EUR/USD Mid-Asia Session Update

Slept through half of the New York session to wake up and have lunch with old friends, after which I watched the afternoon price action which was about as exciting as watching paint dry; from the moment I crashed (after the German data came out) to when I woke up, the price had moved against me by 50 pips and then bounced back to my break even.

I notice that lately Asia seems to be the catalyst for what happens and has been leading with trend establishing moves that are followed in the other two sessions; a demonstration of the economic power shift, or the normal Asian session break-out tendancy re-emerging? A bullish move on risk assets has manifested now in Asia, but price is now hesitating at present levels. EUR/USD moved up above the key 1.4100/1.4110 to reach a high of 1.4132 before being pushed back down to 1.4120/25 where it is now loitering. Short of my first target I have unloaded one of my contracts already, and moved the other 3 in such a way as to lock in enough pips to make this my first 1000 pip (what can I say, I think in round numbers like most people) monthly gain. I will trail my stops manually if we get another squeeze higher, but I anticipate the trading day to be characteristically nutty for the end of the month flows and option plays, so I imagine that my stops will be taken out at a profit soon. In light of the mixed fundamental data from Europe, the IMF declaring that the euro is "overvalued", and of course Goldman Sachs advising the closing of all Long positions in EUR/USD, I think any further upside may be capped at either 1.4140/50 or 1.4180/90, but I cannot predict the future. Part of being a consistently successful trader is knowing when to lock in profits at levels where you are comfortable, leaving a bit of wiggle room for additional gains, but not leaving so much that a reversal will leave you shaking your head about the money you left on the table. As a swing-trade and a contrarian play, this has already worked out nicely. I now wish I had done my usual EUR/USD and GBP/USD long combination play, as I would have done much better. Regardless, I'm only going to be watching my positions from now till the weekend, without any intention of initiating new plays as I will be sleep-deprived once the wackyness starts. Crossing my fingers for another squeeze higher!

S&P 500 Bull Flag...but...Looking Exhausted

Classic Bull Flag on the S&P 500, but with momentum all but ground to a halt, the price is currently looking exhausted or in consolidation. I have a hunch that trader sentiment is overall bullish, and that it may move to test 1000/1010 in the next hour of trading. If there is a strong rejection of this hypothetical attempt, 990 seems to be key to the downside short-term, and 970/972 seems to be providing a base since the break to the upside on July 23, 2009.


Still holding EUR/USD Long, and it has barely moved in the time when I went to sleep last night after the German unemployment figures and woke up late this morning. The relief rally seems weak at best, but I'll have to see what Asia and early London have to say. It seems that a solid break of 1.4100 is key to the upside, and failing that, a downward correction may finally crack the 1.400. Playing this one closely now because the US GDP number is out tomorrow, combined with the end of the week and end of month usual craziness, it may not prove wise to be holding risk.

EUR/USD Late Asia Session Update

It appears as though risk was down, but not quite out, and there may be a bit more upside in the next few hours. Rumors of a 1.4000 barrier option, and some comments from the Chinese contradicting their tightening of lending policy has begun a tentative risk rally yesterday afternoon. I tried to sleep, but when price started moving up, I found that I couldn't so I guess I'm going to watch early London. In the meantime, here is a 15-minute chart of the EUR/USD.

Buying EUR/USD Near Up-Trend Support Zone / July 29, 2009 Beige Book is Less Worse

The Fed's Beige Book came out today, and although the expectation was for a very downbeat tone, the actual contents are - as I expected, less worse than expectation.

"Reports from the 12 Federal Reserve Districts suggest that economic activity continued to be weak going into the summer, but most Districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level. Five Districts used the words "slow", "subdued", or "weak" to describe activity levels; Chicago and St. Louis reported that the pace of decline appeared to be moderating; and New York, Cleveland, Kansas City, and San Francisco pointed to signs of stabilization. Minneapolis said the District economy had contracted since the last report."

Full report:
Beige Book

Playing the contrarian angle, I am currently long for several contracts for the EUR/USD, which is trading at lows (so far) of the session and in-and-around the support zone I discussed in my last post, in anticipation of some (hopeful) short covering in the next 24-36 hours after the less-than-apocalyptic report that just hit the wires. Mind you, that I still need to do a bit more than skim the report myself. The consensus seems to be that major support comes in at about 1.3750/1.3850, and that short term support is near 1.3980-1.4000 which has held as of this posting. My stops are well below major support in anticipation for the usual risk aversion that has characterized the Asia session over the last few weeks. I fully anticipate more downward movement but so far as of 18:54 GMT (14:54 EST), the selling of EUR/USD has moderated but the risk is still palpable with the S&P hovering near 970. I am hoping to ride this as a swing trade over the next few days, with modest targets of 1.4180, 1.4220, and possibly another attempt at the 1.4300, but subject to change as always. I will be watching the chart for the next few hours to see the end of the New York session and I will be updating again soon.

