Friday, February 29, 2008

EURJPY scalp trade - 29 February 2008

I just got out of this trade here at 00:00 GMT - 2 AM o'clock local time.
A pretty nasty selloff in the Yen Carry crosses induced by the breach of the 105 Exporter defended level -- the rumored stops sub 105 / 104.90 were triggered leading to an extended plunge of the pair to 104.70 in a swift manner.
Playing with the drop in EURJPY I decided to enter a swift counter trade at the previous Resistance level around 159.50 - which coincided with 50 day MA on 4-hour chart.
My Initial idea was to get out fast if I see a breach there.
Well so much for discipline and cutting loss early :>> I averaged down at 159.30 level --- here by mistake I was trying to buy 1 standard lot but I actually sold I one and took some little 20 pip loss but the dynamics of the trade were going even lower.
Then I checked the Daily chart presented above --- the 159.22 stood for the 50 day MA which I started to believe that will make the drop at least stall or pause (no matter it would reverse or continue even lower).
I want to make sure I never forget this insane scalp trade as it was ultimately risky and it exposed the whole week's labor at a plain collapse. Actually the whole equity was at stake.
My view that I still could exit at least at Breakeven led me to add more longs at 159.23 >>>
a that point I guess I touched the largest leverage I ever used - 7 standard lots with average trading location at 159.35.
I swiftly covered 3 lots at 159.43 at the first bounce. Then it broke sub 159.25/29. So on the next quick bounce I saw 159.42 I immediately squared the last 4 standard lots and went flat with a little gain to make up for the emotional strain and clearly irrational use of leverage.
......... .......... .......... ............ ...........
What is worse is that I had an excellent trade location around 160.70 at the start of the European session - I closed it with 30 pips since it was a bit sluggish - but I should have locked in initial profit and run stops above clear level indicated by the Descending Triple top formation quite evident on the 4-hour chart -- Daily is seen as 3 candles with lower highs.
So this is just a mark to remember that good trades demand CONVICTION, PATIENCE, PROPER MANGEMENT and certainly stop and limit. Those 30-40 pips with 1 standard lot are nice but what makes trading professional is going with a trend and managing the trade properly - otherwise it is plain gamble - let's face it!
:: After it bounced to 159.42 it went straight down to 158.70/80 - it would have just wiped me out completely!!!
>>>>>>>>>> Now regarding conviction - this is what Stanley Druckenmiller recalls:

Soros came into my office, and we talked about the trade.
"How big a position do you have?" he asked.
"One billion dollars," I answered.
"You call that a position?" he said dismissingly. He encouraged me to double my position. I did, and the trade went dramatically further in our favor.

Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig. It takes courage to ride a profit with huge leverage. As far as Soros is concerned, when you're right on something, you can't own enough.
And another classic - this is from the Interview with Paul Tudor Jones in Market Wizards by Jack Schwager:
JS:: What are the trading rules you live by?

PTJ:: Don't ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don't have control. For example, I don't risk significant amounts of money in front of key reports, since that is gambling, not trading.
If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. There is nothing better than a fresh start.
Don't be too concerned about where you got into a position. The only relevant question is whether you are bullish or bearish on the posi­tion that day. Always think of your entry point as last night's close. I can always tell a rookie trader because he will ask me, "Are you short or long?" Whether I am long or short should have no bearing on his market opinion. Next he will ask (assuming I have told him I am long), "Where are you long from?" Who cares where I am long from. That has no relevance to whether the market environment is bullish or bearish right now, or to the risk/reward balance of a long position at that moment.
*** The most important rule of trading is to play great defense, not great offense. ***
Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown. Hopefully, I spend the rest of the day en­joying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.
Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead.
Jesse Livermore, one of the greatest speculators of all time, report­edly said that, in the long ran, you can't ever win trading markets. That was a devastating quote for someone like me, just getting into the busi­ness. The idea that you can't beat the markets is a frightening prospect. That is why my guiding philosophy is playing great defense. If you make a good trade, don't think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check.

Sunday, February 17, 2008

GBPJPY short trade - 14.02.2008

Brief post of my last trade - based on the 4H chart I entered a short GBPJPY position at 213.19 - however I entered my trade a little early and I was close to getting scared off.

After studying of the Daily chart I assumed that the recent high at 213.88 will pose a good resistance area I decided to double up my short trade and actually added 2/3 short position around 213.80 so that my average price moved up at 213.38.

Soon after the testimony of FED Chairman Ben Bernanke and Treasury Secretary Henry Paulson at the Senate Committee DJIA, NASDAQ and S&P all started to slide.

As presumed the GBPJPY upsurge stalled around 213.70/80 and after a brief congestion around 213.30 - 50 it broke thru the 213 level. >> Because of the aggresive leverage involved I squared my position around 212.78 - for +60 pips.
:: Respect to Tonbridge AL (rule:: instant gratification required when excessive leverage is applied).

BG40 Weekly - 17.02.2008

BG40 Weekly chart gives a clear view how the bear market has stalled its decline above the 345 level - a breakout gap support that if broken targets the 260 level where a breakaway from the price base emerged

SOFIX Weekly - 17.02.2008

SOFIX Weekly chart update - bear market rally seems to stall at the previous high around 1420 --- next Support level test comes at 1222 - with scope turned to 968 last Strong base if 1222 gives way..

Thursday, February 7, 2008

'Blue chip' SOFIX continues the descent -- Rising triangle breakdown targets the Yearly Support line ~1155
Declining RSI 20 confirms the downtrend momentum.

Update of the broader market index - BG40 unwid.
Targets are set at the projected Descending channel bottom ~ 290 below the strong Support ~350.
What is named Yearly Support ~~ 350 is a mistake as it solid Support because of the Upside gap and the recent low -
- however ~ 270 - where is the projected Channel bottom marks another confluence of technical levels -- predominantly the June 2007 Low which formed a base for the followed bull run -- this should be a very emotional level as it was the first test and I expect a major turnaround after that Gap is closed.

Saturday, February 2, 2008

SOFIX Weekly - 01.02.2008

The 'blue-chip' index SOFIX just like the broader market index BG40 shows more downside to be seen before a strong base is set for a reversal to the long term uptrend.

Basic elements like the cross of the 20 & 50 week MAs confirm this imminent scenario and MACD points to a continuation of the downward momentum.

A good point for a reversal and building a solid base should be the 1150 level where we have a confluence of a Long term trend line support and a major low.

Of course we can't argue with the tape - market will show if I am right or wrong.

BG40 Weekly - 01.02.2008

Here we have the Weekly chart of the broader market - BG40.
On intraday basis the market shows some signs of strength - also on Friday US markets shrugged off the -17k NFP (+ 70k expected) and focused on the 44.6 billion deal in which Microsoft offered to buy Yahoo.
Anyway the weekly chart has some technical inclination to show more of a drop before resuming the upward trend represented by the long term trend line support that comes around 310 / 320.
MACD hasn't signalled any reversal of the downward momentum and I assume we have to first close the gap around 310 where the tredn line support will help to develop a strong base for reversal.