The Alba System Journal- EUR/USD intraday system

[pssonice]

Thesis on how to handle the money market

Thesis :
"Those who treat forex trading as if they were in a casino will see the same long-term results as when they go to Las Vegas," he says, adding: "If you treat forex trading like a business, including proper money management, you have a better chance of success." - Newsweek International, March 15, 2004

proper money management :
http://www.pfxtrade.com/article4.htm
"...If you have a balance of 10,000$ and you enter a trade with 1,000$ then your core equity is 9,000$. If you enter another 1,000$ trade,your core equity will be 8,000$. It's important to understand what's meant by core equity since your money management will depend on this equity."

a system with 60% winning odds
It was proved that if 100 traders start trading using a system with 60% winning odds, only 5 traders will be in profit at the end of the year. In spite of the 60% winning odds 95% of traders will lose because of their poor money management.

the rest is yours. systems with 60% winning odds are available here and everywhere at zero and of max. cost

 

[Big Pippin]

Someone Give Me Some Caffeine

So tropical storm Ernesto took his sweet time over us and flooded our whole area. But the flood wasn't what bothered me. The fact that we lost power did! Consequently I couldn't get into the market on Friday and so I took a nice 4 day weekend with Labor Day on Monday.

So what's going on with the EUR/USD right now? The same thing that's been going on for the past 2 weeks.....nothing! And this week looks like it's going to continue that trend. With no big economic catalysts this week, I think we will see another week of tight range trading. If you notice on my chart below, the daily Bollinger Band is contracting showing just how little this pair has moved over the last few weeks.

Tomorrow we have the Non Manufacturing ISM and Beige Book. I don't think these will move the market but they are worth getting some airplay.

I actually think the EUR/USD will make one more push up to 1.3000 and maybe even as high as 1.3100 but 4 things concern me once the pair hits that level.

The first is the overwhelming number of existing long positions in the Euro. Once the Euro gets that high I think we will see alot of profit taking.

The second thing that concerns me is that the European officials will not be happy if the Euro gets that high. The reason is that Europe is highly dependent on their exports and when their currency goes up, it will be more expensive for other countries to buy their Mercedes Benz's, resulting in an economic slowdown. If the Euro gets this high, watch for these officials to start talking down the Euro to push it down.

The third reason is that the Fed does not want the dollar to fall too much. The reason is that if the dollar goes down, other countries won't want to invest in us as much which will hurt our deficit financing... remember the TIC has to AT LEAST equal our trade deficit because it is what's covering our trade deficit. If the dollar goes down too much, confidence will shrink and foreign investors will be more hesitant to put their money in our economy.

The fourth reason deals with oil prices. At the moment, oil prices are getting cheaper which is making gas prices cheaper. I think with gas prices dropping, we could see an increase in consumer spending as well as an increase in consumer confidence.

If the EUR/USD gets up to 1.3000 I'd be on the lookout for the dollar to rally!

There were no Alba trades today. As you can tell by my rant, the Euro has been boring and today it pretty much stayed within it's range (see chart below).

I still don't see any good looking charts right now, but I am looking at the AUD/USD again (see chart below). It's made a new 20 day high and it's moving averages are creating another perfect order. I'd like to go long, but I am going to wait for a dip and then a re-test of this new high which is around 7720. I'll keep you posted on this.

That's it for me today. It looks to be another boring week but don't worry...the Forex never stays dull for long Cheers!

-BP

Related charts:

 

[Big Pippin]

The Dollar Just Won't Die

From Non Farm Productivity to Unit Labor Costs to the ISM Non Manufacturing Index--we are still seeing economic indicators that hint at another possible rate hike by the Fed. All 3 reports came out higher than expected causing the dollar to rally yet again. Are you getting familiar with this scenario yet? The dollar drops and then positive economic reports come out causing it to rally again. This is why we are seeing so much range bound movement. And even though we are seeing good intraday movement, we are still not getting any clear longer term trends.

Could the Fed raise rates yet again before the year end?

I doubt they will, but I wouldn't count it out entirely. Interest rate futures show that 19% of traders think the Fed will raise the rates again before the end of the year which is up from 16%. However in a larger perspective, this is down from 71% in July so the expectation of another rate hike is still slim.

The only pair I'm really looking at right now is the AUD/USD. Like I said yesterday, it made a new 20 day high and I said that I would wait for a dip to buy. I'm expecting the dollar to gain a little more ground in against the Aussie over the next day or two and if the price goes back up and breaks the 7720 area, I will enter long.

Other than that I don't see anything to compelling to risk my money on.

Alba had a close call trade today. There was a break of the EU low at 9:40 but I always avoid trading around news events....at least the ones I think are important. I'm glad I stayed out because the price retraced back up and it would've ended up a bad trade. So it's been a pretty dry couple of weeks as far as number of Alba trades but with the EUR/USD being flat as a pancake, I don't mind staying out.

