It’s the end of January and http://www.forexproject.com continues to remain in an uptrend. Thanks to everyone who visits and especially those that contribute, our 4th month is yet another record breaking one. I’m going to share a graph of total unique visits and total visits that has gone up each and every month since the site opened in October.
Thanks again and let’s hope we all reach our goals in the near future.
The orange are unique visitors, the yellow are total visitors. This graph is for the months of October 2005, November 2005, December 2005, and January 2006.
Yesterday’s Trading Opportunity
Pictured below is an hourly chart of the EUR/JPY. The green channel is called the Keltner Channel and the indicator at the bottom is the CCI or Commodity Channel Index. My short came at around the purple downfacing triangle.
My rationale for this trade was that the price before I entered was hovering above the top channel line indicating that the price may have reached exhaustion. Now there is no guarantee that exhaustion had been reach yet in this case. The price could have continued to go up.
The key here is to wait to see if the candle closes below the upper channel line which it does. Once it does, a selling opportunity arises and can be furthur confirmed by the CCI which in this case had begun to fall below the 100 level. In addition, I looked at other momentum indictors and they showed similar findings.
I initiated a short at 142.26 once the indicators confirmed this. The Keltner Channel as well as other channels expect that price will gravitate towards the median line 80% of the time. I was betting that gravity was on my side.
The price retraced a bit to the top line of the channel once my short was in but then declined and passed through the median line. I had place a stop at the high of the previous candle which was never close to being hit.
Once momentum slowed, I got out of the trade for a 43 pip profit x 2 lots = 86 pips.
I finally made a trade this week! I’ve been a lot more picky following through on a setup opportunity since I reevaluated my strategy last week. I’m not just jumping on everything without first carefully considering it. I don’t know how this will work out for me but I’ve tried many things over the last 9 weeks and this is definately not one of them.
In my 9th week of the Forex Project, I am far from my goal of trading full-time. I have no confidence that at this point I can be consistent week in and week out. I’m just not experienced enough and haven’t been exposed to all the different types of market conditions that could arise. What I mean by this is that over the last 8 weeks, I’ve generally been trading a range market. I have not had much experience trading a trending market. This experience will come but it will take some time.
I’ve been humbled over the last 2 weeks by the forex market and some of you may sense a bit of despair in my posts. While I have lost a bit of my enthusiasm, I don’t attribute this to my trading performance alone. A lot of it has to do with external factors such as everyday responsibilities. Working full-time doesn’t allow much time for following the market as close as what I believe is needed. I’m continually working to automate as many things as I can so that it is all at my fingertips. As always, anything that I create to help me will always be given to you. Even if and when my trading does reach a point where I am successful, nothing I do at this site will ever require payment.
Getting back to my 1 and only trade this week, I shorted the EUR/JPY last night and closed the trade out about 8 hours later for a $734.00 profit. How did I make this profit?
For this trade, I tried using a combination of support/resistance and technical indicators. A couple of weeks ago I was preaching that support and resistance was everything and I thought this would be the only thing I needed to be successful. Although I still partly believe that today, I’m starting to realize how technical indicators are needed for confirmation. For this trade, I used support/resistance, keltner channels, and the CCI. This post is getting pretty long so I’m going to end it here and start a new post with more details of my trade last night.
For interested geeks, Internet Explorer 7 Beta 2 is available for download. It includes tabbed browsing (firefox), instant rss feeds, dynamic security protection, a streamlined interface and more. I use firefox but I figure I would check it out.
You can download it at http://www.microsoft.com/windows/IE/ie7/ie7betaredirect.mspx
Everyone should most likely be aware that tomorrow is Alan Greenspan’s last meeting as Fed chairman. The Fed are widely expected to raise interest rates to 4.5%. Ahead of the meeting, the currency market is taking a breather and is expected to do so until a rate increase is announced.
I have not traded at all this week and it isn’t because I’m waiting for the Fed announcement. It also isn’t because I’ve been frightened away from the market. I just feel like I’ve lost my way a bit. Not only that but my posts have been fewer and I’m finding myself reaching for something to write about. I don’t know if I just need a break or if this is the beginning of the end. I hope it isn’t. I’m not one to quit very easily.
