Paper trade: Closed GBPJPY @ 146.42 for +140 pips

Just closed my GBPJPY long at 146.42 for around +140 pips average gain, or 0.4% in the account balance. Damn good for a 24 hours holding. Obama just finished his State of The Union address at the moment. I am not impressed. Still all talk of change but nothing concrete yet. Anyway, that’s beside the point in this trade log.

146.50 price level for GBPJPY is the 10 day moving average. It has also been a strong support back in late December. This should be a good resistance level. My guess is that GBPJPY should stall, or even retrace, here for a while. Thus I’m taking profit at this price as shown in Figure 1 (yellow triangle).

I still believe my bullish setup from yesterday is still good. So I’ll be watching this pair for a re-entry.

Update: I re-entered at 145.24 the next day.

GBPJPY, 3-hour

Paper Trade: Long GBPJPY @ 144.24, Stop 143.60, Target 148

My previous short-side setup on GBP/JPY played out beautifully. Yet I wasn’t able to ride it down because I got stopped out on a stop-hunt counter-move before the dive, see Fig. 1. Now that GBP/JPY has reached its other end. I am betting for it to go reverse with a long position. I expect this move to be more fierce with more upside potential as it’s in the direction of the long term up trend. Some people are calling the top has been printed in the markets and the wind is now blowing the other way. I am not one to guess what the market is about to do. So it’s business as usual until the trendline is broken.

What I really like about this setup is that GBP/JPY is testing a double trendline cross on the weekly, Fig. 2. Secondly, the 3-hour chart of Figure 1 is showing a RSI positive divergence on this test of the long term support. I am quite confident of this setup. However, I am not confident about the timing as GBP/JPY is known to be a wild horse and volatility could very well stop me out, like last time.

With British preliminary GDP number coming out in about 6 hours, it might have been wiser to wait until the after that to enter. On top of that, the markets have been on a stall for the last few days waiting for data in the next 48 hours. End-of-week volatility this week is expected to be significant.

Anyway, I’ve put in a position already and will just let it run. This a small initial position with 0.1% of my account at risk. I have also placed limit orders above resistances to add to this position. We’ll how this turns out soon enough.

Lastly, even though I said I’ve been cut off from trading at my day job. It doesn’t mean I’m completely out of the game. I just have to adapt my manual trading strategy while my automated system is still in development. Basically meaning that I’ll trade with a slower timeframe for longer-term moves. All the better, as longer term moves are generally less deceptive.

Update: I closed this at 146.42 for +140 pips gain the next day.

GBP/JPY, 3-hour

GBP/JPY, weekly

EUR/USD +95 pips in 2 hours: An example of swing and day trade convergence

I had my best day-trading day this quarter on November 27. I made 95 pips in two hours at the open with only two trades. This post is a review of my trades that day for my future reference. To save you and myself from reading, the two reasons for this good run are:

1. Convergence of intermediate term signals with day trading signals
2. Ignoring my bearish sentiment (Dubai news) and traded what I saw from the prices

Before moving on, let’s start by setting the stage with some background information to summarize what conditions were like that day.

Background

The news on November 25 after NY close of Dubai World delaying their debt repayments sent the dollar and yen soaring. I made my first 400+ pips trade by being at the right place and time on this panic wave. The U.S. market was closed that day but FTSE sold off more than 3% the day after the news. So the expectation was for US to do a catch-up sell off when it opens again on Friday 27th. Risk aversion (equities down, yen and dollar up) was the talk of the day.

Figure 1 below shows the charts of ES futures (e-mini S&P500). Left is a 1-min. from midnight of 27th to that morning’s NYSE opening. Right is an hourly showing the move overnight from 26th to 27th.

ES Futures (e-mini S&P 500)

Intermediate term signal

Figure 2 shows my intermediate term signal. EURUSD has been printing an uptrend on the daily (not shown). Figure 2 shows that EURUSD was testing the bottom of my channel so I should consider going long. Notice that this is the same channel that called for the 1.5150 top on 25th. At least it has proven itself useful once.

EURUSD, 3-hour

Short term signals

For the short term signal, we need to go back to Figure 1 for the ES charts. ES tanked 40 points over the holiday with very low volume. It made it all the way to 1067 just before 3am on 27th. Then it lifted all the way to 1080 at 9am. 1080 is the line in the sand for the bulls and bears. So retracing all the way to that level before opening is significant.

This pre-open strength in ES was the sign of oversold for me. This is the short-term confirmation I needed. I entered my first position to long EURUSD @ 9:09 am to test the water.

Then I watched both EURUSD and ES closely for the next half hour. Once NYSE opened. I noticed that the TICK was relatively mellow with readings around -250 to -500. It’s unusually good for a -20 points open drop on S&P 500. One would expect at least -800 readings for a strong negative sentiment. So after watching EURUSD, ES, and TICK for about 10 minutes, I entered a second position on a weak retracement at 9:39 am.

The exits

For my exit, I took profit at 1.5180 because it’s the 50% Fibonacci level and it’s also the top of another of my channel (Figures 2 and 3). After about 10 minutes of watching the 1M bars, EURUSD failed to clear that resistance, so I took profit on the second half to go flat in this pair just before 11 am because it’s an early-closing Friday (NYSE closing at 1pm).

The gains were +95 and +93 pips for +0.27% and +0.28% in my demo account total. Not bad for holding for 2 hours.