So what's happening tomorrow? Hmmmm...absolutely nothing!

Yea, this is a short entry because I don't really have anything else to talk about. I will still watch the markets (of course!) but my expectations of seeing alot of action aren't that high. I'll definitely be multi-tasking as I trade!

Happy trading everyone.

-BP

 

[Big Pippin]

Breakout?

If you did any trading today, then you know that I'm referring to the dollar rally that occurred. In fact this whole week, the dollar has been making gains across the board. Today was pretty interesting though because the dollar actually broke the 2700 level against the Euro. If you've been watching that pair, you know that it has been trading between 2700 and 2900 for some time now. That's why this break of 2700 is pretty significant. It looks like with the stronger than expected US data such as the labor costs and ISM, traders are speculating the Fed may still raise rates one more time before the year end.

Looking at the Fed funds futures rates, it still looks like only 20% of traders think the Fed is going to raise rates in October, but you never know what could happen in December.

I'm thinking with all the existing long Euro/Dollar short positions, many traders are covering their positions. This is probably what caused the big drop today. Now we are in sort of a "no mans" land. Yes we've broken the range, but will the market continue to rally towards the dollar or is this just a false break? Could this be a true comeback for the Dollar or is it just a failed comeback attempt like the way James Blake failed on his comeback attempt against Roger Federer in the US Open? The answer? Thats right....we need more data. There wasn't much to go on this week so we'll have to wait for more significant reports to show dollar positive results to see a further push in the EUR/USD.

With the AUD/USD, there has been a strong dip which is what I expected. Now I am waiting to see if it can break the 20 day high that it made 2 days ago. However, if the US keeps churning out positive reports, we might just see this pair continue to drop.

I had an Alba loss yesterday but recovered most of loss with a win today. The sharp drop in the EUR/USD helped me grab a good amount of pips and I'm at about breakeven for the week with Alba. With the EUR/USD finally making some movement, we'll see if Alba can produce more trades and break out of this dry spell.

Well thats it for this funktifiably fresh pippin magnet. I hope you all have a groovy weekend!

-Big Pippin

 

[Big Pippin]

Yen is clear. Euro is muggy.

What I mean to say is that with today's big drop in Japan's machinery orders, it's becoming more and more clear that Japan's rates will stay put. Japanese machinery orders came it at a shocking -16.7% while the forecast was around-7.5%. With such a negative number, the Yen dropped like a rock against both the USD and the EUR. But I didn't need to tell you that. All you have to do is open up a chart and you can see it for yourself.

With a clearer direction of the Japanese economy, traders were selling the Yen up the wazoo and buying currencies with potentially stronger economic futures. The USD and the EUR were the 2 that stuck out the most. Although the common consensus is that the Fed is pausing their ferocious rate hikes, it is not a complete understatement to say that the Fed could still raise rates as shown by the past few economic reports which showed dollar positive numbers. The ECB is also expected to raise rates 2 more times this year which made the Euro another good currency to purchase against the Yen.

However, if you take a look back at the EUR/USD, the most liquid currency pair in the Forex, you'll notice that the Euro made a jump back above 2700 which means that the uncertainty battle between the Fed and ECB is still not over. On Friday, we saw a drop down to 2650 in this pair which was something we haven't seen in a long time. Well now we are back at the 2700 level and once again we'll have to wait for a clearer fundamental picture.

Alba saw no action today as there was a wide EU range which meant that there was little chance there would be a breakout. That was exactly the case today as the pair simply traded within the EU range.

Longer term I am waiting for some retracements before looking at possible entries. Many currencies have been making 20 day highs and lows such as the Yen, Euro, and Pound. I like to wait and see if there will be any profit taking and once the retracement occurs, I want to see if that 20 day high/low can be broken. This would give me a good confirmation that the trend is actually a trend and not just a short term fluctuation. So no specific entries yet but I'll know in a couple days whether or not anything pops up.

On a final note, although Roger Federer (a Swiss) defeated Andy Roddick (an American) in the US open it still looks like our currency is still beating them.. YEA! Go dollar! Sigh...first we lose in the FIBA World Basketball championships and now the US Open. What's going on?!

Hope you all had a great weekend and let's get ready to rock this week!

-BP

 

[Doctor Leo]

Just look at 1H charts, put a 24 period MA on it and you'll clearly see the entry in continuation of yen's falling... it's that easy... and the same for all other pairs... just a hint on what to look for and at.

 

[Big Pippin]

The Yen Again

Once again the story for today deals with the Yen. Everything I read talks about how the Yen is under pressure now that there are strong signs they will not raise rates again. There was a brief advancement for the Yen against the USD after the trade balance showed a widening deficit. This move was brief and once again the dollar picked up where it left off.

Forget the EUR/USD right now. This pair has been extremely boring for quite some time. So boring in fact that I haven't even been seeing any reports on that pair lately. Until we can get a clearer fundamental picture between the Euro-zone and the US, expect to see more boring range trading.

