Items Tagged With July 2006

I'll be taking a break from trading today and tomorrow due to 4th of July holiday.  I haven't looked at a chart since Friday and probably won't again until Tuesday night or Wednesday morning.  After a year of doing this, I've found that sometimes it's just better to get away from all of it when volume is so decreased.  

Clear your mind.  Take a break. 

I am alive and watching the market somewhat.  I am watching what unfolds at midnight EST when the Bank of Japan announces whether they are increasing interest rates or not.  If they do, it would mark the first time in six years.  Supposedly, they are expected to raise rates by at least 25 basis points.  According to Kathy Lien, even if BoJ does raise rates, it doesn't necessarily mean bullish times for the Yen.  According to her, there are 3 possible scenarios that can happen tonight:

1. Leave interest rates alone which would clearly be Yen bearish.  LONG USD/JPY
2. Raise rates 25 basis points and signal that in the upcoming months more rate increases are expected.  This is clearly Yen bullish. SHORT USD/JPY
3. Raise rates 25 basis points and indicate that just because they are raising rates now doesn't mean they will continue to raise rates.  This is a highly likely scenario and one which doesn't give a clear directional signal.

I don't know what I will do if anything to trade this pair tonight.  The pair is trading right now at its highest since the end of June at 115.87.

If you want to follow the Bank of Japans decision, go to http://www.boj.or.jp/en/theme/seisaku/kettei/index.htm  

I get a ton of requests from a lot of you asking about Rob Booker as a mentor and I've responded to probably all of them.  I'm in the process of adding a FAQ (Frequency Asked Questions) to the site so that you have the information at your fingertips. 

I thought I'd attach the latest PDF Chart School from Rob Booker.  You have to be one of his students to get it but I'm posting it here.  For those of you that may be interested in signing up with him, it may give you a little idea of what to expect.

 Rob Booker Chart School 25/07/2006,16:25 157.17 Kb

Do you despise waiting in line? Are you constantly in a race against time? Patience is defined as calmness, self-control, and willingness or ability to tolerate delay. 

I took an online patience test yesterday because I was curious of how I compared to the norm.  My score was 48/100 which put me surprisingly in the middle.  I'm mentioning this because over the past couple of months, I have made a conscious effort to improve my patience as it relates to trading.  I remember the days when I was trading too much.  I would trade at all hours of the day and many times just to be in the market.  I didn't have the patience to wait for a setup and would jump to conclusions or assumptions before the setup materialized.   Sometimes I would actually win but many times I would also lose.  The biggest issue with my impatience was that it formed some really bad habits.  I am now just starting to fix them.  

Part of my "therapy" was to set a realistic monthly goal of 260 pips.  260 pips don't sound like a lot over a month's time and there is the possibility of making this on 1 trade.  I felt that setting a daily or weekly goal only contributed to overtrading.  For example, it is Wednesday, July 5th and I have yet to make a trade in the month of July.  If I had a 60 pip weekly goal, I might have felt forced to enter the market this week just to reach that goal.  Instead, I don't care if I trade this week or not.  I still have 18 trading days left to reach my monthly goal.

Want to test your patience?   http://www.queendom.com/tests/minitests/patience_access.html

The July Issue of Currency Trader Magazine is out.

Highlights:

• Trading Pullbacks in Foreign Exchange
• Advanced Strategies of Commodities and Currencies
• Analysis of Composite ROC System
• Demark Indicators at Work
  

I mentioned last week that I was going to continue using the FXEngines "trade the news" platform since it has been slightly profitable over the last 6 weeks.  I received a lot of comments about this platform during this time and it seems like some of you who jumped on the ship quickly jumped off.  This is totally understandable considering the broker issues encountered during highly volatile news reports and just the simple fact that the platform never seemed to capture those huge moves.  Over the weekend, I decided to subscribe to the ultra-aggressive engine which by the description is obviously very aggressive in entering the market if a price spike is encountered.  What this means is that I will be trading every US news event automatically.

Today was the Consumer Confidence report and it turned out to be the most profitable trade since I started using this platform.  One visitor to this site said that it seems like the platform doesn't perform well during highly volatile moves but does have more success during medium volatility moves.  That turned out to be correct today as I was able to capture 60 pips short on the EUR/USD.  I manually closed this trade out so I could have captured more or less depending on future movement.  So in this, my 7th week, I stand at +108 pips using this platform.  It certainly isn't the perfect system but as I said last week, it is my only consistently profitable system.  For some of the bashing I've given it, it really hasn't been all that bad.  I know I'm saying this after a nice win but take a look at the weekly P&L:

Week 1 -> +58 pips

Week 2 -> +22 pips

Week 3 -> -51 pips

Week 4 -> +19 pips

Week 5 -> +3 pips

Week 6 -> -3 pips

Week 7 -> +60 pips

This shows 5 profitable weeks and 2 unprofitable.

