Strength in EUR / AUD

Watching EUR / AUD in the past 24 hours I notice a double bottom low higher close (dblhc) on the daily chart. Whilst I am not a trader that looks at fundamental analysis I have noticed over the last couple of days since AUD / USD has rallied and AUD has weakened against the EURO. This is even more mysterious considering the AUD is almost at an all time high against the USD.

I cant see the AUD going much high than 0.97 USD until it is almost certain domestic interest rates will rise (which they will do), however in the interim I think it will trade in a consolidation range. In the mean time I would expect from a fundemental and technical standing point that EURO / AUD will rise.

I entered long at $1.6332 currently at $1.6435 I think I will ride this one out , even though I am at my targeted 1 : 2.5 Risk to return ratio .

First Pyramid Entry + Succesful Trade of 144 pips

Looking at the hourly chart a double bottom candle formed (although this wasn’t accompanied by a higher close when I entered). After noticing on the daily chart that price has been trending in a channel for the past month or so I decided this was a high probability trade.

After entering I waiting for a fib retracement from the swing high to enter my second position (pyramind my trade). In hindsight I should have waited for this fib level to be tested more than once (as it dipped slightly lower from where my 2nd entry was), however my analysis was 75% right and was able to net 144 pips in total (including pyramid entry that was the same value as my original trade).

Missed Trade + Trading Thoughts

I have been reflecting over my trading style and I think I need to pay more attention to the daily chart and not the hourly and 15 minutes and instead of going in and out for quick positions that last a couple of hours, I need to start riding out my trades for longer positions that last days - weeks.

By onlly targeted part of the trend, i need to be more consistent in picking up positions and better at my entry. I think this may be my downfall at the moment.

I missed this trade on the EUR / AUD, this trade would have been top notch and is what my trading plan tragets.

A break out from a fib level with strong support confluence and a double bottow low higher close right at this level.

Fib Level + key support + price action breakout = high probability trade

70 ish pips bagged - mixed feelings

Netted 70 ish pips on USD / JPY , not too sure if I am happy with the trade though. I spotted potential for a breakout on 15 minute chart , corresponding with double bottom low higher close on a fib level on the dialy time frame and acted. A couple of hours later and nothing happend until the price broke out 70+ pips in less than 15 minutes.

I know the mantra of any trader is let your profits run and cut your losses, i cut out of this position when it hit a level of resistance with a fib level and daily pivot. My reasoning for exiting is I was not comfortable riding out the position and would like to wait for a consolidation on these levels. I am also mindful of not trying to pick the full trend but only 80%, will see how I go tommorow on this one.

Key actions for tommorow - Watch for support on this level and look for another entry. Daily chart suggests that this has longer to run, this is a result of the double bottom low higher close on the fib level.

When your stop loss is set too tight!

Support forming on a pre-established Fib level, wasnt such a high probability trade due to the fact there was not overwhelming price action, however this trade did go the distance.

However

Stop loss position was way too tight and my position was whipsawed ! If stop loss has been a little bit looser would have netter 80 - 100 pips ! Not a loss of 20 pips..

AUD / JPY

Made 2 trades on Friday on AUD / JPY, the first trade was stopped out with a loss of 43 pips whilist the second trade made 62 pips.

I got into the first trade a bit early and the position moved in the opposite direction fairly quickly triggering my stop loss. After my position was closed out I sat on the sidelines waiting for price confirmation to re-enter the trade going short again. A couple of hours later on the hourly chart a double top high lower close formed , on a tested key fib level. As a result i re-entered short my analysis proved to be correct and was able to real in 62 pips. I thought id better exit the position at the tested support and daily pivot, waiting for the line to be breached. As a result the support was breached and i was not at my computer to enter the trade.

After reviewing my trade i realised i had forgot to plot the daily pivot on the chart. When i did this it turned out that the pivot was acting as a key level of support and therefore my intial short entry was too premature ( as it was boucing off a key level of support and not going to conitune south straight away) . I later acknowledged this level and exited once the trade boucned hit this support again.

USD / JPY - 46 pips

Short USD / JPY @ 101.343 ($100,000)
Margin - $1,0000
Stop Loss - 101.521
Maximum Possible Loss - $178

Return - $460
Risk / Return - 2.58 : 1

After lackluster results from intra day trading I decided I would put faith in my judgements bite the bullet and go for a longer set up. After watching the breach of 3 succesive support levels, an emerging downward trend and two pin bars, I executed an entry position at 101.343 exiting at 100.787, giving me a 46 pip movement.

* Please note - I used invert colours on this chart as as a result the green pin bars are - movements and visa versa.

