Trader Focus

February Market Update and Outlook

2013-02-25T01:51:00.003-08:00

Hey traders!

This month I've been spending travelling to South Africa and Holland, speaking with some of the most successful people in property and business. However, I'm now back in town for a while and present to you February's market update as well as a few trades I'm currently looking at. Enjoy :)

This month on whole, saw markets reverse any gains made in the January rally. The first week of the month started the short covering on the back of key economic central bank announcements. After a slightly better than expected US Non-Farm Payroll the week before, the Euro ended on a 12 month high. However, with key interest rate decisions and central bank outlooks, profits were booked and the markets retraced recent trends. The first announcement from the Reserve Bank of Australia led the Australian Dollar to tumble over 200pips in a few days. Whilst the Bank kept rates steady at 3.0% they signalled further easing was possible, even though their Trade Balance data came in better than expected (-0.43B actual vs -0.81 expected). The next key announcement was from new Bank of England Governor elect Mark Carney and his policy measures. The British Pound rallied across most of its counterparts as he set the bar high for any changes given the success of Canada's and the UK's flexible inflation targeting. However, the European Central Bank disappointed as President Mario Draghi’s comments disappointed markets with more talk and no change.

The second week of February started off fairly range bound with the Greenback trading in an un-correlated market. The Euro ended lower on the week after an initial rally faded on the back of comments from ECB President Mario Draghi. His February 11 statement started the initial rally with comments stating that Spain had made enormous progress since November 2011. However, with no new real news announcements, traders looked to bank profits after weeks of strong rallies. The British Pound was the victim this week as it continued its move lower started at the beginning of January. UK Retail Sales came out worse than expected (-0.6% actual vs 0.5% expected). GBPUSD fell over 80 pips in less than an hour, increasing its weakness against other currencies. This was the catalyst in what has been a strong de-leveraging in the British Pound.

The markets opened up quietly in the third week as traders awaited the US Federal Reserve FOMC statement on Wednesday night. As Monday was also a US Public Holiday, President's Day, the market was held in a fairly tight range with Euro held in a 60pip range. However, volatility increased on the FOMC statement. The S&P500 fell from its 5 year highs and booked in its biggest decline since November. Investors came out of risky based assets and fled to the safe haven US Dollar. The uncertainty between each member and the ongoing debate on the pace of long-term asset purchases led to a bout of profit taking after recent risk rallies. The British Pound continued its de-leveraging since January highs. UK Claimant Count Change came in better than expected at -12.5k actual vs -5.3k actual. However, all eyes were on the Bank of England meeting minutes and the reaction to the aggressive sell off in the British Pound. The BOE members were split 6-3 over more bond purchases which unexpectedly revised the prospect of additional quantitative easing. The markets did not like this and the British Pound fell 120pips in less than an hour.

However, the main event of the month was the UK losing its AAA credit rating status and being downgraded to Aa1. This, along with central bank policy measures that are having the opposite effect in helping economic growth, split Bank of England members and the ongoing political pressure of a Euro exit have weighed heavily on the British Pound. At the beginning of the year 1GBP bought $1.6340, now only two months later 1GBP buys $1.5100.

CURRENT TRADING OPPORTUNITIES

USDCHF – Currently trading at the upper end of its downward trend channel, we could easily see a move to 0.9000, the reward to risk is in our favour.

CRUDE OIL – The main theme right now is Oil as we come into a typically seasonally bullish quarter. Price action also suggests a move higher as we into support at 92.80. Continuation divergence confirms a potential move higher as does the daily low test bar/hammer candle. Initial target of $100.

Trade update, cut your losses and seasonals...

2013-02-04T05:28:00.000-08:00

Hi traders!

Whilst I've been in South Africa for the past two weeks, the markets haven't really done much but has still yielded some trading opportunities.

The Sterling crosses rebounded slightly and GBPAUD was the best performer although that has now been stopped out at breakeven. Hopefully, you managed to kill the GBPNZD trade as price action struggled to bounce of that level - shown by 4 high test/hanging man candles and a doji. Hardly the sign of strong buyers coming into the market! Let your winners ride and cut your losses short as they say. You may get it wrong sometimes but the effect of compounding is on your side.

The JPY pairs have still been great to trade on an intra-day basis but rather difficult end of day. As they saying goes 'trade the trend until the bend at the end'.

A few pairs I'm looking at now are EURAUD and AUDCHF. Historically, February is the worst performing month for EURAUD and the best performing for AUDUSD.

Whilst EURAUD has broken a bullish head and shoulders pattern it has run into resistance at the 1.32 handle. The divergence also suggests a pullback.

AUDCHF is essentially the opposite trade because of the Euro peg, however, it is also at the lower support level of its 6 month trading range.

Of course if these levels fail then look for breaks and retests to confirm the new direction.

Happy trading!

Sterling crosses due a rebound? Short covering and technicals suggest so....

2013-01-24T01:33:00.000-08:00

Hi traders!

The market has been fairly range based, especially against the Greenback. After such strong moves recently the market is in a corrective mode.

