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This is a discussion on Mr Spread Better's blog within the Trading Journals forums, part of the Reception category; www.paddypowertrader.com Currency markets have turned full circle in just over a week; now the wheel of misfortune has swung back ...

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Old Jan 13, 2009, 12:49pm   #31
 
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Around The Forex World In 12 Days

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Currency markets have turned full circle in just over a week; now the wheel of misfortune has swung back to Sterling, sending it lower against both the Dollar and Euro.

After Sterlingís lousy Christmas, it was the Euro that suffered the New Year hangover. Within days it was the Dollarís turn to get the January blues. But itís taken just over a week to return to the sport of Ďpounding the Poundí.

Iíve packed in trading for the day. After last weekís bumper trading profits this morningís trades were predictably messy. Small gains on GBPUSD and EURUSD were cleared out by repeatedly looking to short EURGBP.

One of my trading rules is to stop trading if I make 3 consecutive losing bets, which Iíve now managed in EURGBP. Luckily 2 of my 3 EURGBP trades were just in a quid (the other was in £2) making the losses irritating but manageable.

My sell bets were at £0.8885, £0.8929 and £0.8945. I wasnít adding to a losing position; each trade had been stopped out, but I kept looking for a reversal that wasnít there. Total loss on my EURGBP bets this morning was £94; profits from the Dollar cross trades was £72 before being stopped out on both, so not a disastrous morning.

Where now for Sterling? Dunno. On a rotation basis it must be Sterlingís turn for a rough ride after recent hits on the Euro and Dollar. In terms of GBPUSD a small amber alert flashed up on Friday when the price didnít make a new high. It was no more than that as the Pound could well be consolidating after a 4-day uphill run. Todayís price action hasnít been too healthy; itís now dropped below the 21-day moving average.

Click the image to open in full size.

But against the Euro I still favour Sterling, though some short-term weakness is reasonable after the recent sell-off. Just like the EURUSD last week, the price has rebounded from the last-ditch Fibonacci 61.8% retracement (If youíre new to trading and wondering who, or what, Fibonacci is weíve got a handy article called Fibonacci And The Bonking Bunnies). But note that although the EURUSD bounced of that level, subsequent price action hasnít been too hot. I reckon itíll be the same story for EURGBP.

Click the image to open in full size.

Talk of Germanyís latest stimulus plans and uncertainty ahead of Thursdayís ECB meeting could be reasons for a few traders to lock in last weekís gains, but look at what bond investors are telling us.

German government bonds currently yield around 3%. But you can get a yield of 4.35% from its Euro-neighbour Italy. Or 4.70% if you fancy buying bonds issued by the Irish government. And to top it all, Greek bonds offer a yield of 5.30%, a whopping 230 basis points more than German bonds.

Think of the extra yield as the risk premium; the extra return demanded by investors for the higher likelihood that these countries default on their debt; not really the sign of one big happy family. Investors are taking the view that should one of these smaller countries fall into difficulties then itís more likely theyíll be cast adrift than bailed out by the Fatherland.

Either way, large parts of the Eurozone are losing confidence and economic growth at an alarming rate so either lower rates, lower currency, or preferably both are needed pretty damn quick. And that should make the Euro a less attractive investment.

Happy Trading
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Old Jan 14, 2009, 10:19am   #32
 
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Gloomy Economy Hits Sterling And Equities

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Forget last weekís US payrolls, this week the Dollar is flying. Meanwhile, Sterlingís slump continues after a further downpour of gloomy retail sales and housing news, and equities drop below trendline support.

Iíve decided to bite the bullet on equities; after a tentative intra-day sale yesterday I plucked up the courage to short the FTSE in a fiver last night. I sold £5 at 4421 and although I bought back £2 at 4403 I sold a further £1 at 4373. Why?

It looked as though the Santa Claus/ New Year rally had run its course; a pattern of lower highs and lower lows was emerging. The S&P 500 had struggled above 900, then yesterday the Dax and FTSE dipped below their recent (slightly arbitrary) uptrend lines.

Click the image to open in full size.

At the moment Iím short £4, with my stop at 4355 to lock in a profit if the US decides to rally. A couple of things worth noting; this week sees the expiry of January options on Friday and the theory runs that more often than not equities rally during that week (my shorter term analysis hasnít been able to back that up for FTSE).

Also, the US earnings reporting season is just warming up. This week is pretty low key with only 8 S&P 500 companies reporting, but next week sees 52 companies baring their souls, followed by a further 99 in the last week of January. Add in ECB rate cuts and fiscal stimulus plans by the day and thereís likely to be plenty to trade off.