240 Min (4hr) EUR/USD, 5:00pm GMT July 19, 2009

This is my 240 minute chart study of the EUR/USD, made in preparation for the upcoming trading week of July 20th-24th. Clicking on the image will make things more clear. To start off, I cannot say where the currency will be in a few hours, or days or by the end of the week, but I do have some ideas and areas of price interest. Before I get into the details of my analysis, you may want to check out this wonderful support and resistance webinar by Triffany Hammond courtesy of fxstreet.com.

Support Areas

Up Trending Support zone. Notice the pair of red trend lines starting at the bottom left hand side of the page, these start at the low of about 1.3823 reached on May 17th, 2009, and extend up to where they were tested and held on the July 8th Monthly low of about 1.3834. The reason I have used double lines for my support and resistance up-trend/down-trend lines is to include both the wicks and the tops/bottoms of the low/high candles of these zones; the idea being that support and resistance are better thought of as zones rather than specific price points. The interesting thing about this zone is that it has only been tested once unsuccessfully and has not been approached with strength since July 8th; in fact, if you look at the candles approaching this zone from July 8th onwards, you'll notice that they have very long wicks pointing down. This means that there was an attempt to drive the price down, but it was successfully repelled within the 4hr candle itself and at increasingly higher levels. This would indicate that long interest in the EUR is gaining ground and pushing support progressively higher.

1.3423 Might be considered as a potential bottom on a potential serious move to the downside, seeing as how this price held after the breakout to the upside - and resistance often becomes support and visa versa. This was also the start to the creation of the very large consolidation triangle that has formed since.

1.3775-1.3750 Should be as strong support zone. This zone starts at 1.3775 which is the 61.8% Fibonacci level of the previously mentioned breakout support starting at 1.3423 to the high of 1.4349 achieved on June 3rd which has yet to be approached since. I would consider the zone bottom to be at 1.3740/50 which is the June 15th monthly low.

1.3880-1.3910 Includes a number of interesting levels, where we have the 50% retracement from the down move from the 1.4339 to the June 15th low of 1.3748 which is 1.3896. Also there is the 50% retracement level from the 1.3423 to 1.4339 top which comes in at 1.3881. 1.3910 is included because no 4-hr candle body has successfully closed below since we came off that July 8th recent low.

1.3975 is a 38% retracement of the 1.4339 to 1.3748 June low.

1.4075 has held very nicely in the last couple days of trading on the week, and is a 50% retracement for the up move from the June low of 1.3748 to the July 1st (candle body high) of 1.4184.

Resistance Areas

Naturally we have the high of 2009 thus far coming in at 1.4339, which will probably make more sense on a daily chart, as I'm sure it's near an important Fibonacci level. This is the top of our triangle. This is also the begining of our complimentary down trendline in the double blue lines (which are actually black in this screen shot). This resistance zone was tested once and held the candle body at 1.4184 on July 1st but the wick extended up to peek about 1.4200 before being pushed back down again with strength. So far this has held but barely it seems, because once we get into the second half of July, this zone is violated repeatedly and we have even had 3 candle body closes within the resistance zone and one even above it before the price was chased back to the bottom of the zone in the last few hours of the trading week.

Key zones of resistance to the upside of the triangle:

1.4140 we have not had a 4 hour candle body close above this level since July 1st.
1.4180-1.4200 we have not had a 4 hour candle close in this zone since the early June highs. I have heard and read that this is the level to break for an indication of a return to long-term bullish momentum for the EUR/USD
1.4320-1.4340 we have not had a 4 hour candle close in this level since July 1st since 2008. This in my mind would be the zone to beat to make sure that we haven't turned the triangle into a rectangle - which I suspect is one scenario we might see until earnings season is over or the rest of the "summer correction" (I keep hearing about it but not seeing very much from the bears) is finished.

