Trading Education: March 2010

MESSAGE FROM JACKO 572

It is 3.00am NY time Wednesday March 31 and the market is at 1.3422

The market has taken a retracement in the last 24 hours but is now heading back upwards. The market is moving erratically / noisily between the Support and Resistance lines as we wait for it to get to our SELL trades at the Resistance line.

Edit 8.00am NY time Market is at 1.3484 As`stated yesterday, (Edit 12.05pm NY time) "we may see a turnaround in the afternoon session today. As you know, there are often turnarounds at the change over of sessions and at the changeover in the US morning/afternoon session. Today may be one of them". The market has been mainly moving up ever since to its current level. I am hoping that it will continue to move up to my target Resistance line. However, there is the ADP Non Farm Payroll numbers out at 8.15am NY time which may send the market in a spin

Edit 12.05pm NY time Market is at 1.3525 The market is slowly edging closer to my target SELLS at 1.3600. After a high of 1.3543, the market has just dropped back marginally, but I am confident that my orders will be filled soon. The ADP NFP numbers disappointed the market but I believe that the more reliable Govt NFP numbers to be announced on Friday will show a positive employment number.

Edit 8.00pm NY time Market is at 1.3525 The market has been wandering around in a small range as the directionless "noise" of the market moves it. However, the market has been staying above the 1.3500 level, so we may see a move up to the 1.3600 Resistance line area soon. There has been a little 20 pip move up in early Asian trading coming out of Sydney and Tokyo. The markets in Hong Kong/ Singapore are about to open.

Emails

Email 1

I was just about to send you an email about the Greek rescue package/safety net news and then saw you have mentioned it on your blog. Ok

My question was going to be that the market hadn't moved much on the news ... then it started to rise .... slowly. I was wondering is the slow rise due to no one really believing it is great news (and who in their right mind trusts politicians eh?) and so, the market does move, but just not convincingly. Correct.... The problem has not gone away.... The bailout only covers the Greek debt until May.... Then they need more again... And so do all the other PIIGS

And really the same question, but in reverse. If the Euro gang had announced that Greece was on its own and doomed, would the Euro have tanked with a lot more momentum? Oh yes.... thats why it still has a long way to go.... It is not just Greece that is doomed...and the IMF and Germany can not support them all

Email 2

I have quick question concearning price action around significant areas.
I know if the price is rapidly rejected from the res/sup lines that means that it will probably hold. ( at least for a while:) Yes
If the price is sitting on it it will probably break that levels. yes
But sometimes price is firstly rejected ( maybe for around 30 or 40 pips) and then goes streight though the res line. Yes, the initial move is to drop back and pick up some momentum to then break it
Sometimes i have been waiting hours watching for price action around this levels and a still had no clue about the direction . it's great that there are only two possible direction that makes that sometimes i am right LOL .Yes, so it is sometimes best to let it run and then jump in once the direction is clearer
Is there any time period you would recomend to wait and watch price action around supports/ res? I think it is more about the number of pips rather than time...If a market breaks a Resistance line by 100 pips, you can safely say that it is NOT Stop Loss hunting and it is NOT a false break out...it is the real thing...The downside is that you have "given up" 100 pips before entering...Those are the trade-offs that we must make as traders or is it strictly linked to the time frame we are trading on? so trading on 4 hours resistance means i have to wait another 4 hours or so .No, you can still jump in earlier as soon as the direction is established

MESSAGE FROM JACKO 571

It is 3.00am NY time Tuesday March 30 and the market is at 1.3525

Good morning Europe... As expected the market is grinding its way back up to the Resistance line as bigger traders wait to sell at the higher prices. My order to SELL at 1.3600 have been placed and it is waiting to be filled.

Edit 8.00am NY time Market is at 1.3485 Good Morning the Americas and Canada. The market has dropped marginally in London trading after hitting a high of 1.3537 in late Asian trade. My orders to SELL at 1.3600 have been placed and are waiting to be filled. For news events, we have US Consumer Confidence numbers coming out at 10.00am NY time. But the key mover of the market is still the situation in Europe

Edit 12.05pm NY time Market is at 1.3410 Good morning to West Coast of America The market has moved away from my entry point. But we may see a turnaround in the afternoon session today. As you know, there are often turnarounds at the change over of sessions and at the changeover in the US morning/afternoon session. Today may be one of them

Edit 8.00pm NY time Market is at 1.3433. Good Morning Asia and Australia The market has not moved very much in the US afternoon session and early Australian trading. Asian trading is about to start. The market has moved up marginally.

