Forex Calls Recap for 5/10/11
Pretty flat session again. Interesting how the US Dollar index intraday with market directional ended up right at the midpoint again:
New calls and Chat tonight, but Trade Balance in the morning is one of our Big Three each month, so half size. EURUSD had a winner and loser last night, see below.
EURUSD:
Triggered short at A, hit first target (50 pips) at B, second half stopped at C. Triggered long at D and stopped:
Tradesight Market Preview for 5/10/11
The SP posted a small range inside day, closing higher by 8 on the day. Price settled below the February high so the burden of proof remains on the bulls.
Naz also posted an inside day, settling higher by 13 on the day. Note that the day’s close was above the 8/8 Gann level.
Multi sector daily chart:
The weekly cumulative A/D line continues to register strong readings which are a very strong foundation for favoring buying pullbacks vs. selling rallies.
The OSX was the top gun, though the day’s range was contained by Friday’s bounderies.
The XAU was also relatively strong but posted an inside day. Price closed back above the 200dma.
The BTK settled at a new high on the move. Note the key 8/8 Gann level just overhead at 1500.
The SOX was lower on the day and contuse to bearishly lag the Naz.
The BKX was weak vs. the broad market and is still using the 0/8 level for support.
Oil bounced strongly off the March lows but is still in correction mode until the MACD turns positive again.
Gold settled back above 1500 and continues to bounce off the static trend line. The intermediate trend is positive until the 50dma is violated.
Forex Calls Recap for 5/9/11
One loser and one winner that is still going in the EURUSD. Here's the US Dollar Index intraday with market directional tool lines:
New calls and Chat tonight.
EURUSD:
Triggered long at A and stopped. Triggered short at B, hit first target at C, and stop is now over 1.4325:
The Importance of Ranges and Volatility in Stocks and Futures
I get asked all of the time what the secret is to making money trading. The answer is simple, though not something people typically want to hear. If I had to pick one thing to teach new traders, I would say this: “Markets ebb and flow, but you need range, volume, and volatility to make money. The secret to success is that you have to stick around for those periods.”
When it comes to Stocks and Futures, success comes from volume in the markets, which typically leads to better volatility and ranges. Since these markets do measure volume, it becomes a fairly straight-forward process to analyze what is happening. This is why we analyze volume after 30 and 60 minutes each day...it tells you so much about your chances for success for the rest of the session.
Now, another way to view this from an "end of day" perspective is to look at NASDAQ volume daily. We like to see volume over 2 billion shares per day on the NASDAQ. Those are typically the "good" trading days. If you go back to the start of the year and view our "2010 Summary," you'll see that most of the last year so volume over 2 billion NASDAQ shares. However, this year, we've been hit or miss in that arena.
Here's NASDAQ volume daily, and I've put a box around anything UNDER 2 billion shares since January, and you'll notice that most of the days fall into that category:
So, even though we have had days well over 2 billion shares, they aren't the norm, and this is a complete departure from what we are used to seeing. Having said that, markets aren't always what we want or need them to be, and you have to trade what you get. The last month in particular was weak until this last week. As the chart above shows, the last week was the first week in a while that was consistently over 2 billion shares of daily volume, and we had some extremely easy trading, from futures to stocks to ETF calls. Lots of nice winners on those days.
Why is the volume back? Well, in prior weeks, we had concerns about the economy, the debt ceiling, unemployment, the US Dollar, the Fed, and quarterly earnings. With several of those items passed us this last week and gold and oil tanking, the markets picked up their volume (even though much of it was to the downside, which is fine for us as traders).
So let's see what that means to range and volatility.
Here's the intraday 10-minute bar data on the ES in the days PRIOR to this last week. I've drawn boxes around the ranges for each day because it makes it easier to see. Without volume, things were pretty flat overall, even if the market trended for several days:
Meanwhile, look at this week. With volume back, ranges were big, there was back and forth movement, and we did well:
Look at the last day on that chart, for example, and note that the move from the green dashed line at A to the red dashed line at B was AVERAGE DAILY RANGE, and then we exceeded that to the downside by a lot. In other words, with volume, we're trading more than the averages.
This is very important to recognize and understand when putting together an annual trading system.
