Volatility this Wednesday, Thursday, Friday

I've been trying to keep on top of economic announcements because they are at the core of the Rob Booker channel trading strategy.  I've created an Economic Announcement PDF with notes that were modified from material provided by Rob Booker.  

According to the calendar, we can expect volatility in the market on Wednesday, Thursday, and Friday this week.  Before then, traders may be sitting on their hands waiting for Bernanke's announcement on Wednesday afternoon. 

 Forex Economic Calendar 08/05/2006,14:43 561.15 Kb

Popularity: 4%

Magdalena Speaks About Her Forex Experience

I like to post some of your comments sometimes because I find them so beneficial to my learning process and know that they can do the same for you.  This is an email I received from Magdalena yesterday.  I can totally relate to her comments because we are at similar stages.  Maybe you are to.

I started learning about Forex last October and was totally amazed for two reasons: The whole concept of trading FX seemed so perfect and natural that I felt like I discovered the best way to make a living there is. My master thesis was on hedging foreign currency transactions in international trade yet it has not occurred to me until then you can actually make money yourself trading forex. I blame it on the fact that I got my master's in Poland and my home town university's curriculum missed a lot of practical and useful information, since I refuse to admit that it's probably me being a dummy and it never dawned on me before.   After an initial immersion into the market I opened my first demo and doubled it within a month without much effort and occasionally missing trading days. I didn't have any strategy whatsoever, I went with my gut feeling and basically after a while, my way to trade would be to open (I only traded EUR/USD) 2 positions on the same currency just in different directions waiting for each position to make a 10 pip profit. I didn't use any stops based on an assumption that what goes up must come down and vice versa - pretty naive thinking for someone who has degree in finance. It worked beautifully for a while though. Then came December and a couple of big loses that I had to take which pretty much ate all my profits from previous month. This is when I decided to actually learn something and went on a crazy search for a Holy Grail. I guess we all do that at some point Hundreds of websites, offers and promises. The only reason why I didn't buy any system or program is because  simply couldn't afford it. But I kept on looking and got every book from the local library that something to do with trading. And after a while I got to a point where I didn't know anymore what works what doesn't and worst of all I stopped trusting my own judgment. I was dazed and confused.   Then I bought Raghee's book and all of the sudden realized that there is no perfect system. That you can chose basically any strategy and if you have the discipline (the hardest part of it all !!!) to stick with it, you will become successful. So this is where I am at now… Trying to train my eye to see set ups as described in the book and get my personal feel for the market. So far I have found that I get some pretty good trading ideas, however my execution sometimes is not up to par.   I could ramble on about my trading experiences for hours since no on around me shares the interest…Right now I trade a small mini account just to get the feeling of the real account and hope that within next few month I will have enough to open standard account and will be consistently making profit.       Talk to you soon,     Magdalena

Popularity: 3%

Come into my trading room

I was interested by some of Alexander Elder's comments in his book, "Come into my trading room." For those of you who have never heard of him, he is a professional trader who at one time was a psychiatrist.  

He states that a successful trader needs to stand apart from the crowd and one way to do so is to be unique in choosing your timeframes.  I've always used the 60-minute, 180-minute, 240-minute, and the Daily timeframes.  Elder says that it pays to use uncommon parameters for charts and indicators.  Most traders use the default timeframe configurations in their trading software but since thousands of people use half-hourly charts, why not be the minority that use 25-minute charts.  The benefit to this also is that you may get signals a little faster.  

I was reading more about his Triple Screen Strategy not really because I'm looking for a brand new strategy to use (I'm always open-minded) but because it stresses the use of multiple time frames for entering and exiting positions.  I've always treated each timeframe as a totally separate entity mostly because it simplifies entries and exits and also because I adopted this style after reading Raghee Horners first book.

Elder seems to have a lot to offer in the way of trader psychology and money management.  I'll continue to post anything interesting if I come across it.

Popularity: 2%

What Markets Am I Going to Trade?

This is a continuation of my trading plan.  I have added a link to the left main menu called My Trading Plan.  You can view the latest trading plan at any time by clicking this link or going to http://www.forexproject.com/trading_plan/ 

The second question I will ask myself is "What Markets Am I Going to Trade?"

I will be trading the Foreign Exchange market only.  Specifically I will be looking to trade the EUR/USD currency pair only until I can develop a consistent trading strategy.  Once I become more comfortable trading the EUR/USD, I will slowly integrate more currency pairs into the mix.  I will allocate 100% of my fund to trading forex.

This year, I want to look further at trading the following:

·         Mini-sized Dow (YM)
·         E-mini S&P (ES)
·         E-mini Nasdaq (NQ)
·         E-mini Russell (ER)
·         Soybeans (S)
·         Mini-sized gold (YG)
·         Corn (C)
·         Wheat (W)
·         Crude Oil (CL)
·         Mini Crude Oil (QM)

Popularity: 2%

Multi-lot strategy for Today

I have exited only 1-lot of a 3-lot position for the first time.  Last week I said that I had a bad habit of closing out a position when it went a little bit in my favor and that developing a multi-lot exit strategy may help.

I entered a Long position in the USD/CAD at 1.1360 (3 lots):

My targets were:

T1 - 1.1395
T2 - 1.1425
T3 - 1.1460 

My T1 was hit for a 35 pip profit.  I heard that it would be best to move your stop up to the entry level which I did at 1.1360.  So the worst I can do at this point is make a profit of 35 pips.  The best I can do is a profit of 200 pips.   

I already feel like this strategy will be good for me.  For one, I already have a guaranteed profit.  Two, I have the potential to profit 165 more pips without any risk of losing anything except unrealized gains.  I really think this will prevent me from micro-managing my positions and
impulse trading.

Popularity: 2%

Preserving Capital

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.

Popularity: 1%

Staying with the Trend

I have started the week on a positive note and sit at +$1000.  I have been watching the DMI indicator to confirm that a trend is still in place before buying or selling a pullback.  Though I have done this successfully today, I have a hard time holding on to these trades and have not followed my own advice on where I’ve been placing my limits..  Once I can net about $300-$400 on the trade, I’ve been exiting.  Now this might look good on paper right now but the simple fact is that I don’t do this when a trade is going against me which means that my risk/reward is poor.  I set a stop but never a stop that triggers when I’m only down about $300-$400.  My stops are usually a minimum of about 30 pips so this would net me a loss of $900.  One bad trade and I’m back to square one.

Call this rationalizing but I feel like exiting now with a smaller profit may be sufficient due to the lack of liquidity in the market until either the Asian or European sessions. 

I’ll continue to work on holding on to my positions longer when the pair is going in my direction.  I should learn my lesson after exiting my USD/JPY position last week right before the big 100 pip move down.  I could see using my exit strategy if I was trading the 15, 30, or 60 minute charts but I’m usually trading the 240-minute (my favorite period.)

Popularity: 4%

March Issue of Stocks & Commodities

I picked up a copy of the March Issue of Stocks & Commodities magazine this weekend.

There is an article that explains the use of candlesticks and moving average crossover as a strategy.  This is yet another setup strategy that I like for its simplicity.  As long as you can chart 2 moving averages and identify candlestick patterns, you can use it. 

The simple idea is that as moving averages crossover, the candlestick that forms during that crossover can be used to identify the possible direction of the market.

 

 

 

 

 

 

You can read a snippet of the article at http://www.traders.com/Documentation/FEEDbk_docs/ForexFocus/FOREXfocus.html

To read the full article, you need to buy the latest issue of Stocks & Commodities.

Popularity: 3%