Trading the News Redemption

June 30, 2006

With the threat of falling to unprofitability after 4 weeks of automated news trading via FXEngines, redemption prevailed this morning.

My automated moderate trade entered long on the EUR/USD at 1.2724 at 8:30:58 and closed about 15 minutes later at 1.2759 for a 35 pip profit. 

So after 4 weeks and 17 trades, I'm up 48 pips.   I remain suspicious of this method of trading but it makes me realize even more how important risk and reward are.  Typically a losing news trade will cost me 10 pips.  In 4 weeks, I have 7 wins and 10 losses for a win percentage of roughly 40% yet I remain profitable. 

I'm done trading for the week.   It's time to take an overdue weekend break.  We have the 4th of July holiday on Tuesday of next week so I'm not sure when I'll jump back into the market.  

Forex Monthly Goal and Other Ramblings

June 29, 2006

Before I get into the real reason for this post, let me just say that automated news trades haven't been going as a lot of us expected.   After 4 weeks, I've gained a total of 13 pips with a couple of economic releases left for tomorrow.   Just the fact that I'm still in the black is enough to continue with automated trading though today was very disappointing.  It seems like whether you were conservative, moderate, or aggressive, the results were similar; very little gain during the FOMC release.  If an engine cannot capture a move like today, it's going to be tough to trust it in the future.  It makes you realize more that there is no substitute for the human mind.   Computers are fast but have no intelligence (artificial doesn't count.)

My Trade History and Goal & Performance are being kept up to date daily.  In the past, everything was categorized by week but I have since changed this to by month.  I feel that doing this will put less pressure on me each and every week.  It gives me less of a sense of urgency.  Before, if I had a bad week, it was like the end of the world.  Now my "final" performance can be evaluated 12 times yearly instead of 52 times!  

My goal right now is to profit 260 pips a month.  This is not just an arbitrary number.  This is a figure that I have calculated based on how much I need to make a year to sustain a living by trading 3-4 lot positions.  It isn't set in stone that I have to trade 3 or 4 lots each and every time but it is a best effort at an estimate.  I feel like if I can consistently profit 260 pips or more each and every month, I can do this full-time and for a living.  I live in New York City so for some of you that have a lower cost of living, this figure could be much less.   Read my post a while back titled, How Realistic Am I Being About Trading Full-Time.  This explains more about this.

With the end of the month of June coming tomorrow, my goal of 260 pips will not be realized but I didn't start discretionary trading again until June 18th.  Since this date, I have profited a total of 131 pips and $1250.  I am quite satisfied with my trading over the last couple weeks but I have to remain disciplined no matter what happens.  I'm obviously still learning a lot and have to expect that there will be many bumps on the way.  I have been learning and trading Forex for almost a year now but the road is long and if I want to put it into the perspective of a formal education, I am a still a Freshman.  My "GPA" certainly wasn't stellar but I learned a lot, had plenty of all-nighters, studied a lot, and certainly had heapings of stress.  My motivation remains as I continue the journey into year 2 which is critical to success.  I can't say that there haven't been times when I felt like giving up but in all honesty, being surrounded by so many other traders striving for the same goal has kept me going.  

Happy Trading. 

Automated News Trading?

June 29, 2006

I could not trade the news today because I'm at work so I decided to continue with automated trading via FXEngines.  Look at the candle we got below on the EUR/USD at 2:15!  I got 4 pips!  That's it!  The image below is from a 15 minute chart but if I had the tick data, I might be able to explain this.   In this case, manually trading would have been much better or automating the entry and using manual exit.  Either way it is quite disappointing considering these are the type of moves this platform stresses they can capture.  Why was this a disappointing move?  I asked the CEO and this was his response:

If
you watched a chart for that trade live you would see why. It was
HUGELY volatile. That particular engine has built in profit protection,
and it was hit, which is why you got out.

We will have some other engines soon that will help you manage these big moves better.

I hope you all captured some pips today. 

Forex Candle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FOMC Preview

June 28, 2006

I found just what I was looking for in a preview of the FOMC meeting tomorrow.  Being relatively inexperienced in macroeconomic events and their effects on currencies, I wanted someone to give me a general idea of what to expect tomorrow.  I know that no one knows exactly what will happen but it helps to put everything in context if we know the possibilities.

According to Richard Lee, Currency Analyst at DailyFX, the 2 most likely scenarios are for Bernanke to:

  1. raise rates 1/4 point and keep the statement unchanged
  2. raise rates 1/4 point and continue bias to raise rate

In the event of #1, the outlook is initially dollar bearish because it keeps the market guessing and is generally what most traders are hoping for.

In the event of #2, this will signal that the Fed is committed to raising rates yet again in August thereby creating a dollar bullish situation.

Scenario #3 is of medium likelihood and is for the Fed to raise rates 1/4 point and shift to a neutral  stance.  This would be bearish for the dollar because the signal here would be that the Fed is done raising rates.

Scenario #4 and #5 are highly unlikely. 

#4 is for Fed to raise rates a 1/2 point and move to a neutral stance.  This would create a mixed reaction because of a higher than expected rate change but a signal that this would be the final rate increase. 

#5 is for the Fed to raise rates a 1/2 point and maintain a hawkish bias.  This is highly unlikely yet good to know in the event that it ever does happen.  This event would obviously be quite bullish for the dollar.

Another thing of interest in this column are his positioning conclusions which could greatly affect my EUR/JPY position which as of now is still open.   He states that if the Fed produces a dollar bullish scenario, the dollar rally would probably be most pronounced versus the NZD, GBP, and JPY.  It would be least pronounced versus the EURO.  If the Fed produces a dollar bearish scenario, the opposite would be true.

