MESSAGES FROM JACKO (FEBRUARY 2008) 45 - 49

MESSAGE FROM JACKO 45

It is 9.45am NY time Saturday February 2 and the market is closed.

Well, the figures are in for January (see below).

The bad news is that this is the first month in the two+ years since I have been trading Forex that I have not made a profit.
The good news is that I did not make a loss.

Compared to out November and December results, January was a disappointing month. (Mrs Jacko says I need to do much better to keep her in the manner in which she is accustomed).
Ironically, since I started the group in early November, the Euro has moved into a sidewards pattern ever since.
How much that has had an impact on my trading results will be interesting to see when we look back on our trading in, say, six months. So, let's look at the January results:

Trade 1 Message 30

Sell 4700 Counter Trend Trade
Buy 4717
Loss 17 pips

Trade 2 Message 31

Sell 4700
Buy 4688
Profit 12 pips

Trade 3 Message 34

Buy 4850
Sell 4871
Profit 21pips

Trade 4 Message 36

Buy 4750
Sell 4690
Loss 60 pips

Trade 5 Message 37

Buy 4700 (A-H trade)
Sell 4660
Loss 40pips

If you recall, that 36 hours between message 34 and 36 saw the biggest test of my methodology since I started trading.
1. This was the first time that I have had an initial trade position go straight down 50 pips . (Thank you Euro Central Bank !!!)
2. This was only one of two or three occasions that the A-H fallen soldiers hasn't recovered all my losses from a trade.
3. This was the first time that my A-H soldier has lost almost its full (50 pips) value.That intervention by the ECB initiated a very strong stress test of my trading method. (A 200+ pip drop in less than 25 minutes is not a normal daily event !)
As`stated in Message 38, the fact that we survived an event as unusual as an ECB intervention in the market with a maximum loss of 100 pips, gives me ongoing confidence in the future of my trading.

Trade 6 Message 39

Buy 4550
Sell 4634
Profit 84pips

Total pips profit (117 pips) minus total pips loss (117) = zero profit/loss
It should also be noted that a number of the group are able to "fine tune" their Buy/Sell orders at the time of the transaction and therefore have better entries/closing than my prices (because my prices are stated well in advance).

Furthermore, many of you emailed that you got in on that infamous 1.4550 order (Message 40 in the live Edits) that went to 4778. As you recall, my wife dragged me away from the computer for shopping....VERY expensive shopping trip Mrs Jacko !!!

In short, some of you made more money than me....some made much more money than me...(much gnashing of teeth !!!!)

As I stated in the last message, I will be further stripping my trading back more to just the way I used to trade.
I have found it very difficult to maintain a balance when I am receiving emails saying "why aren't we buying/selling here?" or, even more "why didn't we buy/sell here where we woulda, coulda, shoulda made money?"

When you start to get a number of these type of emails, firstly, you start to doubt yourself and your strategies, and secondly you start to modify your trading in order to satisfy the pressure of the emails.

However, I am going to take my own advice and not beat myself up about it...just put it away and move on with the next trade.

Finally, we will be heading back home to Hong Kong in the next week or two. (From a trading point of view, the Hong Kong time zone is a much better trading time zone for me).

Jacko




MESSAGE FROM JACKO 46

It is 8.45am NY time Monday February 4 and the market is at 4825.

The market looks a little weak at the moment. I think that we may be in a mild correction from the 1.4951 high.... down to around the 1.4650 to 1.4700 mark. (I think that it will get there quicker than some people think). This is a 50% retracement of the move from 1.4365 to 1.4950 with a target of 1.4650.

I will be waiting with a buy order in that area. As we get close, I will SMS text message with a tighter number.

I will not be shorting this market.

Jacko


MESSAGE FROM JACKO 47

See live updates below

It is 7.20am NY time Tuesday February 5 and the market is at 4676.

As stated yesterday, the market has dropped to a low of 1.4666.... in less than 24 hours...(Was that quicker than you expected?)

I believe that the market will go back up when NY opens or just before it opens in about 1/2 hour. Buying at these current levels (or even less) is a good opportunity. I will be buying at 7.45am NY time at whatever the price is at that time.

