MESSAGE FROM JACKO 486

It is 3.00am NY time Thursday November 12 and the market is at 1.4970

This market is still stuck in the trading zone where it has been for most of the week. Today we see the US Unemployment Claims which should add a bit of life to this otherwise very lackluster market. As we get close to the London open, the market is taking a bit of a dive but it is still well within the tight trading range that it has been in for most of the week.
I am hoping that the market will move lower to get closer to the Support line but it is hanging up in this trading zone at the present time. The tight trading range is not throwing up many trade opportunities, even for the adventurous trader.
But I expect that this tight trading range has a very limited life left in it. I think we will see a move (hopefully down to the Support line area) in the next 48 hours.
It is unusual for the market to stay in a tight range for any prolonged period. Either the market can go up or it can go down. It has had a number of attempts at moving up and has not been able to break the 1.5062 Resistance, so it is more probable that it will fall back towards the Support line and attempt to gain some more strength.

Edit 7.45am NY time Market is at 1.4913 The market has finally broken down out of the tight trading range from early this week. This market should progressively work its way down towards the Support line at 1.4700 over the next 24-48 hours. There may be an upward reaction from the change of sessions (from London to US) and also from the US Unemployment Claims numbers at 8.30am NY time, but the market is now looking tired and is heading down to the Support line area.
The adventurous traders may see this as an opportunity to sell this market down to the Support area. (If not already in, I would suggest that you wait for the reaction upwards from the US Unemployment Claims news)

Edit 12.10pm NY time Market is at 1.4864 The market has continued to move down and is still heading towards the 1.4700 Support line. However, after such a strong move down, we may see a small retracement upwards in the afternoon session. But the market is definitely moving towards the Support line

Emails

Email 1
When i look at the chart at any time frame i see many support and resistance levels how do u pick up one which is mostly effective and price will turn direction. There are always S&R levels on each chart.... The best solution is to make a decision..
The first thing you need to do is decide what time frame YOU are most comfortable trading.
You need to choose ONE time period (4H or Daily)
Then you need to set your charts to 300 bars/candles.
Then you need to place ONE Resistance line linking up all the highest points.
Then you need to place ONE Support line linking up all the lowest points.
Then you need to plot ONE 50% Fib line (working from Right to Left, using the last Highest point and the last lowest point)
When you have done that, you need to remember that the market will move between Resistance and Support levels.
The market also likes to target the 50% fib line on the way through from Support to Resistance OR from Resistance to Support
IF. AND ONLY IF, the Support line is NOT sloping upwards OR the Resistance line is NOT sloping downwards, then we need to look at horizontal Support or Resistance lines which are drawn from previous highs or lows or obvious congestion points over the 300 bars

Email 2
Ive been looking at the Euro closely this weekand as you mentioned it has been struggling to get past the 5000 level. Considering that it has been only ranging around 60-70pips week so far, would there be a higher probability for the pair to move lowerback to the 4700 support line. Yes, if the market doesn't keep going in the trend direction, the traders get disappointed and then take it back to the Support line where it can start building from strength again
Does it also mean thatwhen there has been a ranging market the probability of an explosive price movement in either direction becomes higher as well? Yes, definitely...the market players all get frustrated and when it starts to move they all jump in

Email 3
Now i am interest about your thoughts on the upcoming long trade. If the market is going to go down now, then it will be a lower high on the daily chart. Yes
How do you feel about that ? Will that make the long trade riskier more than you would like ? No, because the Support and Resistance line is the strongest TA tool in the box
Another thing that confuses me a bit is the trendlines. When we had the last long we connected the bars on march 3 and april 21. And now we link again those lows and adding nov 2 low and have a nice trendline without any possible break of it like we saw the last time. Did we connect the lines last time correctly yes, given the charts as they were, that was a validly drawn line ....It just didn't work that time
or should we had drawn the line like we have done right now just without the nov 2 low (just the lows of march 3 and april 21). That is only being considered because the last line didn't hold and was broken...So we moved to the next possible trend line option .. Remember , it is never 100% infallible. We are always playing a probability game with the benefit of only trading the high probability set ups.
Like any business, there are always multiple business options available. The key is to go with the highest probability options, but also understanding that you will never get it 100% correct


MESSAGE FROM JACKO 485

It is 3.00am NY time Wednesday November 11 and the market is at 1.5006

This week has been an unusually quiet week so far. We have had two days of no US news events and today is a Bank Holiday in the US for Veterans Day. Canadian markets are also closed. However.... sometimes.... the market takes advantage of these thin Bank Holiday markets to make a significant move.
The markets have been trading in a very narrow range for the last 48 hours and I would not be surprised to see a fast break in the next 6-12 hours. As to whether it will be to the upside or downside, these moves are usually in the direction of the trend. However, you need to be very cautious with these moves and be prepared to move in and out of them quickly if it moves against you.
Trading today, especially in the very thinly traded US session times, is only for the very adventurous traders.

