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.
Showing posts with label Forex. Show all posts
Showing posts with label Forex. Show all posts
Friday, October 23, 2009
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.
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.
Tuesday, October 20, 2009
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.
Friday, October 16, 2009
USDCAD--am I trying to be contrarian?
There’s much to write about this morning. But I thought I’d stay with USDCAD since the USD is so reviled right now. Then too, as everyone knows, there’s an inverse relationship between commodity prices and the USD—if commodity prices rise the buck goes down. CAD (the Loonie) is a commodity currency. So the sensible position is to short USDCAD.
Yesterday I wrote that I bought, not sold, the pair at 1.0255. As of late yesterday it was up 80 pips. Overnight it languished in that zone and is now edging up slightly.
If a new trader asked me if they should go long this pair my advice would have to be no, given the egregious downtrend and the negative sentiment that weighs heavily upon the USD’s head. But I explained why I bought:
1) Its lows were attractive as support meaning I could have a tight stop
2) Bullish divergence on the 3-hour chart
3) Bullish candle coming off the bottom
4) Rounding bottom pattern on the 15-minute chart
All patterns are formed because of psychology. The rounding pattern goes from lower lows to the same lows then onto higher lows. It hints that the sellers are losing their dominance. How dollar bears could lose their dominance at a time when everyone, it seems, hates the dollar, is an interesting question.
TICS data is coming out today. “Capital drain promises more pain for the dollar,” was the quasi-poetic headline in the Wall Street Journal this morning—although the word poetry seems oxymoronic when written in the same sentence as the WSJ. So this trade could be taken out on that data alone. But my stop is set to a small profit so if I’m at risk of not being able to finance my next vacation from this trade, I’m also at no risk for losing money.
Bulkowski wrote about rounding patterns in his book, Encyclopedia of Chart Patterns. This one isn’t perfect—I’d prefer to see a steeper drop into the bottom and not the long, slow bleed that the world or Washington is inflicting. Gee, I thought Bush was gone but that’s right, it’s still the same old, same old—can anyone spell Paulson, Bernanke, and Geithner?
Looking at the 15-minute chart below you can see I’ve drawn a trend line into the drop—this is what Bulkowski calls the lead-in. I traced the rounded bottoming. Throwbacks to the trend line are not uncommon. This pair does throwback. It then marches, hopefully not frog marches, up from there. I don’t like the dip below the trend line that recently occurred. Remember, too, this is only a 15-minute chart. It’s sometimes useful for timing entries but it’s not a harbinger of a long-term future. The pair just reached 130 pips in profit so I lightened my position, taking some of my profits. As I said, TICS news may be bad for the dollar. We’ll see.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Yesterday I wrote that I bought, not sold, the pair at 1.0255. As of late yesterday it was up 80 pips. Overnight it languished in that zone and is now edging up slightly.
If a new trader asked me if they should go long this pair my advice would have to be no, given the egregious downtrend and the negative sentiment that weighs heavily upon the USD’s head. But I explained why I bought:
1) Its lows were attractive as support meaning I could have a tight stop
2) Bullish divergence on the 3-hour chart
3) Bullish candle coming off the bottom
4) Rounding bottom pattern on the 15-minute chart
All patterns are formed because of psychology. The rounding pattern goes from lower lows to the same lows then onto higher lows. It hints that the sellers are losing their dominance. How dollar bears could lose their dominance at a time when everyone, it seems, hates the dollar, is an interesting question.
TICS data is coming out today. “Capital drain promises more pain for the dollar,” was the quasi-poetic headline in the Wall Street Journal this morning—although the word poetry seems oxymoronic when written in the same sentence as the WSJ. So this trade could be taken out on that data alone. But my stop is set to a small profit so if I’m at risk of not being able to finance my next vacation from this trade, I’m also at no risk for losing money.
Bulkowski wrote about rounding patterns in his book, Encyclopedia of Chart Patterns. This one isn’t perfect—I’d prefer to see a steeper drop into the bottom and not the long, slow bleed that the world or Washington is inflicting. Gee, I thought Bush was gone but that’s right, it’s still the same old, same old—can anyone spell Paulson, Bernanke, and Geithner?
