PM Update

It would appear some serious buy orders were hit just before S5; as I haven't heard any activity coming out of the ECB or BoJ concerning open market operations. We are still below the day's open by -30 pips, and are currently hovering around yesterday's low of "113.816."

The 300 EMA was breached slightly more than 4 hrs ago, and PA has since plateaued. Look for a retest of the 100 & 300 EMAs shortly after tomorrow's session in 1 hour and change. It's hard for me to give a buy recommendation on this pair given the past weeks' activity. If PA is able to weather a 300 EMA test and soars upwards, then the tide may have changed temporarily.

I expect to see another downward bust of the 300 EMA in tomorrow's session however, so get your finger on the sell key once again. If you got in a buy order when the 300 got busted, I hope you took some quick profits and got out.

Summary:

• This bull retracement up to yesterday's high will most likely be short lived; don't get your expectations up for a permanent upside reversal.
• Get your trigger finger ready to sell, the EMAs will be tested early in tomorrow's session
  

Early AM update & Monday Recap

Firstly, my apologies to those expecting the update yesterday. I ended up not trading (it was Columbus Day here in the good 'ole USA) and took the day off.

The weekend saw the pop of the 300 EMA to the upside. This wasn't out of the realm of expectations, as Friday's late PM session action broke the 100 EMA, and most likely would have popped the 300 that day had it not been for the close. Last week saw the EURJPY tank, and a retracement was expected.

Monday was another prolific day for the EURJPY bears (which must have broad teethy smiles as I type this). Despite the retracement to "114.721" (the session high), PA quickly resumed the bearish trend, thoroughly smashing through the 100 & 300 EMAs only seven hours into the week. After breaking, PA flirted close to Friday's lows (only about 11 pips off), and then got cozy with the 100 EMA into today.

Today is just another slaughter for the BoJ (really starting to feel sorry for these guys). We saw PA briefly break the 100 EMA @ the open, kissing the 300 EMA for a bounce down. Breaking the 100 EMA once again, PA has plummeted almost 70 pips as I write this.

When I first started this post, I watched EURJPY smash through S3, and am currently wondering how much farther we are to drop in today's session (as we are only about 6 hrs into the day). It's hard not to imagine a little old fashion quantitative easing coming out of Japan in the next few hours to stem the bleeding; and we might see a return to the 100 EMA before the day is out. That being said, should there be no BoJ intervention today, we could very well see PA flounder all the way down to S4 (112.743), another 50 pips from where we are at the moment.

Summary:

• The bears are hungry. Continued downward pressure on this pair has those holding shorts singing praises. Hold short, and don't expect any buy recommendations in the near future.
• Expect the BoJ to come out either today or this week in another vain salvo in this iteration in the FOREX War.
• The moving averages continue to be everyone's close personal friends. Don't get greedy and trade against them, as this bear market will trample your account.
  

Friday Update

Again, this Friday turned out to be a huge trading day. As I mentioned in a previous post, Fridays are normally reserved for low volume profit-taking, traders/institutions liquidating their positions in anticipation for the market close. The past few Fridays have seen absolutely huge moves, and have been easily trade-able; in other words, not a lot of PA chop/spikes...a smooth definable trend.

This particular Friday saw the continued dissolution of the Bank of Japan's latest (BoJ) monetary intervention/QE campaign. When it first intervened, the Yen strengthened by a few hundred pips (their implicit goal), but there is just too much fiat out there folks. The combined printing presses of the West soon out-diluted the Yen, forcing its fiat value down once again (opps, ryhme...but it's Friday).

If you have been following my other posts, you would know that we were closely watching PA (price action) and its relationship to the 300 EMA. Since early Thursday's trading session, PA broke the 300 EMA, and has been below it ever since (indicative of a bearish trend). In today's early trading session, PA briefly flirted with the 300 EMA, playing above the 100 EMA, but failed to firmly break through. I recommended that shorts were to be held until the 300 EMA was broken (which it has not been).

Since Thursday's 300 EMA break, EUR/JPY has fallen by more than 140 pips, and now rests approximately 90 pips below the initial break; not a bad trade to have been in. Remember, my "10 pip TPs" are guidelines; if you feel comfortable with following/reading moving averages, feel free to stay in the trade as long as you believe it to be profitable!

My "prognostication" for this pair is that there will be continued intervention by either the BoJ, FED (indirectly) or the ECB...or a combination of efforts from all three. Again, watch PA and the 300 EMA. It's still very much in the downtrend, and until we effectively cross the threshold of the 300 EMA, my recommendation is to hold short. Next week's trading session could see a return to the upside however, so keep a close eye on early Monday's session.

Have a great weekend!


Summary:

• PA has remained below the 300 EMA from Thursday into Friday, hold your shorts.
• BoJ's intervention(s) have failed, expect future interventions
• 90+ pips gained from 300 EMA break on 10/8/20120 @ 3:45 AM EST
  

Oct. 7, 2010 PM Update

Today was pretty crazy, with EURJPY dropping by more than 120 pips over the course of the day. PA played the 100 EMA from the open until around 3:35 AM EST, when PA broke the 300 EMA.