Alba produced nothing again today, even with the widening trade deficit. We did see some spikes but the price settled back to it's range with a slight edge going to the dollar (at the time of this writing).

There are 4 charts I'm looking at right now. The USD/JPY has made a new 20 day high today and looks like it is going strong. Simultaneously, the USD/CHF has made a new 20 day high and the AUD/USD has made a new 20 day low. I am waiting to see if there will be some profit taking and then a re-test of these levels before deciding to enter. However, those 3 pairs are on my radar now. Another pair that I am close to trading is the AUD/CAD. There were 2 days of nice consolidation on 9/07 and 9/10 and I now am looking to play a breakout. I have set entry orders at .8460 and .8387 and will put stop and reverse orders on one of those levels when/if they trigger.

Nothing great is happening tomorrow for the EUR/USD so I would expect to see some more crappiness. If I didn't love that pair so much I'd punch it! Sigh Can't live with it, can't make money without it--Forex!

Happy trading everyone!

-BP

Related Charts:

 

[Big Pippin]

Forget Overtrading! Are you Undertrading?

Here is a little excerpt from a Pipsychology article posted some time ago:

"Don’t overtrade. Focus on the quality of each trade, not on the quantity. One of the hardest lessons for a trader to learn is not to overtrade. You will lose BIG if you continue to overtrade. Every time you enter the market, you expose your capital to the market. The more you expose your money to the market, the better chances your money will part with you. Also, the more you trade, the more execution costs you pay, mainly the spread.
The most common misconception among new traders is that they have to constantly be in the market. Wrong."

You can read the rest of that article here.

This used to be one of my major problems when I first started trading, especially because I was mainly an intra-day trader. I constantly felt like if I wasn't in the market, then I wasn't able to make money. In actuality, I would've SAVED myself a ton of cash if I had focused more on the quality of my trades, rather than the quantity.

The reason I bring up overtrading is because, yes, I've learned to control my emotions and not trade on impulse. But the question that you will eventually ask yourself is, "Am I being so cautious about overtrading that now I'm actually "under" trading?" There is that fine line between waiting for a good trade and not knowing when to pull the trigger. Often times you can have a feeling like you are missing many trades because of your fear. The reality is that you cannot control the market. You will never be 100% correct. The key is to find a trading environment where you give yourself a good probability of a winning trade so that once you are actually in a trade, the rest is smooth sailing.

I haven't spotted a good medium-longer term trade in quite some time now and even I have asked myself if I am "under"trading. Am I so scared of what is going on in the markets right now that it prevents me from pulling the trigger and missing out on some trades? The answer is, absolutely! I am scared! But with good reason. The EUR/USD, which is the pair I trade the most has been in the most unbelievable slump I've seen in a while. In this fundamental tug of war between the Fed and ECB, I AM scared to get caught in the middle. A majority of my trades come from this pair and right now the market is just flat, which leaves me on the sidelines. So am I really missing much? Sure I might miss a few trades, but I'm also giving myself a peace of mind knowing that now is not the best time to attack. Waiting is the name of the game right now and I must adapt to what the market is doing.

Even when I posted yesterday that the USD/JPY was showing a better fundamental trend in favor of the US, I was corrected by today's report that the Bank of Japan actually might raise rates again before the year is over. Fundamentally, I am in gridlock again, but with the technicals, I still see some potential trades.

Because of today's statements by the BOJ, the Yen gained ground against the Dollar and now we have a slight retracement from the 20 day high. This is what I was looking for. I'd like to see one more day of retracement and then see whether or not the USD can resume its trend. If the Dollar can break the 20 day high it made a couple days ago, then I will enter long.

Conversely with the USD/CHF, the dollar took out the 20 day high and made a new 20 day high in today's session. Once again, I want to see some retracement first before thinking about going long. The AUD/USD also made a new 20 day low today so again I am waiting for some retracement. Now I could be wrong on both pairs and they could just keep moving in the directions they are currently going but thats ok. I can accept that. I'm more comfortable waiting for a retracement before jumping right in.

Tomorrow looks to be another boring day with the EUR/USD as there aren't many important economic reports coming out. The only thing that I think might potentially move the market is the Retail Sales report at 8:30 am EST. Be prepared for more range bound movement.

So in conclusion (I used that phrase all the time when I wrote essays), I come back to the first point I mentioned earlier. How do you classify whether or not you are overtrading or undertrading? The answer is that it depends on the market. The market may be so chaotic that you stay out for a month. Is that undertrading? Not necessarily. In fact you probably just saved yourself a boatload of money. Then again, there might be a strong fundamental trend and you can find trades every day. Is that overtrading? Not if there is an overwhelming bias towards one currency against another. Know what type of environment you are in and roll with the punches. Trust your gut and don't worry about it too much. Pick your spots and always make sure that you put yourself in a place where you have a good PROBABILITY of taking in a nice profit. Then, relax and let the market do the rest.

