Commonwealth of Dingoes

Thursday, October 9th 2014

Today was an eventful day. We have a couple open trades outstanding from yesterday’s Dollar bloodbath and I intent to close them today. In addition to that, we also opened GBP/AUD trade with a picture perfect setup and I even try to “add” position during retracement period.

Trade #1 – Long GBP/AUD at 1.82450

First chart shows how perfect this Sonic R. classic set up was. Price bounced from a whole number of 1.82000, blew through the dragon and trend, pulled back to the dragon and started a move upward. I entered at 1.82450 when price is moving up inside the dragon but not without reservation. Everything checked out with a standard classic entry but the dragon is not above the trend so I was being extremely careful with this because I’m afraid it might stabilize and did not resume the move upwards. Price quickly moved up, however and we reached the next whole number of 1.83000. Since I am a little wary of the dragon not being above the trend, I closed the trade around this level at 1.82980 for approximately +43 pips profit. That said, I am keeping my eye on this because I feel the price will slightly retrace and then move further upwards to RDH.

Trade #2 – Long GBP/AUD at 1.83150

Second chart shows another “classic” set up this time after a slight retracement that I have been waiting since I closed the first trade. In addition to that, dragon finally crossed over the trend and I entered the trade without hesitation. Price quickly moved to DR1 and RDH when I finally closed the trade for another +43 pips profit. Note that the price has since move further upwards but I rarely trade in US afternoon session as volume is low and price is easily moved.

What about the Swiss Cheese?

The outstanding (and awesome) open trade from yesterday has finally been closed. I’ve been wary about closing this trade given how the dollar dropped precipitously yesterday in light of Fed minutes. USD/CHF formed a double bottom in early US session and I decided it’s enough and we have to close the trade. We took about +145 pips profit on this. At the time of this writing, the Dollar has strengthen considerably and have now broken through the dragon and trend during the US session. Glad we closed it.

That said, the reason why I post a second 1 Hour chart for USD/CHF is to show that this classic set up can be applied at any time frame. If you look at my first short entry of 0.96000, it was actually a picture perfect classic short entry on 1 Hour timeframe too!!

In addition to this, I also closed a short USD/CAD from yesterday as well as took profit on another daytrade of short AUD/USD and EUR/USD during US session. Not nearly as exciting as these other trades, though, so I decided not to go through them.

That’s all for today’s trade journal but I have a write-up regarding Dollar and the global economy tomorrow. Be on the lookout for that commentary post in the morning!

Fly Away Like a Dove

Wednesday, October 8th 2014

Today’s post is going to be a little different. I do not have a closed trade as of yet. I’ve been building short dollar position since Tuesday.

Open Trades

I currently have 2 lots of USD/CHF short open. One lot was from 0.96000 and the other two are from 0.95750. In addition to this, I also have a half lot short USD/CAD position from 1.1150.

Why a dovish Fed makes sense

Today was a huge day for Dollar short traders. The Fed minute came out and it was much more dovish than expected.

Some powerful quotes from the minutes released today:

“Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector,”

“Several participants added that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk.

This minute shows for the first time that the Fed is giving a second thought about quickly raising rates due to the disinflationary impact of a strong currency and further concern about global growth will hold inflation rate to below their 2% target.

In addition to that, there was also a push for further clarity that rate increase will be data dependent which shows investors that the Fed is more flexible than initially thought.

In my opinion, this makes a lot of sense given the nonfarm payroll figure, while looking great on the latest headline, is still hobbling when we dive deeper into it. Some examples of the weak “internals” of the supposedly strong job data last week:

• 102 million adult are not in labor force or unemployed. This is approximately 41% of adult population.
• Youth unemployment is at 20%.
• Labor participation rate is at its lowest in over 36 years (62.7%). This matches 1978 lows and contributes to the 5.9% unemployment rate.
• Employment to population ratio is 59% vs 62% (6 years ago) and 64.2% in the year 2000.
• Out of the 248k jobs added in the latest report, 230k is actually from 55-69 age group.
• The prime working age population of 25-54 demographics actually lost 10k jobs in the latest report
  • Their employment ratio is at 1982 levels.
• Since December 2007, the 55-69 age group has gained 5.5 million jobs vs loss of 2.04 million jobs for the core 25-54 demographics.
• The type of jobs added in the latest report are restaurants and supermarket jobs which are lower wage and more often than not, not a full time position.
• U-6 measure of labor underutilization is at 11.8%. This measures the total unemployed plus all “marginally attached workers” plus total employed part time for economic reasons (underemployed)
  • While this number is lower than what it was during the depth of recession, it is still at an elevated rate and have not recovered to its pre-recession rate.

