Temporary pause

I been away for 2 weeks and will need some time to catch up with FX events. I be back ASAP.

EUR/GBP (Short)

I had not been updating for a while. While I was still trading the FX markets, I was taking more of a hit and run strategy. Yesterday, I decided to take a shot at shorting the EUR/GBP pair. The entire Euro-Zone is now mired in deep economic problems. Though Britain is not doing too well either, it seem to be doing better comparatively. This week, both central banks will make rate announcements and I am predicting that ECB will play catchup with BOE and slash rates by 50 basis points.

I shorted the pair at 0.8965 and my position is now in the green. I will first aim for a 100 pips gain at 0.8865 and if the pair really plunges, I will move my profit stop another 100 pips more downwards to 0.8765. Technically, this certainly looks plausible. I will be very careful on this trade as the denominator currency is pounds and the exchange rate against SGD is much higher than any other base currency. Still, I am pretty hopeful I can profit from this trade. The guys over at DailyFX seem to have have the same opinion. Keeping my fingers crossed.

P.S. I research on DailyFX http://www.dailyfx.com/analyst_picks/index.html

Update 1
The pair fell smoothly as I expected reaching a low of 0.8875. I am placing an OCO for a stop loss at 0.8950 and a slightly more ambitious profit target of 0.8800. Will adjust accordingly again if the position gather more momentum.

Update 2
Yesterday night, the pair rallied to above 0.894 levels and hit my stop loss. Really frustrating to see a position gaining pips and losing them back again. Argh! Still I managed to catch 15 pips off the table and if the opportunity arises, I will short this pair down again.

Yen loses its safe haven status?

The Yen had been plummeting. I attempted to short the Euro/Yen pair with disastrous results resulting in over 155 pips loss. I also made some impulse trades which results in other small losses. There is certainly something going on with the FOREX market that I as a teeny weeny little player has no clue about. However, this article is worth a read.

Why is the Yen sinking?

I think a good thing for me to do now is to stop trading and wait till the signs are clearer.

USD/CHF (Short)

Its been a couple of days since my last post. I been off forex trading for sometime. Yesterday, I am back to short the USD/CHF pair again. This time the price I entered was 1.1751. I strongly believe that the pair will range bound between 1.18 and 1.14. The Swissy used to be a safe haven currency. But the recent economic turmoil has turned it upside down. Still I think that the pair is very unlikely to shoot above 1.20. My stop loss is set at 1.185 and I will try to get as much profit as I can if the pair goes down as I predict. So far, after a day, there isn't much action still.

Update 1
Unfortunately, the pair went the opposite direction today and hit my stop loss. I took a 100 pip hit. Ouch.

USD/CHF (Short)

I managed to get into a short position yesterday on USD/CHF at 1.1731 and it went very close to my target of 1.1500. Earlier, the Switzerland consumer price index came in at a low of 0.1%. Further, the Swiss national bank also hinted at intervention to allow the currency to trade lower and thereby stimulating exports. The pair swiftly went up to 1.17 regions where it experience some resistance. The pair earlier had turned back after meeting this resistance and I figured that this time it will not be any different. The markets were holding their breath as US released their plans for the bank rescue and other broad economy stimulus and the pair give up the gains as I expected. However after the announcement, the broad market seems skeptical of the bank rescue plan and the trend sort of reversed. I decide to cut short my trade and exited at 1.1565 making a profit of 166 pips.

$819 billion Stimulus Package

Yes, its Obama to the rescue and the markets are throwing risk outta the window. We see safe haven currencies like USD and Yen losing their appeal. I made some small trades but nothing worth mentioning. Will watch how the situation develops. In the meantime, do spend some time to admire this beautiful chart I saw over at Kathy Lien's blog

$819 billion Stimulus Package

BOE cuts rate by 50 basis points

This is a case where my bias against the GBP is completely wrong. When BOE cut rates by 50 basis points, the Cable rallied instead of dropping. Its a good thing that I did not suffer any losses on this trade.

GBP/USD (Short... yet again!)