I'm not sure if I've ever mentioned the site of a trader who seems to have tons of experience trading and has the proof to back it up...  Don't just check out his reports; be sure to check out his FX Thoughts section which talks about beginning trading, asset allocation, backtesting (he thinks you're crazy if you don't do it), carry trading, equity curves, psychology, scalping, stop losses, and much more.  Take some time to go through his site.   It's definately worth it.

http://www.users.bigpond.com/morleym/

John Carter gives a nice and quick overview of what's going on in the currency market for tomorrow morning.  

http://www.tradethemarkets.com/video/ttm07262006forex/ttm07262006forex.html

FYI, he loves LONG AUD/USD if we can get a bit of a pullback. 

I was reading a new article in "Stock & Commodities" magazine titled, "What Time Frame is Right For You?" by Thomas Bulkowski (author of Encyclopedia of Chart Patterns) and felt it was a pretty good overview of a type of trader that you can strive to be.  Bulkowski identifies 5 types of traders:

1. The Scalper - if you want to be this type of trader, be prepared to be in and out of the market in minutes.  What does it take?
• Trading for about 4 hours a day
• Research 3 hours a day
• Very small chunks of profit
  
• Intenseness
• Tick, 1 minute, 5 minute charts
  
2. The Daytrader - if you want to be a daytrader, you most likely will buy and sell throughout the day and typically don't hold your position past that day.  What does it take?
• Follow only a few select securities
• Hold positions for a couple of hours
• Range trading
• Requires long hours of screen staring
• Less intensive than scalping
• Less than 1 hour charts
  
3. The Swing Trader - if you want to swing, you should be good at timing the market to buy at bottoms and sell at tops.  What does it take?
• Trades that can last from minutes to days and sometimes weeks
• Holding overnight sometimes
• Longer term view
• More relaxed than day traders
• 2 groups of swing traders: those that have trades that last less than 3 days and those that have trades lasting weeks, usually 8 to 10
• Typically 1 hour, 4 hour, or daily charts
  
4. The Position Trader - will usually buy and hold.  What does it take?
   
• Patience
• Holding for days, weeks, or months
• Typically have full-time jobs
5. Investors - your typically mutual fund investor.  What does it take?
• Buy and hold
• Checking the market weekly or monthly

Bulkowski found that 50% of surveyed traders were swing traders which is what I feel like I have been striving towards since I started.  My problem is that I don't time the market well enough to be classified as anything but a "trader in training."

This is kind of off subject, but a visitor to this site brought up a very good point the other day, MG said that 1 year just isn't enough to gauge whether you will be successful or not:

Give it more time, 1 year is not enough

To become a very good:

• surgeon - you need 15 years
• lawyer - at least 6-8 years
• programmer - at least 3 years (I can relate to this)
• carpenter - at least 3 years
  

...you hurt all the Wall Street guys feelings, man (meaning don't think you can just jump into the market and expect to beat the seasoned veterans in your first year or ever) 

Thanks MG.  

I don't know if what I'm thinking is right or wrong but I find us in a similar situation to where we were back in early May.  May 10th, the FOMC announced a 25 basis point hike and the dollar declined for a couple of days following the announcement before making a healthy 50 - 60% retrace.  Last week, the Fed announced another 25 basis point hike and kept a similar statement regarding the future of interest rates.  So where do we go from here?

• Will we get a minor correction (as we've seen the last couple of days) and then further dollar weakness pushing prices down to mid-May levels?
• Will we get a renewal of dollar strength and see levels push to early April levels?
• Will we get neither of these scenarios and just furthur consolidation?

Similar to what the FOMC are doing, we have to keep on top of economic releases.  We have the Non-farm payroll release on Friday which is a huge market mover and may be the lighter fluid or not.

The bottom line is I don't know what is going to happen.  I haven't read any "expert" commentary on any of this because I like to make my own assessment first.  Thinking about stuff like this helps in keeping you sharp on the possible scenarios that could occur.  I also firmly believe that it's beneficial to your future if you make your own choices without listening to outside noise.  I'm not saying to totally dismiss others words or recommendations but I try to keep the influence that this has on me to a minimum.