However, here a few major themes I am looking at:

GBPNZD - Support is found at 1.8800 which includes third touch horizontal, 1.13 Fib extension from weekly cycle lows and completed ABCD pattern. We also have triple divergence and potentially bullish price action (depending on how today ends). Initial scale out target at 1.9000 resistance with a protective stop trailed on remainder of position.

GBPAUD - Support is found at 1.5000 which includes lower trend support line on closing prices, 78.6% Fib retracement from last major monthly low and completed ABCD pattern. Divergence and inside bar and inverted hammer supports a bullish move to at least the 1.52 handle.

Friday wrap and trade update...

2013-01-18T06:11:00.003-08:00

MARKET NEWS

After strong rallies against the Greenback last week, markets consolidated in a whip-saw trading week. Patience and holding your nerve was definitely necessary this week! Whilst most traders digest US earnings reports, the resurgence of EURCHF skewed currency correlations. UK CPI came in as expected at 2.7% and US Retail Sales fared a little better at 0.5% against 0.2% expected. Arguably, the key data this week was China GDP which came in as expected at 5.7%. However, this represents the slowest growth period in 10 years. Subsequently, the Australian Dollar fell due to their import/export relationship. Elsewhere in Asia, comments from BOJ and government policy makers supported the Yen as they look to work towards a 2% inflation target. The Yen depreciated against all its counterparts, continuing its 3 month rally.

TOP TRADES OF THE PAST WEEK

1. USDJPY – 16.01.2013 4hour chart – Support is found at 80.00, the 50ema and 61.8% Fib retracement. The low test bar confirmed the move higher resulting in +2%

2. NIKKEI225 – 17.01.2013 – Support is found at the daily 20ema. The morning star reversal pattern confirmed a move higher resulting in +1.5%

3. Coca Cola (KO) – 14.01.2013 – After bouncing off multi year lows t $36, the higher low was confirmed by the low test bar. This trade is still running currently up +1%

4. EURUSD - 14.01.2013 - Resistance is found at the 200 weekly MA and 1.272 Fib extension. Price action and indidcator divergence suggested a move lower. I'm still holding the trade short, even though it's spent more time in the negative than the positive! The trade is now around a break even level. Patience is key!

EFFECT OF THE NEWS LOOKING FORWARD

Next week’s Bank of Japan Monetary Policy Statement will be very key as tough talk from political leaders on a 2% inflation target will now be put to the test. Their press conference will also highlight key levels on which they will support the Yen further. German ZEW on Tuesday will also be key as traders look for hard evidence to support recent comments from ECB members that the Euro is now out of danger. The Canadian Dollar has a big week as BOC Rate Statement and CPI data is released. As always, be careful of intra-day volatility and always follow price action as a leading indicator.

Friday wrap and trades...

2013-01-11T07:36:00.003-08:00

MARKET NEWS

Whilst last week saw a US Dollar rally on the back of a deal to avert the fiscal cliff, this week was risk on. Now that the US politicians are working out a deal before the US hits its debt ceiling on 28 February, all eyes were on central banks and the strength of the Eurozone. The beginning of the week saw little volume as Euro was held in a 3 day 150 pip range. Light volumes from the Equity markets, due to Q4 earnings announcements, clearly spilled over into FX trades. However, the market was poised for a break on Thursday as ECB President Draghi spoke. After strong Chinese data, traders were looking for a bullish tone to get long on risk trades. They were not disappointed as Draghi played down the chance of a possible rate cut, as was previously suggested in the last ECB meeting. The 'rate decision was unanimous' as the 'Eurozone has experienced strong capital inflows'. This risk carried on in the Asian session as the Japanese government approved an emergency stimulus package at their Cabinet meeting. This includes targeting a 2% inflation target and creating over 600,000 jobs.

TOP 5 TRADES OF THE PAST WEEK

1. EURUSD - Long 07.01.2013 - Support is found at 1.3030, the 50dma and 61.8% Fib retracement. The low test bar/hammer candle confirmed the bullish bias. This trade is still running currently up +1.5%

2. USDCHF - Short 07.01.2013 - Resistance is found at 0.9270, the 50dma and 61.8% Fib retracement. The high test bar/hanging man candle confirmed the bearish bias. This trade is still running currently up 1.5%

3. NZDCAD - Long 07.01.2013 60m chart - Support is found at 0.9250, the 50ema, previous days high and 61.8% Fib retracement. The 12pm bullish engulfing bar/candle confirmed the move higher resulting in +2

4. EURNZD - Short 08.01.2013 60m chart - Resistance is found at 1.5705, the 50ema and 50% retracement level. The series of high test bars/hanging man candles over the Asian session confirmed the bearish bias resulting in +2

5. EURJPY - Long 08.01.2013 240m chart - Support is found at the double bottom 113.60. The ring low confirmed the move higher just before the Asian session open resulting in +2%

EFFECT OF THE NEWS LOOKING FORWARD

US Federal Reserve Chairman Ben Bernanke's speech on Monday may set the tone for the week as he discusses policy measures and their quantitative easing program. Q4 earnings in US equities also may have an effect on risk trades as the markets seem to have bought back the time old correlation between equities and FX. However, all eyes are on the US debt ceiling issues up until reaching the limit on 28 February. As the negotiations will have positive and negative moments, always follow price action for a more conservative and consistent way to trade.

