Thursday 18 September 2014

Knowing Which Style to Play and When to Play It Part II

As per my previous post on this topic title I mentioned that I had and am still continuing to face some rather monumental difficulties in my life and in my "career" as a currency trader (aka, foreign exchange operator). I am small time, an account less than 10K (growing though), with some memorable wins and some gut-wrenching losses in my past. My pattern is usually one of two or three steps forward and a step or two back, but at the moment I am progressing. Part of my problem at the moment is the fact that I cannot support myself through this activity alone, but I am looking forward to the day when it will be possible - I was on the cusp of it approximately three years ago, had an account just shy of 10K > grown from 1K a year prior, with an equity curve that I consider impressive considering I was working for someone else full time, with a combined commute of one to two hours a day thrown in to suck extra time away.

Then I got desperate, my work situation was - less than ideal and growing worse by the month, and I decided, and I chose my words carefully - fuck it, I loaded up against GBP/JPY sold 100,000K into the wickedest rally that I ever saw on this pair - a pair which for the most part I loved to buy low and sell high on. I threw myself against a brick wall, and refused to give up - being honest here. I lost, in the end $4500 on the trade when on Boxing day of 2013, the markets gaped above my stop loss - or did I run out of margin - no matter - I was stupid, and I was stupid for a period of a couple of months where I kept thinking I would come back, and I kept selling on the way up to add to my woes. Plain and simple I was an idiot, running into a brick wall repeatedly, thinking, soon it will retrace and then return to the range, and I'll earn my next 10K in a matter of months. I cannot stress the utter stupidity of the initial decision, but also the continued stupidity of what I continued deciding as the days wore on and I lost more ground to this trade, never mind the -ve carry on this sucker.

It takes a special kind of idiot (me at the time) to allow the feeling of desperation to overwhelm my normally good judgement (and cold blooded trading style), to interfere with my analysis, my money management, and my damn case money.

Never mind the fact that less than a year later, I did this again with the AUD/USD (during the shocking interest rate cut), this time I went long, and continued buying on the way down. lost only 1.5 K on that one, and in my defense, it was my home life (roommate, whom I sure meant well, but was extraordinarily harsh to be around), that was the distraction and the negative influence, so much so that on the month that I moved, I wrote this this piece on the importance of a good environment when attempting to work magic, to employ a craft, to build something of lasting value.

I am now here, just under a year later, and while it has definitely not been a cakewalk by any stretch of the imagination, I feel that my instincts for the trade are somewhat returning. I am nowhere near the level that I was back in the first 3 quarters of 2011, where for three or four solid months, I was earning more money trading than I was at my day job, while working my day job, while commuting, while sacrificing precious time in the present for the future, but I am still playing, and still making gains.

What did I do when I realized I had to fix my brain, especially in regard to how I operated? I stepped back, after a few mistakes, and took things slowly, also my broker started allowing microlot 1K positions to be taken, so I started trying to think like an institutional trader, which means I began to take my business more seriously and enter into deals more cautiously, and more slowly, building positions gradually - which I recommend to anyone who has lost the magic touch of instinctively finding tops and bottoms (which is what I used to do) and playing their whole hand right at the reversal point; which is a bit of bull, it is not magic, and tops and bottoms are generally speaking only a matter of time and perspective (quarterly, monthly, weekly, daily, 4-hour, 1-hour, 15-minute, 5-minute) i.e. which chart is being looked at.

While I have played a few hard and fast trades and done it well on occasion, I traded small for the most part and gradually improved my instincts to the point where some of the fear (and chain-smoking) diminished, and started to have a bit of fun. I realized this step back in intensity and focus allowed me time to heal, and time to look at other aspects of my life sorely lacking...

While I do not think I was quite at the breaking point, I really did feel almost no reason to continue trying, in trading and in life - it was that bad. I am not now in a much better position than I was a couple of months ago, my environment is not great but it is for the most part stable, my day job leaves a bit to be desired but the people there are great, and though I am still way more solitary than I am used to (I miss my old friends badly because I shut them out), I did make a few new friends when I stepped back and just feeling some sincere and meaningful human contact can work wonders even when the world seems to be collapsing around you.

