Mid-week Update

Related entries: Progress Check

Dollar slumped this afternoon after an unexpectedly weak Chicago PMI report. Seized this opportunity to reassess and close out some positions. Second trade (chf) was a misjudgement - should have got out on Monday or even earlier (much earlier). It has been a real roller coaster ride after misread the signal and didn’t quite follow the swing index strategy. Managed to put it right finally…..

eur/gbp
24/8 2106 short 0.6812
29/8 2214 exit 0.6806 (+6)

usd/chf
16/8 2141 short 1.2552
31/8 1815 exit 1.2545 (+7)

gbp/usd
29/8 2235 long 1.7957
31/8 1815 exit 1.8041 (+84)

Net gain this week +97

More Info: Swing Index Explained

Related entries: Daily Report

Thanks for some quick responses already for my daily newsletter which is now officially launched.

Here is one of the queries:

Interested to get more info about the swing index and the frequency of signals and newsletter?

My answer: Trading based on using swing index is a fairly simple and effective strategy. Basically, at the end of each trading day, I compute the latest swing index for each currency pair monitored (11 pairs in total, i.e. 4 majors + 7 others) after closely studying its price action on that day. The swing index is derived using very specific rules and a combination of customised technical indicators. The index is weighted between -10 and 10 and will be used for determining the strength and direction of the latest market trend. More importantly, the index will be used to identify any arising technical conditions and trading opportunities.

In general, the weight of index gives you the following meanings:

In addition, I will also sort and rank all the currency pairs based on their swing index and trading potentials. Buy/sell signals will then only be generated on those currency pairs with the highest rank. Normally, there will be 1 - 3 qualified signals for the next trading day. And with the inclusion of short and medium targets, the signals can be used for day trades as well as setting up swing positions.

The whole report is included in my newsletter and will be delivered to you five times a week at the end of each trading day as soon as I complete all the necessary "analytical" homework.

On Course For Breakeven

It appears that the trading activities in the past two days were quite frantic with a lot of intraday swing actions of greater pip range. I also noticed that most signal providers out there are actually doing quite bad for this month.

Even the Stop and Reverse (apparently C2 top forex system) who sends real time alerts as well as the swing traders like stormyforex are having troubles in weathering the cyclical price action.

Of course, our swing strategy hits rough patch too. But I am, at present, quite pleased with how things have turned out for us, because I was a little worried and doubting myself two days ago. We are on course for breakeven this week and in case you didn’t notice, I have already swung back into action, closing a trade for +29 and opening a new trade.

Results of closed trades for august so far: 75 +447 -276 +29 = +246

Still Doing OK?

I received a message from GFTraders, expressing their concerns over my lack of trading signals lately.

The fact is that I have not issued another signal since 18/8 and have been holding onto some losers. I have to admit this is the first time I am in such an awkward position. I haven't followed my trading plan properly and have ignored some fresh opportunities in my daily evaluation report.

Thanks for the pointer (feature article by Innerworth: Visualize and Relax). Soon, I will be getting back to my old self, try not to overthink it and just mechanically follow my trading plan, which proved to be effective during the last 2 1/2 months.

What Not To Believe...

Here is a quote from my last Sunday’s post:

…a close above 1.8000 in the next 2 days as a positive sign for the continue of the bullish price action seen last 15 days

Here is the situation:

Two days went by quickly, the official Tuesday close was 1.8005, just slightly above the 1.8000 level.
Meaning: Bull beats bear...gbp/usd will move higher
What’s in for me: I will recoup all my losses, 101 pips to be exact
What’s in for you: A possible buy
So far this morning: Another minus 70 pips in the bag

Here comes a disclaimer:

Do not believe everything you read in this blog.

Recovering Slowly ...

A quick check on the current (still holding) positions:
gbp/usd Buy 1.8106 current 1.8010 Loss -96
usd/chf Sell 1.2558 current 1.2696 Loss -138

Latest addition:
usd/jpy Sell 110.52 current 109.84 Profit +68

Total P/L: -166

I'll be happy already with a chance to get into breakeven with the above 3 positions before end of this week.

GBP/USD Outlook: What Next?

GBP/USD daily chart - last 20 days (closing price at 19 Aug - 1.7948 )

Support: 1.7880 ... 1.7800
Resistance: 1.7995 ... 1.8060

I would like to see a close above 1.8000 in the next 2 days as a positive sign for the continue of the bullish price action seen last 15 days. If not, we could be (in trouble!!!) heading down towards 1.7800 level.

Lost by TIC, Saved by Mr. BullBear?

The 'plot' for this week was somehow lost in the midst of significant economic data releases (i.e. Cap Flow and Philly Fed) which provide a fairly friendly market environment and hence a five day winning streak for the dollar. Is there a backup plan if positions deteriorate further next week since I am still dollar-bearish? What can be salvaged from current losing plot? Everything remains bleak until...

For a moment, Mr. BullBear - one of my favourite technical indicator - arrived this morning and managed to stir a short-live rebound on my positions. He went away soon after and the outlook, actually, hasn't changed much after all. At the end of the day, it is impossible to recoup this week hefty losses.