It will be volatile...if you want to increase your odds of not being stopped out, you may wish to halve your
order size and double your stop loss to 100 pips.
I believe that the market may try to get back up to 1.4800 sooner than many would expect.
Jacko

Edit 7. 25am I think that 1.4657 might be the bottom . I have just bought at 1.4675

Edit 9.05am I am still in... market now at 1.4690....lets see where it goes (Am currently on FF). Will answer any o/s emails from you later in the day........(Mrs Jacko says I spend too much time on the computer....she thinks that I am looking at porn !!!....I wish !!)

Edit 9.40am Stopped out by trailing SL at 1.4649 for a 26 pips loss...But A-H will pull all that back in the next day or two and more.

Edit 10.05 I have decided that this market is worth getting back into. (If you halved your order size and doubled your stop loss to 100 pips. ...then you don't need to do anything). I am buying back at 1.4647...got them

Edit 10.35am I am NOT looking at emails at the moment as I don't want to be distracted by everyones opinions.
I am just trading my way for the present time and will answer the emails later..thanks.

Edit 10.40am Market is looking weak but I believe that a recovery is about to start within the next hour or so
But, I could be wwwrong !!!

Edit 10.45 am I love this...trading is soo pure...unlike a normal business, you know straight away if your business decision is correct or incorrect. Btw, the buy at 1.4647 is a stand alone trade from the first trade (at 1.4675) from an A-H point of view. If my 4647's dont work out, it will have its own A-H.

Edit 11.00am. Those of you with 100 pip stops should place your TSL's at 1.4599 (high of 1.4699 - 100) if you have not already set your TSL's.




MESSAGE FROM JACKO 48

It is 7.30am NY time Wednesday February 6 and the market is at 1.4616.

Well yesterday was an interesting day.

My first trade was bought at 1.4675. The market obligingly rose to 1.4699 and then fell to hit the Trailing Stop Loss at 1.4649 (the high of 1.4699- 50 = 4649) for a 26 pip loss
The market has since fallen further to 1.4599 (that is, 50 pips past where I was stopped out) setting off the criteria for an A-H trade to be set ready to be picked up in the future.
An A-H trade is already in place now to buy back into the market at 1.4649 (that is, where I was stopped
out).

My second trade was bought at 1.4647. (A bit of over- enthusiasm...). Again the market obligingly rose again but only as far as 1.4662 then fell to hit the Trailing Stop Loss at 1.4612 (the high of 1.4662- 50= 1.4612) for a 35 pip loss.

As the market has not hit 50 pips below my Stop Loss point (that is, 1.4612-50 = 1.4562) , no A-H has yet been triggered.

At this point in time, no more positions will be opened until either:
1. The A-H fallen soldier from trade one raises up at 1.4649, or

2. (If in the unlikely scenario that the market continues to fall past 1.4562), then an A-H trade will be established for trade two at 1.4612.

I had two loss trades yesterday. I am not rushing back into the market. I will wait for my "insurance paybacks" of the A-H trades to get my accounts into balance before I take a further financial risk.

However, for those of you who are interested in my current (very short term) view of the market, I believe that I may have judged the recovery one day too early. The market has spiked down to 1.4591 at around 3.20am NY time.
I don't believe that there is much more downward movement left. It will be interesting to see the impact of trading in NY today. I believe that the Euro will be significantly higher at the end of the day compared to where it currently is at 1.4616.

Edit 9.30am A-H soldier from trade one was raised at 1.4649



MESSAGE FROM JACKO 49

t is 7.15am NY time Thursday February 7 and the market is at 1.4612.

My A-H trade was bought at 1.4649. The market again obligingly rose to 1.4670 and then promptly fell to hit the Trailing Stop Loss at 1.4620 (the high of 1.4670- 50 = 4620) for a 29 pip loss.

That means that I have had three losses for a total loss of 90 pips (26, 35 and 29 = 90 pips).
(Mrs Jacko is NOT happy...)

