EURUSD: Weekend Analysis

I don't generally trade the EURUSD but since it's the weekend I seem to have some extra time on my hands.

Here are a series of charts, in varying timeframes, that I'd use to get a general feel for this currency pair.

First, let's look at the 1D chart to see what's happened over the long term. I've compressed the chart a fair amount in order to get it to fit into a single snapshot -- you should be able to click to expand the image:


First, notice that over this period there has been an apparent double bottom. In fact, I've drawn a trend line to help identify this. As well, the currency pair has not yet broken above a resistance line drawn from the middle of July until now. In the big picture I'd expect the price to bounce around between these lines until a major news event or until the lines have converged.

Frankly, I'm not sure what will happen to the Eurozone or North America with respect to economic growth and interest rates, so I refuse to try to call which direction a long term breakout will go. However, that doesn't mean you can't speculate on either or both directions.

Moving to the 3HR, below, it looks like we might be able to fall a bit, but more importantly, we've broken a recent support point:


Notice the horizontal yellow support line that has been breached? If I were going to put money into this market I'd be thinking that we've got some room to drop. Don't get me wrong, it certainly doesn't have to, but often a support or resistance breach is a prelude to further movement in that direction.

On the 1HR chart, I see something that looks like a setup to me. See how the price appears unwilling to break the lower red support line? If I were going to play EURUSD I might wait to see if the currency makes it's way back to upper resistance line and then short the pair:


It's easy to call shots on the weekend and obviously when the markets open on Sunday this could all be trash due to news of some type. However, until things get shifted in some major way I'd either try to counter-trend a long position back upwards or simply wait for the short setup that seems suggested after a move back up.

Finally, this is not advice, and I could very well be completely out to lunch. However, this is my take on the situation. You should simply consider this one interpretation. Obvious weak points, from other points of view, are previous highs and lows as resistance levels, Fibonacci points, and so on.

Trade Free Weekends

It looks like The Rookie has survived another week. Although, I have to admit I'm holding my breath on a few underwater instruments this weekend.

In particular, the USDJPY took a heavy knock on the jaw and is lying face down waiting for the three count. Maybe the weekend will be long enough to let the coach clean up a few wounds while the dollar catches it's breath for the next round? Get up Rocky, get up!

The Australian dollar was showing a little strength. Better yet, the AUDUSD was bobbing up and down and I was able to shave some pips here and there right up until the last couple of trading minutes. A couple of extra dollars in the account can make a big difference -- not so much for the value as for the extra margin buffer.

Personally, I was disappointed by the EURCHF. Cheffy, my pet name for the CHF (pretty clever, I know) was busy chomping on the Euro's nuts from the moment the US jobs report came out. Come on, we don't need the Euro to be a surrogate for the US dollar. Anyway, I'm just grousing because it would have been nice to see a little more traffic going in the opposite direction to the recent stampede.

Speaking of stampedes, the EURUSD was feeling pretty uppity. I'm afraid a large portion of my potential gains were penned up via some, in retrospect, cautious limits. That's really too bad, but as my last post said, I got some learning out of that too. Maybe one of these days I'll know enough to catch a bit of ka-ching here and there.

Heck, I guess I was spread all over the place. Pretty aggressive for a complete rookie if I think about it. Anyway, the GBPUSD was a bit ambivalent about the recent news. Sure, it left the dollar in the dust for a while, but the pound suffered from a guilty conscience and came back to offer encouragment. However, by the end of today it was tired of waiting up.

I'm thinking that once I can clear out of my current positions I'll move to trading within a basket of somewhat offset instruments. Heck, I'm sure I can figure out tons of ways to give away bits of money here and there. Most importantly, yes, it's still fun. I'm still stuck to the screen like a fly on a lightbulb. Yes, I am aware that usually this isn't too good for the fly. I'll change my analogies when I'm a cash magnet.

A Couple Trades

Okay, time to show that I'm not absolutely wrong 100% of the time. So much for the inverse signal idea... damn, foiled again.

B CADJPY 109.36 -> 109.61 = 2.17
B EURUSD 1.3645 -> 1.3658 = 0.30

I had a fair amount of margin on my account and figured I'd unload the EURUSD on a spike so I could leave myself a bit more wiggle room with respect to other open positions.

Getting Spanked

Oh oh. I might be about to get spanked. It's really strange, because you look at things and come to a conclusion, but the market certainly doesn't have to give a damn about any of your thoughts, calculations or conclusions.

Today I've been selling the EURUSD at the top of some price spikes. The only question is, are these really spikes are just some short term pauses on a large upward movement?

