside.
Still, I’m not at complete ease with this pair. There’s a lot of sentiment against the USD. My longs are up about 75 pips and I’ve moved the stops to breakeven. We’ll have to see where it goes from here. Here’s the hourly chart:
But then the question is what to do next. As you see from the hourly chart below, I went long again with two buys. Why? One reason is that it looks to me as though the market is still expanding. Neither price nor RSI has broken their uptrend lines. I wrote yesterday about the deadly nature of orthodox broadening tops. The pair did fall out of what looks like one. But notice that it has now climbed back in (Can I have another chance, Mommy?) instead of hitting its head on the lower line and falling away. That could be a bull flag which would lead to more upside.
Still, I’m not at complete ease with this pair. There’s a lot of sentiment against the USD. My longs are up about 75 pips and I’ve moved the stops to breakeven. We’ll have to see where it goes from here. Here’s the hourly 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.
Yo, Euro! How about that 1.50? Take 2.
Bunting its way back to 1.50, the pair reached 1.5047 yesterday. I imagine this resulted in a Bronx cheer from those who held “no touch options” at 1.50. Get over it. The game continues.
A look at the hourly chart as of 8AM EST gives me no signal at the moment. There is negative divergence between price and RSI. 1.50 is still resistance since it hasn’t closed above it on a daily (and ideally weekly) basis. All I can do now is watch. A pop above 1.50 will result in me watching the short term charts closely. A drop to the 1.4950 area would result in the same. The question though is how much upside there is at this point. Nothing goes straight up. Plus there are disturbing signs on the longer term charts as I wrote earlier this week. How I’d love to see a drop back to 1.45! Unless it was a rout, I’d be buying with both hands. Here’s the one hour chart:
A look at the hourly chart as of 8AM EST gives me no signal at the moment. There is negative divergence between price and RSI. 1.50 is still resistance since it hasn’t closed above it on a daily (and ideally weekly) basis. All I can do now is watch. A pop above 1.50 will result in me watching the short term charts closely. A drop to the 1.4950 area would result in the same. The question though is how much upside there is at this point. Nothing goes straight up. Plus there are disturbing signs on the longer term charts as I wrote earlier this week. How I’d love to see a drop back to 1.45! Unless it was a rout, I’d be buying with both hands. Here’s the one 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.
EURGBP--possible buy?
Flipping through charts this morning, I was taken by the EURGBP. If you look at the daily chart you can see the sharp rise that reached .9805 and then dropped sharply to a low of .8400. In September I wrote about how the pair had left a simple quadruple top on my point and figure chart (P&F) and I posted the chart. This entry is at http://forexreflections.blogspot.com/2009_09_13_archive.html
The pair rose to .9412 earlier this month and has dropped from there. The price objective I calculated from the P&F chart was .9420. It didn’t quite make it but that’s close enough.
When you look at the daily chart you can see the drop, the leveling off, and finally the turn upwards. I couldn’t draw a rounded line but if I could you’d see the rounded bottoming which usually signals diminished selling. It hesitated at the downtrend line which is not unusual (these can serve as resistance just as horizontal lines can), then smartly rose above and has pulled back. Now what? It’s possible it could rise to its highs again if sentiment stays bullish toward the Euro (key word there is “if”) and bearish toward the GBP. However there’s no way to know that right now.
What caught my eye this morning was the pennant on the daily chart along with price near an upward sloping trend line. This is in conjunction with the general rounding you can see on the condensed chart. It might be worth a buy in the .8940/9000 range. Had I been awake earlier this morning I would have bought the slight dip. I wasn’t. Now I’ll just keep an eye on it on the shorter time frame charts.
Be aware that if you do go long this pair you need to be patient. Its average true range (ATR) is a skimpy 89 pips a day, although it has turned up a bit lately. In order to determine if a buy is worth while one would also have to study the shorter term charts. Here are both the condensed daily chart and an expanded one to better show the up-sloping trend line.
The pair rose to .9412 earlier this month and has dropped from there. The price objective I calculated from the P&F chart was .9420. It didn’t quite make it but that’s close enough.
