Week 17 Performance

March 31, 2006

I have nothing to report this week because I didn’t make a trade.  As I said in my previous post, in between everyday responsibilities and being sick, I didn’t have any motivation to sit in front of a computer screen.

If you don’t trade, you can’t lose but you can’t win either.  I want to mention an excellent NEW article I read this week regarding money management.  Before I give the link, there was some pretty powerful substance to this article that I want to post:

Put two rookie traders in front of the screen, provide them with your best high-probability set-up, and for good measure, have each one take the opposite side of the trade. More than likely, both will wind up losing money. However, if you take two pros and have them trade in the opposite direction of each other, quite frequently both traders will wind up making money – despite the seeming contradiction of the premise.

Note that a trader would have to earn 100% on his or her capital – a feat accomplished by less than 1% of traders worldwide – just to break even on an account with a 50% loss. At 75% drawdown, the trader must quadruple his or her account just to bring it back to its original equity – truly a Herculean task! 

I would recommend you check out this article.  It really does drill home the money management principle.

Money Management Matters 

Missing in Action

March 31, 2006

I’ve been missing in action most of this week.  I’ve been recovering from my stomach bug and been taking some time off due to a hectic schedule and other responsibilities.  I haven’t dedicated nearly enough time to the currency market or the Forex Project this week.  

It seems like my beginning of the week analysis of the EUR/USD was not too bad.  For those of you that don’t remember, I was going to try to improve my technical analysis by "pretending" to be a Currency Strategist.  I use the word pretend by if you really think about it, we are all our own best Currency Strategist.  So though I was analyzing the market as if I was a Currency Strategist, the simple fact is that we are all Currency Strategists.  

My prediction from beginning of week was the following:

Prediction
EUR/USD may remain in the 1.2000 – 1.2200 range.  If the psychological important 1.2000 is broken, look for furthur downside to 1.1868.

fxcmtr.com Guest Trading Ideas

March 29, 2006

I still have an account balance at FXCM and therefore am entitled access to their "Trading Room."  The primary feature that I visit on a daily basis is their Guest Trading Ideas section.  Currently there are 8 guests providing trading ideas.  Some guests provide ideas on a daily basis while others come and go as they please (ie: Rob Booker.)  I find some better than others but anything that may show me how others are seeing the market can only be beneficial.  Who are the guests?

1.    John Dean from Currency Insight Ltd
2.    Marius Alexe from Phincorp Capital
3.    Learn:Forex
4.    Jes Black from Black Flag Capital
5.    Black Swan Capital
6.    Jared Martinez from Market Traders Institute
7.    Dynamic Trend Profile
8.    Rob Booker 

I’m going to provide some of their ideas in the coming days so we can all see how beneficial their comments are. 

I’m providing John Dean’s Guest Trading Idea below:

USD/CAD – March 29th, 2006

Near term USD trends continue to improve with evidence building to suggest an important/cyclical low is now already in place at 1.1300. Previous/notable reactive highs around 1.1800 are targeted next and once this supply level gives way a re-test of the psychological 1.2000 level is anticipated.

John Dean Currency Strategist 

 

 

 

 

Encouraging Words from Raghee

March 29, 2006

I’m alive and eating solid food! 

I was delighted and surprised to receive inspirational words from Raghee Horner the other day.  Here they are:

Hang in there…you’re trying some new things and its when you are getting close that the setbacks often seem the greatest. Keep it simple…you already know that. You shared some great insight as well as your ups and downs…kudos for your frankness. Anyone who says they haven’t been there too is just fooling themselves. If I can be of any help, please don’t hesitate.

Out of Commission

March 28, 2006

As I’ve heard before, don’t trade when your sick.  This stomach bug has got me so good that I’m getting nauseous just writing this.  Hope to be back soon.

Gartley and Wolfe Waves

March 26, 2006

Brent brought up Gartley and Wolfe Waves a couple of days ago as a way of predicting where price is heading and when it will get there.  I started to read the sparse amount of information out there but from what I have read, it’s pretty interesting stuff.  For a quick overview, visit http://www.investopedia.com/articles/trading/05/040405.asp

Here’s a comment and recommended links from Brent:

According to my research the gartley and butterly patterns have an 80% success rate.

http://www.moneytec.com/forums/showthread.php?t=17228

http://www.forex-tsd.com/suggestions-trading-systems/1093-harmonic-trading-12.html

http://www.harmonictrader.com/

Gartley, Butterfly Patterns

http://www.forex-tsd.com/metatrader-4/885-price-patterns-gartley-butterfly-bat-2.html

EUR/USD Week of March 26th

March 25, 2006

I stated a couple of days ago that I would try to analyze the market as if I was a Currency Strategist.  I have no idea what it takes to be a Currency Strategist but  I made an attempt today to analyze the EUR/USD for the upcoming week.