Strangely enough, I did warn myself before the start of the week about the Fibonacci technical resistance. Perhaps, I have really missed the bigger fundamental picture and only got myself to blame...

Holding GBP/USD, USD/CHF Still

Two signals were issued two nights ago (my daily signals are usually sent between 5-7pm New York time), i.e:

Buy GBP/USD at 1.8106 (as for yesterday closing price, both adx and cci indicators show that the current trend is still healthy and should remain intact plus my own scoring system-adv index: 7 = buy)
Sell USD/CHF at 1.2558

Results a this point:

GBP/USD -53 (86 dd) Action: Hold

USD/CHF-42 (64 dd) Action: Hold

Given the opportunity this morning, I entered a long GBP/USD position (real-time trade) at 1.8040, which currently yields +15. I'll be holding it until tonight signal re-evaluation time.

Euro Rebounds From A Lower Support

The title says it all. Does it? Just few things needed to add for future improvement:

1. Better to start slow, then only, build up more positions as the week progresses.
2. Be aware of major economic news releases that could affect the fundamental outlook
3. Be more flexible on the use of stop loss

Euro Support Seen at 1.2300?

Here is the sentiment. The dollar remained relatively weak against the yen but rose against the euro after yesterday's US capital inflows report for June.

The headline data was positive for the dollar as it showed that foreign capital flows into the US reached 71.2 bln usd from 55.8 bln in May, beating predictions of a more modest rise to 65 bln usd and comfortably spanning the 58.8 bln usd trade gap during the same month.

This is from a Bloomberg source:

Gains in the dollar accelerated further today after it rose past $1.2335, a level where traders had pre-set orders to buy the U.S. currency. Traders sometimes place so-called stop loss orders to limit losses in case their bets go the wrong way.

Meanwhile, my stop loss is set at 1.2300.

Searching for Clues Last Night...

Decided to stay with yesterday's two positions, unfortunately one got stopped out overnight and possibly taking out the bottom. A bad start that I always try to avoid.

Dollar Up This Morning

"A number above $60 billion would be enough to boost the dollar.'' Traders currently feel optimistic about the report on capital flows which is due later today.

Read here and here.

Although I have avoided gbp/usd, I am still stuck with two other dollar-bearish positions. Rush decision overnight, may be? Give me something to think about ...

Samurai Su Doku - A Real Brain Scrambler

Is anybody else hooked on the number puzzle - Su Doku?

I thought I was good until I met "Samurai" Su Doku wherein there are five individual Su Dokus superimposed to become one. As you have to tackle the giant puzzle as a whole, it totally drains my brain energy out and very quickly. May be, only suitable for playing prior to bed time before you are fully recharged for the next trading day?

Something About Fibonacci – The Golden Ratio

Believe it or not, the Friday closing price of gbp/usd (1.8145) is actually at the exact 38.2% retracement level of 1.9550 - 1.7270 down move began since December last year.

In case you don’t know, the constant percentage of 38.2 (0.382) is really the inverse of the well-known Fibonacci ratio of 61.8% (0.618), which is famously recognised as the golden ratio of trading, and mystically as the divine proportion of nature (interestingly used too by Dan Brown as key to answer his mysteries in a recent bestseller “the Da Vinci code”- which I enjoyed reading). In trading terms, the levels of 0.382 and 0.618 usually provide very strong support/resistance for currency price movement.

I believe that the short-term correction in gbp/usd could be ended after it had gained back 38.2% of its losses. I expect the market to go sideways from now and if the support continued to hold at 1.8145, we could be heading towards 1.8400, the next retracement level of 50%.

Thus, I will avoid gbp/usd for the coming few days till I grasp a better picture. Hey, may be a good chance for scalping during the time of uncertainty? Meanwhile, I will be seeking trading opportunities in other currency pairs being monitored.

We Had A Good Week

The key to success is not to get carried away despite one or two amazing trading weeks as we are in this for long haul. Always expect tougher and trickier trading weeks ahead. Here are the final stats of this week:

System 1 as verified by GFsignals: +447
Closed trades are: +143 (gbp/usd)*, -10 (eur/chf), +48 (usd/jpy), +91 (gbp/usd), +94 (usd/chf)*, +56 (eur/usd) and +25 (eur/gbp)

-- 7 trades

System 2 as verified by collective2: +330
Closed trades are: -12 (eur/chf), +41 (usd/jpy), +152 (gbp/usd), +50 (eur/usd), +77 (usd/chf) and +22 (eur/gbp)

-- 6 trades

Note that * indicates automatic take profit trades with their limits successfully hit outside our normal evaluation and signal providing hours which is around 4pm - 7pm New York time, i.e. at the end of US session.

Enjoying Good Rides

At this point, I have already exited all dollar-bearish positions (including yesterday's EUR/USD and USD/CHF) with sizeable individual profits totaling over 400 pips since last week.

I am wary of current situation where the trend reversals, in some cases, have already exceeded the 50% Fibonacci retracement level. Thus, I will be standing on the sideline tomorrow, but will still continue to building up the data needed for next week's trading.