Weekly update...

2013-01-04T02:12:00.006-08:00

MARKET NEWS

Financial markets were relieved, at the beginning of the week, at a deal to avert the US fiscal cliff crisis. The US Congress approved a rare tax increase on the wealthiest households to prevent the US economy falling into recession. However, it is far from over as a rocky period begins. All eyes are now on the negotiations to avert the US debt ceiling which is scheduled to hit on the 28 February. Whilst the rally held in Global Stock Indices, the FX market played a different story with a strong risk off sentiment. The main victims were the Euro, British Pound and Gold which gave back their two week gains. The US FOMC statement did not help risk trades or the soft metal as the minutes revealed that while there was support for the Fed’s bond buying program there was disagreement over how long the program would last; mainly whether it will continue through 2013 or end before the year’s end. With the ongoing fiscal cliff issues, disagreement between FOMC members and better than expected ADP Non- Farm Employment (215k actual vs 134k expected), traders looked to cover their positions and pile into the safe haven US Dollar.

EFFECT OF THE NEWS LOOKING FORWARD

This week's US Non-Farm Payroll will be widely looked at considering the disagreement between Federal Reserve policy makers. However, all eyes are on the US fiscal cliff issues up until reaching the US debt ceiling forecasted for 28 February. As the negotiations will have positive and negative moments, always follow price action for a more conservative and consistent way to trade.

Trade update

2013-01-04T02:12:00.001-08:00

NZDCAD and Gold both were stopped out on the back of a negative FOMC statement last night. However, as we managed our stop loss this was only a 0.25% loss. Remember trading is about controlling losses and maximising winners. If you look at your best trades, they are the ones that just typically go. It took me a while to actually get to 'cut my losses short, let my winners ride' and I realised that I don't know what's is going to happen next and as Warren Buffett's Rule 1 of trading goes: 'Never Lose Money!'

Our US stock trades did relatively well, combining in over 4% on the day trading the gaps, which were closed end of day.

I'd also like to point your attention to the USDCHF chart. Seasonally, January is the best performing month for the US Dollar and it seems it has take a bit of a lift. The weekly chart points to significant divergence on RSI and Stochastics. Depending on NFP today, we may end up as an engulfing bar:

NZDCAD +3%, Trade the Gaps in US session

2013-01-02T02:10:00.001-08:00

Happy New Year to all my readers around the world! I hope you all had a lovely festive break.

Financial markets were today relieved at a deal to avert the US fiscal cliff crisis. The US Congress approved a rare tax increase on the wealthiest households to prevent the US economy falling into recession. However, it is far from over as a rocky period begins. All eyes are now on the negotiations to avert the US debt ceiling which is scheduled to hit on the 28 February. However, we trade the chart and look at momentum and sentiment.

The risk on mode from Asia helped our NZDCAD trade which if traded on the 4hour chart is currently up 3% (assuming 1% risk). If traded on the daily chart then it is currently up +1%. The former would see stop losses moved to break even and the latter stop losses trailed to Monday's low. Our Gold trade is also currently up +1% with stop loss moved to Monday's low.

If the risk on sentiment continues we may see some gaps on stocks during the US session.

Coca Cola Long (KO) - Strong horizontal support from yearly highs and lows. RSI and MACD divergence, Ring Low setup. This is tradeable as a pure price action setup but could also be traded on the open if the market gaps higher.

Home Depot Long (HD) - Double bottom with Stocahstic and RSI divergence. This may provide further support for the market to gap open higher.

Exxon Mobil Long (XOM) - Support is found at four touch trend line from 2011. The engulfing bar/candle and Stochastic, RSI divergence supports a bullish case. This is tradeable as pure price action but you could also wait for the intra-day gap.

Trade update and Read your Words!

2012-12-30T03:43:00.001-08:00

The markets gave some unexpected volatility over the Christmas period where traders were happy to take on risk. The EURCAD trade ended up as break even (trading on the 1 hour chart, the trade went 2:1 reward to risk, so a great place to move stop to break even) and did not trigger on the Daily chart. Gold is still moving sideways as the fiscal cliff issue has not made any progress.

I have taken a long on NZDCAD as my seasonal's suggest a bullish January but this will depend on the risk on mentality for the New Year and clearly the fiscal cliff. However, the technical setup was there and the weekly low test may support the bullish case. Daily chart below:

As it's the New Year, most people will be re-writing their trading plan and looking back at what goals they have or haven't reached and why. A few traders have sent me their thoughts and plans and it is surprising to see they don't where they are going wrong. If they just looked at the words they used to describe their trading plans and their reasons on why they have or have not reached their goals, they would see the lack of confidence and consistency they have in themselves.

