Journey to Samadhi

[muddbuddha]

You know, I've never discussed my trades much. I've talked ideas and systems, but always kept my trades to myself. With this thread, I'll share some trading insights and current trades and you can disect it and maybe pull a few good ideas and concepts.

The number one thing I've learned over the years is that trading decisions are easier on daily charts. Trends are easier to indentify and trade set ups typically work out with a higher success rate.

while I'm not a fundamental trader, per se, I do pay attention to the obvious.

The obvious being....pay attention to the futures in the morning. When futures are down, the USD typically puts up a fight as the futures market rolls into the Dow. Only takes a few minutes on CNBC to determine whether your LONG position may start losing ground.

The credit crisis will continue to hurt any JPY SHORT position....but only in spurts. When it comes to this topic, investors create the fear and traders take advantage of the sell off. The safe trade is SHORT JPY on the long term charts until the BOJ stops taking advantage of the low value of the Yen.

An old myth that quickly disolved for me was the $$/Oil relationship. Doesn't really exist. I was told early on that low oil was dollar good....and then told that high oil was dollar good. Personally, I've never seen any evidence that oil affects the USD whatsoever. If we were talking CAD....then yes. You can post charts and say, "See here, and here, where the price action reflected each other?!" Well, you can do that with 99.9% of any charts and find similar movement based on some fundamental based reaction.

I fell that trading for me is about 75/25 technical to fundamental. I trade based on what I see but watch for what may hurt me. So it's method as well as discretion.

That being said, I use very little in the way of indicators....acutally just two simple moving averages, and that's it. Overbought and oversold conditions I try to visualize in my mind by "seeing" the price average. This, I believe, keeps me in sync with the charts and makes trading decisions easier and more effective. I believe, personally, that a seasoned trader can see in the price movement the same thing that a MACD, ATR, Stochastics, and other suplemental indicators display. It's a matter of opening your eyes. Nothing mystical about it. It's the same concept of a Chess Master seeing 7 moves ahead. Pay attention to what the price is trying to tell you. Has nothing to do with bars or candle formations and I pay no attention to those. They can be good for some and bad for others as they tend to be self fulfilled prophecy.

Last week was an excellent week. It started off early with good movement and I was up about 750 points on 5 positions. By Thursday I had closed those trades on pull backs and re-opened when the Citi Corp. crap started to wane. By Friday I had closed enough to put me over the 880 mark.

No super system or indicator.....no trade calls from a pay service....just a couple of visual lines and common sense.

So...let's see where this goes. Learning this wonderful craft is a journey. Doubt, fear, and greed will lead you down a lot of paths of unfullfillment. Your best trading tool is the mind that god gave you.

Currently, I'm LONG GBP/JPY and EUR/JPY off rebounds off the 20 SMA.

GBP/JPY = -10 from 239.50
EUR/JPY = +4 from 166.99

Closed out the EUR/USD for +48 this afternoon off the 20 SMA. Decided to close it out as I wasn't too thrilled with the price movement this afternoon. Closed out the GBP/USD at -27.

Thanks for the insight, muddbuddha. I've read your posts before and always appreciate the knowledge you impart.

I'm fairly new at Forex and have been testing various systems/strategies over the last few months. I've really been trying to cut out all the indicators since they only end up confusing me and end up preventing me from making an actual trade.

I hope you don't mind if I pick your brain a little. Just a couple of questions.

1) I've been looking at trading off the dailies myself. Besides the 20 SMA that you mentioned, which other one do you use?

At one point I was using a MA cross strategy, but I've always had problems with using MA's as S/R lines. I never know when to get in or out with them.

2) When you say "pay attention to the futures in the morning", do you mean overall movement or specific ones?

3) Forgive my ignorance, but I'm not quite sure what you mean by "When futures are down, the USD typically puts up a fight as the futures market rolls into the Dow". Can you elaborate a little?

TIA for your help.

I appreciate what you said about your 75/25 technical/fundamental style. I'm more geared toward technical trading, although, as I said, too many indicators end up confusing me. My biggest problem is the fundamental side. I really don't understand the relationships of the economic reports, except for what I read in the calendar (I use FF's). I can't imagine pouring over that kind of info on a regular basis.

I was also surprised to see that you don't pay attention to candle formations. That seems to be the big thing nowadays, doesn't it? Everyone talks about candle formations and what indicates what. I've always had trouble seeing them, and trying to figure out which of the myriad of formations are the most important. It's nice to see that not all successful traders worry about them. I guess I'm in good company, then.

Take care.

Terry

[muddbuddha]

Originally Posted by In2Blues

1) I've been looking at trading off the dailies myself. Besides the 20 SMA that you mentioned, which other one do you use?

