Trading week 26/9/11

Weekly Summing Up

I only traded today, Thursday, but I made 194 pips using my TS system. Another great week for TradeSpotting!

Off for long w/e now so will be back on Tuesday of next week. The USDX and EURX are really chopping around in a sideways channel. This makes trading very difficult. I'll be glad to get away from them for a few days!

Thursday 29/9/11

The USD seems to be on the march upwards again and the EURX looks to be pulling back.

I have received signals to day to LONG the USD/CAD, EUR/AUD and GBP/AUD and to SHORT NZD/USD & Gold.

Some of these trades are correlated so you would need to manage risk accordingly.

Update: all trades closed for profit or b/e. See below:

Long USD/CAD: closed for b/e

Long EUR/AUD: closed for 31 pips
Long GBP/AUD: closed for 56 pips

Short NZD/USD: closed for 18 pips

Short Gold: closed for 89 pips

Total gain: 194 pips!

Another fantastic trading session using my TS system!

Wednesday 28/9/11

The EURX has broken out and up out of the descending triangle on the 4hr chart. (see charts). This could indicate more bullish up moves for the EUR. It is currently retesting this breakout level and I will wait to see if it continues up or reverses. The positive talk about the Greek bailout overnight is no doubt at work here; buoying the EUR and seeing money flow out of the USD perceived safe haven.

I think caution is needed here until a clearer picture about the overall trend is available.

Midday update:

The ADX is heading back to the water line on a majority of pairs. This is good for catching the next major trend. Patience is needed at times like these to wait for the next trade set up. The EURX and USDX are both bouncing along in a sideways pattern. No clear direction on these just at the moment.

Tuesday 27/9/11

The EURX kept me out of a short on the E/U last night. Positive talk overnight about a Greece bail out has buoyed the EUR and stocks and seen money flow out of the USD haven. This is yet another example of how technical trading is impacted upon by fundamentals (announcements etc). That is why, now more than ever, traders need to look for lots of confluence before placing trades. Last night, the EURX index did indeed bounce off the bottom trend line, as suspected, and this lifted EUR pairs.

This change in sentiment has resulted in some sideways movement with many pairs. This is good for the TS system as the ADX tends to move back to the water line and it is then much easier to determine a new trend and, thus, new trade.

I will be cautious with any LONG signals on the E/U, A/U, E/J and A/J as their upper Bollinger Band on the 4 hr charts are pointing steeply downward. This can be a strong barrier to continued movement.

Monday 26/9/11

I have signals to short the E/U and E/J. The E/U is currently sitting above the key psych level of 1.34. The EURX is also bouncing up off the bottom trend line of the symmetrical triangle. I will wait for a break and close below 1.34 before taking a short on the E/U. I'm leaving the E/J alone for the time being. It is too low for me and there is always the risk of the BOJ intervening on the Yen.

Indices for week 26/9/11

USDX

Last week began with a breakout of the USDX from a bullish flag pattern (see daily chart). Technical theory here states that the breakout should be equivalent to the height of the flag pole. The flag pole was about 290 pips. Thus, the expected target of this bullish move would have it reach up around the 80 level.

The USD is still looking bullish on the weekly chart as well and finished the week by pausing at the daily pivot level and just under the weekly R2 level. It is approaching some strong resistance at around the 80 mark with the weekly 200EMA and pivots lurking in the area.

Summary: The USDX looks poised for some further up move to at least the 80 level. Thus, I will see how the index opens next week and use this a guide to look for possible long USD trades.

EURX

The EURX is drifting within a symmetrical triangle on the weekly chart. It is also trading under a bearish trendline on the daily chart dating back to late last month. This index looks bearish which is hardly surprising with all the EURO land problems.

Summary: The EURX looks poised to break out of the triangle pattern, either up or down. I will watch which way this moves to help determine direction for EUR trades this week. A break out and down would guide me to look to short the EUR.

Trading week 19/9/11

As suspected from my previous post, the USDX broke up and the EURX broke down at market open. I have received some signals on a number of charts and I have taken these trades this morning, that is, during the Asian session.