Words such as usually, sometimes show lack of a consistent trading system and thought process. Their goals and targets are only in the 'I want' category, these need to go in the 'I will' category. What was most apparent is most don't have a measurable plan of success, i.e a 3 month, 6 month and yearly plan. When are you going to increase your risk, put more capital in, etc...

Remember, trading is a business. Look back at how you have treated your trading business in the past year or so and would you have opened up and operated another business in the same way? Sometimes, because of the benefits of trading (low start up costs, ease of access) this creates a false precedence on trading being easy. The truth is trading isn't easy but it is simple!

As ever, I'll keep you updated when I can on anything I see setting up. In the meantime, have a fantastic New Year!

Euro trade +4%, Gold Long, EURCAD Short

2012-12-24T05:35:00.001-08:00

Hi traders!

I'm finally back in the UK after a visit to the States and am glad to see our Euro position going well. First part has been scaled off at the large option expiry number 1.3300 and stop has been moved to 1.3155, still locking in a 2-3% gain (assuming 1% risk).

My 20 year seasonal analysis is still providing me a bias on my trades, as it did with Euro (posted in: http://qitrading.blogspot.co.uk/2012/12/euro-long-probabilities-and-seasonals.html).

Gold looks interesting for a long as it comes off its 1.272 Fib extension and the Stochastics diverge, as my good friend and trading partner Rob Colville also suggest so: http://robtrading.blogspot.co.uk/2012/12/gold-long-anyone.html. However, we may see a lower low to the 1.618 Fib extension where the RSI will also diverge. This is why I have taken this trade with half my usual risk.

EURCAD has hit its average monthly gain for December (sample size of 20 years). January suggests a negative month for this pair. Technically, we have RSI divergence, 2 resistance levels and the 1.272 Fib ext. I have gone short on the 60m high test but you could wait for an end of day setup.

Charts below

Have a very Merry Christmas and a fantastic New Year!

Euro long? Probabilities and Seasonals suggest so...

2012-12-10T14:36:00.000-08:00

EURUSD has retraced 50% of its original move from November lows to December highs. This is also the fourth touch of the 200dma which is providing a level of support. The order of moving averages suggest further upside but we need to wait for them to start separating away from each other to confirm the move higher. Continuation divergence on the RSI and the Inside Bar/Harami candle price action suggest bullish momentum, as the chart below shows. Whilst this pair is arguably trading sideways, the seasonal probability suggests for a bullish month as the table shows below.

Below is also an analysis I have done on the EURUSD since inception. It shows the best and worst performing months on AVERAGE. Remember the data can be skewed with the likes of the 2008 crash but Seasonality is an extra edge in the market we shouldn't ignore.

Listen carefully....I also get it wrong, which is why I RISK MANAGE!

2012-12-09T04:04:00.001-08:00

Hello all from a lovely day in Surrey!

So, I had an interesting conversation with some trader friends of mine. The reason I say interesting is because the mindset of the human being never ceases to amaze me! They mentor a lot of beginner and advanced traders who also follow my blog. However, what they've noticed is that people only listen to what they want to hear! Or in this case read parts of what they want to hear!

For example, the past few trades haven't triggered and the ones that have, depending on how you entered got stopped out. Now, in my post I explain my thought process and the reasons I look at certain trades. Why? Because I want every reader to understand trading is about looking at the markets the same way every single day. Let's take the recent FTSE trade. For those of you who have been following me for a while, you know that I am medium/long term bullish on global stock indices (due to seasonals, dow theory and fiscal cliff). Therefore, the trade I posted before was a short term trade which I highlighted I would trade at lower risk! Yet some people ignore the risk part and sell, sell, sell!

Herein lies the obstacle of being a successful trader. Through our life we have been programmed to listen to everyone else and the so called experts as they know more. Honestly, the way society works today is that they grow us up to be sheep! Follow the path you 'should' take, follow the path of what everyone else is doing, the safe path, comfortable path, etc.

Simply put: 'Not many of us have the entrepreneurial spirit - a single minded focus and belief in yourself and your path'. However, as a trader this is exactly what you need!

My blogs, other blogs, your idols, your teacher are their to guide you and help along the traders journey. However, you have to have your own plan, your own goals and your own path to success.

I truly believe everyone can trade if they have the correct mindset. Just follow Anthony Robbins path to success in his Business Mastery:

1. Know your Why - this is your story and driving force
2. What's your Strategy - how are you going to get there as a business?
3. How - know the tools to implement your strategy

One more thing I'd like to highlight is RISK. Remember the key quotes from Warren Buffett and the World Poker Champion I blogged about in November: http://qitrading.blogspot.co.uk/2012/11/what-warren-buffett-and-world-poker.html

Also, remember this from George Soros:

'It's not about being right or wrong, rather how much money you make when you are right and how much you lose when you are wrong!'

I'll send out my watchlist in the next day or so. But it looks like the risk rally could start with Gold, Precious Metals and Indices turning.

Sell Indices before the rally? Previous trade update...