We discussed why the appreciation of dollar and concern of global growth will hold inflation rate to below their 2% target but there is another factor in determining inflation. The last puzzle piece which drives inflation is wage growth. Unfortunately we have not seen wage growth manifested as of yet despite the recovery in stock market. According to Mohamed El-Erian, this is partially due to the lack of “holistic policy response because of polarization of congress” in not taking up measures to increase the minimum wage.

I believe that in addition to the paralysis in Washington, this is part of the “new normal” where the jobs being added (as shown in the latest jobs report) are low paying jobs in retail sector which might not even be a full time position. This phenomenon suppresses wage growth as people are force to take up positions with little to no future increase in salary.

Lastly, we are also seeing an increase in productivity which prevent companies from hiring as they can now squeeze more out of their existing workforce. This means less opening for higher salary jobs and the unemployed are stuck doing retail jobs at lower wage which will also diminish their skillsets over time.

Overall, there are still reasons for the Fed to be concerned about the US economy which makes their dovish minute today a lot more sense.

Happy trading!

Spring Cleaning in Australia

Friday, October 3rd 2014

Happy Friday (and US jobs day!). Prior to outlining the trade, I hope you will visit this Methodology page for an updated outline of my trading methods. Reason being is that today’s trade will be the first that I posted to utilize Sonic R method (despite having traded using this for several months now).

Trade #1 – Short AUD/JPY 95.502

Sonic R method satisfied for short.

• Wave is H-L-LH
• Dragon (blue shaded areas) are angling down
• Price is below the long term EMA trend as well as the “dragon”

Entered this trade at the confluence of those three conditions as well as the .50 half number level. Price broke through day pivot and went to RDL (which is the range daily low level) and I closed as soon as the price stabilized around that area for some +40 pips profit.

Commentary Regarding Market Manipulation

I mentioned on the news section yesterday that

USD has been weakening the last few days. Is this a real catalyst for USD (and equities) move downward? or is this just banks trying to drive price down so they can reload long USD trades?

Today’s NFP release really put a whole new meaning of V-shaped recovery. The dollar has been hammered the last 1.5 sessions and it bounced back up to the same level as 2 days ago in a short period of time. This looks like the case of banks whacking price down to go long at lower price points.

With a relatively strong jobs report, the Fed will not hesitate to shut down the stimulus this month. We have to be careful, however, because equities market look weak and the flight from risky asset might mean a stronger Yen or decline in USD/JPY.

Lastly, I am planning to write a deep dive into the US Nonfarm Payroll number tomorrow. Be on the lookout and happy trading!

Connecting Cable (and adding methodology)

Thursday, October 2nd 2014

Trade #1 – Short GBP/USD at 1.61550

Did not activate the EA and was too late in catching the move down. Waited for an opportunity to get back short on this pair during retracement. Shorted the pair at 1.61550 for 2 lots yielding +32 pips profit each lot.

Format Change

Starting next week, I will start posting trades with a different qualification criteria than the usual CWB Pivot method. This is in light of today’s trade that when trading manually, I employ several different methodologies and sometimes I try to switch to another method if I did not catch the price on the move down using the EA bot. In addition to that, it allows me to share more trades with my readers as I am not confined to only sharing trades made by that particular method.

This new methodology will employ a shorter 15 minutes timeframe and I will post an update once I finished writing the tutorial for qualifying these trades (ETA this weekend October 4th).

News Alert

NFP tomorrow. USD has been weakening the last few days. Is this a real catalyst for USD (and equities) move downward? or is this just banks trying to drive price down so they can reload long USD trades?

