ForexTraderX

closed half the short out for a 3 point profit... don't like the lack of follow through on this selloff since europe opened. FTX

Welll, just got short at 1407...4 point stop... no set target right now...

Here is a daily chart of the GBP/AUD. I've included some notes on why i'm bullish, and where I think would be good prices to get in at. also, when i mention the 50% fib retrcement, i am referring to drawing a fib of the high and low of friday.

Ya, i'd strongly recommend a charting package that shows a forex day ending at 5:00 pm EST. I find daily highs and lows to be one of the most significant factors I use when determining possible entry, stop, and target points... and if your chart shows days differently then the "official" time...then what may be a price level that you believe the market will reverse off of because it is a previous "daily low".... well, if it's not a daily low that corresponds with the largest proportion of other traders... you could be in for a lot of frustration. FTX

Well... I feel I have some clarity coming into this wee as to what is going to be moving up, and what will be moving down. i'll go more into the analysis a bit later, but I'm probably most bullish on the dollar... and the yen shortly behind. I'm still extremely bearish on the CAD... but now I'm also more bearish on the euro than I have been in a while, and i'm probably most bearish on the AUD...maybe even more than the CAD for the next couple days. I'd say USD and JPY strongest, GBP behind that, then EUR and CHF and possibly NZD behind that, then the weakest should be CAD...and maybe AUD at the very bottom of the pack. as for my trades, i'm long right now the GBP/AUD from around 1.5485ish, the USD/CAD from around 9950ish, and the EUR/CAD from around 1.2770ish. My biggest position is on the USD/CAD long.

Anyone else ready to sell the pants off the market this week? Personally, i'm looking for the market to push down to at least 1388 this week, possibly even down to 1380, though at that price i'd consider a counter trend trade long... and until the market retests the low of last week of 1393, I'd love to get short somewhere between 1418-1424. So for monday, i'm looking for any excuse to get short until we hit 1393. I'll happily hold those shorts until we hit 1388. and if by some miracle we can get up to or above 1418 before we retest 1393, i'll go short even without an excuse. anyone else care to speculate what this week may bring? FTX

Ok... ok, that's kind of what I figured you were saying... and from a few minutes on google I can't argue the inflationary effect on commodities over the last X years... and as you say it's really all about the fed (and for the most part I agree with you here). However, the devaluation of the dollar also has a positive effect on many U.S. firms, particularly those doing a good deal of business abroad. Earnings for the past 2 years have been quite remarkable on wallstreet in a variety of industries. We could credit this to many factors, but I would suspect that fed policy has had a significant influence, even if only indirectly. And besides, correlation that is statistically valid, regardless of underlying rational, is still statistically valid. It's also prone to becoming "uncorrelated" fairly rapidly at some point, and probably never to see that type of correlation again. But as long as it is a statistically valid correlation, it's better than the 50/50 proposition of a coin toss. Kind of like the rational of following a trend. Sure it eventually ends..but while it is trending in a particular direction, there is a greater likelyhood of any given trade being successful if it trades in the underlying direction of that current trend. FTX

Fact is Mighty, sometimes I find copper leads, sometimes the spooz, sometimes they dance in tandem. I know what your saying, but over the past few years of observation, I find the relationship is more like that of the NQ and the ES...sometimes one leads, sometimes the other, sometimes they are in lock step. As far as CB policy influencing the spooz/cop relationship... care to expand on that a bit? are you implying simply because copper is an inflation hedge (like gold, silver, etc?) If so, you may be correct, but "common sense" tells me that gold and silver and other precious metals absolutly, but copper I believe is more influenced by industrial production than it is by a "flight to/escape from" quality. if your making another point, please elaborate. FTX

