The information below was extracted from Jacko's Trading Blog
MESSAGE FROM JACKO 25
Please note: I have not sent an SMS re this post as I don't consider it time critical.
As outlined in my previous post I placed an order to go long at 1.4550.
The 47 pip loss is the biggest pip loss (by a BIG margin) that I have suffered since I incorporated the A-H strategy some 18 months ago.
It is also the quickest.... $$ Six figures in about 90 minutes, with the the majority of that (43 pips) in just 5 minutes...OUCH !!
(I told the wife to cancel the Christmas dinner ...and order two glasses of water and a loaf of bread...LOL).
However, it is still only a very small amount of the profits that I have taken out of this market in the last 2 years but the timing of the loss relative to the group is just awful.
Just a couple of notes that I want to post because of a post on FF. I would like to clarify the following:
It was always my understanding that I would be posting MY trades.
I am not recommending, or even suggesting, that anyone follow all, or any, of my trades.
Nor am I suggesting that anyone should only trade as I trade. If anyone wishes to take other trades, that is your prerogative. If anyone feels that the market is about to "tank" and I have placed an order for a "long" position, feel free NOT to take the trade.
Furthermore, if anyone does take a similar position as me, please feel free to adjust your trade in any way that you see fit.
Also, if anyone has taken a trade of such a size that 47 pips makes a sizable dent in their trading capital, then you are risking more than 2% of your capital on each trade. I suggest that you re-evaluate your money management immediately
Furthermore of the 47 pips lost, the huge majority of it (43 pips...from 4538 to 4495) was lost in a 5 minute time period (from 6.20am to 6.25am). (If anyone foresaw that move in advance of it happening, please feel free to contact me again next time so that I can capitalize on it. I would also suggest that next time you see such an opportunity with such certainty, you should "bet the farm" on it)
Many of you want to trade much more than I trade, and I have no problem with that...but just remember I am not a daytrader. I do NOT want to live my life chained to a computer.
I am a trend trader. I use the leverage of the market and my accumulated profits to take sizable positions in the market. The power of compounding those profits over the last two years has been absolutely extraordinary. As I have said repeatedly, ad nauseam, this is the best business I have ever seen in my long and very successful business life.
My life is not going to be altered in ANY way by a 47 pip loss. Neither should yours!
Having said all of the above, I want say that I am not angry, I am just hugely embarrassed that I have been publicly criticized for taking a trade that I considered a high percentage trade. (However, he has since the post been courageous enough to email me and apologise for his comments).
Jacko
Finally, I want to thank those of you who have sent emails of support to me in these difficult times. However, my pain is insignificant compared to the enormous impact that my fathers illness is having on my mother (who has been married to him for some 58 years) and her sense of absolute loss and total despair at being alone sometime in the future. When she asks the question of "what is the point of living without him?" I have absolutely no intelligent response.
Again,thanks for your emails of support
MESSAGE FROM JACKO 26
It is 8.05am NY time Monday December 17 and the market is at 1.4391.
Well, the market has certainly taken a beating.
As I said last week in Message 22
"The market is at a really interesting point at the moment (1.4650).I am trying to decide whether it is going to have a run at 1.5000 or whether Bernanke's unbelievably irresponsible flooding of the monetary system with liquidity in the last week (as demanded by the even more unbelievably irresponsible ...but enormously rapacious.. money market players) will cause a temporary strength to the USD resulting in a drop of the Euro to 1.4200 (50% from 1.3360 to 1.4966)."
It now appears the latter was the correct.
A bit of Fundamental Analysis
A primary reason for the current US Dollar strength is that the markets think that the interest rate cuts are over....I think not !! Mr Bernanke is now firmly in Wall Street's grip. After an initial period of giving the impression that he would stand up to Wall Street and it's appalling excesses, he has now totally buckled. If Wall Street wants another cut,(which it does!!!), he will give it to them next month. Expect another 0.25% next month (because Wall St didn't get the 0.5 % it wanted last month). Wall Street will argue that if they don't get another cut, the Dow will tank, a recession will start, and the end of the world is just around the corner, etc. Mr Bernake had his position as head Central Banker threatened by Wall Street, he totally caved in to the
intense pressure and took the easy option of giving Wall Street whatever it wanted.
A secondary reason for this temporary strength is a result of an international consortium of Central Banks (especially Mr Bernanke) pumping another (!!!) $64 Billion into the banking system last week to allow the credit markets get started again. read: a bail out for the banks and their huge bad debts. ( It beggars belief that a Bank would knock back a customer as a bad risk for a mortgage, yet eagerly buy a package of those exact same mortgages...especially after a Wall St firm has ripped out exorbitant fees for packaging up the dodgy mortgages on the way through !!!)
The questions to be asked therefore are:
1. Has the problem of all those bad debts from sub-prime mortgages gone away? ...the answer is NO
2. Has the money that has been pumped into the system been written off and not need to be repaid by the Wall St banks in the near future ??? ...the answer is NO
3. Has this orgy of flooding the system with liquidity had the longer term effect of devaluing the currency?? Not yet, but it will..!!!
4. Have the necessary structural changes to the US economy been made that will reverse the yawning US deficits??...the answer is NO
The result of all the above is that in the longer term, I believe the US dollar will continue to weaken
Trading Perspective
In the short term the US Dollar has strengthened.
Do I believe that the major UP trend from Oct 2000 and Nov 2005 has changed ??? The answer is NO
The question is to what level will the US Dollar temporarily strengthen and rise compared to the Euro... That is, to what level is the Euro like to fall??