Pedal To The Metal

Wednesday, October 1st 2014

There are times when you have to pounce and go for the kill. Today is one of those days and I made multiple trades all for profit. US Manufacturing data slumped and the Dow, S&P500, and Nasdaq tanked 1.5% for the day bringing along USD with them.

Trade #1 – Short AUD/JPY at 95.746

Started this trade during Asian session overnight. AUD tanked right after the Australian Retail Sales data came out which missed estimates. Got out at S1 level and this is a good thing as AUD/JPY recovered during London session before eventually grind down towards the end of New York session but we got out for +39 pips profit.

Trade #2 – Long AUD/USD at 0.87149

Took the trade right after New York session opened and got out for some +16 pips profit.

Trade #3 – Short EUR/JPY at 138.401

Took the short after it rejected daily pivot. Rode it for around +25 pips profit. Price fell further during NY session but again we achieved our target and got out. No regrets.

Trade #4 – Short USD/CAD at 1.12003

Took the trade again at the open of New York session. These are actually two different trades worth total of +24 pips profit but we only traded half size on this one.

Summary

Between these 4 trades, I banked approximately 105 pips in profit. In addition to that, I also took a fun GBP/JPY short at the end of the day which yielded around +15 pips profit. This is not a bad day worth of work at all!

USD looks weak today due to the soft manufacturing data and NFP is coming up on Friday. If they did not beat estimate convincingly, I can forsee further deterioration of the dollar in the coming weeks.

On Thursday, ECB is having their rate decision as well so be on the lookout for that.

Current Open Trades

I am currently Long EUR/CHF, EUR/USD, and EUR/GBP ahead of ECB rate decision. They are currently in the green overall but I might look to close these positions before the ECB rate decision and Draghi’s press conference on Thursday. Never a fan of trading during important Central Bank releases.

Happy trading!

Bulls Make Money, Bears Make Money, Pigs Get Slaughtered

Tuesday, September 30th 2014

After about a week without any notable trades, things finally picked up slightly ahead of NFP on Friday. Made a mistake on the first trade but kind of recovered slightly on the second.

Trade #1 – Long GBP/AUD at 1.86079, 1.86987, 1.86127

Went deep with this trade but I got greedy and did not close the trade when I was up about 120 pips in total. What happened next is predictable, market turned and I had to settle for -45 pips loss instead. Please remember, you can be bullish or bearish but pigs always get slaughtered. Stick to your plan, stop loss, and target price to live for another trade.

Trade #2 – Long NZD/USD at 0.77798 and 0.77748

Tried to recover here at the end of London session. Price bounced at the pivot and went long. Closed the trade for +12 and +21 pips respectively.

Current open trades

Currently Short AUD/JPY at 95.746 right before the Aussie retail data miss overnight. Position is +38 pips as of 12:35am October 1st. Trailing stop has been in place. Edit: This trade has been closed. Overview will be posted on Wednesday’s journal.

Battle of the Pacific & Back to the Cable

Monday, September 22nd 2014

Trade #1 – Short AUD/NZD at 1.09547

Price rejected at pivot. I am testing a more risky trade to follow the rejection. A little late on the entry because I was trading manually. Closed for +23 pips profit at around low of the day.

Trade #2 – Long GBP/USD at 1.63519 and 1.63501

Price bouncing off at moving average level after being rejected at pivot. Thought this would move back to test the pivot again at the end of the day. Closed for +6 pips and +7 pips profit respectively.

Note that I am using new trade price information label. Instead of manual label I had to do, this indicator set has a built-in dots to show where I entered and exited the trade. Red circle for short entry, Blue circle for long entry, and Grey circle for exits.

The Union Stays Intact

Sunday, September 21st 2014

Last week was an interesting week with a bunch of news. SNB did not introduce negative rate and EUR/CHF tumbled. Scotland voted “No” for independence and stayed in the United Kingdom.

Trade #1 – Long GBP/AUD at 1.7905 and 1.8240

Made two trades in anticipation of Scottish vote. Got out at 1.8351 for total of +557 pips profit between the two trades. The mantra buy the rumor sell the news rang true after the result starts to trickle in and GBP starts to go lower.