Iíve turned cautious on the EURGBP rate, just in the short term. I lost money on three short bets yesterday so Iím obviously on a different wavelength. But, regardless of whatís going on in the real world (and, sure, thereís plenty of gloom in the UK today), yesterdayís chart action is warning me off:

Click the image to open in full size.

Yesterdayís green candle reversed Fridayís fall, and further rises today took the price back above Thursdayís level. Throw the upward 21-day moving average into the mix and thereís a hint of higher prices to come. Am I going long? Nope, Iíll watch from the touchline, but concentrate on my FTSE bet this afternoon. If I decide to short Sterling Iím more likely to work it through GBPUSD.

Good news for the pirates; yesterdayís Times reported that more oil companies are looking to store oil in super-tankers whilst they wait for the price to rise later in the year.

Yesterday I drew attention to the widening gap between yields on German bonds and the bonds of its poor Eurozone neighbours. Today, John Authers talks more articulately about the same subject. Itís worth clicking here for a quick video and a couple of easy to view charts.

Finally, good news for some, a small worry for others. British researchers with too much time on their hands have concluded that when it comes to trading, size matters. But before you start peering below the desk, theyíve been measuring tradersí ring fingers as a gauge of early exposure to androgens (male sex hormones).

Happy Trading
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Old Jan 14, 2009, 3:53pm   #33
 
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Equities Crash On Banking Woes

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A trip down memory lane saw shares plunge on a tsunami of bad news across the banking sector. Darlingís attempt to breathe life into corporate UK was eclipsed by news of further losses, job cuts and possible capital raising by European banks.

Stop loss management, or rather mismanagement, has played a major part in my trading fortunes over the past 24-hours. Yesterday I had a £4 short bet on FTSE, which Iíd opened at 4421. Keen to lock in a profit, I trailed my stop down to 4355 where I was duly hit. That trade made an overall profit of just over £250, but a wider stop loss might have kept me in the game for a much bigger prize today. Letís see, FTSEís currently trading at 4200, so that would have been (4421-4200)X 4=Aaagghhhhh.

Click the image to open in full size.

This morning I sold £5 of EURGBP at £0.9091. I bought back £3 at £0.9078 and brought my stop down to breakeven where I was taken out. Profit on the trade was £39-the EURGBP rate is now having a sniff at £0.90. Hmmm

I bought GBPUSD in a fiver after appalling US retail sales data. I paid $1.4539 and the price is now $1.4590. Looks good, except that somewhere in the middle of all that I was stopped out for a £95 loss.

Further short bets on FTSE and EURGBP mean that Iím a few quid up on the day but not a lot. Iím not too upset; it was deliberate plan to run tight trades the day before the ECB announcement and avoid getting mauled, and Iíve managed that. Itís just a great example of how a less cautious approach would have paid dividends (and there arenít many of those around these days).

Ah, and talking of the ECB, hereís another competition with a chance to win a copy of Harrimanís Money Miscellany. Three simple questions; the one nearest the bull wins:
1) How much will the ECB cut rates by?
2) Will the EURUSD be up or down on the day?
3) Will the Dax be up or down on the day?

For this competition weíre defining Ďthe dayí as between 7 am and 4 pm tomorrow; prices as per paddypowertrader.

So come on; thereís not much work involved here, just three simple guesses. Iíll get the ball rolling with a stab at a 75bp cut sending the EURUSD rate lower and the Dax higher. In the event of a tie weíll pull names out of Zís hat.

Finally, if youíre new to spread betting you might want to check out a piece Iíve just put out on a Dummies Guide To Charting Part I.

Happy Trading
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Old Jan 19, 2009, 11:35am   #34
 
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Equities Rally As Bush Bids Goodbye

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Yesterday the Dow popped down for a close look at 8000 and decided not to bother. The screens are full of reasons for todayís savage bounce but, more importantly, will these levels hold?

Not a great dayís trading today; luckily a late-in-the-day forex trade bailed out some poor trading in FTSE. I made money this morning by closing out a short bet on FTSE from last night, then made the mistake of trying it again after blisteringly bad numbers from Citigroup and Merrills. But in a week of bad news, traders just couldnít be bothered by these numbers; after all, the banks only need to pull the arm on the taxpayersí fruit machine and money will come pouring out.

Needless to say the loss wiped out the overnight profit as I stopped out near the high of the day (doesnít that just always seem to happen?).