Update: Thanks to Jeff on Twitter for the question. I updated Figure 3 with the Fib. levels and showed the top and bottom used to draw it.

EURUSD, 30 min.

Conclusion

In summary, I started with an intermediate term setup that aligns with the major trend. I observed the reaction of the markets on an important news. Identified an oversold condition from the short-term charts for a short-term positive divergence signal. Scaled in a position. Then added more with another confirmation. I scaled out when the target was hit.

Recommendation

Once again, I could have been more aggressive on this trade. As shown in Figure 3, 1.4920-4930 was a short-term resistance. I could have added more to my position when that level broke, with a stop at 1.4900.

Paper trade: Long AUD/JPY @ 81.22, SL 80.99, TP 82.50

Several major pairs are testing their support on this market correction with a 20 points drop in the S&P500 before 10 am. This is a short term capitulation scenario.

From looking at the major pairs, the long term trend still seem to be intact. In particular, I am interested in shorting Yen because I’m seeing FTC setups across the board in JPY crosses.

I compared AUD/JPY, CAD/JPY, EUR/JPY, GBP/JPY, and USD/JPY pairs to decide which one to go long with. Seeing that I already have a USD/CHF long position, USD/JPY is out. Then EUR/JPY is out too because of recent Euro weakness from my observations of intraday price actions. I haven’t had much luck with British Pounds, so GBP/JPY is out too.

That leaves me with my two favourites, CAD/JPY and AUD/JPY. So I checked with USD/CAD and AUD/USD charts to see which has better support/resistance. USD/CAD has a lot of resistance above 1.06, so going with CAD/JPY long seem like to be less risky. However, from looking at the 3-hour chart, I changed my mind to go with AUD/JPY long because it is showing a positive divergence there.

From the daily chart of AUD/JPY shown in Figure 1, we can see that the up-trend is losing steam. The price action is expected to be choppy. Long term condition, up and choppy.

AUD/JPY

Figure 2 shows the 3-hour chart of AUD/JPY, this is where things get more clear. Notice that AUD/JPY is testing the lower fChannel the third time in a month with the lowest RSI. This is a clear positive divergence.

AUD/JPY, 3-hour

However, the strong short-term down move is making this long entry very dangerous. Thus, I am using the NYSE intraday sentiment (Fig. 3) to pin point my entry. Notice the extreme negative open and then the intraday positive divergence as shown by the S&P500 and TICK.

NYSE intraday sentiment

As part of my analysis for this trade, I compared the current scenario with earlier this month. Figure 4 is the hourly chart of AUD/JPY when I entered this trade. Figure 5 is the hourly chart of AUD/JPY from Nov 1st – 4th, when AUD/JPY last tested the lower fChannel. I noticed that AUD/JPY had a tendency to break below my fChannel by about 50 pips before reversing. With the fChannel at 81.80 today, AUD/JPY should fall to 81.30. I watched that level closely this morning and timed my entry with the intraday sentiment as described above.

AUD/JPY, 1-hour

AUD/JPY November 1st-4th, 1-hour

Position size: 100%

Entry: 81.22, entered based on intraday sentiment.

Stop: 80.99, below round number support.

Target: 82.50, previous congestion and near top of channel.

Reward / Risk = 128 / 23 = 5.57 > 3. A risky trade with great potential.

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Paper trade: Long USD/CHF @ 1.0122, SL 1.0060, TP 1.0225

Seeing that this is my first commitment after the big drawdown, I’ll bring back my tradition of writing a post to log my rationale and market conditions on this entry for later review.

I sifted through the weekly charts of all pairs on my watch-list tonight and found that USD/CHF long is the most promising. Figure 1 shows my daily chart for the setup and Figure 2 is a 3-hour chart with my entry timing.

Let’s talk about Figure 1 first. USD/CHF is making a triple bottom with a positive divergence as shown. I have also marked the current major support at 1.0010. USD/CHF has trade below it for about a week now but failed to break any lower. Today is the first day when we’ve opened somewhat above it.

Secondly, note that we have broken above a descending channel as shown in Figure 1. USD/CHF has also tested the 1.0010 support twice already at both sides of that channel. And accompanied with a positive divergence as I said.

The major caution as shown in Figure 1 is that we’re still trading below the 10-day ma.

As for the entry timing, observe Figure 2. Notice that USD/CHF just made a higher low outside and above the descending fChannel (the two thicker brown lines). This is the signal for entry. Note that the fChannel is my proprietary channel.

This trade is initiated according to my new Forex Trend Fading (FTF) setup.

Position size: 100%, 50%

Entry: 1.0122, from fRays signal.

Stop: 1.0060, below major support

Target: 1.0225, first major resistance, ease off some at that point, add more above it.

Reward / Risk = 103 / 62 = 1.66 < 3. Not not good enough for my usual R/R target, but I’ve been considering lowering it to 1.5. So lets see if an R/R of 1.5 is a good enough number. I would have been more comfortable with a 2.0 though. Anyway, let’s see how this goes.

Update: I took half of it off at breakeven because of the lower R/R and the new setup. Only 50% in this trade now. I’m looking to add a EUR or JPY cross for my other half allocation.

Update 11/19: I’m stopped out of this position @ 1.0150 for +27 pips.

USD/CHF

USD/CHF, 3-hour