Looking at the 15-minute chart below you can see I’ve drawn a trend line into the drop—this is what Bulkowski calls the lead-in. I traced the rounded bottoming. Throwbacks to the trend line are not uncommon. This pair does throwback. It then marches, hopefully not frog marches, up from there. I don’t like the dip below the trend line that recently occurred. Remember, too, this is only a 15-minute chart. It’s sometimes useful for timing entries but it’s not a harbinger of a long-term future. The pair just reached 130 pips in profit so I lightened my position, taking some of my profits. As I said, TICS news may be bad for the dollar. We’ll see.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Thursday, October 15, 2009
GBPUSD and USDCAD—not a natural coupling, I know, but those are the two I’m going to write about now.
GBPUSD is hovering in a narrow range for the last several hours, resting, one supposes, from its feverish rise from yesterday’s low of 1.5921 and Tuesday’s low of 1.5708. Currently, it’s at 1.6270 and still over-bought.
With little action and since it blew easily past all near term resistance levels, I decided to look at the monthly chart. Monthly charts help put “big” moves in perspective. Looking at the chart you can see it fell from a high of 2.1104 in 2007 to 1.3655 in March of this year. What a drop! Its high this summer was 1.7072, not even 50% of the drop. For the last four months it has ranged from 1.5707 to 1.7072. With a high today of 1.63 it achieved just over 50% of this range. One wouldn’t be shocked to see it get back to the top of the range but right this moment there’s little in the way of clues as to whether it’s going to attempt that. Also note that it fell beneath its uptrend line last month and hasn’t yet recovered. It has edged just above a symmetrical triangle on the hour chart. Future movements may depend on USD’s performance. Here’s the monthly chart:
GBPUSD is hovering in a narrow range for the last several hours, resting, one supposes, from its feverish rise from yesterday’s low of 1.5921 and Tuesday’s low of 1.5708. Currently, it’s at 1.6270 and still over-bought.
With little action and since it blew easily past all near term resistance levels, I decided to look at the monthly chart. Monthly charts help put “big” moves in perspective. Looking at the chart you can see it fell from a high of 2.1104 in 2007 to 1.3655 in March of this year. What a drop! Its high this summer was 1.7072, not even 50% of the drop. For the last four months it has ranged from 1.5707 to 1.7072. With a high today of 1.63 it achieved just over 50% of this range. One wouldn’t be shocked to see it get back to the top of the range but right this moment there’s little in the way of clues as to whether it’s going to attempt that. Also note that it fell beneath its uptrend line last month and hasn’t yet recovered. It has edged just above a symmetrical triangle on the hour chart. Future movements may depend on USD’s performance. Here’s the monthly chart:
Speaking of the USD, I bought USDCAD this morning at 1.0255. Why, someone that was even reasonably well adjusted might ask since everyone knows the USD is a loser. And it has no friends, either, it seems, certainly no friends in high places.
A look at the three-hour chart shows quite a respectable drop from the September 28th high of 1.0993 to a low of 1.0208. I went to the long term charts after that drop as well and found I really liked that low. It has paused there before, both going down and going up. That means I can have a tight stop. What else. On the three-hour chart I saw bullish divergence. I also liked the way it bounced off the bottom on the next candle. On lower time frames than this, I noted a rounding pattern which is generally bullish—it tells me selling has slowed. So here I am, up 80 pips or so and my stop set at a small profit. It’s sputtering a bit, now. Again, let’s see what tomorrow brings. Here’s the three hour chart.