Remeber, the moving averages (13,100,300 EMAs) aren't some sort of magical prognosticator, predicting where PA is going to go. They are visual representations of price movements over time, and effectively show trends. The higher the moving average, the more price bars the equation takes into account when coming up with the average. Where the actual price is in regard to the moving average is critical, and the larger the moving average, the more important it is to account for it being the main trend indicator.

The 300 EMA is the largest MA on the chart. PA above it (the green line) is indicative of a bullish trend. Vice versa, PA moving below it indicates a bearish trend. You could get even more technical, and measure the slops of the MAs, but for our purposes it isn't necessary. All we are looking for is WHERE the PA (price) is RIGHT NOW in relation to a particular MA.

After we have accounted for MAs and PA, we can look at pivot points, but I'm going to leave that for a future post by itself.

Right now, PA is playing the 100 EMA again, with the 13,100,300 EMAs converging on one another. The downtrend is still in effect until PA breaks the 300 EMA.


Summary:

• PA broke the 300 EMA, signaling a return to the downtrend.
• Watch the pivot levels, PA won't much further than a few S-levels, today it stopped out @ S3.
• PA is playing the 100 EMA at the moment, hold your shorts until PA legitimately breaks the 300 EMA.
  

10/05/2010 PM Update

Apologies for a lack of posting lately, I've been fairly busy.

To recap today's earlier action, the BoJ (Bank of Japan; their version of the USA's Federal Reserve) cut rates, sending the JPY pairs soaring. Specific to EURJPY, it skyrocketed over 100 pips over the course of the day following the announcement. The only unfortunate element of this move was the sudden nature of the buy signal.

As you can see in the included graph pic, the market reaction to the release occurred in 3 large 5m candle spikes, each of a magnitude of 25-50 pips. It is harder to play these candles on moving averages when the next open candle above the MA is 30-50 pips away. What this effectively does is increase the downside risk by however far away PA is away from the MA. In this case, PA actually did retreat back to the 100 EMA, rebounding upwards to new highs.

After the rebound, PA has continued upwards, for a total move above the 100 EMA of >100 pips.

At the moment, PA has broken the 100 EMA, with a test and rebound back down. I'm currently short below the 100 EMA @ "115.024." My downside is relatively low (compared to the previous spike yesterday), and rests at about 10-15 pips. I'm going to take profit when (if) PA gets near the 300 EMA, as there is likely to be either resistance or a rebound off of this MA.

Good luck to everyone trading, and I'll include more regular updates along with the next installment in the trading 101 series later on today!

FX Trading Class 101 Part 1

*This is to be the first installment following the post where I promised to flesh out the material this blog focuses on, currency trading*

The first, and most important aspect of currency trading is understanding the "currency cross." Which currency pair are we looking at or trading? When identifying a cross, it is displayed as the following:

"currency A" / "Currency B"

So if I were to see

"EUR/JPY"

and then the price quote: "115.236" next to it, what I am reading is that 1 Euro buys 115.236 Yen. Another way to conceptualize a cross is backwards, or, to buy 1 Euro requires 115.236 Yen.

After grasping what a pair and its price quote represents, we can move onto our options when trading, and there are only two.

Buying (other terms: "going long," "covering," etc.)

and

Selling (other term: "shorting")

For the purposes of this blog, I will refer to buying as "buying" and selling as "shorting."

I'm really beat, and I'll be completing this series tomorrow morning along with my market sentiments.

Thanks for reading!

Question on Material Comprehension

It has come to my attention that many find their way to this blog are less than versed on technical charting, whether it be equities, commodities or currencies. This weekend, I'm going to post a introductory "course" to fast-track the neophytes on the relatively simple technical analysis studies I've been applying to my EUR/JPY charts. I'll try to link most of my MT4 indicators/experts and templates.

*Special Note*

I'm in the process of automating certain aspects of my trading method to simplify entries (BUT NOT EXITS). The hardest part of trading is making clean entries when the "time is right." Supervising the trade, "pruning", etc. is best done with a set of human eyes to gauge when to get out of a trade. I'll keep everyone updated on my progress in addition to my regular trade/trend postings!

Thank you everyone for your continued comments and support!

Oct. 1, 2010 AM Update

This has really turned out to be a somewhat unconventional Friday trading session. Instead of plateaus and intermittent profit-taking, there has continued to be a huge surge to the upside.

We opened fairly high above yesterday's low (>90 pips). Which was a good sign this uptrend was to continue into today. There was been a strict adherence to the 100 EMA as far as touches and bounces are concerned. If you went long at the open @ "113.884" you'd be up >35 pips (3x + our 10 pips daily TP). Remember, moving averages are the basic, banal math. Don't bet against the math, or you'll get burned. If PA is trending above a moving average, it will continue to do so until it crosses below.

All in all, this has been a great Friday with lots of volume. I wouldn't stay in any trades over the weekend, as there is a lot of uncertainty concerning austerity measures both in America (QE 2.0, credit unions being bailed out) and Europe at the moment. You really don't want to be caught in a trade if there is a huge drop over the weekend.

Good luck trading and have a great weekend everyone!

Summary

- Should have gone long @ open "113.884" and played the 100 EMA. Good for 10+ pips.

- Always be mindful of the moving averages. Where is PA in relation to an individual moving average (MA). This is how we gauge trends and trend strength.

- Take a break for the weekend. Open trades are susceptible to huge weekend swings that can hit SLs and ruin an otherwise excellent trading week.