When you look at the daily chart you can see the drop, the leveling off, and finally the turn upwards. I couldn’t draw a rounded line but if I could you’d see the rounded bottoming which usually signals diminished selling. It hesitated at the downtrend line which is not unusual (these can serve as resistance just as horizontal lines can), then smartly rose above and has pulled back. Now what? It’s possible it could rise to its highs again if sentiment stays bullish toward the Euro (key word there is “if”) and bearish toward the GBP. However there’s no way to know that right now.
What caught my eye this morning was the pennant on the daily chart along with price near an upward sloping trend line. This is in conjunction with the general rounding you can see on the condensed chart. It might be worth a buy in the .8940/9000 range. Had I been awake earlier this morning I would have bought the slight dip. I wasn’t. Now I’ll just keep an eye on it on the shorter time frame charts.
Be aware that if you do go long this pair you need to be patient. Its average true range (ATR) is a skimpy 89 pips a day, although it has turned up a bit lately. In order to determine if a buy is worth while one would also have to study the shorter term charts. Here are both the condensed daily chart and an expanded one to better show the up-sloping trend line.
© 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 21, 2009
Yo, Euro! How about that 1.50?
Yesterday, I wrote that the one hour chart one showed some bearish and indecisive candles as well as a break of a short term trend line in price and RSI. “You can learn a lot just by watching,” Yogi Berra said. I agree. Euro reached a low of 1.4883 from the high of 1.4995. The ones who bought at 1.4995 (and there were some) are probably most unhappy.
What do things look like now? The hourly chart shows it didn’t quite reach the upward, short-term support line. This might be bullish but it hasn’t bounced off with great exuberance. On the plus side, the RSI hasn’t dropped too much. Notice the proportion of the tops under each small arrow. If there’s a third one, it may indicate more weakness and would hint at a correction. That would support my Elliott Wave count yesterday—that the overall move from March is a corrective wave two with an ending diagonal. If the pair dipped to 1.45 there’s reason to buy (the 13 EMA on the weekly chart, which the pair largely respects, is at 1.4543). But we’re “livin’ in the future,” as the Boss sings on his Magic CD. All I can do this minute is watch. If it drops below the trend line, I’ll be observing candles and lower time frames. If it breaks above and definitively closes over 1.50, then it may be a buy. Here’s the hourly 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.
What do things look like now? The hourly chart shows it didn’t quite reach the upward, short-term support line. This might be bullish but it hasn’t bounced off with great exuberance. On the plus side, the RSI hasn’t dropped too much. Notice the proportion of the tops under each small arrow. If there’s a third one, it may indicate more weakness and would hint at a correction. That would support my Elliott Wave count yesterday—that the overall move from March is a corrective wave two with an ending diagonal. If the pair dipped to 1.45 there’s reason to buy (the 13 EMA on the weekly chart, which the pair largely respects, is at 1.4543). But we’re “livin’ in the future,” as the Boss sings on his Magic CD. All I can do this minute is watch. If it drops below the trend line, I’ll be observing candles and lower time frames. If it breaks above and definitively closes over 1.50, then it may be a buy. Here’s the hourly 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.
Hangin' with USDCAD
USDCAD is up 257 pips as I write this at 6:45 AM EST. Looking at various time frames, I see that on the 5-, 15-, and 30-minute charts as well as on the 1- and 3-hour charts, the pair’s RSI has fallen from overbought. On the daily chart it’s so far from overbought as to not merit a mention. Falling from overbought isn’t a bad sign, necessarily, but it implies some loss of momentum. Not unreasonable after a rapid climb. One needs to catch one’s breath, after all.
