Recent Trading Results

First, some recent results:

Week ending 28-Nov: +23% NAV
Week ending 05-Dec: +08% NAV
Week ending 12-Dec: +10% NAV
Week ending 19-Dec: +45% NAV

This is silly! I'm going to outline some of the events that transpired to help this happen.

During the week ending 05-Dec I acquired some AUDJPY positions in the 58.xx price range. I had a nice trend line indicating that this was likely to be a support point and it turned out to be one -- several times.

Considering the bottom relatively safe I would buy other positions at local lows... making sure to leave enough room for a retest of the 58.xx lows. Obviously, this was quite risky, but at the time I did not have significant capital in the account so I didn't mind risking some calamity ripping the bottom out of the AUDJPY.

So, with that in place, I'd track where I'd bought and sold positions, slowly lowering my entry points and average position price. Then, later, as we all saw, the price spiked massively and pushed all of my positions into a sizable profit.

I don't know if this is something that I'll be able to repeat. Some reasons include increasing my NAV to the point that I'm not as willing to take risks, trying to execute a swing trading strategy which makes it difficult to accumulate positions, and the difficulty in developing confidence in a bottom point.

Finally, this was a challenging week. With the wild gyrations taking place every time the auto bailout shifted sentiment it was difficult to jump into the market. Who knows if a massive spike or drop would go against a current swing trade? While I am a fan of volatility, I've realized that it would be nice if it the market wasn't actively volatile all of the time.

Trade well.

AUDJPY Revisiting Lows

We're down below 63.00 in the AUDJPY market (as I type -- it may bounce).

This appears to be a test of the 5+ year low for this pair... google charts. Are we ready for a bounce and the much awaited eventual upward trend?

Obviously, I have no idea. However, you can be sure I'm sitting here watching the price action as I type.

Right now, we've bounced a bit and are setting up for a possible "tweezer pair" on the 15m chart. I'd consider that bullish if it happens and gets the expected reaction.

UPDATE: 11:15 has passed, we have two tailed candlesticks near the prior bottom, but I don't see the market rebounding as of yet. I have a small long position with a short stop loss very close to the bottom and, honestly, I wouldn't be surprised by a false downward stab to take out my position before any sustained upward movement.

UPDATE: 11:24. We've pushed down a few extra pips, but we haven't snapped through the resistance at this point yet. With a long position on the table I'd like to avoid pushing an extra pip or two as it encourages the bears and increases the risk of overcoming available support.

UPDATE: 11:30. We moved back and forth between a tailed candlestick and closing near the bottom of the candlestick a few times. We ended up with another reasonable tail length -- I guess I shouldn't be calling them "long tails" per se. In any case, if we can get a bit of upward movement after these failed downward pushes it might scare off some bears.

UPDATE: 11:33. I really shouldn't be watching if I wanted a stress free life, but I've got a stop loss in place so this is no big deal. Anyway, we're pushing downwards again, and I'm hoping we can stop a few pips short of the last downward push. Extending by a pip here and there, as we just did again (11:34), greatly raises the risk of a downward breakout. And here it is.. how far will it go?

UPDATE: 11:38. I'm not sure where we can expect to go right at the moment. I'd say that if we don't have commodity prices recovering and/or we don't have global markets moving upwards then we can expect further downward movement towards some as yet to be found bottom.

UPDATE: 11:59. We have what looks to be a nice long tail on the 1hr chart. This could be an interesting development.

UPDATE: 1:27. Another downward break. Presumably not a surprise to most!

Forex Carry Trade Bottom?

I'm probably never going to try to call a bottom, but I will point out that there is a difference in behavior since the recent panic drop. Now, we see the Yen based carry pairs bouncing off a resistance point instead of simply dropping as if they are in free-fall.

What am I doing about it?

I'm glad you asked. My current trading activity involves playing with a bit of a gridding strategy. When the price gets down near the recent resistance point I'll place limit buy orders above the price. This means that if the price rises I'll start filling orders. These orders have a small take profit zone so I won't have to worry about accumulating many positions, or risk, but I'll make an okay profit if the price decides to bounce back and forth for a while.

I've booked small amounts of incremental profit this evening in the EURJPY, GBPJPY and AUDJPY markets. Admittedly, the profit is very small per trade. However, if the price continues to rise and fall I'll be able to take that same small slice of profit during each cycle. It adds up!

Interestingly, if the price drops, I'll just extend my grids downward and catch whatever eventual upturn arises.

Don't forget, I like to accumulate long-term carry trade positions at what are apparent low points. I make sure not to overextend my account so that the sum of my open positions are not large enough to put my account at risk. So, if I end up holding on to some grid based trades for the longer term, I am fine with that.

Overnight Trading

As I live in the eastern timezone, I get to trade overnight prior to the NY trading session on the next day.

Last night I was able to settle some AUDJPY positions around 96.7, 96.8 or so. At the moment these are nicely profitable while the DOW futures are simultaneously positive.

As far as I can tell, the US trading day pushes around the AUDJPY based on stock market movements. By this, I mean that any established trend can easily be broken as soon as the stock market does not itself follow any such trend. In short, reading your charts and so forth can be pretty misleading at this time.

However, a potential strategy ensues. There are underlying fundamentals based on both the AUD and the JPY. When the US trading day is over, these fundamentals can start to exert themselves on the AUDJPY pair. So, on a heavy US down day, it might make sense to acquire a little bit and hang onto it overnight. Basically, take a small bet. If it moves against you get out, of course, but if it goes your way, put a profitable stop loss under it and hope for a good day in the US.

This will probably be true as long as the US economy and the world economy are still considered to be different entities.

Personally, I take tiny sustainable nibbles on the ride down... getting a little bit of carry action. Then, from time to time, when it seems a bottom is possible (considering that a downward moving DOW pushes down the pair) I'll jump in with larger positions, hoping for that eventual correction or reversal.

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!

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.

Bottom Spotting the USD/CAD

Down and down it goes, where it will stop, nobody knows.

Just how low can the USD go compared to the CAD? Parity is an option. Below parity is an option. However, there have to be some fundamentals that come into play here. The amount of trade between the USA and Canada is huge!

Traditionally, the USD has always sat above the CAD.

Anyway, I'm not sure parity or below is realistic. I'm starting to dip my toe into this market. I've got a small stake which represents a "water mark" to help me gauge future expectations. Somewhere, presumably within the next 500 pips, we should find the bottom. From there, we should see lots of volatility and false starts, allowing for profit in the short term.

It should also provide for profits in the long term once the USDCAD starts trending towards a more appropriate historical level. Unless of course there is a large fundamental change happening. That's possible, but flying under the radar still.