Undeterred I went £2 short this afternoon at 4208 and Iíll probably run it over the weekend.

Iíd been prepared to leave Sterling alone today. I missed the early move and didnít fancy chasing it near $1.50. But as the price retreated back to the $1.49 area I reckoned there could be a trade on. I keep a record of the daily trading range for GBPUSD; itís generally over 200-pips, but todayís action fell well short of that. The key was betting on the right direction-a bounce off $1.49, or a decent fall through it.

Click the image to open in full size.

The first visit to $1.49 saw a worthy bounce, but this was short-lived and next time around I decided to have a go at it. Normally Iíd wait for a confirmed break of the big figure before committing myself, but the price action was giving a strong hint at breaking through.

I sold a fiver at $1.4902, with a 40-pip stop. The plan worked and I closed out £3 at $1.4878 and $1.4862 (Friday afternoon is no time for heroics). I bought back £1 at $1.4803 and still have £1 running, protected by a stop at $1.4852. Nice one Charlie!

And hereís one for next week;
Click the image to open in full size.

The chart looks tempting. I donít like holding forex positions over the weekend, so I should leave this for Monday. The Euroís had a good bounce from the same low as last Friday, but I still think it has to go easier, regardless of interest rate policy. Discipline, discipline; Iíll shut my screens down early to avoid the temptation.

Hey! Hereís a good tip. Tonight, grab the remote off the missus and switch onto Sky Sports. Sale need to beat Munster at Thomond Park to stay in the Heineken Cup. Munster will start with a 5-point advantage from their supporters, but Sale are on top form and have a point to prove. It should be a cracker.
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Old Jan 19, 2009, 5:08pm   #35
 
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Will Bailout Save The Banks?

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European banks got caned this morning; Her Royal Highnessís Bank of Scotland plunged over 50%, closely followed by the newly formed Lloyds-HMG-HBOS, down 35%.

My morning began with a nasty reminder of the downside of using stops overnight. In Fridayís blog (Equities Rally As Bush Bids Goodbye) I decided to run my £2 FTSE short bet over the weekend. I left my trade in good shape; I was reasonably in the money with a stop loss at 4198 locking in a small profit.

Well, not exactly. First off, I tend to leave the desk a bit earlier on Fridays to start the weekend, so I missed the mega sell-off that started just after the close. Secondly, the subsequent rally didnít go quite far enough to stop me out, but this morningís optimistic open did. The early mark-up took me out at 4208, way above my stop, back to where I sold in the first place.

Todayís trades havenít been too adventurous, what with the US being on holiday. In the early market I sold GBPUSD for a £50 profit and made a further £20 by shorting EURGBP. And talking of EURGBP, although I missed out on Fridayís equity collapse by leaving early, at least it prevented me from opening a short in EURGBP, as mentioned in the blog. Now that would have ruined my Monday morning.

Click the image to open in full size.

At the moment Iím running three short bets, opened this morning:

1) Iím short £1 FTSE (again) from 4195.
2) Iím £2 short of EURUSD from $1.3196. I sold £5, but closed out £3 at $1.3186 to make sure of a gain. This oneís working quite nicely, but Iím giving the bet some slack with my stop way back at $1.3186.
3) Not done this for a while (and really should have done it last week when I first thought about it) but I sold £7 of Lloyds TSB HBOS (whatever) at 76.3p. Iíve since bought a scrap back at 64p, leaving me short of a fiver. Iím not sure about this one; at 68p it could be a screaming buy, but the price action seems to be following the pattern of Northern Crock, Bungle & Bodgit and RBS.

Click the image to open in full size.

The Eurozone still looks to be falling apart at the seams. Today, Spain lost its treasured AAA credit rating, following last weekís downgrading of Greece. And over the weekend an ex-official from the Irish central bank called for the Emerald Isle to threaten withdrawal from the EU unless itís owners, France and Germany, bother to lend a helping hand. Like I mentioned in last weekís blog (Around The Forex World In 12 Days) whichever way you shake the tin, it doesnít look good for the Euro.

This week sees CPI and GDP releases in the UK and a big step-up in US corporate earnings reports. Check out whatís coming up in the Weekly Wrap.

And finally, we have one last copy of Harrimanís Money Miscellany to give away. As this week is likely to be about one man this competition has an Obamarama theme. All youíve got to do is guess the level of the Dow when President Obama finishes his inauguration speech tomorrow. As usual, the prices will be as per paddypowertraderís screen and nearest the bull will win. Iíll get the ball rolling with a wayward 7950.