Emails

Email 1

1.) I know you say FOREX is the best business on the planet. So you got me wondering.....If you were 23 like me and just starting your career in this day and age, would a FOREX business or investment fund be the type of business you would build to make your fortune? YES...definitely...If I knew then what I know now...and the opportunity was available (which was not available when I was younger) ....I would not have looked at any other business Trading has always been a passion for me. just not a profitable one lol. Most small businesses are not either I'm very confident that this year that is going to change! Forex trading allows you to change your "business approach" quickly and easily to turn your business around and into profits. You can start again today in forex...without any baggage associated with normal businesses (Rents, staff, etc). It is a brand new day and the forex market has no memory
2.) I see that you mentioned doing some property deals, Real Estate is the other interest of mine for career choices. Since the age of 15 I have been interested in investments in general. Can real estate be as profitable as trading or is trading still way better. Trading is much faster compounding and has much less "ins and outs" costs. Also, if you get into a bad property transaction, it will take longer to get out. But having said that, property is an excellent investment vehicle in the longer term
3.) Finally an actual FOREX question haha. I see that you have been fairly accurate at predicting where the EURO is going. How do you pick a number? For example, you just stated that you think it will go to 1.1000 by the end of the year. I am very certain that the Euro is going down in a major way... looking at the weekly charts, it is reasonably easy to see where it could go by the end of the year

Email 2

How do you determine the Resistance line point for each day? OK The simplest way is to go to the free charts at DailyFX.com or Netdania.com (they are the same)......Pull up the EUR/USD chart......Click on Time Scale.....Set it to Daily.....................Click on View..........Click on Periods.......Set it to 300 bars .............You now have 300 days worth of Daily bars............Click on Lines..................Click on Add lines..........Click on Freehand.....Click on the high point of Dec 2 and draw the line touching all the high points ending with March 11......

Now click on Zoom.....Click on Zoom IN.......Highlight the last (approx) 50 bars and you will see a magnified copy of the last (approx) 50 days with the 300 bar Daily Support line clearly seen......Drop a line down from todays price bar up to the Resistance line and read the value off the right hand price axis.... You will have the declining Resistance line price for today....... Then round up for additional protection against SL hunting around the Daily Resistance line.........Easy.

Email 3

I don't think I have seen you compound trading in recent times. I don't think I fully understand how you do it. Compounding is adding to previous positions using the profits of the previous positions to increase your lots
Can you please give me an example of how you would have done "rapid compounding" in the recent downtrend from 16th March to today (assume you were not stopped out at 1.3800 but your sell is still open at 1.3700). Thanks. Adding at every 150 pips in profits, so that the cost of opening the new positions is partially offset by the profits of the previous positions

My confusion is because in Message 564 you stated to one member to "take the profits out and get back in at a higher level for more "short" profits". So I am assuming you would have closed out at 1.3520 from short at 1.3700 ? Yes, and gone back in with more lots at the higher price Or would you still have "compound" trades open ? You can do that, but if you are reasonably sure that the Support line is going to hold (and therefore price will bounce up) then you can close and then sell more positions from the higher price. If you think that the Support line will break, then it is better to hold and keep the trades open

Email 4

I joined your group in january this year. I have not written you yet because I wanted to read the whole blog before asking any "stupid" questions. LOL..There are no stupid questions ...but I really do appreciate that you have read the blog first instead of just asking the same questions that have been answered many times previously in the blog

I also found it quite useful to keep a diary where I note my thoughts, feelings and ever so much self-deceptions... LOL. By this I concluded what were reasonable trades and where I tried to outsmart the market (for some trades I actually talked myself into a better future for the Euro! Tststs...) A diary is excellent because it allows you to not "bend the truth" by looking at something with 20/20 hindsight.Without it being written down , we can often delude ourselves that we would have done something different..It is called "selective memories".....You will do well...you have the right attitude and approach to trading

MESSAGE FROM JACKO 570

It is 3.00am NY time Monday March 29 and the market is at 1.3462.

(Note: Europe has now adjusted for Daylight Savings Time so we are back to London opening at 3.00am NY time... I post at London open, NY open, NY lunchtime and Hong Kong open). I am back in warm Hong Kong and still recovering from a 20 hour flight.