Happy trading everyone!

-BP

 

[Big Pippin]

Another Insignificant Day

Once again, nothing really major happened today except for the fact that it's more evident now that the ECB will raise rates again due to inflationary risks. Trichet used his popular statement of applying "strong vigilance" on inflation. That's such a cool term. I'm going to start saying that whenever I need to make a point. "The Los Angeles Lakers and Kobe Bryant are going to apply strong vigilance to the Boston Celtics and Paul Pierce." (Inside joke between me and one of my buddies)

So the Euro made it's way up to 2750 today at around 11:00 am which simultaneously resulted in an Alba breakout. However, with the lack of "juice" that was all she wrote. At around 12:20 pm EST I decided to recoup some of my losses and ended up closing my position at 2743. My entry was at the close of the 10:50 am candle at 2749. Result: -18 -9(spread)= -27 pips

The USD/JPY looks like it could develop into a good trade but it will depend on the US fundamental data coming out tomorrow. We've seen some retracement since it made its 20 day high and now we have a new 2 day low. If I see a strong move towards the upside and a break of the 20 day high I will enter long on that trade. Again, the economic reports will play a big role in this trade on whether or not the price moves in that direction.

The USD/CHF and AUD/USD have also made retracements so I am still watching those charts for an entry but again, this will depend on what the economic reports say.

Adding to the mix, I am also looking at the GBP/USD. It's had a very nice retracement since Monday from a long drop and it recently touched 8900. I will look to short this pair if I see some momentum in the Dollar's favor. As you can see all my trades right now depend on whether the US reports come out positive for the dollar. If they don't then I'm sure most of these potential trades will go away and I'll be stuck again. We'll just wait and see.

We do have quite a bit of news coming out tomorrow. Euro-zone CPI and trade balance come out at 5:00 am EST. US CPI and Empire Manufacturing index come out at 8:30 am EST while Industrial Production and Capacity Utilization Rate come out at 9:15 am EST. Consumer Sentiment comes out at 9:45 am EST. It's quite a bit of news so I probably won't be looking for a trade until at least 10"ish".

Well it's a short post today since I didn't have any note worthy things to talk about, but as always, stay tuned because the Forex never stays dull for too long. Happy trading everyone!

-BP

 

[Big Pippin]

Close but no cigar

There was an "ok" amount of movement in the markets today, none of which really gave any time for me to find a plausible entry, but at least there was something. I came very close to entering 2 trades.

The first one was the GBP/USD. Yesterday I mentioned that I was looking to short the pair after seeing a nice retracement from a prolonged downtrend in the 4 hour chart. The pair also skimmed the 1900 level so a short trade was my plan of attack. I was waiting for signs that momentum would pick up in the dollars favor and at 8am I had my opportunity of attacking. But I was faced with a dilemma. Yes the technicals were giving me signs of an entry but with the plethora of US economic reports still yet to come out, I could be getting into a sticky situation. I decided that even though technical signs led to a short trade, the fundamental mysteries would still lead to a chaotic day. And that is exactly what happened. Although at the end of the next 4 hour candle, price did end up closing much lower than what would've been my entry, the high of that candle proved that my "chaotic day" news assumption was correct. Had I entered, I would've lost because the next candle spiked up high enough to where I would've placed my stop loss. I would've gotten stopped out and then to add to the pain, the price would've dropped and I would be kicking myself for getting spiked out. I was very happy with my decision to stay out of this one today. However, I am still not giving up on this pair. At the beginning of next week I will look for another opportunity to short this pair as all my technicals point to a drop in the Cable.

The other pair I almost entered was the USD/JPY. I've been talking about its recent 20 day high and how there would be a retracement. The retracement came as I expected, producing a 2 day low and now my only action was to wait and see if the pair could break its 20 day high which was at 118.14. Today, the pair got as high as 118.11 but unfortunately it wasn't enough to put me in a trade. I am still set to go long on this pair if the price breaks 118.14. We will have to see what happens next week. For now I put my trading gun back into my holster.

One pair that I forgot to mention yesterday is the AUD/CAD. I am actually in this trade right now and have been for a couple days. A few days ago I talked about consolidation in this pair and that I would make a breakout play. My short trade was triggered but we have yet to see any movement. The pair is still range trading but I'm ok because I expect a breakout move sometime soon. I don't really care if the trade goes against me because I put a stop and reverse on my long entry order so if the pair does decide to sky rocket, I will be stopped out of my short trade and automatically entered long. Let's just hope the breakout move is a nice one

As for the USD/CHF and AUD/USD--

The USD/CHF made yet another 20 day high today. I am not going to enter a pair until I see some profit taking and then a continuation of this trend. I am still waiting on this.