A look at the three-hour chart shows quite a respectable drop from the September 28th high of 1.0993 to a low of 1.0208. I went to the long term charts after that drop as well and found I really liked that low. It has paused there before, both going down and going up. That means I can have a tight stop. What else. On the three-hour chart I saw bullish divergence. I also liked the way it bounced off the bottom on the next candle. On lower time frames than this, I noted a rounding pattern which is generally bullish—it tells me selling has slowed. So here I am, up 80 pips or so and my stop set at a small profit. It’s sputtering a bit, now. Again, let’s see what tomorrow brings. Here’s the three hour chart.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Wednesday, October 14, 2009
GBPUSD
GBPUSD
So after yesterday’s successful trade, how will I approach GBPUSD today?
Equity futures were bidding up early and now that the US equity markets have opened, the Dow and S&P are slightly up. This usually does not bode well for the oft-maligned USD. Looking at my three-hour point and figure chart (P&F), I see that there is still a bit of room for GBPUSD to rise if it ranges within the area I’ve highlighted. I’ve pasted a picture of that chart below the candle one. The pair is in a downtrend on the shorter time frames. The three-hour candle chart has interesting features. First, the pair didn’t quite achieve a minor resistance level. It could rise to the blue lines that I’ve marked as a strong resistance zone but it hasn’t happened yet. Second, the candles have upper shadows. These are more apparent on a one-hour chart (not shown). Third, it has broken a steep, short-term uptrend line. This is not a big deal because it could be dropping down a bit to catch its breath before it pushes up. But it isn’t showing great strength as represented by RSI or candle size. The candles aren’t tall like the first one that pushed off yesterday’s morning’s bottom. Finally, it could be forming a Gartley pattern that, if it develops, will be bearish. I sold which is marked by the little triangle. I’ve already moved my stop to break even. We’ll have to see what unfolds. In any case, here are both the three-hour candle chart and the three-hour P&F chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
So after yesterday’s successful trade, how will I approach GBPUSD today?
Equity futures were bidding up early and now that the US equity markets have opened, the Dow and S&P are slightly up. This usually does not bode well for the oft-maligned USD. Looking at my three-hour point and figure chart (P&F), I see that there is still a bit of room for GBPUSD to rise if it ranges within the area I’ve highlighted. I’ve pasted a picture of that chart below the candle one. The pair is in a downtrend on the shorter time frames. The three-hour candle chart has interesting features. First, the pair didn’t quite achieve a minor resistance level. It could rise to the blue lines that I’ve marked as a strong resistance zone but it hasn’t happened yet. Second, the candles have upper shadows. These are more apparent on a one-hour chart (not shown). Third, it has broken a steep, short-term uptrend line. This is not a big deal because it could be dropping down a bit to catch its breath before it pushes up. But it isn’t showing great strength as represented by RSI or candle size. The candles aren’t tall like the first one that pushed off yesterday’s morning’s bottom. Finally, it could be forming a Gartley pattern that, if it develops, will be bearish. I sold which is marked by the little triangle. I’ve already moved my stop to break even. We’ll have to see what unfolds. In any case, here are both the three-hour candle chart and the three-hour P&F chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Keep a Journal
Yesterday morning I wrote that I bought GBPUSD amidst all the bad news of its decline. I did so because it dipped to polarity (actually a bit below) but there were signs it was not going lower. The trade hit its target this morning at 1.6001. I bought at 1.5736. My profit was 265 pips. Not bad for a trade that looked fairly obvious.
It’s important to point out, though, that while the pips came fast and easy, they didn’t come by magic. They didn’t come by luck. They didn’t come because of some obscure method which has been whispered down through the ages and for which I paid $15,000 to learn.
The pips came because I do the work. I study my charts. I draw my significant lines. I calculate confluence zones. They came because I’ve built a strong habit of needing to see at least three reasons to take a trade. These three things can come from various things—support and resistance, candle or bar behavior, patterns, fib levels, Elliott Wave, anything that I have reasonable faith in as a technical analysis tool. But there has to be at least three present.
