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 

Eur/Aud Double Top 

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 actsofforex@gmail.com listing the email you would like me to use and I will place you on the list.

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.

Tightening stops before the weekend

USD/CAD really hasn't moved since the entry price. Tightening to 1.1675. EUR/AUD is paying us the interest so I won't be tightening it as much but still tightening to 1.6155.

Short the USD/CAD

Took the short position on the USD/CAD at 1.1620. 100 pip stop loss, targetting 1.1420 over the next 2 weeks. Resetting Eur/Aud short position to 1.6090

Quick scalp or long trade watch

For the aggressive scalper, you may be interested in jumping into the USD/CAD short for a 20 to 30 pip swing in an hour or so.  For the more conservative longer-term trader, watch for a close below 1.1600.  Remember this could be volatile due to Canadian elections.  I am still pro commodity-based currency pairs, such as the USD/CAD short and the AUD/USD long.  With a little push post elections, I would not be surprised to see the USD/CAD got to 1.1400 easily if not down to 1.1300 over the next 2 weeks.  Keep an eye on these commodity currencies

Give me break

It has been a volatile few weeks with few strong signals but now we are looking for some big move breakouts.

As you know I am a fan of trading the Eur/Aud short when I am justified to trade it short.  I have been waiting for this head and shoulders pattern to complete.  I wanted a close below 1.6130 and we got the close below yesterday. (see image below)

Because this pattern is looking for 200 pips and gets paid 1 pip a day in interest, I like the set up and continuation of the pattern today.  I am entered the trade at 1.6116.  Even though the pair has moved down significantly I would still feel comfortable with a 1.6042 entry and a target of 1.5920.  You will notice there are only 122 pips left in the move.  I still like it.  I am not putting a limit on this trade as of yet, but I will be adjusting my 125 pip stop loss as we get closer and into the pattern a little further.

I think we are going to have a great opportunity to short the USD/CAD in the next couple of days.  Keep an eye on that pair.

The GBP/JPY may be setting up a head and shoulders to go short.  If we close below 200.35 in the next week, we could hope for nearly 600 pip move on that pair.  If not a break down I will watch for a close above 204.50 and go for 300 pips plus interest to the top side.

Eur/Aud Head and Shoulders 

Publishing errors

Much to my disappointment there have been technical errors. I had 2 post and only 1 made it to the site and 4 days late at that. Please note the post on Monday. I entered the GBP/JPY on the 7th at 209.90 and it is breaking higher. No good news from Japan is good news for this trade. Oil has also been rising this week helping the GBP side of the trade. I was taken out of a number of my trades on tightening my stops. All of the trades exited were profitable. I am waiting for another entry on the USD/CAD but with no luck on a break out yet. This is actually a good thing. The more time it spends in the channel and the tighter the channel the more pressure it will be under when it breaks out giving a greater opportunity for profits. Friday is usually fairly quiet. I anticipate the market will pull back some and calm down for the afternoon. Next week could be full of opportunities.

Calendar Events

Quick post, tightening stops. Eur/Aud to 1.5727. Usd/Cad to 1.1605. Eur/Cad to 1.3677. All ahead of EuroZone minutes, Australian Balance of Trade, Canadian Building Permits and US non Farm productivity and Factory orders.

Happy Holidays. USD/CAD

Happy Holidays.  I hope you had a great Thanksgiving and hope you took the trade set up on the USD/CAD.  As I posted before, if the USD/CAD broke the 1.1850 it would be a good entry, well it most certainly was.  Right now that trade is up 175 pips.  I am a little leery of the upcoming FOMC meeting Thursday.  My take on the market is, for the first time in over a year, we are not certain of a rate increase.  An increase would be a pleasant boost to the dollar bulls, a non increase to rates could give the USD the beating many have been expecting for months now.  The USD/CAD could drive down to the original target near 1.1520 if rates are not raised, but I am not willing to lose my 175 pips. I will be tightening my stop loss today to 100 pips from the close and potentially tighter tomorrow afternoon ahead of the announcement.  

The Eur/Cad trade is up 240 pips.  I am readjusting this stop loss to the highs for the last 2 days at about 1.3880.  This only locks in 90 pips but it allows for the volatility that the Euro has shown.

The Eur/Aud has paid out the $1 a day per mini contract.  Since the open of the trade at 1.6023.  So now we have 20 days of interest (0% return on a 2% margin account) plus 85 pips to boot.  I am a little uncertain about this trade.  The US changing or not changing rates will affect the Euro and the AUD differently.  I am readjusting the stop loss on this trade to 1.6023.  If I get taken out of the trade, I got paid the interest, if not and the pair continues flat or drops further I am golden.