The 50% fib line The most relevant 50% fib line is the target retracement number of 1.3542 which is the 50% fib from 1.3817 (March 16) to 1.3267 (March 24). However, given the proximity of the 50% Fib to the Resistance line, I will be using the stronger Resistance line number as my SELL area.

I am now waiting for a retracement back up to the Resistance line area at 1.3600 so that I can SELL into this downtrend again.

Also, we have been notified by our SMS provider service that all their problems have now been fixed and that they are back to normal. So our SMSes will resume this week.

Edit 8.00am NY time Market is at 1.3474 The European market has been absorbing the news of the Greek bail-out from late last week but it is not a very convincing story. The Euro will continue to be weak over the long term but I am sitting and waiting for the market to get closer to the Resistance line at 1.3600.

Edit 8.30am NY time I ama SELLER at 1.3600 with a 100 pip fixed Stop Loss. SMSes have just been sent

Edit 12.05pm NY time Market is at 1.3464 My order to SELL at 1.3600 have been placed and it is waiting to be filled. It has a 100 pip Fixed Stop Loss.

Edit 8.00pm NY time Market is at 1.3489 As expected the market is grinding its way back up to the Resistance line as bigger traders wait to sell at the higher prices. My order to SELL at 1.3600 have been placed and it is waiting to be filled. The Greek problem has only been papered over by a the bail-out funds. The amount of the bailout only covers the Greek debts falling due until the end of May. This problem of Greek default has not gone away and other PIIGS are soon to be in the same problem. I am still very confident of the Euro hitting 1.1000 by the end of this year.

Emails

I have just started answering the backlog of emails from last week. My meetings in New York City punched huge holes in the times that I usually allocate to answering emails. I was getting stressed about it all so I decided that rather then try to answer emails and go to the meetings, I would answer all unanswered emails when I returned to Hong Kong.

MESSAGE FROM JACKO 569

It is 4.00am NY time Friday March 26 and the market is at 1.3350.

Very little has changed from yesterday. This market has had some some big spikes down with minimal retracements. I would be surprised to see this "piece of elastic" being stretched much further without a retracement. I think that this market is getting close to its short term lows and may possibly turn around today and have a reasonable retracement.
I am still waiting for a retracement back up to the Resistance line area so that I can SELL into this downtrend again. I missed an opportunity at 1.3800 and I am now waiting for the next opportunity. This down move will continue to play itself out over time until we hit at least 1.1000.

For those of you who are interested in becoming traders for Investment Banks and brokerage houses, I have taken some interesting notes from my meetings. I will outline them later when I am more awake.

Edit 8.00am NY time Market is at 1.3385 The market is finally retracing after news that European leaders have endorsed a plan to assist Greece via the IMF and some bilateral loans. However, this relief rally in the Euro has no real reason to be strong and should have difficulty breaking any major Resistance levels area next week.
I will get my Sell trade next week.

Edit 6.00pm NY time Market is closed. The week has ended on a positive note. The market is showing signs of having reached its short term lows and retracing back up to the Resistance line area.
I will be heading back to the warmer climate of Hong Kong after spending a week in New York learning more about the Funds Management/Hedge Fund/ Investment Bank/ Brokerage industry from some very Senior Executives at those firms. (I have to thank Mark for setting up so many appointments from his deep list of contacts). I will outline some issues next week, especially for those of you who are interested in becoming traders for those firms.
I am looking forward to getting home. The Hong Kong timezone is a much easier timezone to trade the active trading times of the Asian, London and US markets.
I am looking forward to trading again next week.
Finally, we have been notified by our SMS provider service that all their problems have now been fixed and that they are back to normal. So our SMSes will resume next week.

MESSAGE FROM JACKO 568

It is 4.00am NY time Thursday March 25 and the market is at 1.3330.

This market has had some some big spikes down with minimal retracements. I would be surprised to see this "piece of elastic" being stretched much further without a retracement. I think that this market is getting close to its short term lows and may possibly turn around today and have a reasonable retracement.
I am still waiting for a retracement back up to the Resistance line area so that I can SELL into this downtrend again. I missed an opportunity at 1.3800 and I am now waiting for the next opportunity. This down move will continue to play itself out over time until we hit at least 1.1000.

