Forex: Australian Dollar’s Limit is 10 Trading Days
By DailyFX Updates | October 2, 2007
The Australian dollar has had a magnificent run over the past few weeks but that run has finally come to an end after 10 consecutive days of strength. It seems that 10 days is the max of any AUD/USD rally. Back in July, when the currency pair raced from 8550 up to 8800, the one way directional move also matured after 10 trading days. What does this mean for the AUD/USD going forward? As you can see in the trading pattern back in July, we could see some consolidation before a more major turn.
Tags: dollar, forex, forextrading
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Afternoon Trade
By Laetitia Vaval | September 21, 2007
I entered a short-term position (probably until tomorrow) position in CHF/JPY earlier today. I had noticed that it was trading in a range between 98.56 and 98.20. I got short “relatively” close to the top of the range at 98.483 (middle black line), placed my protective stop at 99.350 ( a previous support level — on the 1 yr chart. Since i’ll be holding this trade overnight i’m going to set a limit price at 98.00 (lower green horizontal line on the chart above). From the different colored lines you can easily see that my risk vs. reward ratio is not optimal in this trade. It seems to be about 2:1 (when it should be 1:2)…
Tags: currency market, forex, forextrading, jpy, wall street warrior, wall street warriors
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Food For Thought
By Laetitia Vaval | September 21, 2007
I found an article by Tom Long on www.forextradingblog.com. He talks about using protective stops and his article identifies one of the major DON’Ts that I’ve been doing on the demo account and that I briefly touched upon in some of my previous posts. I copy-pasted what I believe to be the essence of the problem: “Too many new traders use what they call a “mental stop”. They have a price level in mind where they would consider getting out if the market moves against them, but do not enter it into the trading platform. Typically, when the market does move down to that price, instead of exiting, they “wait and see how the market will react”. If the loss becomes larger, they then decide that they will exit when the market moves back to their original mental stop level. As the market continues to move against them, intentions about getting out turn to hope about the market coming back before they get a margin call. Many times, it is that margin call that determines their exit, not their own analysis”.
As I will be trading live very soon, I can not make that mistake again. I have to 1) use protective stops and 2) respect them. Hopefully, the fact that I’ll be trading with “real money” will be a good enough reason to not take such a useless risk !
Tags: currency trading, dow, forex, forextrading, trading strategies, wall street warrior
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Range Trading CHFJPY
By Laetitia Vaval | September 19, 2007
I just opened a position in the CHFJPY as I am looking to range trade this afternoon. The CHFJPY has been trading in a range between since yesterday afternoon between 97.92 and 98.30. I entered the trade (got long) at 98.01 about 8 pips away from the bottom range( I realize this might not be an ideal entry point given that the range is relatively narrow), placed a stop at 97.78 (2pips below the bottom of the range — including the candle wicks), and a limit at 98.26 (the top of the trading range). I am going to use this trade to really respect the stops I placed initially.
I’ve seen that one of my biggest problems is that as soon as a pair starts trading against me, I just close the position without even waiting for it to hit my stop and that has made me loose a lot of “fake” money since after I closed out my position, the pair would trade back in my favor. I also placed a limit at 98.250 as I will be stepping out to lunch soon and therefore won’t be in front of the computer for a little while. But my main goal for this trade is to leave it untouched until it hits either my Stop or my Limit prices. And to learn to control my emotions, because as I write the CHFJPY is trading against me and I’m tempted to just close out my position ! But I’m going to let it trade “by itself”. Will update in a little bit.
Tags: forex, forextrading, jpy, laetitia vaval, range trading, wall street warriors
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Trading the Fed Rate Cut Announcement
By Laetitia Vaval | September 19, 2007
Yesterday was pretty exciting since the Fed was set to announce whether they were cutting interests rates and if yes, by how much (25bps or 50bps). Opinions were mainly divided between a 25bp or a 50 bp rate cut. Before, the announcement at 2:15, I prepped myself by planning out the trades I would place for each scenario.
A 25bps cut would have been bullish for the dollar whereas a 50bps would have been bearish. I decided to trade the currencies I was most familiar with — that is the EURUSD and the GBPUSD.
At 2:15pm EST, the Fed announced that they were in fact cutting rates by half a point. The reaction in the US Dollar was immediate as you can see on the 5-minute charts above (EURUSD and GBPUSD). In the case of a 50 bp cut, my plan was to get long the Euro and the Pound as soon as possible right after the announcement.
