how to trade currency

If You Can't Trade It – Blog It

Forex Kong Got something to say?

I’ve been in and out all day, and again return to my computer – only to find the same. It’s a freakin gong show out there! So if I can’t trade it – I might as well blog about it.

One of the most popular articles I’ve written “2013 – You Will Never Trade It” comes to mind.

The markets have more or less been grinding up a day, down a day for the past 2 weeks – and the direction continues to be questioned. Granted the overall trend is still up, but we’ve seen some relative short-term damage – and many factors have come in to play to suggest a correction is needed. The last week has had the Canadian “TSX” erase the entire 2013 gains to date, “Bank of Japan” has now become a household term ( a little late considering we’ve been talking about it forever) , and earnings are set to kick off with Alcoa after the close today.

If there was ever a time that one would be thankful to be safely sitting in cash – I’d say this it.

I made out like a bandit on the huge JPY slide over the past few months but admittedly – have 100% completely missed the latest ( and most massive ) move. It’s too bad – but its a part of trading, and so is life.

Forex has a funny way of “kicking your ass” so….when anything has travelled so far/so fast – you really can’t go chasing it. You get back at it….you apply what you know – and you find the next trade.

As it stands….and as boring a read as it may be for you guys – I still sit (for the most part) 100% in cash….taking the odd “little trade” here and there to keep the moss from growing.

Be safe – and don’t worry – things will get really, really exciting here soon.

This I can promise.

 

Trade or Invest – Things To Think About

Forex Kong 12 Comments

It’s crazy out there.

Currencies are literally “all over the map” with several of the usual correlations giving traders/analysts a good run for their money. Eur up and stocks down, continued JPY strength in the face of risk aversion, and the British Pound (GBP) on a tear.

In equities the transports ($tran)  have taken it on the chin, with Fed EX pummelled over last several days, and the massive market leader APPL having  lost 200 billion in market cap. 200 billion! – Poof…gone.

Earnings will likely disappoint, we’ve got seasonal selling ahead (“sell in may?”), tensions in North Korea moving higher, terrible employment numbers (again) in the U.S , and of course –  and any number of “unforseen events” far more likely bad than good.

So…..Is it a dip or a turn?

Time to trade or invest?

I’ll have to leave it up to you decide the best course of action, as you’ve all seen my charts and read my views. Regardless of any short-term action ( as the possibility of another “pop higher” in risk  always remains ) seriously….

If a broker/trader  hasn’t picked a top, or the area to sell and book profits – what possibly likelihood would there be in timing a “scoop buy / dip” for a few more points?

For the most part – by the time retail is convinced the water’s are safe, the move has already passed – and you’re once again caught……buying the top.

Give In To Mother Market – She Always Wins

Forex Kong 5 Comments

To tell you the truth – I’m a little frustrated with you. Ya’ know…….

I’ve written the articles. I’ve posted the charts.  I’ve outlined the underlaying factors, and have even gone as far as to suggest effective methods of protection – should things go South.

But you don’t listen. You don’t care.

You’ve got it in your head that “everything’s gonna be fine” and “scoff” at suggestion to the contrary.

You refuse to consider the fact that you’re not in control, you don’t have the answers, it’s bigger than you, stronger than you, wider than you. You can’t accept the fact that if you don’t make a decision fast……this thing is gonna crush you like a bug.

Well……news for you my friend….welcome to the club!

You don’t think I feel the same? You don’t think I question the same?

Give in to mother market ma man….. cuz she always wins. ……….She always wins!

Best advice I could give…………get to cash.

Stop worrying about the “returns you’re getting”. Aleve the pressure and do some math. Consider 6 months to a year with no exposure to the market –  and the amount of money you’d of made…..or more importantly ……the amount of money you’d have lost. It’s just not worth it.

This is a top not a bottom. I can assure you – you won’t miss a thing.

Discipline – The Trade That Got Away

Forex Kong 4 Comments

I want to continue with my trades long JPY.