I will be back for the US open. It is cold (9 degrees), dark and lonely in NYC. It is 4.00am for goodness sake!! I am just coming to the realization that the US trading time zone is not the best timezone to trade forex. It misses the action of the late Asian session and misses the London morning session while the US is still asleep.
Again today, I see that Hong Kong has again taken the market down earlier this morning at 1.00am NY time and now London appears to be attempting to do the same at its opening (4.00am NY time). I much prefer to trade from Hong Kong"s time zone

Edit 8.00am NY time Market at 1.3360 The market has started to retrace from its lows which were triggered when a senior Chinese banker Zhu Min said that the Greek crisis was just the "tip of the iceberg". Zhu Min is a deputy Governor of the Peoples Bank of China.
However, there is anecdotal evidence to show that when there has been a long move in one direction, the correction usually starts on a Thursday.
I don't intend trading it because it is a countertrend trade and I have sworn off countertrend trades for the present time. I am still waiting for a retracement back up to the Resistance line area so that I can SELL into this downtrend again. This down move will continue to play itself out over time until we hit at least 1.1000.

Edit 7.00pm NY time Market is at 1.3274. The market rose as high as 1.3387 in the US session before being slapped back down again. The wait for the move back to the Resistance line is annoying but I am no longer going to be "encouraged" to make trades just because some traders want to trade more actively than me. The market always "returns to the line" of Resistance because when it gets too far away, big traders see the valuation as "extreme", and cut back their selling which then causes the market to float back up to the line.
One of the most outstanding issues that has come from my meeting other Fund Managers here in New York is that they do NOT care about the frequency of trades. They get NO enjoyment from the trading environment. They are ONLY interested in the results at the end of the year. The universal opinion is that my results last year were outstanding. The results so far this year are considered better than average. I want to get back to the results of last year and better. My focus is heading back to maximizing returns, rather than "being active" on marginal trades.

Emails
My meetings here in New York City during the day are punching huge holes in the times that I usually allocate to answering emails. I am getting stressed about it all so I have decided that rather then try to answer emails and go to the meetings, I will answer all unanswered emails when I return to Hong Kong. (Please note: I always take my flights on weekends to minimize the downtime for trading but 16 hour flights from HK to NYC still take their toll on my sleep pattern

MESSAGE FROM JACKO 567

It is 4.00am NY time Wednesday March 24 and the market is at 1.3427.

I was woken by an urgent call from Mark at 1.00am NY time to tell me that the market was drifting close to the 1.3450 Support level. In the 5 minutes it took me to get out of bed and get to the terminals the market had cracked the 1.3450 Support and was at 1.3410.
The break of 1.3450 was a trade for the breakout traders. I personally prefer to sell from the Resistance lines because it gives a better return.
The issue with trading the breakouts is the there are often "false breakouts" that only go a few pips past the breakout point and then turn around, trapping the trade. (For example last weeks "false breakout" only moved 17 pips past the 1.3800 Resistance point)
The other issue is that when they do breakout, the market doesn't usually travel very far before turning back around to "confirm" the broken Support line (The current breakout below the Support line at 1.3450 has traveled as far as 1.3406 and is now heading back up ...to 1.3450??)

Edit 8.00am NY time Market is at 1.3356 The market rose as high as 1.3447 for a very quick confirmation and then fell again. (The broken Support line became Resistance).
This is no longer just an issue of the euro falling because of Greece. This has now become an issue of a flight to the safety of the US dollar again, as shown by the fact that ALL currencies are lower against the USD.
However because of the speed and extent of the fall of the market at the moment and the likely speed of a reversal, I cannot recommend chasing this market and selling it now. And I certainly would not recommend anyone to buy into this market at the present time.

Edit 6.15pm NY time Market is at 1.3322 This market move has been a breakout traders dream. However as stated above, I prefer to sell at the Resistance lines (not on the break of Support lines). This has simply been one of those occasions when the breakout trade has worked well. Even though I recognize that it has been successful for the breakout traders, I would not have changed my strategy to include it. I have seen too many "false" breakouts where the trade gets trapped by what appears to be a breakout but which, in reality, is simply Stop Loss hunting around the broken Support or Resistance line.
I am still waiting for a retracement back up to the Resistance line area so that I can SELL into this downtrend again.
I am currently in New York City on Fund business. Ironically, the US session has been the least attractive session. The major moves today have taken place at 1.00am NY time and again at 4.30am NY time when I was trying to get some sleep. This market is currently being driven by Hong Kong and London. I want to get back to Hong Kong as soon as possible where the daily time zone includes Hong Kong trading, London trading and the active US morning session.