I would be surprised to see the Euro hit 1.4200 and would be VERY surprised to see it hit 1.4150 (which is the 50% of the rise from 1.3359 (on Aug 15) to 1.4966 (on Nov 22).
I am starting to look for entry points for long positions for another run up to 1.5000
Also, I have a wounded A-H soldier at 1.4500 from my last trade. I also think that he will be reactivated in a shorter time period than most of you expect.
As I have outlined before: I have a huge confidence in my methods because of my success rate in trades. Over the last two years my success rate on initial trades is a touch over 72% However, combined with an A-H trade (on any losing trade) that percentage increases dramatically to 95+% (Now you can see why I have been very confident in my methodology and especially the A-H strategy).
This current correction has has not been pleasant but my success rates have not changed to any degree.
Finally, To those of you who are relatively new traders, I believe that a serious lesson was taught to one of our members last week...that lesson is: NEVER, NEVER, NEVER trade without a Stop Loss !!!!!
(The main reason people don't use Stop Losses is the fear that the market will come down to your SL , hit it and then turn around and go straight back up. The reality is that that will happen occasionally...get over it !...However, the risk of being wiped out by a rogue wave (such as last week) if you do not have a stop loss far exceeds the risk of hitting a Trailing Stop Loss). As I have said before, although, my Trailing Stop Loss is set at 50 pips from the highest point after the trade has been set, my Trailing Stop Losses are an average of only about 15-20 pips.
Also, if you have NOT read Message 25.....PLEASE DO SO NOW !!!!
Jacko
MESSAGE FROM JACKO 27
It is 7.30am NY time Thursday December 290 and the market is at 1.4320.
As stated in my last message, I am starting to look for entry points for long positions for another long term run up to 1.5000
A bit of Fundamental Analysis
The Central Banks are flooding the system with liquidity. The ECB allocated $US 500 Billion (that's not a typo...$500 Billion US Dollars) to help offset the credit squeeze affecting the banking industry in Europe.However, the fundamental problem of the credit lock-up is not liquidity...it is that the major banks don't trust each other and are not lending to each other..that is why the interbank rates are so high. (Most banks are now carrying enormous amounts of bad debts but they all think that the other banks are in a worse situation, so they are refusing to extend credit to each other)
In addition to the ECB's actions, Mr Bernanke had a $20 Billion loan auction on Monday and again today to encourage banks to borrow funds from the Fed at lower rates than the rates on offer in the market. (In other words, Mr Bernanke has said that because the bankers don't trust any other bank, then you can get your money from the Fed... and by the way, it is dirt cheap....). So the question is: Why would the bankers start dealing with each other now? The Fed money is cheaper than market and it's the US government safe !!!!
Is it any wonder that the loans were oversubscribed by 300%?
Mr Bernanke is firmly in the grip of Wall St, He will give them anything and everything they want...lower interest rates, cheap funds and US government security on all loans.
He should be going after the heads of the big banks like they went after the heads of Savings and Loans fiascos. (I note that yesterday the head of Morgan Stanley wrote off $US 9.4 Billion in one quarter... and the best he could say was that he would forego his bonus!!).. Absolutely appalling !!!
Trading Perspective
The market is now getting very thin and volatile in trading. I personally think that they are going to run this market down into the low 1.4200s over the Christmas break (just like they ran it up to the high 1.4900s over Thanksgiving).
And if they do, I think that a buy at those levels (low 1.4200s) is a screaming good buy. And then just keep buying all the way to 1.5000.
The selling down to the low 1.4200s from these areas is the risky trade...the buying at very low 1.4200s is the safer trade...PLUS I believe that it will mark the resumption of the major trend.
The question I keep asking myself is : What major underlying fundamental issue has caused a significant strengthening of the US dollar ??? And I can't see anything !!
But I could be wwwwrong.
I will be buying at 1.4210. I will also be a buyer at 1.4150. Because of the increased volatility of the next two weeks I am reducing my trade volume by half and increasing my trailing Stop Loss to 100 pips.
As stated in my previous message, I would be surprised to see the Euro hit 1.4200 and would be VERY surprised to see it hit 1.4150 (which is approximately the 50% of the rise from 1.3359 (on Aug 15) to 1.4966 (on Nov 22).
However, if it does hit either of those numbers I will be an active buyer...I may be surprised but I do believe in Santa giving me a present for Christmas.As I have been writing this the market has fallen from the mid 1.4300's to the low 1.4300's. I think that the run down and increased volatility has started in earnest.
Just beware, this market will be fast and furious as the market gets thinner over the next two days. Those with a low tolerance for excitement should sit this market out until after Xmas.
This market will be dangerous for inexperienced traders in the next two weeks.
Be very careful and don't try to be brave. Use stops on all trades
Jacko
MESSAGE FROM JACKO 28
I would like to wish each of you a very Happy Christmas and a safe and exciting New Year.
I will be back on January 4 2008.
Mark will be monitoring my trades (hopefully, he will be.....because he does like a drink or three).
As stated below I have placed orders at 1.4210 and 1.4150, which are the round numbers on either side of the 50% fib line from 1.3359 to 1.4966.
The unusual " reducing my trade volume by half and increasing my trailing Stop Loss to 100 pips" is purely to allow for the excess volatility over the Christmas break due to the thin markets.
HAPPY CHRISTMAS TO EACH OF YOU, YOUR FAMILIES AND FRIENDS.
SHOW THEM THAT YOU LOVE THEM, AS IF THERE WAS NO TOMORROW
See you back here in early January
Jacko
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