The 50 SMA

2) When you say "pay attention to the futures in the morning", do you mean overall movement or specific ones?

3) Forgive my ignorance, but I'm not quite sure what you mean by "When futures are down, the USD typically puts up a fight as the futures market rolls into the Dow". Can you elaborate a little?

Sorry....the Dow futures. If they are negative, then the FX market will lean toward a positive dollar. It also weighs on the JPY carry trades as well. Once the Dow opens in New York, there is always the posibility that the Dow ignore the futures after the open, but 99% of the time if CNBC/Bloomberg talk of the Dow futures being in negative territory before the New York open, the Fx market will lean toward dollar positive.


I appreciate what you said about your 75/25 technical/fundamental style. I'm more geared toward technical trading, although, as I said, too many indicators end up confusing me. My biggest problem is the fundamental side. I really don't understand the relationships of the economic reports.

Read below for more insight on this....

I was also surprised to see that you don't pay attention to candle formations. That seems to be the big thing nowadays, doesn't it?

Candles, bars, and S/R. Candles and bars are more or less a study in probability in that the formation stands a good chance of doing this or that based on historical movement. S/R is 100% self fullfilling prophecy.

If any of you were watching last night, then you saw the huge move on Gold and the subsequent dollar sell off that pushed the EUR/USD to the largest daily move that I had seen in a long time. This, of course, was brought on by the Chinese officials spur of the moment comments of moving trillions of dollars away from USD assets. This caused a momentary panic in the market and prompted the big sell off. Let me say this.....that guy is a dufus. He has a history of announcing big financial moves by China that have never happened. I believe he just likes the media attention, personally.

This morning while on the way to work, CNBC stated that there was a serious situation developing as the Dow futures were down almost 200 points. Ah....traders!

That being said, it punished my LONG GBP/JPY and EUR/JPY positions terribly. I closed the GBP/JPY at -178 and the EUR/JPY at -98. Once the price closed and held below the 50 SMA on the 3 hour Oanda chart, I opened positions on both SHORT. Those are currently at 117 and 84, respectively. I also went SHORT AUD/JPY which is currently @ 117 from 105.97. So give and take.....

Once I recognized that the USD/CAD had reached it's daily average range, I went LONG to pick up a small retrace trade..... ta da!!!...it exceeded it's normal range due to the panic and was -74 this morning. Well, being stubborn and knowing that traders are fickle and love to play the retrace, I decided to hold; I went ahead and closed that one a few minutes ago @ +98. It was bit of an aggressive trade, but I had sized the lots accordingly.

While we're on the subject, let me say this about China:

When China speaks, the market listens. Even when it's talking trash. China stands to be the Worlds richest and most powerful super power in a few years....and they know it. Why? Well, because they are about as capitalistic as a communist country can be without actually admitting that they are capitlists! God forbid!
There will never be a war with China....at least not in my lifetime. The financial hardship it would impose on both the USA and China would be devasting to the Global economy. That's why we quietly excuse each others wrongs. When North Korea starting playing bully on the block with South Korea, they arrongantly thought that China had their back when the US stepped in.....yeah,not quite. China isn't going to risk relations with the USA for some backwater country like N. Korea. That would kill the Christmas DVD sales!!

The GBP/JPY trade was opened from 238.25 and the EUR/JPY @ 165.98 for reference sake.

[muddbuddha]

FYI

I closed the GBP/JPY @ 206 pips; the EUR/JPY @ 147 pips; the AUD/JPY @ 178 pips. I've covered my losses from last night and made a few bucks in return.

Mostly due to the fact that the upbrupt sell off of USD pairs was so strong, that this reverse action was an opposing reaction to the movement. It may push a litle more, but for the most part, I think it will start wanning.

Buy the slide....short the ride.

Also SHORT USD/CAD off a (hopefully) bounce of the 50 MA back to the downside; from 9326, currently at -2.

Thanks for the help, muddbuddha.

I must be suffering from information overload and my brain is shutting down.

I look at the chart with the 20 & 50 SMA's and see the movement, but I just can't figure out what to do when the candles reach the SMA's. For some reason, I can't grasp how to trade off the lines.

Anyway, I appreciate your insight.

Terry

[muddbuddha]

Originally Posted by In2Blues

I look at the chart with the 20 & 50 SMA's and see the movement, but I just can't figure out what to do when the candles reach the SMA's. For some reason, I can't grasp how to trade off the lines.

The biggest problem is looking for a system where none exists; and it took me some time to see the behavior of price in relation to the MAs. That's basically the "system".

