Forex Biases for July 30

Price consolidation. Markets are out of sync at the moment. My current daily biases on the following markets are as follows:

USD/CAD UP
USD/CHF DOWN
USD/JPY DOWN
EUR/USD DOWN
GBP/USD DOWN
NZD/USD DOWN
AUS/USD DOWN
AUS/JPY DOWN
CHF/JPY DOWN
GBP/JPY DOWN
EUR/JPY DOWN
EUR/CHF DOWN
EUR/CAD UP
EUR/GBP UP

I played a short trade on CHF/JPY today with +22 on half of the position and stopped out for nothing on the other half after an unusual price swing. Total: +0.55R. I had an unrealised 34 pips gain earlier, ouch! Meanwhile, I am predicting a tighter trading range for tomorrow and even the day after tomorrow. Then, there should be some playable breakout actions.

Done for the Week +246 pips

Here are my trading results:
No. of trades: 4 (all with 2 lots)
Win rate: 100%
Conservative strategy (exit 1 lot): +6, +36, +20,+27
Aggressive strategy (hold 1 lot): +6, +40, +63, +48

I didn't put on any trades on Thursday and Friday - been hesitated a lot these days and missed some playable actions. Not sure it was a good or bad thing. Nowadays, I started to think hard about my entry levels since I decided to use a tighter 20-pip stop loss on each trade (i.e 40-pip with 2 lots). My return (R) for this week trades was therefore 0.3R, 1.9R, 2.07R, 1. 87R respectively.

As I am still perfecting my trading style, I have temporarily put my real-time signal service on hold. Thanks for your expressed interests so far. In the mean time, I am determined in moving forward with this short-term trading model for growing my account size and for fulfilling the milestones as set in the 1-million forex project.

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.

The Meaning of High Frequency Data

Source: High Frequency Data: Higher and Higher

Some claim analysing high-frequency tick data reveals hidden behaviour trends in the market that can be profitably exploited.

Unlike exchanges, where prices and volumes are available for deals that have been transacted, prices in an over-the-counter market such as forex are far more ambiguous.

One tick might be from a market-maker, the next from a small hedge fund trading algorithmically, the next from a corporate trading infrequently and the next from an institutional trader working on a large order. Only at the tick level are the dynamics of the interaction between these different groups visible. Occasionally, the views of these different classes of traders suddenly coalesce and everyone acts in a similar way for a short period. Most of the time, there is quite a bit of spread across how people see things in the market, then something kicks in and they start thinking similarly.

When options expire in different time zones and in different currencies, there are big spikes in volumes. When lunchtime occurs, the markets know all about it. When there are data releases for a particular currency pair, you get big spikes - as much as four times normal trading in the five minutes before and the five minutes after a data release. The ebb and flow through the day is quite astonishing.

The trend across markets is to move to higher frequencies, and all participants are facing challenges in terms of their analysis and response to prices, events and opportunities. The processing speed race is leading to an increasing requirement for quantitative and technological approach to trading. This has also unlocked a number of new opportunities, as the capability to collect and analyse historical tick and order book data can lead to more accurate identification of significant patterns in the market data that can be exploited. This is where high-frequency data and its analysis are proving very valuable today, when combined with the fastest trading technology, in a wide range of fields including optimal order execution, competitive market-making or statistical arbitrage

Sound interesting? Recently, I have also been exploring the use of tick volume to assess the underlying market trend and to identify turning point. I have quoted some relevant information from the article for future reference.

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.

Short AUS/USD @ 0.8732

I am going to hold this new short position overnight. -20 pips on USD/CHF earlier. I thought I was doing OK until the TIC report spoiled it all.

Short USD/CHF @ 1.2008

Mid-noon. I am taking a short here at 1.2008 with 20-pip stop loss. Update on yesterday USD/CAD position - out 1/2 position for +29 pips (conservative), still holding another 1/2 but with stop moved to breakeven, price target 1.0402 (aggressive).

Short USD/CAD @ 1.0462

A swing setup. Use 20-pip stop from the opening level. Price target below 1.0402.

13 July Results

Mixed results for today. I didn't know what to trade for the last two days. Somehow today, I had four trade ideas. I started the day with some quick losses: -30 pips on short NZD/USD - should have waited for further confirmation but I entered this trade too hurriedly. Also, -12 pips on long USD/CHF as I took a small loss. Then, I had to reverse my USD/CHF bias and turned into a short position at 1.2036 by sticking to my system. It rewarded me with +29 pips. Then, it got better. I followed another good signal in long EUR/CAD trade which in the end yielded +40 pips.

To be honest, forex trading is a real tough business. I was a bit stunt by this week's volatile market and hence, I didn't manage to deliver my many trading signals to you as promised (I only sent out one). Things should get better from here . I will try my best to keep my promise and to deliver you good quality free trading signals next week.