Happy Trading

PS. If youíre going through a tough time with your trading, watch BBC2 at 9.00 to see how bad it can get with Million Dollar Traders.
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Old Jan 20, 2009, 2:11pm   #36
 
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Sterling Hits 7-Year Low Against The Dollar

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Once again UK officials managed to put the skids under Sterling. The Pound smashed the 7-year low against the Dollar and hit an all-time low against the Yen.

Iíve said before that, even if they deny it, it suits the UKís men in charge to have a lower currency. The usual depreciation downside, higher inflation, isnít the number one worry, but a lower exchange rate to help whatís left of its export sector would do nicely thank you.

And what better way to give a green light to the forex market than to combine a multi-billion giveaway with a request for the banks to say just how much mess theyíre really in? So on the day that RBS hinted that it had lost more than any UK company in history, the Prime Minister admits that he hasnít a clue just how bad things are!!! Interesting to note that 93% of the open positions on the paddypowertraders Home page are long GBPUSD. After a 600-pip drop from 5 0′clock yesterday, that could be a canny move.

On the trading front Iím still short of FTSE and Lloyds, but yesterdayís short bet on EURUSD was stopped out at $1.3156 (boy does that look a long way off now!).

This morning I added a £2 short bet on HSBC at 508.4. The price had been holding up well, relative to the other banks, and this morning provided a golden opportunity to short the opening rally. Doing the school walk meant that I missed the best prices, but Iím happy enough with the position.

Click the image to open in full size.

But the real earner was another short bet in GBPUSD. I thought Iíd missed the boat as the rate was already 200-pips lower by 7 oíclock, but once the break below $1.42 was confirmed I sold £5 at $1.4181. As usual I closed out part of the trade for an early profit, buying £3 at $1.4156, but resisted the urge to deal again until the break below $1.40. I reckoned that area might put up some resistance so bought back £1 at $1.3996 and trailed my stop down to $1.4021 where I was hit later on. But thatís OK; the trade put £400 plus in my back pocket, leaving me with just my short equity bets to manage this afternoon.

Click the image to open in full size.

Hey! Check out the Lloyds price. Does some-one know something there? Itís just gone 38p bid. HSBC is holding up well at 496p-perhaps benefiting from switch activity. Iíve just closed out some of my Lloyds short at 40p and sold some more HSBC at 490p. And Iíve just closed out my FTSE short at 4115 in case there is an Obama rally this afternoon. There shouldnít be as thatís far too predictable, but you can never tell with the Americans. If we get a decent rally Iíll be looking to put my short back on again.

Donít forget this afternoonís Obamarama competition; if you havenít entered yet, weíre looking for where you reckon the Dow will be when Obama finishes his inauguration speech. Nearest the bull wins our last copy of Harrimanís Money Miscellany.

Enjoy the speech, and happy trading
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Old Jan 23, 2009, 2:27pm   #37
 
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New Lows For Britain

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Growth in the UK, or rather the lack of it, was even weaker than expected. Traders ignored a dubious rise in retail sales and sold Sterling down to yet another new low. Equities are pushing ever closer to Novemberís lows.

A lighter day on the trading front so far; I had to see a man about a car so missed the early Dollar strength. When I got back I didnít fancy selling Sterling at a multi-year low, and buying it would have been spitting into a very strong wind. The US session usually offers between 80 and 160 pips on a quiet day so Iím sitting back with my charts and watching to see which way the US folks go.

Yesterday, late trading saw EURGBP crash through my tidy uptrend line (featured in Equities Fail To Hold Gains), but by this morning normal service had resumed with a new recent high at £0.9472.

I closed out my FTSE short late yesterday purely because I didnít fancy much exposure to the vagaries of overnight markets. It was the wrong move, but thatís OK; Iíd locked in a profit and my short bets in Lloyds and HSBC are showing small gains this morning. My exposure isnít much, but I still need to decide whether to close them out ahead of the usual weekend banking headline lottery.

Hey, check out this chart and see if you get as irritated as I did:

Click the image to open in full size.

I trade FTSE regularly, but Iím a simple bloke and recently most of my attention has been on the forex market (my missus will tell anyone that I canít multi-task). Iíve been trading FTSE on the short side, but not with the determination, or size, that I used so successfully in the autumn.

But this chart makes it look so simple; when the index rises up to the downtrend line, sell it. Go and have a shot of caffeine then come back and book your profits! So, whatís the chart telling me now?