Edit 8.00am NY time Market is at 1.5035 As expected, the market has moved up in the thin trading today. (The market was actually at 1.4975 when I started writing the above blog entry, and by the time I was finished typing it had moved up 31 pips)
As London starts to wind down for the day, and we get into the holiday US session, the market will become more volatile....
Those of you who are in a trade, you need to be very cautious and be prepared to move out of them quickly if it moves against you.

Edit 12.15pm NY time Market is at 1.4964 The trading in the US session has erased all of the move from the London session and we are back in the trading zone that we have been in for most of the week. More importantly, the market only rose as high as 1.5048 and did not break the previous high of 1.5062 (Oct 25). Over the next few days we may see the fall back to the Support line from here.

Edit 7.00pm NY time Market is at 1.4980 This market is back and stuck in the trading zone where it has been for most of the week. The Sydney and Tokyo markets are doing nothing at the moment. Since there was no firm direction from the US session, those two markets are maintaining the status quo and remaining in the current trading zone. Hong Kong is about to open but I expect the market to be quiet until London opens tomorrow at 3.00am NY time. Tomorrow morning we see the US Unemployment Claims which should add a bit of life to this otherwise very lackluster market.
I was hoping that the market may have moved lower to get closer to the Support line but it is hanging up in this trading zone at the present time. The tight trading range is not throwing up many trade opportunities, even for the adventurous traders


MESSAGE FROM JACKO 484

It is 3.00am NY time Tuesday November 10 and the market is at 1.4965

The market has been basically locked in a 40 pip range (from 1.4970 to 1.5010) for the last 43 hours. There was a lightning fast move down to 1.4050 and back up again in minutes after an announcement by the Fitch rating agency that the UK economy might lose its AAA rating sent shock waves through the GBP and then the Euro, but otherwise it has been not been an exciting or tradeable day... yet.

While the market does nothing, I am on the sidelines awaiting the next pull back to the Support line

Edit 8.00am NY time Market is at 1.4974 This market looks as though we may have a retracement today. It appears that the 1.5000 resistance area is putting up a good show of resistance. I am not interested in any Counter Trend trades at the present time. I will wait until we get back to the Support level.
I want to spend most of my time IN a good trade, rather than just looking for entries.

Edit 12.10pm NY time Market is at 1.4950 The market is really struggling with this 1.5000 resistance area. After rising to as high as 1.5005, it has again fallen back and a retracement lower is looking very probable.

Edit 7.00pm NY time Market is at 1.4985. Today has been another day of the market trading in a tight range. This was caused primarily by the lack of any US news events again today. The market has been in a 60 pip range (1.4950 - 1.5010) most of the week. When the market is in such a tight range for a couple of days, it is easy to get frustrated and open a trade just for the "action". It is better not to do that. While the market is doing nothing, it is best to be on the sidelines waiting for the next pull back to the Support line

Emails

Email 1
Why are you so sure that the market will go back to the Support line? Trading rules tend to be self fulfilling. When the market is too far from the Support line, major players stop buying.... and wait.
Some of the more aggressive traders consider that when the market is a large distance from the Support line, it is"out of line" with where the market should be and that it is a good reason to actually Sell the market. Therefore the market falls back to the Support line.
Once the market starts to fall, it is reasonably obvious where the market will go to (the Support line). That is why the moves between Support and Resistance lines are reasonably quick. Like most of the trading rules they are self perpetuating.

Email 2

I was sent this useful site by one of the members. It is a timezone converter for forex traders.
http://forex.timezoneconverter.com/index.cgi?timezone=Hongkong;
You may want to put it in your favourites


MESSAGE FROM JACKO 483

It is 3.00am NY time Monday November 9 and the market is at 1.4963

The market has moved up early this week in the Australian / Asian session. Normally this session focusses on the AUD and Yen pairs.

