Angry Birds – And Where We're At

With the recent purchase of a new Ipad 5 and subsequent purchase of the popular game “angry birds” (I bought the outer space version) it’s fair to say that my trading has suffered as a result . Now , with consideration of “going pro” it’s unlikely I will be able to commit the hours necessary, as well focus on trading so – angry birds it is.

Hardly…….but a real hoot all the same.

Market wise it appears that once again we are offered new opportunities to short USD on it’s rise over the past few days. I see absolutely no fundamental change here whatsoever, and as boring / repetitive as it may seem – I will again look to load short USD against a miriad of the majors.

Zooming out a touch, gold is still flat as a pancake and of particular interest the “TLT”  20 years treasury bond fund sits at a precarious position. A falling dollar as well falling bond prices can most certainly suggest money flowing into stocks (as we’ve been seeing) but is also reflective of higher interest rates, and in turn – pressure on borrowing and tougher times ahead for corporations.

When corporations suffer……stocks sell hard.Watch the bonds, watch the dollar and in series – stocks are the last to go.

Im back at it here full time as always everyone. Let the games begin!

Short Term Trade Tip – Horizontal Lines

Obviously my short-term trade set up is a thing of beauty, and relatively soon – will be made available to the rest of you. But aside from that, I want to pass along a simple little tip – that could provide you an “edge” here in the meantime.

When you drill down to smaller time frames such as a 1H chart (1 hour candle formations) or even a 15 minute, or 5 minute – take out your crayola crayon (and not your laser pointer) and draw a line THROUGH THE MIDDLE OF THE CONGESTION/SQUIGGLES. It will be this “price level” that is currently at play – and not the “highs and lows” of the given time frame.

For the most part anything smaller than a 1 Hour chart is frankly just “noise” so the highs n lows are really not as significant as the middle ground where price is centered. Once these lines have been drawn – a trader can then focus on a “realistic price” to consider for entry or even stops etc, as the volatility short-term will spike/fall and give you all kinds of levels – not exactly relevant to your trading. On a 1 hour Chart 30 – 50 pips on either side of this “central price” is completely normal, and isn’t enough to even get my heart beating – in consideration of dumping a trade.

If you don’t understand the given volatility on the time frame you are viewing – you will get killed.

Take out a crayon and not a laser pointer – and plot the “middle of the squiggle “.

As simple as it seems – this can easily be the difference in catching many, many more pips in any given trade, based on the fact that you have not skewed your lines of S/R to reflect the highs and lows of smaller time frames….but the center – where price is currently fluctuating.

Thanks Kong!

AUD/USD – A Trade In Gold

As China’s largest trading partner and the world’s second largest producer of gold – I often look to the Australian Dollar (AUD) movement, as an excellent indication of  “risk behavior” in general. As well (and more broadly speaking) many consider the “aussie” and excellent proxy for gold.

I don’t see the two assets correlation in an absolute “minute to minute” or even “day-to-day” way (as each comes with its own volatility and characteristics) but when looking at the bigger picture – similarities cannot be denied.

A 5 year weekly chart of AUD/USD – an almost mirror image of a similar long term chart of the gold ETF – “GLD”.

The Australian Dollar and its similarities to long term Gold chart.

The Australian Dollar and its similarities to long term Gold chart.

Now taking a closer look at the current price in AUD/USD and keeping in mind our fundamentals (currently suggesting a possible “blow off top” in risk, with continued devaluation of USD) things look very much in line for some additional upswing in AUD/USD.

AUD/USD at near term support and clearly still trending upward.

AUD/USD at near term support and clearly still trending upward.

This is another excellent example of how trades develop when one has the combination of “fundamental analysis” as well  “technical analysis” firing on all cylinders. The opportunities for considerable profit present themselves only when BOTH ARE ALIGNED. 

I see an extremely low risk / high reward set up developing here – if indeed we do get an explosive move upward in risk, as retail investors flock into stocks here near the top. One could certainly keep a relatively tight stop here, as well “buy around the horn” as I’ve suggested earlier – spreading out your risk on entry. There is lots of room to run here – with even 1.08 on a relatively near term horizon.