I have reservations about these trades though for the following reasons:

1. There were gaps at market open which often reverse and get filled.

2. The Asian session is often difficult to trade due to low liquidity.

3. There is a Japanese holiday today which often affects JPY pair trades.

Having stated this however, I am committed to taking signals when they appear on my charts..."Plan the trade and trade the plan". My system works in a majority of cases and that underpins my trading strategy, along with good risk management. I have also taken trades today on correlated pairs but have adjusted the risk accordingly. You can check out for Forex pair correlation at: http://www.forexticket.co.uk/en/tools/01-01-correlation

The trades I have taken today:

Short: E/U, E/G, E/J and G/U

Long: USD/SGD

I will provide updates on these trades as they progress.

Update Tue 20.9.11:

Long USD/SGD: closed for 100 pip profit

Short E/J: closed for 100 pip profit

Short G/U: closed at b/e (trade went sideways)

Short E/U : closed for 46 pips. (closed due to volatility re:Greek debt)

Short E/G: closed for 59 pips. (closed due to volatility re:Greek debt)

Total pips= 306!

My weekly target is only 100 pips! I will trade carefully, if at all, until the end of this week.

Update Wed 21/9/11

Many of the pairs are just drifting along in a sideways movement. I suspect this may continue until after the FOMC meeting, scheduled for early Thurs am here in Sydney. This sideways movement has been good for my TS system though. It has enabled the ADX to get back to the waterline level of 20. Thus, the next big moves on these pairs will be much easier to evaluate and trade on.

Update Thurs 22/9/11

I have woken to find that big moves have occurred on some of the pairs due to the Fed statement overnight. I have signals to short the A/U, G/J and A/J and to long the USD/CAD. These pairs have made huge moves in the last 4 hours though and, so, some pullback might be expected. Also, the U/C will close above parity for the first time in many, many months! I mentioned earlier that I will be conservative for the remainder of the week as I have already made my weekly target. Of all of the signals I am choosing to long the U/C. I have an order in to go long at 1.004 as I anticipate some retrace given the significant break of the 1.00 level. Why choose the U/C? Well...I am cautious trading about Yen pairs as there is always the chance that the BOJ will intervene. The A/U and A/J are trading within symmetrical triangles and both are approaching the bottom trend line of these. Thus, a bounce might (or might not!) be due. Thus, a Long on the U/C looked the best choice of these pairs.

Update Fri 23/9/11

Another ringing endorsement for my TradeSpotting (TS) system. These are the current updated results for the trades that were signaled yesterday by my TS system:

Short A/U: up 350 pips

Short A/J: up 280 pips

Short G/J: up 230 pips

Long U/Cad: up 230 pips.

Unfortunately, I missed my entry into the USD/CAD as I was anticipating more of a pullback. Lesson learned: enter on candle close and set a larger stop. Then, you don't miss the move.

Week ended Fri 23/9/11

Another great week using TradeSpotting on FX.

I caught 306 pips and my TS system yielded more than 1000 pips in subsequent trade signals.

Using Indices to plan for week 19/9/2011

USDX

The US dollar index is looking a bit bullish to me.

On the daily chart: it has had a bullish breakout from a symmetrical triangle and looks to be pausing before another 'up' run. It retraced a bit to the daily 200 EMA which was also a strong S/R level of 76 and also a fib level retrace of 38.2%. It finished last week by resting at the weekly pivot. (PS: click on charts to enlarge them for viewing.)

On the 4 hr chart: it looks like a bull flag to me and it remains to be seen whether it breaks out and up this week.

EURX

The Euro dollar index is giving mixed signals.

On the daily chart: It is forming a symmetrical triangle within a larger symmetrical triangle. Last week it bounced up off the lower trend line of the larger symm triangle, hit the 50% retrace level from the Aug high which was also near the Weekly R1 level and finished the week off by pausing at the Monthly pivot S1.

On the 4 hr chart: It is getting close to the apex of the symm triangle and could break out up or down. You will need to watch this index from the beginning of the week to see which way it moves.

