A USDJPY “FINGERPRINT”

“Sluething for clues in USDJPY.”


Today, I want to go over the subject of “fingerprints” in MT4 markets; specifically USDJPY. What I mean by a “fingerprint” are identifying characteristics that can often be found in helping you identify the short term direction of the market; the 2 most popular in USDJPY are 1) retracements, and 2) double tops and/or double bottoms.


The first I don’t pay much attention to because the M1 volatility algorithm will most often totally nail the turn after a retracement in price, so there is no need to guess [no matter how educated] what that particular level may be. The majority of the time retracements in price in USDJPY are in the 20-25 PIP range before the move continues on its merry way; however, “willy nilly” taking a position just because it retraced 22 PIPS can be very dangerous, as it might be on its way to a 40 PIP or even 60 PIP retracement before resumption of the trend. In any event, the M1 algorithm will pinpoint the turn anyway, so what’s the point of guessing?

There is however a scenario, on both tops and bottoms of a short term move, which we can take advantage of and make money. To set this scenario up, let’s assume 1) I am using the HR1 with SAR [0.032 & 0.32 respectively for input values], and 2) if the general intermediate uptrend in USDJPY is up, then I have yellow support lines [2] in place for a change in trend [tutorial]. Assuming these 2 criteria are in place, also assume that the “white dot” SAR is above the market [sell] at the moment and USDJPY is moving lower and I want to “buy” at the change in slope of the Plum Line from negative to positive when the Plum Line is under the Yellow Line. [Note: this is the market scenario which is currently present.]

In this scenario, I am clearly faced with a market “correction” in an otherwise intermediate up trending market; there are “cross currents” here that have the potential to make trades either “choppy” or losers with a higher probability than if the “white dots” SAR was below the market [buy]; what those probabilities are I can’t tell you, but they are lower than the 95%+ we would have with the SAR below the market.

USDJPY, especially when the down move is strong, very often will attempt a test of the low before putting in any kind of rally I’d like to capture. If the attempt to take out the most immediate low is successful, you can expect some gap action on the downside; however, when the attempt for a new low fails [a double bottom], the M1 with the algorithm is very quick in picking up the trend change, and it is this rally I want to capture. In other words, 2 things to pick up from this: 1) you don’t have to “take” every single algorithm buy [sell] signal in a down market because even if you were wrong and it would have made you money, by missing it you only have lost opportunity, and there are infinite opportunities available to you in the future, and 2) the second signal many times will be the one with power.

Today’s action in USDJPY bears this out; all the conditions above were met, and once we got into the New York session, there were 2 trades that show what I have been writing about above. Directly below the 2 trades.
 

You can clearly see the 2 double bottoms, and the subsequent rallies that followed them, with the second one going to the RM=1 exhaustion line. This type of trading action happens frequently given the assumptions I made earlier; however, don’t look for this [cuz you aren’t going to get it very often] scenario when the SAR is below the price. Most often, in that case, you have one opportunity before the “train leaves the station”, and if you miss it, you aren’t going to get another chance at that price level.

Take everything I said above and “flip it over” for price action from the sell side, and now I’m talking about “double tops”; the scenario here is exactly the same except reversed for price and the position of the SAR. Nothing in trading is 100% “fool proof” or guaranteed, but what I described today happens so frequently, I think it’s worth paying attention to on an ongoing basis. Having said that though, if you totally ignore today’s post and simply follow algorithm rules [on either the M30 or the HR1 from the tutorial], you will still be very profitable; this “tweak”, if you will, simply has the potential for you to be more profitable in your trading without violating algorithm rules and/or procedures.

Experienced professional traders, like me, don’t just sit like “bumps on a log” and drift through life year-after-year when trading, happily collecting money along the way nary a thought in our heads; I READ, THINK. STUDY. ACT. PROSPER. I pay attention to anything and everything that might possibly give me and/or the algorithm a problem and then I find a solution, or a course of action that mitigates the risk I might be facing; I learn the “personalities” of markets, how this differs from other asset classes, what the particular “fingerprints” of any market are and how best to trade it, and always have “my ears to the ground” listening for possible paradigm shifts in financial trading.

I wasn’t really planning on trading today, but after that first exhaustion move up off of the lows, another algorithm buy signal popped up that I thought should be a good trade … actually became a great trade. Directly below today’s first and only trade.

I’ll take it, and now I’m sooooooo outta here. Until tomorrow …

Have a great day everybody!

-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT [CHOOSE THE “ZERO ACCOUNT”] AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

 

DECIPHERING WHICH WAY THE WIND BLOWS

NOBODY “CIPHERS” BETTER THAN JETHRO

Gold has/is/always will be one of those markets where one day you swear there will never be another down tick [let alone a move lower], and literally hours later you swear there will never be another uptick. It’s tricky business “ciphering on the fly”, and more often than not, your brain, guts, or both will get you into serious trouble in this market.

Which brings me to the daily white horizontal line we calculate every day when we turn our computers on to trade [see the manual for calculation, which you can view or download for free in the “Download Links” section of the website over in the right hand column]; it’s there for a reason, and that reason is to place a “price point” as our “line in the sand” on the M1 candlestick chart for determining which way the bullish/bearish wind is blowing at the moment. Above the horizontal white line has bullish implications, and below the white line has bearish price implications; more importantly, above the white line has a different set of algorithm rules for buying than when price is below the white line. These rules validate the first priority of the algorithm, which is to keep your donkey out of trouble and totally prevent large losses.