I’ve long jotted down the reasons I was taking a trade in my journal. The journaling keeps me honest and it’s the number one piece of advice I offer to traders. Keep a journal. Print the screen shot. Then you have something to go back to and study if you find your trades aren’t working out. It’s also a nice record of when they do. When you write down the reasons for taking a trade your trades will get better over time. You can no longer fool yourself about what and why you’re doing. It’s true that these days I take some trades where I don’t write first. As I go along my eye seems to get better. Or maybe it’s just reflex based on the rigor I practiced during the last few years. Regardless, I still jot down the reasons for the majority of my trades. And so should you.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
It’s important to point out, though, that while the pips came fast and easy, they didn’t come by magic. They didn’t come by luck. They didn’t come because of some obscure method which has been whispered down through the ages and for which I paid $15,000 to learn.
The pips came because I do the work. I study my charts. I draw my significant lines. I calculate confluence zones. They came because I’ve built a strong habit of needing to see at least three reasons to take a trade. These three things can come from various things—support and resistance, candle or bar behavior, patterns, fib levels, Elliott Wave, anything that I have reasonable faith in as a technical analysis tool. But there has to be at least three present.
I’ve long jotted down the reasons I was taking a trade in my journal. The journaling keeps me honest and it’s the number one piece of advice I offer to traders. Keep a journal. Print the screen shot. Then you have something to go back to and study if you find your trades aren’t working out. It’s also a nice record of when they do. When you write down the reasons for taking a trade your trades will get better over time. You can no longer fool yourself about what and why you’re doing. It’s true that these days I take some trades where I don’t write first. As I go along my eye seems to get better. Or maybe it’s just reflex based on the rigor I practiced during the last few years. Regardless, I still jot down the reasons for the majority of my trades. And so should you.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
Tuesday, October 13, 2009
Sometimes you need to ignore the news
I am convinced that most traders would be better off if they’d turn off CNBC, stop scanning news, and start trading their charts based on plain old, classical technical analysis. Oh sure, you want to be aware of and careful around major economic news announcements. But otherwise the noise from news can result in information overload at best and distract and keep you out of good trades at worst.
Here’s an example.
Yesterday one bit of constant news was that the pound was taking a beating along with the weak dollar. The pound dropped to a four-month low against the dollar and a six-month low against the Euro. This morning I woke up around 3 AM EST as I sometimes do. It’s a nice time to trade—so quiet and peaceful here in Florida while London is gearing up. While flipping through the shorter time frame charts, I noticed the pound had slipped beneath a daily support line I had drawn. Here’s the daily chart showing where the level has proved to be both support and resistance, something that’s known as polarity. I have removed my trade from view so as to give a clear look at the chart alone.
Am I a contrarian? Some will think so. I’m not. Much of the time the crowd is right, after all. I am quite sure I’ll be shorting the pound soon. But this was a nice little trading opportunity. So I took it.
Here’s an example.
Yesterday one bit of constant news was that the pound was taking a beating along with the weak dollar. The pound dropped to a four-month low against the dollar and a six-month low against the Euro. This morning I woke up around 3 AM EST as I sometimes do. It’s a nice time to trade—so quiet and peaceful here in Florida while London is gearing up. While flipping through the shorter time frame charts, I noticed the pound had slipped beneath a daily support line I had drawn. Here’s the daily chart showing where the level has proved to be both support and resistance, something that’s known as polarity. I have removed my trade from view so as to give a clear look at the chart alone.
Many traders, influenced by news and the belief that the pound was in real trouble would stay away or worse, jump in with a short. On the shorter time frame though, 15-minutes and then 5-minutes, I noticed some interesting things.