One thing I know that has been affecting me is my full-time job. There have been many changes going on at my company and I don’t know if it’s going to be for good or bad. I have a new boss as of last Friday and I’ve really had to dig in deep at work. This has prevented me from doing anything Forex related during work hours. Some of you may remember that I accepted a forex related job a couple of months ago that I was going to start after I received my bonus at my current position. It turns out that I’m not going to take the job after all. The manager who hired me quit suddenly in the beginning of the year. I was able to reach out to him to find out why and was shocked by his words. He told me flat out not to work there. He said the environment was absolutely terrible and that he actually felt bad when he sent me an offer letter. He said he was trying to delay the entire hiring process hoping that I would get tired of waiting and give up. I’m talking about one of the larger Forex retail brokers in New York City not having a men’s bathroom. I don’t want to mention them by name now. I’d rather things cool down before I say anything.
What is my trading strategy going into Week 9?
I’m not drastically changing anything with my actual trading style this week. What I do every week though is adjust the indicators on my charts to some degree. This week I’ve rid myself of permanently placing 6 different exponential moving averages on my charts. I’ve always had the 8, 21, 34, 50, 100, and 200 EMA lines on all my charts and I’m finding that I don’t use them all the time. Therefore I’ll enable them when I need them. Other than that, the only addition to my charts this week are the EMA Keltner Channels.
What I have been doing today is taking more notes on what I see on the charts so that I can refer back to it later. In addition, I’m not planning on trading this evening (Sunday.) I’ve always traded when my broker opens for business at 5 pm EST Sunday but this week I’m going to take the time to study price action going into the higher volatility London, New York hours.
Currently I’m trying to expand my knowledge by watching a video that was recommended on several forums. This video is titled "How to Successfully use Pitchforks and Median Lines to trade." Since it is the belief that the market is greatly influenced by support and resistance, this may be another tool to use in my toolbox. Last week if anyone remembers, I mentioned an article on Andrew’s Pitchfork which is part of what this video demonstrates.
I cannot fully comment on this video yet as I’m just in the process of watching it but if anyone is interested in checking it out, it can be found at http://www.cbot.com/cbot/pub/cont_detail/0,3206,1058+35604,00.html
I’ve updated my Currency Strength charts to include functionality to just graph the currencies that you are interested in.
Above is a graphic of your choices.
1. Select a Calculation method (simple moving average, exponential moving average, or triple exponential moving average)
2. Select a period between two and fourteen days
3. Select the currencies that you want to graph
The higher the period, the smoother the graph.
I received an email from a site visitor that I’m convinced was more of an attempt to sell me something than help me. I’m still not convinced that paying someone money to help is the way to go. There is so much information out on the internet and if collated can be quite valuable. In addition, there is no question that forums and sites like this can assist in making us better traders. I truly believe that if one can hang in long enough without burning through their funds can gain the experience to become successful.
On that note, here is the email I received. If it is a sales attempt, I’ll be sure to add the sender to my blacklist. If not, I welcome the help because I too am appalled by some of my trades.
Subject: May I be of assistance?
Body: I came across your website and was appalled at your trading history. May I be of some assistance? I am sure I could assist you in improving these results if you are willing to accept some assistance.
Obviously if the sender had visited this site before, he would have known that I am absolutely and totally willing to accept assistance and criticism. I just don’t want to pay for it.
I’ve finished a new website feature tonight that displays currency strength graphs based on parameters you choose. You can specify how you want relative strength to be calculated, either the simple moving average, exponential moving average, or TRIX with a period between 2 and 14 days.
The whole idea was inspired by a trading model at http://www.mkl.sp.ru/charts.html. He no longer keeps his calculations updated so I decided to try to perform them myself. Below is a quote from his site that explains this whole idea best:
Using momentum data derived from relative-strength studies of a basket of currencies, it is possible to calculate an average “exchange rate” involving any two currency families and plot its rising and falling action on a graph. If the rate is rising, the odds favor a long trade in the pair. If the rate is falling, the odds favor a short trade. This is valuable information to have, but by digging deeper into the data we can learn even more.
You can click the link to the left, "Currency Strength" or browse to http://www.forexproject.com/staticfiles/forex_relative_strength.php
What a week. I lost $1782 and 214 pips. That calculates to a 12% loss of capital this week.
I decided after losing 214 pips last Sunday evening to take some time off to try to study price action. But even as I watched the charts and traded a demo account, I lost big. I just couldn’t pick anything right this week. Everything I tried that had worked for me in the past at least half the time failed.
I’d be really interested to know how everyone else fared this week. Please send your comments.
I’m a bit discouraged because I really felt totally out of sync with the market this week. I’ll give it a go again on Monday and hope that things turn out better. By no means am I giving up but the more I do this, the more I realize how difficult it is.