Thursday, December 30, 2010

Happy New Year


This is my last post for 2010. I wish everyone a happy and healthy New Year. May your best trade from 2010 be your worst trade in 2011. See you January 3

2010 Blog Trade Results +37,780 pips

For 2010, I earned 37,780 pips from trades I discussed in this blog. These were trades I blogged about as I was preparing to place them or shortly after I did place them. How different from so-called "gurus" who talk about their successful trades only in retrospect. These were also all trades based on generally accepted technical analysis methods. There were no secret, mystical methods—in fact, there are no secret, mystical methods. Most of the pips were from trades taken between January and October as I began winding down my trading in November and only took a few trades in December.

Until July, I was posting my results monthly but I stopped doing so for several reasons. First, I could never resolve how to calculate pips for the blog when I scaled out of positions in pieces. I was lumping all pips together as though they were separate trades but that didn’t sit well with me. In some trades, I establish more than one position but this is extra work when blogging about trades. I asked for advice from readers but never received a method I thought was better.

Another reason I stopped was because I believed it was putting the emphasis in the wrong place. If one has solid reasons for getting into a trade, that trade is a good trade regardless of whether it makes money or not. Most people do trade to make money, of course. The reality, though, is that a trading approach is one key to that. The other key is discipline. One isn't a bad trader if they use a solid approach and apply discipline (including getting out of a losing trade on terms that were defined in advance).

Regardless, many of the trades I blogged about were good trades, both technically and from the perspective of earning pips.

Business Plan—Performance

Any business plan worth its salt needs a section devoted to performance objectives and evaluation.

Objectives are what you hope to achieve with your trading. Objectives should be specific and measurable. Most traders don't bother to spell them out beyond a vague desire to "make money" or "beat the market." Some say they don't want to lose money. Each of those statements is vague. How much money? What will you do to be sure you don't blow up your account in trying to make money? How will you measure your results?

It's important to spell out objectives in the business plan. Perhaps it's to double one's money in a year. As ridiculous as that might sound, once someone knew that was their objective they'd have to figure out the best way to achieve that goal without risk of losing their capital. Doing so would require evaluating the trading methodology they used, understanding its probability for success, performing a thorough risk assessment (including all the things I wrote about in yesterday's blog), and being sure they followed the discipline to execute their plan successfully.

A reasonable objective for a new trader might be to evaluate the use of several different trading methods. They could take very tiny positions using different approaches and at the end of the year might have enough information to determine the approaches that are best for them. I personally consider paper trading a waste of time. Using real money, even if it is in small amounts, brings the trader's psychology into the picture. Another objective might be to practice a specific daily routine. This is one of my objectives—I have a list in my trading plan of what I should be doing each day. The list ranges from a self-assessment (for example, if I'm under great stress, that may impact my judgment and decision making) to updating my Point & Figure charts to calculating my daily P&L statement. I also have a checklist for weekly and monthly tasks. Another objective might be to earn a specific percentage this year. The point is that one should think through and decide what their specific objectives are.

It's also important to include how one will evaluate one's performance. This is easy with specific objectives. For example, each quarter I specify a profit target for each of the months in the upcoming quarter. I take into consideration such factors as whether I have a large amount of business travel (thus taking my focus off trading) or whether it's a slow market month (August and December are usually light months). At the end of each month, I know what my results are and I can compare them to plan. If there's a variance—positive or negative—I want to know why. I do the analysis to find out. I keep a checklist of the things I'm supposed to do each day and mark each task off. It's easy enough to scan them each week to keep track of whether I'm doing what I'm supposed to be doing. If not, why not?

I also include objectives in my plan for education and sometimes include specific books I plan to read. For example, in 2011 I know I'll be attending the MTA conference in May—it's in my plan to do so. Again—it's easy to measure my performance against such specific goals.

All of this takes work. Is it worth it? Yes, if you want to be a good trader. Good trading is the result of hard work. Hard work begins with planning that work.

© Dianne Fecteau, 2010. 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.

Wednesday, December 29, 2010

Risk—Bruce Kovner Quote

In line with the post I just made on risk, I think that Bruce Kovner's words in Jack Schwager's book Market Wizards (2006) are very useful:

I would say risk management is the most important thing to be well understood.
Undertrade, undertrade, undertrade is my second piece of advice. Whatever you
think your position ought to be, cut it at least in half (p. 82).

Business Plan—Risk

If I could use only one trading rule it would be this: always calculate and assess the risk of a trade before getting into it. How much risk one is willing to take on should be part of the thought that goes into a business plan.

People define risk differently. Some use the amount of loss per trade; others use drawdown or such things as variability of returns or price volatility. I first define risk as the amount of money I will lose at the price I will get out of the trade. If that price is touched—whether because of news spikes or because I was wrong in my analysis or because of some unforeseen event—then I take the loss. That amount is my risk for any given trade. This is the first number I look at when deciding whether to place a trade and I look at it regardless of how confident I am that the trade is a good one. No matter how skillful my analysis (and I believe I am skillful), I do not have a crystal ball and cannot predict with 100% certainty what the market will do. Nobody can. So my first question to myself is can I stand to lose this amount of money.

Only after I know what I can lose do I look at the potential return. The potential return has to be at least two times and better three times the risk taken. If my risk is $1,000, I want to see a potential return of $2,000 to $3,000 and preferably more. If that return is not possible, I don't want to be in the trade. Notice that I use dollars since dollars will affect my mood most. This is true for most traders. If one uses tiny positions, a trade can move against you by hundreds of pips with no significant dollar impact.

How much you are willing to risk should be in your business plan. Sometimes traders know the amount but don't realize when they've taken on additional risk of the same type. For example, assume a long position in GBPUSD with a potential $1,000 risk of loss. If one goes long in another correlated pair—one that tends to move in the same direction as the Cable—then that is two trades. If they each carry a potential for a $1,000 loss, the risk of loss is $2,000.

What this implies is that in assessing how much risk one is comfortable with for each trade, one must also look at the overall account equity. It's common to hear that one shouldn't risk more than 1% of the account. However, even a couple of correlated trades can push it well above that. Part of my daily routine—another part of my business plan—is to review correlation. Another need is to determine the correct position size.

