FX Pup Lessons

A lesson on trading with the stochastic indicator on the GBP/JPY by:  James ‘Big Dog’ Boyd.

The stochastic is a great tool to monitor the trade to see how much room we have left to go up or down. The stochastic again tells us the bullish or bearish sentiment in the trade. In this example we look at both bearish and bullish examples on the GBP/JPY.

Caption #1: 1- GBP/JPY short at a diagonal level of resistance on April 6th. 2 – MACD confirms rollover, stochastics crosses to the downside. 3 – GBP/JPY pair selling off at resistance.  Indicator Settings: MACD Hist setting = 6,13,9 and Slow Stochastics setting = 5,3.

Caption #2: GBP/JPY confirms a stochastic “pinch” after 5 days (April 13th).  Once the stochastic pinches we have 2 options… 1) Exit the trade.  2) Make sure the stop is appropriate.

When the stochastic is oversold, buyers in this case buy the GBP/JPY.

 ***KEY*** Watch the width between the 2 lines of the stochastic. When the GBP/JPY falls, monitor the trade by looking at the separation between the stochastics (you may have not hit your stop loss at this point). If the 2 lines are still apart they have potentially some room to drop. If they pinch, BULLS are buying the GBP/JPY back. If that’s the case, invoke # 2.

Caption #3: GBP/JPY confirms that it is going to hold the higher low. Stochastic crosses back up representing that bulls are coming back into the trade.

If the stochastic cross back down, you have a greater chance in getting stopped out.

REMEMBER, when the stochastic pinches like in photo #2, we have 2 options — 1) Exit the trade 2) Make sure the stop is appropriate.

 

Audio FX listeners

Having trouble uploading the images from James’s FX pups commentary from Friday and Saturday. Working on it an will have them up asap.

Friday’s InvestoolsFX Audio Commentary

Friday 04/18/08

• Asia – Look at the inverted head n shoulders on FXI
• Europe – Great Britain giving out pounds – look for institutional traders to step in
• US – James look into the Financial futures crystal ball and tell me what you see?
• James how do I trade the financials and the JPY?
• $ up and commodities down.why??? – Interest rates may not fall as much as the market had been pricing in?
• $CRX.X what does that tell us, POT,MON, EOG, PCU, IWM -UYM
• Look at commodities/ w JPY
• FX Pup Lesson on Stochastics
• Have a great weekend

Audio commentary Link

Tuesday’s Daily Audio Commentary

Tuesday 04/15/08

• To quote from Andrew Busch, currency strategist for BMO Capital Markets: Happy Tax Day! Most likely, this will be the lowest tax rate you will be paying for the rest of your life…….
• AUD rally then retracement overnight on rumors and then spends the rest of the nigh selling off
• $CRX.X, GLD, SLV, OIL make the commodity picture increasingly more bullish based off of demand – $ gets whacked
• UK housing meets up with Browns Approval ratings and gets sold
• EUR rallies on Poor German News?
• SKF – Up but CHF and JPY still not selling off??
• US PPI and what that means for CPI tomorrow? Want to see commodities follow through to get long Commodity equities and currencies
• FX pups postponed, James Boyd is MIA

Audio Commentary Link

Monday’s InvestoolsFX audio commentary

Monday 04/14/08

• Currency trading end of last week into this week is like the Abbet and Costello “Who is on first and what’s on second” bit, confusing and violent.
• G7 Language was purposefully vague not referencing China’s currency but general currency fluctuations- market tried to anticipate intervention action which caused more violent price action overnight and through today’s trading sessions.
• Sunday Asian and European markets took the time to reduce risk led by Fridays’ GE news and US equities had potential and going into today to sell off dramatically – WAMU posts poor earnings prompting dollar selling and JPY holding steady while SKF rises. While US markets holding up steady as well – By commodity stocks and a weak dollar
• Commodities rally while the currencies struggle??? Re-iterate the strong correlation between $ and Commodities. Highlighted by NY trading session.
• Promptly discount US retail sales – housing later on this week could be a catalyst
• UK housing tonight watch for a drag on the good news overnight of PPI input
• NZD might be showing some weakness on Retail overnight and then CPI tonight may put a drag on the bear flag on the AUD/USD 4 hr chart
• What are pro CTA’s doing YTD: 2.5% to crack top 10, 27% to be par with #1 ytd leaders managing over a mil and under 10 mil

Audio Commentary Link

System Trading

Hello all,

From time to time, I will be posting some a system that other coaches may have developed, heard of, or even tested. I want you to take the opportunity and test it yourself and see how it works on a particular pair of your choosing. As a word of caution, I want to point out that there is no guarantee that this particular system works in this type of trading environment but this system may give you an idea on how to set up a system of your own.

Some of you may have seen this system before or it may be new, I would suggest you read it, test it and re-test it and make it your own system. That way you will own it at that point and understand it. I ask one thing, post your findings in the comments section and share with others what you find. That way, others can learn from your findings. Have fun!!!