So, I have competing issues to deal with. The price going in a direction counter to my position and my "determination" that it will go in the other direction significantly due to a correction. So, if I don't get into the market to take advantage of movement I can't make money, but if I do get in, and reinforce my position to take advantage of it, I risk more and more.

This is exciting!

In the end, right now, I know I'm a beginner. I'm able to write off my entire $100 initial investment if it comes to that. Then again, if I'm right...

Reporting Some Losses

I guess since I crow about profits, I should also disclose some recent currency trading losses. I mean, that is the whole game right, win some and lose some. The key is to make sure you regularly win more than you lose.

B EURUSD @ 1.3643 S EURUSD @ 1.3649 = 0.60
B EURUSD @ 1.3638 S EURUSD @ 1.3605 = -3.30 (S)
B EURUSD @ 1.3634 S EURUSD @ 1.3619 = -1.50 (S)
B EURUSD @ 1.3630 S EURUSD @ 1.3619 = -1.10 (S)
B EURUSD @ 1.3627 S EURUSD @ 1.3619 = -0.80 (S)
B EURUSD @ 1.3611 S EURUSD @ 1.3617 = 0.60

The four stop orders were the positions that I had left open over the weekend. I recently blogged about leaving those positions open without having any stops in place, so I was happy to add them in when the market reopened.

What does get frustrating is that it seems that the price will drop right down to your stop point, sell, and then rebound back up. I guess this is the whole point of developing discipline. I know it is imperative to protect your capital but it still can be annoying to see this behavior.

Perhaps my new found ability to set price alerts will let me analyze things in time to decide whether or not to remove a stop order.

Onward with my Forex education...

Impending Day Trading Resumption

I can hardly wait. In another five hours, approximately, the Forex currency trading markets will start another week of operation.

Will my open trades bust my account? Sure, it's only a SuperMini, but I'd rather not simply throw my money away. On the other hand, perhaps the EURUSD will go up and I'll end up looking like a hero? The suspense is awesome...

I've been doing my best to learn more about Forex trading, reading up at Babypips.com, as mentioned in a previous post. Quite honestly, I'd love to find out that I have the discipline and the ability to be a full time trader. Nothing would please me more than to give up the day job.

Okay, I'm rambling, but if I do blow up my account, I'll fund it again with another $100 deposit. I've only been trading for about half a week now, and I've learned first hand about the importances of stop orders, trailing limits as well as paying attention to when exactly the markets are open.

Hey, I'm sure I can find other ways to screw up, but that is how you learn! Or, on the other hand, if you are reading along, maybe you can learn from a few of my mistakes and save yourself from some costly early mistakes. Tick, tick, tick. Can I trade yet?

I should also mention that I am interested in having multiple simultaneous accounts. You see, while I am day trading right now, I am also interested in trading over longer periods of time. Both types of trading involve different risks and potentially a different level of capitalization to remain in the market. Also, the trading platform I am using will close out a position if the opposite trade is made, which could close out what was supposed to be a long term position.

Look, only 4 hours and 45 minutes remaining until trading time...

Another Trading Session

I've been doing some reading, while waiting for prices to move up and down so I can get in and out of the market, so it's possible that I'll start to use industry terminology within the next few weeks.

The best introductory site I've found so far is the Babypips.com offering. As I learned just the other day, a pip is a single movement point in the price of an issue being traded.

Anyway, during this reading I realized how the candlestick charts work. I also realized that I'm trading on a 5 minute chart. Now I'm armed and dangerous! Well, okay, I'm feeling lucky. This sessions trading went like this:

B EURUSD @ 1.3622
S EURUSD @ 1.3637

This puts another $1.50 into my pocket. Of course, keep in mind that I'm learning on a $100 SuperMini account... so this is a nice percentage point gain.

Lucky Morning Session

This morning I was quite simply very lucky. I had been having network troubles and was not able to watch my position closely for several hours:

B EURUSD @ 1.3625
B EURUSD @ 1.3612
B EURUSD @ 1.3606
B EURUSD @ 1.3603
B EURUSD @ 1.3597

When I did finally get my network fixed, I was sitting pretty with:

S EURUSD @ 1.3650 (x5)

Wow, I'd just turned $100.33 into $121.03 in a morning. Can you believe the ~20% return on investment in such a short period of time? However, that means it is just as easy to burn that much money as well.

Anyway, I have to tell you, when I was watching my positions, seeing them all underwater at one point was a bit nerve-wracking. All I can say is that I watched the charts and felt the direction and then, by luck, hung on long enough to see it happen that way.

You'll notice that I'm not employing any "sophisticated" ordering strategies at this point. Beware, lucky novice at work!