2012-12-04T00:25:00.001-08:00

Whilst I am bullish on Global Stock Indices in the medium to long term, most indexes have put in decent reversal patterns which suggests a short term bearish bias. When the US finally sort out the fiscal cliff, which they have to, then the market could be in for a strong rally. Until that point the market has been rallying on low trading volumes, as the ATR levels are near historic lows during previous peaks.

How then would you position yourself? Well trading is all about having a view based on what you see on the charts. Then it's about executing that view in a risk managed way. Whilst I could be wrong on my analysis, as may be the case with AUDCAD - the news of another rate cut from the RBA was taken positively from the market, it's all about reward to risk at the end of the day. Therefore, on the majority of these short positions I will be risking less than my usual stake and then position my full stake on the rally, if it comes along.

This is how I position myself in the markets. How about you? Do you have a thought out structure and plan everytime you sit down to trade? If you don't, you need to. After all, this is a business and if you fail to prepare, you prepare to fail.

Charts: DAX, FTSE, DJIA - remember this is just the selection criteria. Execution of the trade depends on your strategy, risk rules and time frames to trade and whether we get the right signal to take action!

Market overweight on the Yen....COT report suggests

2012-12-03T01:53:00.002-08:00

The Japanese Yen has been heavily sold off on the back of strong comments from opposition party LDP. This currency could get a little choppy in the run up to the elections on 16 December. However, technically we have some interesting setups. Last week's Commitment of Traders report showed an strong increase in the number of Yen shorts which is at a 5 year high, whereas the Yen didn't move that much relative to the positions taken - suggesting a fundamental divergence and a heavily overweight bias.

I'm currently looking at GBPJPY and CHFJPY short as below:

Friday wrap...

2012-11-30T10:48:00.000-08:00

MARKET NEWS

As with last week and much of the month so far, the biggest mover across the board has been the Japanese Yen. This week was no different as long awaited positive economic data hit the markets along with positive comments from both political parties. The biggest surprise was Japan's October Industrial Output which rose 1.8% (down 4.1% in Sept vs expectations of a further 2% fall for October). Strong comments from political ministers and the Bank of Japan regarding beating deflation also helped depreciate the Yen. In turn, the Nikkei rallied and is potentially due a breakout considering how underweight the index has performed in relation to global stock indices. Most currencies rallied against the Greenback as positive news from Greece buoyed risk assets. The release of another round of aid for Greece, sent the Euro higher. EURJPY benefited the most as traders position strength against weakness. Elsewhere in Europe, UK GDP came in as expected at 1.0%. However, news of the newly appointed Bank of England Governor Mark Carney (ex-Governor of Bank of Canada) sent the British Pound higher. Even in late week trading risk assets benefited as the White House released details on a compromise on US taxes, helping their fiscal cliff situation.

TOP 5 TRADES OF THE PAST WEEK

1. EURJPY Bullish Engulfing Bar Long 28.11.2012 Support is found at the 4hour 50ema and 38.2% Fibonacci retracement at Y105.50. The price action reversal bar confirmed the move and resulted in +2%

2. USDCAD High Test/Hanging Man Candle Short 26.11.2012 Resistance is found on the 60m chart at 0.9953, including a horizontal support cum resistance level, 50ema and 61.8% Fib retracement which resulted in +2%

3. USDCAD Double Top Short 28.11.2012 60m chart Resistance is found at 0.9953. RSI divergence and the High Test/Hanging Man Candle confirmed the move lower which resulted in +2%

4. AUDCAD High Test/Hanging Man Candle Short 30.11.2012 60m chart Resistance is found 1.0360, the 50% Fib Retracement and the 50ema. Whilst this trade is still running it is currently up +1%

5. AUDCHF Double Top Short 28.11.2012 4hr chart Resistance is found at 0.9750, along with the 50% Fib Retracement level. RSI divergence confirmed the move lower as well as price action reversal bar. This resulted in +2%

EFFECT OF THE NEWS LOOKING FORWARD

Next week represents the last month before the start of 2013 so we may some repositioning of portfolios coming into year end. Key news announcements are the RBA Rate Announcement on Tuesday where a 25bps cut is expected, however, they disappointed the market on the last statement so watch price action after the release. We also have key news announcements regarding central bank policy from the UK, US, EU and New Zealand. The last Non-Farm payroll news announcement on Friday may set the tone to any fiscal cliff situation left come year end.

Friday wrap...