Yes.... that is how bearish I am for Cable. Yesterday, shortly after I closed the trade, the Cable rallied 200 points to a high of 1.445. I was extremely lucky to had escaped in some sense. For a volatile pair such as this, it is perhaps wiser to be prudent and thread carefully. Nevertheless, I still see opportunities in shorting this pair. So I am initiating a short order at 1.44 and let's see if it hits my trigger.

Update 1
The trade triggered this morning but I did not get lucky this time. The pair went against me and I took a loss for 60 pips at its peak around 1.4460. The pair is really more resilient than I thought. Guess I should not be so stubborn. Discretion is the better part of valor. Best stay on the sidelines and watch till the trend becomes clear. Bank of England will make a rate decision tomorrow. Maybe its wiser to re-visit this pair after decision has been made

GBP/USD (Short... again???)

Unfazed by my loss overnight, I am re-entering a short position on GBP/USD. I am still of the opinion that the correction for the Cable's recent rally is not done yet. RBA slashed the interest rates to 3.25% catching up with RBNZ. Obama warns of more bank failures.

Update 1
The Cable swings wildly and the trend seems unclear. I decide to take a early profit of 56 pips at 1.4194 and closed the trade. This pair is definitely worth visiting again. So do not be surprised if I enter another position this week.

GBP/USD (Short)

This week is gonna be another exciting week for forex traders as Reserve Bank of Australia (RBA), Bank of England (BOE) and European Central Bank (ECB) will make rate decisions. GBP rallied strongly against all other currencies last week recovering 800 pips from a low of 1.36. I am of the view that the rally is fatigued and indeed this morning, GBP/USD dropped close to a 100 pips from last week's close. I am jumping onto this falling trend in hope that the trend will continue into 1.40. I shorted at 1.4361. My stop-loss is 1.4425 and I set my initial profit taking stop at 1.42. I will adjust the profit taking stop when the trend pans out as what I anticipate.

Update 1
The pair pulled up shortly after I entered the position and went precariously near to my stop loss. But it dipped quickly and from there it was one way down. I adjusted my profit taking stop a little to 1.415 and before I knew it, my profit taking stop was hit. I made a nice 211 pips on a full position. May enter short again on this pair if opportunity presents. A great start to the beginning of the month!

Update 2
Just as I thought its over for this trade, another opportunity shows up as I was writing Update 1. I entered a fresh position short again at 1.42 which was 50 pips higher than my last close. Stop loss placed at 1.43. Profit taking at 1.40 (aggressive but unlikely). Think we can continue to ride this trend down?

Update 3
Surprising, the Cable continue to hold and the pair rallied overnight and hit my stop loss making me take a hit for 100 pips. So instead of 210 pips, I got 110 pips. Still not too bad for a day's work

January pip tally

NZD/USD short -50 pips
USD/JPY short +55 pips
GBP/USD short +420 pips
USD/CAD long +250 pips
EUR/USD long -120 pips

Total 555 pips

In the first month of 2009, I recorded 5 trades. 3 winning ones and 2 losing ones. Total I made 555 pips for this month. Not too bad. Do note that I am only recording pips and not monetary value as the denominator currency may be different for each trade and some positions are actually half positions. I will try to think of how best to present the pip tally in a more objective way next month. I also did other trades on the side which I feel is not worth putting it down in the blog.

RBNZ cut rates by a whooping 150 basis points

It turns out that I was quite right after all to short NZD/USD at the upper end of the range. RBNZ cut rates aggressively to 3.5% in an all out attempt to spur growth. The currency still remains ranged bound just as I had expected. Can we still expect further cuts?

EUR/USD (Long)

There has been much talk about the creation of a 'bank' to soak up all the toxic assets and ease the credit crunch. If this plan get the go-ahead, traders will likely dump the current safe asset currencies like USD and JPY and go for other higher yielding currencies. I decided to take a long position on EUR/USD ahead of the FOMC meet. It will be a half position at 1.328 just below a key resistance of 1.33. If this resistance can be convincingly broken, the pair will likely move above levels of 1.35. Stop loss is set at 1.316, 120 pips below my entry. The pair currently trades at 1.326. Wish me luck!

