Items Tagged With march 2006

I have to admit that there are certain traders that appeal to me.  I find that this is because I can relate best to the qualities of these traders in their speech or style.  Rob Booker is one of these traders.  I stumbled upon a Q&A session with him and will highlight important parts of it:

• His favorite time frames are 1 hour, 4 hour and daily
• His favorite indicators are support and resistance
• He uses the 5/13/62 EMA for trading totally separate from S&R
• He also likes the RSI, MACD and Momentum indicators
• He uses 5 p.m. EST close to calculate pivots
• He is always willing to take a profit of 10 - 20 pips
• He targets the recent high or low for exit
• He believes that the EURO session is best for short term traders
• If you want to make money, plan your trades the night before and only take the trades you plan

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.

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.

It was probably inevitable: China’s foreign exchange reserves are now the largest in the world, having recently surpassed $850 Billion. The reserves are both a product of China’s massive current account surplus and the $100 Billion+ that the nation attracts in foreign investment each year. Further, experts do not expect China to slow its accumulation of reserves, which may reach $1 Trillion by the end of the year. As the majority of China’s forex reserves are held in USD-denominated assets, any slight appreciation of the Yuan causes a relative depreciation in the value of its reserves. Rediff.com reports:

China's forex reserves maintained an upward growing trend and would be beneficial to maintain the nation's and its enterprises' external credit and the stability of financial structure and to prevent and resolve international financial risks.

Read More: China's forex reserves = $853.7 billion!

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.

Greg made a comment regarding a trader that interests me:

Two books worth their time: Market Wizards, and The New Market Wizards. One of the traders interviewed made the observaton that on any given day trading is probably luck, but if the trader is consistently winning over time, it's not luck. Another trader said the whole purpose of entering a trade was to preserve capital (he has never had a losing month.)

Entering a trade with the purpose of preserving capital is an interesting way to go about things.  I will probably read more about this in the upcoming days. 

For next week, I think I will change my exit strategy which may help with my early exits.  Instead of entry of 3 lots and exit of 3 lots, I will start to use a multi-lot exit strategy, one in which is probably based on multiple targets.  This will definately require more management per trade but if my worry all along has been with giving back profit, this may help curb it a bit.

This weekend I will also be working on formally drafting a real trading plan.  I will post sections as they are completed.

I finally had the time to update my trades for this week, Week 14.  My profit/loss is -$3055.70.  It has been my worst week as a trader. 

The last 3 weeks have all been losses.  I am still profitable though for the last 14 weeks with a total of $2463. 

I can't go over all the mistakes I've made over the last 3 weeks or the last 14 weeks but I'm sure I've made every rookie mistake in the book and more.  I know what I must now do.  I can no longer put off constructing my written trading plan.  Once it's in writing, I'll be at least one step closer to trading for a living.  I'll have to take the first step in the next couple of days.  My trading week is most likely over.