Two things:

1) I should look to sell any rally up to the 4050 area (although thereís room for a rally up to 4100 on todayís candle). Of course itís only a chart, and charts do go wrong so I wouldnít blindly sell there, but I would watch the test of the trend line and sell on a failure to hold above it.

2) So far FTSE has found support at the 3950-4000 area. A lot of the clever people are targeting a break of 3953 for full speed ahead to Novemberís lows. Oh, and something else worth watching out for is the weekly close on the S&P 500. In Wednesdayís blog (Sterling Rout Continues)I highlighted the break below key support at 812. The pre-open price is 811 so it should make for some interesting trading.

With GEís results out the way thereís no data out from the US today.

Happy Trading
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Old Jan 26, 2009, 3:41pm   #38
 
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Bumper Day For Banks And Sterling

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Sterling defied a barrage of negative press stories to rally against both the Dollar and Euro. A relief rally in banks pushed my FTSE short deep into the red.

Whenever a chart looks Ďirritatingly simpleí beware-or you might get caught out like I did. And I made matters worse, not only by trading, but by trading badly. Instead of just selling the rally at Friday afternoonís high I waited for my mechanical trigger and by the time the green light flashed the FTSE index had fallen to 4030. I sold £3 at 4033; a trade which is now covered in red ink.

In fairness, I could have taken a small profit in pre-trade this morning, but took the lower market as confirmation that the sell-off remained in place. As Julia Roberts once said, ďBig Mistake, Big Mistake.Ē Iím currently about £250 in the red on that trade and a touch more on whatís left of my bank short bets (luckily I took a nice turn on the HSBC bet on Friday).

This is a huge week for US earning reports (check out the Weekly Wrap for details) so Iím not looking to panic out of my trades on a Monday rally. However, the US missed a trick on Friday, allowing the S&P 500 to close above the key 812 level; despite dropping below the line during the day, support has continued to stand up and look strong:

Click the image to open in full size.

Surprise of the day must be good old Sterling. Another weekend of negative press (Darling plans another rescue, MPC member says rates should head for zero, biggest fall in house prices since 2001, yeah, yeah, yeah) saw a predictable sell-off in early trade. I can count my blessings that I didnít join in, but my discipline paid off. I didnít want to press the button until my MACD indicator confirmed the moving average crossover. No confirmation, no trade; not long afterwards Sterling bounced, taking out a couple of resistance levels to boot.

Click the image to open in full size.

I was happy to let the school walk/gym combination get in the way; my trend indicators still have Sterling heading south so I wasnít too keen to open a counter-trend bet so early in the week. But an hour and a half later, with GBPUSD just breaking $1.38, I decided to push the button. My indicators showed that I was late to the party, but had scope to come away with a result.

I paid $1.3803 for a £5 bet and took a £50 profit out of the trade, but the usual rush to bring my stop loss up for a profit meant that I missed out on the bigger gains. Thatís OK; for me itís too early to call a change of direction in Sterling, so Iím happy to nibble away at the smaller trades.

Update
Interesting that traders tried to take GBPUSD down at the US open (1-1.30pm) but the break below $1.38 aroused as much interest as a Gordon Brown press conference. It looks a tempting buy, but Iím going to be off the desk for a while so Iíll leave it and kick the cat later when I return to a higher level.

On a similar theme, equities look to have ignored the early negative earnings releases, FTSE lacking sellers below 4100. I canít bring myself to buy the market but can expect a bigger loss on my short when I return.

Happy Trading
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Old Jan 27, 2009, 6:06pm   #39
 
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IFO Numbers Fail To Spark The Euro

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The Euro found few friends despite better than expected IFO numbers and lost ground against the Dollar and Sterling.

I had to work hard this morning to pay for my toilet rolls and Weetabix; plenty of trades but no big winners. Iím still running my short FTSE bet, along with short bets in Lloyds and HSBC, and, yes, theyíre still covered in red ink. Last night I traded the Dow in both directions for a bit of beer money, but Iím trying to break my relationship with the evening session in favour of a bit of family time.

Todayís trades focussed on Sterling, mainly because it showed slightly more sign of life than the equity markets. But itís been damned tricky because the short charts are showing a positive trend, but scaling back to the daily chart still has it in a miserable downtrend. Also, one of the factors driving Sterling higher is the supposed return of risk appetite. As I donít reckon the risk appetite is sustainable I shouldnít get too bulled up on Sterling. Looking at todayís chart I donít think Iím alone in wondering what to do next.

The dayís range has struggled up to around 215 pips, but check out the chart:

Click the image to open in full size.

