Support/Resistance & Trend Lines

[FXAJ]

Hey all,

I trade support & resistance and trend lines. Whilst most people will fade I'll also trade the breaks.

I like to understand the fundamentals as best I can.

Position size and risk are down to you but for illustrative purposes I'll assume an account size of 10k and 2% risk per trade.

This isn't about live calls. I don't have anything to prove. I just want to catalogue my trades somewhere I can review them and hopefully get some constructive input from other similar traders. I also have a habit of straying from my strategies or lacking discipline from time to time (aka wild punt). I'm hoping scrutiny improves my consistency!

I have back tested a few types of PA trading. Trading support & resistance and trend lines provided the greatest returns for risk.

I also like a cheeky 38.2 and 50 fib play.

I trade EUR/USD, USD/JPY and GBP/USD mostly but I'll stray from time to time and occasionally as far as XAU.

I trade the daily charts. I have the occasional peep at the weekly, 4 hour and sometimes the 1 hour (shhh, don't tell!) but mostly when I'm bored!

I have to warn you that I've had drawdowns run into several months before. If the market is a little choppy or range bound then it's to be expected. It's the year on year capital growth I'm after.

I'll post my analysis of USD/JPY, EUR/USD and GBP/USD shortly.

AJ

 

[maiden22]

Sounds interesting, look forward to reading your posts.

 

[FXAJ]

Eur/usd

Fundamental Bias - Short

This has moved a way over the past 7 months. I'd expect a bit of chop or a retrace over the coming 3-4 months.

The bailout fund has helped calm the storm but it's still raining on the EUR. I really can't see a way out for Greece, it's not like they can inflate, devalue or grow their way out of debt. Their recession is likely to get worse, which will make it harder to shrink debt as a % of GDP. It may even take a few years but doesn't look like things are going to get any better. Italy and Spain (forget Portugal) are the two I really worry about but they have a better chance of growing out of this. I think we'll continue to see money moving away from the EUR and back to the USD or into other riskier currencies. The EMU is breaking apart.

Technical Bias - Short
The chart tells us we're in the middle of the current downtrend. Nobody knows how long it will last so don't second guess it. When you see a move like this you have to ask yourself - who will buy the EUR? Only punters, profit takers, stop hunters and the ECB in my opinion.

Note that the bottom two support and resistance lines we're drawn prior to this move. I pulled my orders in all the panic as I didn't like the crazy action. Stick to the strategy eh?

I'm now waiting for price to reach one of my levels (marked in blue). Price action may introduce other levels over the coming weeks, we'll have to wait and see.

For now we wait.

 

[trader_dante]

Re: Eur/usd

When you see a move like this you have to ask yourself - who will buy the EUR? Only punters, profit takers, stop hunters and the ECB in my opinion.

The average trader won't know the smart money bought until the market has rallied massively off the lows. By then it will be too late.

 

[pssonice]

corparate sector is the right place for you

desktop flat & notebooks flat means DELL short.
you have to be an insider like mr. trichet to trade currency on a weekly or monthly base.

From my point of view EURUSD will drop "peu-a-peu" during may to mid june.
Nevertheless, the market will make a sharp recovery after every selloff.
There is no sit-and-wait trending opportunity for small pocket traders like you.
Even if politicions are announcing packages of huge amounts of money for greece, italy spain or germany ...
u cannot stop a falling knife

 

[FXAJ]

Usd/jpy

Fundamental Bias - Long
The Japanese economy is an enigma to me. They are battling a generation of thinking I feel. I'm not entirely convinced they have the reserves to continue pumping into the economy but they are in the right neck of the woods for growth (assuming China doesn't go pop - could be next year, could be 10 years!)

Once risk appetite is established and the fed moves closer to raising rates we'll see a cautious then more aggressive return to the carry trade. If there is one thing that's consistent in the markets it's the ignorance of punters. That's why we have regulation - a weak attempt to constrain the maximum amount of damage and failing that a scapegoat for governments.

I'm keeping an eye on the Fed's position with regard to money supply. I get the impression they would be happy to see a weak USD in the near term. I'm also keeping an eye on JPY's diversification from western markets.

Technical Bias - Short
I have a conflict here between my fundamental and technical bias. This likely means a potential shift in the technical bias of USD/JPY and that can introduce some chop as traders try to establish positions against the wave/trend - it could be a bull-bear fight, I'm hoping the bears roll over and play dead for a couple of years! I've already caught a couple of good moves off this one and I'm keen to get into some longer term trades over the course of the next year.

There are two entries near by for me. I'm going to avoid going short @ 93.55 and instead will only go long @ 94.05. If I get long I'll probably be a little cautious with my stop as this has already chopped up my supres line a little.

The supres line below price I'll trade long and short. My orders are in long at 92.60 and short @ 92.10. I'll use 50 pip stops on both.

