Trading week 17/10/11

Saturday 22/10/11. Hmmm. Musings after a difficult week.

This week has been a difficult week for trend trading as well as other types of FX trading. We did not get the follow through on many of the moves. It was rather like my front loader washing machine, one way one minute, the other way the next! I stood aside towards the latter part of the week. I belong to a trading forum with people who trade a range of systems and all of them have struggled this week.

I’m not sure what was more bruised though...my ego or my account. I have hardly had a loss using TS to trade FX so it was hard to take this week. I have looked back at the trades I took and human error/judgement was probably more at fault than anything. I noticed that I jumped in too early on almost every trade without waiting for all the indicators to align together. Basically, I took trades when the signals had not formed fully. I was overly confident with TS after a lengthy run of success and, as a result, took trades too early without waiting for proper confirmation. That essentially is the ‘greed’ they talk about in trading when they discuss the ‘fear and greed’ concept.

I have also tweaked my ADX indicator a bit. I’ve raised it to 25 rather than 20, thus meaning I’m waiting for a stronger indication of trend. I'm thinking that this may help to protect from being drawn into the sideways choppy moves, like we had for a lot of last week. I'll trial it from next week and see how it goes. The ADX is only one component of my TS system though but an important one.

Friday 21/10/11 (6am)

Markets still ranging. USDX and EURX still bouncing around in the narrow ranges as shown in the charts below. The last 3 daily candles on the both indices have been indecision candles. I'm reading elsewhere that many traders are struggling this week so, that is some comfort to me.

Thursday 20/10/11 (6pm)

Another look at charts of the EURX and USDX show the narrow range that price has been bouncing around within since the middle of last week. (see highlighted area on charts below). The dotted vertical lines on the charts are weekly divisions.

I'm thinking that it is probably safer to wait until price breaks out of these narrow ranges before trading any further using a trend trading strategy, such as my TS system. Yes...you might miss some good moves but at least you're less likely to lose!

Thursday 20/10/11 (5pm)

I've just had a 4 hr candle close here and, although there seems to be continued USD strength and EUR weakness, I'm not getting convincing signals on my TS system. There are weak signals to short the A/U, silver and gold, all basically correlated and long USD trades, but that's about it.

I'm not giving this EUR weakness much credibility until it breaks, closes and holds below the 200 EMA on the 4 hr chart. (chart below). You can see how this level has acted as support over recent sessions.

I've spent much of today mulling over how to avoid getting caught up in this choppy side-ways type of movement. Far better to stay out of 4 hr trend trading when the moves aren't following through sufficiently. I'll post more on this later or over the weekend though.

Thursday 20/10/11 (6am)

I have woken to see another trend reversal overnight. The USD swung back up and EUR went back down. Trend trading is impossible during these times. A look at the USDX shows how range bound price is. (see chart).

Many pairs are showing head and shoulder patterns on the 4 hr charts..interesting. The E/U H & S pattern is shown below. There are H & S patterns on the E/J, A/J, G/J and NZD/USD as well. It seems to be more a time for trading breakout/continuation strategies, such as these H & S breakouts, at the moment as trends are just too short lived. Otherwise, trend trade on 30 min or 1 hr time frames.

Wednesday 19/10/11 (8.30pm)

There is still a lot of USD weakness and EUR strength around tonight. Well..at the moment there is but we all know how quickly this can change! I have seen signals on my TS system to short USD/SGD and long the A/U. These are both USD trades though and thus correlated. There are some road blocks in the path way of these pairs (previous support /resistance and trend lines etc). There is also red flag USD news out in a few hours. So, what does all this mean? CAUTION needed.

Wednesday 19/10/11 (noon)

One look at the 4 hr charts of the USDX and EURX shows how choppy this week, so far at least, has been. (see charts below). Trend trading on 4 hr charts during this is not easy. I'm down in pips this week..a first for me with TS..... and I'm not happy. It has literally 'rained' pips using my TS system over recent weeks so I know I need to put this 'blip' into a monthly perspective. BUT.....poor decisions, or rather, discipline (jumping into trades too early and, then, too late) and poor trade management have been even more to blame than the markets themselves so I'm cross with myself!

All trades this week had pips in profit before reversing so, I need to investigate using an EA that moves my STOP to entry once my first profit target has been reached. This is especially the case for Asian session traders who are usually asleep when many of the big news announcements etc occur causing big market moves or swings. The good thing about all this sideways chop though is that it has resulted in the ADX getting back down below the 20 level on most pairs, making it so much easier to pick the next new trend.

Wednesday 19/10/11 (6am)

Have woken to see a reversal in trend for the USD and EUR. There was good USD data released overnight as well as positive talk out of the EURO zone. These have combined to see a return to 'risk on' trading. Thus, the USD is down and the EUR is up. This is 'Grand Ol Duke of York stuff' at the moment!

Swings like these will test any trend trading system unless you move down to smaller time frames and work within the swings. 4 hr trend trading will struggle at times like these, especially when you sleep through most of the swing events, like we tend to do down here in Australia.

The short Gold made 100 pips (was up 300+ at one stage!).

The short silver and USD/CAD were stopped out though.

Tuesday 18/10/11 (9pm)

In spite of the USD strength and EUR weakness over recent hours, few TS signals have evolved fully. I did receive a signal to long the USD/CAD and short silver and gold. These are all correlated trades though, essentially long USD trades. There is USD 'red flag' news out later. This is always a problem for Aussie traders, that is, being asleep when news might affect a trade.

I did lock in some pips on the G/A and N/U trades earlier.

Tuesday 18/10/11 (5pm)

I have had signals to short NZD/USD and long GBP/AUD.

Tuesday 18/10/11 (noon)

The USDX is pausing on its uptrend at the 4hr 200 EMA level which is also near the weekly and monthly pivot point. (see chart)

Still no clear signals on the pairs just yet. A swathe of China data due out a 1pm so this could cause some movement. I will wait to see if the USDX breaks and closes above the resistance before taking any further long USD positions.

Tuesday 18/10/11 (am)

We got the bounce in the USDX and pullback in the EURX as suspected. A lot of the pairs are adjusting to this new trend and signals look like setting up on many of them after the next 4 hr candle close ( in 3 hrs time).

The EURO weakness did not help my trades from last night though. Bad CAD data overnight pushed the CAD down and my GBP/CAD was stopped out and I closed out the EUR/CAD. I did get into these trades a bit late though. It is worth noting that after the initial signal, the EUR/CAD made 85 pips before reversing and the GBP/CAD made 150 pips before reversing. My loss on these trades can be put down to greed...I chased these trades. By that I mean I entered a few candles after the initial signal. Bad CAD news overnight then finished this off. What have I learnt??? DON'T CHASE TRADES! I'm pretty annoyed by my lack of discipline! My TS system works, even these trades reflect that BUT, my lack of discipline compromised my progress. Good horse...dud jockey!

Monday 17/10/11

It's early stages yet but the suspected bounce up in the USDX and drop in the EURX seems to be unfolding. (see my post on Indices for this week).

I have a new signal to short the EUR/CAD (1.3965). I am also breaking one of my rules to 'not chase trades' and I'm short on the GBP/CAD (@1.5927), a short signal received last Friday. This trade had already moved 100 + pips from the initial signal before I entered it though!

A rally in the USDX, if it occurs, will trigger some further new signals though so I wait with patience and discipline to see how these indices progress.