Thursday, February 21, 2008

Potential AUD/JPY Double Top

It's hard to say whether it will complete or not, but the 1hr chart is showing the potential to make a nice visible double top by the end of today.

As I'm sure my readers know... the AUD has had a nice run lately based on speculation that the RBA will be raising interest rates. However, the AUD/JPY pair has bounced back from attempts to get beyond 99.60 during this week.

We should start to expect either a break above this level or the formation of a double top, which could potentially lead to several hundred pips worth of decline.

Saturday, February 16, 2008

Forex Reflections

Saturday is a good time to reflect on Forex activities.

What did the markets do? What did I do? How much cooperation was there between these actions as measured by achievement of my goals?

As time passes, and I actively trade, I'm starting to notice trends. The entry points that cause me the most stress, that I end up regretting or being put in a position where I'm forced to make decisions, are the ones that occur near the top of a movement.

If you are silly enough to ask why anyone would get in near the top, just be assured that it is incredibly difficult not to do. I do have rules and strategies that are designed to protect me from such things, but at the same time my goals push against these security blankets.

Anyway, I have to devise some new strategies.

I simply am not going to have the time to babysit the market all day long while I watch CNBC anymore. I'll be sitting at a desk all day gainfully employed instead. However, this little tryst between the markets and I is not something I'm willing to give up at this time.

The lure of earning decent money, or better, is keeping me in the game. I've been doing a passable job during these turbulent times. I can imagine how I would do if these were not turbulent times. As the saying goes, a rising tide floats all boats.

If I've been able to weather the stormy periods with plenty of ups and downs, I'll be able to do much better when the economic sunshine starts to grace us once again. So, the real game plan in the medium term is to play safe. When things start to get better, when the weather starts to warm, I plan to be in the game.

My goal, and I've been experimenting with it for a few days, is to trade off balancing high cost and low cost positions to end up with medium cost positions. I know that doesn't sound very insightful or precise, but remember that I trade the AUDJPY and it's a good carry pair. So, what I'm suggesting is that I'll slowly work to lower my average price over time.

Sure, I know, that's easy, right? Just buy into new positions when the price is lower than your current average! The problem with that is that with limited capital it simply is not safe to enter into more and more positions. Pretty soon too much of your NAV (net asset value) is sunk into the market. Pretty soon you are carrying way too much risk and eating Rolaids for breakfast.

No thanks.

Create a budget, pop in some new funds on regular basis, and sink them into the market at opportune entry points. Over time you'll develop some positions that represent high cost entry points and others that are low cost. Those pairs can be canceled out and used to retry at some new lower entry point.

Time is a powerful thing so put it to work for you instead of struggling against it. Heck, it's a force of nature. Enlist it to your cause and then stay out of it's way.

Friday, February 15, 2008

Bernanke's Signal

I think the Bernanke signal I highlighted a while back is batting 100% right now. You did catch the markets tanking because he was speaking to congress, right?

When Ben speaks... markets tank. It seems you can Bernanke on it.

Saturday, February 9, 2008

No Time? No Problem!

I'm a lot busier than I was. I no longer have time to watch the forex markets full time in pursuit of profits.

So, as you can imagine, I've developed a new trading strategy.

A good way to figure out when to attempt to enter the AUDJPY is when the 1hr chart shows the price hitting or dropping below the lower Bollinger band. It won't always bounce up from that point, but very often it does.

Armed with this knowledge, it's easy to leave a 1hr chart up on the screen and from time to time glance at it to see if action is needed. Did the price hit the Bollinger? Bam, fire off a small purchase. Did the price bounce and re-hit the Bollinger? Bam, fire off another purchase.

If you are trading, you can set a take-profit with each purchase, or at least each purchase that you actually are able to execute (since if you are busy you will surely miss some of them). If you are trying to carry, you've picked fairly good places to enter and hope for a market rise.

The only problem is that it may be quite a while between opportunities. You may find yourself missing a lot of movement. However, that's the price you pay for not having time to watch the market with any serious time commitment.