Sorry Suby, forgot to give a shred of evidence. Actually, I kinda use my eyeballs and a couple charts to see if something has some positive/negative correlation, but if you want a more precise visual representation, this guy has some cool looking pics that although doesn't give a standard D of variation of a mean... it is pretty obvious that there is some strong correlation going on, particularly with copper/ES S&P 500 Relationships & Correlations - TheArmoTrader | TheArmoTrader As far as the vix goes, your right on with it's inverse correlation to the S&P... I use the vix from time to time, but I don't think of it as a capital market that has an inverse correlation to the S&P, for the simple fact that it is literally a derivative of the S&P... it literally calculates volatility and the rate of change of volatility in the S&P... so it's not really a "correlated market" as much as it is a "derivative index" of volatility of the S&P. Though your point is true, a high vix usually occurs with strong selloff days (or right before strong selloff days), this really can work no other way. Without the S&P, we would not have a vix. But without the S&P, we could still trade 30 year bonds, copper futures, etc. i'm primarily arguing semantics here, but I do see it as a worthwhile stance because I feel the vix is more an "indicator" of sorts (kinda like charting the COT data, or the TRIN or TICK), and not so much a "correlated market" FTX

It is correlated with gold and silver, but gold and silver are not really "industrial" metals. However, copper is very much so. demand for copper futures often will start to tick up as businesses make more semi conductors, electrical appliances, etc. In fact, nearly anything tech related uses copper as a raw material to at least some degree... so for these reasons, copper is frequently viewed as sort of "leading indicator". At very least, it's more correlated to the S&P than probably any other raw good or raw commodity. Here is a link to a few graphs that show the degree of correlation between various markets. As you can see, of the various commodities that have some statistically relevent positive correlation to the movement of the S&P, it's actually copper that has the highest and most consistent degree of correlation, when compared to gold, the U.S. dollar index, crude oil...etc. S&P 500 Relationships & Correlations - TheArmoTrader | TheArmoTrader

Ah man... sorry Mitsu, I would have liked to respond to this in real time... cuz any schmuck with a demo account and 2 eyeballs can look back and give really clever sounding post-move analysis, but I like to do things in real time for the obvious reason: that's where the money is. my bias was more based on a greater chance of the ES first hitting, say 1416 than it would of, say 1390. So it wasn't so much set for monday exclusivly, rather, a particular upswing with a particular magnitude would be the qualifying factor. Once that move was hit, my bias would have been "resolved", and I'd reanalyze. If you had asked me for the next 2 weeks, i would have said bearish (and am at this point, daily, weekly, monthly... all TF's i'm bearish biased right now)... but for monday/tuesday? more bullish than bearish. I'll try to post up something later here for what I'm seeing, and how i'm measuring it, and why, specifically regarding the ES... so we can keep a theme of real time calls here. otherwise, i mean, i can say what I thought and mentioned to an associate or 2, but really, hindsight analysis is not worth the trade one can place on it, when it comes to explaining a methodology IMO. It's fantastic to learn from mistakes of course, but that's not really the intention here, so i'll stick with analysis of future outlook regarding daily bias. FTX

Ya. news/econ report trading is really like price action/candlestick trading. No, it's not as simple as "good report = buy. bad report = sell". But I never really understood this type of garbage logic anyway. That's like saying "green candle = buy. red candle = sell." If that's your approach to reading price action, then your gonna pay for a lot of other peoples dinners. Same thing with news/data/catalyst event based trading. However, just like reading candlestick price action, the news/event/catalyst based trading can be a viable profitable approach to trading. And really good point on the time thing. This never gets enough attention IMO. But, there is usually 1 good trade in asia. 1 good trade in london, and maybe 1 or 2 good trades in the U.S. session. The hour before and after the "open" of each session tends to be the hour that "the move" is going to be found. Combine with a few other basic concepts like previous daily highs/lows, etc..., and this can be a real "bread and butter" money maker. I mean, if I had a dollar every time the EUR/USD slid downward during asia, then london opens only to retest the asian session lows before reversing 30-100 pips to the upside...then I would make a good livin....oh, wait. nevermind. I do have a dollar for many of those times. Very good points though Steve... and both are sorely neglected by the general trading populace. My guess is because neither approach has enough multi-colored squiggle lines to hypnotize the masses. FTX