Conclusion:

The USDX looks bullish so I'll keep a close watch on this at the start of the week to see which way it moves. A bullish USDX points one towards going long on the USD in the pairs. Each pair then has to be assessed for potential trades though, the index just give added confirmation, if needed.

I'll be watching which way the EURX breaks before taking and EUR dollar trades. If the index breaks out and up that would suggest to me to look for potential long EUR trades. If it breaks down though, then I'd look for opportunities or set ups to short the EUR.

PS: I continue to be grateful to Pierre Du Plessis, from FX Mentor Pro, for teaching me the value of tracking the indices to assist with trading the FX pairs.

Gold using TradeSpotting

Gold has offered up two good trend trades using my TS system in the last 24 hours. This trend was picked up on the 30 min charts. See chart...you may need to click on this image to enlarge it for viewing. Last night, that is, during the US session, there was a Gold move worth almost 300 pips. During today's Asian session there has been a further down move worth over 150 pips. Not bad for a days work!

Week ended Fri 16th Sept 2011

I made my weekly target early in the week with GBP/AUD. Most of the pairs have either chopped sideways for the week or have chopped sideways for the last few days after the big moves from late last week. The ADX, on many pairs, is drifting back to the base line with all of this sideways choppy movement. Check your charts for the ADX on the E/U, A/U, E/J, A/J, U/J, U/CAD, G/A, G/U and the E/G. This is a good thing though! Many good moves come out of sideways markets. The ADX, being back at the base line, should be an effective alert for when the next major moves start. There are only a couple of red-flag news events out tonight from the US. So, the moves may not evolve until next week. Unscheduled news and speeches out of the Euro-zone is a constant problem of late though. It is difficult trading from a technical perspective when there is so much fundamental impact on the markets by way of news and announcements from the troubled US and Euro-zone.

Whilst I was sleeping!

The E/U gave a nice LONG trade worth over 100 pips on the 30 min chart during the US trading session last night. This is one of the frustrations with trading FX....many moves occur whilst us Aussies are tucked up in bed! It is comforting, though, to know that my TS system is working! Check out the chart attached. You may need to click on the image to make it larger for viewing. I have labelled the entry and exit points for this trade. The ADX gives a clear signal but I cross reference this indicator against a few others too before confirming a trade.

Using indices (USDX and EURX) to help with trading FX

Using the indices to help track the direction of the major pairs

Part of my FX trading regime at the beginning of each week, and of each day, is to assess and monitor the 2 major indices, the USD dollar index (USDX) and the Euro dollar index (EURX). I find this useful to help with determining the possible trend directions on the major FX pairs. For example, if the USDX is trading up then I would look towards being ‘Long’ on the USD and short on the currencies that make up this index.

Description of the components of the USDX and the EURX

The US Dollar Index (USDX) is a measure of the value of the US dollar compared a basket of foreign currencies. It is a weighted mean of the dollar's value compared to

EUR, 58.6%, JPY 12.6%, GBP, 11.9%, CAD, 9.1%, SEK, 4.2% and CHF 3.6% weight

The Euro dollar Index (EURX) is a measure of the value of the Euro compared a basket of foreign currencies. It is a weighted mean of the dollar's value compared to

USD, 31.5%, JPY 18.9%, GBP, 30.5%, SEK, 7.9% and CHF 11.2% weight

An example of how I would use the indices to help track trade direction on currency pairs is given below with charts attached. The vertical dotted lines on the chart separate each month. You may need to click on the charts to make them larger for easier viewing.

A look at the daily chart for the GBP/USD for August shows that this pair was pretty choppy with no real clear direction. A look at the USDX chart for this period shows that it was also fairly choppy, not surprising. The USDX had been trading during this time within a symmetrical triangle and, according to triangle theory, was likely to break out, either up or down. From this chart you can then see that the USDX did indeed break out, in an upwards direction, at the beginning of September. The ADX indicator (bottom of chart) supported the direction of the USD trend as being Long (or, moving upwards) from the beginning of September. This observation would then give a trader more confidence with tracking the direction of US currency pairs. So, looking back then to the GBP/USD chart for the start of September you can see that the trend with this pair was down, that is, short for the GBP (and long on the USD). Thus, this trend was supported by observations made from looking at the USDX chart. That is, look to go Long on the USD, relative to other pairs.