2012-11-23T08:14:00.002-08:00

MARKET NEWS

All eyes were on the Bank of Japan's Monetary Policy Statement released on Tuesday. With their decade long problem of an appreciating Yen hurting any type of growth prospects, the upcoming elections have created high levels of volatility. Opposition party leader Abe of the Liberal Democrat Party has repeatedly announced his party would intervene in the markets to a level surpass that off their last intervention three years ago. This coupled with their target of inflation of 2%, was welcomed by traders as they sold the Yen across the board. Elsewhere, markets were fairly subdued due to the US Thanksgiving Holiday on Thursday. Canadian Retail Sales came in worse than expected (0.1% actual vs 0.5% expected), however any moves were capped due to the US holiday and ceasefire in Gaza. The USDCAD's has high inverse correlation to Crude Oil and as such is affected by such events. Whilst the Euro has slowly edged higher on the back of a deal being done to release the next tranche of aid for Greece, gains were capped for the British Pound. This is due to poor Public Sector Net Borrowing figures (6.5B actual vs 4.1B expected) and comments from Bank of England's Weale stating: 'significant risk of economic contraction in Q4'. Euro saw an early rally on Friday morning, from better than expected German IFO Business Climate figures (101.4 actual vs 99.5 expected).

TOP 5 TRADES OF THE PAST WEEK

1. USDCAD High Test/Shooting Star Candle Short 19.11.2012 Resistance is found at 1.0040, the 50% retracement level from May's high to September lows. RSI divergence confirmed the bearish move. This trade is still running, currently up +0.5%

2. NZDUSD Ring Low Long 19.11.2012 Support is found at the 200dma, 61.8% fibonacci retracement and re-test of multi-month trend line from February highs. This trade is still running, currently up +0.75%

3. EURJPY Inside Bar/Harami Candle 21.11.2012 60m chart Support is found at the 50ema, daily pivot level and 61.8% fibonacci retracement. Continuation divergence confirmed the move higher resulting in +2%

4. S&P500 Bullish Engulfing Bar Long 19.11.2012 Support is found at 1350 with 61.8% fibonacci retracement from June's low to September's high and 1.618% fibonacci extension from September's low to high. This trade is still running, currently up +1.5%

5. McDonalds Corp Low Test/Hammer Candle 19.11.2012 Support is found at previous low 83.81 which coincides with 1.272 fibonacci extension from August low's to October high's. Price action and divergence confirmed the bullish move, which is currently up +1%

EFFECT OF THE NEWS LOOKING FORWARD

The macro themes mentioned last week are still in play but next week has a specific focus. Watch out for the UK GDP number on Tuesday, SNB Chairman Jordan's speech on Wednesday, US GDP on Thursday and Canadian GDP on Friday. Whilst any macro trends are unlikely to change from these announcements watch out for intra-day volatility. As always, follow price action as a leading indicator.

AUDCAD looks interesting...

2012-11-21T06:02:00.002-08:00

Whilst we have to be careful of thin trading coming into the extended US holiday, AUDCAD seems to be an interesting chart. As we can see price has put in a lower high after coming off a three touch resistance line from February highs. More interestingly we can see that each high has been relatively overbought as the MACD has triple topped whilst we have had three lower highs. We also have Stochastic and RSI divergence at Novembers recent high. How do we trade this? Well, we can trade off the lower high put in yesterday or wait for a trend to establish on lower timeframes and wait for pullbacks to intra-day levels of resistance. We have a 60% chance of a December rate cut in Australia, the move may have been initiated from the macro players last week.

Here's the chart:

What have you been trading?

2012-11-21T03:09:00.002-08:00

Hi traders! Well it's been one of those months again, every time I'm away the market seems to present itself with the best trading opportunities of the month. Hopefully, you've been catching the moves in the Japanese Yen. Too often I see traders only trading currencies or markets they are used to or have an emotional attachment to. Some of you may say, 'well how do you know the JPY was going to depreciate like that?'. The answer is CORRELATION. Look at every currency against the JPY, the market on a whole is doing exactly the same thing! That type of correlation only presents itself when there is strong momentum and in this instance, where everyone is buying anything against the JPY.

So why is this the case? The Japanese government are spending Y1trillion ($13.5bln) in another round of fresh stimulus to revive the economy. The opposition party LDP have been suggesting they would pursue monetary easing on a scale exceeding that when LDP were in power three years ago. Their leader Abe has also been calling for a 2% inflation target.

Whilst I haven't posted for a while as I've been travelling, there hasn't been anything that has hit my levels. Intra-day trading speaks for itself, follow a strong trending market and wait for a pullback! However, my watchlist for the past month is still the same as I look for long on commodities and stock indices in the run up to the end of the year.

Good luck!

What Warren Buffett and a World Poker Champion have in common....

2012-11-14T04:37:00.000-08:00

Hey traders! That exclamation mark is probably the only excitement you've had if you've been trading recently. The market's have been fairly quiet post US election as reality settles in on issues surround the US fiscal cliff, Eurozone worries and a new Chinese government.

However, this quiet period is just part of the process where the market gets rid of the weak and keeps the strong. For the weak minded traders with lack of patience and discipline will keep trading, lose and naturally give up. The strong minded traders are waiting on the sidelines with their research and analysis, making them ready to attack when the right picture starts to unfold.

We all know the most efficient and effective pathway to success is to emulate the great traders out there. On Monday I was fortunate enough to have a live Q&A session with Jack Schwager and Larry Williams. People always ask me, at your level why go to these events. I simply say because life never stops, always aim to be better, to learn more and be the best you can be. In my previous posts you all know the importance I place on surrounding yourself around the right people with the right mindset. Some people messaged me saying they don't have access to people like that. I simply reply saying you have access to millions of books, videos where you can gain inspiration and motivation.