We also looked at the head and shoulders on the GBP/USD.  I would like to say that I took this trade, but then I would be lying.  If you had taken this trade, you would have been up about 180 pips.  I did not take the trade and now that we are ahead of the FOMC announcement, I wouldn’t chase the trade.  Take a look at the chart, you will see today being a significant bearish day for the GBP.  Purely based on technicals, this appears to be testing the neck line and could be a good entry short on the GBP/USD.  Once again, I am not comfortable with the trade.

We are still in the Eur/Usd.  We never hit our stop nor our limit.  Currently we are up all of 20 pips.  I will be tightening this stop right up against tomorrows high, before Thursday’s announcement.

For those keeping track, we are doing rather well with our trades.  Based on the postings, I don’t include my scalping; we have profited about 510 pips.  Adding the interest earned and risking no more than 5% in any one trade, based on the stop losses, the account is up 25.4%.  Not too bad for a month of trading with minimal risk.

Last thought and I have said it before, “THE LONGER I TRADE, THE LONGER I TRADE”.  Some of these trades are 3 weeks old.

Bearish Pennant

Bearish Pennant

As I posted, I jumped into a trade short term. Eur/Cad is up 44 pips. I have 2 contracts on this pair; I am closing 1 contract and letting the remaining one run. The Eur/Aud contract is still paying its interest and is up 58 pips. The Eur/Usd trade is up 121 pips.

Looking at the Usd/Cad, I have been stubborn about the fact the Usd/Cad should be going down due to fundamentals, yet it has been rising. I have been adamant about oil not going below $58 but it did and then stalled out. If you look at crude oil prices, the price has reached where oil gapped up in March. Frequently a gap in price will act as a barrier (support or resistance). Oil bounced off that level and rose just under 2% today. The Usd/Cad has consolidated, giving spinning top dojis right at the resistance price 1.1975, which has been a barrier 6+ times in the past year. This has occurred in a downward trend, creating the bearish pennant formation. The formation is encompassing 380 pips at the widest point. If the Usd/Cad breaks below the pennant by 10% or about 40 pips (1.1850) the price pattern would set up a move to near 1.1520, coincidentally the trend line going back about 9 months. Add one more technical indicator forming, a bearish divergence on the CCI. If the pair breaks below the 0 on the CCI at the same time it breaks the 1.1850, this is a great signal to go short. I am still very bullish fundamentally for our friends to the north (bearish for this pair). That being said, if it breaks upward above 1.2010, the price could go to 1.2200 short term.

Quick entry to trade

Got called out for a few pips of profit. Went short the Eur/Cad AGAIN (3 times a charm) at 1.3971 and the Eur/Usd is still running at 1.1660. The Eur/Aud is still paying out about $1 a day and is up a few pips to boot. Happy trading.

Keep it Comin'!

Usually the first couple of hour in the afternoon early evening holds little activity, today is different. Most of the gains on the 3 open trades showed up after the 5pm est rollover. At the time of this post the Eur/Cad trade is now 123 pips up. The Eur/Usd trade is up 104 pips. The Eur/Aud trade is up 34 pips, remember that the Eur/Aud is also getting about $1 in interest to boot. All in all a fantastic couple of days. I am feeling rather exposed on the Euro. I like the fact that there are 3 different trades, in essence long the USD, long the AUD and long the CAD. I don’t like that I am short the Euro 3 times over. Spreading out sentiment of one currency across varied pairs is a good strategy if your intension is to reduce risk of a single trade but to trade longer term. To give ample opportunity to continued trend and possible reduce my short Eur exposure. I am going to tighten stops slightly, not too much like last time but a little. I will tighten my stops to 115 of the current price on the Eur/Cad and the Eur/Usd. I am leaving the Eur/Aud unchanged as it hasn’t moved very far and I am trading it for a longer term trade and interest payment as well.

Now, much to my surprise, oil finally closed below $58 for the first time since June of this year. Stubborn as I am, I am not convinced this is the break out. If it is a break out of the head and shoulders pattern that formed over nearly 5 months, we could expect oil to slide potentially down to $46 over the next 5 months. IF oil drops further tomorrow, I would also expect the Gbp/Usd to also complete a head and shoulders pattern and drop 800-900 pips potentially. That kind of move is possible If and only IF oil drops and IF the Gbp/Usd confirms a breakout of the head and shoulder (10% of target ~1.7300-ish).

Other setups are forming. More to come.