Aright Cat... for the most part i've been away myself this week... other than a few losing trades I took. Anyway, first problem I see is that I have no idea what time zone your MT4 is spewing data out from.... I see you got long on October 29th, at 6:01 AM... problem is, I don't know what 6:01 AM is. I see your post with the charts occured around October 28th, at 11:18 PM Central Standard Time (which is about 12:18 AM New York Time, on October 29th)... So, if you could do the following, it would be greatly appreciated: 1. Let me (us? whoever else is watching this thread I suppose) know what time zone your MT4 is in... so, when it says Oct 29th at 6:01 am... well, what time zone is that exactly? I don't see how it could be GMT, or EST (which are the two most common time zones quoted around this forum)... So, give us some sort of standardization so we can look up your trade on our charts, and all be on the same page. 2. Also, I would STRONGLY advise that you use a different charting provider other than MT4 for your daily charts. Reason being, I find that having a forex day end at 5:00 P.M. Eastern Standard Time (EST) is the best time to have your daily charts start and end at. In other words, if you lived in New York, and your chart time was set to your local new york time... then when new york time hit 5:00 pm, your daily candle would "end", and you would start a new daily candle at 1 second past 5:00 pm. Why does this matter? Well, admittedly many say that it doesn't matter because forex is a 24 hour market, it never closes...blah blah... however, the close of the U.S. session at 5:00 pm EST is traditionally considered the "end" of the trading day, with the NZ (and AU) markets bringing in the new day at the close of the U.S. session. So many of your daily candles will print a bit different depending on when your day "rolls over" into the next. With experience and time, you will probably be able to see the same basic message on a daily chart, regardless of the daily cutoff time, however in the beginning (now), I would have your day set to end at the time that the largest proportion of traders also have theirs set to end, which is the 5:00 pm new york time each day. I for one ONLY use the 5:00 pm EST cutoff as the end of my "daily candle", and this has served me well for years now. Give us info on my point 1... and then for point 2, I would simply say you do this for your future daily chart analysis. Once you reply with this info, I'll probably be able to give you more of my own take, and a more insightful critique of your analysis and this trade. FTX

Well, you got an answer from Col.... now I'll give you mine. To save time, I also use a type of market profile analysis, but you've already seen this from Col so I won't post that aspect up. For myself, I put most of my emhpasis on recent daily,weekly, and monthly candle price action, proximity to support/resistance levels, as well as trend, market symmetry, distance and momentum of current swing, and finally, a sort of deductive logical analysis regarding what price levels likely provide high levels of liquidity... and how price has reacted to those levels... and then where the next level is likely to be that will provide liquidity again. I also repeat much of this process in several correlated markets, including the 10 year bond futures, the EUR/USD, and copper futures, and of course I also include the NQ... and I also glance at the cash equivlient markets in the NQ and ES.... just to make sure the levels i'm watching in the futures are the same as in the cash markets... as well as any other market I find may be relevent (sometimes crude, which these days is directly correlated, sometimes the DX...which tends to be inversely correlated, etc) If I had to isolate just the most prevalent, heavily weighted factors that I consider...it would be recent daily candle price action, in conjunction with distance and momentum of current swing, and obvious S/R levels on the daily chart. Ok, so here's the pics and thought process breakdown. I have only included a pic of the 3 most important elements. However, I will include another post that later (probably tomorrow) that outlines more of these ideas and shows how I put them all together. But, honestly, these 3 are a damn good start..and probably will give me 50%-60% of my bias just as they are. Lets take a current chart of the ES, and break down what is going on. Click in the pictures below, and you'll see my explanation for how I look to understand each concept.

IMO, that's like asking a mechanic what the best tool is to fix a BMW and a Volvo.

