Author: Forex Kong

A Golden Hammer – Has Gold Bottomed?

Forex Kong 3 Comments

Hammer: Hammer candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.

Has Gold Finally Bottomed?

Has Gold Finally Bottomed?

I’ll be the last one to call it as I am relatively new to the world of gold – but can tell you it’s been a complete and total grind for the past few months. This particular candlestick formation is usually a pretty good sign that buying interest has started to creep back in. Usually a trader will wait for an additional days candle to form (ideally closing above the high of the hammer) before entry.

If it provides any relief going into the weekend – I for one have considerable confidence that we should see some higher prices moving forward.

Gold Rinse Job – Cruel Irony

Forex Kong Got something to say?

So I’m a fat cat on Wall Street  – that’s just seen two straight days of retail investment  pour into markets like liquid butta.

Can you get your head wrapped around the profits created (today alone) with respect to anyone who’d bought over the past two days and had a stop on their trade? Even a full 10% stop –  completely annihilated!

As well for those newbies still trying to make a buck trading EUR/USD – because your broker offers teeny-weeny pip spreads and the ability to scalp / short-term trade. No shit! – any wonder why?

You have now been liquidated on your 2k starter account as EUR/USD dives a full 250 pips!

So….has anything changed? Is the Europe story on the mend? Has the world lost its interest in gold?

Nope.

Everything is exactly the same as it’s always been  – as retail investment continues to fuel the engine of  the massive steam roller smashing you to bits.

It’s a sad truth…………..It’s a cruel….cruel irony.

Forex Position Size – Massive Gains Part 2

Forex Kong 5 Comments

Today will mark the largest one day total profits of my entire trading career – with an impressive 9% overnight.

This brings me back to the topic of position size, and how I tend to see this as a much more “fluid” part of my trading plan as opposed to a static / formatted / predetermined element. Gains of this size could not be realized if only risking a static % of my total account balance per trade – every time I place a trade.

I have come to learn that “buying around the horn” makes much more sense in Forex ( and likely in any asset class) as it is virtually impossible to pick a single specific price level  – and put your entire trade on in a single order. As well – there are times when “the coast is clear” and stepping on the gas just makes sense – as both fundamentals and technicals align perfectly to provide a clear sign that “now” is the time.

Identifying horizontal lines of support and resistance PRIOR TO PLACING A TRADE is an extremely important aspect of my trading. When these levels are hit (or at least “close” to being hit) I start to buy in smaller quantities before the turn has been made – so that by the time price has reversed I am well into the trade. This type of strategy generally has me “selling to you” as I am well into profit and banking my returns around same time you’ve come to realize that price is now moving up.

The majority of large moves happen at the beginning, and for the most part retail investors tend to jump onboard after this move has been made. This is when the “smart money” is already selling their shares “into strength” – as they had already “purchased weakness” around the horn – before the reversal was made.

More in Part 3

Forex Position Size – Volatility Part 1

Forex Kong 5 Comments

Everyone’s ability to manage risk is different, and risk tolerance varies from trader to trader. When considering “how much risk” you are willing to take in any given trade – obviously the “size of your position” is paramount. Coupled with the stop level ” (or in my case mental stop level – as I usually don’t use stops) a trader should know exactly how much money they are willing to risk / lose in any given trade – long before initiating it.

A general rule for new traders is to consider a “fixed percentage” of your total account (for example 2%) and plan your trades accordingly – never risking more than 2% on single given trade. So a 50k account for example with 2% risk would allow for a 1k loss on any given trade. If one full lot was purchased of NZD/USD  a full 100 pip stop would be used.

I do not trade like this.

When trading foreign exchange it is virtually impossible ( at least for newcomers) to enter the market, and not see the trade go against you almost immediately. This is due to the short-term VOLATILITY in forex trading ( not necessarily a bad trade entry) and must be taken into consideration when figuring out your position size. Some currency pairs range as much as 50 or 60 pips on even a 15 minute time frame – and could range as high as 150 pips on a daily time frame. If you entered a trade in the right direction but only a single day too early – does this mean you where wrong? Of course not. Although without understanding the inherent volatility, you may very likely get stopped out and/or abort an excellent trade idea based on a “little slip” in your timing.

A forex trader must understand the given volatility in each and every individual currency pair they trade – as each exhibit unique characteristics – and in turn adjust position size accordingly.