The morning of the announcement I got long the EURUSD at 1.38818. The pair did not move much until the announcement in the afternoon. Within 5 mins the EUR jumped to 1.3965 - more than an 80pips. However, soon after the pair reversed and traded down. I got out of my position at the top of the wick of the next 5-minute (red) candle at 1.3936. I made $542 on that trade. OF course, the reversal was only temporary and a few minutes later the Euro continued trading up and at 14:40 hit 1.3980, and a few hours later hit a high of 1.3987. Had i held onto my trade longer my profits could have been doubled.
My second trade involved the GBPUSD. I also got long the pound in light of the half point rate cut. I actually ended up buying 2 lots of the GBP. I bought lot #1 at 2.00419 and sold it for 2.00670 ( a 25.1 pip gain). I bought lot #2 at 2.00528 and sold it at 2.00650. Looking at the 5 minute chart from yesterday, it is easy to see that I only captured a fraction of the profits that could have been made on this explosive upmove. As you can tell from the 2nd chart above, the GBP kept trading up to hit a high of 2.0150 about 35 minutes later. Same problem here as in the EURUSD, and many of my previous trades as you can see in my past postings — I exit my trades way to early and then they keep trading my favor.
About 15 minutes after the announcement I placed a few smaller trades on the USDCAD (got long at 1.0178) and re-entered a long position in the EURUSD at 1.3960. I exited those trades a few pips higher and made some minor profits — about $100.
I really enjoy trading the news. It’s very fast paced and there is a potential to make a lot of money. However, unfortunately market moving news like the fed rate cut do not happen everyday and in the meantime, I have to make some trades in the “slower” in between phases. Today, I’m going to focus on trying to find a few range-trading currencies.
Will update on that this afternoon.
Tags: dollar, dow, eurusd, forex, forextrading, pips, rate cut, trades, wall street warrior
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Trading The Pound
By Laetitia Vaval | September 17, 2007
Today, I decided to mostly focus on the Sterling and more precisely on the GBPUSD in light of the recent financial turmoil Great Britain has been facing. One of Britain’s largest mortgage lender, Northern Rock has seen its customers rush to branches to withdraw their money as response to the bank’s financial trouble. At 7:37AM EST I decided to get long ( I had a very short term frame — about an hour or so max): I got long at 1.9987 and held the position for 16 pip up to 2.0003 and sold my lot there, expecting to see a reversal and watch the pound trade down in light of the recent economic events. However, it traded up further up to about 2.00294.
Finally, the GBPUSD broke down and traded down very rapidly all the way down to about 1.9913. I sold one lot at 2.0012. I made one major mistake, i bought my lot about 20pips lower, and seeing that it kept trading down sold it again, then bought it back again 20 pips lower. All in all the GBP traded down about 100pips over a very short period of time. However, I failed to make all the potential profits I could have made, and got in and out, in and out of a trade again, wasting tens if not hundreds of dollars by paying the spread several times and by selling off several pips lower than where i had just bought back.
On the chart above, you can see the GBPUSD drop about 100pips between 9:30 and 11:30ish.
Tags: dollar, dow, forex, forextrading, gbp, wall street warriors
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US Retail Sales
By Laetitia Vaval | September 14, 2007
As I wrote yesterday, I had a short position in the USDJPY when I left the office. At 12:30 GMT, the August US Advance Retail Sales came out at 0.3% ( vs. 0.5% expected). Although this number came out slightly below expectations, the real disappointment came from US Retail Sales LESS Autos (-0.4% vs. 0.2% expected). This number indicates that US consumers are spending less money and is reflected on the USDJPY chart (above) within minutes of its release. I was short from 115.320 kept my position overnight. The USD weakened this morning in light of the disappointing Retail Sales release and the USDJPY dropped to a low of 114.35. I decided to buy back at 114.51 as I was starting to see a reversal and the beginning of a new uptrend. I made a 81pip profit.
I am still holding onto the EURUSD position that I bought yesterday at 1.3894. As I write, it is trading at 1.385.
Tags: currency trading, eurusd, forex, forextrading, jpy, retail sales, wall street warrior
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The Second Day
By Laetitia Vaval | September 12, 2007
Today, I placed two trades on my demo account.
