forex trading « Kevin and the Giant Peach

Archive for the ‘forex trading’ Category

The dollar is strengthening and we’re just going along for the ride..

Thursday, December 17th, 2009

The trade I have going with the dollar against the Swissie is moving along nicely. On Tuesday, the price closed above my intial entry + 1xATR and so, I added another contract putting me long 2 contracts USD/CHF.

USD/CHF Daily

I could have gone short the EUR/USD but because a) the USD/CHF broke the 14-day high, first, and then b) the EURO and the Swiss are closely correlated, they are, for all intents and purposes, the same trade.

What is driving the dollar higher? Inflation. Or more appropriately the worry of inflation. Consumer Price Index and Producer Price Index, which were reported yesterday, showed a slight uptick in prices. (This should come as no surprise to anyone who is vaguely familiar with the way our government has been spending money lately. The real surprise is that it took so long!)

The way the thinking goes, if the Federal Reserve and “Time’s Man of the Year”, Ben Bernanke, start getting a wiff that prices may start rising, their job is to keep them from rising to quickly. So while for now the overnight interest rate (the rate the Fed charge banks for borrowing money to lend to you) is at 0.25%, the Fed not have any choice but to begin raising rates next year if prices continue to rise. This is good for the dollar. And, since forex is essentially the futures market, what’s happening now reflects what traders think will happen in the future – i.e. rates are going to go up. Looking at the Fed Funds Rate futures, it looks like traders expect the Fed to start raising in late spring, early summer – so the dollar will be a good trade through then.

A WORD FROM OUR SPONSOR! Before running out to the mall to do your Christmas shopping, you may want to check on Ryan Gardner’s web portal to see if you can’t a) save money on the stuff you’re already planning on buying, b) get paid on on what you do spend and c) get paid on what your friends and family spend when you refer them to Ryan’s portal. Just click on the following banner to find out how:

Earn 2% Cashback and 1/2% on Referrals!

Tweet This Post Plurk This Post Buzz This Post Delicious This Post Digg This Post Ping This Post Reddit This Post Stumble This Post

Tags: Dollar, Fed Funds Rate, swissie, USD/CHF
Posted in Uncategorized, forex trading | No Comments »

It’s oftentimes a good idea to step back…

Saturday, December 12th, 2009

…and take an even “wider” look at the big picture in taking a trade. It’s been awhile since I’ve dropped a chart in my post. So, let’s take a look at the only trade I have going, at the moment, beginning with the loooooong-term weekly chart of the USD/CHF going back to 2006. (CHF is Swiss Frank, btw. I forget why but that’s its symbol and I doubt they’ll be changing it to something that makes more sense any time soon.)

USD/CHF Weekly Chart

Other than the fact that the candlesticks don “Christmassy” colors in the spirit of the season, the overall trend has been down (in favor of the “Swissie”) but shows signs of turning up (in favor of the Greenback). Now, a long term trend trader would be justified to wait until the price FOR THE WEEK closed above the 21 week moving average (the yellow line) before taking the signal to go long. In fact, I will be adding this “filter” to my system for considering future trades.

In the meantime, my system put me in the Dollar on Tuesday (12/8) at 1.02835. The Stop-loss is in place at 1.01335 (which is price minus 1.5 x ATR).

USD/CHF Daily Chart

I’ll stay with the trade until the price drops to the stop-loss which is this price or the 14-day low (which is adjusted daily).

Earn 2% Cashback and 1/2% on Referrals!

Tweet This Post Plurk This Post Buzz This Post Delicious This Post Digg This Post Ping This Post Reddit This Post Stumble This Post

Posted in forex trading | No Comments »

I’m waiting….which is what some traders do..

Friday, November 13th, 2009

Since getting in long on the pound on Tuesday, I’ve been just updating my charts at the end of each day.

This is what many traders do on a daily basis. When the system says do something, then do it. If it says to wait, I wait.

Tweet This Post Plurk This Post Buzz This Post Delicious This Post Digg This Post Ping This Post Reddit This Post Stumble This Post

Tags: british pound, Forex, forex trading
Posted in Currencies, Forex, cable, forex trading | No Comments »

Inverse Head & Shoulders on The USD/CAD?

Friday, November 6th, 2009

USD vs. CAD Daily Chart - inverse head & shoulders

Our trade on the USD/CAD is still in place despite flirting with the original stop-loss. The current stop loss is the 10-day low of 1.0594 to which the entry order was changed after yesterday’s close.

Today is a key news day with the initial jobless claim report for the month of October. This report, which comes out every first Friday of the month, is a major market mover in that it is a barometer of the health of the U.S. economy and a signal to what U.S. Fed and policy makers may do in the coming months.

The reaction to today’s report, which came in at 193,000 jobs lost (vs. an estimate of 175,000) in the month of October, was initially positive for the dollar and negative for stocks. However, there seems to be some digesting of the news at this point which is mid-day.

The chart of the USD/CAD shows that the USD is strengthening somewhat against the CAD. An inverse head and shoulders pattern is developing which would also be a positive for the trade. The pattern will be complete at 1.1100 and a break above that would confirm a change in trend towards dollar strength.

Tweet This Post Plurk This Post Buzz This Post Delicious This Post Digg This Post Ping This Post Reddit This Post Stumble This Post

Tags: CAD, Forex, U.S. Dollar, USDCAD
Posted in Canadian Dollar, Dollar, Forex, forex trading | No Comments »

Going against the CAD

Thursday, November 5th, 2009

The latest trade has us going against the Canadian Dollar. Trend following is not for the faint of heart and this is a good example.