I would use a much smaller position size trading a pair that ranges 100 + pips a day, than I might in trading a pair that only ranges 30 pips a day. A trader must learn to study each currency pair on its own, and come to learn its individual characteristics.

I get alot of questions about this and the topic could likely run on for several more posts – so for today I’m going to call this Part 1, and plan to let you know how I “position size” on a coming post.

Welcome back everyone – and good luck here in the new year!

Currencies or Stocks – Who Leads Who?

Forex Kong 2 Comments

By the time you hear that “stocks are going higher” I can assure you – I am selling you my shares. Right around the time your broker calls and suggests that “now is a good time to buy gold” guess what? – I’m unloading. Your T.V provides you with the exact information needed  – to empty your bank account and fill mine. The entire system is a complete scam and oddly….you still keep asking yourself – what am I doing wrong?

It’s bigger than you. You can’t win. Stop now. Give up. Don’t quit your day job and god help you if your wife finds out you just bought Apple. Well…..truth be known – you can win. Don’t give up ( but seriously…don’t quit your day job) and be proud of your recent Apple purchase.

Turn off your T.V and Internet for one week, then ask yourself – “do I really know what I am investing in/what I am doing?” Seriously…..do you really think you know what you are doing?

I like to use the analogy of boats on the ocean – where currencies are a gigantic cruise ship and U.S equities are a speedboat. Sure there are waves (in this case volatility) but it takes a long time to turn the cruise ship around, while the speedboat is already sinking. Fact of the matter is – currency markets are far more stable than equities, and it takes more than a rainy day and a little storm to put that cruise ship on its side.

Granted I think you can get a speedboat/license,  and be out on the water in a  in an afternoon  – where as… not every Tom Dick and Harry putz around in a cruise ship. Fair enough.

I promise you – keeping your eyes on the currency markets ( and not just the silly EUR/USD ‘cuz they’ve got you on that one too) should keep you one step ahead of the next guy.

Check this out:

EUR_NZD_Forex_Trading

 

Predictions For 2013 – Apes Will Win

Forex Kong 31 Comments

Making a prediction for the future is easy. (In response to a valued readers questions)

The precious metals have decoupled from the dollar to a certain extent, so putting a time frame on the future prices of these two “asset classes” based on the usual correlations is difficult. I do predict that gold will go up and the dollar will fall. (go figure eh?)

I expect the USD to make its way lower through the first couple weeks of January – then take a usual oversold bounce, and then at least one more leg even lower into the middle/late February. During this time equities will likely push to near term highs then top out and trade sideways. As I am constantly moving in and out of the market I plan to be 100% cash sometime late February early March at the absolute latest, but in a different sense than my usual trading. I will continue to play the safe havens against the risk related currencies with possible addition / focus on EUR.

I plan to  completely re-evaluate my trade plans come March.

A previous article worth reading : click here.

Considering that I trade the fundamentals coupled with an extremely accurate shorter term technical system – I will really just allow price to guide me. As per my usual shorter term entries and exits – I am (more often than not) sitting in cash during times of  “trendless market direction” so regardless of exact dates / predictions I will trade what I see  – as I see it.

I will continue to post real-time trade activity here via twitter, as well through the daily posts. I suggest extreme caution after this next (and possibly final) move up in equities and risk in general  – come mid Feb or early March.

This Close Gets Bought Hard – Kong

Forex Kong 13 Comments

I’m usually not one for moment to moment market commentary – but on occasion (for example my “risk on” post some weeks ago with reference to getting short JPY) I have been known to do so.

Take it for what it is…as this is a free blog – but if I was ever a buyer of U.S equities (which as a general rule I am not) – I would buy this close – HARD.

Forgive me for a small poke as well but….the American politicians should be absolutely ashamed of themselves. I’m not sure if anyone living in America still thinks they live in a “free country” – but once again stock holders are more or less “held hostage” till (let me guess) late Sunday night…before getting on with their lives – some I’m assuming worried if they will still have a job in 2013 and/or if additional tax hikes will break them.

Its appalling. Its embarrassing. Shame, shame, shame…..

So….obviously – buy stocks!

Im getting short the USD hard as well staying short JPY – long the commods here, as well getting long EUR late this evening or sometime tomorrow.

Good luck America! Good luck!

 

 

Currency Wars – Japan Turns Up Heat

Forex Kong 11 Comments

This is getting really interesting.