For example, let's say I decide to go long the AUDUSD today, 12/29 at 1.0174. That would be very dumb given this illiquid market but this is only an example. I buy 100,000 units. Where do I place a stop? The low yesterday was 1.0073 so let's use 1.0069 as a stop. I do not necessarily recommend this approach to stop setting but stops are a different subject. My potential loss is $1,048 (105 pips) and I use margin of $2,034.84 for a trade value of $101,742. In order to have even a 1:2 risk/reward ratio, the pair would need to move up 210 pips to 1.0384. But there's another problem. How big is my overall account? If it's small, i.e. $10,000, I'm tying up 20% of it in one trade. Is that a good idea? Probably not, although a definitive answer would require knowing what type of trading methodology one was using and considering the probability of success of any given trade. When one begins to factor in such issues as that, one can see how risky this entire proposition is, even though it looks as though I'm near my risk tolerance of $1,000. Reflecting on all these factors provides real insight into why so many people lose all their money when they begin trading. Using a hypothetical account size of $10,000, one would want to reduce the above position from 100,000 units to possibly 50,000. I still think this is too high for small accounts but it's a better risk position (including potential loss) than the original. But even with this reduced amount, it would only take a string of 20 losses (not impossible) to wipe out the account. I repeat—this is an example only. Nobody should be trading these illiquid markets even if the AUDUSD is at a potential breakout point. It could also be at resistance.

So risk is multifaceted. It begins with the potential loss on any given trade. It extends to overall size of the account, leverage, and size of the trade. It also includes the probability of your trading methodology. All aspects should be in your business plan. The time to decide upon acceptable risk is in advance of deciding upon any particular trade.

© Dianne Fecteau, 2010. 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, December 28, 2010

Business Plan—Trading Methodology

Most people have some sort of trading methodology, i.e. they buy or sell on moving average crossovers or when there's divergence. Readers of this blog know that I use a range of methods but that buy or sell decisions usually require at least three pieces of evidence. For example, I've taken many a short when a pair has reached resistance, there is negative divergence with RSI, and the candle behavior is bearish, i.e. a doji. This doesn't guarantee success but my experience and knowledge tell me that this is a high-probability trade. In addition, my stop can be tight. So using three pieces of evidence is one approach I will continue in this year's trading plan.

Another part of my approach (that is in my business plan) is the research I do. At the end of each week, I do a weekly analysis of the currency pair; at the end of a month, I do a monthly analysis. This helps me in identifying potential trade set-ups, particularly concerning support and resistance or pattern behavior. I have no plans to change this approach. It has proven successful. It requires work, yes, but that's the price of good trading.

One thing I'm formalizing in my plan this year is to identify harmonic patterns on a more rigorous basis. These range from such things as the simple Gartley to the more esoteric bat, crab and butterfly patterns. I'm not sure these work but the reality is that I've been dabbling in them—sometimes I make a conscious effort to look for them; sometimes I don't. That haphazard approach does nothing for my trading because I have little confidence in the patterns when I see them. Only if I begin to track the results of these patterns, will I be able to say whether I believe they're useful for me or not. I'm also introducing more rigorous analysis of cycles this year. Sometimes I refer to cycles in my blog but it has been random. Cycle analysis is either useful or it isn't. This is the year I'm going to do the work to see which it is for me.

Similarly, I'm going to stop bothering with such Gann techniques as eighths in price moves and things such as this. Honestly, if you do enough calculations you can prove any number and that makes the whole mess a waste of time. Fib numbers do seem to have some validity—or maybe it's because they're well-known and so traders tend to respect them. The 50% rule seems to have some validity. These things are easy to calculate—I have the spreadsheets set up or I can draw them on the chart. They're worth doing. But the more esoteric techniques—they're not worth it.

Such things as the Gann wheel also seem to be a waste of time in the spot Forex market. I wasted hundreds of hours this year and last fooling with this and it never helped one pip. I'm dumping my wheel in my office cleanup this week. Let the people that use it produce a valid statistical study. Believe me, they won't because they can't. Notice that I'm excluding it for spot Forex—I've not tried it in any other market.

All of this has to do with time management in one sense—how can I best use my valuable time. It also has to do with methodology. I've found things that work. Those deserve my time and attention. It doesn't mean I won't continue to study and learn but that comes under the section of my plan I devote to education. I've also found things I want to try and incorporate this year so formally determining these goals and allowing the time to do so is important to my plan.

One thing I'm adding to my plan this year is a discussion of different approaches for different markets. Trending markets behave differently than sideways markets; quiet markets behave differently than volatile markets. I intuitively know this and adapt on the fly but I'm going to give more thought to how to assess this and list the approaches that work best in each.

© Dianne Fecteau, 2010. 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.

Business Plan

Do you have a business plan for your trading? Many small traders believe they don't need one or don't want to spend the time creating one. I disagree. A business plan forces you to think about where you want to go—what you want to achieve—with your trading. You can set monthly or quarterly goals for your trading, instead of just winging it. This results in a way to evaluate your performance each month. It also lets you decide on the best methodology to use in your trading. A plan lets you decide how much capital you're going to use to fund your accounts. It lets you decide on the best markets to trade given your goals. A business plan structures your thinking, letting you make decisions about a daily routine and the environment you need to be successful. You can figure out how you'll eliminate distractions and what data you need to make decisions. This results in stronger discipline.

Each year I look at my plan and adjust it based on my experience in the prior year. Over the next couple of weeks, I'll be posting some of the components of my plan.

© Dianne Fecteau, 2010. 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.

Thin Holiday Markets

The market is very thin with little liquidity. This hasn't stopped the sell-off in the USD or the ongoing appreciation of the CHF against all currencies. The best approach for small traders is to stand aside until normal market volume resumes in early January. Barring that, one could take very short-term, intraday trades but that's certainly not something I'm going to do.

© Dianne Fecteau, 2010. 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.