The Theme here is an ever higher series of lows with the main line of support strength being the uptrend line support zone which makes up the base of that triangle that most traders have been watching very carefully over the last month and a half. I would be able to say the same about the highs being lower, but the last 2 days of trading this week has the price action working fully inside the resistance zone and even above it for significant periods above it. To me and to a lot of traders out there this looks like a bullish pennant, but I've seen many of these fail on different timeframes, so caution is advised for either short or long positions. I'm favouring a break to the upside based on the balance of data and charting analysis, but waiting for confirmation (before going long at what seems like the range highs) is a good play, i.e. waiting for a close above 1.42 on the hourly. Another play might be what I have been doing since June, which is to buy very lightly near the bottom of the triangle, in an attempt to set up a swing trade, which has the potential to turn into a break out trade if the long term bullishness resumes. Regardless of what happens, the week should be intersting, and possibly very choppy. Keeping an eye on oil, the DJIA and the S&P would be a good idea as well.

Trading and Being Your Own Boss

Unless you work for a firm, trading for a living means that you are your own boss. For some, especially entrepreneurs, this concept is freedom and is part of the reason they are in the market. For others, the idea of being self-employed is frightening because you work without supervision and without the benefit of a structure composed of other individuals; you work alone, and you survive by your own wits. There are benefits and costs, in either case, and I'll front-load the good:

1) You decide your own hours and days

• Enjoy working Monday to Friday like everyone else, with regular hours if you wish. This is great if all of your friends and family operate on this schedule, but not all people have this luxury in this day and age. Many businesses and places of employment operate at either odd hours, on shifts, or 24/7. I've done all these schedules, and while my trading activities have me occasionally trading outside my ideal of Mon-Friday 6am-3pm ish, I trade outside these times when I want rather than when my company tells me that it is required.
  
• Hit and passed your goal and feel like taking the rest of the day or week or month off, you can do so.
• Find that second wind coming on and you are not tired at the end of the session, or you have some deals that are still gaining, you can keep going for as long as you are still effective (but be wary of overtrading of course)
• Find that you are more productive and more profitable at certain times of the day, well you can work those times.

2) You work as hard or as soft as you want

• Part of working for yourself is having the right to work at your own pace, as opposed to working at your boss' pace. For some this might mean more slacking off, but for others it means working harder and more effectively. Personally I've noticed my own work ethic improved dramatically when I started to take my trading seriously and treat it as a full-time job rather than a part-time hobby.
• You are able to balance life and work easier, with some care and planning. At some workplaces, your social networking is seriously curtailed, i.e. no facebook, or personal emails, or phone calls. If you trade for yourself, you can do all the above on your own time, provided you keep track of your work while you're doing it.
• Get it done when it needs to be done, rather than waiting for approval from up above. When I worked in technical support, there was often the problem of upper management questioning what middle management was doing, and on down the line. Often those in the middle and on the bottom are on the ground so to speak, and if they care about what they do, they will usually know what needs to be done to fix a problem for either the company or a client, but would end up with a solution on hold until approval came from above. Precious time was wasted and productive hours were lost when there was a serious lag in communication. As a trader, you have an idea as to what needs to be done within seconds or minutes of a critical decision moment, and the only approval you need come from your strategies, your rules, your equity, and sometimes your gut.

3) You enjoy the full fruits of your labour

• Because you are working for yourself, your profits and losses are yours rather than shared with your company. In many places of employment, often the most productive people carry the rest of the department or organization. In my understanding, this is true downside to communism (which operates on the principal that the all humans are pretty much the same and that the human spirit can be forged to follow a universal set of ideals) and improperly managed corporate structures. Taking realistic human nature into the equation, when everyone in society, an occupation, or a position is paid the same regardless of effort or results, the end result is usually the lowest common denominator of productivity; in other words, why should I work harder and more effectively for the same pay as the slob who only makes the effort of appearing to work hard when he/she is being monitored by a superior?

4) Job security

• No need to worry about downsizing, off-shoring, or closures.
• You are not likely to replace or transfer yourself due to workplace politics or business needs.
• In fact not having to deal with workplace politics really is a complete benefit in and of itself.
  

While the positive aspects seem logical, there are cons to being an independent trader:

1) You need to provide your own work ethic and motivation

• Don't quite feel like trading, but you have yet to reach this week's or last week's goal, you may need to suck it up and start looking for opportunities and deals.
• This doesn't mean trade when there are no opportunities, but you do need to put in a certain amount of time and effort to achieve anything of value (well other than winning the lottery or having a rich uncle that favours you in their will), and this includes being a successful trader.
• This is a profession like no other, but it is still a profession.