As this is a time to be patient and follow rules, I though I would share with you some rules from the great Warren Buffett and also two times World Poker Champion Puggy Pearson. One is a professional investor/money manager and one is a professional gambler. Let's have a look at their top three rules, from their books and interviews:

Warren Buffet

Rule 1: Never lose money. Rule 2: Never forget rule No.1 - minimise your losses by understanding how your strategy works and why you are trading it
The market is designed to transfer money from the Active to the Patient - consistent returns come from those who wait for the best opportunity to present itself before making a commitment. Would you buy a house with the same analysis you've done as this trade you are about to put on? They're both investments of your hard earned capital!
The most important quality for an investor/trader is temperament, not intellect - independent thinking and confidence in what you believe in and are doing are far more important than knowing everything there is to know

Puggy Pearson

Knowing the 60/40 end of a proposition - understanding the odds of any bet. As a trader we should aim to find the best opportunities with the odds in our favour. How many reasons do we have to buy or sell here?
Money Management - minimise losses on each opportunity and understand reward to risk
Know yourself - do everything you can to remain disciplined and not blow yourself out of the game before you've even started

What's interesting is that the same traits are required when dealing with investing money to make money and they all come down to psychology and the mindset.

I'll be honest and say that I was not the most disciplined person this month and subsequently took a few losing trades. Why? From my analysis I do every week - over confidence. After one great trade, greed can kick in. This is why it is so important to be on top of your game everyday and remain focused and humble.

As always, if anything DECENT pops up I will post it!

Happy trading and Happy New Year to some of you (it's the Indian New Year!).

Ozzie disappoints; US election provides uncertainty

2012-11-08T01:13:00.002-08:00

The Reserve Bank of Australia surprisingly held rates at 3.25% rather than cutting a half a basis point as expected. However, the technical setup was strong and the reward to risk was in our favour, providing around a 4:1 to the lower support level. Remember it's not whether you are right or wrong, it's how much money you make when you win and how much you lose when you're wrong. After all the most important and free concept we have in trading is reward to risk.

Eg: Reward to Risk of 3:1.... if I lose 7 times but win only 3 times I am still net up 2! This is so important in our trading and just highlights the previous message.

Also, congratulations to Barack Obama, hopefully the Democrats and Republicans can join forces and sort out the US fiscal cliff which is high on the agenda. I can't see any immediate setups and am waiting for post elections, central bank announcements to fade before I do anything.

I have been informed my posts are being sent out a day late, so my apologies to all. If you join me on Facebook you can receive live updates and new posts. However, I will sort this out as soon as possible.

Happy trading!

It's all about the Ozzie.... (Australian Dollar that is!)

2012-11-04T10:10:00.002-08:00

Hey traders! Firstly, a thank you to all those who sent me personal emails regarding potential trade setups; I'm glad they've helped. October was a good month (the EURCAD short posted last week (http://qitrading.blogspot.com/2012/11/current-opportunities.html is still running) but is just one out of a year. The most important trait of a successful trader is to keep level headed, win or lose; keep it emotionless!

Whilst I don't have anything major on my watchlist (of course I will let you know when I do!), the Australian Dollar has caught my interest both technically and fundamentally.

A report last week showed that the Reserve Bank of Australia allowed its FX reserves to grow significantly without balancing the inflows by not converting foreign currency back into Australian dollars - a move likely aimed at weakening the Australian Dollar. Subsequently, the AUD has been held in a range. With the Swiss National Bank also announcing that the percentage of Euros held with them have dropped to 48% from 60%, many are suggesting that the SNB may be done selling Euros. This will be a positive for EURUSD but negative for alternative assets such as AUD. Combined with the issues facing the RBA we could see a strong rally in this currency. With a potential RBA rate cut on the cards on Tuesday this could add fuel to the fire. However, I never solely trade of just fundamentals, the technical picture has to say the same thing. We also have to bear in mind the Eurozone problems, a possible recession in China and the US fiscal cliff coming up.

However, looking at the technicals it seems as though we have some decent trade setups. I'm currently looking at:

EURAUD Long - Support is found at the 38.2% retracement from August lows to October highs. Several oscillators such as RSI and Stochastic are pointing to a heavily oversold position in relation to previous lows. The low test bar/hammer candlestick could provide the confirmation of this. The target will be just below the 1.30 handle

AUDJPY Short - Price has been held in a 6 month range and is currently testing the upper limit. The RSI divergence potentially shows a reversal is likely and the high test bar/shooting start candlestick may provide the confirmation of a move lower

Whilst I am currently in Norway for most of the week, I'll endeavour to post more after the US election results to see what if historic seasonal trends will be in our favour.

Happy trading!

Current Opportunities

2012-11-01T02:08:00.000-07:00

Here are a few trades I'm looking at (previous posts on long commodities and global stock indices are still valid).

