ForexSpirit

2010-12-04 19:42:15 I’ve decided to try and find a way to record my ongoing trading thoughts as I need some way beyond just numbers to analyse my trading performance. Videoing the millipede method isn’t really practical. Twitter only allows 140 characters which I doubt will be enough to record most trading thoughts. A regular blog post isn’t impulsive enough. I often need time to compose a proper blog post. So instead I’ve decided I’m going to try and record snippets of analysis and thoughts as I view my chats. I’ll compile these snippets into daily or weekly blog posts as a full record.

I’m going to avoid attaching too many charts as I scan too many pairs at the moment (nine). It’s easy enough to pull up historic data to match price action to my comments. I’m also going to pass on reporting full market analysis as this is readily available at sites such as ForexLive and DrForex.

Let’s kick off with a few thoughts on this week’s action. I’m disappointed that I didn’t try any buys on EUR/USD from Wednesday onwards (okay, there was one but it was not followed up). I knew there was a high probability that there could be a retrace after such a big move down over the past 10 days; so I was prepared for it. I did not draw a trendline to see when strong resistance might appear, so a 400 pip move in three days was more than I expected.

I was more focused on waiting for the retrace to burn out and thus waiting for opportunities to get back short. The speed and size of the retrace has opened up a real possibility that there might be a new bull trend in progress (on the hourly charts). Thus it’s a major missed opportunity that I don’t have any buy legs in place from the 1.300 low.

There were three times that I thought about going long (but held out obviously). At least one of them might have worked out:

1. A buy right at the bottom when price was in a small range in the Tuesday night Asian session. A buy stop above this range with a stop loss if a new low was reached would have been a valid trade.
2. Going long on the quick dip on Thursday morning just before Trichet did his ECB press conference. It was almost a double bottom with a quick spike down from the previous day. To get this one I would have needed a buy limit order in place as I was commuting at the tine.
3. Going long after the weak NFP number. I felt that it would be bad for the USD and went short USD/CHF and USD/JPY. I’ve been burnt quite a bit by putting on too many trades almost simultaneously and thus have put a rule in place to only place a max of two trades an hour. I stuck to this rule here. Sometimes rules are there to be broken. This would have beer one of those times which I’ll hopefully he able to spot and act on as I get more familiar with this trading style – trading multiple currency pairs being still relative new to me. Nothing is fixed and rigid when it comes to trading. I need to have general guidelines and principles while also being flexible and most importantly, adaptable. If I had been in this case I would have had good buys on Friday in euro, Sterling and Aussie.

Another good trade (in retrospect) was going short loonie Wednesday night. Wednesday there was a small breakout north from a trading range that persisted over the past couple of weeks. The entry would have been to go short on the break of the inside bar that formed after the breakout attempt. I passed on the trade as if it would have worked out price was only going to end up in the trading range once again. It would have been in barbed wire territory where I foresaw very little chance of it working out. Bad mistake. It was still a good high probability entry point. I can’t predict what the future holds so I shouldn’t let possible outcomes influence what is available and in front of me right now. There is always the possibility that price moves out of the range at the bottom and thus starts trending. I should have kept that possibility in mind. If I had maybe I would have taken the trade. My daily goal is to look for good entry points so that I can participate in the market. After that it is up to the market what happens.

2010-12-06 10:36:24 Placed a sell stop entry order on EUR/JPY at 109.61. The 5:00 hourly bar was a small breakout to the downside, followed by an inside bar. The 7:00 bar broke out the top of the inside bar. Entry was placed on anticipation of a failure of the breakout failure.

2010-12-06 10:39:03 Range forming in euro since 4:30 this morning between 1.33 and 1.3250. What looks like a double top forming close to 1.33 over past hour on 5 minute chart. If small up trend from 8:30 is broken will look to go short.

2010-12-06 12:16:02 Failed to move SL to BE on newly opened euro trade. Was aiming to do so when it moved down to around 1.3250. I made it to 1.3253 but I failed to spot this and have to now deal with price above my entry point.

2010-12-06 12:21:39 Whoops on those new Benjamins.

2010-12-06 12:22:24 EU meeting this evening in Brussels which probably explains continued range trading in euro.

2010-12-06 13:43:54 Going long euro as SL on breakout failure triggered. Last trade today on euro.