The pair has ranged from 11AM EST yesterday to 1AM EST today, before climbing a bit more. Latecomers joining the party before it ends? Could be. Or it could be healthy consolidation. A look at the hourly chart doesn’t show any real concern. It’s maintaining a short term trend line although I do wish the angle wasn’t so steep. It shows what might be a bull flag. But this could also be an orthodox broadening top which is deadly after an uptrend. There are no tall upper wicks on the candles that can cause alarm. Indeed, the candle before this one had a nice long downward shadow that hints it was rejecting prices at the lower levels. I have 100 pips locked in as a profit stop and I lightened some after 200 pips profit yesterday. I’ll watch this pair for now but not intently. There’s nothing I can do to affect it. Here’s the hourly chart and see the three hour chart below it:
On the three hour chart, you can see this pair is at a resistance level. It’s probably true that there are a lot of big players with more money on the table than I’ll ever see that don’t want this pair ascending past certain levels. If I wasn't already in the trade I wouldn't go long here. I'd look for a pullback or watch to see it safely clears this resistance level. If that’s a bull flag then there’s more upside. But let’s not get ahead of ourselves. Let’s watch and see if this dog hunts. Here's the 3-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.
The pair has ranged from 11AM EST yesterday to 1AM EST today, before climbing a bit more. Latecomers joining the party before it ends? Could be. Or it could be healthy consolidation. A look at the hourly chart doesn’t show any real concern. It’s maintaining a short term trend line although I do wish the angle wasn’t so steep. It shows what might be a bull flag. But this could also be an orthodox broadening top which is deadly after an uptrend. There are no tall upper wicks on the candles that can cause alarm. Indeed, the candle before this one had a nice long downward shadow that hints it was rejecting prices at the lower levels. I have 100 pips locked in as a profit stop and I lightened some after 200 pips profit yesterday. I’ll watch this pair for now but not intently. There’s nothing I can do to affect it. Here’s the hourly chart and see the three hour chart below it:
On the three hour chart, you can see this pair is at a resistance level. It’s probably true that there are a lot of big players with more money on the table than I’ll ever see that don’t want this pair ascending past certain levels. If I wasn't already in the trade I wouldn't go long here. I'd look for a pullback or watch to see it safely clears this resistance level. If that’s a bull flag then there’s more upside. But let’s not get ahead of ourselves. Let’s watch and see if this dog hunts. Here's the 3-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.
Tuesday, October 20, 2009
Dig USDCAD
OK, this past Friday when my USDCAD went up they said it was the “result” of the Canadian CPI. This morning I bought again, having been profit stopped out of the trade from Thursday. Now it’s up over 200 pips, the “result” of the dovish Bank of Canada statement keeping their interest rates on hold. As though the US is not keeping interest rates on hold? As though Canada isn’t a commodity currency and commodities are up and the USD is down and nothing will ever change that according to most?
Well, I won’t worry about it. It may drop again; it may not. I just lightened up a bit to take some profits and have set my stop at a profit stop. Let the markets do what they will. Let the “experts” say why. I will continue trying to trade what I see. I will continue showing you some of those trades in the hopes that those who sincerely want to learn how to trade and who are willing to do the work will see that one can earn pips. All it takes is discipline and the willingness to trade what you see. Not what you want to see; what you see. You’ll be wrong sometimes. But if you have good reasons for going into the trade, select entries where your stops can be small, and cultivate patience you will gain more pips than you will lose.
Looking at the hourly chart for the USDCAD this morning you can see some of the reasons I bought again. It halted at a minor support level; the candles were getting smaller and more indecisive. On the five-minute chart I saw bullish divergence between RSI and price. My stop could be small. While I wasn’t happy it had retraced more than 50%, it wasn’t a lot more than that. It seems to be basing, looking for a bottom. Of course it could drop below parity someday soon but I’m trading today based on what I see now. Here’s the hourly chart:
Well, I won’t worry about it. It may drop again; it may not. I just lightened up a bit to take some profits and have set my stop at a profit stop. Let the markets do what they will. Let the “experts” say why. I will continue trying to trade what I see. I will continue showing you some of those trades in the hopes that those who sincerely want to learn how to trade and who are willing to do the work will see that one can earn pips. All it takes is discipline and the willingness to trade what you see. Not what you want to see; what you see. You’ll be wrong sometimes. But if you have good reasons for going into the trade, select entries where your stops can be small, and cultivate patience you will gain more pips than you will lose.
Looking at the hourly chart for the USDCAD this morning you can see some of the reasons I bought again. It halted at a minor support level; the candles were getting smaller and more indecisive. On the five-minute chart I saw bullish divergence between RSI and price. My stop could be small. While I wasn’t happy it had retraced more than 50%, it wasn’t a lot more than that. It seems to be basing, looking for a bottom. Of course it could drop below parity someday soon but I’m trading today based on what I see now. Here’s the hourly 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.