Monday’s arent the best day for entry as there is alot of jockeying going on. I generally will look to observe price action and see where things end up mid day.

Risk On – How To Trade For Profits

I am often a day or two early – but rarely RARELY a day or two late.

When assessing “risk behavior” one needs to look across the board at a number of currency pairs, and evaluate which are indeed exhibiting strength – broadly. A “quick jump”  in a single currency pair is absolutely no indication of a change in trend, and a silly little tweet or headline from a newbie blogger – even less.

No single currency trades in a vacuum , and with each and every move in one – there is an equal and opposing move in another. Identifying those currencies associated with “risk” and those associated with “safety” is paramount in formulating  a fundamental trading plan. 

I never trade a commodity related currency against another – and rarely (if ever) trade a safe haven against another. (Although as of late with the “devaluation war” in full effect – I am actively pitting one against the other – yes.)

Simply put – money flows out of risk related currencies and into the safe havens in times of risk aversion…and the opposite (into risk related currencies and out of safe havens) during times where risk is accepted.

This evening I will leave this with you – to  discern which is which, and invite your questions or comments in putting this very important piece of the puzzle in it’s place.

Kong gets loooooong risk.

 

Looking To Trade – Need Catalyst

As a fundamental element of my trading plan – I need to stay active. I rarely leave profits sitting on the table for more than a day, and equally – can’t stand sideways directionless action. My short-term trade technology has proven incredibly reliable once again as I have been 100% cash nearly 10 days now (Permit and Bonefishing in Punta Allen – please google it) and literally haven’t missed a pip. The majority of currency pairs (with a few exceptions) are sitting at nearly the exact levels as a week ago, while equities and PM’s have more or less treaded water.

This soon will change.

Thursday’s, with their barrage of U.S economic data have often provided swing points in markets – and I suspect that this week will be no different. With a bit of news out of Canada tomorrow as well the GBP unemployment rate, my current “tech” should have me on one side of the fence or the other, sometime late tomorrow evening / possibly early Thursday morning.

As difficult as it is to believe at times, and as little sense as it makes (considering the general state of “things”) I still favor further upside in coming weeks, but am a touch more cautious than I may have been prior. Obviously nothing moves in a straight line – so the usual zigs n zags are expected…as we likely “grind” higher.

Some signs of life also being seen in the PM’s and related mining stocks and etf’s.

I will continue to monitor commods vs USD as well JPY, and should the USD continue in another leg down – getting long GBP also looks like a promising trade. The JPY pairs have obviously had their “day in the sun” and I would be reluctant to push much further without seeing a reasonable pullback/correction before continuing (in general) short JPY against the lot. I’ve seen no real change fundamentally as the currency wars continue – with everyone taking their turn at bat. Perhaps Thursday’s U.S data will be the catalyst to push things firmly in one direction or the other.

Careful People – You Are Retail

If you aren’t worries about the markets – you should be. If you think you’ve got it all figured out – you’re dead wrong. If you think you are a professional trader – you won’t be for long.

I took the time over the past few days to peruse the financial blogosphere and get caught up on my reading – after a much-needed (and extremely enjoyable) “holiday from my holiday”. Bonefish put up a pretty good fight, and watching my father reel in the only “Permit” caught in recent weeks was an absolute thrill. For a moment I too imagined – I’ve got this covered.

Wrong.

Passivity and complacency play no part in successful trading. It only makes sense to me, as one feels even the slightest sense of either – markets are gearing up to smash you in the face.

You have to keep in mind (as hard as it is for you to accept) that right around the time you imagine the coast is clear, that all is well, that you can surely do no wrong ( and likely that you’ve just received a call from your broker encouraging you to buy) that you are retail.

You are the life-giving blood of wall street and the “last of the last” to jump on board. The train left the station weeks if not months ago, and right around the time you’ve decided to jump onboard – you guessed it, it’s coming off the tracks.