~ G

CCI and Simple Moving Average (50) System

The Commodity Channel Index (CCI) and Simple Moving Average (SMA) trading system is a simple approach to trading the currency market. The CCI is used to determine the entry point into a trade, while the SMA is used to filter the signals. The management of risk is accomplished by using a 100 pip stop loss. Winning trades are exited with a 100 pip profit.

The system employs a bracket approach to exiting winning and losing trades. Both the profit target and stop loss are 100 pips away from the entry point, which means that the system must achieve a high win/loss ratio in order to be profitable. The following table displays the rules of the system:

Timeframe: Daily Chart

Indicators: CCI (14); SMA (50)

Enter Long: When CCI crosses above -100 and SMA is greater than or equal to yesterday’s SMA value.

Enter Short: When CCI crosses below +100 and SMA is less than or equal to yesterday’s SMA value.

Exit Point: Set profit target of 100 pips.

Stop-loss: Set stop of 100 pips after entry.

Pairs Traded: EUR/USD, USD/JPY, USD/CAD, EUR/JPY

Thursdays Audio Commentary 4/03/08

A slew of information and action happening this week and last, the boys give a good run-down of the action in there Commentaries.

• Don’t Be fooled by the Commodity Rally….. Watch the price action to confirm a breakout. Is it possible to see the dollar and ‘Stuff’ go up long term?
• Uptick in Jobles Claims – what is up with that bro?
• ISM is better than expected but still below 50 – which is bearish
• Commdity Bull very, very Short term – cautious because $CRX.X, no GLD or SLV or KIWI buyers stepping in because of non-farms
• Equities Trader are no dummies – Buying commodity stocks as a hedg for tomorrow
• Timing of trades today seems curious
• The TAX payer is going to be left holding the bag through inflation – Jimmie what did Countrywide tell you
• Sara – Get back to SnR – is what you are doing repeatable, maybe it is analysis of entry setup, reuce the pip count and keep practicing, focus on few pairs.
• George – We didn’t know – near term downtrend, RBA looking to lower rates and commodities cooling off

Tune Into Tuesday’s Audio Commentary

What’s cookin’ James? Greenback Stew– “Lessons Learned from Lower Highs”

What makes up a lower high technical — Insights from Shay.

What makes up lower highs fundamentally?

Why am I not bullish on commodities?

AUS/NZD — USD

James why are you spooked by the Dow?

http://forex.investools.com/commentary/audio.fx#

Tune Into Monday’s Audio Commentary

Hope everybody had a happy Easter — Major European markets are still closed which leads to slightly illiquid day. Asia flat overnight. Go Taiwan, ETF’s opened up big on the elections and potential trade relations with China

What does or how can I trade well when Interventions is on the table?

Froth in the market leads to blow off and consolidation in commodities look at for price action to begin to base 1- 3 weeks and then move higher based off of fundamental demand

Intervention – Dennis Gartman, analyst on Bloomberg discussing the need to maintain strong liquidity and integrity in the financial system in the near term even though the long term effects are certain to follow.

Risk on scenario near term- look for equities and commodities to base, gain footing and then move higher for higher probability setups.

Hal set a date to get your first real trade in!

I PREDICT #4: I PREDICT that if you made a Currency Trading resolution, but you didn’t turn it into a specific, written goal with a deadline and a strong reason why you must achieve it, you will freely abandon it the moment the going gets tough. (4)

http://forex.investools.com/commentary/audio.fx#

The After Fed Effect

It has been a week now since the Bear Stearns collapse and the Federal Reserve decision to bail them out and lower rates by 75 basis points. Now what??? We see that Oil is starting to head back up and that the rally that we had in the markets were short and sweet. The dollar seems to be getting crushed again and may end up retesting the highs of 1.5900 again. I would like to know your thoughts on the Fed matters. Please fill out the poll so we can get your opinion on what the Fed is doing. Who knows, maybe the Fed will listen this time.

~ G

Tune in to Thursday’s audio commentary

James ‘I want to sell you some commodities’ Boyd- Outlook on GLD, USO, UNG and commodity related stocks.

What pairs to focus on going into the weekend? CAD/JPY, AUD/JPY. GBP/CAD, EUR/GBP, USD/CAD

Follow up with EUR/USD, AUD/CAD, NZD/USD. EUR/GBP. Watch for the lower highs on JPY and CHF crosses

Persian new year’s affect on the markets?

Re-group over easter

Lack of liquidity this weekend.

I predict plug –

I PREDICT that the way you see yourself in your Currency Trading mind’s eye today will be an exact reflection of what you see in the mirror at the end of the year. Barclays – Pros – Be in this profession not as a hobby but to make real money.

Tune in to Wednesday’s audio commentary

Uncle James please tell me more about the Commodity Squeeze, the narrowing of the spreads between interest rates, economies, and supply and demand.