2010 Highs and Lows

Here are the year's highs and lows to date for the following pairs. The date of the high or low is in parenthesis:

AUDUSD High: 1.0185 (11/5); Low: .8066 (5/25)
EURGBP High: .9152 (3/1); Low: .8067 (6/29)
EURJPY High: 134.36 (1/11); Low: 105.43 (8/24)
EURUSD High: 1.4581 (1/13); Low: 1.1876 (6/7)
GBPJPY High: 150.74 (1/4); Low: 126.45 (10/25)
GBPUSD High: 1.6460 (1/19); Low: 1.4229 (5/20)
USDCAD High: 1.0856 (5/25); Low: .9929 (4/21)
USDCHF High: 1.1732 (6/1); Low: .9434 (12/28)
USDJPY High: 94.99 (5/4 and 5/5); Low: 80.22 (11/1)

© Dianne Fecteau, 2010. 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.

Wednesday, December 22, 2010

Happy Holidays


Best wishes for a wonderful holiday season. The blog will return Dec. 28th.

Tuesday, December 21, 2010

EURUSD—weak

With last Friday's close, Euro logged three consecutive weeks with a close below the 10- and 20-EMA on the weekly chart, currently at 1.3383 and 1.3365 respectively. Last week's candle was bearish with its long upper shadow. If you're not already short from last week (Friday high was 1.3360), this probably isn't the time to jump in but shorting on rallies seems the way to go. Support is at 1.3097/94 (200 daily SMA and Monday's low), 1.30 (psychological) and then the Nov. 30 low of 1.2969. Resistance is 1.3360/65 and 1.3398. Only if the pair closes above 1.34 would the near term outlook improve. On the weekly chart, you can see the pair is near the bottom of a channel—it could be starting down after the ABC correction but one can't rule out the possibility of one last upward push. RSI has broken below its upward trend line; once price does, then one should see further lows. The pair is in an overall downtrend. I don't think much of anything will happen for the rest of the year but keep stops tight regardless of direction.

Here’s the weekly chart:











© Dianne Fecteau, 2010. 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.

EURGBP—not giving up yet

This pair is interesting simply because despite the Euro's woes, it doesn't seem to want to collapse against the British pound. I've been long but bailed out yesterday at +77 pips because of it nearing the .382 retracement of the move from .8941 to .8335 and because of the holidays.

On the weekly chart, there was an outside candle last week with a range from .8345 to .8556 (8566 is the .382 retracement). The low in November was .8340; in December, to date, it has been .8334. The pair is trying to base and trying to overcome that initial resistance of .8566. Beyond that is resistance at .8595 and .8638 (the 50% retracement of 8941 to 8335 and just above the 50% retracement of 9150 to 8068). The 10- and 20-EMA on the weekly chart are within pips of each other at .8515/19 and the monthly 10- and 20-EMA are identical at .8532. Clearly, this current price zone is significant resistance. Failure is probable but what will be more intriguing is if it doesn't fail. That would signal potential gains to .8759 and .8941. However I'd expect middling trading until after the start of the new year.

© Dianne Fecteau, 2010. 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.

AUDUSD—near top of range

AUDUSD opened 2010 at .8927, reached down to a low of .8067 in May, and then climbed to a high of 1.0183 in November. It then fell to .9537. The rally from there, many of which believed would result in a swing high to 1.03 or thereabouts has stalled. Some might speculate that a thin holiday market is responsible. However, note that last week's candle was bearish with its long upper shadow reaching up to 1.0029. In addition, if you look at a three-hour chart, you see that the rally from .9537 looks corrective (three waves up) and that the entire move is taking place within a rectangle. Be that as it is, the pair is still in an overall uptrend for the year.

Trading in an illiquid market can be dangerous. However, the pair looks like a possible short around current levels (9988 as of 8:19AM EST). Weakness appears if the pair is unable to climb above 1.0005 (downtrend line from the 1.0183 high) so the stop can be tight. Initial support is at .9889, .9825/12, .9767/25 and .9650. A close below .9537 (the last swing low) would open support at .9406, .9222, and .8770 (strong). Above 1.0005 is additional resistance at 1.0029 and 1.0183. Above 1.0183 opens up prior price projections but let's see if it can get above there before discussing those again.

I looked at average monthly moves in price for AUDUSD during December going back to 1980. There are some outliers (i.e. 850 pips in 2008 and 525 in 2003) but the range is generally below 400. The range so far this month has been 492 and it's nearer the top of that range than the bottom. Data like this can be useless—I certainly wouldn't bet the farm on its reliability but it gives some sense of range.

Here's a three-hour chart:












© Dianne Fecteau, 2010. 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.

Monday, December 20, 2010

No posts today

I'll be making some posts tomorrow, Tuesday, but then winding down for the rest of the holiday week.

Friday, December 17, 2010

Thin holiday markets

Be careful trading over the next couple of weeks. The markets lack liquidity. This can make for extreme moves that don't mean much technically but that can play havoc with your stops. Best is to sit it out and wait for next year. One thing I'll be doing over the next couple of weeks is working on my business plan which I address each year. This is a plan for trading because trading is my business. I'll be sharing parts of it with you over the next couple of weeks.

USDCHF—weekly

USDCHF managed to hold its weekly uptrend line with the swing low to .9560 earlier this week. Today it has pushed one pip lower which doesn't seem like much but it's clearly trying to base. On the three-hour chart (not shown), there has been a robust push off this low so we'll have to see if the pair can pull it off. On the monthly chart (not shown), the high this month is within a couple of pips higher than last month. The best case scenario—basing and then moving on up to 1.0154/68, 1.0330 and above—is only going to succeed if the USD index moves up. Support is at .9558 and .9463. RSI has dipped slightly below its uptrend line on the weekly chart. If price follows then the lows may indeed come back into play.

Here's the weekly chart:











© Dianne Fecteau, 2010. 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.

USD Index—Daily

The USD index has managed to hold above its 77.98 low this week and while this is good news for the USD it also raises the bar a bit in that it now should hold above 78.82, Tuesday's low. On the daily chart below one could argue that an ABC correction is in place. Nearby resistance is 81.44 and a move over 83.60, the next resistance, would be very bullish for the buck. Again, though, with the thin holiday markets, it's not clear this will happen next week. Support is 77.98 and 75.63.