2010-12-06 13:45:18 I’ve been thinking of putting in place a maximum pip drawdown that I can sustain in a given week. My worst weeks trading the millipede method have seen losses of around 1000 pips which was excessively high. I have been more comfortable seeing them in the region of 500 pips. When I updated my results spreadsheet last week I compared the losses experienced over the prior two weeks. The week before I had just lost around 300 pips while I was sitting at around 500 pips again that week. I’m inching towards putting in place a 300 pip limit. It allows for enough room to place quite a few trades and should mean that I get through at least three days of trading before blowing it out even on a bad week. While if I manage to move towards having more BE trades and fewer that hit SL it shouldn’t impose any real straight jacket on my trading approach at all. In the short term I hope it will focus my mind on taking higher probability trades so as to not tag myself out of trading for the remainder of the week. The importance of such thinking is easily highlighted by the fact that I’m already down 144 pips this week and it’s only Monday! 7 trades closed out (two of which were entered last week) and only two BE.

2010-12-06 14:52:17 Closed out euro long at BE. Let’s wait till we get some news out of the EU meeting before looking to see if bias should be long or short euro. Seems to be just treading water at the moment.

2010-12-06 15:18:50 Looks like a three push up on 5 minute euro chart. Keep eye out for a good 2nd short entry point.

2010-12-07 08:28:13 Waiting on vote on Irish budget before thinking of placing any order. Euro is inching back
up towards 1.3400. Seems to be bulls in charge today so far. Aussie and sterling broke to new highs during European session while euro did not.

2010-12-07 10:18:08 Double top formed on 5 minute euro just below 1.34. Still waiting for results of Irish budget vote, although Aussie has had a 60 pip move south in past hour; unable to fully retest parity. My breakout failure buy in yen is in the black by 50 pips. BoC kept rates unchanged, loonie is up 40 pips. All signs of some USD strength.

2010-12-07 10:21:34 This morning I have been mulling my inability to get some legs going on currency pairs outside my traditional forte: euro. If I just focused on trading a single currency or two I would be able to bump up my gearing. This would mean I’d hopefully seem some profit more regularly, instead of the slow bleed I have been incurring. On the downside I would not be as well diversified and would have to somehow deal with ranging periods that would offer very little gain. The main advantage of trading multiple pairs is that I can put more focus on those that are in a strong trend and ignore those that are going nowhere. I know that this trading method is profit by a thousand cuts but it can be hard to deal with that on certain days. This morning was one them. Adversity is all part of the game.

2010-12-07 13:57:57 Interesting Outside the Box article about euro problems: author thinks that until euro leaders are blaming everyone else (like the short sale ban by US in 2008) then the crisis is not over. Probably in stage of not even realising how big the problem is right now.

2010-12-07 23:46:12 Double bottom on GBP/JPY daily (May 20 and October 25) and yesterday looks like a good bull second entry signal day.

2010-12-08 12:28:23 Focus today is on the continued rise in the US 10-year note. Driving USD/JPY higher (and yen down across the board). Watching for retest of 84.40 in yen. Small rising trendline on 5 min chart in euro. 3 touches so far. I have a sell stop limit order placed at 1.3197 if this trendline is breached and USD continues to garner some strength from the rise in the bond market yields.

2010-12-08 14:44:21 I’ve gotten well whipsawed on euro today. Decided to try and play within the 1.3225-50 range and got burned.

2010-12-08 18:08:58 Unsurprisingly, we’ve had a very quiet, sideways market since after lunch. Price is smack in the middle of the upward trend channel on the 5 min chart from 4 am this morning. I’m about 15 pips in the red on a euro short entered at 1.3247. If we have a breakout to the north and it is a trend channel overshoot I’ll consider going short again. I’m hesitant to buy as my bias is still short, but I know I need to keep looking for good buy entry points in case this upward trend channel is the bottom of a consolidation zone of the longer term charts (potentially between 1.32 and 1.34). I feel there’s still a good chance of another re-test of the 84.40 level in yen. We only reached 84.25 so far today but it’s been higher lows on the hourly chart all day so a squeeze could be on the cards.

2010-12-09 10:13:42 Reviewing my trading on the euro yesterday I feel I could and should have done better. Having a short bias is fine (and still validated by this morning’s price action) but I need to open myself up to fully recognising and acting on bullishness. I tentatively put a buy position on yesterday. I bailed on it early when it started to go against me; the main issue with that entry was that I did it in the middle of the upward sloping trend channel. I should have gone long near the bottom of the channel. That would have allowed me to have a close SL (on a breach of the trend line) which if hit I could have then turned my bias to short once again and looked for a second entry on a retest of a resistance level. My short entry overnight was good as it played off a slight overshoot of the trend channel line and a retreat back into the trend channel.

2010-12-09 13:46:50 Disappointed with a USD/CHF trade from this morning. It’s the sort of trade that I need to eliminate from my repertoire: the primary reason I entered long was on the strength of the down move in euro. There were no reasons on the USD/CHF trade to take a trade. Just because the two are vaguely correlated is not a good enough reason to blindly take a trade! I know I can hold on for the big moves. What I need to work on is not taking pointless trades that result in driving up the diversification break-even point. Focus on taking high probability, risk aware trades.