Thereíve been a few trades in both directions, but by the time part of the move has been used to confirm the direction (ie breaking the moving average), and part of the move has been taken up by a retracement to the trailing stop loss, it wasnít a day for ísit back and watchí trades.

My winning trades came from going long of GBPUSD early on, then changing direction with the chart and shorting the Pound. I sacrificed part of my winnings to the trading gods with an unsuccessful trade in EURGBP. I bought EURGBP at £0.9363 after support at £0.9350 appeared to hold. I placed a tight stop at £0.9340 in case support broke. Unfortunately it broke just long enough to close me out before pushing ahead as my trade had planned.

I made the ultimate sacrifice to the trading gods this morning; I traded in gold. Regular readers will be well aware of my trading record on gold (Iím King Midasís poor cousin). Gold looked to have held the $900 support with enough conviction yesterday so, with the Dollar going weak at the knees, I thought a small purchase of bling at $906 was reasonable.

It might have been reasonable, but it was poorly timed and has languished in the losersí corner all day with a stop loss at $890. Iím still in there, but not booking a holiday on the strength of that trade.

Update
OK, so after the mother of dull afternoons GBPUSD threw a neat dummy to send me short at $1.4034 then rallied hard. I took a bloody nose, closed the trade for £100 loss and went long to recoup nearly the full amount. Hmm, thatís trading.

Donít forget tonight on BBC2 itís the final instalment of Million Dollar Traders (even better at 10 oíclock thereís a new series of Shameless).

Happy Trading
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Old Jan 28, 2009, 5:13pm   #40
 
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Bad Bank Gives Shares A Boost

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How much further will equities travel before they arrive? The ĎBig Bad Bankí talk has worked wonders for ailing banks around the world, but how will equities react when the facts are announced?

The rallyís a bit perplexing (what with short bets on FTSE and a couple of banks), but there are several factors driving the move. The obvious one is the ĎBad Bankí talk and, in percentage terms, itís given one helluva kicker to the banking sector. Also, speculation over what could come out of tonightís FOMC meeting is adding to the purple haze.

Given that the Fed hasnít got any interest rates worth talking about, itís thought they might announce details of their Quantitative Easing plan. And if youíre wondering what the hell thatís all about, Moley wrote a great piece about it in December.

And to finish off the bull casserole add a sprinkle of month-end adjustments. But, especially in the US, the January month-end is more peso sauce than a touch of basil. The S&P provides added interest as US folk-lore has it that Januaryís performance determines life for the rest of the year; if Januaryís up, itís a bull year; if itís down, put on your bearskins.

At the moment the S&P is fast-tracking at 866; itís target to break-even is around 894 and I reckon there are plenty with a vested interest in seeing the market above there.

Click the image to open in full size.

But what of next week? With the month-end out of the way and Obama unwrapping the nationís present to itself, whatís there to look forward to? Yeah, it might be the start of the brave new world, but weíve seen that a few times before over the past year.

This morning George Soros lent an uncharacteristic helping hand to Sterling. Having presumably made another fortune selling Sterling he reckoned that the risk of shorting below $1.40 was too great. Cheers George.

Iíve made 4 bets on Sterling today; all long, and guess what? If Iíd run my first trade of the day with a wider stop then the others wouldnít have been necessary. But each trade was a winner, and I quite like the practise of spotting entry levels. My gains were a modest £200, but so long as the numbers are in black, not red, Iím happy. Sterling could have a testing few days; the GBPUSD rate is approaching resistance in the $1.44-1.4450 area.

Quite a few of the clever guys are marking this as the end of Sterlingís glorious run and a return to the serious business of disappearing down the toilet. But, if this level is broken and held then (Wahey) up we go to the 50-day mav at $1.4750.

No surprises, my gift to the trading gods ran to form. My gold trade was stopped out this morning for a £160 loss. If ever I trade in gold again, take notice. Trading against me is the safest bet youíll get!

Happy Trading
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Old Jan 29, 2009, 6:42pm   #41
 
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Sterling Rallies After Overnight Wobble

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The Dollar threw a wobbly overnight and I fell for it hook, line and sinker. The Fedís decision to do not very much gave equities and the Dollar an initial boost, but both suffered a post-party hangover this morning.

I should have stayed in bed; I fancied a lie-in, but duty called and I was ready for action at 7 oíclock. Quite often thatís the best time to catch the early move. But on days like today youíre coming in at the end of some-one elseís successful trade.

Click the image to open in full size.