Here's the daily chart:



















© Dianne Fecteau, 2010. 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.

EURGBP—higher

EURGBP managed to move higher this week and with the range of .8526 to .8553 it will be an outside week on the weekly chart. It's also managed two higher highs and one higher low between so this is positive. I took partial profits on my long at .8548. Had I been actively trading this week I might have closed it completely and entered a short. Yet today it has managed to push a bit higher. It looks possible that the pair will hit its next resistance at .8598 and possibly beyond at .8638 and .8731. Above that would be bullish—we'll have to see. In the illiquid holiday markets it seems unlikely the pair could gain that kind of traction.

Support is at .8450/30 and .8334 (doji low from 12/3 week)

Here's the daily chart:












© Dianne Fecteau, 2010. 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.

EURUSD—nowhere week

Euro has gone absolutely nowhere this week staying within a 316 pip range which is essentially the same range it has been in since the beginning of the month. On Tuesday there was a spike high to 1.3498; the low was 1.3182 yesterday and it's hovering not too far above there as of this morning. Bears would like to see a weekly close below 1.31 which seems a bit out of reach; bulls, on the other hand, would swoon over a weekly close above 1.35. This is out of reach.

The spike high on Tuesday is reminiscent of the Euro's spike high Dec. 18, 2008 (1.4721). On a weekly basis, it's causing a long upper shadow which is essentially bearish. A close below 1.3164 (last week's low) would result in an outside weekly candle. This may set the stage for further moves down. As I wrote Monday, I still believe the downward angle on the weekly chart is a bit steep so I'd like to see a rally to short.

Where might that rally go? The most recent high was 1.3359. You can see on the daily chart below that the Euro hasn't managed to break above a former uptrend line. That line is about 1.3392. Certainly a move to 1.35 would warrant a short position.

Support is at 1.3150, 1.3103, and 1.2969/33 (a fib and a speed line that has previously served as support).

Here's the daily chart:













© Dianne Fecteau, 2010. 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, December 14, 2010

No posts until Friday because of business travel and I'm fighting a cold. I'll do a weekly wrap-up on Friday. Meanwhile be careful with trading as the markets are becoming more illiquid because of the upcoming holidays.

Monday, December 13, 2010

USD Index Monthly

The shadow of November's candle on the monthly chart below dipped below the uptrend line which is not good news. That particular low of 75.63 came on the day the Fed announced the latest news of quantitative easing (November 4th). It does need to hold and better would be holding the low of 77.98 from later in the month. However, as we're in the thin holiday markets extreme moves can happen without meaning much technically.

There's a lot of indecision out there. The USD is poised technically to go higher yet the last three days of last week were basically sideways movement. Nonetheless, with the strong support and the strong November candle, one would expect from the monthly chart that the next move will be up. Here's the chart:



















© Dianne Fecteau, 2010. 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.

EURUSD—weekly

The high for the week just ended was 1.3425 just a dozen pips or so below the high of the week ended Dec. 3. Note that just like the EURGBP, the angle of descent is steep and normally the steeper the angle the less likely it is to be sustained. However, the net sideways movement of the last few days show the same indecision present with many pairs and while there's good evidence for additional moves down, the pair needs to stay below 1.3788 to keep the bears satisfied. They'll be thrilled if it gets below 1.3788.

Today's action will be interesting to watch but again, thin holiday markets are having an impact. Still, let's see if the German finance minister's strong statement of support on Friday for the Euro has an impact. Sounds a bit desperate to me.

Here's the weekly chart:












© Dianne Fecteau, 2010. 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.

EURGBP—weekly

The low of the doji from the week ending Dec. 3 (.8334) must hold or the pair is definitely on its way down. Below that is support at .8204, .8068 and .7856. Note on the weekly chart below how steep the angle of descent is—it's not likely that will continue without some sort of correction upwards. If it does reverse upwards, resistance is at .8514, .8549, and .8598.

Here's the weekly chart:












© Dianne Fecteau, 2010. 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, December 10, 2010

USDCHF—basing

After dipping to a low of .9799, the Swissy has regained its short-term uptrend line on the hourly chart (not shown) and, unless it drops quite a bit further today, is on track to have the same low as last week at .9726. This is more evidence that it's basing. Below .9726 , of course, would hint at further lows. Market action is a bit sluggish, in part due to the thinning holiday markets. As I pointed out the other day, the pair is holding the uptrend line from the hammer low of .9463 in October and RSI momentum looks good on the longer-term charts. Nonetheless, one must be careful to keep stops tight on any longs. There's a chance that pattern on the weekly chart could be a bear flag which, if it played out, would be heart-stopping. Unless you were short. Then it would be joyful.

Here's the weekly chart. My trades don't show on the monthly charts since I use a different charting package for weekly and monthly charts.











© Dianne Fecteau, 2010. 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, December 9, 2010

EURGBP—correcting

EURGBP looks corrective and I expect it may get up to .8552/95 before it heads down again. This would be near a fib confluence and would complete a corrective C wave. I've gone long at .8392. The low of .8361 should hold for there to be an expectation of further moves up within the channel on the 3-hour chart. Below that is support at .8204, .8068 and .7856.

If it does get to those highs then I plan to reverse.

Here's the three-hour chart:












© Dianne Fecteau, 2010. 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.

EURUSD—still choppy

Euro is still choppy but pushing downward with a low so far of 1.3168. I'm short from 1.3232 and don't expect the pair will be able to gain above 1.3323 (just a bit over the high I expected yesterday). There's a chance the chop could continue over the next day or so. We'll have to see. Thinning holiday markets are having an impact.

© Dianne Fecteau, 2010. 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.

AUDUSD—looks corrective

So far, the best that that AUDUSD has been able to do was a high of .9965 on Tuesday, only a few pips above the Nov. 22d high and failure point of .9954. The August, 1982 high was also .9965 (for what that's worth). The pair is hovering near the.618 retracement of the move from 1.0183 down to .9537. Price action since the beginning of the month looks corrective but as I've written in prior posts, the overall trend is still up. Last week's candle was very bullish which hints that the .9537 low may hold.