For me a trade on the 3 hour or above is "possbile" once price closes and retains above the 50 MA. Once the trade gets going, I use the 20 MA as a trailing "pay attention to me!" line, but not necessary a stop out line. If price penetrates the 20 and holds above or below, then I consider exiting the trade - but as well, watch price as it moves back toward the 50. Does it bounce back? or ride the line like a roller coaster climbing the big hill? I typically find that the hill climb leads to an upward push rather than a downward drop as would be expected. If price bounces back and pushes off for more than three periods OR breaks the previous period(s) high, then I'll re-enter in the previous direction.

The important things are: time period and pairs traded. Three hours and up are easier to trade. Less stressful....and you get more sleep. The pairs you choose are extremely important. The things I use to choose them are:

Margin cost : The more it costs to hold that pair, the fewer positions I can take in other pairs that may be moving to a greater degree. Try to pick pairs where the margin cost is justified by the movement.

Volatility : Dead pairs are a waste of time. If they flatten and zig zag back and forth in a 200 point range...avoid them. I like heavy trending pairs and pairs with a lot of daily volatility.

Daily average range : If the pair isn't moving enough to justify in my mind continually holding it, then I remove it from the platform. I see no reason to tie up margin with a pair that may move 37 pips in two days from the trades open. I like results, and I like to see them every day. Some days I get none to little, but over the course of the week, I should see some postive progress on that position.

Currently I'm only trading 7 pairs and gold due to their volatility and trending, and four of those are YEN crosses. I also like low spreads and avoid anything higher than 8 pips on the Oanda platform. Most are under 4 and at times below 2.

Lastly, and this is important: pay particular attention to your positions around 5PM EST, USA. I start watching mine around 4:30 going into the 5PM mark. For the last 8 to 9 months, 5PM to 5:30PM EST has been a very volatile period, especially for the YEN crosses. I don't know why and I don't know who is causing it, but it occurs pratically every day. Personally, I don't care who or why, as long as is keeps occuring! It also lends some insight into possible direction for the next day as well.

[muddbuddha]

Currently still SHORT USD/CAD

Took 25 pips on EUR/USD. Could have held out for more, but Bernackes comments started to cause market flucuation, and I didn't feel I was in a position to start losing ground at such a high level comfortably. Better safe than sorry. Worst case is I wait for the next pullback or correction and jump back in LONG at that point.

Took AUD/JPY SHORT off continued movement downward from 104.36.

Now if CAD will start to correct, then all will be good. Though it will probably be at the AUD/JPY SHORTs expense at it will most likely start rising again.

Originally Posted by muddbuddha

The biggest problem is looking for a system where none exists; and it took me some time to see the behavior of price in relation to the MAs. That's basically the "system".

For me a trade on the 3 hour or above is "possbile" once price closes and retains above the 50 MA. Once the trade gets going, I use the 20 MA as a trailing "pay attention to me!" line, but not necessary a stop out line. If price penetrates the 20 and holds above or below, then I consider exiting the trade - but as well, watch price as it moves back toward the 50. Does it bounce back? or ride the line like a roller coaster climbing the big hill? I typically find that the hill climb leads to an upward push rather than a downward drop as would be expected. If price bounces back and pushes off for more than three periods OR breaks the previous period(s) high, then I'll re-enter in the previous direction.

The important things are: time period and pairs traded. Three hours and up are easier to trade. Less stressful....and you get more sleep. The pairs you choose are extremely important. The things I use to choose them are:

Margin cost : The more it costs to hold that pair, the fewer positions I can take in other pairs that may be moving to a greater degree. Try to pick pairs where the margin cost is justified by the movement.

Volatility : Dead pairs are a waste of time. If they flatten and zig zag back and forth in a 200 point range...avoid them. I like heavy trending pairs and pairs with a lot of daily volatility.

Daily average range : If the pair isn't moving enough to justify in my mind continually holding it, then I remove it from the platform. I see no reason to tie up margin with a pair that may move 37 pips in two days from the trades open. I like results, and I like to see them every day. Some days I get none to little, but over the course of the week, I should see some postive progress on that position.

Currently I'm only trading 7 pairs and gold due to their volatility and trending, and four of those are YEN crosses. I also like low spreads and avoid anything higher than 8 pips on the Oanda platform. Most are under 4 and at times below 2.

Lastly, and this is important: pay particular attention to your positions around 5PM EST, USA. I start watching mine around 4:30 going into the 5PM mark. For the last 8 to 9 months, 5PM to 5:30PM EST has been a very volatile period, especially for the YEN crosses. I don't know why and I don't know who is causing it, but it occurs pratically every day. Personally, I don't care who or why, as long as is keeps occuring! It also lends some insight into possible direction for the next day as well.

Thanks so much for the insight and help.

I think I've got everything straight in my head except for the entry point.

I can see the entry when candles first cross the 50 MA, but what if it's already crossed and well above/below? How can I determine the best entry point then?

