31 Aug 2007

I have both position in the waiting for a possible breakout today at 2.0200 and 2.0013. As I am going away for holiday, I do not want to enter any more new position.

Summary:
Long 2.0133 (Paper loss), TP set at 2.0330
Short 2.0025 (Paper Loss), TP set at 2.0013

Starting out in Forex (3)

Technicals
I use mainly a daily chart and a hourly chart. On both, I have WMA5 (cyan), EMA21 (green), EMA55 (blue), EMA100 (yellow) and EMA200 (red). In additional I have, CCI(34) fused with BB(14, 0.9) and BB(14,0.3).

The concepts I adopt was based on David Kolachi method of trading, http://www.kolachitrader.net. I do not know now if the explaination is still free. Its quite a theorem by itself. My analysis starts with the daily chart. In days where there is no dispersion, and the direction is clear, I will use a fibonachi retracement to set my take profit or resistance /support line. In days of dispersion, the resistance and support line is set using the nearest EMA line.

Similarly, using a hourly chart, the method is the same for days when there is no dispersion. In days where there is dispersion or when a dispersion is about to take place, I use a breakout method, the entry is set at either above/below the EMA200. On a day of dispersion and a rebound of the WMA5 is expected, I will set a U-turn entry at the next EMA.

A bit difficult to explain, if you are not familiar with Kolachi Theorem, Fibonachi Retracement and concepts of breakout. For the later two, do a search on any forex trading method and you can get some explaination. I follow Eillot Wave Theory at times, so do read them.

The best way is to follow my daily trade diary. I always start with a overall analysis of the market and explain how I expect the WMA5 will move for the day (either using a hourly chart or a daily chart). Next, I will normally explain where to entry, trace the entry on your chart and you can see whether the trade is set up for U-turn or for breakout. The last thing I highlight is the take profit support or resistance line. These are predicted using either Kolachi concept of WMA5 and EMA behaviour in days of dispersion, or by fabonachi or Elliot Wave theory to determine the level of support or resistance.

The above may be enough, but to have an addition confirmation, I have a set of lower indicators. A combination of CCI(34), BB(14,0.9) and BB(14,0.5). A daily chart is used. The oversold and overbrought is set at +/-150. When there is an oversold or an overbought situation, enter when CCI(34) cuts the BB(14,0.9). Exit when CCI(14) punches through the BB(14,0.9) and a change in gradient happen. Watch out for rebound of CCI(14) on BB(14,0.9) or BB(14,0.5). You may want to abandon position.

For case without oversold or overbought, enter when CCI(14) cut BB(14, 0.5). Exit likewise like the mention above.

Confuse? I will explain with more charts, which I will take time to prepare. But in the meanwhile, follow my trade daily and try to understand the underlying reasonings.

30 Aug 2007

My TP was not hit for the short position yesterday.

With a long position at 2.0133, I am now into profit. I have set the TP at 2.0186.
Another long position will be set at 2.0210 for the breakout north.
The short poistion has a TP set at 1.9986

Summary:
Long 2.0133 (Paper Profit)
Short 2.0025 (Paper Loss)

29 Aug 2007

With the reversal taking place, GBPUSD triggered my short position at 2.0025. I set the profit taking at 1.9916. I will take no new position today.

Summary of trade:
Long 2.0133 (paper loss)
Short 2.0025 (paper gain)

Trade 27/28 Aug 2007

As I expected the price to make a U-turn, I now have a long position at 2.0133, which is taking loses. Keep it there.

I have place a short at 2.0050 with a TP at 1.9900. for 28 Aug.

Summary: of trade as at 28 Aug 0800hrs
Long 2.0133 Paper Loss:44 pips

Starting out in Forex (2)

Knowing the fundamentals alone allow you to guess in a good probability the direction of the currency pair.

Knowing the technicals allow you to determine when to enter and when to exit.

But before I go into the technicals and technique I used, lets talk about some strategy I employed.

The technique I use is based on momentum as well as trend. It means at times I can hold on to a position for days and sometimes weeks. By doing so, I am not emotionly attached to the whip saw and the swings that happen throughout the day. This means that once I determine my position (early in the morning of each day), I can choose to close some positions or to alter some positions. All these are done first thing in the morning before the Asian market starts. Sometimes, I will take a look before the European market as well as before the US market starts.

I use 2 trading account. One for buying pound and the other for buying USD. In general, the technique I employed do not set stop loss. CAUTION: make sure you have enough margin. I normally trade upto 30% of my available capital and set a leverage of only 50:1. In the event, when I predicted the direction wrongly, I will trasfer money into the other account and trade accordingly, while holding on to the other position. Again, I will like to remind all that there is interest in holding to a position. http://www.bloomberg.com/markets/rates/index.html
As such, if you feel that there is a chance that the price will swing back in your favour, please hold on to that position, forgoing the interest, and you might end up with a profit.

I used this method and at transaction I have a short a position and at its height it is losing 600 pips. But during the climb up, I make profit on the other account and as it swing back, I make again. Finally I still managed to close this position with a 20+ pips minus the interest I have to pay.

I like the trading platform http://www.oanda.com. It allow me to deposit fund only to one primary account and allow me to create sub-account. It has the facility for me to transfer funds from the primary account to the sub-accounts with ease and within a minute without cost.

I will continue in the next blog to talk about the technicals.

Starting out in Forex

3 Months ago, I started out a method trading in GBP/USD. I became and sole focus only in this currency pair.

The method I used is a combination of fundamental as well as technical. Understanding the economics and political allow me to determine the direction of the GBP/USD. The technicals using a combination of WMA, EMA, CCI, BB and fabonacci retracement allow me to confirm the direction as determine by the fundamentals and determine when and where is the entry point.

To understand about forex, please go to http://www.babypips.com I find these site useful and easy to anyone who has a interest to understand about the subject to start. The site goes through both fundamental as well as explaination of technicals tools.

The second important thing is to know when and what is the big news. A good site to follow is http://www.forexfactory.com This site allow me to know which day and what time and what news and how volatile is the news. To act after the news is too late, but in general, leading to the announcement of the news, you can also read about the economics and political situation from a number of sites, newspaper as well as television. But to have too many news will cause indigestion. Reading news is just reading news - that is no good. Try to understand the why for a money policy, a fiscal policy, a political decision etc and how these is going to affect the direction of the GBP/USD pair. Fundamentally, ask whether (example) when the Feb raise interest rate, what is the impact of the US economy. Does UK response well? The direction of the GBP/USD pair is determined by the relative strength of the UK/US economy. Not in particular UK but Europe, with Germany as the second largest European economy. But as the US dollars is the most traded currency - note the Swiss and the Yen. On the whole, undertand how any US economic policy affect the European and the Asian market and vice versa.

A good and quick way is to look at how the Asian, European and US market is performing. I usually look at the stock market indicies. http://http://finance.yahoo.com Understand how the performance of the market and what corelationship they have on the GBP/USD pair. This is one of my research topic. I will share more once I have any results.

In the next blog I will share on the technicals. To be continue.