Until you’ve mastered the psychology, until you’ve flipped this thing completely upside down – you are …and will always be…..retail.

Careful people……..careful.

They don’t call it risk for nothing right? – personally I can’t get excited re entering long here, and see more than a couple of reasons to start looking short. Take it for what it’s worth – I’m 100% cash – and would not be buying risk tomorrow….not even close.

Mixed Signals – Opportunity Or Not?

I don’t like getting caught in sideways market action. Nothing bothers me more than seeing my hard-earned dollars tied up in the zigs n zags of a given trade – ranging sideways and going nowhere fast. As much as I understand this to be a common (far too common actually) and normal aspect of trading – sideways is a killer psychologically as “dead money” starts to weigh heavy on the brain. Trading capital is tied up as other opportunities present themselves, and a trader is left with his/her hands tied – unable to act.

When I get mixed signals across my intermarket analysis as well my shorter term technical system – I question if perhaps an opportunity has presented itself – or if  I am looking at the initial stages of “sideways” and possible reversal. If a trend is still evident on the longer time frames such as a daily chart as well a 4H chart – I will then come down to the smaller time frames to see where we are at.

Kong’s Awesome Tip

On any time frame chart you are viewing – if price starts in the upper left corner of your screen, and ends in the bottom right -YOU ARE IN A DOWNTREND. If price starts in the bottom left corner of your screen and ends in the upper right YOU ARE IN AN UPTREND. Anything else – and you are sideways.

As simple as this may seem, it serves as an excellent exercise when looking to eliminate sideways action. Even if (to start) you only drill down to a 1 hour chart – and run this simple exercise, it should go a long way in helping you to avoid sideways market action, and possibly identifying potencial trade opportunities.

Todays Markets – Trading What I See

Stepping away from the markets for a day or two can be a mixed blessing. Sure the sunshine is great, the beer cold and the fishing fantastic – but what about work? These days 2 (or god forbid 3) days away from the markets – and you could just as well be looking at a completely new game! War may have broken out, stocks may have crashed, some nutjob may have launched his own missile, man…..my buddies from the planet Nibiru may have returned to pick up more of their gold! You just don’t know what the hell’s gone on until you start digging back in.

Top of my list – several of my beloved commodity pairs are showing relative weakness against both the USD and JPY. At this point it’s just too early to tell, but as it stands I would still be sitting on my mits here this morning regardless of the holiday, as things have more or less traded as expected – sideways. Price action has more or less remained steady/flat in risk in general, but I give a touch larger weighting to these “dips” as opposed to seeing much of anything “blowing through the roof”. I dare say “getting short risk” has poked its head around the corner – but still have considerable reading to do here today.

The moves in both silver and gold appear “healthy” but as per the usual these days – nothing to write home about.

I will spend the majority of my morning reading/reviewing Central Bank statements/news as well getting back up to speed with the planet at large before making any drastic decisions but in “trading what I see” – current trading conditions look a touch cloudy with a small chance of showers in the afternoon.

Glad to be back everyone – lets get out there and make some money.

 

Over Trading – Not A Good Plan

Considering the recent run with respect to the short JPY trades , as well recent gains made short USD – Im taking this opportunity (being 100% in cash) to wish you all the best – and get out of dodge.

Markets are nearly some relative near term highs ( with DOW around 13,600 looking like solid resistance ) so I find it highly unlikely that I will miss any “upward action” in coming days. As an active trader, these opportunities rarely present themselves so…..I am “obliged” to take it when I can get it.

Often traders will get caught in the moment when “everything is going up” – push their luck – and do run the risk of overtrading. Too commonly resulting in losses and significant psychological wear and tear.

When stars align and you find yourself sitting with significant profit and absolutely “zero” market exposure….one really can’t look a gift horse in the mouth.

This gorilla is going fishing!

Ill do my best to get a post in tomorrow evening and be back on track for the rest of the week. Good luck everyone!

Forex Position Size – Massive Gains Part 2

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