 

[FXAJ]

Re: Eur/usd

The average trader won't know the smart money bought until the market has rallied massively off the lows. By then it will be too late.

A lot of "smart" money bought this on the way down. I'm happy to wait.

 

[FXAJ]

Re: corparate sector is the right place for you

desktop flat & notebooks flat means DELL short.
you have to be an insider like mr. trichet to trade currency on a weekly or monthly base.

From my point of view EURUSD will drop "peu-a-peu" during may to mid june.
Nevertheless, the market will make a sharp recovery after every selloff.
There is no sit-and-wait trending opportunity for small pocket traders like you.
Even if politicions are announcing packages of huge amounts of money for greece, italy spain or germany ...
u cannot stop a falling knife

I think that's what I'm saying no? Couldn't tell if you were agreeing or disagreeing. You can't stop a falling knife but you can slow it down by trying to catch it. You'll get bloodied in the process ... unless you previously worked in a circus. I actually think that's what the ECB and EU want, is to stem the flow of blood and buy them time. I'll be keeping an eye on Spain and any sign of trouble for Italy.

 

[shadowninja]

Re: corparate sector is the right place for you

u cannot stop a falling knife

I used my thigh once. That stung, I can tell you. Actually, it was a short sword. What's my point, you may ask. My point? It's the thing buried in my thigh, that's what it is.

 

[trader_dante]

Re: Eur/usd

A lot of "smart" money bought this on the way down.

Did they?

 

[FXAJ]

Fundamental Bias - Short

Not sure the UK is in great shape right now although we're in the same boat as most western governments with a little more power to do something about our debt than the EMU countries. Clearly there is divergence between our economic data and that of the US that favours the USD right now.

Technical Bias - Short

I'll trade the near supres line I've drawn. Long @ 1.4826 and short @ 1.4726.

 

[FXAJ]

Re: Eur/usd

Did they?

yes

 

[FXAJ]

Both cable trades triggered and stopped out! Came close to getting in long (7 pips out) but not sure I would have put my line anywhere different so chalk 2 losses down to the support/resistance.

USD/JPY long @ 92.60 triggered. Was up just over 1R so stop to BE (about to be stopped right now!)

Looks like we might see a bit of consolidation over the coming weeks. This strategy probably wont see much action during that time.

Will post a log of trades at the end of each month with analysis.

 

[FXAJ]

Some updates.

EUR/USD broke the support line @ 1.2495. Now short (sorry, should have posted this order - I know I know). My stop is 75 pips. I may move it closer at the end of today.

USD/JPY - not the greatest choice to skip the short @ 93.55 but there you go. Short pending @ 92.10.

GBP/USD - I didn't trade the support line again as I didn't feel price had moved far enough for long enough away from it. Damn. My nerves are still shot to pieces after last week's crazy action. Stiff drink on order.

 

[pssonice]

"sorry, should have posted this order - I know I know" yep, let it be

99% of all poste in this forum r equal to yours

 

[pssonice]

"May 11, 2010, 8:32pm #13 FXAJ USD/JPY long @ 92.60 triggered." pleaze, ...

... don t tell us that this is your best trade of the year !
May 11, 2010, 8:32pm #13 FXAJ USD/JPY long @ 92.60 triggered.

20100511.1030,92.554,92.661,92.499,92.520,616
20100511.1045,92.512,92.549,92.429,92.497,871
20100511.1100,92.499,92.519,92.428,92.450,666
20100511.1115,92.442,92.495,92.422,92.439,465
20100511.1130,92.448,92.459,92.260,92.365,719
20100511.1145,92.366,92.422,92.334,92.359,441
20100511.1200,92.350,92.350,92.242,92.282,573

20100511.1215,92.285,92.459,92.263,92.407,597

20100511.1230,92.407,92.447,92.360,92.437,395
20100514.1230,92.481,92.481,92.367,92.412,505
20100514.1245,92.412,92.447,92.412,92.422,204

 

[FXAJ]

I'm not that keen to hold these trades (EUR/USD and USD/JPY) over the weekend. We've seen a few gaps so I'll close EUR/USD @ 1.2385 and USD/JPY @ 91.92. I may look to reenter on Sunday.

 

[FXAJ]

I'm out this week with poor data connectivity. Consider the trades closed at Friday's levels for this journal.

 

[FXAJ]

Eur/usd

I'm going to drop the fundamentals for now. It's a little hard to backtest so I'll forward test offline. I'll just focus on the technicals.

I'll sell EUR/USD @ 1.2454 with a 75 pip stop. Nothing else is close enough to print here.

 

[FXAJ]

Usd/jpy

I'll sell @ 88.70

I'll buy @ 88.44

I'll sell @ 87.84

All stops are 60 pips.