Making Forex Pips Out of Dow Jones Extreme Swings

The Dow Jones Industrial Index had erased a whopping minus 400 points at the opening and was finally ended in a triple-digit gain of 400 points. A massive 800 points swing intraday.

I didn't follow stock charts these days. But as a forex trader, I did pay attention to yen-crosses / carry trades markets. During this financial turmoil, high yield currencies such as GBP/JPY, AUD/JPY, AUD/USD, NZD/USD, etc are showing a good price correlation with the movement of stock market indices.

When the Dow Jones was hovering near the breakeven level midday, I made my first two discretionary trades in the yen-crosses markets. Promptly took my profits after the Dow's first 100-point breakout run. I then reversed my positions after Dow hit 200 plus points. Exited immediately with reasonable profits for the second time. I decided to stop trading after that and were actually out of position during the Dow's final-leg surge to 400-point gains.



Most of the time, almost 90% of my forex trades are executed by my automated trading programs / expert advisors. Today, I made an additional gain of 313 pips manually using my discretionary skills and technical judgement with my forex chart systems.

Have I Picked the JPY Bottom ?

My system picked up 5 long signals on the yen-crosses pairs in one session this morning ! I promptly issued them live on my member site. Checking on their current prices, all of them are currently yielding more profits in the post-session hours.

GBP/JPY long at 201.23; +60 pips; now at +120 pips !
EUR/JPY long at 160.89; +30 pips; now at +50 pips !
AUD/JPY long at 95.10; +20 pips; now at +40 pips !
CHF/JPY long 101.05; +15 pips; now at +20 pips !
USD/JPY long at 102.26; +30 pips; now at +45 pips !

The level of correlation seen within these yen-crosses 'signals' was unprecedented. Looking at the current outcomes, the additional 'info' brought out by the number of signals in the same direction could be used as an additional 'secret' gauge to diagnose high probability swing trade setups and so to further increase our targets/winnings ! I am sure I will do more homework on this :-)

Also check out yesterday Market Club (smart scan analysis)'s reading on USD/JPY market which informed us of a probable chance of a major trend change from current weak downtrend.

Ongoing Subprime Woes

Fed Chief Confirms Housing Predictor Forecast - that more than 2 million homes will be foreclosed as a result of the sub prime lending crisis

The Mortgage Mess - STUPID LENDERS making stupid loans to stupid borrowers. What is to be done?

BNP freezes funds in sub-prime shock - "The complete evaporation of liquidity in certain market segments of the US securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating"

Global Liquidity Defined - "What do they mean when they talk about global liquidity drying up?"

Subprime meltdown can cause a massive crash in stocks, dollar, and long bond - Bear Stern’s disastrous subprime investments were just tips of the icebergs

Money is Also Destroyed - If money can be created from thin air, the opposite is also true

Yen rallies as investors spooked again by risk - Low-yielding yen jumps, high-yielding Aussie and NZ dollar crumbles

Are We at The Peak of a Minsky Credit Cycle? - "It is always risky to call an equity market peak and the beginning of a bear market in equities"

Intensified Selling in JPY Crosses (4)

Fast and furious. This morning, I thought we might finally get some price support in some of the JPY pairs. Nonetheless, I was right to be cautious. By mid afternoon, the selling action has intensified once again. Some crosses were pushed down over 100 pips in less than an hour and even more afterwards.

Market pulse:

"The risk theme is very pervasive today. As credit spreads widen, we're seeing the carry trade being unwound.''
"All asset classes are moving now. As the equities are coming down, people are paring risks and liquidating some of the carry trade positions.''

Trading update: zero action for today, still on the sidelines. I was being too selective and might have missed some great setups too. There is always tomorrow.

JPY: What's Next?

Be cautious. After 4 days of intense selling in all of the JPY crosses, i think the yen is temporarily at crossroad. There are mixed signals amongst the pairs. Some of them seem to hold out better and have more support than others.

Pair / Yesterday Low/ Today High /Current Price/Current Bias

USD/JPY 119.80 120.73 120.40 Reversed to UP

AUS/JPY 105.34 106.83 106.61 Reversed to UP

EUR/JPY 164.69 165.50 165.27 Still Down

CHF/JPY 98.92 99.42 99.27 Still Down

GBP/JPY 246.28 247.73 246.68 Still Down

More Selling in JPY Crosses (3)

Just Following The Trend. Finally, I am back into action after missing some good entries as mentioned earlier. This time, I had plenty of time to make up my mind and to place a short trade in AUS/JPY.

My entry was 106.55.
First lot exit at 106.28 (+27 pips)
Second lot exit at 106.07 (+48 pips)

I was being flexible too. My initial targets were set to 30 and 60 pips but I was happy to close out early (grabbing fast pips).

AUS/JPY 15 min-chart


(1 Million Goal: 6/88)

Fast Selling in JPY Crosses (2)

Market pulse: Yen Advances to Four-Week High Against Euro on Risk Aversion

"The risk aversion we're seeing is leading investors to reduce carry trades. The yen is benefiting on the crosses."
"Japanese retail investors are selling the yen across the board amid the currency's rally."

Last Friday, I mentioned that we could see more downside in the JPY crosses. Since then, I adhered to my stance and it had rewarded me with +83 pips on the short AUS/JPY position. There were just too many short opportunities around but I could not keep up with the fast selling action. This morning, I missed some good entry points in EUR/JPY and CHF/JPY. Although I am out of position, I feel like I am "in control" and able to "understand" the market.

Significant Break Down in JPY Crosses

Pair / Yesterday Low/ Today High /Current Price

USD/JPY 121.78 122.45 121.25

EUR/JPY 168.10 168.70 167.72

GBP/JPY 249.70 251.09 249.28

AUS/JPY 106.82 107.72 106.77

Initially, I was very keen to buy at this dip if prices could hold their yesterday's lows. The reason was simply to hold some long positions over the weekend to earn me some interests. However, this was not the case, we had some significant break down in the JPY crosses. In my humble opinion, the carry-trade party was temporarily over at least for the next couple of days. At present, I will stick to my negative bias and will not fight this sign. I fear the worst is yet to come.