Emails
There are a small number of emails which I have not yet answered. I am currently on the road traveling and will answer them tonight after the US market closes

MESSAGE FROM JACKO 566

It is 4.00am NY time Tuesday March 23 and the market is at 1.3515.

After a very slow US afternoon session yesterday and a very slow Asian session today, the market has finally shown a little life in the last two hours of the Asian session (and the lead into the London session) where it has moved a grand total of 45 pips. (And it is now retracing those 45 pips....).

The weaker horizontal support at the 1.3450 area held yesterday, and will probably be able to hold again today unless there is some dramatic statement out of Europe regarding Greece. It is becoming more and more obvious that Germany and the EU will not bailout Greece but will pass the problem on the the IMF. By passing the problem on to the IMF, the problem is effectively passed to non European countries because the biggest funder of the IMF is the USA. However, until such announcement is made, we may see some movement back up to the 1.3700 area.

I am still waiting for a retracement back up to the Resistance line area at 1.3700 so that I can SELL into this downtrend again.It may take a day or two to get back up to the target Resistance area. The big Hedge Funds are still targeting the Euro and building big short positions.

NOTE The reason I am not buying this market up to 1.3700 is because it is counter trend!!!!

Edit 8.00am NY time Market is at 1.3485 The market is continuing to hold above the horizontal support at the 1.3450 area though it is looking more and more shaky as the Greek issue plays out and the various Greek, German and French politicians continue to shoot from the hip with their comments. The market is now reacting to each new comment from the various parties. A dangerous place to be at the moment.

Edit 12.10pm NY time Market is at 1.3547 The market is choppy but it would appear that we have seen a short term bottom at the 1.3463-1.3476 area and we may see the move up to the Resistance area from here

Edit 7.00pm NY time Market is at 1.3500 The market is still very choppy, but the last 4 x 4H bars are showing higher lows and Resistance at the 1.3450 level seems to be holding. However, Greece's fate seems doomed to an IMF "rescue package". I am still waiting for a retracement back up to the Resistance line area at 1.3700 so that I can SELL into this downtrend again.

MESSAGE FROM JACKO 565

It is 4.00am NY time Monday March 22 and the market is at 1.3513.

I have my charts open to 300 periods of the Daily time frame.
The Resistance line is found by linking up the highest points on the daily chart starting from 1.5140 (Dec 2) and 1.4579 (Jan 12) and 1.3796 (March 11) , with the resistance line today at approx 1.3700. (Note: the candle spike up to 1.3818 is disregarded since it was a false breakout)
The Support line is of no real value at the present time since there is no upward sloping Support lines of value in any proximity. There is some weaker horizontal support at the 1.3450 area.
The 50% fib line The most relevant 50% fib line is the target retracement number of 1.4000 which is the 50% fib from 1.4580 (Jan 12) to 1.3444 (Feb 17)

I am now waiting for a retracement back up to the Resistance line area at 1.3700 so that I can SELL into this downtrend again.

On a fundamental basis, the back-channel chatter is that we will see a retracement this week as we lead into the announcement that the IMF will be brought in by Greece. (The announcement is likely to take place over the Easter weekend).
Despite all the innuendo and encouragement from French Prime Minister Mr Sarkozy, that the European Union should fix the problem and not the IMF, that will not happen.
The reason why the Germans want the IMF to be be brought in is that the Greek problem is effectively transferred from Germany (and the rest of the EU) to the USA which is the biggest financier of the IMF.
Also, the USA is the only country that can effectively print lots more money to bailout Greece without causing too much damage to the rest of the world.
However, the big issue is that everyone is continuing to move the (increasing) problem of sovereign debt default into the near future.
We will see the Euro at 1.1000 by the end of this year.

Edit 8.00am NY time Market is at 1.3502 After rising to 1.3546 in European trading it has fallen back to its current level. To sell at the current levels is too risky. And to buy at the current levels is counter trend trading. And so I wait...

Edit 12.10pm NY time Market is at 1.3540 After bouncing off the weaker horizontal support at the 1.3450 area at 1.3463, the market has been showing strength. It may take a day or two to get back up to the target Resistance area.

Edit 7.00pm NY time Market is at 1.3555 As is usual lately, the market went to sleep in the US afternoon session and we are now waiting for the slow Asian session to get into swing.

Trading Education

Tuesday, August 10, 2010

March 2010

No comments:

Post a Comment

Blog Archive