This is a very interesting situation because all of the technical signals and fundamental signals seem in place for a continuation of the downward trend in USD/CAD. I have played the pair a few times with mixed results. With the most recent U.S. Inventory report this week, and the upcoming summer driving season, the price may yet go higher. If the price continues to climb, USD/CAD could see fresh lows. However, I'm not positive that we will hit 75USD (as suggested by Saudi Oil Minister Naimi) as the demand for gasoline has yet to reach what it was a year ago as stated in the article, but already we are now just over $66 a barrel. On the technical side, the signal for selling USD/CAD was hit yesterday May 29th, when the daily price closed below the 50% retracement level from the last year and a half of the rising dollar. In my opinion, the next level of major resistance, should price continue downward, is the 1.06 region where prices tended to hover near and around for the last two summers, which might make for some decent sideways action for a little while. Nonetheless, I wouldn't be playing any long positions without very tight stops, and certainly not for any extended time until both the fundamentals and the technicals indicate otherwise. On the short side, I missed the move on friday while I was trading other pairs so I will be watching the action next week to spot a decent retracement back up to a decent selling level (say 1.100/1.1060, former support which would now be resistance), if the market provides such an opportunity, with the intention of seeing the 1.06 level or possibly lower.
Please click on the image to see the proper details and please pardon the crudeness of this candlestick chart, as I haven't figured out how to bring up RIM with e-signal (if it's even possible). I have taken this from the TSX website and included MACD, Volume, bollinger bands (red), and a 50 day moving average (maroon). The Fibonacci levels (magenta) are drawn in and calculated by hand so to speak, and drawn the uptrend channel (green).
Fibonacci Study for RIM:
89-44 = 45
0.382 (38.2%) retracement = 89 - 45 x 0.382 = 89 - 17.19 = 71.81
0.500 (50.0%) retracement = 89 - 45 x 0.500 = 89 - 22 = 67
0.618 (61.8%) retracement = 89 - 45 x 0.618 = 89 - 27.81 = 61.19
For Long entries, the 71.81 level is a good level at which to buy, or 75 for more aggressive traders looking to catch a bollinger bounce. Based purely on technicals, the 71.81 represents both the 0.382 or at 38.2% retracement from the recent and rather massive move off the March lows of 2009 (44/45) to the High of 89/90 in May. Also, the 50 day moving average comes in at this level, along with the recent trend channel (marked in Green). Mind you, if this level is broken with strength, it would be a bearish signal (look for further weakness) and the price may attempt to revisit 61/60 which would be a 50% retracement of the recent uptrend. If I were planning on buying, I would probably be watching the price very closely if it moves below 75 in the next week or two. I may liquidate my position if it goes below, and cut my losses. If the price holds at 70 or above, a move which follows the top of the trading channel could see the price move near 100, and if this channel is broken with strength, we may see another power move of 20 or so points into the 120 area, based on the recent break of 60 - 80 at the beginning of April. This is purely technical and I haven't even begun to digest the fundamentals that I have been researching. Any significant move to the upside would certainly hinge on some positive news for both RIM and the global markets, and the same goes for the downside respectively; the future is still murky right now so naturally be cautious and only trade when you can afford the potential losses. When I am not occupied with the currency market, I will try to go over the fundamentals and update any significant changes to my technical studies for RIM.
I thought it might take a few weeks, but RIM hit 81.23 at the time of this posting. Not sure where it is going, but a sell off may still happen. I'm still in my position, because my long-term goal for this deal is 140-160, but even if that happens, I may need to wait until the second half of 2009. Also, if you trade EUR/USD, pay attention to the 1.3120/1.3235 zone as a clear break in either direction could signal an accelerated move either to the topside or downside.
Although my main strategy is the ranging strategy, i.e. buy when the price is at the range lows, or sell when the price is at the highs, occasionally this strategy can turn a trade with the potential of 20-50 pips into a an even better gain when the price breaks out of a range. This is off of a 15 minute chart for EUR/USD where I went long on Eur 126.91 in the hopes that it would bounce up from the session low to the 127.40 previous high. I was in this one for about 2 hours and even refused to take a profit of 30 pips when it went in my direction the first time and even saw it go back down to 126.79 (-19 pips against me), but a bit of patience paid off as it pulled up, moved past 127.00 and then sailed past 127.40 to go all the way to 128.24. I set my stop at 115 pips (out of 130), on the chance that it would break past the 128.20 resistance zone (which would be a true breakout on the hourly chart) but it didn't and retreated back below 28.00 once the market took my stop at 128.06. Not bad for 3 hours of work. As always, when I conclude a trade like this, I log out, and take the rest of the day off, lest I be tempted to put my profit on the line while I'm a bit giddy with success. Nice to end the work day at the time I would go for my first coffee break in my previous job. Mmm...coffee.
I have been struggling as of yesterday and took on more losses than I care to admit, but I'm still here and I've re-learned the lesson that I keep learning every few weeks or so; bucking the trend continuously can be ruinous to your bottom line. On some days, I can get an idea stuck in my head -for instance buy on the low or sell on the high - and I'll keep doing it despite evidence and information that argues against an entry. I think I'm still dealing with my own psychological issues with regards to being a bit arrogant and firm in my ideas, when this is a game for neither characteristic.