The AUD USD did retrace but still has yet to take out its 20 day low. If it does, I will go short on this pair.

There was an Alba breakout but it was in the midst of all the news events. I said yesterday that I would only start looking for trades after 10:00 am EST. Since the breakout occurred during news, I wanted to see if price could break that candle's (the 9:30 candle) low before entering. This did not end up happening so I stayed out. 2650 seems to be the new support as this is the 2nd time (I think) that the EUR/USD has tested this level after breaking 2700 without going any further.

All in all I'm excited that we saw some movement today and now that I'm on the brink of getting my feet wet I can't wait to see what happens. Next week should be a good one and I hope you all are getting your trading trigger fingers ready! Have a great weekend everyone!

-BP

 

[Big Pippin]

In with the Yen, out with the Euro

Last Friday I talked about all the pairs I was close to trading. Well today, I finally entered one of my trades. I've been yapping about the USD/JPY and how it had recently made a 20 day high which was expectedly followed by a retracement. Well after 4 days since that 20 high, I am finally in trade after the USD/JPY broke through this level. Apparently during the G7 meeting, no one mentioned the need to raise the value of Asian currencies. My entry was at 118.20 which was 6 pips higher than the 20 day high at 118.14. I've placed my stop loss at the low of the 2 day swing at 117.30. I know today's low was lower but I'm guessing that was just noise so I'm not going to count it as the most recent swing low. My initial target is at 120.00. I will continue to monitor this trade and how the market moves to decide whether or not that target needs to change. For now, this trade looks good to me and I'm comfortable being in right now. (See chart below)

I am still looking to short the GBP/USD but I don't see any entries yet. All I'm waiting for is to see some convincing momentum that this pair will head down and I will catch and ride the wave. If this doesn't happen that's ok too. Right now I just have a short bias on this pair so that is what I'm looking for.

My AUD/CAD trade is still going. This pair is still staying in a range and a breakout hasn't happened yet. I really don't care which way this pair goes. I just want to see it move when it does finally break out. Hopefully I'll see some action soon on this one.

And what a surprise....the EUR/USD was umm...yup...rangebound again! As a result, there were no Alba trades and it was another manic Monday for the pair. At this point, I have no directional bias on this pair and am being very cautious right now because of that. Even though this is the pair I like trading the most, I have to realize that right now I can't find any reasons to trade it and shouldn't force anything. I'll continue to watch it of course, but I don't feel strongly about any trades in this pair as of this moment. (See chart below)

I'm still excited about this week, especially since I'm actually in a trade now, and I'll keep posting anything I see that catches my eye. Hope you all have a great trading week!

Cheers!

-BP

Related charts:

 

[Big Pippin]

Dollar paired currencies are weird

Unfortunately my USD/JPY trade did not pan out and I was stopped out with a big spike today for a 90 pip loss per lot. I'm not too upset but it never feels good when you lose on a trade I think this pair could still go up but it was just unfortunate that there was such a huge spike today to stop me out.

USD/CHF is developing a similar type of trade as the USD/JPY. There was a 20 day high on the 14th of this month and now we've seen a couple days of retracement with a new 2 day low. Once again, if I can see the dollar break its 20 day high I will go long on this pair. However with the weak US economic data coming out, I'm not sure if there will be enough juice to push the dollar too much higher so it does have me somewhat skeptical. Technically it looks good but fundamentally I'm still not 100% confident in the dollar.

My AUD/CAD trade is finally moving. I originally got triggered (barely) on the short order and the price has reversed and is rallying right now. I got stopped out of my short trade and entered into my long trade. I am currently down 53 pips on the trade which includes the loss I took from the short trade. Like I said, I wasn't really worried if it went up just as long as it keeps going. This was a breakout trade after 7 days of tight consolidation so I'm hoping the market continues to rally. My target now is at 8600 and my stop is at 8387.

Once again we saw little movement in the EUR/USD but what else is new? After gaining some strength with the weak ZEW numbers, the dollar returned back to its EU session high only to finish out the day right near the middle of the EU range. So once again, there were no Alba trades and I have a feeling Alba trades will be scarce until some solid fundamentals come in from either currency.

Interest rate statements come out from the Fed tomorrow. We may see a spike during this candle but unless there is a surprise, I think the market has already priced in the fact that the Fed is going to hold rates the same again. So I'm not expecting much, but it's still an important thing to watch for in the Forex.

So I'm slightly down right now but I'm feeling ok because I'm putting myself in situations where the probabilities are in my favor. As long as I continue to play my cards right I know I'll be ok. It's just like poker. Play your game because even if you have a bad beat, you did all you could to give yourself to best chances to win. That's really the best you can do!

Happy trading everyone!

-BP

 

[Big Pippin]

Reason to get excited?

My computer was in the process of getting healed after I had to re-format my hard drive. I run spyware and virus scans daily and defrag my computer about once a month and yet my computer still found some way to run unbelievably slow. So now with a fresh computer, I'm finally getting things back to where they were.

