Items Tagged With November 2005

I'm posting this because I searched for the answer for a little bit today:

EUR/USD

During the Asian session, the Euro trades 15% of all volume but it can still have a good move.It trades 39% of all forex volume during the European session.

The pound trades lightly before and during the Asian session but has good moves.The market can be quiet in the middle of the Asian session.In the European session ,GBP/USD accounts for approximately 23% of all forex trading volume .

During the Asian session,USD/JPY accounts for approximately 78% of all forex volume.This drops to about 17% during the European session but price can be on the move all day.

The Asian session opens at 0.00 GMT or 7 PM EST and closes at 9.00GMT or 4 AM EST.

The European session is the largest market and opens at 7.00GMT or 2AM EST and closes at 17.00 GMT or noon EST.

The US session opens at 13.00 GMT or 8 AM EST and closes at 22.00GMT or 5 PM EST. The best trades occur in the first 3 hours.

The EUR/USD didn't quite hit my predicted support line but got pretty close before going back up where it now trades at 1.2031.  I set a trailing stop last night at 1.2004 before going to bed and it was hit on it's way back up in the European trading session.  So I made a 50 pip profit on this trade. 

I am sticking to my previous prediction that the USD will break down within the next few weeks.  Until then, I see the pair range trading between 1.2100 (projected target next 24 hours) and 1.1950. 

Most Consecutive Up Days: 10

CAD/JPY has had 10 straight up days since 11/14/2005 when the pair opened at 99.15.  The pair is currently trading up for the 11th day at 102.50.

Profit in pips since 11/14/2005:  335

Source for information below: Investopedia 

Why would the CAD/JPY rally? As we mentioned earlier, the Canadian dollar is a petrocurrency that has received a tremendous boost from the stratospheric rise in the price of crude. The yen, on the other hand, is the principal victim of high oil prices because it is the only highly industrialized country in the world that must rely on imports for 99.5% of its petroleum needs. The CAD/JPY, therefore has an 89% correlation with the price of oil.

Canny traders who bet on an oil rally could have expressed that opinion very effectively in the currency market through a long CAD/JPY position. Even better, they would have harnessed a positive yield differential in the process. With the loonie currently yielding 2.75%, while the yen rates remain at 0%, the interest rate differential alone was 275 basis points or 27.5% annualized using a standard 10:1 leverage factor. (This essentially means that since FX traders can use $1 of capital to control $10 worth of currency, the gain from the 275 basis point differential will be 10 times larger than if traders did not use leverage.)

I was reading Currency Trader magazine and it is interesting to note that the payrolls report which is released this Friday is very difficult to forecast.  According to the article, no matter what the forecast is, the forex market will spike on it, sometimes in both directions on the same day.   This is why it is not recommended to open a position in the morning on the first Friday of each calendar month.

According to an analysis by S.A. Johnston, on the payroll date each month from January 1999 to September 2005, the Euro had 42 payroll date-days closing up and 36 days closing down.  The maximum spike up was 240 points and the maximum spike down was 249 points.

It is interesting to see Warren Buffet's Berkshire Hathaway having such a terrible year considering it's usually a top performer year in and year out.  Part of the reason has been the affects from Hurricane Katrina against their insurance holdings.  Another reason has been Buffet's bet against the dollar.  Recently:

"The company also reduced its stake in foreign currency contracts to $16.5 billion on Sept. 30 from $21.5 billion three months earlier. Buffett has bet against the dollar since 2002 amid concern that high U.S. trade and budget deficits might cause non-U.S. investors to pull money from the country."

I know Buffet is known as one of the greatest investors of all time but has the foreign exchange market ever been his specialty.  I don't know the answer to this nor do I know who is the greatest foreign exchange investor of all time.  I'd like to find out though. 

I've been wondering whether my Foreign Exchange experiment is going to pan out.  I remain enthusiastic of the prospect of quitting my day job to trade full time but in all honesty, I haven't heard too many success stories.

On a side note, it's amazing how many forex related websites there are.  I've noticed 2 things about a majority of them:

1.    They have outdated content which I can only assume was run by someone who burned through their account and gave up on currency trading.  I often wonder if I would continue to run this site if I didn't trade anymore.  I doubt it.

2.    They promise success and riches but only if you pay them.

Getting back to success stories, I read a little about John Henry, the owner of the Boston Red Sox who made billions following trends in Futures, Foreign Exchange and Fixed Income.  I found an article about him from 1996 which was before he owned the Red Sox and therefore was more known for his trading expertise and not for winning the world series.  John Henry success story here 

I still don't know if I can make it in trading.  I need to become a lot more disciplined and exit trades when they aren't going my way instead of waiting for my luck to turn.