Update 1
USD performed mixed against other currencies following the Fed's release. Unfortunately for me, EUR nosedived immediately following the announcement to my stop loss. I took a 120 pip loss today. Re-examination of my trade tells me that perhaps 120 pips stop loss may be too excessive. Remember, we always want to keep our losses small and let our wins run

NZD/USD (Pending Short)

The Reserve Bank of New Zealand will announced its rate decision on Wednesday. I expect the rate cut to be at least 75 basis points matching the interest rate of Australia. There is perhaps more than 50% chance that it might be 100 basis points or more. NZD/USD will unlikely rally given the impending rate cut. Looking at the hourly chart from this week, I believe that it will at least continue to range bound between 0.53 and 0.52. The pair closed the week above 0.53 and if it remains at this level when market opens next week, I will attempt to short it.








Update 1
I decide to hold back the short today because both gold and oil are rallying. Best to stay on the sidelines and watch first.

Update 2
Looks like the previous support of ~0.53 levels has now turned into a resistance with the impending rate cut. I will place a sell limit order at 0.533. It may or may not hit this level even. I will act accordingly if the order triggers. We will see a lot of action on Wednesday in the FOMC press release

Update 3
Decide to withdrawn the position. Just did not feel right about with the FOMC meeting so close.

Note: I incorrectly state that both the RBNZ and FOMC press release is on Thursday but they are both on Wednesday. I since correctly it.

Fighting the urge to trade

Yes... you heard me right. It is sometimes very tempting to enter into any position recklessly when staring at my dashboard. Sometimes I tell myself, I am just going to pocket 20 pips. Surely that is not so difficult right? But more often than not, going to war without a plan is simply planning to fail. In my last one year of trading, I had hits and I had misses. The hits, I mean the good ones are often the ones which I followed events meticulously, laying out an ambitious but attainable target and following through by adjusting my stops along the way.

I end this week positively. The market is still very volatile and that just means that there will be plenty of opportunities to go in again. We just need to plan. Here is an interesting read from dailyfx for the weekend if you are really keen to try out FX trading.

Why does the average forex strategy lose money

It all boils down to risk

As mentioned in an earlier entry, risk sentiment is now a major determinant for the direction of the markets. It appears that the markets, whether the stock markets or the currency markets are plagued by fear. Despite the inauguration of the new U.S. president, DJI fell more than 300 points last night. In Obama's speech last night, he spoke of hope and fear. Indeed, if we strip down the markets to its bare minimum, its merely a play between people's hope and fear.

The Chinese says 新官上任，三把火 , meaning that when a new leader takes over the reins, he will often begin implementing policies and changes in earnest. Similarly, I will expect Obama to swiftly lay out plans to address the U.S. economy, his current most pressing issue at hand. If he succeeds in convincing us, the market may rally and risk sentiment might again shift into reverse gear.

London bridge is falling down...

“I would urge you to sell any sterling you might have,” said Jim Rogers, chairman of Singapore-based Rogers Holdings, in an interview with Bloomberg Television. “It’s finished. I hate to say it, but I would not put any money in the U.K.”

The CABLE recovered shortly after my exit in the last position climbing back close to 1.5 again before crashing down to almost 1.4. A whooping 1000 pips. If only I had held the position.

I wonder how will the markets react to Obama's speech during the inauguration ceremony.

USD/CAD (Long)

This morning there was a glitch in the system of POEMS. Shortly after lunch, they resolved it and I got into half position at 1.2399. I have a stop loss at 1.2289 and a profit target of 1.265. With some luck, I may see the pair zoom up and I will adjust my profit target further to 1.3. Let's hope the first long position of this blog will make as much as my previous GBP/USD position.

Update 1
The pair dipped a little after my entry in the afternoon but soon regained momentum following news of more bailout for English banks. The pair is trading at a comfortable level of 1.256. I adjusted a little to bring the stop to levels after my entry so I do not suffer unexpected losses. Let see if I can squeeze more pips outta this trade.