The first trade involved the GBP/USD pair. As you can see from the chart above, the pair has been trading in a range for a few days now. The wider range this pair was trading at can be set to 2.0358 - 2.0228. If you look at a shorter time frame, the range can be narrowed down to 2.0358 - 2.0281. I decided to trade that range, meaning to get long at the bottom of the range and short at the top. I got long the Sterling at 2.0316. I placed my stop 10pips below the 2.0281 support level at 2.0270.
Ialso had a long bias because the recent weakness of the USD and the relatively good unemployement news that came out in the UK overnight.
My second trade was buying the AUDUSD. On the 1yr chart (2nd chart), you can see that 0.8397 had been a resistance level in mid-April.
As far as fundamental analysis goes, the September Australian Westpac numbers came out above expectations during the night and indicated a 4.2% increase in consumer confidence since August. According to the Daily FX the Westpac number has a moderate impact on the market, however it might be partly responsible for today’s uptrend in the AUD.
At 10:18am, I got long the AUD at .8388. At 12:52pm, I’m up 32pips.
I placed my stop at 0.8277 and my limit at .0581. I placed my stop at the 50% fib level which closely matches the S1(daily) pivot level of 0.8273. My limit was placed close the nearest resistance level of 0.8600.
Tags: dailyfx, dow, forextrading, fxcm, gbp, pips, trades, wall street warriors
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First Trades
By Laetitia Vaval | September 11, 2007
Tuesday, September 11, 2007
I’ve just set up my new demo trading account and here I am with $50,000 (fake) dollars at my disposal to buy or sell a currency pair that I believe will move in the direction my combination of technical and fundamental analysis will have predicted.
The first currency pair i looked at, of course, was the EURUSD. The Euro was reaching a record high at around 10:30AM 1.38494 as you can see on the chart above.
I had seen an important resistance level @ 1.3837 and got in as soon as that resistance level was crossed. I got long at 1.3841 (where the top line is drawn). The Euro peaked at 1.3849 and traded back down to its previous levels. I sold my position at 1.3832. A 9 pip loss ($90).
Having traded previously, I can easily identify some of the mistakes I made on this trade. First, I did not clearly identify my Risk vs. Reward (and with that my Stop and my Limit). My upside was difficult to estimate since I was expecting a breakthrough all-time highs. My downside however was about 19 pips since the next closest support level can be found at 1.3822 (the bottom line on the chart). I’ve learned that a trader — especially a beginner should never enter a trade without having first identified his risk vs. reward. Had I followed this rule, I should have expecting to see at least a 40 pip upmove - since my downside was 19.
Although i’m not an expert, I believe that a 40pip upmove would have been quite important and difficult to achieve without some sort of news breaking event. I’ve traded equities before and although false breakouts exit, they seem more rare than in the Foreign Exchange market. I’m used to seeing stocks skyrocket after breaking all time highs. This didnt happen with the EURUSD — i was just the victim of a false breakout.
Another mistake I made in one of my other trades was that I got shaken out too quickly. I entered a position, the currency pair did not immediately move the way I had expected it to, and i quickly closed the position by fear of loosing too much. Of course, immediately after I got out of the position, the pair made a reversal and started moving the way my analysis had predicted. That’s most likely an old habit left from day (short-term) trading. I’m not used to waiting hours (and sometimes days) to see the results.
In my EURUSD trade, you can see that I exited my position before my stop was hit. Although it was for the best since the currency kept trading down from there, it probably shows a lack of discipline by not respecting the levels i had previously set.
For this trade i did not factor in any sort of fundamental analysis as I was looking to enter a short term position and trade a breakout.
Tags: demo trading, dollar, dow, eurusd, forex, forextrading, pips, trades, wall street warrior
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EUR/CHF: Only a Bit More Room to Go
By DailyFX Updates | September 10, 2007
On Sept 5, we said that EUR/CHF was ready for a Turn. At that time, the currency pair was trading at 1.6450 and we said at bare minimum, the pair was going to test 1.6350 (which it did on Friday and then again today) and could possibly target 1.6300. Below is an updated chart of EUR/CHF. The MACD is crossing downwards and the price is below the 38.2% fibo support. At this point, there is a decent chance that we could still squeeze another 40 points out of this trade, but the 200-day SMA support comes in at 1.6325 and that should further losses.
Tags: dow, forex, forextrading
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