Friday, February 03, 2006

Knowledge is like money.

Knowledge is like money; the more he gets, the more he craves.- Josh Billings

That being said, I hope that to this point the ready has got some knowledge and some money and craves more as I do.  The bonus in currencies is the better your knowledge the more money you can get (then crave).

There is the philosophy for the day now for the set up.

The CHF/JPY formed and broke out from a double bottom formation on 1/24.  It was a nice confirming break as it paused right at the top of the middle peak and broke to the topside well beyond the 10% break I usually look for.  The double bottom’s target shows 190 pip target (yellow line).  It is interesting to see that the target puts us right to previous resistance.  There was a small pull back today, which could turn into a reversal.  I would like to see Monday as an up day before entering this trade.  If Monday is stable and positive, the entry will be close on Monday or at 92.25, whichever comes first.  Stop loss originally being set at 91.40 (10% of the mid channel defined by the Fibonacci lines).  This is a little aggressive on the initial entry due to the 1.7 to 1 risk to reward ratio and a possible bearish divergence developing on the CCI.  If the pair does not move up with any commitment, I will scrap the trade and wait for clarification.  If the entry price puts me into the trade, I will watch for an approach to 93.25 (distance targeted by the double bottom).  If the pair slows at resistance at all, I will tighten my stop into profitable territory maybe 92.75, locking in 50 pips with the potential of a break through to the next target near 94.25.  The 94.25 would give us a 200 pip movement and some interest payments on this pair.  Monday’s price movement will define this trade.  See Chart.

The Eur/Aud has formed a 300 pip double top.  This pair pays good interest and has a long term down trend.  With an additional 40 pip move to the down side, I will enter this trade targeting the remaining 260 pips and hope it takes its time reaching the target as I get paid interest every day.  There appears to be a 3 to 1 risk to reward placing the stop loss near 1.6190.  See other Chart.

Have a great weekend!

Chf/Jpy Double Bottom Posted by Picasa

Eur/Aud Double Top Posted by Picasa

Thursday, February 02, 2006

Newsletter? Updates? Something New?

Beginning of something more?
I am considering a weekly newsletter and occasionally sending out midweek emails when updating my blog. The newsletter will have additional insight not just trades but will be less dynamic in regards to trades with the blog still looking at trades specifically. If you are interested in receiving an email newsletter and occasional blog update notifications, or know someone that is, please send an email to listing the email you would like me to use and I will place you on the list.

Tuesday, January 31, 2006

45 minutes to blast off

We are 45 short minutes away from Alan Greenspan’s final hurrah as Chairman of the FOMC.  Coincidentally, many are speculation on interest rates and the new captain taking the helm.  Because of the volatility expected from the meeting there are a couple of strategies to consider.  The Eur/Usd is extremely interest rate sensitive.  The Euro has climbed 60 pips in anticipation of the announcement.  One may consider placing interest orders both sides of the current rate of 1.2176, 50 or more pips out, in this way, it doesn’t matter which direction the rates go as long as it is a significant move, the trade could be profitable.  Another technique would be to buy exotic or fixed rate options placing one-touch positions out over 100 pips assuming a run one direction or the other.  This will work if and only if the payout on one direction is higher than the cost on both of the one-touch options.  The Aud/Usd will also be affected as many investors move to gold as a hedge against interest rates, if interest rates go up, the investors will run back to the interest rate or USD if interest rates stay the same or go down than the investors will stick with gold.  Once again the straddled entry technique or exotic options could also be used on the Aud/Usd, keep in mind the Aussie does not move as much as the Euro so you will want to tighten up the options and/or entry positions.