Actually, there is a new trade (not a dollar pair) I have just entered this evening based on seeing a new breakout, which is a short position on EUR/GBP with the opening level at 0.6680.

Near the End of a Good Run?

Yen hit 110.20 this morning, a target I set earlier in the week, and with both GBP/USD and EUR/CHF also having a go at their target levels. The sudden strong move of these positions did surprise me as it has materialised faster than expected. As a result, I have booked my profits, may be, a little bit too early?

Actually, I have decided to switch into EUR/USD and USD/CHF positions after spotting some fresh opportunities. Really, couldn't afford to hold too many positions at one time, right? For the two opened positions, I have some short-term targets for them.

Bought EUR/USD at 1.2384 Target: 1.2450
Sold USD/CHF at 1.2567 Target: 1.2480

Hope they can soon materialise too.

Holding Yen for a Profit

"Koizumi's job approval rating rose 9 percent to 46 percent this month despite the defeat of his plan to sell the nation's postal service."

"The advance of Nikkei beyond 12,000 is a significant breakthrough as money is flowing into Japan from overseas investors."

I've been holding a yen position since 4/8 amid uncertainty over recent issues. Now, I can see some light on the position as it finally creeps in for a 30-pip profit at the moment. Although at one point, the drawdown was almost at 140 pips just two days ago! Is this a kind of endurance which is needed for swing trading? I am still questioning myself. Maybe in this case, it is definitely not for the faint hearted.

Support & Resistance

Ezechiel Copic's report:

Support for GBPUSD is holding at the previous resistance level of 1.7820. Additional support remains at 1.7720, back by a firm foundation at 1.7660. Upside is capped at 1.79, followed by 1.7918 – the 61.8% retracement of the decline from 1.8313 to 1.7272.

USDJPY resistance holds at 112.50, followed by 113.00 where we see increased selling pressure for now. Support starts at 111.80, backed by 111.50. Key support stands at the 3-month trend line support at 110.75--of the line extending from the 104.20 low to the 106.49 low. Next key support stands at the 110.08—the 38% retracement of the 104.20-113.71 rally.

Space Shuttle Return and Fed Rate Due Later Today

Uptrend: GBP/USD (Buy-Target: 1.8050), AUS/USD, EUR/USD, GBP/JPY
Downtrend: USD/JPY (Sell-Target: 110.2), EUR/CHF (Sell-Target: 1.5520), GBP/CHF, USD/CAD, USD/CHF

As trends persist, there are plenty of opportunities (i.e. being identified via own constructed action index, see example) available at the end of trading yesterday.

I have re-entered GBP/USD position at 1.7849 level after booking a sound 143-pip yesterday and now with a higher target in place. Will continue to monitor and evaluate its potential on end-of-day basis. My other positions are USD/JPY and EUR/CHF with targets listed above.

On a different subject, watch out for price hike at your local petrol station as oil price continues to surge.

Read how the shuttle reenters the earth, and hope they have a safe journey home.

Financial Blogs

Adam Kritzer gives his view on the dollar's recent decline.

Isabel Berwick of Financial Times recently reports about websurfers turning to blogs for help and education concerning on personal finance and investment matters. Here are some blogs being mentioned with 'interesting' investment ideas:

• My Personal Finance Journey
  
• Neville's finacial blog

Morning Update

Koizumi has lost the vote on what he called the biggest 'reform' in a century, and calls for election. How's my positions doing? Yen has since strengthen from 112.60 to the current level 112.02, hence I am still hopeful about my medium-term target.

Although I am quite happy about the easy ride of my GBP/USD position, I've been complaining about the poor fill of its opening price by the collective2 site last night. I am expecting 1.7750 level rather than 1.7785.

Profit Booked; New Breakout: EUR/CHF

"The market is looking to take a bit of a breather.''

I have decided to book my profits and stay away from yesterday positions. There could be significant fundamental developments ahead of the interest-rate decisions and US job report. Yesterday sizeable profit has propelled myself back into the positive region in collective2 site. See my trades here.

Meanwhile, by being conservative, I am trading (sold) EUR/CHF on the technical side today due to a recent chart breakout.

Breakout Confirmed: EUR/USD, GBP/USD & USD/CHF

"Sentiment is pretty bullish for the euro at the moment."

As much anticipated, the bullish price action this morning has extended the Euro position to nearly 125-pip profit. Moreover, the in-house system has also managed to raise signals for GBP/USD and USD/CHF last night. As a result, I have bought GBP/USD from yesterday price of 1.7716 and sold USD/CHF from 1.2763. I have opened these positions at collective2 and hopefully I can recoup my losses from last week.

New Trade: EUR/USD

"Recent moves by central banks in Asia and elsewhere have led to dollar selling and euro buying.''

I bought the euro at 1.2182 last night, and the position has already geared into a 40-pip profit this morning. Last week, I suffered a minor losses, as a a result of uncertainty and lack of vision. After reviewing my technical charts last night, I am expecting some trend reversals in this two weeks.

The euro is currently the first to lead the pack, however, possibly a false breakout for Yen (still uncertain after recent bank moves). Will continue to updating the situation.