Immediate support is at .9747. If this breaks then it would show weakness. Next support is at .9537/07 (prior low and daily 100 SMA) and .9496 (where the C wave would equal the A wave). These would have to hold as it's likely sellers would pile in otherwise for potential lows down to .9125 (50% of the move from .8067 to 1.0183) and possibly .8770. On the upside, until it definitively closes over 1.0000, there's little to discuss.

Overall, I'm leaning bearish but of course price action will define whether I enter long or short. We're also getting into thinner holiday markets so moves might be more extreme. Caution is necessary.

Here's a daily chart:












© Dianne Fecteau, 2010. 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.

Wednesday, December 8, 2010

USDCHF—monthly

The Swissy is holding the uptrend line from the hammer low of .9463 in October. Support is at .9741 (12/5 low) and .9631 (the uptrend line from the hammer low). A close below .9463 would be devastating to the bulls but one could make a case for far lower than that if you use an Elliott Wave argument on the long-term monthly chart. You'd have to go back to before 1980 to start the count but what is most relevant is the triangle formation price recently dipped below. EW theory hypothesizes that prices thrust out of triangles and in this case that price would be significantly lower than what we've seen. Notice though that I use the word "hypothesize." EW has no proven studies and in fact there haven't been any so hypothesis is really putting too nice a spin on things. Regardless, that's the theory. If one accepts that we're in wave (C) then a projected price for (C) would be .7445 if it is .618 of (A). Gulp. Do you think that would satisfy the baboons practicing the banana republic economics of our administration? Probably not, but I'd certainly try a long at that price. 

That's one way of looking at things. However, in addition to it being only one piece of evidence, one can make an opposing argument rather easily. For example, look at RSI. It's a nice uptrend line. Even better, since the 2008 low, RSI hasn't gone into oversold (below 30). It hasn't dropped below 37 on the price dips. That's important. One would expect the much despised currency to have significant downward momentum. It isn't doing that. It also means there is positive divergence. There has also been positive divergence on the daily chart. RSI levels and divergence is only one piece of evidence as well. So is there anything else? One could argue that the pair is basing although the pullback from 1.0066 was a bit steep. On the USD Index chart, one can use an EW count on the monthly chart to show that the pair is beginning a third wave up. This would result in USDCHF going up as well.

All this is to say, that one has to examine several pieces of evidence to determine a trade direction. Most readers of this blog probably don't trade off monthly or even weekly charts because the stops have to be wider in most cases. But one should be aware of the overall picture even if trading is carried out on a daily (or shorter) chart.

Here's a monthly chart. My trades don't show on the monthly charts since I use a different charting package for weekly and monthly charts.











© Dianne Fecteau, 2010. 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.

EURUSD—chop

Euro is chopping around this morning. It may be in the final leg of an ABC correction on the hourly chart which could take it to 1.3318 or so. I was profit stopped out of the remainder of my long at +100 pips. There are some mixed signals so I'm staying out for now. I'll see what it does if it approaches 1.3318. Any gains above that will most likely be capped by 1.3450.

© Dianne Fecteau, 2010. 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.

EURUSD—chop

Euro is chopping around this morning. It may be in the final leg of an ABC correction on the hourly chart which could take it to 1.3318 or so. I was profit stopped out of the remainder of my long at +100 pips. There are some mixed signals so I'm staying out for now. I'll see what it does if it approaches 1.3318. Any gains above that will most likely be capped by 1.3450.

© Dianne Fecteau, 2010. 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, December 7, 2010

EURUSD—trade analysis

I'm going to trace back over my trades in the Euro from last week in the hope that someone might find this interesting.

When I wrote about Euro early last week, I was short from 1.3638. I took partial profits of +580 pips on Tuesday and wrote, "Only above 1.3317 would I expect to see a potential move back to the 1.35 area." I also added that I didn't think that was likely (haha as subsequent events proved). By Thursday I was seeing corrective action. Euro rose to 1.3217 and then sank to 1.3060. I noted that it cleared the 1.3150 resistance level and that it had closed four consecutive hours above that resistance.

This price action put me on alert that the Euro might rise further, especially since it had only missed my profit stop by one pip. What's interesting, though, is that I didn't want to believe this. One reason was because of what my regular readers know—I tend to stay in winning trades letting profit stops be hit rather than get out of them. This can be highly profitable, of course, and has been for me. But it can also mean I don't always get out when I see clear signs of change. Who wants to take on risk going the other way when the market has paid you so well for your original analysis?

The other reason behind my not wanting to believe things were changing is that I had faith in my original analysis. I spend many hours studying the market and use a variety of techniques to arrive at my conclusions. I always look for validation—at least three pieces of evidence that support my conclusion. I also go through a "what if I'm wrong" analysis and try to find evidence that refutes my conclusion. I had done this with Euro and I was pretty sure it was going to hit at least 1.28. Faith in one's analysis is something a trader needs to take on trades—otherwise the risk is too scary. Clearly, my original analysis had paid off well; just as clearly the market was signaling that my final conclusion—price would hit at least 1.28—was questionable. But that doesn't mean it was easy for me to let it go.

The final reason I didn't want to believe a reversal was in the cards is that the Euro is in trouble fundamentally and I think it's clear that the worst is yet to come. I can find lots of evidence for this. I don't trade on fundamental factors but that doesn't mean I ignore them completely because ultimately it's fundamental reasons that move charts.

I'm telling all of this because even when a trader is profitable they are vulnerable to being hostage to beliefs. However I've done lots of work on myself in this area—it's probably the majority of the work I've done that has led to my ability to successfully trade. After an hour or so of internal struggle I not only closed my short (for +499 pips) but went long at 1.3139. I had at least three reasons for doing so—on shorter term charts there was positive divergence, hinting that at best it was ready to work out the oversold status; both price and RSI were maintaining an uptrend line on dips; and price was hovering around the 1.3150 resistance. In addition, the drop had been fairly steep and rapid and, as I'm always saying, price never goes straight down. I set a wider stop than I wanted to (because there was quite a bit of chop) and hovered like a helicopter parent over the trade. As soon as I could move the stop to breakeven, I did so.