Twice I backed the Dollar, selling GBPUSD at $1.4080 and later on at $1.4113. The first bet was in a tentative £1, the second was a cautious £2 so the damage was limited to an overall loss of £124. To explain to newcomers, if the direction of a trade changes (like I wrongly thought GBPUSD had) my early bets are tiddlers, money Iím prepared to lose to find out if Iím right about the market. If Iím wrong Iíll go back into my cave and re-assess; if Iím right then Iíll start to up the bet size.

This morningís losses were bailed out by a couple of winners in EURGBP. My first trade was to sell £5 at £0.9261, after a failed attempt to break above the 21 mav on the 5-min chart, and the subsequent break below the £0.9264 pivot point. I took part profits at £0.9241 then, with the price below Ď30, I trailed my stop down to £0.9251. Aaagghh!!! I was just too eager and was stopped out by a pullback.

Click the image to open in full size.

But today I had faith in the trade and re-opened a short at £0.9251. I took some early gains at £0.9231 then ran the balance down to £0.9150 before my stop was hit at £0.9185. Total profit on those two trades of £205 wasnít exciting, but covered my loses on a bad morning.

My equity bets look a touch healthier today (thanks Xstrata). I havenít added to my short position as I want to see the strength of any rally first, and whether thereís any month-end monkey business left.

So, did any of you gold traders get back in at $880? I watched it and decided that, given my record in gold, Iíd wait for the security of trendlines and moving average support closer to $855. And I missed an $18 bounce!

Hey, the Paddypowertrader team are working overtime to fill those gaps between trading. For the newbies, Zís just published a Ďmust readí on how to get started with your trading (Dummyís Guide: How To Make A Bet). And one for me, Flashrabbitís put out a highly topical piece on gold (Inflation Or Deflation).

Happy Trading
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Old Feb 5, 2009, 10:15am   #42
 
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Euro Takes A Pasting Ahead Of Rate Decision

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Every now and again I write a Ďconfessionalí, a blog to give newbies a laugh and make seasoned traders groan in despair. These confessionals usually feature a mistimed trade in gold, but this time I made a right fist of FTSE.

Check out the chart below and if you can see what the hell triggered a sale of FTSE at that point be sure to let me know. I donít do drugs, and not a drop of Guinness had passed my lips. I wasnít on the phone, or absent-mindedly tapping my finger too close to the keyboard. I did actually mean to trade!

Click the image to open in full size.

Hereís the best explanation I can come up with:
Iíd been looking to increase my short in FTSE, and over the past few days had made small gains from selling at around that level. Ignoring my moving averages and RSI I concentrated on the candles. The red (down) candle took out the previous green candles gains, but then rallied a bit (this was another mistake as it didnít form an engulfing pattern). When the next green candle failed to hold above the previous high I jumped in and sold £1 at 4118.

I closed the trade out this morning at 4208 (probably where I should have been selling it) as Iím already running a long-standing short, which is quite enough when the marketís going against me. It was an unbelievably bad deal, not because I lost money, but because there was no rationale for the trade. Iíll bookmark this for my ĎDumbest Tradesí blog next December.

In other trades I survived a sell bet on the Dow last night, taking a profit just before the rally, and sold EURGBP a couple of times, unfortunately closing ahead of this morningís fun and games. The Euroís taken a real pasting this morning; the EURUSD rate crashed 230-pips and even the less volatile EURGBP plunged by over 180-pips. So whatís that all about?

Iím not entirely sure, but hereíre some of the scraps Iím picking up:
1) Knock on effect of Russian debt being downgraded to BBB (location, location, location I guess),
2) Goldmans reckon Euro interest rates will hit 0.5% by June,
3) The EURGBP rate failed to break £0.9080 for the third time in 3 daysí
4) It was overdue a good mauling.

Click the image to open in full size.

If you fancy an easy read with your coffee Iíve just knocked out a piece looking at where the equity markets stand ahead of tomorrowís rate decisions and Fridayís payroll numbers (Where Are We Now? Equities). Hopefully, tomorrow Iíll be having a look at the currency markets.

Happy Trading
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Old Feb 5, 2009, 10:20am   #43
 
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Old Feb 5, 2009, 4:51pm   #44
 
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Rates As Expected But Sterling Flying

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The interest rate decisions were the predicted non-event, but there was plenty of excitement on the forex see-saw with Sterlingís rise sending the Euro lower.

