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Monday, March 13, 2017

CLASSIC FX CROSS TRADING


“This is what I mean when I say drive me to the airport!”

First day of trading FX crosses since the manual “How To Trade EURAUD” was posted yesterday over in the “Download Links” section in the right hand column; some classic trading lessons to go over and think about for the future.



First up, we’re now in “daylight savings time”, meaning Europe opens at 3 A.M. here in Island Paradise Time, not 4 A.M. in normal winter hours. In case you don’t know, most of the Caribbean does not change time at any time during the year. Just so happened today, first day after the time change, EURAUD comes “flying out of the box” and heads straight down from the European open. Me? I’m late to the party and get to the computer about 35 – 45 minutes after the open … first and last time that’s gonna happen going forward.

If you look at the early European action, there were 2 good “sell” signals in that first hour from an uptrend correction in the last hours of Asia: I got to the computer just as the second one was happening.

 

Ok, you see how that sell scenario played out? Now remember what I wrote in the manual … which is extremely important … you do your buy/sell initiation orders as the market is” coming back to the middle”, whether it is going up in a downtrend or going down in an uptrend makes no difference, the important point is that it is this minor correction within the day’s trend that we want to capture, and regardless the direction of the correction, IT WILL ALWAYS BE HEADED TOWARDS THE MIDDLE OF THE DAY’S RANGE … hence the term “trading against the middle”.


If you take the time to closely examine the day’s M1, on that early move down to the low, after the low was put in, we had some bullish engulfing patterns and reversal buys that showed up in the correction move up; I didn’t take any of these “buy” trades, because the risk this close to the low is for spikes down that would be against my position [see the manual]. That correction move up lasted about 110 minutes, and took the market about 40 PIPS off the low, and from that “sell signal” I made my first trade on the reversal pattern at the correction top. I sold it at 01 and change, and my thinking was I wanted to see it below 00 [even] within a minute; it did in fact go bid below even, but never went even offer, so I simply scalped it … as it turned out, that was a mistake, as I should have ridden it down to the low where there was a clear bullish engulfing pattern at the bottom. “Meh, life moves on .. I catch the next one in the infinite series … I certainly don’t dwell on the shoulda, coulda, woulda beating I could give myself … been there, done that … and I’m telling you right now, if it happens to me, it will happen to you at some point as well”. The key point, though, is that the manual is “spot on” in the analysis of the trade, and staying away from trouble via “buy signals” too close to the low. Directly below that first trade.
 

As I mentioned above, I ignored the “buy signals” as the market is too close too the low, and the risk for spikes down in price that can run my stop are high; now, it may be a good place to cover existing shorts if they were on, but it’s not a good place to get long. The chart below shows what can happen when taking a bullish engulfing pattern near the low to initiate a long position.


You can see from this, you’re going to get stopped out, and if not then you run the risk of further price erosion on a stop that is lower still.


From the looks of today’s trading, this will most likely get filed as a “sub standard” day in terms of action; even with the 2 runs down, the minor corrections up were very light and there really was “no action” to speak of for most of the time. If the ranges and HVALUES hold [maybe, maybe not] this day, with what’s coming Wednesday, is a sleeper.

That’s not to say it isn’t or wasn’t worth trading; remember, this is one of 3 crosses that pretty much has some tradable action at all times; compared to USDJPY today, EURAUD is “carnival in Rio”. Not that there is any “usual” day for EURAUD, cuz I don’t know what that day looks like it could be anywhere, but today, tomorrow and Wednesday all financial markets are likely to be in the “Twilight Zone” awaiting the avalanche of “event risk” that comes Wednesday afternoon. Coming into this week, and at least until events become known and digested, my tolerance for risk is about as low as it can get; volumes and leverage low because pre-event surprises surely will get put out as “trial balloons” by those looking to influence outcomes, and I’m not going to get caught in something I can’t get out of without massive slippage.

When you trade crosses, you have to understand the animal you are taming; 1) it can go anywhere in a day, 2) there are no “support or resistance” rules like with U.S. Dollar pairs, 3) spikes have been and will be vicious in scope, and your top priority as a trader [before you go down to the dealer and look at all those shiny red Porsche’s] has to be to preserve capital and stay out of trouble … and staying out of trouble means avoiding like the ebola virus those spikes that can hurt you … most often, up spikes come after the market is trending up and down spikes come after the market is trending down … that’s not to say you can’t get spikes that originate “in the middle” of the day’s range; you most certainly can, especially on reversal days, but the statistical probability is still very low, and finally 4) your mentality towards a cross market can never get “lazy” … meaning, while sometimes you can get away with violating trading rules with pairs like USDJPY or GBPUSD, or some other instrument, with crosses violating rules will get you quickly back into the Pudding Business.

Some time ago, I posted a blog on “falling dominos”, and when they start to fall, if you aren’t there at the beginning to take advantage, you often times will “miss the boat”; in many ways I feel like that today. Early trades that should have been made weren’t; and those “falling dominos” meant I was lacking the perspective on the way down that should have spelled profits. As it was, even though I made money today, it was nothing to what I should have done, and now that Europe is finished for the day, it looks and feels very much like the U.S. session is a “snoozefest” waiting for Wednesday, with very little if any chance for any kind of move where I can capture profits.

And, as so often has happened in the past, you end up sitting there as a trader [somewhere] wondering what alien force is watching you and getting the biggest yucks in the world watching you pee into the wind and getting it all over yourself … nobody is immune to it … all you can do, whether you were on a trading floor or sitting at home, is be strong enough mentally to cast it aside … what has always separated me from others, though, is that when I have my turn at bat I lose opportunity and very little if any actual capital … losing opportunity leaves no lasting marks simply because they are infinite in scope … losing large amounts of capital does leave marks, especially when your next gig [who hires traders?] has you asking people if they’d like a hot apple pie with that happy meal.

I have no idea what tomorrow will bring to the table trading wise; probably much like today with a couple of good moves then it dies down into the European close, and if today’s U.S. session is near comatose, tomorrow’s will be even worse. So, I’ll be ready at the European open to take it all in and get some trades via the algorithm signals whenever they come. “Boy, do I just want it to be Thursday already or what”?

PAMM spreadsheet for today directly below.
 




Beach beckons … I’m outta here … until tomorrow.


Have a great day everybody!
-vegas
OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!
  



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