Support and Resistance Spillover

There's a short lesson on support and resistance spillovers on Dailyfx.  Specifically, they talk about using 20% of the range for stop placement below or above the new low or new high. If you are fading and short at proximity of the range high, instead of placing a tight stop right above the range high, you would calculate 20% of the range and place a stop loss at that value above the range high.

Support and Resistance Spillover

Popularity: 1%

Trading Results Are Bad

Looking at my trading results for the month of July doesn't leave me feeling any sense of accomplishment.  My results are actually embarrasing as they show that my trading is getting worse.  I'm down 401 pips this month and looking at all of my trades makes me wonder if I can make any money doing this no matter what side of the price action I'm on.  Looking more closely also makes me wonder if something is psychologically wrong with me as my habitude of shorting looks not to be coincidence.  Out of 15 trades this month, 14 were short.  Last month I made 8 trades and all 8 were short.  This is just strange and something I had not noticed until yesterday.  Performing a search on Google for this habit turns up nothing.  

Another thing that I cannot fully explain is that even though I've had a terrible month, I am still optimistic.  When I first started trading, one thing that I heard a lot of was, "The Trend is Your Friend." I remain optimistic because I realize that I've lost sight of this saying.  A lot of my trades have been counter-trend in nature and I've been trying to pick tops and bottoms.  Trying to do so is difficult if not impossible for even the most seasoned traders. 

Next week I will remain cognizant of the trend as I try to recover from this deficit. 

I am finding that the setup of my charts are reverting back to their previous state and I think that my attempt to analyze with a limited number of indicators may be a mistake.  For instance, more advanced traders can see momentum increasing or decreasing by price alone but I know that I just cannot do so with my limited experience.  I've been trying to get by with mainly support and resistance lines but I'm going to start using MACD and moving averages more.  

Popularity: 3%

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%

Asian Session May 8th

Journal Entry

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I decided to trade the Asian session and shorted the USD/JPY.  I was just stopped out at 0 profit/loss. 

I shorted the pair on a break of the support trendline and a break of RSI trendline.  It was good entry execution.  I waited for the price to break the trendline and then waited for the 15 minute candle to close.  After I was up 20 pips, I moved my stop to break even at 111.52.  My limit was still 111.05, right above a lower support line.  The trade was up as much as 28 pips where I typically would have closed the position.  Tonight, I wanted to show a little restraint and patience so I waited.  The pair never made it back down before stopping me out for a scratch.  

Should I have taken the 28 pip profit? Would you have?  

Popularity: 3%

Learn:Forex Exclusive Analysis

Learn::Forex provides exclusive content for members of FXCM.  I find that out of all Guest Trading Ideas they have "keeping it simple" analysis that you have to respect.  Others have analysis that from day to day is not consistent and analysis that also can be contrued as more of an art.  (easily interpreted differently from 1 person to another)

Here is Learn::Forex's Analysis today.  See for yourself.

AUD/JPY April 12th, 2006

The pairing that has caught our attention this week is the AUD/JPY.

First lets take a look at the Daily. Two things that stand out.First, notice that we have TWO different fib pulls that are coming together and have for resistance. And second, look at the momentum.it is appearing to weaken.

Then on the 240 minute chart we find confirmation of the price action losing momentum and we also get a nice trend line to use. In SHORT there seems to be an opportunity here.anywhere from current market price all the way back to re-test the trend line and resistance zone of 87.00

We have some support at the 85.50 area with more major support coming in at 85.00 which also happens to line up with a .382 retracement fib. 

 

 

 

 

 

 

 

 

Popularity: 3%

There’s a New Kid in Town

There's a new guest trader on fxcmtr.com.  His name is John Putnam and he comes from Putnam Financial. 

This is John's Trade Methodology:

FX Analytics (FXAN) is a blend of quantitative modeling, combined with advanced technical overlays. PFI's trade and forecast models are built around a balanced dollar index providing exceptional insight and liquidity into a large group of US based pairs. FXAN utilizes a mathematical model and scientific grade software to process a large dataset across a distributive grid of computers. This forecast is then triggered into actual trades through a series of overlays where algorithm efficiency, market dynamics and specific risks are modeled and factored in.

HIS ANALYSIS?

Trade Idea:

Long EUR/USD on a bullish candle reversal (1 hour or 2 hour bullish Harami) that fails to sustain a break below 1.2240

Stops below 1.2210

Target 1.2330

Dollar forecast for the next 24hrs: Bearish

Stronger EUR/USD, GBP USD & AUD/USD

Weaker USD/JPY, USD/CHF & USD/CAD

Market Dynamics:

Favored - Cyclical & Regression Models 

At Risk - Trend Models

PFI exited its long EUR/USD trade this morning for 221 pips. For all practical purposes I could have stayed with it given the model bias remains bearish on the dollar.  That said, with a major event risk on the horizon (NFP on Friday) I've decided to stand aside for the balance of the week.

Today's price action will probably look a lot like yesterdays and will remain choppy through the day. This makes the target of the trade idea (1.2330) a tough task in the short term and could push traders into Friday trying to achieve it; which I don't encourage.  1.2240 and 1.2210 are Bollinger Band and ma support levels (different time frames) with 1.2330 bringing in substantial Bollinger Band resistance.

Overall the dollar is finding some support at our lower channel; it would be unusual for the dollar to sustain a push deeper into this region after floating across the top for any length of time. If we don't see a substantial pull-back to a more neutral position tomorrow, I'd almost expect to see NFP come out stronger than expected or an overall muted reaction to poor numbers, which will leave the market in good shape for a technical reversal at the beginning of the week.

 

 

 

 

Popularity: 3%

EUR/USD Week of March 26th

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.

Popularity: 6%

USD/CHF 2006-02-21

TRADE

Date: Tuesday, February 21st

Entry: Short USD/CHF at 1.3082

Reason for trade/setup: Using the 240-minute chart, there was the presence of a downward trend line above.  In addition, a momentum indicator that I created and am currently testing indicated a short opportunity.  Furthur confirmation was obtained from the 3-period, 5-period Price oscillator using EMA and the continued downward movement of the 8-period, 21-period Price oscillator.  Stochastic crossover and a decreasing rate of change since early February provided double-secret confirmation.

Initial Stop:  1.3121, the high of the entry day.

Initial Target:  1.3050 then 1.2950 which are horizontal support lines.

RESULT 

Exit: 1.3121

Reason for Exit:  Stop Loss triggered

Profit/loss:  -38 pips

Trade executed according to plan? yes

Outcome: After trade entry, the pair had remained close with the downward trend line.  Volatility was non-existent during Asian session.  The USD was bullish going into the European session and the pair went as high as 1.3153 stopping me out of the position between 3 am and 7 am.  This trade never moved in my favor by more than a couple of pips.

Thoughts:  All the indicators in the world can’t predict the future.  I seemed to have multiple confirmation, felt great about the trade, yet it didn’t turn out well.  I feel good about executing the trade though because I didn’t go against my plan.  I saw a possible setup and pulled the trigger.  If I could do it all over again I would make the trade again but may have waited for an increase in volatility.  In addition, I probably set my profit targets too high considering the lack of price action this week.

Popularity: 4%

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…

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Popularity: 1%