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.

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.

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.

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.

Kramer's Bottom Call

I take heart in the fact that Kramer has called a bottom.

Although there is a lot of volatility I am hoping that over time I'll be able to build and protect a sizable AUDJPY position. You see, as you get positions in profit and place stop losses in to protect them, you get to start again with respect to risk. Also, as the profits rise, you can start to get positions that are funded by locked in profits instead of your own capital.

Finding a bottom, then sinking in some serious capital, will let you earn a decent incremental revenue without much effort... at least until some large downturn starts to remove you from the market.

At that time, assuming you've moved the stops up a little, you'll end up with some nice gains to your capital to offset the loss of income.

I guess there is always the chance that interest rates will change, but until then, this is my long term goal.

I only hope Kramer is right. If we've hit bottom, then it will be "easy" to buy into uptrend days... over and over again.

Forex Trading Wish List

Well, once again it is Saturday. There is no trading at all today so I have some time to reflect on wider issues. So, as someone who wants to trade full time for a living, I am feeling the need for the following:

• A nice large workstation including a comfortable reclining chair. As an active trader I can find myself sitting at the keyboard for many hours at a time so I might as well be comfortable while I do so.


• A fast and light whisper quiet computer. Listening to noisy and raspy cooling fans all day long cannot be good for the ears in the long term.


• Multiple large flat screen monitors. Trading a currency well requires an awareness of technical issues across charts in various time frames. Having them all visible at once would help.


• A small cable ready television to watch CNBC during trading periods. It's very helpful to associate stock and Forex movements to news events. You can develop an understanding of how news affects stocks and currencies.


• A wireless mouse and keyboard. This is certainly not a necessity but it is very nice to be able to avoid the confines of a wired setup from time to time.

Well, it looks like it is time for me to quit fooling around and start making some money -- especially since it is apparently already spent.

Forex Trading Review

So, I've been practicing my strategy using a micro-account for months, and it's time to up my game and start trading for real.

I capitalized my account on Thursday evening and have been playing the AUDJPY with a more serious dollar value for the last two days. Here is a summary of the mistakes I noticed myself making over this period:

1. Discipline breakdown. I broke discipline and acquired too many open short positions as I was predicting an eventual downturn. Actually, I was afraid of it and wanted to be protected from it, but the result is the same. Lesson -- stick to the plan.


2. Too impatient. For quite a while the market was moving very slowly. I tried to push capital into the market and forced some trading. This was a mistake. Lesson -- stick to the plan.


3. Too protective. I was overprotective of my open long positions. Stop losses were placed too early or too close to market prices. This accumulated with my strategy of acquiring in-profit positions. Lesson -- adjust the plan.


4. Confused. With a long position trading sub-account and a long position carry sub-account, I need to use different strategies for each. I got confused and used my grid strategy in the carry account as well. Needless to say this was not conducive to accumulating profitable carry positions. Lesson -- stay focused.


5. Buying tops. With gridding strategies it is easy to buy at the top of price spikes. It is necessary to factor this in when setting stops (see point 3). Lesson -- adjust the plan.

In summary, trading with some real money for a period of almost two days has me up $1. While pitiful, I'm happy to not be negative while trading in such a sloppy manner. Fixing these errors, with the size of positions being used, would have me up $20-$40 over this period. Lesson -- do it right and make some useful money!

I don't know if what I'm describing will be helpful to anyone, but I'm putting this out here for my own benefit. Of course, if you can learn from my mistakes, that would be great.

Double Top Warning

It isn't here yet, and that means it may never arrive, but we are currently looking at a potential double top on the AUDJPY.

This means that the DOW could also be poised to give up some recent gains.

Obviously, the DOW can do what it wants, but if you are seeing gains right now and are thinking of jumping in, be wary.


Personally, I'm hoping for the downturn. If it happens according to "my" chart then it means that I'm able to take advantage of the movement. It also means that the AUDJPY will be "on sale" as it will eventually rise again. It will always rise again as long as the carry trade remains associated with the DOW.

UPDATE:

The rollover continues...


While anything can happen, ignore such signs at your own risk!

UPDATE:

I hope you were paying attention this morning...


The market has now made a double top and reacted to it. The DOW has followed/driven the AUDJPY (since I'm sure the overseas markets have a say in the matter too) and once again I have a strange feeling of "control" which is certainly misplaced.

Earning While Sleeping or Catching The Top

This morning I wake up to verify that I've made about 30% of the NAV (net asset value) of my downside trading sub-account. Sweet!

How did I do this?

I have been charting the AUDJPY for several days. There is a clear down trend and at 7:30pm last night the price touched the top of the trend. From there I'd been able to accumulate short positions, setting protective stop losses before opening up another position.


Needless to say, I ended up with a large portion of my account value in sold positions, without assuming undue risk.

If the trend lines hold, and I hope they do, I'll be accumulating long positions at some point later today.

NOTE: The chart is a bit squished and perhaps complex, as I've got trend lines based on various high and low points, two different averages, one MACD, and some Bollinger bands. However, I've highlighted the significant top touch that set off my sell strategy.

Monday Forex Thoughts

Well, I was able to successfully navigate the downward movement of the AUDJPY overnight. It's always a pleasure to wake up to a large degree of pippage! Of course, I sunk a few positions with protective stop losses before retiring for the evening.

This morning, the AUDJPY is bouncing around the 91.36 resistance point. However, a double top has formed on the bounces, so I'm starting to suspect we'll get some further downward movement.


Looking at various time scales I don't see a channel bottom to run into at this point -- so we are likely to drop down to resistance levels if we resume our downward movement.

I'm poised to enter the market if we break downwards.

UPDATE: A few moments later...


UPDATE: Of course, it's never easy, here is enough resistance to make you second guess the action...

Is It Bigger Than A Breadbox?

This was gold!

Poulson, while trying to avoid questions about the exact size of a proposed stimulus package, answered "I don't want to play 'is it bigger than a breadbox?'"

It's hard to say what the DOW (and hence the AUDJPY) is going to do with this. Obviously, it's better for the economy than not having incentives, so it must have some impact. It also shows the government is serious about the issue -- whether or not it will have the desired impact.

I'm currently watching a bit of a bounce in the AUDJPY. Perhaps people are buying companies that are going to benefit from the impending temporary increase in consumer spending?

However, when the president was speaking we saw a decline...