NOW we are getting somewhere!! Yes, absolutely. You put into words what I've been thinking about off and on for a long time now, but have not been able to articulate. It's also why I personally don't have any sort of set trading plan that says "step 1: do this, step 2, do this, etc". I don't even have a specific "setup" that I look for. I don't even have any risk management rules other than "don't crash your account today". But your correct when you say "it is knowing when others are going to be wrong". That IS my edge. I use a lot of tools to do it, but it's all about finding a price point where I believe the most amount of traders are going to realize they are wrong in the shortest amount of time, and I put an order at that price. Damn Mighty. Your name suits you. That's why I trade with and against the trend now that I think about it... I didn't know why really until this moment. It's because either with, or against a trend, there will be a point when price stops moving up and starts moving down, or visa versa. That point is always somewhere, regardless of trend. And it's that point that my entire career is devoted to identifying. If i'm right, i'm paid. If i'm wrong, I pay out. Simple as that. I know what types of traders tend to be losers, and how they act in general and how they execute orders going in and out of the market. and I also know how other groups of more sophisticated traders look to identify how losing traders usually place their orders, and they look to trade against them so that they can profit from the other guys losses. That's my edge. It's not always right about it, and that's why I never bet the farm. But i'm right more than i'm wrong, and make a bit more when I am right, than I lose when I'm wrong. And this is why "diversification" in a general sense doesn't make any sense to me. My edge is in finding large clusters of losing traders and bad decisions and rapidly shifting emotions over a relatively tight range of prices. I suppose "diversification" lets me find more of those spots, because different markets have those spots at different prices and are touched at different times. SO in this way, trading more than one market DOES help me make more money. But it does absolutly nothing to reduce my chance of a loss. My ability to find lots of losing traders in a very tight price range is what defines my success and failure.. And my success or failure at meeting this particular objective is completely independent of how many or how few markets or groups or markets or whatever that I"m involved with. My edge is in finding a price where the most amount of people will likely realize they are wrong. My method is any tool that gives me insight as to what price this is most likely to be in any given market, on any given day. The only form of "risk management" that even applies to me is how much I bet on each trade, and how well I'm in control of my actions and in sync with my emotions. In my trading, diversification helps me reduce risk about as well as watching survivor on TV will help me play basketball better. And any other "traditional" form of risk management would really just be a useless distraction. Great summation tho of a real edge. FInally something I can tell people when they ask "how do you make money trading?" I can tell them "I identify a price that I have reason to believe that the greatest number of traders are going to realize that they are wrong, and I take the other side of their trade" FTX

Ok Mighty, I see your point, and it has it's merits. The "january effect" is now more like a "january afterthought"... "IPO investing is a great way to wealth", as long as quit investing by around March of 2000, or talk to anyone who facebooked their portfolios. And of course "buy and hold" has been dead for a decade and counting... etc. Also, mathmatically based, statistically valid edges are vulnerable to possible extinction. A chart pattern that works 64% of the time now may not work that well in the future, if it works at all. But there are other, less specific, more conceptual ways of trading that I believe will always remain viable, because their existance is rooted in the very heart of how human beings compete with one another to make a profit in a free floating, auction market model. Take the concept of "support and resistance" for example. We can measure it differently today than yesteryear, and maybe it works better or worse at different times and in different markets, but if someone bases a strategy on identifying areas of support or resistance...well, it's probably going to work for a good, looong time. Another one is the nature of markets is to be mean reverting. Once a market swing hits a capitulation point where there is simply not enough buyers at that time and price to outbid sellers at that time in price, an upswing will start to turn down. And because humans hate to lose money more than they like to make money, the former bullish winners become losers at a higher frequent and the losses are in greater magnitude as the bear move takes over...thus forcing more selling, etc. Until of course this has exhausted itself again, and starts over the other way. If one identifies a variety of ways to determine this "overboughtness" or "oversoldness" (and not just one. and also not a stochastic oscellator)... and this same person also is constantly looking for new or better tools and methods that help them measure this overbought or oversoldness.... then one now has a strategy or methodology that I daresay has an "eternal edge" Because the individual tools can and DO break down over time, yes. But the "edge" IMO is not the tool, it's the IDEA behind the reason for that tool to exist in the first place. A good mechanic is a good mechanic. Sure, this mechanic like every other will need many tools to do his job, and sometimes, those tools wear out, break down, get stolen, or become obsolete. But are those tools what makes him a good mechanic? I'd say no. It's his experience, his knowledge, his ability to understand mechanical problems and find solutions for those problems. His tools do not provide his "edge". They facilitate the proper implementation of his "edge". And unless the guy has a stroke, or the world of physics and simple machines like levers, wedges and pullys suddenly travels through an alternate universe where matter exists as energy alone (or whatever).... he will be a good mechanic. He will have an "edge" on fixing cars. mathmatically based, statistical edges do come to an end (options trading edges from optiosn mispricing has changed greatly over the last 40 years) market cycle or "flavor of the month" based edges also do end. (dotcom IPO's... commodities during stagflation in the 70s. Buying and flipping real estate in 2000-2006) but edges that are based on market principles don't end. The tools one needs to measure them in detail may change. but these edges don't change. And in this perspective...neither do markets. FTX But, conceptual based "edges"