An EW Look at the Euro
I haven’t done an Elliott Wave (EW) count on the EURUSD daily chart since 25 September so it’s time, especially now that Euro has left its extended, excruciating stay in the 1.47 range. Last night it made a high of 1.4995. It’s so close to 1.50, a big psychological number. “Yahooey,” I imagine the Euro bulls are saying. “Just a bit longer in the saddle and we’ll be there!”
You can’t blame them. After all, there are some nice targets over 1.50. Besides which, all the people who have been selling short (not only Euro but in the equity markets and other currencies) will be proven definitively and absolutely wrong. Those of little faith, those who believe a rising equity market really does require rising volume, and finally, those stubborn coots who just won’t go along with the big boys in Washington/London/Wherever saying, “Dow’s up, kiddos, get over it. What recession? Sure, the Emperor has new clothes.”
OK, enough foolishness. Euro is up, past the point many people believed it would go. Updating my EW count, I still believe this might be wave C of a correction from the move down from July ’08 highs. In other words, a primary wave two. A wave two can correct all the way to wave one’s origin. That means 1.6041. Oh, to find a way to buy if that’s true. It could also fall short of that. Or this might be the top and it will now turn down. Could go higher; could go lower. That sounds about as definitive as most so-called trading advice, LOL.
One interesting thing is that it could be forming an ending diagonal. According to Frost and Prechter in their book, Elliott Wave Principle, an ending diagonal, “occurs primarily in the fifth wave position at times when the preceding move has gone ‘too far too fast,’ as Elliott put it.” (p.37). Sometimes these end with a “throw-over” which means a break of the upper line of the diagonal. If it is an ending diagonal we can expect a retreat to at least the beginning of the formation which would be in the 1.45 range. Who would find this unreasonable? Not I.
Here’s the thing—as a trader I’m looking for trades that have a probability of making money. So I might try a short sometime soon given that:
1) 1.50 is a psychological resistance level
2) This could be an ending diagonal. If not, it’s a range bound movement
3) The current uptrend is very steep and it’s difficult to maintain such steep angles
Before we go to shorter time frames, here’s the daily chart:
Now that I’ve taken a look at the daily chart, I want to examine the shorter time frames. It’s there that one can sense what may be unfolding. Looking at the one hour chart one sees some bearish and indecisive candles as well as a break of a short term trend line in price and RSI. I’ll be watching this pair. Of course, a definitive break above 1.50 would mean a buy. Here’s the one 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.
You can’t blame them. After all, there are some nice targets over 1.50. Besides which, all the people who have been selling short (not only Euro but in the equity markets and other currencies) will be proven definitively and absolutely wrong. Those of little faith, those who believe a rising equity market really does require rising volume, and finally, those stubborn coots who just won’t go along with the big boys in Washington/London/Wherever saying, “Dow’s up, kiddos, get over it. What recession? Sure, the Emperor has new clothes.”
OK, enough foolishness. Euro is up, past the point many people believed it would go. Updating my EW count, I still believe this might be wave C of a correction from the move down from July ’08 highs. In other words, a primary wave two. A wave two can correct all the way to wave one’s origin. That means 1.6041. Oh, to find a way to buy if that’s true. It could also fall short of that. Or this might be the top and it will now turn down. Could go higher; could go lower. That sounds about as definitive as most so-called trading advice, LOL.
One interesting thing is that it could be forming an ending diagonal. According to Frost and Prechter in their book, Elliott Wave Principle, an ending diagonal, “occurs primarily in the fifth wave position at times when the preceding move has gone ‘too far too fast,’ as Elliott put it.” (p.37). Sometimes these end with a “throw-over” which means a break of the upper line of the diagonal. If it is an ending diagonal we can expect a retreat to at least the beginning of the formation which would be in the 1.45 range. Who would find this unreasonable? Not I.