Looking at the 15-minute chart below, one can see the lower shadows indicating the market was rejecting those lower levels. You can also see divergence between price and RSI. The divergence was more pronounced on the 5-minute chart. The pair had experienced a significant fall, causing a lot of news. It was swooning below its daily support line. Yet the pair has been in an uptrend since early in the year. I bought, of course. It’s another of those trades where, yes, there is risk it could continue down, but I could set a tight stop. So here we are at 1:15 PM EST with 154 pips of profit. I’ve lightened by half my position and the rest is stopped at a point that will provide a 6o pip profit. I may move it up soon. The point is this—don’t be afraid of a falling pair if you can find reasons to buy on a shorter time frame. Most falls are not free falls forever. It just doesn’t work that way. To be honest, I expected to grab 50 pips or so from this trade before it started falling again. So it has done better than expected. To be honest a trade like this can fail. I’ve certainly had them do so and will try to remember to post the next one that does. But that’s why you set a tight stop. Here’s the 15-minute chart:
Looking at the 15-minute chart below, one can see the lower shadows indicating the market was rejecting those lower levels. You can also see divergence between price and RSI. The divergence was more pronounced on the 5-minute chart. The pair had experienced a significant fall, causing a lot of news. It was swooning below its daily support line. Yet the pair has been in an uptrend since early in the year. I bought, of course. It’s another of those trades where, yes, there is risk it could continue down, but I could set a tight stop. So here we are at 1:15 PM EST with 154 pips of profit. I’ve lightened by half my position and the rest is stopped at a point that will provide a 6o pip profit. I may move it up soon. The point is this—don’t be afraid of a falling pair if you can find reasons to buy on a shorter time frame. Most falls are not free falls forever. It just doesn’t work that way. To be honest, I expected to grab 50 pips or so from this trade before it started falling again. So it has done better than expected. To be honest a trade like this can fail. I’ve certainly had them do so and will try to remember to post the next one that does. But that’s why you set a tight stop. Here’s the 15-minute chart:
Am I a contrarian? Some will think so. I’m not. Much of the time the crowd is right, after all. I am quite sure I’ll be shorting the pound soon. But this was a nice little trading opportunity. So I took it.My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
Yesterday I posted that I bought AUDUSD when it hit the bottom of a channel. I commented that it was an easy trade at the channel bottom. That trade worked in that it not only went back to the top of the channel but has since broken above. It’s up 112 pips as I write this.
On the hourly chart below you can also see where I took a second position this morning when it dropped back to the top of the channel. Why did I feel OK taking a second position?
One reason is that the pair is in an overall uptrend. Trading is about probability and if a pair is in an uptrend the likelihood is that the trend will continue. It’s the line of least resistance as I believe Jessie Livermore said. A second reason is that this was a smaller trade size and I had the first, larger one in profit enough to cover any small loss I might take on this one. My initial stop loss was just below the upper channel line although I have now moved it to breakeven. Third, I liked the way that RSI didn’t drop too much on the pullback. That said to me that momentum was still there. . Fourth, and finally, the bearish candle ended at the channel top with no upper wick and the following bullish candle was strong. The two together may form some sort of double bottom. I’m still not thrilled with the break of the trend line yesterday on the short tern chart but for now this is the right position to be in. Here’s this morning’s hourly chart:
On the hourly chart below you can also see where I took a second position this morning when it dropped back to the top of the channel. Why did I feel OK taking a second position?
One reason is that the pair is in an overall uptrend. Trading is about probability and if a pair is in an uptrend the likelihood is that the trend will continue. It’s the line of least resistance as I believe Jessie Livermore said. A second reason is that this was a smaller trade size and I had the first, larger one in profit enough to cover any small loss I might take on this one. My initial stop loss was just below the upper channel line although I have now moved it to breakeven. Third, I liked the way that RSI didn’t drop too much on the pullback. That said to me that momentum was still there. . Fourth, and finally, the bearish candle ended at the channel top with no upper wick and the following bullish candle was strong. The two together may form some sort of double bottom. I’m still not thrilled with the break of the trend line yesterday on the short tern chart but for now this is the right position to be in. Here’s this morning’s hourly chart:
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
Monday, October 12, 2009
AUDUSD allows a quick long entry
Here on the hourly chart you can see how the AUDUSD allowed for a buy. When I see these setups I trade them. The risk is small. The range of this channel is only 60 pips so if it bounces back down from the top you won’t make a lot of pips. But depending on your philosophy, 20, 30, or so pips may be good. I’d prefer more. That means I’ll keep my stop at just over breakeven and lighten by a third at 50 pips. Remember, this pair is in an uptrend and broke above the psychological .90 level last week. I don’t like it breaking below trend lines on shorter term charts but we have no real evidence it’s heading down at this point. This could be a bull flag which would result in greater highs. Take the easy trades like this where you can set a tight stop. Trading is hard work and it’s nice to catch an easy one sometimes.