I want to place these trades (a few short pips underneath current price action) in currency pairs such as EUR/JPY and GBP/JPY. I want to get short NZD/JPY as well AUD/JPY not to mention CAD/JPY. I want to push a bunch of buttons. I want to enter a bunch of orders. I want to do it right this second! Right here! Right now! My god let’s do it! Do it! DO IT!

But no……….I can’t.

I’ve got patience. I’ve got trade rules. I’ve got plans.

I’ve got millions of trade opportunities in front of me, and a lifetime of trades –  lying in wait.

Most importantly of all. I’ve got discipline.

I’ll sit tight here a while longer and see how things shape up come London open. Frankly, I’m not satisfied with this correction in Nikkei and JPY and still feel there is further downside in risk. I still have reservations about taking positions of any reasonable size so will stick to my guns….and stay on the sidelines.

 

Going Short – A Difficult Trade

Forex Kong 9 Comments

I have been struggling with “going short” all week. Not in the conventional manner as in “selling a stock short” – but more so with consideration to “getting short” on risk.

For the most part “long trades” are considered bullish and are taken when traders feel that markets (and risk) are going to move higher – where as “short trades” are bearish and are taken when traders feel markets are making a turn to the downside. There are many ways to play it – through inverse or bearish ETF’s or possibly through the purchase of instruments that perform well in times of risk aversion (many feel that gold is a good play in this instance).

Via currencies I have chosen to “buy JPY” as it is considered a safe haven currency – and is generally bought during times of risk aversion. Any way you cut it, the idea being that investors would be seeking safety – and that “going short” would be the trade of choice.

This has not been easy.

Markets have traded within a very tight range (sideways) for nearly two full weeks! And regardless of some great intra day trades and profits (which I’ve had to work very hard at) it’s been near impossible to hold on to any position of size for more than a couple of hours or so – before it’s either back to break even, or worse – going against me.

My indicators ( and my gut ) keep me on the short side regardless. I will endure this mornings barrage of U.S based news and evaluate from there.

I’ve layered in to a couple of long JPY trades here over the past 24 hours that will either make me a great deal of money or (at the worst) cost me 2% of my account (not bad considering I’m up over 4% on the week anyway) so…..

Stay tuned for some fireworks.

Getting short…and “staying short” – is a very, very difficult trade.

Take Profits – There Is Always A Trade

Forex Kong 9 Comments

If I didn’t take profits as often as I do – I seriously doubt I’d be this far ahead. There are few worse feelings than seeing a trade go well into profit, waking up the next morning to see – that not only has the profit evaporated, but the trade has actually gone against you. Volatility in forex trading  can be an absolute killer (not to mention greed) – so when profits are sitting on the table…..you’ve got to learn to take them.

Take the long JPY trades over the past 24 hours for example. I went short CAD/JPY (so…looking for JPY to gain strength against CAD) and caught a 100 pip move over a 4 hour period. That’s what I call a really nice trade.

Seeing the “waterfall” type selling pressure in the pair, I knew from experience that this type of market behavior doesn’t “last forever” and would likely be followed with a bounce in the opposite direction. I exited the trade with a full 100 pips profit with absolutely no concern as to “what I might miss” in further downside movement – if I’d remained in the trade.

Here we are a full 24 hours later – and the pair has 100% completely retraced the entire 100 pips from yesterday.

Take Profits Often When Trading Forex

Take Profits Often When Trading Forex

You can never go wrong taking profits – never. As well, by keeping yourself relatively nimble you are also equipped to take additional trades or (such as in this case) re-enter the same trade at even better levels.

Learning to distinguish “when/where” to do this does take practice, but if you keep in mind that you are continually growing your account balance as well as limiting your exposure in the markets – taking profits often (very often) should become a regular part of your daily trading.

I rarely leave money sitting on the table – as there is always another trade. Take the money – call it a trade ( a good trade ) and get back out there with a little more gas in the tank.

Kong Hits 100% Cash Target

Forex Kong Got something to say?

