Success With AUDJPY

Finally, I seem to be able to make a few dollars. This is significant as it represents a ray of sunshine in my quest to become a Forex trader.

I'm still playing with a small account balance, but hey, if I'm able to grow this into a more serious stake, I'll be willing to trade with it.

Anyway, to give you what might be a trading tip or two, my process currently is to start out by looking at a 1hr chart, identifying any potential trends. Once I've scoped out this level, I'll drop down to the 15min chart, again looking to identify any apparent trends.

Once the above have been done, I'll use the 5min chart to look for entry points into the trend. When the market is "rational" then simply buy low and sell high.

Of course, it is particularly difficult to execute this strategy, and it is very difficult to know when the market will become "irrational", but you only need to be right more often then wrong if you do this right.

One hint, when you approach the end of a trend, a boundary between two trends, or major resistance levels, the market may or may not behave rationally. Trends often break, prices halt, drop or pop unexpectedly, and bets on the trend get even riskier than they are under the best of conditions.

Time To Accumulate A Carry?

The AUDJPY is down around 96.00 at the moment.

I've ridden the money train on the way down a couple of times. I don't know if there is a real term for this, but as it goes down, I add new positions as previous ones have profit protected behind a stop loss. When you catch a large down movement using this practice you can put nearly your entire account into play -- while only taking any risk on the last one or two entry positions.

Anyhow, that's a bit off topic for today. I'm thinking that it's time for me to try to accumulate some carry positions. I would of course have to buy when I expect an upturn or a correction and then place protective stop losses above the purchase price. Once again, the only real significant risk is on the last position opened since it starts out negative and needs a little bit of room to breath.

However, while I'd like to accumulate some carry positions, it seems to me that this will be an exercise in bottom picking. If we aren't at bottom and the positions are all protected behind a stop loss, then they will all be closed as we move towards a new low.

Wait a minute! That's not a bad thing. It means that if we are diligent in this strategy that eventually we will have a string of positions anchored down at a level near the eventual bottom, whatever it finally happens to be. Then, upon any potential future unwinds that close out our positions, we can reenter either at a lower bottom or very near where we were.

It sounds like a good long term strategy to me -- I just wish I had some serious capital to play with!

AUDJPY Unwinding

The yen is appreciating quickly at the moment, or should I say a short period ago. Luckily I was awake and able to scramble around in my account to keep things sane!

EDIT: It is still unwinding... now at 102.75 and holding. Oops, now approaching 102 and probably beyond.

AUDJPY Thoughts

I'm still trading the AUDJPY.

I've learned that the Dow Jones and the AUDJPY have a correlation based on the fact that people borrow Japanese Yen to invest. You can watch the AUDJPY rise and fall as the Dow rises and falls.

Hmm, what else have I learned?

I've also learned that I have a tendency to get too heavily invested. I guess I'd be okay if I had a larger capitalization -- assuming I did not increase my position sizes by the same proportion. You see, as a corrective trend gets longer I'll often see opportunities and act on them, and then be left positions I view favorably, though I can't get rid of them without a loss unless I wait.

Blah blah blah. Good thing for me to realize about myself as perhaps it will let me slow the trigger a little bit.

What else, oh yes, charting. I've been looking at common chart patterns, and have started to see them happen... and what do you know, at times I can make a prediction, for a reason, and watch it unfold. It's very exciting to see an opportunity, pull the trigger, and watch the pips roll in.

Bragging Rights on the AUDJPY

I just could not resist posting this. It represents a great day of trading the AUDJPY leaving me with both profits and some low priced carry positions. What more could I want?

I should note that I stayed with this pair for over 24 hours. The US Jobs report came out during the spikes outside the trend lines.

Trending the 5 min AUDJPY

I've been having a great time spotting trends on the AUDJPY today. Well, of course, I have to point out that trends are good until they change. However, with that out of the way, I've been able to pick up some trends, identify channels, and generally advance my knowledge and confidence quite a bit.

Sure, sure, I know, everyone can float in a rising tide, but check the charts today, things have been a bit choppy!

It's a powerful thing to see prices bounce off the "walls" of your trend lines for two or three hours. While maybe only an illusion this gives you the ability to enter and exit trades with a feeling of control. Well, a semblence of expectation at the very least.

Similarly, there is a chess-like pattern to this dance. If you've got a gain, there is going to be a drop. If you've seen a quick drop, there is going to be a gain. These aren't truisms, but you can rely on one of two things. If you have a long position, and the short term average is under the price, the price will either hit the other side of the trend line, or your position will improve in profitability.

When you can start to see some inevitibilities, while a trend holds, you can start to plan, have enough confidence to hold aside both greed and fear, and reap profits while the market stays rational. When it falls apart, it's time to start looking for the patterns in the sea of chaos...

Forex Scalping Information

Okay, I've been trying to find information on forex scalping and the pickings are mightly slim indeed. In fact, the so-called information on the net is so bad I'm going to write up a small post of my own... because I'm sure if you found this page you are desperately looking for some real information.

What Is Scalping?
Quite simply, very short term trading.

Why Don't Brokers Like Scalping?
Well, some brokers don't like scalping because of how they are set up. If they are not able to execute your trades quickly or efficiently enough then they risk being the source of your profits.