I have my charts open to 300 periods of the Daily time frame.
The Resistance line. At the present time there is no descending Resistance line of interest. In regards to horizontal Resistance lines, the Resistance is at the previous high of 1.5062
The Support line is found by linking up the lowest points on the Daily chart starting from 1.2460 (March 3) and 1.2886 (April21) and 1.4626 (Nov 2) we can see that the rising Support line is today at 1.4700. As can be seen we are quite some distance from the Support line.
However, as we saw only two weeks ago when the price moved from 1.5052 to 1.4691 in three days, a 350 pip move down can happen quicker than most traders expect to happen.

Until the market returns to the Support line, I am on the sidelines.

Edit 8.00am NY time Market is at 1.4995 Market has moved to the Round number Resistance of 1.5000. The market is currently too far above the Support line for me to enter as a buyer at these high levels and I am not interested in Counter Trend sell trades at this time.

Edit 12.10pm NY time Market is at 1.4995 The market has been restricted to a narrow range around the 1.5000 area all morning, reflecting the lack of any US news events earlier today.

Edit 7.00pm NY time Market is at 1.5006 The US session today was one of the quietest sessions I have seen for a long time. Yesterdays Australian/Asian session was the prime mover, then the London session was quiet and the US session was almost dead with only a 35 pip range (and most of the trading session was within a 20 pip range).

Emails (Most relate to the last trade)

Email 1
The last trade we had a support line that becomes broken , we sell the next rally when the price comes back to the line to confirm..... and then the price keeps on keeping on until we're stopped out. Was this an anomaly ? Yes, the market usually (greater than 75%) follows the rules...this is one of those occassions when it didn't. It is never 100%
Or have the rules changed? No, the rules rarely change,..even over the very long term (The expression, "this time things are different" is rarely correct)
I still like working with the daily charts better. It seems like the trendlines are stronger or more established (despite getting stopped out!). Yes, this was just one of the 25% those times when it didn't follow the "usual" pattern.

Email 2
i still dont understand how to enter a trade accurately. Wait for it to get to a Support line, then either go long if it bounces up OR short if it breaks down through it. Wait for "confirmation" touch after the break
Also I was looking at our latest trade. My bias was to go long at the 1.4700. I saw the break down to 1.4626 as an indicator that the 1.4750 Support line was convincingly broken. But the rules also say to wait for the move back up for the "confirmation" touch This usually (75% of the time) happens when the market is breaking down. The market did move back to the 1.4750…And I was expecting that it would the drop . However, this move was one of the 25% of the times when it didn't play by the rules

Email 3
About the last trade. Do you think we should have waited a little bit longer for shorting? It had dropped 120+ pips through the 1.4750 Support line which dated back as far as April this year with multiple touches. The rules say that when it moves back up for a "confirmation" touch, you hit the SELL button. This was one of those cases where it did not follow the trading rules....

Email 4
u have said the trend is broken when the price broke 1.4750 and since u have outlined before that we still have a support at 1.4600 and after this no more support until 1.2650 . why u didn't wait to see the break of 1.4600 before u consider the trend broken ? I saw the break of the Support at 1.4750 as being the critical break (in hindsight, I was wrong). It was broken by 120+ pips to 1.4626 so I was just waiting for the move back to 1.4750 for the "confirmation" touch as the point to Sell... I considered that waiting for the 1.4600 break would mean a missed opportunity to sell down from 1.4750 to that 1.4600 level.

Email 5
I'd also like to ask about fundamentals. My understanding is the value of the dollar should rise on negative news and fall on positive news. Is this correct? It is the opposite. Good news means that the country is in better shape, therefore the currency should be stronger as investors are attracted to the country. Having said that, we are in a time of huge economic stress and there is currently the "flight to safety" factor, so that when there is bad news, the money flows into the USD (making it stronger) because they perceive it as the best currency in times of economic crisis
How do you treat fundamentals and what role do they play in your decision making? Background knowledge only. It allows me to understand the context of WHY a currency is moving in a particular direction
Do you take into account any medium/longterm expectations of the US/World economy? Only vaguely.... for example, I have in the back of my mind that the USA is still the most powerful economic engine in the world and will soon come back into force, causing the USD to increase



MESSAGE FROM JACKO 482

It is 3.00am NY time Friday November 6 and the market is at 1.4868

I am waiting or the market to move down to a more acceptable and risk free area near a Support line. The market is sitting resolutely 1.4875 area for the last 32 hours and refusing to budge.

Today is the infamous Non Farm Payroll (NFP) day. The NFP and the FOMC statements are the biggest market movers on the Forex calendar.