Read the complete article 25bp and then what?

Trading Forex in “Harmony”

June 28, 2006

It seems like everyone is waiting on the FOMC Thursday including me so I haven't been actively seeking trades but I do have 1 position open since Monday.  I am currently sitting short on the EUR/JPY.  This was traded off the daily charts so I'm looking for a target that is still quite a ways away.  The position is currently at +60 pips and in the past I would have jumped at the opportunity to take the profit but not anymore.  I will stick to my guns on the target for now.   I think it is realistic and was based on technical analysis pre-trade.  I emphasize pre-trade because mine and your technical analysis on 1 chart could be quite different depending on whether you're thinking about entering a trade, currently in the trade, or you were in the trade but now your not.

After a long day at the office and after I've finished various family obligations, I've been trying to read more about chart patterns and market harmonics.  Forex2stay has opened my eyes to the primary use of market harmonics in trading and so I've started to learn more about it.  Market harmonics could be anything related to the recognition of price patterns or fibonacci numbers on any time-frame chart.

I talked about this in a previous post before I was truly interested in it.  That post contains some links if you may be interested in it also.

http://www.forexproject.com/Blog/Investing_and_Trading/Gartley_and_Wolfe_Waves/

Trading the News 0 for 8

June 27, 2006

Week # Pip P/L Gross P/L Total # of Trades Total Winning Trades Total Losing Trades Total Even Trades Avg. Winning pips Avg. Losing pips
1 58 $58 2 2 0 0 29.0000  
2 22 $22 5 2 3 0 20.5000 -6.3333
3 -51 $-51 4 0 4 0   -12.7500
4 -21 $-21 2 0 2 0   -10.5000
Total 8 $8 13 4 9 0    

As you can see from the results above, automated trading via FXEngines is almost back to breakeven.  I have not had a winner since the 6/15 Initial Claims report.  That makes it 0 wins in the last 8 trades. 

Just to refresh your memory, I deposited $1000 into a mini-account in early June to see what type of potential this platform had.  So far I'm less than impressed but who can you blame?  4 weeks aren't enough to test the waters with this platform and there just haven't been any quality spikes during news releases this month.  I'll continue to perform news trades until I deem it unprofitable for me or until I run out of the $1000.  Hopefully this won't happen.

What’s Your Problem?

June 26, 2006

Brett Steenbarger, author of "The Psychology of Trading" has a new post on his blog today titled, "Why Your Trading Isn't Working Out."

He identifies 4 possible reasons why your trading may be unprofitable from a market knowledge and psychological perspective.

  1. Problems of training and experience or lack there of
  2. Problems with changing markets or the identification of change
  3. Situational emotional problems or immediate psychological issues such as the stress of successive losses
  4. Ongoing emotional problems such as depression or substance abuse

I've gone through #1, #2, and #3 and probably will continue to intermittently do so as I'm sure a lot of traders have.  The important thing is to identify this and then try to overcome it.

Check out the entire post at http://traderfeed.blogspot.com/  

News Trade Losing Becoming Consistent

June 26, 2006

New Home Sales report was released at 10 am EST.  My FXEngine automatic trade was initiated and lost again.  There was an initial spike down but my moderate rated trade got in at the very bottom of  the spike.  I lost 9 pips.  

I actually almost canceled my automated news trade today but opted to decrease the contract to 1 to see what might happen.  I really didn't expect a trade to even go off but unfortunately it did.  Today may have been a day to use the conservative engine which may not have gone off.

In the 4th week of news trading, I'm at +20 pips total.  I'll continue with this in hopes of catching one of those news trades that is a really big 1 way mover.

Scaling up a Trade

June 25, 2006

There's a new article on Investopedia by FXCM strategist, Boris Schlossberg on scaling up a trade.  Scaling up a trade is to add to a position ONLY after it becomes profitable.  Most traders may be familiar with the scale down trade which is adding to a losing trade.  Richard Dennis, a very famous pit trader stated that scale up trades are only successful 5% of the time.  This technique seems like it is for more risk tolerant traders and not for me.  With great risk sometimes comes great reward though. 

You can check out the article at http://www.investopedia.com/articles/forex/06/ScalingUp.asp  

Bearish Flag Pattern or Not?

June 23, 2006

The question is: Was the chart pattern below a bearish flag pattern?

sp32-20060623-201047

Though I stated during the week that I thought it was getting a little long for a flag pattern, I was under the impression it was. 

Well I was right about the "getting a little long" part and what I'm about to tell you explains a possible reason (1 of many) why the price didn't continue downward after the big move down in April.

According to Bulkowski, here is the modus operandi of the flag pattern.

  1. Price action is bounded by 2 parallel lines.  The price will go against the prevailing trend. In the above chart, the trend was down and the flag pattern is in an upward direction.   This is a flag pattern!
  2. Flag patterns form after a steep, quick price trend.  In this case, the flag pattern did form after a steep downward price trend.  This is a flag pattern!
  3. Three-week maximum.  Bulkowski states that "flags are short, from a few days to 3 weeks."  The above chart met the criteria until the beginning of June when the pattern continued after 3 weeks.  It's actually pretty amazing how the price made it down to the bottom trend line at exactly 3 weeks but failed to penetrate essentially negating this chart formation as a flag pattern.  This ISN'T a flag pattern anymore!

All along I thought this was a pretty nice bearish flag formation but it's a good thing that I now know differently. 

Bulkowski has a very good reason for why the price broke through the upper trend line today.  He states, "sometimes an excessively long formation suggests an impending failure or a weak price move after the breakout."  The above chart shows an excessively long flag formation and also the impending failure to break down. 

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