Ok, so the story of the day was the huge and unexpected drop in the Philly Fed Index. The median forecast was around 14.5 and the number came out at -0.4! This big discrepancy caused the dollar to lose ground across the board. Because of this, my USD/CHF trade idea has been tossed out, along with all the other pairs I was watching that also depended on the dollar.

However, I did see one trade that lined up and I entered way before the Philly Index even came out. Had the index come up suprisingly strong, I probably would've gotten stopped out, but this time, the news played in my favor. At the beginning of each week I take a look at several pairs and determine whether or not they are in "buy" or "sell" mode. Once I determine what mode they are in, I look more intently for trades in that direction on the smaller time frame charts. This is not a new idea by any means, but it is a great way to trade. The USD/CAD is one of the pairs I look at and for this week it was in "sell" mode. Early this morning I saw a momentum shift towards the short side and I entered short at 8:00 am EST at 1.1226. I was actually late on the entry because the true entry would've been at 4:00 am, but since I can't trade in my sleep (I'm working on a way to do that ) I had to make a decision on whether or not I would still enter. The entry price between 4:00am and 8:00am weren't too far apart so I decided to go ahead and enter. Since the dollar dropped like a rock today, I am up about 50 pips and will hold until I see a momentum change in the opposite direction. My stop is at 1.1300.

I am still in the AUD/CAD trade and it reached up to 8532 today which was about 70 pips from my target at 8600. Unfortunately it has retraced since then and is back below 8500. I'm still holding and am hoping the trade will resume in the direction it was going.

Since the Philly Index didn't come until 12:00 pm EST, I was already done trading the Alba system. I trade Alba from 8am-12pm EST so unfortunately I missed this trade.

So things are starting to get interesting between the EUR/USD now. The Fed kept their rates the same and with this weak Philly Index report, it looks as if the Fed will either stay put. In fact, look at this quote I read on Bloomberg:

"The yield on the December Fed funds futures dropped to 5.23 percent following the Philly Fed report, the lowest since June and below the Fed's benchmark, which indicates people are starting to price in a possible rate cut in that month."

And with traders firmly believing that the ECB is going to raise rates, we might actually see the Euro push higher. I don't want to jump the gun, but we might actually be seeing the fundamental shift we've been waiting for.

Happy trading everyone!

-BP

 

[Big Pippin]

Expecation vs. Reality

Before I get into the "meat" of this post, let me "appetize" you (get it?) by re-capping the trades I've been talking about. First the bad news. My AUD/CAD trade went to crap and instead of going the way I wanted it to, I ended up getting stopped out at breakeven. I still ended up losing a little on this trade because if you remember, I was initially short when the price nipped my entry before reversing to the long side. So in total, I lost about 70 pips on this one. Bummer!

The good news is that my USD/CAD trade is doing well now. I exited a third of my position today at 8:00 am EST when I woke up to find a 90 pip profit per lot on this pair. I still have 2/3 of my position still open with my stop now at breakeven. Price has retraced a little but it could just be some profit taking and I still see momentum favoring the short side. I'm going to continue to hold my remaining lots until I see a momentum shift. Besides, I can't lose on this trade so I'll rest easy this weekend

EUR/USD trading was pretty dead today (no Alba trades) seeing as there were no economic reports out but I'd still like to talk about this pair. Yesterday I talked about how we could be seeing a fundamental shift now swinging towards the Euro's favor, and although I still think the Euro will gain against the dollar, it's important to still remain cautious. I think a reason for the big move yesterday is that the market sentiment is ready to see the dollar weaken. Interest rates were already being held steady before this last meeting, but economic reports were still not giving enough reason for traders to give up their dollars. With the big drop in the Philly Index yesterday, traders finally got the catalyst they needed to finally pull the trigger and go short on the greenback. The thing is, yes it was a weak US economic report and dollar negative, but the job market is still relatively strong and with oil prices remaining low, it seems like the US consumers are still doing ok. I'm not saying this is a cause for the Fed to raise rates, but the movement we saw yesterday is an example of how the market's sentiment over-reacts to what is actually happening in reality. Traders were just looking for a reason to sell the dollar and yesterday, they got that reason.

The point is, market sentiment is a strong trading tool. Even if the US economy may doing better than traders' think, the dollar will still plummet if the expectation of the dollar is for it to weaken. This is a quote I pulled from Jack Crook's Black Swan Currency Currents: (This is a great daily read by the way)

"And presently, it seems, the crowd expects the dollar to crumble; on the view of slowing US growth (yesterday’s manufacturing data and continued housing fears), a Fed that is done (with a subtle but growing chorus of “next move a cut” on R-word fears), a European Central Bank that will hike (on inflation fears as evidenced by ECB banking hawks) and the European economy is gaining momentum (as evidenced by French consumer spending today)."