Edit 8.00am NY time Market is at 1.4871. The countdown for the Non Farm Payroll (NFP) has started. The news is released at 8.30am NY time and the impact is instant. Spreads widen, the market gaps up or down, slippage occurs, and Stops get taken out with ease by the volatility in both directions. The brokers love this type of chaos to eat up novice traders accounts. To those who try to trade the NFP news release before the announcement...you have been warned.

Edit12.15pm NY time Market is at 1.4850. The NFP excitement is over and the market is back at 1.4850. The market is looking as though the 12.00pm turnaround outlined yesterday is in place again. I am watching it with interest.
Edit 8.00pm NY time Market is closed The Friday afternoon session was its usual dead trading session with a trading range of only 10 pips.
Have a nice weekend. The markets are closed, you can't trade, so spend some quality time with family and friends without any thoughts about Forex. That's one of the benefits of being a trader...You get every weekend off.

Emails
I am still catching up on the emails fromthis week because of the End of Quarter for the Fund. I will answer the rest over the weekend

Email 1
Thank you for the new hours of posting your comments....they hit the really "key" times. Thanks. They actually work better for me in HK too.
What I am appreciating the most is your laying out in great detail the S/R lines and the reasoning behind the trades. That is what I benefit the most from. Thank you...thank you....thank you!!! I am getting more comprehensive in my reasonings ..It is a great benefit to me as well
I love how you let us know where you believe it is headed and why. I am one who also likes to trade both ways....when there is enough possible action to make it worthwhile. Truly amazing how often you hit it. I am learning....just wish it were faster! You get more patient as you get older and richer...The downside is that you get older… and can't remember what you wanted to do with the money....LOL.

Email 2
Do you think that we will over the next year see these currencies back to pre GFC levels? 1.6000 ??? Possible but I hope not. the bull has run too far without a break so the UP side is limited.....I want a nice long, long short that I can ride for 12-18 months down to 1.3000 or lower

Email 3
even though your timing on the last trade was off, it would appear to me that your decision was still sound just more of a timing issue. Could we be seeing a flush out of the remaining bulls in the upper resistance area before we see the substantial drop or correction? I don't know...when you look at the new Support line it doesn't touch ANY recent bottoms of the bars since April..so the old Support line was definitely broken, but the bulls kicked back on

Email 4
I am sure after all you find that trading from the daily time frame suit you the most. However, I am still struggling to figure out which timeframe suit me the most.In your early days, you must have gone through this before you realize that you best suit trading of the daily time frame. Do you start of by trading in the lower time frame? Trying to scalp few pips here and there? Intraday trade? What is the breakthrough along the process that make you discover you are going with the higher time frame? You will be tempted to trade the shorter term time frames because you will be excited and you will be keen for "action". But after a while you will realise that the "longer the time, the stronger the line", so you will start leaning more to the longer time frames. And then you will realise that you want to do this for the rest of your life, so you move to the longer time frame again to allow a sustainable lifestyle where you are not glued to the terminal..and then you will have a great business and a great lifestyle


MESSAGE FROM JACKO 481

It is 3.00am NY time Thursday November 5 and the market is at 1.4818

I was wwwwrong in my last trade. It appears as though I may have called the death of the bull trend prematurely. Therefore there will be no Anti-Hedge trade for this trade.The market has been as high as 1.4908.
However, we protected ourselves and minimized our loss by using a Stop Loss and only risking 2% of trading capital. This trade highlights the absolute importance of both of those mechanisms in trading.

As you know, my personal account and the Fund tracks the exact trades as outlined here in the blog. I am NOT a signal service. I am not just sending out signals. The trades here in the blog and the SMS notifications are MY trades.
In this respect, the Summary to investors in the Fund might allow you to put the blogs trading notifications into perspective.

Message to Investors ...... November 4
The Fund earned 234 pips over the three months of Aug to Oct for an annualized rate of 18.6% for the Quarter. The Quarter included a very unimpressive period from September to mid October where I saw a correlation between moving to smaller time frames to trade more frequently (due to some mild pressure from some of the more active traders) and a deterioration in the quality of my trades.
As soon as I became aware of it, I took immediate steps to rectify the situation. Fortunately, we caught the drift to the shorter term and Counter Trend trading of those six weeks in reasonably quick time, and we have seen an immediate positive impact on our trading.