Tuesday 9 September 2014

USDJPY to 110 and eventually 200: a few cases for staying Long or Buying on a Dip, or Adding to a Long Position

This is my Daily Chart for USD/JPY, and though I did not post this idea originally when I started establishing my long position months ago, there is new information pertaining to the possible future, and some new technical developments to merit a look back and a look forward.

USD/JPY Daily Chart taken September 09, 2014 at 23:20 EST
When I started establishing this position, I had recognized both the trend from 2012 (I bought much lower that year and cashed in because I did not recognize the opportunity (below 0.80 -which I am still kicking myself for). This currency pair has gone up since then, and was playing between 101 and 103 when I decided not only to start buying, but to hold (a bit unusual for me). In hindsight that previous area of range 100.70ish to about 103.10 now serves as a deep base for the move higher.

I began buying at around the 102 level, and on dips towards 101.50ish, and then even a few tiny additions in the 102/103 level. Now, I should have bought more on the break of 103.10 which was a plan, but instead I trimmed my position to take a minor profit. Nevertheless, I am currently long from 101.85 (Average contract price).

What has gotten interesting as of late is that downward sloping red line from left to right labled (16 year bearish (-ve) trendline...). This is trendline has been indicating that in fact USDJPY was headed downwards over a period of 16 years FXstreet article indicating major resistance started from 16 years ago with tops in place from 150 down to 124,  which by extrapolation put resistance to this trend at about 105.50ish. Price is now not only above 105.50 (closed on daily at 106) On Friday September 06, 2014 and the weekly candle had only a small wick, which technically establishes a daily and weekly break of this 16 year trendline. A monthly close above 105.50 would probably confirm price continuing higher.

For me personally, I am now cautious to add to this position because it is now at highs not seen since October of 2008, and because I have other trades in play as well (margin is precious).

Nevertheless, I have come across some interesting posts today that speculate that price will continue into the 110.00 / 112.00 area before year's end, for example Citi's Case for establishing long USDJPY

This article illustrates Kyle Bass' case for USD/JPY to reach 200 (Yes, pretty much doubling from here) in the next 3-5 years if you have the intestinal fortitude.

A few minutes ago, I came across a article adding to Japan's economic woes on Zero Hedge, as Japan began Monetizing Debt at Negative Rates which could begin the slow process of crashing the Yen.

Another piece of the puzzle is the potential United States Federal Reserve (ironic name considering it is a private bank, but never mind that) to schedule rate hikes in 2015, which would only add fuel to this position as it would become a proper carry trade in full.

After reading all of this and watching the exciting price action over the last couple of weeks, I myself have to take time to pause and reflect on the possibilities here, but I have begun to consider adding to my position on breaks higher should price continue to elevate. Another case, is to try to buy anything approaching that 16 year trendline should price go towards it.

Naturally, none of this information comes with anything close to a guarantee.



Knowing Which Style to Play and When to Play it

It has been a strange couple of years for me, my head has been in a serious fog for a while and the last couple of years have been bleak. Lost a fairly decent job a couple of years ago, and this year I lost two very good friends who passed away. To make own matters worse, I isolated myself from my remaining friends. Though I did make some seriously bad mistakes and still do, both in life and in my trading, I have learned a few things about both and about myself.

Sometimes I make the same mistakes over again, because well, a painful lesson is often my best teacher, learning it twice or three times creates a deeper impression.

I have learned the strength of a diverse trading style, with contracts spread among several currency pair trades, rather than placing everything in one idea. This used to put immense pressure on me as my progress would be either halted when one idea failed, or stalled while that idea languished in limbo, or reversed as the idea turned against me and cost me more than I should have allowed.

The lesson is that no one idea should or can realistically make a person that trades wealthy; it can happen under the right circumstances, but it it not likely and therefore not highly probable.

Someone that studies and takes positions in the market with an aim to be an "expert" or at the very least professional about it should have more ideas to employ than they know what to do with as they progress, then it is a matter of choosing the right ones, in other words, best risk/reward for your efforts - life on the other hand is not so simple.

