School will be starting next week. I decide to switch from day trading to mid or long-term trading.
I currently have two positions and decide to let them roll over time, as they need to run for a while in order to take profit.
My positions are: Long on USDJPY and short on AUDUSD.
I believe that the weakness cycle of USD is now over. What I mean by that is not really that USD is now tapering or not, but rather that the market believes that the Fed won’t taper too soon. Of course, even if they taper, it’s gonna be good for me anyway. This is the reason why I decided to go long on USDJPY. Japan is printing bills for a while now, and we all know why. I believe that the USDJPY pair is now resuming its uptrend, even though its unlikely it won’t make new highs. This is why I’ll be getting something like 50 pips and then get out.
About the AUDUSD, there isn’t any reason to get long on this pair at all as the Australian economy is in a very bad shape. The surge of last week is to the best a pulling back from the AUD sell-off. Entering from here is IMO a good timing to re-enter in this pair.
So, this is my first attempt to do long-term trading. Anyone has some advice?
I advise against it in the currency markets. Have a look at the thread I just created. Things can radically change in the world over long periods of time. Everything from monetary policy to natural disasters. The less time you are in, the less chance there is for one of these events to happen and destroy your trade. By holding only a couple long term positions you are also putting “all your eggs in one basket”, so to speak. What will you do if you were wrong on both?
Also, if you are practicing proper money management, then these trades would not be any more profitable than shorter term trades. If you are risking 5% with a potential profit of 10% for example, then you are going to be waiting weeks or months for something that could have been done in a day on a short term trade with less risk of news moving the market against you.
For example, I will risk 5% on most trades and 10% on a trade I am extremely confident in. Say I have $10,000 in the account. That means I will risk $500. If I am doing a short term trade with a necessary stop of 20 pips then I will take the number of lots that will make each pip worth $25. That way if my stop is hit, I lose 20 pips x $25 = $500 or 5% of the account. Now, if you take out a long term position then you have to use a much wider stop. Say you use a stop of 100 pips. That means you need to shoot for a per pip value of only $5. So you will be in the trade much longer, exposing yourself to much more risk, and you will make the same profit. I don’t know about you, but I like to reduce risk as much as possible.
The usd/jpy is a toughie - daily suggesting down, today’s action seems to have hit a wall.
A correction on the stock index would push yen up - see today’s action on the usd/jpy and the Nikkei 225 and you’ll get a sense, plot the monthly,weekly pivots on the index and check out 14030, the monthly pp, see the usd/jpy reaction.
So a long term trader has to look at the s&p daily - is that a h&s I see forming, is a little retrace on the cards, is the question of US budget going to rise again etc etc - obviously if the s&p retraces so too will the Nikkei.
The tapering question seems to be priced into usd, though may provide some volatility.
The other thing - listen to nobody’s opinion except your own
I’d argue to the contrary. 5% of account balance on a 20 pip stop. I would argue is very risky indeed! To get near to this kind of trade I would imagine needs a small’ish TF, perhaps 1m/5m or possibly 15m. Its not uncommon to see PA spikes taking out a 20 pip stop on these TF’s and 5%? If you consider that there are 288 5m bars and 96 15m bars in a daily, its not the kind of trading I’d be interested in.
Re the longer position and news. As a swing trader I can often be in a position for many days. Even high impact news (NFP) has little effect on this type of trade. In fact, news is often used as a catalyst to push price in the longer direction (contrary to expectations on the data) or it will simply spike one way and then the next and resume on its previous course
In fact, when I say longterm trading, I think that this expression is actually wrong. It’s not longterm, but rather letting the position rolling to where I believe the trend has come to and end, and that I should get out to reevaluate the situation.
I decide to do that is because currently I look at the daily candles for patterns (mostly rejections and reversal), get in and grab something like 10 pips then get out.
Right now, I want to try something else. As you said, the price of pairs will go to a certain direction listening to the price action of the bigger picture, and not this random pinbar giving a 5 pips reversal.
I started to do it yesterday, after that the news of Advanced retail in US was worse than forecast, but still went forward to what the overall price action suggested. Indeed, despite a worse performance of a highly important report, USD surged in value across the board. If against other currencies is normal, it’s not for EURUSD. Euro-zone is recovering, and numbers coming out are often better than predicted. However, arrived at this significant level last week, the market still decided to push Euro downwards, and I don’t think they even considered the news releases.
Of course, the results that are far far away from forecasts will spook the market, but these are often just temporary spikes.
If the news is already priced in the pair, the output could be whatever they like, but won’t really change the results on the pairs.
As far as I know, the market has already priced in the tapering of USD. No matter what comes out in about a month, USD will still go up. Before September, I would already be gone with my profits. Australian dollar doesn’t have any blue sky in front of it, as the Aussie economy is in big trouble no matter what the numbers are. At the same time, Japan won’t really come out and say they won’t print more yen.