The Bollinger bounce is a great way to get started if you enjoy being right most of the time, but this strategy cannot be blindly followed - something I do without thinking about on occasion, the kind of days when I don't review my rules and strategies prior to trading, oddly enough. The last hyperlink is courtesy of Baby Pips, which is a fantastic resource to use if you have some experience with forex, but I extend my endorcement to a must read if you are a beginer (like myself). The basic idea is to buy or sell when prices go outside of the ranges, where the bollinger bands provide you with a visual representation of those ranges on a chart. Often this can be viewed as going against the trend, but there are ways to use it with a lot of success, for example, using the bollinger bands as an entry point in conjunction with a larger trend. For example, if you trade off of a 15 minute chart (as I do), and then take a look at the hourly chart (which I have in the background), you can see an hourly trend, then look to get into it using a 15 minute chart to find your entry point. So in effect, you may be going against a fifteen minute trend, but in synch with the hourly trend. Used in combination with Fibonacci Retracements and Pivot Points, you can put the odds in your favour. Did that today, and although I entered twice on a GBP short vs the USD, first deal I got stopped out with at 10 pip gain, the second time around wourked out nicely with a 95 pip gain. Although I did not magange the deal to the best of my abilities, left more than 40 pips on the table, and I'm kicking myself for not going in with 2 lots as opposed to 1, I am content to have undone some of yesterday's damage.
In other news, RIM went all the way to 66, but is now consolidating back at 63. I'm curious to see if it will go anywhere near 80 in the next few weeks. In addition to RIM being a great company with a fantastic product (I love my T-Mobile 8320 Curve Titanium), and the seeming appearance of a bottom in stock price a few weeks back, I've heard that Apple's issues with Steve Jobs' illness, may be a factor in the appearant reversal in RIM's price.
The purpose of this blog for me is to create a resource for information and discussion regarding the international currency market or as it is known, Forex. Although the blog will specialize in the spot market, I will also be writing about other aspects of the various financial markets. Also, I wish to keep a detailed record of some of my strategies, rules, tips, goals, gains, and losses; with the aim of keeping me honest and on track with my career as a trader.
You can gain from my blog by reading about my pursuits as a trader, knowledge (if the market interests you), help you with your trading activities through the resources I aim to provide, and hopefully some entertainment as I delve deeper into my own understanding of the global financial markets.
I have been trading the currency market for a few months, after I was laid off from my exciting and lucrative job as a senior level technical support representative. Before I started trading live money, I spent several months trading on a demo account to get an idea of what I was getting into. If you are interested in forex and think that you may have the potential to be a successful trader, my advice is to find a reputable broker and see if they offer a demo account for practice purposes. The idea behind a demo account is to provide you (the client), with a means to learn about currency trading, and the trading platform of your broker without the exposure to any financial risk while you learn. Think of a demo account as a 'sandbox' which provides the opportunity to learn while you play. Some advice that I followed and kept in my mind was to spent several months with my demo account and to pretend that I was trading real money; an illusion, but a valuable one in my humble opinion. Another strong piece of advice regarding the demo account is to trade with it for a few months and aim for consistency of profits prior to even thinking about putting your real money on the table.
With most forex brokers, they will usually offer a demo account worth $50,000 dollars in play money. This type of account mirrors the standard forex real money account wich usually has a minium of $2500-$5000 as a minimum deposit. This type of account has a standard contract size of $100000 and a leverage of 100:1; in plain english you can control $100 with $1. Although I did start this way, and it was interesting to watch the value of my demo account fluctuate by 1000s on a daily basis, I came to the realization that it was an unrealistic starting point for my trading activities. Although I could (and can) open a standard account right now, I know that I am not quite ready. When I spoke with a representative over the phone (you may get a call if you start demo trading), I came to the realization that I had more loosing trades than winning trades and my demo equity was falling at a steady rate. I did start my real account, but with the personal understanding that I would only invest a small amount to start. I opened a mini account (value under $2500) and would not trade live until I had gotten my demo account into profitability. Did that, and then started live trading. There was a difference between demo trading and live trading, and it is purely psychological. I did lose money, and then some more money, and then some more money. I was in a bad spot, but then I realized that I had preserved most of my capital by not starting a regular account and then resigned myself to demo trading for a while longer and to keep honing my strategy, my rules, and my discipline.
I started reading, watching videos, and learning as much as I could. Although I did make the transition to live money trading, I am still in the learning process.
Tip: RIM has crossed above it's 50 day moving average for the first time since September of 2008. Although it's at the top of the Bollinger Band (I've already taken long entry weeks ago), this may see the first step to a larger move up. Currently it is at 63.000 at 2:16 pm, and I'm curious to see if either there will be a sell off as the longs take their profits or if it will continue up. I guess I'll have to wait until the market closes to find out, but I'm staying in because this is a long term position for me.
Disclaimer: Please understand that the information provided in this post and all future posts is not a solicitation to buy or sell currencies, futures, or stocks. Currency trading can provide the opportunity for large rewards and large losses. This blog offers no guarantee with the information contained therein, and will not be held responsible for any losses incurred by the participating readers.