So the moral of the story is don't try to fight the masses. If the expectation is for the dollar to get weaker, then don't try to fight it. Instead look at how you can make money from it. Another day, another lesson learned. Happy trading and have a great weekend!

-BP

 

[insight2]

I was curious enough though to follow up on my thoughts about the extra risk/reward gate. To date, since 8 March you have a total of 26 trades for 133 pips with 58% of trades profitable. If you only took trades that have a reward/risk ratio more than 1, then you would have only traded 4 times (10, 16, 21 March, 27 April) for a total of 90 pips and a 100% strike rate. Hardly enough data to base any solid conclusions on, especially as you say Alba normally has a 74% win ratio. However, it might be worth checking over your old records to see if there is some merit in the idea of this gate.

Spartz.

Hi,

How can you know in advance, in real time trading, what is trade's risk / rewards ratio going to be on an individual trade?

cheers, dejan

 

[Big Pippin]

Hi,

How can you know in advance, in real time trading, what is trade's risk / rewards ratio going to be on an individual trade?

cheers, dejan

Well with Alba, my reward was always half of what I was risking. So if my risk was 30 pips, my target was for 15. If my risk was 40 pips, then my target was for 20 pips and so on..

Hope that helps

Cheers,

-BP

 

[Big Pippin]

Case of the Mondays

"Sounds like someones got a case of the Mondays!". Over the weekend I watched one of my favorite movies of all time, "Office Space", and that was a line that was used on a guy that just seemed out of it. It seems appropriate to use it now as thats what the Forex seemed to have--- a case of the Mondays. Specifically, the EUR/USD, which once again showed about as much excitement as a kid having to go to the dentist. I did read that Germany's inflation rate dropped to the lowest level in two years due to the drop in oil prices. Once again, this adds to the constant tug of war between the Euro and Dollar. The dollar sentiment looks weak, but now inflation is dropping off in the Euro-zone as well. It's just another day of questions, and once again we're right back in a range.

The only thing I'm kind of excited about is my USD/CAD trade. Friday I mentioned that I exited a third of my position with a 90 pip profit and was holding the rest of my position until I saw a momentum change. Well today I did see a momentum change as evident by a couple of spinning tops on the 4 hour chart as well as a changing slope in the 8 EMA. I exited the rest of my position with a 64 pip profit per lot. Booyah!

Setups? None at the moment. I'm sure there is a setup somewhere and if I really wanted to, I could find a trade, but I'm sticking to what I like to call "setups" and with my definition of setups, I see nothing.

Tomorrow looks to be another boring day. Consumer confidence comes out at 10:00 am EST. This may or may not move the market depending on what happens. I'll have to keep an eye on it. Other than that I don't really see anything to exciting. It's just another day in the Forex and once again I am waiting for my opportunity to attack!

Have a great week everyone!

-BP

 

[Big Pippin]

Don't count the dollar out so soon

Well I took a self proclaimed holiday yesterday (I do it every year). It's a day where I take off and do absolutely nothing. No trading, no kind of work. I simply enjoy the day and do whatever I feel like. I gotta tell you, it feels great! Sure, you can have vacations, but my vacations are usually filled with a packed itinerary and by the time it's done I'm still exhausted. I recommend that everyone take a day off sometime and do absolutely nothing. Sleep all day if thats what you want. Go outside, or have a movie marathon. You won't regret it. I guarantee it!

Ahhh, now back to the Forex. With the dollar up in the air right now, I've been having trouble feeling confident about any longer term trades. After the Philly Fed Index came out, the Fed Funds Futures were showing that there was almost a 30% chance the Fed would cut rates by the end of the year. I mentioned that sentiment sometimes over-reacts to reality. I talked about how while some aspects of the US economy are topping off, the economy as a whole is still not as bad as it seems. Consumer spending is still ok and the job market is still healthy. With oil prices down, gas is cheap, and when gas is cheap, people spend. Then to add to that, the new home sales report came out higher than expected today which tells me that the dollar's future is still up in the air. After today's news, the Fed Funds Futures are now showing a little over 20% chance the Fed will cut rates. Its starting to look like the Fed will most likely hold the rates constant until the end of 2006.

Day trading hasn't really given me many opportunities either. I'm the type of person that likes to be right more than I'm wrong so before entering a trade, I really try to give myself the best chances to win. Some traders don't mind taking many small losses until they finally can win, and when they win, they maximize their profits as much as possible. I like taking many smaller wins and don't mind taking the occassional big loss. So for now, I don't have any short term ideas. Looking back at the charts, I did notice a trade on the GBP/USD which I missed yesterday. I had a short bias on the Cable for this week and saw a good momentum shift on the 4hr chart yesterday. Right now that trade is doing well but it's too late for me to enter.