2) You need self-analyze your productivity

• Something that many employees either dread or look forward to is the monthly/yearly review, and as a trader you should be tracking your progress.
  
• You will be doing this for yourself, taking extra time out of your day when you are not trading.
  
• This might actually is a benefit for people that are able to objectively criticize themselves and either work around their weaknesses, or overcome them. For others, I recommend learning to do these things very quickly.
  

3) You are responsible for your bottom line

• As an employee, if the company is not profitable one month, you still get your bi-monthly pay, and you will most likely not need to worry about your pay and benefits over the long term. With trading, you are earning money based on the consistent success of your performance.
• If your bottom line dips, or goes in the red, you need to figure things out pretty fast.
• You take care of your own overhead, i.e. paying your rent, power, keep your credit clean and open, pay your Internet connection, and for some traders pay for news/chart feeds, which means your overhead needs to be taken care of in a timely manner or you will not be able to work and earn money.
  
• You are also responsible for maintaining sufficient capital to continue operating your business and your life, even when you are off your game. For most traders, this means planning ahead or having a future-time-orientation, and keeping sufficient savings on hand as case money. Having as much liquid capital as you can amass is key here.
  

4) In many cases, trading is a solitary activity

• Many traders trade by themselves (I do) and sometimes I do miss the back-and-forth with coworkers, having lunch with the gang, the camaraderie of sharing work, being part of a team, and of course the never-ending string of jokes and pranks that I used to enjoy at every half-decent place I've worked.
  
• On the other hand, you can always see your friends and enjoy that time much more when your are not supposed to be working.

All of this comes into focus when you realize that as a self-employed trader, half of your business is to analyze the market and take calculated risks to generate profit on a regular basis, the other half is to analyze yourself before, during and after your trading activities. I find that I will usually devote an hour to a couple of hours on the weekend to serious self-analysis regarding my trade activities, but I usually do as much as I can away from my office so that I can have a fresh and hopefully obejective perspective. Excellent self-management of your trading can make the difference between consistent success and erratic results, so it is worth your time and effort.

RIM down to 77

Back in May, I did an analysis on RIM and, while it has taken a couple of months to unfold, the analysis is holding true (for now). Yet, I remain bullish on RIM in the medium to long term and
apperantly, I'm not the only one that thinks this:

http://www.globeinvestor.com/servlet/story/RTGAM.20090708.escenic_1210405/GIStory/

According to the article, support rests at 75 (the high after the breakout), but in my opinion, 70-75 is the "support zone," because resistance and support is hard to pin to the exact decimal until after the fact. There is a downside, so please read the article fully if you are holding, selling or buying.

You Have to Eat While You Dream

When I started the project, the primary objective for this blog was to be an ideas board for long term wealth creation through trading and investments, however, I am now made aware that basic survival is a primary objective for traders and all people. As a (hopefully) consistently successful independent trader, overhead should be fairly simple, and comprising mostly of the cost of living, entertainment, information sources (Internet), and utilities. In this sense independent traders have an advantage over many businesses which have larger operating costs.

On Friday July 3rd, 2009 in the evening I had Bloomberg Television streaming in the background when I heard an interview with Jack Welch, on For The Record. One statement given by Mr. Welch caught my attention more than any other: "you have to eat while you dream."

The statement was a consise reply to the question posed (and I'm paraphrasing) that: "is it a bad thing that [Jack's] record has set a standard on Wall Street, and should short term goals be achieved at the expense of long term goals?"

He expanded further when he stated that a business needs to meet short term goals in order to survive for the future and that a good business should be doing both at the same time rather than sacrificing one for the other.

Although Mr. Welch was speaking as the former CEO of GE, and his comment was intended as advice for up and comming and established business leaders, it can be taken to heart by individuals. As independent traders, we are all business leaders in the sense that we operate our own businesses.

In case you are like me and do not own or want a Television, you can stream Bloomberg TV at http://www.bloomberg.com/streams/video/LiveBTV200.asxx

Part of keeping expenses down to increase your capital is eliminating wasteful costs, and one of the most wasteful for some, is the circumstance of carrying a large credit card balance. If you are like me, you have decent or average credit, and you have a credit card or two. If you are a trader, I imagine you need a credit card to at least open your trading account and to fund it.

Although credit card debt has been a growing issue over the last few decades, it has come to a head with the recent recession.

You do not need to cut up your credit card. Credit cards have some very useful benefits, and for some, a credit card is absolutely necessary to their way of life or business.