Ok, so today we come in and gold has been drifting lower all night; my calculation for the white line as I start the day is 1346.37, and it doesn’t take long for the low of the day to get taken out and the daily range expanded. Directly below is the trade of the day, as the market moves down to the exhaustion line for a buy signal shortly after the 15:00 cash open in New York.

  

[Note: click mouse on chart once to enlarge]

Now, since we are below the white line in price, we have to use the subsequent short covering rally after the retail stop hunt to liquidate; at this point we can’t hang on because at the moment market momentum is not on our side. Overall, we make about $2 per Oz. on the trade.

Now, there are 2 things here you need to pay attention to, as I have said this before; 1) moves in Asia and Europe are reversed in New York the majority of the time, and 2) after gold moves down from a starting point of around $10 or greater, usually the majority of the time price puts in a “double bottom” on the M1 candlestick chart before trapping shorts and going higher in any significant way.

Well, gold did both of these things today. Now, please don’t misunderstand and think I’m telling you double bottoms are buy signals; from the algorithm manual there is no scenario for initiating a long position from a double bottom; what I am sharing with you here are observations honed from almost 40 years of trading! [Don’t worry, I’m young at heart and got 40 more years of pulling money out of markets like it’s my own personal ATM; especially gold.] Throw in the fact that the plum line had been under the yellow for about 2 hours and 20 minutes right after the double bottom, and you got yourself a recipe for shorts to hit the panic button [which they did, culminating in a price move to the upper exhaustion lines right around the white horizontal daily line]. Directly below is the start of this phenomenon.

 

So, Newbies out there might be thinking, “so how come we don’t buy these?” Short Answer: the probabilities of success over the long run aren’t high enough for me to justify the risk. The reason? There is no such thing as a triple bottom, and if the double bottom fails, your stop gets run like hell and losses may be a lot higher than you planned.

Now, before I finish for the week and hit the beach [and man, is this a Chamber of Commerce day down here in Paradise or what?] I want to leave you with something to think about over the weekend; who among you reading this would have liked to have bought gold 30 years ago when it was about $250 per Oz. and are still owning it now at roughly $1340? Let me see a show of hands for those who say no; “hmmm, I’m looking at the 6 billion people in the world over the internet and funny, I don’t see any hands in the air.”

Ok, 30 years = about 7,200 trading days, and gold has appreciated about $1090 per Oz. during that time. That works out to an appreciation of approximately 15.14 cents per Oz. per business trading day! Remember, this is 1X leverage; you went down to that coin shop in town and bought some 1 Oz. Maple Leafs [or something similar] and paid full price for it, so you have no leverage here.

Now, day in and day out, gold presents buying opportunities for profit; the reason I and our PAMM [which will start very soon by the way] only trades from the long side, is the fact that it is very difficult to make money from the short side even in bear markets. Why? The short squeezes are fast, nasty, and to put it bluntly pure murder. In other words, you have to be the “perfect trader” to make consistent money on the short side of gold, and make no mistake, there are no “perfect traders” anywhere to be found.

So, you are one of the lucky ones who bought gold back-in-the-day and still own it; and your appreciation is about $0.16 per OZ. over the long run. The volatility gold algorithm will on average over 95% of the time [based on historical research] capture AT LEAST $1 - $3 per Oz. at 10X leverage; that’s equivalent to you buying your Maple Leaf and getting $10 - $30 per day, not the $0.16 per day you find amazing.

Now, if life prevents you from trading the algorithm on your own, I of course, have the solution; even taking away my 17% incentive fee on PAMM profits, the PAMM has an extremely high probability of returning to you 100 TIMES YOUR MONEY VERSUS PHYSICAL OWNERSHIP.

Don’t misunderstand, I’m not advocating for anybody to get rid of physical gold or stop from buying more. But if you think somehow that gold is going to be the “medium of exchange” when SHTF and the world collapses I got 2 big news flashes for you: 1) never underestimate government’s ability to change the rules, and 2) there isn’t enough gold in the world to even come close to using it as money, and I mean you’re looking at a physical deficit of at least 100 to 1 to fiat.

So, what that means is that gold is a commodity and will be priced in Dollars far into the foreseeable future, and right now, and most likely next year and the ones after that, the only way you can eat and live is to spend Dollars, not grams of gold. Last time I checked, Albertson’s wouldn’t take a 1/10^th ounce gold coin [valued at about $134] for payment of some groceries at the checkout; nope, they wanted Dollars.

I’ll have more details on our LMFX PAMM next week; all the “nitty gritty” details potential investor clients want to know. So, if you can’t trade yourself because you’re still stuck in the “Pudding Business” and want to change your financial life for the better, consider joining the PAMM.

Ok, I’m outta here; the waves await!

Have a great weekend everybody!

-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

OUR LMFX GOLD TRADING PAMM WILL BE READY AS SOON AS LMFX GETS THROUGH WITH UPGRADES TO ITS PAMM SOFTWARE! WE ARE VERY CLOSE; OPEN YOUR LIVE TRADING ACCOUNT TODAY, FUND IT, AND BE READY TO PARTICIPATE!