The Importance of Ranges and Volatility in Forex
I get asked all of the time what the secret is to making money trading. The answer is simple, though not something people typically want to hear. If I had to pick one thing to teach new traders, I would say this: "Markets ebb and flow, but you need range, volume, and volatility to make money. The secret to success is that you have to stick around for those periods."
When it comes to Forex, there isn't really a true volume measure, but we can look at daily ranges to understand whether people are trading. We look for certain averages. When those averages occur, then things are good. It's easier to make money, for example, when the GBPUSD moves 180 pips in a night than when it moves only 110. At 110 pips, by the time you spot a setup, a support or resistance point, and an entry, once that triggers, you don't really move far enough to make good things happen. The reality is, you don't make money in Forex trading for 20 pips. You have to look for something bigger, and that requires range.
Last June and July were great for ranges. Last October (late in the month) and November were great for ranges. In those months where ranges are good, you need to make good money, because the reality is that in average months, you'll tread just above water, and in poor months, if you miss just a few trades that end up being the big winners for the month, you're in trouble.
This is why we push so hard on the 6-month average daily ranges that we calculate. It's important to understand that if the GBPUSD's six month average daily range is 160, then that means that over the last six months, it's traded above and below that level, but that your expectation can be around 160 pips. If that runs up to 200 pips, then the GBPUSD ranges have expanded wildly, almost to the point of being too crazy on some days. On the other hand, if it drops to 130 or 140 pips, you've got trouble because the market isn't moving. That probably means that you have days where the GBPUSD is trading under 100 pips of range. No matter what anyone wants to believe, there is no success in a 100 pip range, especially if it ends up meaning 100 pips per day and 200 pips per week. That means you aren't moving in one direction either.
But you can't expect markets to be exciting all of the time. Granted, the drop-off that we have seen in Forex the last two months is pretty bad. I haven't seen it like this since 2006. But there will be more exciting times ahead. Just remember, you make your money in those more volatile times, and you hopefully have a system that treads water or doesn't crush you when everyone takes a break.
Tradesight April 2011 Forex Results
Before we get to April’s numbers, here is a short reminder of the results from March. The full report from March can be found here.
Tradesight Pip Results for March 2011
Number of trades: 37
Number of losers: 18
Winning percentage: 51.3%
Worst losing streak: 3 in a row (twice)
Net pips: +190
Reminder: Here are the rules.
1) Calls made in the calendar month count. In other words, a call made on August 31 that triggered the morning of September 1 is not part of September. Calls made on Thursday, September 30 that triggered between then and the morning of October 1 ARE part of September.
2) Trades that triggered before 8 pm EST / 5 pm PST (i.e. pre Asia) and NEVER gave you a chance to re-enter are NOT counted. Everything else is counted equally.
3) All trades are broken into two pieces, with the assumption that one half is sold at the first target and one half is sold at the final exit. These are then averaged. So if we made 40 pips on one half and 60 on the second, that’s a 50-pip winner. If we made 40 pips on one half, never adjusted our stop, and the second half stopped for the 25 pip loser, then that’s a 7 pip winner (15 divided by 2 is 7.5, and I rounded down).
4) Pure losers (trades that just stop out) are considered 25 pip losers. In some cases, this can be a few more or a few less, but it should average right in there, so instead of making it complicated, I count them as 25 pips.
5) Trade re-entries are valid if a trade stops except between 3 am EST and 9 am EST (when I’m sleeping). So in other words, even if you are awake in those hours and you could have re-entered, I’m only counting things that I would have done. This is important because otherwise the implication is that you need to be awake 24/6. Triggers that occur right on the Big Three news announcements each month don’t count as you shouldn’t have orders in that close at that time.
You can go through the reports and compare the breakdown that I give as each trade is reviewed.
Tradesight Pip Results for April 2011
Number of trades: 26
Number of losers: 8
Winning percentage: 53.8%
Worst losing streak: 2 in a row (twice)
Net pips: +140
This was a pretty straight-forward, clean month, although certainly nothing exceptional as the ranges have dropped sharply. We never had more than 2 losses in a row, which is pretty minor. We had less trades trigger than usual because we had a couple of global bank Holidays and other days where no trades triggered. We won slightly more than half of the trades, but we had plenty of clean winners that triggered and got adjusted in the money. One thing of note...we didn't have any major trades that turned into several-hundred pip winners as we usually do at some point in the month. The biggest two winners, after you account for partials and final closes, were closed within two days and added up to 70 pips. Having said that, the net results of the month were only 140 pips total, so missing two trades like that would have had quite an impact on your net numbers. We really need to see better ranges.