Here’s the thing—as a trader I’m looking for trades that have a probability of making money. So I might try a short sometime soon given that:
1) 1.50 is a psychological resistance level
2) This could be an ending diagonal. If not, it’s a range bound movement
3) The current uptrend is very steep and it’s difficult to maintain such steep angles
Before we go to shorter time frames, here’s the daily chart:
Now that I’ve taken a look at the daily chart, I want to examine the shorter time frames. It’s there that one can sense what may be unfolding. Looking at the one hour chart one sees some bearish and indecisive candles as well as a break of a short term trend line in price and RSI. I’ll be watching this pair. Of course, a definitive break above 1.50 would mean a buy. Here’s the one 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.
Tuesday AM AUDUSD 15 min chart
Let’s begin by looking again at AUDUSD
AUDUSD dropped out of its upward channel overnight. It came within 1 pip of hitting one of my profit stops (I have two long positions open, both profit stopped).
The doji evening star I identified late yesterday seems to have had a little impact but the pair isn’t giving up yet. It will most likely climb back to the channel (around .9299 now). There, the bulls and bears will have to battle it out again. It needs to break .9300 in order to continue its rise. If it can’t do so, then it may be time to lighten longs more than I’ve already done so.
On the positive side, it never fell into oversold. It also never reached support of .9225 before it turned again. This is why I won’t close my longs completely. One just doesn’t know. Beside which, there’s time enough for a short if it falls some more. Here’s the 15-minute chart this morning:
AUDUSD dropped out of its upward channel overnight. It came within 1 pip of hitting one of my profit stops (I have two long positions open, both profit stopped).
The doji evening star I identified late yesterday seems to have had a little impact but the pair isn’t giving up yet. It will most likely climb back to the channel (around .9299 now). There, the bulls and bears will have to battle it out again. It needs to break .9300 in order to continue its rise. If it can’t do so, then it may be time to lighten longs more than I’ve already done so.
On the positive side, it never fell into oversold. It also never reached support of .9225 before it turned again. This is why I won’t close my longs completely. One just doesn’t know. Beside which, there’s time enough for a short if it falls some more. Here’s the 15-minute chart this morning:
© 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.
Monday, October 19, 2009
End of day look at AUDUSD - 15 min chart
AUDUSD slowly inched its way above the channel’s upper trend line this afternoon. Yet, all doesn’t look assured for its unfettered climb to yet higher highs. It looks as though it has formed a doji evening star on the 15-minute chart.
A doji evening star pattern occurs after an uptrend and consists of three candles:
1) The first is a long bullish candle
2) The second is a doji, a candle where the open and close are the same
3) The third candle is a bearish one that closes well into the body of the first candle
The pattern has more significance if it occurs near resistance or at a psychologically significant number. At .9294 highs, it’s close to the round number of .9300. Also troubling is the dip below the short term trend line both in price and RSI. It’s also at the top of that channel. None of this is reason to head for the hills and abandon longs; nor is it reason to sell, baby, sell. One can lighten a long position as I just did. Mostly, though, it’s a hint to watch and observe. Remember, this pair is in an uptrend. The bulls are not going to give up without a fight. It’s a commodity currency and we all know that commodities seem to be going up, not down.
But…if commodity prices slow this pair could take it as a chance to catch its breath and prepare for another push upwards. I noted recently that I have a price projections into the mid-90s but I also noted last week that it wouldn’t surprise me to see a pullback to .8800. As usual, we’ll have to see. Here’s the 15-minute chart:
A doji evening star pattern occurs after an uptrend and consists of three candles:
1) The first is a long bullish candle
2) The second is a doji, a candle where the open and close are the same
3) The third candle is a bearish one that closes well into the body of the first candle
The pattern has more significance if it occurs near resistance or at a psychologically significant number. At .9294 highs, it’s close to the round number of .9300. Also troubling is the dip below the short term trend line both in price and RSI. It’s also at the top of that channel. None of this is reason to head for the hills and abandon longs; nor is it reason to sell, baby, sell. One can lighten a long position as I just did. Mostly, though, it’s a hint to watch and observe. Remember, this pair is in an uptrend. The bulls are not going to give up without a fight. It’s a commodity currency and we all know that commodities seem to be going up, not down.