I also have a short bias on the AUD/USD and I missed a trade on that as well yesterday. However, I see a possible re-entry if things pan out in my favor. This pair made a new 20-day low today and I expect to see some retracement. If the pair can revert back to the short side and break its 20 day low, I think I might enter. This entry (if it happens) won't occur until next week so if my weekend analysis still shows a short bias on this pair, this should be a pretty good trade.

Well that's it for me today. Hopefully something will develop. Until then, I still wait patiently.

Happy trading!

-BP

 

[Big Pippin]

Pippin Ain't Easy

Like the title of my blog states, making pips and trading on a regular basis isn't easy. I'm not referring to actually analyzing the market and finding good probability trades. That is actually fairly simple. No no my friend, I'm talking about the monotony of trading. Like with anything that you do over and over, even if it's something you enjoy, there will be times when that "thing" won't seem as exciting and you won't be as into it as you normally are.

With the dollar still in question, I haven't really been able to find a solid fundamental footing, which has been resulting in a lack of trades. I can see technical trades, but to me, I love trades that both fundamentally and technically line up. The pattern right now seems to be that we'll get a negative dollar report and you'll see the dollar lose ground. Then we'll see a report that shows that the dollar might still have some juice left in it, which sparks a rally. Then the cycle repeats all over again.

Today the ISM came out and showed a lower number. The lowest number in over a year. So once again we are seeing the dollar decline across the board. I see a new 20 day low on the AUS/USD and now some retracement. A break of this low after the retracement look would look good technically, but fundamentally that would mean the dollar would have to make another fundamental gain. Medium-longer term I am bearish on the dollar. I am pretty convinced that the rate increase cycle is over. What I'm looking for now is a series of consecutive economic reports to support my bias. This would make it alot easier for me to take technically based trades.

There was an Alba trade today but because it occurred right around the ISM report, I did not take it. The move actually happened right before the report and continued to make another push after the report was out.

So right now I'm still at a standstill. I'm still waiting for the best time to plan an attack. For now, I am keeping my eyes open and staying tuned to what is going on throughout the globe.

For those of you who feel the same as me right now, just know that you are not alone. You don't have to force anything. If you are uncomfortable about taking a position right now, that's ok! Trust your gut. There will always be a better opportunity out there.

Happy trading to everyone!

-BP

 

[Big Pippin]

Resurrection

Just when you thought I disappeared, I have come back with a fresh approach to my trading routine. While it might’ve looked like I had given up on the Forex, I was actually taking my time to re-evaluate my trading approach. After thinking long and hard about how I should proceed, I have decided to make the following changes to my posts:

Each week I am going to determine a “bias” for select pairs that I am following. This will give me a general overview of the overall trend. To do this I am going to be using a method that I pulled from the Vegas Tunnel Method. I stumbled onto his system not too long ago, and I really love the way he uses momentum to get a directional bias.

Basically, I will be looking at a weekly chart plotted with a 5 SMA and a 21 EMA.

I calculate the difference between these 2 moving averages and plot this value into a spreadsheet. I do this for several candles (weeks) and basically look to see if this value is growing or shrinking.

If the value is growing, then I know that momentum is bullish.

If the value is shrinking, then I know the momentum is bearish.

Keep in mind, as with every moving average, this is still delayed. An optimal reading would be to see a pair have 2 consecutive weeks of either bullish momentum or bearish momentum.

I’ve been plotting this data for a while now and have come up with a few graphs. Here are the weekly momentum trends for the 4 majors (the last point marks the week of October 1, 2006) (See charts below):


By looking at these line graphs I can get a basic momentum trend for each pair. For a full reading on Vegas’ Tunnel Method, check out his website at www.tunneltrading.com


I will give each pair a rating on my Bias-O-Meter based on this momentum and other factors I find. (see below)


These will be posted once a week on Mondays.


In the next section I will go into a little detail on the upcoming economic events. I’ll briefly describe (in order of occurrence) what the economic report is, what the consensus is, and what it might possibly do to the market. I’m not a deep analysis kind of person but it will help outline my thoughts on these events.

The following section will list any current trades I’m in and any trades I have recently closed. This is mainly for track record keeping purposes so that I can actually see if what I am doing is working.

The last section will be a chart analysis on the 4 majors. I’ll basically give a snapshot of where the pairs are trading and list any trade ideas I see. Basically it will be a like a picture book of how I come up with trades and why I think they will work.

I will still be mentioning the Alba system because it’s such a simple, yet profitable system. However, because it doesn’t give us as many trading opportunities (it only works on the EUR/USD), this section will be brief and I’ll simply give an update if anything has happened regarding Alba trades.

Overall, I think this outline will not only benefit me, but will hopefully help anyone who reads the posts. I named my blog “Pippin Ain’t Easy” because staying focused and disciplined is a lot harder than it sounds. This blog will keep me on track and hopefully will encourage you all to do the same. So with that said, lets bag us some pips!

Happy trading!

-BP