Getting this right could provide some of the absolute best trade opportunities of 2013. I plan to take full advantage. Considering that I expect the coming year to be extremely difficult to trade (and a real minefield for those with little experience) focusing on “what works” will be essential for survival.

As I’d mentioned in a previous article, the dynamics surrounding the U.S Fed’s plans to “print their way out of debt” and the dynamics of Japan’s recent foray into the “monetary easing business” are very different – and well worth pointing out.

Bottomline – Japan’s public debt is predominantly domestically owned (95% is owned by Japan’s own citizens) while the U.S owes more than 50% of its debt to foreigners. Japan’s printing will have little ramifications (globally speaking) and essentially they can print forever – managing  this domestically, with almost no risk of default.

Sooner or later holders of  U.S debt are going to get extremely “choked” as the dollar denominated paper they own is driven into the ground…and worth less and less and less…….

Japanese Economic Story – Trading The Yen

A quick look at a long term weekly chart of the AUD/JPY.

Forex_Kong_Currency_Trading

Forex_Kong_Currency_Trading

The recent monetary policy shifts/ implications out of Japan are a game changer if you ask me – and will likely be cornerstone to my trading plans moving forward. Eventually (as well with consideration of “eventual” rising interest rates in America) the U.S game will come to an end. It’s gonna be messy, and it’s gonna be tricky to trade.

The Yen (at least for now) appears to have a much clearer path on its road to “devaluation” than the USD – as the currency wars are now really starting to heat up. Opportunity will be found shorting both, but the fundamentals suggest that the Yen may provide an easier path to profit.

Forex Charts – Gaps Get Filled

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There is much debate on the subject of “gaps” in charts, and  it’s been my experience that the vast majority of these gaps do indeed get filled. A large percentage (somewhere around 80%) filled during the following day of trading.

A gap in a chart is essentially an empty space between one trading period and the previous trading period. They usually form because of an important and material event that affects the given security, such as an earnings surprise or a merger or in the case of foreign exchange – announcements pertaining to a given countries monetary policy.

Incoming Japanese Prime Minister Shinzo Abe kept up his calls on Tuesday for the Bank of Japan to drastically ease monetary policy by setting an inflation target of 2 percent, and repeated that he wants to tame the strong yen to help revive the economy. Abe, a security hardliner who will be sworn in as premier on Wednesday, when he is also expected to appoint his cabinet, is prescribing a mix of aggressive monetary policy easing and big fiscal spending to beat deflation and rein in the strong yen.

This has produced some very large gaps in nearly every single YEN (JPY) chart I follow – as well as over 7% account profits practically overnight. Generally these kinds of “gifts” don’t fall in your lap very often, and I have a hard standing rule to take this off the table immediately – and then likely wait for the gaps (in some cases 80 pips) to be filled as price dips back down to fill the “empty space” before resuming its trend.

I am expecting the dollar to make its last stand here sometime this week – and then roll over hard into its next leg down – while risk in general looks  full steam ahead . The Yen crosses have been absolutely fantastic and are now either on the cusp of full-scale break out, or a possible breather. I am planning to stay on aggressively until proven otherwise – booking profits along the way, and jumping back in the trade.

Currency Trading – The Sunday Plan

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As I’d mentioned previously – Sunday’s are sacred.

With no lights flashing on my screen, no announcements scheduled, no scandals hitting  the wires, no “fed speak” etc  – Sundays are truly a blessing, for the hard-working and ever diligent currency trader. Unfortunately the spaceships didn’t show up last night (here on the Mayan Riviera) so the world is saved. Back to business for me.

Don’t think for a minute that markets are going to just sit idle  – while you stuff your face full of turkey.

This week could just as likely” rip your face off” in either direction – should you decide to turn a blind eye. I suggest sneaking away (if ony for a minute or two) check a couple of charts, levels, prices etc…and take advantage of this small window of “down time” to check yourself, your trades and your overall market position and exposure.

Never take anything for granted when trading currency – or any other asset for that matter!

Sure its the holidays…..and I do wish you (and all of your families and friends) the best – and all the best in the coming new year BUT! I encourage you to stay diligent, stay focused and never EVER take your eye off the ball  – even when those presents under the tree appear far more interesting.

Happy holidays everyone – and best of luck to you in the new year!

I do expect relatively light trading in coming days – and imagine the dollar will flounder here on its bounce,  then continue in its downward direction. This being said – keep your eyes on equities ( and in particular gold/ silver related stocks) as well tech for buying opportunities as we still look poised to move higher.