But…if commodity prices slow this pair could take it as a chance to catch its breath and prepare for another push upwards. I noted recently that I have a price projections into the mid-90s but I also noted last week that it wouldn’t surprise me to see a pullback to .8800. As usual, we’ll have to see. Here’s the 15-minute 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.
AUDUSD still in uptrend
I bought AUDUSD early this morning. The reasons are obvious—the pair is in an uptrend and although I think it’s a bit top heavy, so far all longs have been good longs. As long as commodity prices keep rising, AUDUSD, being a commodity currency will probably do well. I do expect something more of a pullback than what we’ve seen to date but I don’t have an indication it’s going to happen today, especially with the stock market rallying.
On the hourly chart the pair is at the top of a channel. There’s no indication of which way it will go so I just lightened my first long somewhat. Notice that I have a second position. To understand this position you need to look at the five-minute chart which shows it closing about a minor resistance line. This allowed me to take the risk of adding a position but I used a tight stop. As is usual when I put on a second position, the position size is much smaller (in this case 1/10 the size of the original position).
Here’s the hourly chart:
On the hourly chart the pair is at the top of a channel. There’s no indication of which way it will go so I just lightened my first long somewhat. Notice that I have a second position. To understand this position you need to look at the five-minute chart which shows it closing about a minor resistance line. This allowed me to take the risk of adding a position but I used a tight stop. As is usual when I put on a second position, the position size is much smaller (in this case 1/10 the size of the original position).
Here’s the hourly 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.
Contrarianism
It’s a bit of a slow morning as of 7:30Am EST. I’m still in my long USDCAD trade plus a few others.
Last week I bought GBPUSD which rose smartly. On Thursday I bought USDCAD at a low. It’s currently languishing around the plus 80 pips line. One could ask, am I a contrarian? I am not. At least not most of the time. Let’s face it—if the trend is up then people are buying; if the trend is down people are selling. Sideways trading is fine if a pair isn’t trending. But one usually makes more money on any given trade when a pair starts to trend and the trader rides it up or down as the case may be. So, if there is a strong trend, one wants to buy on reactions or sell on rallies.
Most traders these days would rather undergo Chinese Water Torture than be long the USD. By the way, there’s not a lot of evidence the Chinese ever actually engaged in this. Houdini probably came up with the name—he had a trick called the Chinese Water Torture Cell. But, as I demonstrated on Friday’s chart, a trade was there and I took it. It didn’t matter to me that I was long the USD.
What is a contrarian anyway? People often believe it means one buys new lows or sells new highs, regardless of where they may occur on a chart. This is not an effective way to trade and the drain on your account over time if you do this can feel like the Chinese Water Torture or Death by a Thousand Cuts which was an ancient Chinese torture technique. Actually, the relentless drop of the USD must feel like death by a thousand cuts to some people, but never mind that.
Humphrey Neill was one of the first to write about contrarianism. He wrote that the crowd is actually correct most of the time; it’s at turning points where they’re wrong. The reason the crowd doesn’t catch turning points is because “habits push our minds into ruts—and it takes a considerable amount of force and time to get out of ruts.” Neill suggested that when everyone is saying the same thing, one should at least try to make the case in the other direction. When you do this you may come up with reasons why the crowd is wrong. Then, if you can find an entry with a tight stop, going contrary may be profitable.
That is true. Asking what could go right for the USD can be a useful exercise and one that I engaged in this weekend. But even if you can come up with reasons why the crowd is wrong, being a successful contrarian is difficult.
First, bottoming (and topping), as I’ve written frequently, is usually a process. It’s not an event. This can mean the process takes place over weeks if not months. Second, a strong, perhaps even irrational bull or bear market, can take prices beyond what seems rational. So even if there are good reasons for a change in trend, the timing can get many traders into trouble.
One reason why going contrary to a longer, prevailing trend works is once a pair has dropped precipitously and everyone has jumped on the wagon, there are few left to push the trend any further. When prices go down people sell. When everyone has sold there’s nobody left to do so. Prices can turn and go up. Trends, even strong ones, do reverse. There are also such things as a dead cat bounce.
