SaigonFX's Daily Short-term Momentum Strength Scores

Trading Systems
82

Here are the short-term momentum strength scores for October 16, 2012 taken at 11:00 GMT:

JPY – 6
NZD – 4
CHF – 3
CAD - 3
USD – 3
AUD – 2
GBP – 2
EUR – 2

Today’s results again do not yield a clear trading signal for me. I can see the JPY coming due for some strength by early next week, but longer-term this currency looks ready to depreciate to levels not seen for a year or two, and therefore I am unwilling to buy the yen at current levels.

Over the weekend, I did some number crunching which revealed the USDCHF as a pair likely to see a medium-term bottom between .8900 and .9200. I have my eye on this pair to see whether a good long opportunity will develop. If one does, I think the rally will last at least 200 pips, so certainly worth a swing trader’s effort.

I remain out of the market for the time being.

83

I am certainly eager to get the PDF out… the only reason I haven’t posted it yet is that it has yet to be written.

On one hand, the process of posting the momentum readings led me to seek to refine the process I’ve been developing over the past few years, and I want to incorporate my latest methodology in the PDF document. Most importantly, I’ve been able to better define entry and exit levels and not ‘jump the gun’ on trades that, while they end up becoming major reversals, nonetheless have quite a distance to go before price reverses.

On the other hand, my day job has changed quite a bit these past couple of months and by the time I get home from work, I often lack the power of concentration necessary to draft the document coherently. I’ve even cut back my own trading activities as I’ve struggled to sleep enough each day and I know from experience that trading with bleary, sleep-deprived eyes is a recipe for disaster. It is perhaps one reason why I am happy to be out of the market at the moment.

Nonetheless, I am expecting to have some time later this month to work on it and will post it as soon as it’s ready.

84

No problem, Sir. I thought I have missed the document. :slight_smile:

Thanks and happy trading…

85

Here are the short-term momentum strength scores for October 23, 2012 taken at 15:00 GMT:

JPY – 7
CAD – 6
USD – 5
GBP – 4
AUD – 3
CHF – 1
NZD – 1
EUR – 0

After a long wait, finally, today my trading system generated an actionable trading signal. Today’s most polarized pair is EURJPY (with bearish bias). I had shorted this pair quite enthusiastically in mid-August and held on to the trade for about a month, until I was eventually stopped out during the QE3 run-up. Price has since made a new post-QE3 high and my momentum indicators are suggesting that this time price really is ready for a drop of at least 2%.

Because price has already fallen sharply from Monday’s high of 104.62, however, I don’t consider the current price as an optimal entry point. Instead, I will await a retrace to 103.85 before making an initial short entry. Should price reach 104.71 or 105.58, I will be adding leverage at those levels. My stop is at 106.45 and my limit is at 101.25. The Elliott wave structure of the advance since September 27 suggests price may still need one more new high above 104.62 before the structure is complete. However, momentum indicators are telling me that any new high is likely to be a modest one, and that in fact price may fail in its attempt to breach yesterday’s high.

Another pair I like at the moment is GBPCHF, for a long entry. Momentum is looking strongly bullish out to the 4H chart and I think price is due for a rally up to at least 1.5015. However, my trading system has yet to actually mark this pair as a buy, so I will sit it out for the time being.

I still have no active trades at the moment, but will be entering EURJPY on the short side if price reaches 103.85.

86

Here are the short-term momentum strength results for October 26, 2012 taken at 5:00 GMT:

EUR – 6
JPY – 6
CAD – 6
CHF – 4
GBP – 2
AUD – 2
USD – 2
NZD – 0

Today’s results suggest a bearish bias for both NZDJPY and NZDCAD, as well as a bullish bias for EURNZD over the next week. However, none of these pairs confirm the same bias at the 1H to 4H timeframes, and therefore I am unwilling to take a trade in any of them.

My EURJPY short triggered at 103.85 and is currently up 33 pips. Stop and limit are unchanged since the last post.

87

Here are the short-term momentum strength scores for October 29, 2012 taken at 10:30 GMT:

CAD – 7
EUR – 6
CHF – 5
GBP – 4
AUD – 3
JPY – 1
NZD – 1
USD – 1

Today’s results have yielded a very high-probability trading signal: A short of USDCAD at the current price of .9997. This pair is showing that perfect combination of a complete or nearly-complete Elliott Wave count plus consistent momentum divergences across all timeframes from 15M to 8H. In the case, both the wave count and the momentum signals indicate this pair will be heading down in the very near future.

My limit on this trade is .9910, which is just above the .382 retracement point off the October 5 low of .9736. I don’t normally take trades that stand to yield under 100 pips, but in this case, I will take a trade that promises at least 87 pips given that the wave count is so clear. (The wave count, in this case, shows a clear five waves up off the October 5 low. I now expect a correction of at least 38.2% of that advance.)