The first chart shows the daily USDCAD on October 30 Close. (The forex market trades 24 hours per day, 6 days per week so it never really “closes” but the candles have to stop somewhere.)

USD vs. Canadian Dollar Daily Chart - November 2nd Close

USD vs. Canadian Dollar Daily Chart - October Close

Notice that the close price of 1.0846 is just above the green line which marks the 20 day high. That was the signal to go long. (The vertical line marks back 20 days and the red line marks the 20 day low. This is the “work” involved – moving these lines every day on about 8 charts. It takes about 15 minutes at most.)

I didn’t get into the trade until Sunday afternoon after the markets opened in Australia – which was Monday morning over there – so I actually got in at a lower price which is always nice.

The next chart is the same but with the lines moved – the gray line to mark 10 days back, the green line to the “add” point of entry price plus one “ATR” (average true range which is the blue line in the mini-chart below the main chart) and two red lines – one marking the initial stop-loss of entry price minus 1.5 x “ATR” and the lower one marking the 10 day low. Both of the red lines tell us when to get out of the trade – whichever it hits first.

USD vs. Canadian Dollar with entry and exit points

The next chart shows that we’ve been flirting with the stop-loss. In fact, if we’d been in the trade right at the close of Friday’s trading, we’d have been stopped out. Which brings up a question – should I have calculated the stop using the entry price I should have been in or at the entry price that I did get in?

USD vs. Canadian Dollar Daily Chart

We’ll see!

Tweet This Post Plurk This Post Buzz This Post Delicious This Post Digg This Post Ping This Post Reddit This Post Stumble This Post

Tags: CAD, Canadian Dollar, Dollar, Forex, USD
Posted in Canadian Dollar, Dollar, Forex, USD, forex trading, investment | No Comments »

Waiting on the Swiss Franc

Saturday, October 31st, 2009

After having been bumped out of the USDJPY trade (for a profit), I’ve been waiting.

The chart shows the USD vs. the Swiss Franc (CHF). As with other currencies, the Franc has been strengthening against the dollar.

USD/CHF Daily Chart

However, the dollar has been strengthening lately. (One of the causes/results is a drop in the stock market. Movement out of stocks has been accompanied by a rising dollar and vice/versa.)

According to “Turtle Rules”, the entry will take place when the price closes – daily close being 6 p.m. est – above the 14 day high for a long trade or below the 14 day low for a short trade.

I’ve drawn in those lines to show the current entry points.

The ATR (average true range) is shown below the main chart. This is the number to be used to set the stop. I trade 1.5 x ATR – approximately 150 pips.

This is a trend following trade. Once in the trade, I’ll look for continuation in the direction of that trend for adding to current positions.

Tweet This Post Plurk This Post Buzz This Post Delicious This Post Digg This Post Ping This Post Reddit This Post Stumble This Post

Tags: Dollar, Forex, Swiss Franc
Posted in Dollar, Forex, Swiss Franc, forex trading | No Comments »

A Tale of Two Trades (Part 2 of 2)

Sunday, October 25th, 2009

The second trade that I took, last week, involved going with the U.S. Dollar against the Japanese Yen (USDJPY).

Note that this pair is quoted with the Dollar on top (the quote) and the Yen on the bottom (the base) which is opposite that of the Euro, Pound, Australian Dollar and New Zealand Dollar. The other currencies that use this convention are the Canadian Dollar and Swiss Franc. It’s important to know this when analyzing their respective charts (or when watching the currency quote box on the top of the screen on CNBC – an “up” arrow alongside the yen quote means the yen is WEAKENING, not strengthening as with the Pound and Euro quotes.)

So, here’s the set up: again we first go to the long term chart.

USD vs. JPY Daily Chart

The behavior of the Yen was opposite that of the Euro and the Pound over the period of September 2008 through mid-December 2008 in that in strengthened, peaked in mid-December and mid-January at approximately 87.25, then weakened through mid-March. It has since strengthened up until early October.

I’ve been watching for confirmation of a reversal – dollar strengthening / yen weakening. That happened on 10/9 with a close above the 5 day moving average (the purple line). However, I use the hourly chart to determine my entry point.

USD vs. Yen on Hourly Chart

I actually missed several chances to get in earlier – I was sleeping or working or something when the other signals came – but that happens. I had another chance on 10/19 at 9 p.m. when the MACD signal line crossed the MACD main line. As it turned out, I was early this time getting in at 90.57 – the cross wasn’t strong – but the trade worked out in that my stop was set at 100 pips below at 89.57 and the price has consistently gone the other way.

USD vs. Yen Hourly Chart 2

USDJPY opens this trading week at 92.06, I’ve moved my stop to break even. The target is approximately 92.50 but will reconsider when it reaches that point. The downward sloping trendline on the daily chart is currently at over 94. I’ll be monitoring the strength of the pair over the next few days and will take profits if it seems to wane.

Tweet This Post Plurk This Post Buzz This Post Delicious This Post Digg This Post Ping This Post Reddit This Post Stumble This Post

Tags: Forex, U.S. Dollar, USDJPY, Yen
Posted in Forex, forex trading | No Comments »

Wild Action in Forex

Wednesday, September 30th, 2009

There is wild action in the USD pairs today. Overnight, prior to the release of the ADP jobs report and the 2Q GDP number, the dollar was losing ground against all other currencies. However, after the release of those two reports, the dollar rebounded. The action moved in the other direction around mid-day. I expect much more volatility for the remainder of the week leading up to Friday’s jobs report.