I have no idea what the future holds for the USD. Neither does anyone else although the theories abound and the talking heads expound. But theories and talking heads don’t make money for the average trader. The questions I seek to answer are more modest, more manageable, and more profitable. That is, has the pair reached a level of support (if falling) or resistance (if rising) that has been historically significant? There are many ways to determine significance—it could be a polarity level, a confluence of Fib levels, Gann’s 50% level, etc. Note, the question is not whether price is at a new high or new low but rather is the level it is at significant? Second, are there any signs, from a technical analysis point of view, that hint a trade may be profitable in the other direction? I look for at least three, usually. This is why I got into both trades I mentioned and both have been profitable.
Again, being up 100, 200, or even 500 pips is nothing compared to what you can gain if you get in on a strong trend. But these can make for very good weeks when prevailing trends seem to have shifted sideways.
© 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.
Last week I bought GBPUSD which rose smartly. On Thursday I bought USDCAD at a low. It’s currently languishing around the plus 80 pips line. One could ask, am I a contrarian? I am not. At least not most of the time. Let’s face it—if the trend is up then people are buying; if the trend is down people are selling. Sideways trading is fine if a pair isn’t trending. But one usually makes more money on any given trade when a pair starts to trend and the trader rides it up or down as the case may be. So, if there is a strong trend, one wants to buy on reactions or sell on rallies.
Most traders these days would rather undergo Chinese Water Torture than be long the USD. By the way, there’s not a lot of evidence the Chinese ever actually engaged in this. Houdini probably came up with the name—he had a trick called the Chinese Water Torture Cell. But, as I demonstrated on Friday’s chart, a trade was there and I took it. It didn’t matter to me that I was long the USD.
What is a contrarian anyway? People often believe it means one buys new lows or sells new highs, regardless of where they may occur on a chart. This is not an effective way to trade and the drain on your account over time if you do this can feel like the Chinese Water Torture or Death by a Thousand Cuts which was an ancient Chinese torture technique. Actually, the relentless drop of the USD must feel like death by a thousand cuts to some people, but never mind that.
Humphrey Neill was one of the first to write about contrarianism. He wrote that the crowd is actually correct most of the time; it’s at turning points where they’re wrong. The reason the crowd doesn’t catch turning points is because “habits push our minds into ruts—and it takes a considerable amount of force and time to get out of ruts.” Neill suggested that when everyone is saying the same thing, one should at least try to make the case in the other direction. When you do this you may come up with reasons why the crowd is wrong. Then, if you can find an entry with a tight stop, going contrary may be profitable.
That is true. Asking what could go right for the USD can be a useful exercise and one that I engaged in this weekend. But even if you can come up with reasons why the crowd is wrong, being a successful contrarian is difficult.
First, bottoming (and topping), as I’ve written frequently, is usually a process. It’s not an event. This can mean the process takes place over weeks if not months. Second, a strong, perhaps even irrational bull or bear market, can take prices beyond what seems rational. So even if there are good reasons for a change in trend, the timing can get many traders into trouble.
One reason why going contrary to a longer, prevailing trend works is once a pair has dropped precipitously and everyone has jumped on the wagon, there are few left to push the trend any further. When prices go down people sell. When everyone has sold there’s nobody left to do so. Prices can turn and go up. Trends, even strong ones, do reverse. There are also such things as a dead cat bounce.
I have no idea what the future holds for the USD. Neither does anyone else although the theories abound and the talking heads expound. But theories and talking heads don’t make money for the average trader. The questions I seek to answer are more modest, more manageable, and more profitable. That is, has the pair reached a level of support (if falling) or resistance (if rising) that has been historically significant? There are many ways to determine significance—it could be a polarity level, a confluence of Fib levels, Gann’s 50% level, etc. Note, the question is not whether price is at a new high or new low but rather is the level it is at significant? Second, are there any signs, from a technical analysis point of view, that hint a trade may be profitable in the other direction? I look for at least three, usually. This is why I got into both trades I mentioned and both have been profitable.
Again, being up 100, 200, or even 500 pips is nothing compared to what you can gain if you get in on a strong trend. But these can make for very good weeks when prevailing trends seem to have shifted sideways.
© 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.
Subscribe to:
Posts (Atom)