I'm not so sure about the "market will behave differently over time" assertation. I mean, in a broad sense, ya, sure, absolutely. But I don't think it has much to do with individuals going broke or learning. Yes, I do think individuals go broke. And I do also think that they learn. But human nature doesn't change...and every day, some market participants die off, and new ones enter the markets. The "changes" that we observe in markets are largely a function of basic market structural changes (decimilization of the stock market for example), technology changes (HFT and home based retail trading), or business/economic cycles and trends (dot com era, long term american financial growth/decline...etc) I think those 3 types of factors actually can and do change the behavior of markets for large periods of time, and possibly even permanently (like the internet has done).... but the effect of individuals changing the markets as you infer would require a proportionally higher amount of people to either "figure it out" or "go broke" than existed at some previous point in history. And I doubt that this is ever really the case. Access to helpful resources and information has become better, but so has access to a larger amount of misinformation and bad advice. The barriers to entry as a trader have become significantly lower over the past 20 years, but that brings as many more bad traders than good traders. I could go on and on...but I think in the end, what distinguishes some from the rest is that they are flexiable, confident, determined, capable, talented, and deeply desire to be successful traders. And the rest are missing one or more of these characteristics. And I don't think time is a function of it here. As ed Seykota once said something to the effect of: "many are called and few are choosen" Markets can and do behave differently over time. They also always behave the same...just the scale and proportion and ratios of each phase of a market cycle will change. But they don't change because some go broke and others learn. As a species, we reproduce too fast, change too slowly, and die off too often for individual change to somehow add up in the aggregate in a way that alters the way a market rises and falls. FTX

Just closed out the last bit of my position in the USD/CAD and the EUR/CAD.... just realized it's friday, and I don't care to mess around on friday after london closes. So, that brings another week in the markets to an end. Looks like I finished out this week up about 1.4%, and for the month just half a trade away from 10% I still have 3 trading days left in the month, so I should have no problem hitting 10%. BUt, at this point, I will not allow myself to finish the month with anything less than 7%. As some of you may have noticed, I just raised this number from 6% to 7%. That's because I have a trailing stop loss on my account equity, just as I sometimes trail a stop in my own trades. The reason is simple: A person can't lose what a person doesn't risk.... and if money has been made by taking risks, money can be saved by reducing those risks. It's still a bit too early to tell, but it does indeed look like I"ll have a strong finish to the year. It is very unlikely that it is the triple digit return that I had last year... it's probably going to be more like 35%-45%... but that's still better than a poke in the eye. This being said, I don't want to get ahead of myself.... After a slow september (made just over 3%), it's really nice to have an above average October to round it out. Now I'm gonna relax a bit.... it's been a fun ride so far... I hope to get back on and continue in a couple days. FTX

Looks like the "USD/CAD to PARITY" rallying cry that I've been drooling about is finally here. And, I've still got something open in the USD/CAD. I'm taking a tiny bit off when we hit parity...then letting the rest of the small position that's still on move up towards 1.0010-1.0015 So, this actuallly was a really really sweet trading situation. I had a good working hypothesis, as well as indicators and technical signals that strongly supported my reasoning. I had a pretty good perspective on what to expect, with a few exceptions of course but over all this USD/CAD for the last 2 weeks has performed about as good as I could have hoped for. Most importantly (for me anyway) is that I continued to hold a position in the USD/CAD for almost the entire duration of the move. I did trade around it quite a bit, yes.... but the fact that I held something from around 9780 up through parity, and over the course of 2 weeks is a decent accomplishment for me, and I'm actually quite proud of this whole thing. Not to mention I'm up over 5% for the two eeks I've traded this....so ya, all things considered, pretty decent.