11 July No Trade

I decide not to trade today, although this is an exciting time when prices are running into multi-year high especially for the pound and euro. Instead, I spend some time running my system on other alternative markets such as NZD/USD, EUR/CAD, AUS/JPY, and I really like their results. For your interest, I have summarised my overall trading strategy as follows: looking for breakouts, making sure the market is active, being patient, entering at price pull back near the support/resistance level, using reasonable stops, booking partial profit, never let winners turning into losers, and also hopefully, riding on winning positions for bigger profit.

Market pulse:

"The dollar has broken lower against a broad range of currencies...the apparent catalyst is an escalation of concern regarding the US housing market outlook."

"As long as the market views these current problems (in the US housing sector) as being isolated to the US then we would expect the dollar to remain under pressure, with the euro likely to target the 1.40 usd area over coming weeks and the pound looking set to achieve our target of 2.03/2.04 usd earlier than anticipated."

10 July Results

Conservative play: -25
Aggressive play: -30

A high volume day. Possibly bankers vs. bankers trading each other as Fed chairman Bernanke will be in focus later today.

In summary, the market sent out false signals in the opening session, then did a reversal and never looked back. By mid morning, I managed to recognise those volume spikes and on hindsight I should have followed the money flow. But I resisted (being too cautious). As a result, I purposely stayed away from the Majors and put on a conservative trade shorting the AUS/USD but it didn't pay off. At least, I gave the position a fair chance, holding nearly 6 hours without being stopped out. However, it was the wrong day to support the US dollar. Not a chance for recovery as the big market players managed to trap you in firmly.

Market pulse:

"The theme today is broader dollar weakness. Concern that the outlook for the riskiest U.S. mortgages will worsen is negative for the dollar. Lack of action from the Fed, no cuts or hikes, is also negative for the dollar.''

09 July No Trade

One of those days. Markets stay in very tight ranges. The only potential play I spotted was GBP/USD. I really liked the bullish action in the morning and was willing to enter long at any price dip. There was a potential entry at 1.15 pm, but the price retraced just too quickly. I assumed other traders having the same thought as me - all waiting for the opportunity to go long as well. It was impossible for me to issue that signal quick enough to you guys to take advantage of the situation. So I waited past 2 pm. And I usually don't favour entering new positions after 2 pm London time as there is so little time left for any significant price movement to happen or to recoup any losses if price doesn't move as predicted. Hence, a zero action day.

GBP/USD 5-min chart


Market pulse:

"There is nothing to alter the trend of carry trade at this point. If there is no clear signal of future rate hikes, people will continue to put on carry trades, and that will weaken the yen.''

FYI, I also include USD-JPY and EUR-JPY markets in our trading portfolio. I am not biased and willing to go either long or short depending on the daily technical situations. Let's be patience as opportunities will present themselves when the time is right.

NFP Day Results

Conservative strategy: +30 ( Approx. 3 hours holding time)
Aggressive strategy: +5

Weekly pip-count: +96 pips for conservative strategy, +140 pips for aggressive strategy

It's a shame that we could not capitalise more on this aggressive play. However, please bear in mind that volatile price swings are quite common in the event of major economic releases. And it is partly my fault too as I should have advised you to keep as many easy pips as possible during the offering of a news event. Basically, a wrong timing for being aggressive.

FYI, I will be sending out my invitations for you to receive the real-time alerts of my trading signals/ideas this weekend. If you are interested, just drop me an e-mail.

Market Pulse:

"This (Non-farm Payroll Report) confirmed the U.S. economy is much better than most of the dollar bears thought. As long as we generate 100,000 jobs a month, there's no chance for the Fed to cut rates."

Thursday No Trade

No trades for today.

Rightly so. Markets behaved 'erratically' today as the volumes crept back in after yesterday quiet market. I wish we had at least one signal to capitalise on today's fast action, but unfortunately it wasn't the case. At least, we stayed out of of the wild price swings.

Wednesday Results

Conservative play: -5
Aggressive play: -5

Great, some last minute actions after sending out the final signal of the day. Most of you could probably get out of the EUR-USD position close to breakeven or even fetch 1-2 pips on the plus side. I have only recognised this one play for the whole day, however, it didn't 'move' as expected in this quiet market.

Market pulse:

"The ECB is on a tightening spree, ECB policy makers are going to tighten a few more times. At the same time, the Fed is pausing and eventually going to lower rates. Rate differentials are in favor of the euro against the dollar.''

Tuesday Results

Conservative strategy: +16 pips
Aggressive strategy: + 36 pips

I have summarised the signals for today in here. FYI, I didn't get the expected price action in the USD/JPY and EUR/JPY markets. Only choppy action. I had to exit earlier at +1 and -11 respectively.

Market pulse:

"There is an underlying pattern of increasing volatility evolving. Dollar-yen volatility should lead the way."

Monday Results

Conservative strategy: +55 pips
Aggressive strategy: +104 pips

Examples of my daily swing signals can be found here.

Market pulse:

"The dollar bearish mode in the market is back, it's the story about better growth and rising interest rates elsewhere.''