There are several good rules to keeping your costs down, and of course to keep your credit card from costing you additional monies. One piece of advice that I was given years ago was to "Live beneath your means", [even if only slightly beneath your means.] The essence of this is to spend less than you take in. The purpose of which is to have extra money. What you do with the extra money is your business, wheather it be for your next vacation, your next car, house, having an large emergency fund, using it to build more wealth, or just for the sake of having it. The result of this recommendation should be a personal mental adjustment that has saving money occupy the back of your mind at all times.

In regard to the credit card, my golden rule is:

Pay your full balance before the due date

The reason for this is simple. When interest is paid on a credit card, the credit card companies are being paid for a service from which the holder receives no lasting benifit. Credit card holders are paying out money for the luxury of holding a balance on things and/or services that they have previously purchased. If the holder cannot pay the full balance for one month, it can be understandable; either they overspent through lack of foresight or for the sake of an emergency. Ces't la vie. If the full blance is not paid for two months, the costs start to magnify and it may be a clue that the holder of the credit card has a serious problem. If this situation repeats over a series of monthly balances, the holder may be in a downward debt spiral and extreme measures can be taken by either the individual, or in a worst case scenario, the credit card companies will eventually pursue the holder for the full balance if and when a minimum payment is missed. This is a personal financial disaster waiting to occur.

You don't need to always pay cash, in fact, in my opinion, the whole point of having a credit card is convienience; you don't need to carry a large amount of cash ever, and you can track your expenses very easily with a credit card, in fact, more easily than paying cash. The caveat is to not overspend your margin of error, and in my humble opinion to have the cash in your bank account before you do the damage on your plastic. One of the first psychological steps is to not count a credit card as a extension of personal income, rather as a means to extend your purchasing power temporarily.

Have a minimum of cards to track, and try to have or obtain cards without a yearly fee.

Keep track of your credit cards regularily, and a good way to do this is to make use of online banking to check balances weekly; be aware of the upcomming balance to be paid and then pay the full amount a few days beforehand. The reason for this is simple, anything that can go wrong will go wrong; in this case, Internet connections fail, weekend getaways can happen on the spur of the moment, or simple memory lapses. In addition paying it off will ease any potential anxiety.

In regards to existing credit card debt, I can only advise paying down the principal as quickly as possible, over an above the monthy minimum but hopefully people in general avoid the trap before it springs. If you have a legitimate and uncontrolled problem, you may want to either seek help and/or have the card cancelled until you can learn self-discipline.

If you have not watched it, I do recommend that you watch The Secret History of the Credit Card which I recommend to anyone with a credit card. You can do so online at http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

Through my own experiences, I have some aditional personal tips to pass on to help your bottom line.

Eating out can be a expensive so I try to keep it to a minimum and save it for social occasions to get the most out of my money. Unless you work 18 hour days, most people can manage to prepare the majority of their food at home. When I was doing tech support, I was a cronic take-out and dine-in junkie. When I let go of this habbit, and kept these to a minimum, I found an immediate improvement in my bottom line. In addition, you should be buying the bulk of your food at a supermarket as opposed to convienience stores (which charge higher prices on staples and basic food items, and your produce (fruits and vegetables) at a decent produce store (typically better quality and cheaper than a supermarket). It also goes without saying that when you do eat, you should make balanced and healthy choices to keep your body and mind in shape, which helps you stay productive and happy.

Before you buy it, ask yourself: do you need it, is it useful, do you really want it, will it make you happy in the long run? I know several people that have houses or apartments filled with things that they either don't need, serve no purpose, and does not add to their quality of life in the long run. Knick knacks encourage clutter, which can cause you to lose valuable time when you have a mess, and a major inconvieniece if you lose something of actual value or necessity. In addition, I'm sure the earth will be better off without a few useless trinkets.

Increase your personal equity (savings and assets) through goal setting and visualisation. Give yourself a small first goal, and then when you get there, increase it. Try for something simple at first, like having 1 full paycheck in the bank, or say $1000. Creative visualization and self-discipline are handy for this; it is the process of goal setting, and thinking positively while actively pursuing your desires. When you start to accumulate money, then you may want to actually get your money to work for you. Wheather it be real-estate, stocks, mutuals, savings bonds, or investing in a business, remember that your end goal should be to do something good for yourself, your friends, your family or the world. Money doesn't buy happiness, that much is true, but as a tool it can expand personal options dramatically when used properly and with respect.