It is 1.00am NY time Monday October 5 and the market is at 1.4637
My SELL at 1.4625 from Friday last week is still in play. I am letting it play itself out.
I have a 100 pip Fixed Stop Loss on it at the present time (which I intend to reduce reasonably quickly to reduce my risk) .
My target is still the 50% Fib at 1.4445.
I have my charts open to 300 periods of the 4H time frame.
The Resistance line. By linking up the highest points on the 4H chart from 1.4843 (Sept 23) , and 1.4647 (Oct 4 ) we can see that the Resistance line is currently at around 1.4650. (We are very close to the Resistance line at the moment
The Support line By linking up the lowest points on the 4H chart from 1.4045 (Aug 18) and and 1.4177 (Sept 2) and 1.4480 (Oct 2) we can see that the Support line is currently at 1.4500.
The 50% Fib line The nearest 50% fib is from 1.4045 (Aug 18) and 1.4843 (Sept 24) and is at 1.4445. Given the obvious strength of that move from 1.4045 to 1.4843, I am using that 50% Fib number as my target
Edit 3.20am NY time market is at 1.4621 I am just sitting back in a cafe and letting this trade play itself out
Edit 8.00am NY time Market is at 1.4625 This market is not doing much. But I have high hopes of a nice profit inthis current trade. There is the ISM Non-Manufacturing PMI numbers at 10.00am NY time but it does not have the same effect as a NFP or FOMC announcement. My trade continues to play itself out
Edit 11.40am NY time Market is at 1.4625 The market has been dull in both the Europe and US sessions with only a 40 pip range (1.4595 to 1.4635) in the two sessions. My trade continues to play itself out
Edit 5.00pm NY time Market is at 1.4644. My trade continues to play itself out
Emails
I apologise for the delay in any emails from late last week...I have had a huge backlog of Fund administration work to get get through after my vacation
Email 1 (Relates to Thursdays trade which we closed for 105 pips profit)
I got a question for you regarding to the entry price for this position...You draw 4h downside Resistance Line and you picked 1.4650 as Resistance at that time (I think it was 29/09)...however, the downside Resistance line has been broken to upside...but you keep looking to sell at that price 1.4650 even the resistance line has been broken...I believe this reflect your experience, but I couldn't get it why? The market had been on a big run from 1.4200 area so it was getting stretched. The break above the Resistance line was initially just SL hunting and then it was settling back to go down. Then the unexpectedly strong German Unemployment numbers gave it another boost . But both were only short term movements. This market had peaked at 1.4843 and was looking to go down
Email 2 (Same question..Asked in a different way)
I am just wondering how you got to the conclusion that the eur/usd will going lower. Let me explain you my thoughts and I hope you can comment on them.
1. If I look at my 4H chart eur/usd is still going up and is just in the last couple of days retracing. Hmmmm...Ok
2. Price broke above our initial resistance trendline (couldn't that be interpreted as a sign for the euro wanting to go higher)? The market had been on a big run from 1.4200 area so it was getting stretched. The break above the Resistance line was initially just SL hunting and then it was settling back to go down. Then the unexpectedly strong German Unemployment numbers gave it another boost . But both were only short term movements. This market had peaked at 1.4843 and was looking to go down
So, what I wanna know is, how you decide which scenario is more likely to happen. If it had only been a move from the 1.4200's to 1.4500's I would have been more skeptical...but the 600+ move from 1.4200's to 1.4840's (some 640 pips without any real retracement) was setting off alarms….no market goes up forever
Email 3
A few questions about the most recent trade you took, especially related to your post yesterday while deciding to stay in your trade:
1. You noted that the 4H trend is down. This is true for about 30 bars before the trade, however if I look at all 300 bars, I see the trend as up and would consider the most recent trade a counter-trend trade, with the next trend trading opportunity being a long trade around 1.4450. Could you explain, perhaps through the "number of bars" you look at to establish the direction of the trend. Usually I stay with the longest of the Support or Resistance lines...until it is broken on the 4H charts. This one was a bit different because of the big run from 1.4200's to 1.4840's..without a retracement of any real size. I thought that it was getting very stretched (the elastic band analogy)
2. There was a break of the steeply sloping downtrend yet you still selected to go short. I would see a break of downward sloping resistance line as a bullish sign and avoid going short thereafter. Could you share your thoughts on choosing an entry point above the trendline and then staying with it inspite of close above on the 4H charts? The market had been on a big run from 1.4200 area so it was getting stretched. The break above the Resistance line was initially just SL hunting and then it was settling back to go down. Then the unexpectedly strong German Unemployment numbers gave it another boost . But both were only short term movements. This market had peaked at 1.4843 and was looking to go down
3. A general question: What makes an A+ trade for you when you are not using a trailing stop loss? Number of pips to your profit target, for example the 50% Fibo, etc? No.... I am not using a Trailing Stop Loss at the moment because I am of the strong belief that this market has peaked in the short term at 1.4843 and that it will progressively drop and retrace, drop lower and retrace, drop lower again and retrace... I don't want to be stopped out unless this market is prepared to power up past 1.4725
I presume that there is a trade-off between waiting for A++ trades and the frequency of trading. If we wait for the absolute premium trades, then trading frequency would be much lower than the 60-70 that you normally take per year. I was trading much less in the last 12 months because of the huge increase in volatility caused by the Financial Crisis....It has reduced my number of trades and my returns significantly.... Using the Jackson Fortress Funds performance shows that I only made a 40% return in the last 12 months. That is a big drop on my previous years results. ( Having said that everyone else was around minus 30% so I don't feel too bad) Also that 40% return was built on a super conservative risk of only 2% of capital on each trade. If I had used 5% on each trade I would have made 100% in the year
Do you find that you have to balance selecting the best trades with ensuring that you are taking enough trades to let the statistics of your system play out on a yearly timeframe? No...I trade according to the pressure from traders for more trades VERSUS the pressure from Mrs Jackson to trade less and take her shopping more often...LOL
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