FOMC

For immediate release

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5 percent.

Economic growth has been quite strong so far this year. The
Committee sees growth as likely to moderate to a more sustainable pace,
partly reflecting a gradual cooling of the housing market and the
lagged effects of increases in interest rates and energy prices.

As yet, the run-up in the prices of energy and other commodities
appears to have had only a modest effect on core inflation, ongoing
productivity gains have helped to hold the growth of unit labor costs
in check, and inflation expectations remain contained. Still, possible
increases in resource utilization, in combination with the elevated
prices of energy and other commodities, have the potential to add to
inflation pressures.

The Committee judges that some further policy firming may yet be
needed to address inflation risks but emphasizes that the extent and
timing of any such firming will depend importantly on the evolution of
the economic outlook as implied by incoming information. In any event,
the Committee will respond to changes in economic prospects as needed
to support the attainment of its objectives.

Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack
Guynn; Donald L. Kohn; Randall S.
Kroszner; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; Kevin M.
Warsh; and Janet L. Yellen.

In a related action, the Board of Governors unanimously approved a
25-basis-point increase in the discount rate to 6 percent. In taking
this action, the Board approved the requests submitted by the Boards of
Directors of the Federal Reserve Banks of Boston, New York,
Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis,
Minneapolis, Dallas, and San Francisco.

Popularity: 4%

Get Back on the Horse

So the question is, When Will I Get Back On The Horse? 

I've been out of it for weeks now.  I do think I'm in the latter stages of tearing it all down and now I need to start to build it back up.  Some things have kept me busy though, like baseball season, stomach bugs, XM radio, and my full-time job as a Linux Engineer.  I think I was so involved with the currency market for the last 8 months or so that I neglected other aspects of my life. 

I have to be honest with all of you. I want everyone to know that I do have a lot less optimism about the prospects of trading full-time than I did in the past.  A lot of people in my shoes probably would have already quit but instead of quitting, I'm taking some time to think through this.  I AM NOT QUITTING.  I will continue trading and posting on this blog.  The Forex Project is not dead.  It isn't unusual though to go to a forex trader blog and just see that one day in 2005, the posts stopped.  I don't want that to happen to this site.  I've put too much time, energy, and dedication to both trading and blogging.  

I hope to hop back on my horse next week and I think at this point I have no choice.   Fight or Flight.

FIGHT. 

Popularity: 1%

Designing a Profitable System

Thanks to Greg for a great post.  Read this.

I believe anyone can design a profitable system, as long as one understands market principles, what goes up, must come down faster. Twice as long to go up and half as much time to come down. I believe that if I am short the market, I need to trail my stops tighter to lock in profit than when I am in a long position. As for as my original stop, all my systems risk the same amount — small. I use to believe that the 3% rule was nonsense with a $10k account. But in the S&P and currencies, I daytrade with less than 2%. I simply cannot get wiped out that way and my profits are at least twice as much the risk in the S&P when trading one contract.

How much am I going to make? I am asked that repeatedly. I can always tell how much experience a trader has by that question. It is not what you make that is important, but what one does not lose. After I have a profit of so many pips in a daytrade, the most important ingredient to my trading takes place, the break-even stop. I have not read any books giving much attention to this concept. What a stressless (for the most part) feeling it is after I am at break-even.

The best way to trade is to find something simple, that works most everywhere and then become very consistent in your approach. Develop your own system, test it, then stick with it. Other people’s systems may work well for them, but probably will not be compatible with your psychological make-up."

* * *
From Successful Anonymous Trader:

You simply cannot have any confidence if you do not have a method or way of identifying trades along with money management guidelines. You’re lost in the woods, so so speak. I was there for many years. What did I do? This may help a lot of you:

I threw out 99% of all the crap I learned about oscillators, divergences, Elliott Wave, cycles, timing, seasonals, Gann, pitchforks, volume, Fractals, RSI, stochastics, overbought/oversold (this is a good one–the stock indexes, currencies and cotton for example everyone said were overbought and topping in February and March this year). Look at what they did. Needless to say, I don’t pay any attention to this anymore either, etc., etc. The list goes on to infinity almost. I went back to the basics. I went back to simple chart patterns, (a simple moving average and trendline now and then for a visual aid.)

I came up with a low risk money management plan and put it together with trading with the trend and, presto, an effective and time tested trading plan. The plan is simple and has worked since trading began and will last me a lifetime. What a relief not to have to spend countless hours every night trying to find a ndw way to trade. I am sick and tired of that after 7-years.

I believe at becoming an expert at one market nd its behavior and then putting all your skills and energy to work in a concern(traded) manner. Get good at that market and trade the heck out of it. Increase your size over time and you’ll make more money with less effort. There are lots of professionals that do this. Look at some floor traders or locals that stay in the pit for many years trading one market exclusively.

One thing that I have learned this year, is that I am trying to cut back on the number of trades I take and be more selective and not trade in congestion as much as I did before. I miss some good trades out of congestion, but I save myself a lot of mental energy, buy myself some more free time during the day, and get better and more profitable trades.

My attitude is changing now to one or two good trades, and that is all I need to make my week ( a triple or a home run, so to speak). There are plenty of them during any given week.

Trading is fun. Once you have a method and money management in place, it allows you to concentrate on trading and not on searching and researching. That gets old and frustrating. Make it your goal to find a simple method for next year. One thing that you can hang your hat on will last you a lifetime. Trading is simple. Remember that it’s the Execution or Implementation of your trading plan that is the bigger challenge.

Most people make finding the method a big challenge. That is because there is so much junk thrown at traders. They feel like a child in a candy store and have to try every doodad in the place. When they are done, they are sick and never want to see another candy store (trading gizmo) again. They could have had the palin piece of milk chocolate at the front of the store (simple method price patterns) which would have done everything they desired and fulfilled all their needs.

I wish to all a great new year. I hope some will be able to end their journey in search of the holy grail or indicator that will turn their life around. Search for simplicity. You will be surprised what has been right under your nose all the time, right there in front of you on the chart or price bars. Pay attention to what they say they will will tell you everything. You need to listen and get to know them. It can be that simple.

Commodity Traders Club News (1997)

Popularity: 2%

EUR/USD longs make a comeback

As I stated yesterday in my forex blog, it looked like the EUR/USD was nearing solid support and I was thinking about going long on the pair.  Since then, the EURO has rallied in the forex market about 40-50 pips.  I unfortunately did not make a move since I was waiting for the pair to at least hit the support line. 

I listened to Greenspan’s speech on Bloomberg radio this morning and he spoke a lot about the ability of the economy to endure the .com bust of 2000, the September 11th attacks, and now the high energy costs. He states that the reasoning for this is that the US economy has a great deal of flexibility. I agree that the economy has been resilent but I can’t see how it will remain so in the coming months. I’m waiting for corporations to pass the cost of energy on to the consumer. I think this is going to happen sooner than later. How else are corporations going to be able to increase their record earnings over the last couple of years? Personally, I have been able to endure higher energy costs…

[Read more]

Popularity: 1%