By Friday morning I was pretty sure I was wrong even though the trade was in profit. There's a certain type of behavior that goes on in prices before news announcements that I find is often predictive of the news (no, I'm not going to describe it). I don't trade on news but I observe prices and if I'm in a trade, the behavior will often give me the confidence to stay in the trade (or get out). I didn't act on it in this case but I was ready to reverse if need be. However the price behavior did not predict the news (that unemployment had edged up) and Euro took off Friday morning in a typical kneejerk reaction. I took partial profits at +235 pips.

As of now, 9:54 AM EST, the trade is up 233 pips. It has been struggling since Friday with the 1.3450 resistance zone, reaching a high of 1.3439 Friday and not quite attaining it since. So there's a warning here but I've haven't yet done the analysis I need to do to determine if I'm ready to reverse. I still believe my original analysis is correct—that lower prices are in store and that this is a correction. As my trading moves to longer term trades (a process that seems to be gradually happening), I might ignore corrective moves such as this (although over 1.3450 I'd want to be out of any short positions—I'm not that long term a trader). But the reversal returned a nice, quick profit.

As an aside, the daily chart (not shown) shows Euro poking its head above the upward boundary of a downward sloping rectangle. The boundary is at 1.3344. So there's a resistance zone in place from here to 1.3450. Paying attention to this zone will be key in any decisions I make. Also, any decision making is placed within the context of the weekly chart which I blogged about yesterday. (And monthly which I also look at in trading decisions.)

A definite close above 1.3450 opens up potential resistance at 1.3656 and 1.3786. Support is at 1.3247, 1.3197, 1.3160 and 1.30.

I'm showing a 30-minute chart below—I made the reversal decision based on the hourly and 15-minute charts.













© Dianne Fecteau, 2010. 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.

Monday, December 6, 2010

EURUSD—weekly channel

A look at the weekly chart shows the Euro at the bottom of an upward sloping channel which I'm tempted to label as a bear flag. It's also possible to label it as an Elliott Wave correction with the possibility of a larger flat correction unfolding. The top of the channel would bring Euro to 1.4543. Many would think this possibility is ludicrous—the Euro is basically junk. Consider, though, that the U.S. government seems intent on keeping the USD weak. Bernanke was on "60 Minutes" last night suggesting the possibility of more quantitative easing.

The weekly candle has a long lower shadow and just barely qualifies as a hammer. A hammer requires that the lower shadow be at least twice the size of the real body. In any case, the low of 1.2969 is a low which must hold for bulls to have any hope. Euro is currently trying to base at a fib confluence point with lows so far this morning of 1.3247. Below this is support at 1.3195, 1.3160, and the psychological 1.30.

Resistance is at 1.3379 and 1.3439. If it definitively closes above the latter, then the bullish case is strengthened.

Here's the weekly chart. My trades don't show on the weekly chart as I use a different package for longer term charting.










© Dianne Fecteau, 2010. 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.

AUDUSD—at .618

The high Friday was .9938, a .618 retracement of the move from 1.0183 down to .9537. Many are watching.9954. That price was 50% of the prior swing of 1.0183 to .9725. It occurred the week ending 11/26 and was essentially matched by the high of this past Friday's .9938. In essence then, you have two weeks with the same high. Last week's low was lower than the prior week's and was essentially the same low as the week of 10/8. The July '08 high was .9851 so this adds to the resistance of this level.

The low so far today has been .9849 which is a confluence zone. The pair is trying to base here.

I'm still long from .9602 and just took another third off the table at +268 pips. If the pair manages a close above .9954, I may add another long as the path is clearer for a move up to retest the prior 1.0183. The top of the rectangle is 1.0329. As I pointed out last week, the pair has been a strong performer since the 2008 low and it's not unreasonable to believe it could get there. The last two daily candles have been very bullish.

One can't dismiss the possibility, though, that it may falter again at .9954. This would be a short signal. I would reverse. There are other bearish signals and I have price targets from both my daily and three-hour point and figure charts of .8500 and .8970 respectively. A close below the confluence of .9849, along with falling momentum on the shorter-term charts (i.e. RSI falling and price following) will be the first hints of another top.

Here's the daily chart with a possible Elliott Wave count. This count looks bullish since it assumes completion of an ABC correction. However, there is an alternate (bearish) count possible particularly within the context of weekly and monthly charts. Elliott is not always useful (heresy, I know, to the true believers but I don't know any true believers that are rich from trading—the truest ones are slogging away in regular jobs so what does that tell you?). In this case, I find it less than useful even though it supports my long position. The downward sloping RSI line I've drawn in red indicates negative divergence so this is a bearish sign. This pair is an interesting one—it's in an overall uptrend since the 2008 lows but is showing signs of real weakness, especially on the weekly chart as I blogged about on Friday.
















© Dianne Fecteau, 2010. 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, December 3, 2010

USD Pairs

The USD is falling after the weaker than expected numbers. Be careful, though. This isn't about currency strength in the Euro so much as it is about the USD. I don't talk much about fundamental factors in this blog but the reality is that Eurozone has higher unemployment than the US. More importantly, unemployment is a lagging factor in an economy—it improves last. So you can't make firm conclusions about things just from this. Well, maybe you can draw one conclusion—the market is full of kneejerk reactions to news. I'm not suggesting the US economy is out of the woods by any means. But even if you believe the Euro, AUD, whatever, will continue up, use tight stops. Some significant resistance levels are being approached that I've blogged about earlier in the week.

See you Monday.

© Dianne Fecteau, 2010. 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.

AUDUSD—update

The pair has reached a high of .9864 (as of 8:58AM EST) which is 4 pips above the 50% retracement of 1.0183 to .9537. Let's see if it can scale it.

© Dianne Fecteau, 2010. 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.

Markets Waiting for NFP

There's not going to be a lot of action until after NFP. I don't trade news events (nor should you—that's short term trading taken to the absurd) but the results should give some insights. An experienced trader once told me that if a commodity (i.e. the USD) doesn't fall on bearish news or rise on bullish news then the news is not what it appears.

© Dianne Fecteau, 2010. 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.