In summary, if the USDX is trending up, look for confirmation to trade long on the USD, relative to other pairs. If the USDX is trending down, then look for confirmation to trade short on the USD. The same theory applies to the Euro dollar index, EURX.

I am most grateful to Pierre du Plessis, from FX Mentor Pro, for teaching me about the value of tracking indices in trading FX.

300 pip week using TradeSpotting

I had a good week using my TradeSpotting system on 4 hr charts.

300+ pips on just 4 trades.

I had shorts on the GBP/AUD, EUR/USD, EUR/JPY and the AUD/USD.

The trick, I believe, is to not over-trade. Patience, discipline and money management are the keys to success in Forex trading.

TradeSpotting on Stocks

My TradeSpotting (TS) system is also useful for directional trading of stocks and options using daily and weekly charts. The TS system provides entry signals to either buy (go Long) or sell (go short) with either stock or option purchases. Whilst I am happy to buy certain stocks, I do not like to short sell stocks. My trading preference for directional trades is to buy either Put or Call options. If a stock chart renders a signal that suggests upward movement then I would look to buy a Call option (at least 3 ~ 6 months out). Conversely, if a stock chart suggests downward movement then I would look to buy a Put option (at least 3 ~ 6 months out).

I have posted weekly and daily charts for two stocks, Avon (AVP) and Walgreen (WAG), to illustrate this strategy. It is important to analyse trading charts fully to identify areas of strong support or resistance and to identify any other trading patterns. Both of these stocks had been trading within a triangle pattern for some time so I was looking for a breakout, either up or down. AVP and WAG eventually broke down and out of these triangles. This breakout move provided added support to confirm the signals to SELL that my TS system identified shortly after the breakout.

The downward move with Avon was almost a $6 move and on Walgreen was almost a $5 move. These would have provided profitable option trades.

TradeSpotting on Stocks

My TradeSpotting (TS) system is also useful for trading stocks and options using daily and weekly charts. The TS system provides entry signals to either go long or short with stock purchases

TradeSpotting on 30 min charts

My TradeSpotting system is also effective to use on 30 minute Forex charts. I have posted a 30 min chart of the EUR/USD from the 8/9/2011. This momentum move occurred during the US session and yielded up to 160 pips. Unfortunately, for us down here in Aussie land, many moves do occur during either the London or US session.

So, for those of you in the US trading zone, 30 min chart trading using a trend trading system, such as TradeSpotting, can be an effective form of trading.

NB: explanation of the blue rectangular boxes. These boxes illustrate different trading zones. The left hand side of the blue rectangle denotes the Asian session, the right hand side denotes the London session. The un-shaded section represents the US session.

My TradeSpotting system

My TradeSpotting system is a mechanical, trend-trading system that uses a range of indicators to generate trade entry signals. The most significant indicator in this system is the ADX. Others included are EMAs, pivots, S/R levels and a couple of others.

An example of a TradeSpotting trade is illustrated above in the screen shot of the GBP/AUD.

This system relies on catching strong, market momentum moves. Mechanical systems offer an advantage in that they take out much of the anxiety and/or guess work about whether to place a trade or not.

A TS trade is placed when all the indicators align together at their optimum levels. My TradeSpotting system is, thus, very visual and takes only moments to assess on any trading instrument (Forex, Stocks ETFs Futures etc) and, on any time frame.

I will endeavour to post trades on this blog.

I am currently seeking Intellectual Property advice as to how I can safeguard my system from being hijacked by others. I have been advised that sharing my system with the public before establishing any IP will void any future opportunity for this protection. Please be patient with me as I investigate this further.

Please feel free to ask questions.

I will post an analysis of the FX indices, USDX and EURX, at some stage over each weekend. This helps to determine or understand the possible overall trend for the coming week. I will then post an analysis of any trade set ups, as they appear, with each 4 hr candle close.