The Aug-Oct quarter is the first Quarter of the second year of the Fund.
Last year, from the commencement of trading on 8/28/2008, we accumulated 1727 pips over 337 days for a net 37.49% annualized return. We achieved it with maximum safety since we have never had more than a 2% capital risk on any trade and we achieved that figure in the midst of, potentially, the greatest financial crisis since the Great Depression.

I consider that our results for the Fund last year was only barely acceptable. Even though we did so much better than any other asset class, I personally, am still disappointed with my results last year. The near 40% annual return was significantly less than my previous years results.

But we are coming out of the Financial Crisis and the markets are returning to conditions as they were before the great Financial Crisis. And in the Sept to mid Oct period we were drifting towards a wrong trading style which has now been corrected.
So now we are back to my 2005 - 2007 trading style where I made sizable returns. Therefore, I am comfortable in the knowledge that, excluding another major Financial Crisis, we will have a much better year this year than the last year.

Edit 8.00am NY time Market is at 1.4870 After yesterdays unpleasant little surprise of being stopped out of my trade, I have gone back to the charts. That's the thing I really like about this business.... If you make a mistake, the market has no memory. You simply start again, and try to do better next time.
My new Support line incorporates the new low of1.4626 set on Tuesday. By linking up all the lows on the daily chart, starting from 1.2460 on Mar 3 and touching 1.2886 on April 21 and 1.4626 on Nov 3, we can see that the Support line today is currently at 1.4650.
The market is currently some 220 pips above that level, so I need to wait until it gets closer to my Support line before I consider taking a trade.
To do anything else, is too risky and has a poor probability of success. And as we saw again last week, this market moves to Support and Resistance lines much quicker than most traders expect.

Edit 12.15pm NY time Market is at 1.4850 The market has moved down almost 70 pips from it high of 1.4919, but it has to move much closer to the Support line to be an attractive trade opportunity

Edit 7.00pm NY time Market is at 1.4876 The market has been slow in the afternoon session. It has moved a total of only 31 pips (1.4850 -1.4881) since the last post 7 hours ago.
For those more adventurous shorter term traders, the pattern of a price reversal at 12.00pm NY time in the US session is becoming very prevalent and very distinct. It has done it again today. It is just something to consider....

Emails

Email 1
I see that the CRB index (commodities) aligns in the opposite way of the euro dollar frame Am i right? Only sometimes...It is NOT a LEADING indicator for the EUR/USD (in other words, it does not LEAD the action of the EUR/USD). There is NO index or commodity that has been statistically proven to be a leading indicator for the EUR/USD...everything I need is on the EUR/USD chart



MESSAGE FROM JACKO 480

It is 3.00am NY time Wednesday November 4 and the market is at 1.4743

My orders to SELL at 1.4725 were filled yesterday afternoon (apologies for my incorrect reading of the 24 hour time in yesterday's entry) The market has moved up marginally past my entry point but is still under the Support turned Resistance line at 1.4750.

Today is a big day for news events. At 8.15am we have the ADP Non Farm Employment Change, then at 10.00am we have the ISM Non Manufacturing PMI and at 2.15pm we have the big FOMC Statement. It should be a volatile day. (Those of you who wish to trade very safely may wish to close some positions for a profit ...it will trade below 1.4725 at some time before the FOMC announcement.....before the news to reduce your risk and then get back in after the dust has settled).

Edit 8.00am NY time Market is at 1.4748 After some gyrations and Stop Loss hunting over the 1.4750 Daily Support line area up to 1.4777, the market is starting to head back the Support line in preparation for the ADP Non Farm Employment news release.
I am still comfortable with my 1.4725 Short trade. If the market gets down to the 1.4600 area, I will be looking to close his trade and Sell it again later when it bounces.

Edit 12.10pm NY time Market is at 1.4837 The market has moved up on worse than expected ADP Non Farm Employment numbers and has stopped me out. A surprising and disappointing result, but occasionally these types of trades happen. Move on to the next trade opportunity.

Edit 4.00pm NY time Market is at 1.4863. I was wwwwrong in my last trade. It appears as though I may have called the death of the bull trend prematurely. Therefore there will be no Anti-Hedge trade for this trade
The market has been as high as 1.4908. However, we protected ourselves and minimized our loss by using a Stop Loss and only risking 2% of trading capital. This trade highlights the absolute importance of both of those mechanisms in trading

Emails
We have almost completed all our Client Account procedures and Auditors sign off for the Quarterly accounts for the Fund so I should be back into the emails tomorrow. I apologise for the delay with the emails