Here’s the trade on the hourly chart.
Here’s the trade on the hourly chart.
This type of trading may not be for you and in any case, as I've written often, this isn't a trading recommendation but rather a blog of how I trade.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
EURUSD--Where to from here?
What's next for EURUSD?
The run up that brought lots of profits from March through September is on pause. While this past Friday’s close was 1.4733, the close three weeks ago was 1.4712. A sideways market.
From the point of view of a classical technical analyst, the pair is in an uptrend. No trend line has been violated; no serious level of support breached.
On the weekly chart (see below) the upward trend line is steep, perhaps too steep to easily continue. The last time it was this steep was the run-up from 2007 to 2008. We all know what happened then.
On the monthly chart, the fall from the summer ’08 highs did breach a trend line that began in early 2002 and had nine touches before that violation. The pair is struggling with that old upward trend line now. It poked its head above it briefly in September as well as last week but seems to have the willies about taking up residence there. This is in the 1.47 area, the area I have talked about as resistance for several weeks. Until the Euro closes definitively above 1.4865 (a weekly and ideally monthly close), I can trade it sideways and the range (1.4480 to 1.4845) is respectable, allowing for more than a few pips to be earned by agile traders.
Here’s the hourly chart showing the trade I entered last week. The stop is now a profit stop. Note the pair violating the two trend lines. Note the negative divergence with RSI. Finally, RSI is staying at or below 50%. The pair needs to drop below the lower shadows I pointed out on the prior candles in order to continue its drop. It could bounce from here as well. The thing is, if you’re in a short, lighten up a bit or close, depending on your style. I’ve lightened a bit. If it fails from the uptrend line (this is, it bumps its head on it and starts down again, dipping below the lower shadows), one could look for another short entry. Or if it climbs back towards 1.48 one could short. Remember though, you want to trade where your stops can be tight.
The run up that brought lots of profits from March through September is on pause. While this past Friday’s close was 1.4733, the close three weeks ago was 1.4712. A sideways market.
From the point of view of a classical technical analyst, the pair is in an uptrend. No trend line has been violated; no serious level of support breached.
On the weekly chart (see below) the upward trend line is steep, perhaps too steep to easily continue. The last time it was this steep was the run-up from 2007 to 2008. We all know what happened then.
On the monthly chart, the fall from the summer ’08 highs did breach a trend line that began in early 2002 and had nine touches before that violation. The pair is struggling with that old upward trend line now. It poked its head above it briefly in September as well as last week but seems to have the willies about taking up residence there. This is in the 1.47 area, the area I have talked about as resistance for several weeks. Until the Euro closes definitively above 1.4865 (a weekly and ideally monthly close), I can trade it sideways and the range (1.4480 to 1.4845) is respectable, allowing for more than a few pips to be earned by agile traders.
Here’s the hourly chart showing the trade I entered last week. The stop is now a profit stop. Note the pair violating the two trend lines. Note the negative divergence with RSI. Finally, RSI is staying at or below 50%. The pair needs to drop below the lower shadows I pointed out on the prior candles in order to continue its drop. It could bounce from here as well. The thing is, if you’re in a short, lighten up a bit or close, depending on your style. I’ve lightened a bit. If it fails from the uptrend line (this is, it bumps its head on it and starts down again, dipping below the lower shadows), one could look for another short entry. Or if it climbs back towards 1.48 one could short. Remember though, you want to trade where your stops can be tight.