I have only one potential trade to clear out before I make a decision to get back into the market. As stated yesterday;
2. (If in the unlikely scenario that the market continues to fall past 1.4562), then an A-H trade will be established for trade two at 1.4612.
I am not rushing back into the market. I will wait for my "insurance paybacks" of the A-H trades to get my accounts into balance before I take a further financial risk.

It is probably a good time to look at the question of whether the trend has changed.

Late 2005
These difficult conditions are reminding me of the conditions way back in late (December) 2005. As you may recall, at that time, I was a vociferous "short" on the DailyFX forum.
However, it became apparent to me, (because my trading profits suddenly became much harder to make), that a trend change was taking place. Taking "short" positions were simply not as profitable and easy to make, as they had been.
At that time, the market was turning from a large downward correction (that had been taking place for all of 2005) and returning to a resumption of the longer term upward trend.
I identified that major change very early and have been riding that trend successfully and profitably for all of 2006 and 2007.

Current period
However, if you take a look at the weekly chart and compare the last 15 weeks (since November 2007), to the 15 week period in November, December2005 and January 2006, two things are very noticeable.
1. The volatility in trading in the last 15 weeks (since November 2007) is much more pronounced compared to the earlier period
2. The market is currently trading in a much more sideways direction, rather than a smooth "rolling over" as seen in the earlier period. "Rolling over" is a nice U shape (or upside down U shape) of the bars over time.

Please note: I use simple bar charts (not candles) and I have set the charts to 300 periods

See http://www.dailyfx.com/charts/Chart.html?symbol=EUR/USD (Use weekly time frame)

This leading me to ask two questions about the volatile sidewards movement:
1. Is the upward trend over, or
2. If not, is this possibly an indicator of a deep and slow correction in the future.

The correct answer to the above questions will determine our future profitability.

The fact that the market is having huge problems in falling significantly from such an important psychological level of 1.5000, seems to indicate that the market will continue to rise further.
However, this current period of "ranging" prices is not doing great things to my equity curve. (Mrs Jacko
keeps saying ...90 pips !!! That's a lot of shopping !!!)

Our policy of risk minimization by using 50 pip TSL's and the A-H have saved us from losses last month, especially from that fast and sizable 200+ drop in less than 25 minutes caused by the ECB intervention. So we know that our risk minimization structures are effective.

We now need to focus on setting our buy orders at the bottom of the weekly trading ranges. The difficulty is that the bottom of the weekly ranges is much more "ragged" than the tops of the ranges. So picking a strong buy point is difficult, as there is no clear support level.
If you look at the ranges, there is strong resistance (that is, there are a number of daily tops) at around 1.4900.
In contrast, there are TWO strong supports (that is, there are a large number of daily bottoms at around 1.4600 but also at 1.4350).

Summary,
1. I don't believe that the current ranging market has indicated that the long term UP trend of the Euro/USD has completed.

2. We are in a trading range of 1.4900 on the upside to either 1.4600 or 1.4350 on the downside. We are looking to buy at the bottom of the range.

3. As demonstrated in a strong stress test, we know that our risk minimization structures are effective. So if it breaks through the bottom then we are reasonably protected.

4. We now need to focus on setting our buy orders at the bottom of the weekly trading ranges.
IF we consider that 1.4600 is the bottom of the range , then fortunately, we already have a buy order in place at around that level. (The A-H strategy buy at 1.4612 which is yet to be triggered).
IF we consider that 1.4350 is the bottom of the range we can either sell at the break of 1.4600 (too risky for me) or wait to buy at 1.4350 (a much safer proposition to me...REMEMBER, I am a trend trader...and I am not convinced that the long term trend has changed)

One of the members sent in this quote which is relevant:
"If a market is making a substantial move and traders seem to understand why, this market trend is not going to last very long. However, if the market is moving in one direction and nobody has a clue as to why, then the trend is going to be prolonged. When a market goes up or down for no apparent reason, it tends to go a lot further in that direction than people can imagine."

Edit 7.53am Market has fallen past 1.4562. A-H trade to buy at 1.4612 has been placed
Edit 8.45am Buy order at 1.4612 has not been hit, so it will just sit there as a Good Till Cancelled (GTC) order until the market goes back up to 1.4612. (In a much shorter time than most expect)

Jacko