So yea… this is a more completed version of my logic which brought me to go short on AUDUSD and go long on USDJPY.
More advice, comments or any thoughts are welcome!
Well I wouldn’t go that far! First decide what type of trader you are? Technical or fundamental or perhaps a combo of both on the longer term TF’s? I’ll pull up A/U and U/J and give you my two cents later tonight though.
I believe that I am a hybrid. When there are big levels of S/R that are met, I go in for maybe around a week. If there is no major S/R in sight, I’ll go on 4HR chart or daily chart looking for rejection or reversal patterns, then I will go grab a few pips there. I am a price action trader, so I guess technical. I don’t use the fundies at all lol.
Well, that places you in Aus or the UK… how am I doing so far? Got a ton of end of day stuff to work through, but will take a look at both as soon as poss!
OK A/U. Don’t like this one now, especially as were in Asian. h1 posted a high @ 0.9157. H4 posted a high @ the same. So expect a fall off. Longer term, 0.9220 is the swing high. Intermediate, 0.9073 is the low. U/J, Current low @ 97.75. High, 98.41. Longer play, short off 98.41.
Wilen, just wondering if you noticed the correlation that I was talking about last night happening today - also see how the push up in usd/jpy was not being replicated in the indicies, thus the push didn’t last too long (the 12.30 gmt green candle in usd/jpy was mirrored by a red one in sp500).
Just thought it might be something to keep an eye on
Sorry for all this probably useless information but just thought I’d add a little pointer.
Copper is sometimes viewed as a barometer of world economic health (Dr Copper as referred to)
The world’s biggest user and importer is… yep China.
From FT.com today …“Demand surges for copper in China”, it seems that prices have tripled for the material in the past 6 months … so what is good for China is good for Aud…
Quick update for you Wllen1, closed out the A/U short @ 90.73 (intermediate swing low as posted below) just shy of 100 pips. Currently, A/U is flat and central between high and low. In short could go either way, no indication at present. Also took the U/J short @ 98.41 on the spike above the swing high (97.75 as posted below). Currently 116 pips and still open.
So my trading positions, both AUDUSD and USDJPY actually lasted for 3 days. I don’t know if I specified this or not in my original thread. For me, a long-term trade is counted in days, and not in weeks. Even though I am a student, I can still check the market once per week.
Here is a little briefing of what I’ve learned in my longest trade. Objectively, I believe that there are still flaws in my logic. Even though I made profit at the end, the downside loss is way bigger than the upside gain. I decided to short AUDUSD mainly because Australia has overall a sick economy. Also, there have been some serious selloff during the last weeks. I took profit of about 20 pips from the market in my short order, while I had to endure almost 100 pips unrealized loss during the week. My plan was to follow the price action of the chart, and to sell any rallies since the overall trend was downward.
However, I am sure that there is something very wrong in what I see, otherwise I would have seen that the pair moves a lot more to the upside than the downside. If my position was down, I would have made my money long before this morning.
About USDJPY, I went long on the pair because I trusted the force of USD and saw that the pair rebounced from the 96 handle. I thought that the pair would resume the upward ascension. Also, there was this tapering rumour all across the sky.
Again, the pair moved downward before giving me 30 pips of profit this morning. A better judgement should led me to a short position, which I would made profit (probable more than what I have now). I simply don’t know what could tell me on the chart that this pair would go lower.
Finally, I still have some problems with fundamentals. I am a price action trader. I don’t look at fundamentals output at all, because that way I follow the market, and not being ahead of the market. However, sometimes the results are so unpredictable that it spooks the pair, and the original plan would go bust. Here is the thing: I can’t dodge important news releases, since they are all over the place from Sunday to Friday. Once the news is out, the potential profit would be taken if I don’t put a position beforehand. Do you have any solution to trade as a price action trader, and not being spooked by the results of any economic data release?
If you have any answers, advice or opinion, please post below!
Yes here’s my take on your post. [B]1.[/B] You seem to be still a little confused? If your going the ‘fundi’ route and that’s fine, the charts will probably not reflect this on the daily. Fundamentals are a longer game. [B]2.[/B] News. If your looking at 4h and up and as previously stated, a swing trader, then only look to high impact news releases pertaining to your chosen pair.
Just a suggestion. Initially, if you’ve decided to be a swing trader. Try using only the charts to enter and exit (perhaps in demo). This should give you a reference point on both the importance or otherwise of news and fundamentals.
First decide what type of trader you are? Technical or fundamental or perhaps a combo of both on the longer term TF’s? I’ll pull up A/U and U/J and give you my two cents later tonight though.