Thinking about the larger picture, even when one is going to trade short-term, is valuable. Is this a simple pause for breath? Or is it the beginning of a reversal? Ah, the age old question and the question that all the hundreds, if not thousands, of trading techniques and approaches seek to answer.The dynamism that accompanied the push up to 1.60 last year is not present on this rise from March. A look at the weekly RSI shows it isn’t reaching the levels it did last year. Looking at it from an Elliott Wave (EW) perspective, this could be corrective. In some types of corrective waves, as Frost and Prechter write in their book, Elliott Wave Principle, “Momentum indicators reveal an ebbing of the market’s power (i.e. speed of price change, breadth, and in lower degrees, volume).”If this is true it’s a bearish scenario.
As I’ve mentioned before, the weekly chart here looks corrective to me. I’ve traced the corrective zigzag in red. If the pair can’t move definitively above 1.4865 then it’s possible the path forward is down, down, down. Note that since I’m currently trading this as a sideways market, the bounce off the 13-EMA has been a buy point in the past. Here’s the weekly chart:
These are not trade recommendations. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. You have to decide on your own approach to trading. Trading is risky. But you know that already.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
Friday, October 9, 2009
Euro and USDCHF
As I wrote yesterday, I had little faith the Euro would continue its little climb. What is wrong with the Euro bulls? Who cares? To be fair it is up over last Friday’s close at 1.4576 but beneath the close two weeks ago at 1.4689. So perhaps a little sideway action until, 1) the Euro bulls get their act together; or, 2) the pair drops of its own weight. My long stopped out just over breakeven. I shorted at 1.4779, a position I prefer at the current time. I’ve lightened that by half at 50 pips profit this morning. If you did the same, set your stop to just over breakeven. It’s now down to support at 1.4720 so it may attempt a bounce from there. We’ll have to see. As I wrote yesterday, should the Euro manage to decisively close above 1.4868 then I’ll start looking for long positions. Until it does there’s no sense throwing up another chart.
The short in USDCHF I wrote about yesterday stopped out at a small profit. I went long and unloaded part of my position this morning at 75 pips. Whatever your opinion of this pair (and I know many think a long position is insane), a buy for fast pips was a low risk trade since it dropped near the bottom again. Since its low in September was 1.0187 and I bought at 1.0241, there’s not a lot of risk. I put my stop below the uptrend line from 1.0187.
Note three things on the drop to 1.0241. First, it hesitated near its prior lows from earlier in the week. Second, the black candle low went to the uptrend line and quickly retreated. Third, there was some divergence between price and RSI for the prior 8 hourly candles. However it is at another resistance level.
After the fact, it’s also significant (to me) that the RSI never went to the oversold line. Momentum is slowing perhaps? Why would that be? Perhaps the dollar bears are just tired. It’s been a busy week for them. The USD has certainly taken a fall lately. As the Wall Street Journal wrote this morning, “There are, as yet, no hints the weakening dollar is ringing alarm bells in Washington—and that’s unlikely to change unless the decline turns into a confidence-shattering crash, a possibility that some analysts have been predicting for years.” Isn’t that a cheery note with which to go into the weekend?
Here’s the USDCHF 1-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.
The short in USDCHF I wrote about yesterday stopped out at a small profit. I went long and unloaded part of my position this morning at 75 pips. Whatever your opinion of this pair (and I know many think a long position is insane), a buy for fast pips was a low risk trade since it dropped near the bottom again. Since its low in September was 1.0187 and I bought at 1.0241, there’s not a lot of risk. I put my stop below the uptrend line from 1.0187.
Note three things on the drop to 1.0241. First, it hesitated near its prior lows from earlier in the week. Second, the black candle low went to the uptrend line and quickly retreated. Third, there was some divergence between price and RSI for the prior 8 hourly candles. However it is at another resistance level.
After the fact, it’s also significant (to me) that the RSI never went to the oversold line. Momentum is slowing perhaps? Why would that be? Perhaps the dollar bears are just tired. It’s been a busy week for them. The USD has certainly taken a fall lately. As the Wall Street Journal wrote this morning, “There are, as yet, no hints the weakening dollar is ringing alarm bells in Washington—and that’s unlikely to change unless the decline turns into a confidence-shattering crash, a possibility that some analysts have been predicting for years.” Isn’t that a cheery note with which to go into the weekend?