After spending a bit more time looking over charts, correlated markets, etc... I actually see that the level I'm long from in the EUR/GBP is NOT the only significant level for a few hundered pips. Actually, there is a better level at 0.8000, and then a decent level 20 pips lower again, at 0.7980. so, i've reduced my position by over half. I''ll hold the rest until it stops out...if it stops out...but I could clearly spent more time on this and figured out that it wasn't quite the trade I thought it was. Something for the notebook to work on...

Ya know, I've found that when it comes to trading (and life in general)... a little common sense and skepticism combine to form a bullishitometer of almost mythical power. If someone is inventing a lot of new words and definitions to describe a market phenomena that other people before have already discribed, just more clearly.... the odds are that this "inventor of language and communication" is probably closer to the "fulll o'shit" side of the meter, than he is to the "inspired brilliance" side. I remember when I first became famlilar with the concept of a "liquidty gap". I always thought they were just range expansion candles, AKA "impulse moves".. but once I became more familiar with market microstructure in general, as well as the various implications that a "liquidity gap" may have on future price action at those price points... then I clearly saw that the new definition "liquidity gap" was in fact a more appropriate and useful way of looking at those range expansion candles in the markets... On the other hand, if there is a new definition for something that already has a definition but this new definition doesn't actually provide some great new insight that the old definition lacked... and WORST of all is when it has several other qualifying factors, taht can morph the new word into several different and confusing other words.... well, lets just say it can get pretty darn stinky in those hotel seminar rooms. SO much so that one might be well advised to bring a heavy pair of cowboy boots. And a shovel. A really,really, big shovel. Look. new fancy definitions should be used when naming new, fancy concepts. if it's just an old concpet rehased or restated, but with a fancy new name, you'll probably be wiser and richer for having never learned those new names. FTX P.S. And I wouldn't put too much stock in the opinions of others who think guru XYZ can walk on water. My experience has been that idolatry is frequently used to fill the void that is created when a person discards independent thought, rationality, objectivity, genuine curiosity, and knowledge. So I tend to not heed such dribble. WHat can I say, i'm contrarian to the core. :p

Ok... so this would be redundant and just lame if it wasn't so darn profitable... but, again, i'm looking to short CAD, primiarly against USD, and then EUR next. Of course, I've esssentially had something invested in a USD/CAD long I think every day for the last 8 trading days. And i've had similar positions in the EUR/CAD..... though it has underperformed the USD/CAD over the last few days... and to be honest... I'm less convinced of my "bullish euro" medium-long term view... At very least, it looks to test lower levels before it pushes up to retest the high the last few weeks (IF it retests the high... ) I do think we need to see more pushes to the extreme of this range between 1.28 and 1.31ish on both sides if we are going to drop, and very likely down to retest the bottom if we are going to break out the top. Also the DX chart looks pretty darn bullish as of this moment... I'm seeing the dollar index about to take off to the upside, and that will bode poorly for any bullish euro move. I'm going to take some time this weekend and do a more in depth research study of the various headlines, data trends, expectations...etc... that are currenlty driving sentiment in the euro, and then look hard at what catalysts could emerge that could alter this. I haven't done much more than read a few articles every day, and watch my newsfeed.... but I feel there is something more influencial at play, and it just feels like i'm missing what that could be. So, I'll do some work this weekend, and then I'll probably have a more informed "long view" as well as "directional bias" than I do now. but CAD is definately the short of the month! Oh, and for right now.... and probably the rest of this week, I woulnd't look to short the dollar. I'm not saying a dollar short wouldn't make a few pips or ticks if someone so desires. I'm just saying its easier and usually more profitable to try to take 20 pips out of a short CAD...than it would be to try to take 20 pips out of a short USD

Hey William, thanks for the post. And I'd love to see this thread become more of a dialogue and less of a monologue! What markets/asset classes do you trade? how long have you been trading? do you trade full time? can you give a brief overview of your method or approach to trading? Looking forward to your answers... FTX

Here's a picture of a 4hr chart of the EUR/GBP.... I like it for a long opportunity mostly because the market is oversold, and this is the only level around for a while... kinda similar to the AUD/CAD and the AUD/USD setups from about 2 weeks ago... not as good... but still, absolutly worth trading.