I’ve done it.

Overnight I took a number of smaller trades looking to fill gaps in many of the JPY’s charts. A number of those paid off and I’ve also sold my remaining  “short USD”  trades for a small profit this morning as well. The point being – I have moved to 100% cash as per my trade plan, and am exactly where I want to be for the coming days.

To an active trader the feeling of being 100% cash is truly , TRULY remarkable….as you’ve “officially” extracted “x number of dollars” from that devil of a market, and are able to put your feet up a day or two and relax. I’m really not much for that  – but in this case, will certainly take a day to re-evaluate and not worry about open positions.

From a completely psychological perspective, the opportunity to step away from the market is a welcome gift. I would encourage anyone who is struggling or confused, or perhaps those who are  underwater in a position or two – to take the time to get away from it all…if only for a day or two.

In my case – a time for celebration, as to have survived yet another  – trading adventure.

Kong………..gone.

Xi Jinping – The President Of China

Forex Kong 2 Comments

Xi Jinping ( born 15 June 1953) is the General Secretary of the Communist Party of China and the Chairman of the Party Central Military Commission. He is also the President of the People’s Republic of China and the Chairman of the State Central Military Commission, and is the first-ranked member of the Politburo Standing Committee (PSC), China’s de facto top power organization. Xi is now the leader of the Communist Party of China’s fifth generation of leadership.

Xi is considered to be one of the most successful members of the Crown Prince Party, a quasi-clique of politicians who are descendants of early Chinese revolutionaries. Senior leaders consider Xi to be an emerging figure that is open to serious dialogue about deep-seated market economic reforms and even political reform, although Xi’s personal political views are relatively murky. He is generally popular with foreign dignitaries, who are intrigued by his openness and pragmatism.

He will rule over one fifth of the world’s population for the next ten years, if all goes to the Communist Party’s plan. 

His challenges are numerous: a strong but slowing economy with growing resentment over corruption, an urban-rural wealth gap, continued calls for wholesale political reform and countrywide worries stemming from countless environmental scandals.

I thought it might be worth getting to know this fellow a bit – considering he’ll be the man for the next 10 years. I was hoping to find some indication of his  plans moving forward and ironically – found “tackling corruption” sits at the top his……………”to do list”.

 

GBP Buying – Good For A Trade

Forex Kong 12 Comments

The Great British Pound has really taken a beating over the past few months. I’m seeing relative strength in the currency  across the board meaning – the GBP is making solid headway against a majority of other currencies. Looking for possible reversals against USD, CAD as well CHF could result in some decent trades.

I do caution however – the GBP is a wopper. It moves extremely fast and furious at times and demands tremendous respect. My suggestion would be to consider these trades with a very small position size – and allow for considerable volatility.

GBP Counter Trend Rally

GBP Counter Trend Rally

All short USD trades are performing nicely here as of this morning, and I will look for further in USD/CHF as the day progresses. Otherwise I am nearly 100% out of JPY trades with a few small ones still hanging in profit.

I rarely trade GBP but do see it as an opportunity and will approach it purely as “a trade”.

 

Skyscraper Index – Believe It Or Not

Forex Kong 12 Comments

The Skyscraper Index is a concept put forward in January 1999 by Andrew Lawrence, research director at Dresdner Kleinwort Wasserstein, which showed that the world’s tallest buildings have risen on the eve of economic downturns. Business cycles and skyscraper construction correlate in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession. Mark Thornton’s Skyscraper Index Model successfully sent a signal of the Late-2000s financial crisis at the beginning of August 2007.

Over-saturated real-estate activity reflects over-saturated markets. Eventually, optimism runs dry and the period marked by over-exuberance recedes, and we notice the good times are over.

Ironically – China is scheduled to complete construction of the “new worlds tallest building” sometime late March.

Skyscraper Index

skyscraper-index

skyscraper-index

skyscraper-index

It’s entertainment at the very least – and something to consider / keep an eye on as the general principals run true.