AUDUSD—rebounding

After touching a low of .9537, the pair bounced smartly to a high this morning of .9824. This pair loves to go up. So even though there's some bearish pressure, back up it goes. It looks as though it may make it past resistance of .9817 and .9853 (needs a close above on at least an hourly chart). If so, eyes are on .9954. Why? From the 1.0183 high the pair dropped to .9725. It then bounced to .9954 which was a 50% retracement and failed. This suggested a secondary top. So if the pair gets back there, interest will be high.

I went long at .9602 earlier this week after a hammer and a bullish engulfing candle on the hourly chart and because I'd identified support at .9540 (see 11/29 blog). I meant to update the blog but time got away from me and, as I've written before, I can't post everything or I'd never get any trading done. I just took partial profits at +203 pips. At that time I suspected it might go as low as .9408 before rallying. Obviously it didn't. We'll have to see what happens at .9954 if it gets there. It probably won't do so this week.

So being long, do I have any bearish sentiment toward AUDUSD? Yes, I do. As it is now (at 7:30AM EST), the pair is going to have a weekly close with a lower high and lower low than last week. This comes after a week with an outside candle so the overall look is bearish. I've also been comparing AUD to CAD and AUD looks weaker. Finally, on the weekly chart below, you'll notice three uptrend lines, each starting from a higher low. This won't continue forever and this most recent pullback came close to violating the most recent one. RSI also has some interesting behavior, as to numeric levels and as to trending. But as I wrote this past Monday, "the size of the rally from the 2008 low is significant." I've made a lot of money going long in this pair over the past year and it's an overall uptrend until proven otherwise.

Here's the weekly chart. My trades don't show on the weekly chart as I use a different charting package for longer term charting. I'm looking to make a change in 2011 to that approach but we'll see. One gets in a rut with one's broker.











© Dianne Fecteau, 2010. 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, December 2, 2010

EURGBP—correcting

EURGBP is approaching the .8500 resistance which is the downward trend line from October. As I blogged yesterday, November's monthly chart closed with a completed evening star pattern which formed near price resistance—the downtrend line from 2008. This is bearish and .8500 is a short opportunity as long as momentum doesn't increase. There is positive divergence with RSI which is of some concern. If it closes above .8500 on a daily basis, then the next resistance is .8543 (50%) and .8595 (fib confluence and 11/22 high).

Support is at .8390 (9/21 and today's low), .8350/35, .8204, .8068 and .7856.

Here's the daily chart.












© Dianne Fecteau, 2010. 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.

EURUSD—corrective

Euro has been choppy this morning because of the ECB announcement and the Trichet comments. This isn't unusual. Before that Euro had corrected to a high of 1.3217 (missing my profit stop by one pip). It then sunk to 1.3060 which is a .618 retracement of the rise from the Nov. 30th of 1.2969. In its rise it cleared the 1.3150 resistance and had four consecutive hourly closes above that. It needs more, preferably a daily close. If this happens, then I'd expect price to retest the uptrend line from June at 1.3315 or the 1.3335 former support. Only above there would I expect to see a move back to the 1.35 area. I don't think that's going to happen.

© Dianne Fecteau, 2010. 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.

GBPJPY—resistance and above

As I wrote yesterday, it looks as though this pair is rallying within a C leg of an ABC correction. It did reach 131.77 this morning, within two pips of my hourly target of a C wave. It has since fallen back to a low of 131.11 where it's trying to base. There are many interesting geometric shapes on the shorter term charts so we'll have to see where this goes. While one can try shorts in this area up to 131.90 (see yesterday's blog), another good shorting opportunity is 134.17. It's important to keep the psychology of the market in mind—people see weakness in this pair based on the overall trend and are looking to short. However those that shorted the break of 130 a couple of days ago are hurting a bit. If the pair moves beyond 132, the pain increases and they'll start buying back their shorts. That feeds more upward price movement. At some point, though, the bears will probably win out given the big downtrend. All you can do is pick shorting points that make sense and go in with tight stops. The potential gains are great—probably down to 120 and potentially lower, a lot lower. For a weekly chart, the one I think most relavent, ee yesterday's blog.

© Dianne Fecteau, 2010. 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.

Wednesday, December 1, 2010

EURGBP—November evening star

The monthly chart shows an evening star pattern which formed near price resistance—the downtrend line from 2008. However the pair is in a triangle with the downward sloping line at .8878 and the upward sloping line at .8204. So a rise to .8878 is possible although the downtrend is bearish overall. There's also a corrective downward channel on the chart. The bottom line of this is at .7856.

Yesterday's low of .8335 was just below the price target of .8363 from the head and shoulders pattern on the daily chart (see Nov. 10th blog). The pair immediately began a rally which has reached .8417. As I wrote yesterday, this is tough resistance up to .8500 and I doubt the pair will overcome it. So I'm using rallies as short opportunities.

Support is at.8350/35, .8204, .8068 and .7856.

Here's the monthly chart.











© Dianne Fecteau, 2010. 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.

GBPUSD—monthly

Looking at the monthly chart, the downtrend line comes in at 1.6316 not too far above its recent 1.63 swing high at the beginning of November. The intermediate downtrend line is at 1.6243. The uptrend line of the triangle is 1.4563.

Considering price behavior over the long term (from Nov. 2007), the trend is down. So while Cable could reach the 1.63 high again, it's not likely it will sustain it. It seems more likely that interim resistance in the 1.5650 to 1.5889 zone will prove to be the top. That's too big a range for short-term trading, I know, but it can be refined as price moves above 1.5650.

Potential downside moves will find support at 1.5485 (yesterday's low), 1.5349/45 (200 daily SMA and 50% of 1.6461 to 1.4228), and 1.5295/87 (Sept. 10th low and fib confluence). Longer term price action, given an Elliott Wave spin, suggests possible moves down below the prior 1.35 low. There will be several opportunities to short on that trip down if, in fact, it should occur.

Here's the monthly chart:











© Dianne Fecteau, 2010. 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.