When I realized sometime over the last year I had issues with the way I operated, I tried to take steps to improve myself, and what I did was I took the margin I had left over (from carrying some -ve positions) and choosing a bit more carefully where I put my money, and by taking several months to use smaller positions and also to scale into said positions, by buying or selling in blocks, at different levels, rather than the whole position at once, and also waiting for price reversals at extreme levels and then having the patience to wait for that tiny position to be worth something substantial (weeks, and months as opposed to hours and days), which means essentially swing trading with small amounts to reduce the amount of stress I carry day to day. It has not worked out perfectly but I am still a human being with some degree of psychological issues - so bad I went to see help.

Over the last week or two, I have tried to take day trades or larger positions (with recently freed margin), and made a few mistakes and a few good decisions. I am not sure if I will be as fast as I used to be, as this takes good health, an even emotional state (something I have not had in a long time), and plenty of rest. Trading when your life is in a survival mode is difficult, and I realized that I have been in that way of thinking for the last year and a half.

Baby steps it seems, for now, in life and in my trading, and if I learn to run again, it will be nice, but I need to make more progress before that can happen, and continue trying to cut out the bad behaviors that mess me up. I am not trying to be perfect; I will settle for better though.

Trading financial markets should be something you approach with a happy and healthy attitude, but then I realize, so should life.

Friday 29 August 2014

EURCHF Update, Potential for Intervention, 240 Minute (4-hour) Chart, Analysis, Order Plan, News, and History

I have been reading and studying possibilities based on my latest idea, buying (long) EUR/CHF above the 1.20 level. The first and foremost fundamental reason for this trade is the theoretical "floor" that the SNB (Swiss National Bank) has set for this currency pair. The premise of this floor is that in order to maintain (inflation / deflation?). The last time 1.20 came into play, this currency pair touched a low of 1.2012 in June of 2012 (numerically poetic?). This happened on June the 9th, of 2012, at 1:02 pm. The Swiss National Bank promptly intervened by selling their own currency / purchasing foreign currency thus driving the exchange rate higher on the pair.

Over a period of weeks, several interventions, to keep the 1.20 minimum exchange rate in place, the last occurring in September of 2012, the pair had a sustainable rally.

After a period of 9 days after the last intervention, the pair touched a high of 1.2180. Over a period of two weeks, once the rally was over, the pair retraced down to 1.2037 over a period of 10 weeks. After which additional movements led to the EUR/CHF pair to move up to 1.2571 (peak) on January 22nd, 2013, and later to 1.2648 on June 22nd, of 2013 (which was were to take profits if you were long this pair at that time).



Obviously, the profits on the successive movements for this pair, occurred well after the last intervention, where patience would have been the key to getting the most out of the investment (months).

My idea on this pair (I have already started purchasing) and laying the groundwork and conditions for additional purchasing (with a small fraction of the margin I have available) is to scale into the investment. Rather than purchasing at a set price with my entire allotment (the cash/margin) I intend to use, I am placing several orders to purchase as the price drops closer to the 1.20 "floor". I have started purchasing as of 1.20562 on August 28th at 06:04. I have additional contract orders to purchase in increments of roughly 10 points below said purchase price down to the 1.20 area.


As illustrated in this 4 hour chart, my pending orders are placed and will not be activated unless the price visits those levels, whereupon additional contracts are added to my position. Should those areas not be touched, my risk level remains even, and the potential reward is also remains even. Should intervention occur successfully, additional contracts could be purchased as the currency pair moves higher, but this would have to done carefully. My stop loss is established, but fairly lower that the 1.1950-1.20 mark where I imagine stops placed by other institutions and traders to have them, (my policy is to not publish my exact stop so that I do not feed the algorithmic traders/black boxes).

So why the floor of 1.20? According to a press release the risk of deflationary pressure on the Swiss Economy increases below this level. Fair enough.

There is a rumor that the SNB will introduce additional measures to maintain their exchange rate with the Euro. First, the possibility of negative rates where the SNB imposes negative interest rates to discourage foreigners from holding Swiss Francs (CHF). This has been done already, during the 1970s. Such an event would make holding Swiss Francs more expensive, and thus encourage other currency pairs to appreciate vs the Swiss Franc over time.