Attributing commodity sell off to the lack of the fed to meet expectations. What was the expectations? 50 – then, 75 then – 100 –

Look at the commodities get ….. shieza get kicked out it. – Then take the chill pill

Watch for near term divergences on near term dollar strength on $/JPY, $/CHF, EUR/USD on MACD.

Large traders looking at flattening on Long Gold/Short Equities

http://forex.investools.com/commentary/audio.fx

The other side of the bay

Coach Nick Jensen has provided part II of a great article he did last week, What does Alctraz and your trading rules have in common? Thanks Nick!

Last week I talked about the importance of having a trading plan and mentioned that having a psychological plan as well is an effective method to deal with market conditions. I have put some guidelines together that can be included in this plan and some of the questions you may want to ask yourself as you develop it. One thing I want to point out is each trader trades at a different skill set level and so each
trader will also trade at a different psychological level as well.

This plan needs to be yours; spend some time introspecting, really trying to understand how you tend to react in different market conditions. Then as you evolve as a trader this plan should evolve with you: do not stay stagnate, you need to progress and strive to achieve a higher level of trading competency as well as psychological competency.

Losses: Trading is not a business of perfection but a business of probabilities. Doing A, B and C does not always equal D and that is OK. You do not have to win on every trade but make sure that you are cutting your losers loose. How do you react when you take a loss? Identify those emotions and realize it is normal to take a loss in the market as long as your risk was justified when you entered the trade and you are taking on a minimum amount of risk.

·Do I fear taking a loss?
·When I take a loss how will I react to the market? (I say “next”)
·How many losses in a row will I take before re-evaluating my system or the execution of my system? (I have taken in 8 losses in a row before, it could be more)

Wins: It is just as important if not more important to control your emotions when you have a winning trade. Do not fall into the trap that you are invincible in the market. It is nice to go on a winning streak but that’s all it is: a streak. Take the profits, be grateful for them but don’t be surprised or disappointed when it comes to an end.

·What will I do to stay calm when I win a few in a row?
·Will I reward my efforts and if so how?

Capital Draw Downs: It is normal for your portfolio to fluctuate in value. Typically the more aggressive of a trader you are the wider the swings in your account. Identify what would be a typical swing in your account during normal trading activity. What you need to identify is how much of a capital draw down is abnormal and warrants a halt in trading to re-evaluate what may be going wrong.

·What percentage drawdown in my account will trigger a suspension of trading?
(In my opinion a 20% draw down is maximum)
·I can not trade real money again until I………….. (What things do you need
to identify and or fix before you can trade live again)

Emotional Extremes: We all know that emotions are a normal part of life. They are also a normal part of trading as well and that is nothing to run from. It becomes dangerous when those emotions get to extreme levels because we tend to become irrational.

·How am I going to identify what are normal emotions and what are extreme
levels?
·If my emotions are at extreme levels; why and what can I do to change it?

Again, in order to stand on the banks of Alcatraz and know we’re going to reach the other side of the bay, we have to be prepared to deal with those things in which we can not control. These are a few suggestions to prepare you to do so, feel free to add to them or take away from them as needed.

 

Tune in to Tuesday’s audio commentary

Cat’s outta the bag and 8-2 the fed has decided to drop the interest rates by 75 basis points to 2.25%

First time commodities or inflation come up in comments

How much does the housing affect this – Gotta clear inventory starts/ permits down

CAD – Looking good with CPI which means C Bank has more flexibility w/ rates

Franc the hell out of other pairs – W/ Industrial Production #’s

Commodities are touching the void – where do they go from here

http://forex.investools.com/commentary/audio.fx

While you were sleeping!!

Well, maybe while you were getting ready for bed. The Federal Reserve Bank decided to make an emergency move this evening and cut the bank lending rate to 3.25 percent from the 3.50 percent it was at earlier. This move made by the Fed was meant to “try” and create some stability in the financial markets. Also, at the same time, Bear Stearns (BSC) is being bought out by JP Morgan (JPM) at a steal of a price. This last minute buyout and the move by the Fed (who also approved this buy out by guaranteeing the deal with $30 billion) had an immediate effect on the overseas market and crushed the dollar. The EUR/USD hit a high of 1.5905 and the YEN hit 12 year low against the dollar at 95.74. Gold also was trading (at time of posting) around 1,026 an ounce. (I guess there goes the gold teeth I was considering!)

One way to help you against the falling value of your dollar is to hedge against it with the other currencies like going long the Euro or even long the Yen. Any trading against the dollar seems to be the most logical move. When asked what should be done about the financial crisis in the US, Federal Reserve chairman Ben Bernanke said “I don’t know!” No wonder the dollar is crashing and the basic carry trade is dead.

Well, hedge your bet for now or wait and see if the fed moves some more on Tuesday with another cut of 75 basis point. Bernankes strategy seems to be trying to keep the economy supported and worry about inflation later. We may see on the EUR/USD 1.6000 before Tuesday if the market sees even more weakness. Also, the USD/JPY may see an even lower level below 95.00 as weakness in the dollar continues. Tomorrow is a new day.

~ G