Update 2
The Bank of Canada announced a rate cut of 50 basis points which was in-line with what we had expected. I took my profit at the original intended level of 1.265 and made a neat profit of 250 pips this time. Not bad at all for 2 days of work. I be following NZD/USD for the rest of the week because the Reserve Bank of New Zealand will also be carrying interest rates cut.

Up coming events this week (18 Jan 2009)

I ended last week positively following a smooth descent of GBP/USD. I must remind myself that not all trades will be as easy as this one.

This week, the events will be less focused on USD or EURO. Instead, there will be a string of events lined up for the Canadian Dollar, also known as the Loonie. On Tuesday, Bank Of Canada (BOC) will announce its rate decision. The popular guess is that the interest rate will be lowered by 50 basis points to 1%. Subsequently, the retail figures and the consumer price index for Canada will also be released later in the week. I have a hunch that both oil prices and gold might trade lower this week and I am not looking favorably on commodity dollars at the moment. Given a good opportunity, I might long the USD/CAD at price of 1.24. This pair has twice tested the resistance at 1.3. Given the weakness of the Loonie, we might see the pair test the resistance at 1.3 yet again.

Another commodity dollar, NZD or the Kiwi, may also see some action as a rate decision by the Reserve Bank of New Zealand will also be released following this week.

US Advance Retail Sales

Yesterday night, the release of US retail sales was much more disappointingly than expected and caused the DJI to drop by 3%. However, US dollar strengthened against most Majors instead of falling. Australian employment numbers are coming in as I blog and ECB will announce its rate decision today. I will stay on the sides for the rest of the week and examine the impact of these events.

GBP/USD (Short)

I had an opportunity to trade yesterday but I did not update the blog because I was not very confident of its success. But it turn out very well today and I shall share how I entered this trade. If you look at the picture below you will find pseudo sort of resistance line I drawn. The left most candle is what is known as the master candle stick. To learn more about master candlesticks, you can refer to this link. I am using an hourly chart in this setup. Mostly, I sense apprehension in the markets and this was used together with the master candle stick method to trade. I entered short at 1.5000 with only half position. I set my stop loss at 1.6000 and initial profit target 1.4800. But the trade soon turns out to be better than I anticipated and I adjusted my target to the recent low of 1.4400. So far I 've got a neat paper profit of 400 pips and I also adjusted my stop loss accordingly to 1.4700 in case things should turn around too fast. Bernanke's speech was an anticlimax. Banks need more bailout??? Good thing I entered this trade early. It is widely anticipated the ECB will cut rates again so I will hold on a little longer to this trade and see if there is any spillover effect to the Cable.








Update 1
The pair went down to a low of 1.4480 early in the morning but soon rallied to 1.4580. I decided to close the trade at this level for a neat profit of 420 pips. I do not usually trade the Cable because it is extremely volatile. This is the first trade I did with Cable on half position and it proves that I can possibly profit from it given the correct situation. Will try to take a break following this small success. I might just get overconfident and enter trades recklessly. I shall update the blog on the finer points of charts and dealing with emotions during trading.

Risk aversion is back....

Markets opened jittery at the start of this week. It seem like the New Year sentiment is fading and investors are coming back to Earth. Overnight Dow Jones lost about 1.5%. Reporting season is kicking in and the numbers ain't gonna look pretty. Tonight Ben Bernanke will give his speech and traders will be watching every movement of his lip. Whenever the FED chairman speaks, markets will display significant movements. If he foresees continued challenging conditions ahead, market will respond quickly on a flight to safety. This means risky assets will be liquidated. In the foreign exchange context, this means that high yielders such as Australian and New Zealand dollars will find difficulty holding on the gains in recent days.