For example, say that it crossed the 50 MA late Wednesday and moved up nicely. Thursday morning it's well past the cross point and it "appears" that it will continue upward, but I'm not sure if it will or not. In effect, I'm frozen, staring at the chart, wondering what to do.

Do I get in or do I wait for it to reverse? Or should I wait for it to bounce off the 50 MA, or maybe cross the other way?

I hate it when I think I know what to do and, as soon as I get in, it reverses and moves against me to my SL. That's frustrating.

I know I'm missing something here and, for the life of me, can't quite put my finger on it. I feel like I'm at the threshold of the success room but can't quite step inside.

Any enlightenment will be GREATLY appreciated.

Terry

[muddbuddha]

For example, say that it crossed the 50 MA late Wednesday and moved up nicely. Thursday morning it's well past the cross point and it "appears" that it will continue upward, but I'm not sure if it will or not. In effect, I'm frozen, staring at the chart, wondering what to do.

There are a few entry types you can use. I commonly use the pull back and bounce off the 20 as well as a break of the previous 3 period highs or lows. Those are my most common entries.

Do I get in or do I wait for it to reverse? Or should I wait for it to bounce off the 50 MA, or maybe cross the other way?

If I'm wrong and it continues through the 20 toward the 50, then I hold off to see how it reacts to the 50. Does it drop right through? or stop and ride the line? Possibly bounce right off? If it drops/rises through and closes on the opposing side, I typically watch it to see how it reacts once on the other side prior to entering. If you feel frustration because you think you're missing out on some profit, then you need to stop and not get into the trade at all. You're too hung up on the profit/loss and not the actual trade.

The key is not to force the trade. Wait for a good set up to develop. If you rush the trade because you're fighting the urge to be in a trade, then you'll loss more often than not.

I hate it when I think I know what to do and, as soon as I get in, it reverses and moves against me to my SL. That's frustrating.

That's fairly typical on longer time frames and something you just have to get used to. It's not uncommon for price to move away 50-100 points from my entry and then move back my direction. Management skill is important when trading slower charts as it's easier to overleverage and fall into margin call.

I know I'm missing something here and, for the life of me, can't quite put my finger on it. I feel like I'm at the threshold of the success room but can't quite step inside.

Don't rush it. There's a time when it all seems to come together and make perfect sense. That may be now or six months from now. But if you rush and become frustrated by repetitive failure to the point of quiting, then you'll never know. Practice your trading technique prior to attempting it live or use it live and use micro lots (less than 1000 units).

Originally Posted by muddbuddha

For example, say that it crossed the 50 MA late Wednesday and moved up nicely. Thursday morning it's well past the cross point and it "appears" that it will continue upward, but I'm not sure if it will or not. In effect, I'm frozen, staring at the chart, wondering what to do.

There are a few entry types you can use. I commonly use the pull back and bounce off the 20 as well as a break of the previous 3 period highs or lows. Those are my most common entries.

Do I get in or do I wait for it to reverse? Or should I wait for it to bounce off the 50 MA, or maybe cross the other way?

If I'm wrong and it continues through the 20 toward the 50, then I hold off to see how it reacts to the 50. Does it drop right through? or stop and ride the line? Possibly bounce right off? If it drops/rises through and closes on the opposing side, I typically watch it to see how it reacts once on the other side prior to entering. If you feel frustration because you think you're missing out on some profit, then you need to stop and not get into the trade at all. You're too hung up on the profit/loss and not the actual trade.

The key is not to force the trade. Wait for a good set up to develop. If you rush the trade because you're fighting the urge to be in a trade, then you'll loss more often than not.

I hate it when I think I know what to do and, as soon as I get in, it reverses and moves against me to my SL. That's frustrating.

That's fairly typical on longer time frames and something you just have to get used to. It's not uncommon for price to move away 50-100 points from my entry and then move back my direction. Management skill is important when trading slower charts as it's easier to overleverage and fall into margin call.

I know I'm missing something here and, for the life of me, can't quite put my finger on it. I feel like I'm at the threshold of the success room but can't quite step inside.

Don't rush it. There's a time when it all seems to come together and make perfect sense. That may be now or six months from now. But if you rush and become frustrated by repetitive failure to the point of quiting, then you'll never know. Practice your trading technique prior to attempting it live or use it live and use micro lots (less than 1000 units).

Excellent. Thanks again for you help. I'll definitely practice these entry techniques.

I know you're right about rushing things, too. As a matter of fact, my wife and I were just talking about that today. I do have a tendency to push myself into a trade when there may not be a good setup, mostly because I want to start making some money. That, of course, leads to mistakes, and losses.

So, I'll try to focus on the trade itself, watch for the setup with the info you've given me, and not think of the money so much (except for the money management, of course).

I'll let you know how things develop.

Terry