Speaking of which, back at the beginning of April, the six-month trailing average on the EURUSD for range was 150 pips per day. It closed out April down at 143 pips. A 7-pip drop to the six-month average in one month is the biggest that we have seen, and it means quite a bit about how bad ranges were. The GBPUSD went from 146 to 140 in the month. That's also quite a drop. AUDUSD dropped 6 pips on average as well. The cross pairs picked up a bit, with the GBPJPY going from 143 to 151. Unfortunately, not everyone likes to trade the cross pairs due to liquidity and spread issues, but it seems that even though the US Dollar broke to new 1-year lows this month, it didn't create a lot of excitement in those pairs.
The US Dollar remains at a critical point here and a move either way will likely start to see the ranges improve. We shall see. On to April…
Stock Picks Recap for 5/5/11
With each stock's recap, we will include a (with market support) or (without market support) tag, designating whether the trade triggered with or without market directional support at the time. Anything in the first five minutes will be considered WITHOUT market support because market direction cannot be determined that early.
From the report, VRSK triggered long (with market support) and worked:
MRVL triggered short (without market support due to opening five minutes) and worked:
ROSE gapped under the trigger, no play.
In the Messenger, Rich's GPS triggered long (without market support due to opening five minutes) and worked:
His GDOT triggered short (with market support) and worked:
His DDS triggered long (without market support) and didn't work:
RIMM triggered long (with market support) and worked great:
Rich's GS triggered short (without market support) and worked:
BIDU triggered long (with market support) and didn't work:
GS triggered long (with market support) and didn't work:
AMZN triggered short (with market support) and worked great:
AAPL triggered short (with market support) and worked:
In total, that's 7 trades triggering with market support, 5 of them worked, 2 did not.
Forex Calls Recap for 5/5/11
Half size session ahead of all of the rate announcements, so not much for me here, but one trade worked and one didn't. Here's the US Dollar Index intraday with market directional:
GBPUSD:
Triggered long very early at A but gave you a chance to enter at B just ahead of the European session, hit first target at C, second half stopped. Triggered short overnight at D and stopped. That trade triggered again and worked, but I wasn't awake yet to take it:
Forex Calls Recap for 5/5/11
Half size session ahead of all of the rate announcements, so not much for me here, but one trade worked and one didn't. Here's the US Dollar Index intraday with market directional:
GBPUSD:
Triggered long very early at A but gave you a chance to enter at B just ahead of the European session, hit first target at C, second half stopped. Triggered short overnight at D and stopped. That trade triggered again and worked, but I wasn't awake yet to take it:
Tradesight Market Preview for 5/5/11
The SP saw more selling closing right at the February high and losing 9 on the day. Price has flipped where today’s close is lower than the close 4 days ago and printed day one of the Seeker buy setup. The February high and 1337 April consolidation level are the important near-term levels.
Naz was lower by 5 handles on the day but was relatively strong vs. the SP all session. This is a very important feature today and one of the few positive technical aspects.
Multi sector daily chart:
The SOX was the strongest major sector on the day. The index fought all day to keep the losses minimal and was able to close above the 50dma. Relative strength in the SOX and also relative strength in the Naz vs. SP will go a long way to minimize the losses in a broad market correction.
The XAU tested and found support at the 200dma. The 200 is a monster level with the current design of the chart. Be sure to set an alarm for a break under 204.30.
The BTK traded inline with the broad market, holding above the 10ema.
The financials were strong in the morning but faded quickly. Price remains below the declining 50dma and DTL.
The OSX settled just below the March low which is a real negative on the chart. The chart is short-term oversold but breaking down. Notice the bearish “M” top that is now in place.
Oil broke the near-term DTL which puts the static trend line and rising 50dma in play.
Gold broke to a new low on the week but held above 1500. Expect that with the media and gold bugs swarming, the 1.5k level is going to be big. But note on the chart, that even if gold goes below 1500, it will likely still be above the active DTL. Considering the weak intermarket relationship relative to the gold miners, gold rallies should be sold and wait for the DTL to look long.