Does Scalping Work?
I've seen some people claiming that it works great as well as others claiming that it is impossible to do profitably. The reality is that if you can predict the direction that an equity pair will move, either up or down, then you can hop into the market and grab a few pips when it happens.

How Easy Is It To Predict Equity Pair Price Changes?
Well, that's the million dollar question! I don't have any books to sell or anything, but a lot of people claim to have solutions for you. Personally, I think if they really had solutions that worked they wouldn't waste time telling you about it, they'd be busy trading. However, in an effort to be informative, when you spend enough time watching a market (which is quite boring) you'll get a feel for it's current state and how it is moving. Often, until conditions change, you can be fairly accurate with your predictions.

Can Anyone Do This?
If you find a market maker that doesn't mind scalping, you can try. However, you must know how to place stop and limit orders with their trading platform. In particular, it would be very nice if you were able to have someting known as a trailing stop. As well you will want to understand the concept of leverage as it applies to a forex account. Basically, I'd suggest throwing $100 at a starter account and playing around, carefully, until you've made enough bad decisions to learn how things work. After that, you should have the tools needed to try out various strategies.

How Much Effort Is It?
Scalping is very time consuming. You have to spend a lot of time watching the markets, to the point that it would be difficult to do well if you had an existing full time job. Also, scalping is very demanding from a psychological point of view, as you will have large amounts of your capital ready to put into play, but you may have to wait hours before you spot a good entry point. Then, upon entry, you might find you are back out with a small loss in no time. Alternately, you might get a small profit, take it, and then watch the market skyrocket after your exit. The shorter your trading is the more attention it will take and the more nerve wracking it will be.

Are You Scalping?
I'm thinking about it. I've been opening up a grid strategy to catch swing trades, but I have noticed that using half of the scalping mentality to accumulate positions in trends may be able to have a significant positive impact on my results. I guess I'll end up letting you know how things work out.

Grabbing Some USDCAD Pippage

Well, it's about time!

It looks like there is some strength in the USD happening (or perhaps it has already finished happening) at this point. Am I vindicated?

Who knows. As I've seen posted here and there a few times, everyone trades alone. You have your convictions, systems or maybe even a dartboard, and you play as your guidance and resources dictate.

However, recent weakness in the USD does make it hard to determine where the real bottom may be. Is it at 0.9650, 0.9600, or 0.9500? Have we hit it? Only time will tell if we have truly found the bottom or not.

As I was saying not too long ago, eventually we will be at the bottom of what will become a large uptrend in the USDCAD. Presumably, at some point, we'll be back in a position where the exchange rate hits 1.0000, 1.0500, 1.1000 or more. Sometimes things move quickly, but it might take years.

What to do?

USDCAD Is Playing By My Rules

Okay, I've blogged recently about the USDCAD approaching a low.

I know there are always skeptics out there, and I'm not trying to sell you anything, but I will suggest that this pair is now fairly easy to trade.

When it shows signs of weakness, dropping significantly, buy it. When it approaches parity, sell it. It may or may not be at bottom yet, but nobody really believes that the Canadian dollar should be valued much above parity with the US dollar.

So, now that I'm in a long term play on the pair, it's time to scalp some profits out of movements below and back to parity. I don't care how long it takes the greenback to recover as long as I can make my pips over and over again while I wait.

The trick, or so I think, is to find relatively safe ways to squeeze cash out of the market when everyone else hasn't figured it out yet. Once everyone is trying to do exactly the same thing... it will stop working.

Widening things out a bit, where do you think we are with the USD? It has fallen to lows that haven't been seen in thirty years. Do you believe the USA is going to fall out of prominence and become a third world country over the next few years? I don't.

Guess what that means! That means we are sitting at the beginning of a very long rising trend, but we just don't know when it is going to start. It might start in a month. It might start in a year. Who can say? However, if you are a swing trader, it might be time to start sneaking in a bit of cash on the greenback when you spot moments of weakness. If you are patient I'm sure there will be lots of little dips and spikes you can exploit.

If you are a long term player, you may even want to consider some USD based carry trading strategies...

USDCAD Edges Lower

Okay, if we were at bottom a few days ago, it was only a soft bottom!

Right now, according to the charts I'm viewing, this pair is trading at 0.9925, which is nearing a penny below parity. I can hardly imagine what such a drastic change in rates, worldwide, truly means to the state of global economic affairs.

Perhaps the current administration has done the unthinkable? Perhaps the US predominance in global markets is about to evaporate?

USDCAD Once Again

Okay, I think it is nearly safe to say that the USDCAD has hit bottom.

Heh, actually, it's probably not safe to say, but it has certainly found some support at and above the 0.9950 level. I think that the downward pressure from speculators has now eased.

I also think the downward jump has been overdone.

However, assuming I'm right, and I'm finding that often I am, I don't know how long it will take before the elusive traders and speculators our there will change their opinions. It could be months before anything significant happens.

I'm playing a long swing trade on the USDCAD. I expect the Canadian dollar to return to normal levels once everyone focuses their attention on other areas. Perhaps this will happen when one or two signs of strength show up in news reports from US sources.