This morning I posted a piece on the major currency markets (Where Are We Now? Currencies); my take on the charts was:

GBPUSD-should re-test yesterdayís high and if it can hold above that level, should set its sights on $1.50
EURUSD-definite downtrend, should go lower
EURGBP-should re-test support at £0.8830 then fall further

Iím not going to claim 3-lemons on the fruit machine, but if Iíd placed bets on all three calls Iíd be sitting here now with a grin the size of a Texanís backside. I donít like running too many bets at any one time so, with short bets still on FTSE and a couple of banks, I restricted myself to a couple of long bets on Sterling.

Click the image to open in full size.

I liked the long GBPUSD trade so tried an experiment today; parallel deals.
I bought £5 at $1.4445 with a conservative stop loss policy, and an additional £2 at $1.4453 with a tighter trailing stop. Predictably the Ďlow interferenceí bet on a strong trend performed better, and is still running.

Committing £7 was a fair old bet for me so I was keen to lock in some early gains. I halved my £2 bet at $1.4483 and closed out £2 of my other bet at $1.4519. The market was moving at such a pace even the stop on my small bet was lagging. Both bets survived some monkey business at 12 oíclock after the MPC announcement, but my £1 bet was stopped out at $1.4553 whilst Trichet was speaking.

I sold £1 at $1.4639 and brought the stop on my remaining £2 up to $1.4540. If I get hit there the trade will have made £530, which in addition to the £130 profit on my small deal, makes for a good day at the office.

This afternoon the Euro recovered some poise against the Dollar, having been lower earlier. But the EURGBP rate was smashed out of the water. The £0.8830 support I mentioned before was brutally swept aside as the price fell to £0.8736. Iím wary of selling the Euro down here and would like to see a test of the £0.8830 level before jumping in again.

And Iíll finish by including a chart I prepared earlier this afternoon, just to show that Iíd used up all powers of prediction this morning. It shows the Dow making a new recent low; my comments at the time said that this would normally be a level to buy the market butÖÖ

Click the image to open in full size.

At the time the Dow had recovered from a low of 7837 and looked pig sick. I didnít fancy a long bet. Now, an hour later, itís cruising at 8000, dragging FTSE back above 4200. The reason? Word on the street is that Obamaís stimulus plan will be approved on Monday and that the accounting practice of Ďmarking to marketí is going to be suspended.

Iím happy for a stockmarket rally to set things up nicely for tomorrowís payrolls.

Happy Trading
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Old Feb 6, 2009, 6:10pm   #45
 
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Not Enough Job Losses To Hurt Equities

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An appetite for risk is back on the table with high-flying equities and even buying of the Euro.

Boy, Iíve had a busy day; fitting in an annual visit to the dentist, a quick gym session and coping with a moody computer, as well as trading FTSE, GBPUSD, EURUSD, EURGBP and even GBPJPY. Not everything worked, or is working, but yesterdayís long bet on GBPUSD continued to give me a warm glow, just like the nuclear Scots porridge adverts.

Click the image to open in full size.

Luckily I was too busy to interfere with my GBPUSD trade, which allowed it to keep pushing ever closer to that $1.50 level. I moved the stop loss up to a still cautious $1.4580, just below todayís low point; that will guarantee me a £600+ profit, but hopefully leave enough breathing space to push further ahead. Unless anything mad happens in the next few hours the price should end the week above its 50-day moving average.

I shorted the Euro several times today, against both the Dollar and Sterling. Itís been making me money but my last attempt, a £3 short on EURGBP is in the red. This was a trade too far, as often happens when I trade a range. I sold at £0.8718 then watched the mother of all squeezes up to £0.8790.

If Iíd had the nerve to double up at that level Iíd be quids in now, but one of my trading disciplines is to not increase a losing trade (yeah, I break that one if itís a strong long-term view on the FTSE, but not on currency trades, oh no.) At the time of writing Iím only a few pips offside and need to consider whether to carry it over the weekend. Hmmm.

Click the image to open in full size.

Of course, the trade thatís very wrong at the moment is my FTSE short bet. I tried to mitigate it by buying a £2 long bet this afternoon, but it just didnít feel comfortable. After paying 4292 I gratefully accepted 4309 for £1 and, with the price at 4330, brought my stop up to 4302; this was subsequently hit. It sort of feels like FTSE could move higher; itís hit a new high for the past 4 days. But Iíd feel sick as the proverbial parrot if I closed my short up here, only to see a 300-point collapse, followed by a more serious 300-500 points!

And on that note Iím off to register my fantasy rugby team just in time for the weekendís fun and games. Ireland at home to France must be the game of the weekend, unless the sweaties can surprise a confident Welsh team.

Have a good weekend
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