EURCAD - Short, Double Top High Test/Shooting Star, RSI/MACD divergence

Here are some more macro themes I am looking at for the longer term if they play out.

AUDUSD - A report last week showed that the Reserve Bank of Australia has allowed its FX reserves to grow significantly without balancing the inflows by buying Australian dollars, in a move likely aimed at weakening the Australian Dollar. Subsequently, the AUD has been held in a range and we can trade off these levels. Look for a bounce off as the central banks aim to hold the currency within a range or a potential break through if market speculators win the battle.

EURAUD - With the Swiss National Bank announcing that the percentage of Euros in held with them have dropped to 48% from 60%, many are suggesting that the SNB may be done selling Euros. This will be a positive for EURUSD but negative for alternative assets such as AUD. Combined with the issues facing the RBA we could see a strong rally in this currency.

Happy trading!

We Can Not Overstate How Epic The Coming Week Is Going To Be

2012-10-28T15:36:00.000-07:00

An interesting read to know what's happening in the week ahead: http://www.businessinsider.com/hurricane-sandy-presidential-campaign-and-economic-data-2012-10

Will update you with my watchlist during the week as some interesting setups in the US markets.

Happy trading!

It's all about the Canadian Dollar

2012-10-22T09:09:00.001-07:00

Sorry for the late post but am currently away exploring Europe :)

I haven't got anything major on my watchlist but am just managing the AUDCAD trade I have scaled out of (7% banked on the first move, 4% banked on the second move and 2% banked on the third move - all in previous posts!). Whilst the we were right on the strength of AUDCAD and on the sell off of Global Indices, it's all about how much we make when we are right and how much we lose when we're wrong! Personally, I scaled some of my Dow short position but then got stopped on break even. Then I was kicking myself as I missed the doji bar trade 18 October but I'm sure they'll be other opportunities (I have to keep telling myself that!).

I will post more on the run up to the US elections as am looking for certain things to happen before initiating a position.

However, it's all about the Canadian Dollar as it was dumped on bad M&A activity which damaged the foreign investment climate in Canada. All eyes will be on the Bank of Canada tomorrow and their rate decision. Whilst their economy is growing and are in a position to increase rates, they have to tread carefully with the weakness in global growth. However, positive news in China is fuelling a risk rally today.

Happy trading!

October Trade updates (+15%) and the problem with retail traders...

2012-10-16T00:47:00.004-07:00

Hi traders. After a long weekend away in the beautiful Peak District it's great to see some of our trades have finally moved.

AUDCAD is currently up 2% (assuming 1% risk here and moving forward) and I have just added in again on the higher low at a smaller percentage risk.

Gold short finally shook a leg and broke out of its range as commodities took a hammering yesterday and was up around 2%. I've taken some profits off the table as it reached September's low, the rest will be trailed on the daily.

Silver has moved as Gold did. I previously mentioned if you are trading both to spread your risk as highly correlated.

Dow Jones Industrials was up around 3%, my stop is at break even and I've taken some profit of the table as price retraced to the previous 4 year highs. The NASDAQ, S&P500 have also diverged on various indicators suggesting a rally.

Now, for the problem with retail traders and their mentality. Last month's trades that I posted produced a 20% return (risking 1%), so far in October the trades I've posted have made around 15%. Obviously, not everyone will have traded those as different markets and not managed them in the same way. There is a big difference between ANALYSING and TRADING. Analysis has no money on the table and is emotionless which is why returns always sound fantastic. However, trading brings emotion as you're now dealing with your hard earned capital. Whilst I have strict management techniques I close trades early. Sometimes it is the right decision, sometimes it isn't. The fact is I need to give myself a reward and pat myself on the back for all the hard work and dedication I put in. For me, that's banking some money so I leave the month positive. Is it right or wrong? Who cares! We're here to make money remember!! You have to know yourself and adapt to it. Too often in life we are controlled by external influences which leads to irrational decision making.

One thing I've learnt in trading is that you cannot be too prescriptive. Well, at least this fits with my own personality. The markets change so you have to have a breadth of knowledge and tools so you too can change with the market.

Remember the key is not whether you are right or wrong but:

'how much money you make when you're right and how much you lose when you're wrong'

Oh and the problem with retail traders is this: Through the trade ideas that I've posted they've returned a decent amount of reward to risk. I know some of my mentees and traders have been catching these moves, on their own analysis which is even better. What you'll notice is the low frequency of trades for the past couple of months. However, I still get messages from people who send me their trade ideas which is fine. I reply asking 'why are you looking to trade more, why not just stick to the style I've taught you?' Their reply: 'oh because I haven't found many trading opportunities'. Most of you can see where I am going with this.....why are you trading? To make money or to just trade?

My philosophy in trading is find a style that suits you, it could be high frequency or low frequency - it doesn't matter. Once you find what you are comfortable with then increase your risk per trade rather than trying to get into more and more trades. This is what I have found works for the majority of currently successful and profitable trades I have mentored over the years.

Happy trading!