Back to the drawing boards

Haven't posted anything up here for a couple of weeks, as I have been sitting on the sidelines re-couping and re-thinking my strategy trying to find my niche. I have come to the conclusion the best avenue for testing a new strategy and new markets is by demo trading. Using fake money on a real time trading platform in order to gain confidence and "learn the ropes" so to speak.

I have found a free 30 day trial demo account with FXCM and currently trialing trading EUR / USD , AUD / USD and USD / JPY. I will post my strategy soon however it revolves around trading on support / resistance levels, 16 ema, bollinger bands and candle stick reversal patterns on a 5 minute chart.

I have been trading for a week now and just under breaking even, I have found that in order to become a consistent trader you must know what type of trader you are. This may sound pretty obvious but it is vital. what I mean by this is, if you are a scalper enter and exit the market quickly take quick profits and leave. If you are a longer term intraday trader and looking for 40 pips in each trade don't try and enter during a phase when you are not likely to get this movement from the market.

At first I thought scalping would a good fit for my personality, making quick trades with my "fingers on the trigger", although my first trades did pick the market movements the majority of the time, I found myself wanting to hang on and let my profits run, (which is normally a good thing) however the tight ranges of scalping meant profits where minimal.

One of my better trades was trading the USD / JPY on Friday night which i snagged 46 pips, entering short at 101.343 and exiting at 100.878. I will post this above with commentary.

Testing short term bull trend

Using a 15 minute weekly chart it is evident a trend has emerged in the past 3 days of trading. The trend line was broken and the price dropped aprox $10 in quick succession. Whilist the trend level was breached, it quickly subsequently rebounded. I expect that in the short term the price will trend sideways, unless large volume push the price above support.

long gold @ US $936.00

Long Gold @ $936 USD (10 oz)

Margin - $93 USD (1%)

Total Investment - $9,360 USD

Stop Loss - 5% ($889.00)

Maximum Possible Loss - $500

Risk / Return Expectation - 3:1

After the massive commodities sell down of late last week I decided to act and put a long position on gold. On Thursday as the price plummeted for the 4th straight day I decided to enter long at $936 an ounce (price after the spread) with my stop loss at $989.00.

In hindsight I should have waited for the price to steady and for a clear trend reversal (I also underestimated the "long weekend" liquidation as people closed there positions). However I was in and this was all the mattered. My reasoning for the entry into this trade was based on fundamentals.

Whilst the hammering of the commodities sent news headlines across all media stating "the end of the commodities bull run", and "the recovery of the bear market". It was my opinion at the time that this was a great buying opportunity and nothing more than a healthy consolidation period for gold. Fundamentally nothing had changed at all.

- The US economy was still in shatters with more sub prime mortgage write downs to come

- Still continued weakness in the US property markets

- US consumer confidence still at extreme lows

- Still strong demand for gold from emerging nations (coming up to India wedding season)

- and to top it off America is about to be officially labeled as being in a recession

None of the above had changed overnight yet because wall street had a run of around 3% all of those above factors seemed to be forgotten. This in my eyes was a great buying opportunity.

As Wall street opened on Thursday night gold was hammered down from $930 ish to a monthly low of $904, almost wiping out my position which had a stop loss at $899.00. Eventually the market closed at $914.00 giving me a slight level of comfort that the $900 level hadn't been tested and I was still in the game.

Lessons Learned

Rule # 1 - Never Invest against the trend.

Tried to pick the bottom too early and eded up falling from $936.00 to an intraday low of $904.00. Wait for confirmation signal to indicate end of bearish trend.

Rule # 2 - Dont underestimate trading holidays
Invested in a long position before a public holiday, resulting in additional downard pressure as investors liquidated positions.

dark world of derivative trading

Being my first post I thought I would give you a bit of a run down of myself and background to future trades I plan to post on this site.

I write on this blog as novice CFD investor, having traded shares on the Australian Stock Exchange (ASX) for 2 years with relative success, I decided to take the plunge into the dark world of leveraged trading. After setting up an account with CMC markets with $1,000 float, I began trading. What a lesson this was !!

Having installed the market maker platform on my computer and browsing through the technical indicators offered on the platform, I was burning to start trading. My first trade was a long on the $USD / $AUD. Although my analysis wasn't too bad, my stop loss was set way too close, with my trade closing out from the stop loss shortly after. My next ventures were trading equities in which I went long on Lihir gold throughout a $3.00 - $3.20 band it hovered in during much of 2007. I also had a small dip into trading spot gold.

Needless to say like most newbie CFD traders, my $1,000 didn't take me very far and it wasn't long before most of it had been lost. Although having lost $1,000 I learnt some in valuable lessons about money management the importance of having a strategy, being educated on the markets and most importantly not to gamble on stocks.

It has been a good 12 months since my de-virgination into the dark world and I have since educated myself and built up enough confidence to re-enter the dark world.