Another rumor is that the SNB will raise this line in the sand from 1.20 to 1.25 or even 1.30...raising the possibility of a profit of approximately 500 to 1000 pips just for buying at or near 1.20, mind you it is just a rumor, and the amount of CHF selling that the SNB would need to manifest a move like that and maintain it is staggering, but again, trading is about ideas followed by action, with no guarantees.

The other side of this trade probably has a mess of Stop-loss orders on the EUR vs the CHF below 1.20 where positions would be liquidated, thus driving the currency pair down even further below 1.20. Should intervention not occur as planned or even fail, I have skimmed one academic paper that states that the currency pair would be trading about 1000+ points lower, say at 1.10 or lower.

This is a game of patience, and it is not for the faint of heart.


Thursday 28 August 2014

I am looking at one chart currently, EURCHF on the Weekly

I have not posted in several months, but it is not a matter of lack of ideas or even lack of trades, just a matter of the lack of time, but I find myself with a few hours in the midst of a couple of days of, I am enjoying a coffee and free wi-fi at a starbucks and the sheer gravitas of this situation merits a post. I wish I could have posted more over the last few months because most of my ideas have paid off.

Nevertheless, the chart:

I will be writing and adding some analysis on this in the next few hours, but I have posted a couple of comments (the other comments and articles are of interest as well) on forexlive.com:

The theme, plan on buying somewhere in the vicinity if you have the margin, and are able to absorb any potential shocks, but be careful

http://www.forexlive.com/blog/2014/08/28/swiss-national-bank-on-the-bid-in-eurchf-circa-1-2050-29-august-2014/

http://www.forexlive.com/blog/2014/08/28/trading-ideas-european-session-28-aug/

my comments are listed under my name, Jason Macko

Good luck and be careful on this one

Friday 7 March 2014

It has been a heck of a week

I am a bit busy to be posting charts and detailed analysis at the moment. My EURUSD -ve and USDCHF +ve trades worked out decently during the week, and a bit of scalping here and there has kept me on my toes. Sold the EUR again, bought it during the ECB meeting where I am pretty sure everyone went "bullish" on the currency. Then took a short - which was poorly timed, but the deal still has potential either to BE or a bit better. Also bought some USDCHF during the latest plunge, that deal is also underwater at the moment.

I am not sure what next week will bring, but I did manage to push my leverage envelope a bit and took a nice 50 pip scalp by shorting GBPUSD with a single contract prior to the NFP drop that occurred after the "surprise" to the upside and a broad USD recovery - which is my lesson for the week, and one I have learned previously but obviously not all that well. Having a good idea and having a good trade setup, and excellent execution can still leave you wanting if your margin is tied into deals that are going nowhere fast.

Inside me there are two traders, or three: one trader takes the long view and takes deals that will most likely pay off well in the long run, but has to wait patiently before they pay off, and consequently is eager to tie his margin up to have his money "at work". The other trader maintains a short view, if it is not happening now, it is not happening, sees opportunities on the spot and takes the plunge, trading fast and hard, and gives nothing back, and likes to keep his margin open and available, and rarely gets "trapped". Should I gain sufficient capital, I will promise to open a second account, and keep these two traders separate.

In the meantime, as I rarely have the time to update this blog, though I still do, and plan to keep it going, I have added a twitter feed on the sidebar, which is much easier to update on the fly so to speak, so feel free to follow me there.

Saturday 1 March 2014

Feburary 2014 Over, March begins, Updates and Ideas

EURUSD -ve 10K @ 1.375 as of Feb 28, 2014
EURUSD Daily Chart taken March 1, 2014 - Indicators used RSI, CCI 20, ADX/DMI

Looking to sell into current rally as my Monthly TF puts sell zone from 1.3750-1.3975

Considering adding to short above 1.38, possibly this week if price moves up.

Will consider adding if it goes down as well, suffice to say I am long term bearish on EUR vs USD

I would cut and run on a strong move above said 1.3975-1.4060 depending. A daily close above 1.39 would be extremely troubling for this idea/and first sell order, prior to any action near 1.40 regardless. A more cautious move would be to wait for a series of movements to point the way back below 1.3720 to add additional contracts.

Should this position be held until next Friday, March 07, 2014, NFP results may well decide if it stays on.

More to add to this post later...time to relax