Upcoming events this week (11 Jan 2009)

There are gonna be some exciting events this coming week and the FX market will definitely have some large movements. For starters, Ben Bernanke will be speaking on 13 Jan. The speech will be potentially very market moving given that risk sentiment is the core of almost all trading decision. On 14 Jan, there will be the release of US advanced retail sales though I doubt this particular event will mean much. On 15 Jan, the European Central Bank will make a rate decision and this is the event that will be worth putting my money onto. Before I decide, we shall see what Ben will say on Tuesday.

USD/JPY (Short)

Overnight, USD traded lower against most majors. There seem to be wide anticipation that the US Non-Farm Payroll to be released on Friday will disappoint again. USD/JPY had dropped 200 pips from last night and I am expecting the trend to continue till at least the release of NFP. I am taking half position here following the earlier loss on NZD/USD. I placed a limit order at 92 and see if it triggers. If it triggers, I intend to place a OCO with stop loss at 93 and a limit of 89. This will give me a risk/reward of 1:3. If NFP proves to be really devastating, I may adjust for lower limit to maximize my profit. Now I wait for my order to be triggered.

Update 1
Order was triggered and the position is now trading in positive territory. Seemed like peeps over at babypips have a similiar view as me. I used a wider stop loss at 93.5 instead of the intended 93.0. Once 90 target is hit, I will adjust my stop loss accordingly. I am not setting a profit stop for this one now because I think the pair might really plunge. The one risk here is that Japanese government may intervene if Yen is too strong.

Update 2
The US Non-Farm Payroll results was indeed bad. More than 500 k job losses. But surprisingly the market seem to think that this number is not huge enough and the pair rallied for a while. Since I did not get the plunge I expected, I took whatever profit I could from the table. 55 pips for this half position. Not a very ideal trade but nevertheless profitable and I live to trade another day.

NZD/USD (Short)

This is the first official trade for this blog. The NZD/USD seem to find resistance at 0.59 level and not able to break out convincingly. I am treading carefully on this one. I got into a position this morning at 2am selling at 58.85. Fundamentals for NZ is very weak at the moment and the global financial crisis hit NZ rather badly. I placed a OCO stop on offer at 0.5935 and limit at 0.5800. The risk reward does not seem very attractive but I will be monitoring the trade closely to see if adjustments can be made after the trade goes into green. Keep my fingers crossed on my first trade update.

Update
Unfortunately, the first trade turns out badly. Got 15 pips to clearing it at a profit but it went up again and hit my stop loss. 50 pips loss. We shall try again when there is possible ground breaking event

Currency Pairs

To begin trading FOREX, it is wise to first understand what you are actually trading. So this is a short section on currency pairs. There are many jargons and slang used in the world of FOREX especially when it concern currency pairs. I will attempt to also include them in this section. In the box below, I will place the currency abbreviation and the respective currency next to it so currency pairs are clear. I will only describe some of the most commonly traded pairs in this entry.

Abbreviation	Currency
USD	U.S. Dollar
JPY	Japan Yen
CHF	Swiss Franc
GBP	Great Britain Pound
CAD	Canadian Dollar
AUD	Australia Dollar
NZD	New Zealand Dollar

The Majors
The majors are the 4 most commonly traded currencies in the world. They include EUR/USD, USD/JPY, USD/CHF and GPD/USD. The first two are just know as the Euro and the Yen respectively. The third pair is often known as the Swissy and the last is the Pound or sometimes called the Cable.

The Commodity Dollars
The other 3 currency pairs commonly traded are known as commodity dollars or the comdolls for short. These currencies have a strong correlation with prices of commodities. This is because the corresponding countries have significant portions of their economies tied to mining (e.g. gold) and the export of oil. These currency pairs are USD/CAD, AUD/USD, NZD/USD.

The Crosses
You might noticed that all the mentioned currency pairs so far all have USD in them. Crosses are any other currency pairs which does not involve USD. Commonly traded currency crosses includes EUR/GPD, EUR/YEN, EUR/CHF, AUD/NZD. Every currency cross has its own characteristics. Some crosses are extremely volatile while others remain in a tight range. It is best to observe how crosses behave in relation to the majors before starting to trade them.