Apology and Update

Apology and Update

I apologize for not updating this blog in the past 2 days, they have been busy.  Let me give an update of my trades.  The Eur/Cad retraced and touched my revised stop loss by 3 pips.  I believe it is human nature to think that someone has it out for you, but I have it on good authority someone is out to get me.  This person pushed a multiple trillion dollar market up just to clear out my stop.  Obviously this is an absurd notion that someone was looking for my 2 mini contracts and purposely pushed the market to close me out of my trade.  The reality is I placed my stop too close to where I saw a strong barrier.  The big banks and large players must have also seen this barrier and tested it.  My stop was just part of the casualties caused by the test.  Enough said.  Back to the trade.  I saw that I had been taken out, still believing it was a break out and seeing the test and bounce off of resistance, I went short again.  My entry this time was 1.4030, same original trade, second attempt.  This means I gave up 20 pips from my previous trade, the cost of a stop set too tight.  Lesson learned…,… I hope!
Next trade, the Eur/Usd closed below the 1.1850 target.  I have been waiting for this break for months now.  Short entry at 1.1796, target of 1.1596, stop of 100 pips, 2:1 RR ratio.
Now here is another trade I have been waiting for, in fact I had been waiting for over a month and had forgot to check it so I missed my entry by 9 pips.  The Eur/Aud is a fairly consistant, slower moving pair.  What I like about this pair in particular is the interest payment. Depending on the dealer, the Eur/Aud pays out about $1 a day on a mini and $10 a day on a full size account.  Going back to the highs last December, the pair has dropped more than 1700 pips.  Add on to that $365 in interest paid for leveraging one mini contract.  Even if the pair netted 0 pips negative or positive and you sold this pair short, the trade would have ended up paying out 182.5% for the year in interest alone.  DON’T GO BET THE FARM ON A CARRY TRADE (maybe bet the tractor). The Eur/Aud has bounced off of resistance and is coming down, hence the reason I sold the pair short (entry price 1.6023, stop loss 1.6173)  Yesterdays close showed a MACD cross, a declining 5 period SMA after the aforementioned bounce off of resistance.  It is my intent to hold this trade until the MACD and or CCI give me an exit signal, each day being paid interest and hopefully a few hundred pips to boot.
Last comment until the next post.  There is a lot of uncertainty on the Usd/Cad.  One of my colleagues and I have argued this.  He says oil is dropping and the pair is rising and no one in the right mind would take this trade short.  I am not one to be a contrarian but I do believe in commodities rising and I think this pair will probably turn around and go south here soon.  Keep an eye out, yesterday provided a beautiful spinning top at a resistance level.  Tomorrow is Sept Trade Balance for both the US and Canada.  It could help break this pair out (my guess to the down side for this pair)

BAM!!!

BAM!!!

We nailed the triangle something fierce.  What a great break out.  At the time of this posting the Eur/Cad is sitting at 1.3930, this is 120 pips on the break out.  If you are trading minis, the pip value is $0.85 per pip, this is equivalent to $102, or $1,020 on full size accounts per contract.  We started with a 100 pip stop loss.  I am going to adjust my stop loss to the entry price, this will guarantee no loss on the trade, gives me a 120 pip stop loss and the entry price is, interestingly enough, the 67% Fibonacci line based solely on today’s move.
The Euro broke below the 1.1850 mark I have been waiting for the past 3 months.  I think it is a good time to watch for an entry.  I am extremely excited, this appears to be the break out and the end of our flat, erratic non trending market.  A trending market can be a real cash machine.  Have a great weekend and successful trading.

Tightening the entry

Tightening the entry signals.

The triangle narrowed today, I am still comfortable with this trade set up. I am adjusting my entry prices to reflect the narrowing triangle.  Buy entry price, 1.4305, Sell entry price 1.4050.  These entry prices are still 50 pips (10%) outside of the triangle.  The 100 pip stop on both and limits still hold.

TRIANGLE READY TO BREAK

In the picture below, we have a beautiful triangle forming on the Eur/Cad.  This is a 30-day triangle (time from the base to the tip of the triangle).  The rule of thumb is not to take a breakout in the last 10% of time, in other words the last 3 days on this triangle.  This allows us to watch for a breakout up to 11/9/05.  The base of the triangle is 500 pips.  I like to see a break of at least 10% of the pattern size.  That being said, a break above 1.4320 or below 1.4035 will indicate a trade.  A retracement of the 50 pip break and cross back into the triangle would kill the trade.  The set is as follows, buy entry order at 1.4320 with a 100 pip stop and a 400 pip limit (4:1 reward/risk ratio) with a simultaneous, mirrored sell order at 1.4035, 100 pip stop loss and 400 pip limit.  These limits are 50 pips short of the upper target based on the pattern and 50 pips late on the entry.  I would rather make 80% of the movement and be right more often than try for 100% of the price movement and be wrong a lot more. Because it has taken 3 weeks to form, it could take 3 weeks for the price to reach the limits.  If the pair breaks out, I will probably adjust the stops along the way.  If it does not break by the 9th, the pattern is void.  If I had to pick one direction, I would favor a short trade as commodity pricing has been rising and the Euro has been struggling.  The ECB meets tonight which could be the catalyst to break the price out of the triangle.  If you have questions about the pattern or trade please click on comment and the system will email me.  Feel free to click the email link below to forward this to friends or other traders.