Introduction
The EUR/USD has had 7 straight weeks of alternating price action (down, up, down, up, down, up, and down.)  The 3 weeks prior to last, we had higher highs and higher lows but last week, the EURO failed to push above the prior high of 1.2208.  The price closed on Friday at 1.2037.

Candlestick
A dark cloud occurred (which indicates that prices moved up strongly on the previous bar, opened higher, but then closed significantly lower).  This implies weakness as the momentum appears to be shifting from the bulls to the bears.

Moving Averages
We have support below from the 8 and 21 EMA’s at 1.2020.  The 50 and 100 EMA’s at close above at 1.2144 and 1.2133 respectively.  The 200 EMA provides longer term support at 1.1720. 

Basic Indicators
MACD – Bullish
Stochastic – Bullish
RSI(7) – Neutral
RSI(14) – Neutral
DMI – Neutral and Trendless 

Trendlines
Resistance: 1.2217, 1.2330
Support:  1.1785, 1.1868, 1.2000

TTM Squeeze
Squeeze in progress since 1/27/06.  The last exit from a squeeze was 11/11/2005.

Commitment of Traders Report
As you can see from my graph, non-commercial positions are building on the long side.

Currency Position 

 

 

 

 

 

 

 

 

 

 

 

 

Volatility Analysis
Bollinger Bands are 41.41% narrower than normal. eur is currently experiencing very low volatility as compared to its normal range.  The probability of volatility increasing with a sharp price move is likely in the near future.   

Prediction
EUR/USD may remain in the 1.2000 – 1.2200 range.  If the psychological important 1.2000 is broken, look for furthur downside to 1.1868.

Newest Forex Volume Report Released

March 25, 2006

Open interest dropped across the board this week except in the Australian dollar.

Canadian Dollar down_corner.gif
Big swing from NET LONG to NET SHORT

Swiss Franc down_corner.gif
Very Bearish.  50,327 Short positions vs. 3,462 Long positions

British Pound down_corner.gif
18,418 Short positions, 13,183 Long positions 

Japanese Yen down_corner.gif
Decrease of 17,632 short positions.  Still Bearish 

USD Index up_corner.gif
Decrease of 7,196 long positions.  Still bullish with 11,114 Long positions and 4,491 Short positions 

Euro  up_corner.gif
EURO remains Bullish with another decrease this week in Short positions (-10,149) 

New Zealand Dollar up_corner.gif
Less Bullish than last week with decrease of 688 long positions and increase of 178 short positions 

Australian Dollar down_corner.gif
Bearish.  Increase of 15,455 Short positions on increasing open interest. 

Crude Oil egal.gif
Less open interest than last week with an almost equal balance of long (128,840) to short (135,177) positions. 

No Plan, No Trade

March 23, 2006

I’ll admit that I’m a bit discouraged by the uncertainty of my trading plan or lack thereof.  Whenever I do try to develop one, I just get overloaded with information to the point where I don’t even know where to begin.  Therefore, this week I have not been trading much.  The only trades that I placed were generated by my Dooku trading system that I have already lost confidence in due to the weak backtesting results it generated on data from 2000-2003. 

So where does this leave me? I’ve actually been getting more involved at my full-time job lately.  I don’t know if this is an ominous sign that my Project is failing.  I know that I’m just a little down on myself right now.  I have to realize that I’ve only been doing this for about 9 months now and my journey has really just begun.  I’m going through the same learning process that a lot of traders who are now successful traders have gone through.  I’m also going through the same learning process that a lot of traders who have since failed have gone through.  What keeps me going is that I find trading to be such a rewarding experience and I enjoy it immensely.

I’m not a quitter and I know that I’ll continue to grind it out to see where this takes me.  What do I need to do to get back in the right mindset?

1.    Continue to develop a simple trading plan, either mechanical or discretionary.  I’m leaning more towards a discretionary plan right now.
2.    Put more time into analyzing multiple time frames of currency pairs.  What may help is for me to pretend I’m a currency strategist and each day write up my own thoughts.  At the end of each day, review my prior thoughts to see how well I did. 

These are really the only 2 ideas I can brainstorm right now.   For all of you that are just starting to explore the world of trading, don’t let my discouraging thoughts seap into your minds.  Just realize that you too will go through this and it’s all just part of the process.

John Carter Video This Evening

March 22, 2006

Seeing that I don’t have anything worthwhile to share lately, John Carter and his trading partner Hubert may:

Hubert’s Video Link:
http://clicks.aweber.com/z/ct/?KRi_uepYPInxyUTYXVHXQw

John’s Video Link:

http://clicks.aweber.com/z/ct/?5Tr.Rqt2fZz3atkrhV_sPA

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