Here’s the USDCHF 1-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.
Thursday, October 8, 2009
Euro, Cable, and Swissy
EURUSD and GBPUSD are up; USDCHF is down. With equity futures bidding up so strongly over night as I wrote in my last post, there was little doubt the dollar was in for a drubbing today. I went long both the Euro and Cable and short the Swissy earlier today. They’re all in about 45 to 50 pips profit and all are profit stopped. I had to use both the USDCHF chart to decide to buy the first two and short the Swissy. It was the only definitive chart.
Someone emailed me the other day and asked me to please give signals in advance. First, I’m not a signal service. They don’t usually work, anyway because the market can change in an instant—start contracting whereas before it was expanding and vice versa, etc. Second, I hope that by showing why I did something (and actually showing I’m in the position—let’s lynch all these so-called gurus who only talk and don’t trade but are still out there pushing their signal services) that someone will be able to learn to trade on their own. Besides, often I do give levels I plan on buying or selling. You just have to stay alert and take the trade at those levels. If anyone has a pair they want me to specifically comment on, just post a comment here asking and I will.
Getting back to the Euro, it hasn’t found its way to a definitive close above 1.48. Heaven knows its bulls have pushed and pushed and pushed. As long as that’s the case, I’d prefer to be short, but the buy signals were just too compelling on the shorter term charts this morning. I’m keeping my stop close because I expect to be stopped out on all of these at a small profit. Should the Euro manage to start decisively closing above 1.4868 then I’ll start looking for long positions. Here are the hourly charts for both the USDCHF and EURUSD. The GBPUSD is too boring to throw up at this point:
None of the above are trade recommendations. Remember that trading involves substantial risk.
© 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.
Someone emailed me the other day and asked me to please give signals in advance. First, I’m not a signal service. They don’t usually work, anyway because the market can change in an instant—start contracting whereas before it was expanding and vice versa, etc. Second, I hope that by showing why I did something (and actually showing I’m in the position—let’s lynch all these so-called gurus who only talk and don’t trade but are still out there pushing their signal services) that someone will be able to learn to trade on their own. Besides, often I do give levels I plan on buying or selling. You just have to stay alert and take the trade at those levels. If anyone has a pair they want me to specifically comment on, just post a comment here asking and I will.
Getting back to the Euro, it hasn’t found its way to a definitive close above 1.48. Heaven knows its bulls have pushed and pushed and pushed. As long as that’s the case, I’d prefer to be short, but the buy signals were just too compelling on the shorter term charts this morning. I’m keeping my stop close because I expect to be stopped out on all of these at a small profit. Should the Euro manage to start decisively closing above 1.4868 then I’ll start looking for long positions. Here are the hourly charts for both the USDCHF and EURUSD. The GBPUSD is too boring to throw up at this point:
None of the above are trade recommendations. Remember that trading involves substantial risk.© 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.
AUDUSD broke .9000--hip, hip, hip, hooray
AUDUSD finally made it above .9000! Big cheers all around as it reached an overnight high of .9046. I had a tiny long that hit profit at .9004. Given all the huffing and puffing to get to this level, I’d expect it to fall back a bit, perhaps to the .8800 level or just below. At that point, my calculations indicate it could go higher—possibly .9160, up to .9480 then .9520. None of this is guaranteed, of course. It still hasn’t worked out its negative divergence on the daily chart. Divergence is all over the place these days and it’s not a great sign.
Here’s the hourly point and figure (P&F) chart which is remarkable only for the clear patterns it built on the way up—climb, consolidate, climb, consolidate. It needs to fall below at least the internal trend line before anyone gets too bearish.
Equity futures are bidding up this morning as of 7AM EST. Might be a bad day for the buck.
© 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.
Here’s the hourly point and figure (P&F) chart which is remarkable only for the clear patterns it built on the way up—climb, consolidate, climb, consolidate. It needs to fall below at least the internal trend line before anyone gets too bearish.
Equity futures are bidding up this morning as of 7AM EST. Might be a bad day for the buck.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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