GBPJPY—corrective rally

The low of 129.93 yesterday equaled a .63 percent retracement of the move from 126.44 to 134.23. Assuming this is an ABC correction on the daily chart, the C leg currently underway could reach 134.17 if C equals .618A. That's near price resistance as well as the current 200 day SMA. It's also near the November high of 134.22 and near the upper line of a downward sloping channel on the weekly chart. As a result, I'd expect to see good resistance there and I'd try a short. The pair's average true range is around 137 pips (low compared to historic levels) so this should happen over the next few days if it's going to happen.

On an hourly basis, one can also see a potential ABC correction with the C leg in progress and possible targets up to 131.75. Just above this is the uptrend line from October lows at 131.90 as well as resistance from a weekly EMA and a daily 10 and 20 SMA. In addition, the 50% retracement of the move down from 134.23 to 129.36 is at 131.80. All this is significant resistance so obviously if the pair is going to achieve the 134.17/35 range, it has to first close neatly above this level. If one shorts here, the stop needs to be over 132.00—not too bad for the potential gain down to 119/120.

Here's the weekly chart:










© Dianne Fecteau, 2010. 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, November 30, 2010

EURUSD—still weak

The low so far this morning is 1.2980 which is more than 50% retracement of the move up from the June low. A .618 of this would be 1.2795. Because that's near a round number of 1.28, is an internal 45° degree support line on my point and figure chart, and a price target from other calculations, it seems probable it can make it. I have targets that go much deeper but there's not a lot of sense in talking about them at this point since no pair follows a straight line down (or up). That said, I have to say that one of the more meaningless statements I read by an analyst this morning was that the Euro had traded at this level many times before. Clearly a perma-bull who thinks this weakness is just temporary. But it's worth noting that the Euro is very oversold and, as I wrote yesterday, there's a cluster of support around the 1.30 price. A rally isn't out of the question. 1.3150 is the most likely resistance and I'd probably add to my short there. I did take partial profits at +580 pips. Only above
1.3317 would I expect to see a potential move back to the 1.35 area. I don't think that's likely.

Here's the daily chart:












© Dianne Fecteau, 2010. 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.

EURJPY—nearing uptrend line

This pair looks as though it's making a run 108.33, the uptrend line from the August low of 105.44. If the pair breaks below the uptrend line then it's likely it will return to that low. Basically, the pair has been in a range since May but 105.44 to 115.70 is a large enough range to have made some decent money. I'm currently short from 110.28. However on the one-hour chart, a hammer candle has formed with the low this morning of 108.89. If it doesn't break that low then a rally is in the cards. Since I had a profit target of 109.40 from my point and figure calculations, I'm taking partial profits here at +114 pips. A rally would most likely be capped at 110. Above there is 111.78/93 which will be formidable resistance.

Here's the hourly chart:












© Dianne Fecteau, 2010. 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.

EURGBP—tumbling to support

With this morning's low of .8366, EURGBP has now retraced more than .618 of the move from .8068 to .8941. It's nearing the head and shoulder target I wrote about on Nov. 10th. Support is at.8350/44 and .8269 (the uptrend line from the July low of .8068). One would expect a rally but last week's outside candle (higher high and lower low than the prior week) along with the long bearish candle for the week ending 11/12 means it's probable the pair may be headed back to .8068. On the monthly chart (not shown) it looks as though an evening star is forming with the completion today. Since the high of this pattern was the downtrend line from December 2008, the pattern is strengthened. Any rally will probably be contained by the tough resistance from .8408 to .8500. So shorting rallies seems to be the way to go if one isn't already short.

Here's the weekly chart.











© Dianne Fecteau, 2010. 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.

Monday, November 29, 2010

EURUSD—weekly

The weekly chart shows the price break of the key uptrend line as well as the break by RSI of its uptrend line. Ideally, the RSI will break below 40 which would confirm a deeper bearish momentum.











© Dianne Fecteau, 2010. 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.

EURUSD—approaching a support cluster

The failure of 1.3335 and the break below the uptrend line from June were blows for the bulls. Euro so far isn't showing any signs of ending its slide and the low so far is 1.3137. I'm still short from 1.3638. This move has the potential for lows in the 1.28 area and possibly lower. However, Euro is approaching a support cluster between 1.3020 and 1.3130 consisting of the lower channel line of the current slide as well as a fibo, speed line, and price support. It's possible we'll see a rally which would provide a shorting opportunity. Only if the pair definitively overtakes 1.3317 which would also move it above the broken uptrend line would I expect to see a potential move back to the 1.35 area. I don't think that's likely. A break below 1.31 would target 1.30 and then 1.28. This is based on longer term charts. Obviously there will be small wave action between here and there.

© Dianne Fecteau, 2010. 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.

AUDUSD—struggling

The overnight low was .9585. This is just below the uptrend line from June (currently .9596) and a weekly EMA. One might expect a rally but after bouncing to .9699 early this morning, the pair dropped back to .9623 which is a .618 retracement. That's bit deep for a sustainable rally and if it continues to drop, one will want to watch a retest of the uptrend line very closely on the hourly chart. Another bounce from there brightens the pair's prospects. However, any rally will run into resistance at .9699, .9729, .9817 and .9853. These might be shorting opportunities if bearish sentiment continues to blanket the pair.

Why wouldn't I assume the uptrend had resumed with any rally? From the 1.0183 high the pair dropped to .9725. It then bounced to .9954 which was a 50% retracement and failed into the current decline. This suggests a secondary top. Looking at the hourly chart, one can trace out an ABC correction. The 6AM candle that just completed is a hammer so support is at .9623. Additional support is at .9585, .9540, and .9408.

All that said, the size of the rally from the 2008 low is significant and the pair probably will rally from .9408.

Here's the hourly chart:


















© Dianne Fecteau, 2010. 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.

Wednesday, November 24, 2010

Thanksgiving Holiday


I'll be resuming blog posts on Monday, Nov. 29th. Have a happy and safe Thanksgiving.

Tuesday, November 23, 2010

AUDUSD—near support

Low so far is .9776 which is definitely in the support zone. This zone extends down to .9725. A rally from here, which it's trying to manage, might provide a good short opportunity. If the pair fails at .9725, .9589 is the uptrend line from June which is also close to a weekly EMA.

© Dianne Fecteau, 2010. 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.