Let’s hope this week has more trading opportunities.

Happy trading.

Calm Before The Storm

Monday, September 15th 2014

I’m back (again) after a second round of disappearance this week. I am still trying to formulate the topics to write when I do not daytrade. Yes I have been slacking but frankly, I just have not seen any good trades so I manually veto-ed the trade from CWB EA!

This week is going to be quite a roller coaster ride and I want to at least put up my thoughts out there before we dive head on to the hurricane.
(Side note: Talk about hurricanes… See chart above. Holy shit BOJ balance sheet)

News Alert

Holy Batman Central Banks week!! We have 3 Central Bank rate decision and 1 Minute release from RBA. Not to mention Scottish Independence Vote on Thursday.

Let’s go through them one by one, shall we?

• Wednesday, September 17th
  • Bank of England rate decision and MPC Asset Purchase votes
    • Currencies in play: All GBP crosses. Going to focus on GBP/USD, GBP/CHF, and GBP/AUD
  • Federal Reserve rate decision, economic projections, and statements
    • Currencies in play: All USD crosses. Going to focus on USD/JPY, EUR/USD, and USD/CHF
• Thursday, September 18th
  • Swiss National Bank LIBOR decision and Monetary Policy assessment
    • Currencies in play: All CHF crosses. Going to focus on EUR/CHF and USD/CHF
  • Scottish Independence Referendum Vote
    • Currencies in play: All GBP crosses.

A couple potential Black Swan event this week:

• If SNB did not institute some sort of negative interest rate or a very strong language indicating their resolve to defend the 1.20 EUR/CHF peg level, expect EUR/CHF to weaken.
  • I would be really careful in trading this pair because of reasons I have mentioned previously. Yes, the SNB needs to keep their credibility by absolutely defending the peg but there is no guarantee here. I would love to tell you just to put massive long order at 1.20 but without any strong language or further push of interest rate to negative territory, I am envisioning bad things could happen with this pair.
• If Scottish voters decided to split up from the UK, expect GBP to be pummeled across the board. 
  • As of today, the polls are too close to call. It  is anybody’s game at this rate.
  • While I do not live in the UK or Scotland, nor I have any connection there (aside from having visited England before and desperately want to visit Edinburgh), I think there might be some major ramification with Scotland leaving England with all the logistics they need to do (e.g. splitting up debts, troops, setting up embassies, getting their own currency, etc). I understand there are other historical factors that I am not included in here and I am by no means advocating for one vote or another.

Happy Trading!

P.S. Watch this for John Oliver’s funny take on the Scotland Referendum vote

Would You Fancy a Kiwi… Fruit?

Thursday, September 11th 2014

So I’m back after a few days without any trades. Too busy following the latest Apple product release and devising ways to pre-order for the new iPhone 6 Plus this Friday. Should be a short post today about the trade but I do want to introduce some new enhancement and weekend posting idea for the future.

Trade #1 – Short NZD/USD at 0.82010

Took the trade for +11 pips profit. Could’ve run it a little bit lower but I’m satisfied with the profit.

Chart Enhancement

You may have noticed the chart I posted today looks different than usual. I switched to another set of indicator to make it easier for my eyes. This is based on Sonic R system. Note that I only use this for the looks of the chart but I am still using the CWB system as indicated on my Methodology page. The pivot level is the yellow lines with this indicator. I like this because it shows the Forex Factory calendar, spread information, timezone info, as well as neatly colored candles and volumes.

Lastly, I will be using the regular CWB chart indicator if that trade was taken automatically. This new look is only for all my manual trades.

Weekend Posts

As you may have noticed, I don’t post on the weekends as there’s no trades during the time. Right now, I am considering to post some sort of longer term trading posts during the weekend. This will most likely be some sort of overview of the week or a preview of the following week. These posts will be using more fundamentals and longer term analysis as opposed to the regular weekday posts. In addition to that, I may also try to post some commentary about events related to that may impact the financial market.

Happy trading.