Here are my trade specs on the USDCAD short:

Initial entry at current price of .9997
Stop at 1.0247
Limit at .9910

I will be making additional short entries at 1.0078 and 1.0162 if price reaches those levels.

Today’s results have also allowed me to make an entry order in NZDCAD. While I think CAD will be a top performer over the next week, I think NZD will be almost as weak as the USD (which is to say very weak relative to the other major currencies). In this case, however, the Elliott wave count I have on this pair suggests to me that price will continue to rise for another day or two. My estimate for the high is .8310; however, because this pair could turn south at any time, I will be making an initial short entry at .8260 if price can reach that level. My stop will be .8490 and my limit will be. 8135. I would be making additional short entries at .8328 and .8397 if price gets that high.

Here is a summary of my current positions in the forex market:

EURJPY short from 103.85, currently +125 pips
USDCAD short just entered at .9997, currently unchanged

88

Here are the daily momentum strength scores for November 20, 2012 taken at 3:00 GMT:

JPY – 7
GBP – 6
EUR – 5
CAD – 4
USD – 3
CHF – 2
AUD – 1
NZD – 0

This is one of the last updates I intend to make in this thread, as it’s nearly served its purpose, which was to help me refine the trading system I’ve been developing over the past couple of years. Since mid-July, the system has generated a total of 19 trading signals – 12 for profits and 7 for losses. Risking 2% of account equity on each trade, I have increased my account equity by 7.5% since July 17.

During November 6-9, trades #18 and #19 completed for profits. EURJPY, which I shorted on October 26 at 103.85, reached its limit of 101.25 on November 9, for a profit of 260 pips. This trade allowed me to add 0.7% to my account equity.

On October 29, I shorted USDCAD at .9997 and this trade hit its target of .9910 on November 6, for a profit of 87 pips. This trade allowed me to add 0.3% to my account equity.

I am currently waiting for my system to generate the next viable trading signal. Today’s most polarized pair is NZDJPY (with bearish bias). However, because the momentum in this pair is still looking fairly bullish to me on the 2H and 4H charts, I will wait for price to move higher before I consider entering a trade. I give this pair a fair chance of breaking through the long-term resistance at 70 and shooting higher towards 80 before making a substantial decline. However, the odds on the bullish side don’t persuade me to buy either, so for the time being I will simply observe this pair.

In general, I think the yen is short-term oversold and I expect it to rally around 2% over the coming month. However, long-term I have to be extremely bearish on the yen and that long-term bear trend, which I believe began in November 2011, is something that I think will allow the yen pairs to rise in spite of bearish short-term and medium-term momentum over the coming 5 years. If I had to take a short-term buy on the yen, I would probably do it against the CHF. Should CHFJPY reach 87 this week, I would entertain shorting it to 85.50, but only because I expect CHF to be among the weakest of the major currencies in the coming weeks.

I currently have no open trades in the forex market. When Trade #20 (yet to be triggered) closes, I will finalize the stats on the trading experiment begun in this thread on July 17 and the PDF guide to applying the system this thread has helped me develop will be posted here. That way, anyone who is interested can calculate daily (or weekly, monthly, etc.) “momentum strength scores” at home on their own. I think the value of the PDF won’t lie so much in applying the system it outlines “as is”, but in the momentum scoring system concept, which can be stripped out from my system and integrated into one’s own - probably for far better results than I have achieved since July!

89

Here are the short-term momentum strength scores for December 3, 2012 taken at 1:00 GMT:

JPY – 7
AUD - 6
USD - 5
CAD - 4
NZD - 3
GBP - 2
CHF - 1
EUR – 0

Today’s results lead to a viable trade: a short in EURJPY. This is the twentieth trading signal generated by my system since July 17. The trade is based on the confluence of two factors:

(a) Momentum is now showing bearish divergences on all the charts from 15-minute out to the daily chart. This is a rare event in itself and it usually signals that price is preparing to drop at least 3% nominally. In that case, price should reach around 104; however, since my system is inherently conservative and the monthly chart is strongly bullish (suggesting a rise in price to at least 123 in the coming year), I will exit this position once price has declined just 2%.

(b) In Elliott wave terms, price has traced out a clear 5-wave advance off the 13 November low of 100.35 and now Elliott wave theory predicts a correction of at least 38% of that advance. The advance of the last month looks like it is wave 3 of a larger structure begun on 10 October and I expect that, after some weeks in sideways action in the 104-106 region, price will advance towards the March 2012 high around 111.50.

Here are the specs on this trade:

Initial entry at the current price of 107.15
Second entry will be at 108.04 if prices gets that high
Third entry will be at 108.94 if price gets that high
Stop: 109.83
Limit: 105 (this is just above the .382 retracement of the advance from 100.35 which began on 13 November)

I’ve been out of the market for a couple of weeks, so currently my only position in the market is the short in EURJPY begun today.