Forex rebates on every trade - win or lose!

I finally close the long from 45 for 70 - not sure if it might turn around here.

Is the carry trade relationship breaking down with the huge amounts of liquidity being pumped into the system?
Are the central banks being conned and instead of borrowing on the carry trade the borrowing is taking place in the home currency?

Attached chart shows gbpjpy to ukx relationship has become odd indeed since late November. gbpjpy has hardly changed depsite a big move both up and down on ftse.




As you can guess I shorted gbpjpy when the ftse index was up at about 240 yet I'm only about 50pips up. Wondering what I should do as if the index starts moving up I could lose the 50pips I do have.

EUR/JPY and GBP/JPY are starting an upleg on the 1-hour chart imo. I wouldn't want to be short (I've been fillinmemanolos long since yesterday), but wdik?

Btw, regarding the correlation between the geppy carry and the FTSE, a peek back at the weeklies to 2000 will show geppy enjoying a straight ride up since October 2000 whereas the FTSE was in decline from then and only started its recovery when Dubbya went into Iraq.

The third side of the triangle is represented by fixed income securities (bonds) which is where the carry trade money was landing between 2000 and 2003. I'd suggest that the strength in equity markets despite the weakness in sterling since the MPC cut in interest rates a few weeks ago has been as a result of money flowing out of the bond markets.

Hilary,
If you want to get rid of the Sunday ticks on Metatrader you need to download metatrader from a broker where they have the clock set to gmt +2 hours as then the Sunday ticks go into the Monday bar.

FXDD offer gmt+3 hours so there are no Sunday bars but i'm not sure what knock-on problems this may cause

I'm ever so pleased you're long EUR JPY Hils, I was yesterday but the curse of the tight stop hit me again - will I never learn!! Anyway, have gone back in again with a wider stop, mainly on the basis of this chart. I also thought when we were up around 165 that it was a short so did .... nothing.

I hate to say this, Seymour, but I offloaded my Yen positions yesterday afternoon based on the dottie line on the M30 hitting 100, as the H1 hadn't really got going by that stage and I figured that a pullback towards the Monday low would quite probably give another entry lower down.

Nice idea, CC. The Sunday bars don't actually bother me as such, but I did wonder if it might be their presence which was causing the cable trendline to perform weirdly.

No worries Hil, I also took my money off last night after posting that, with the same idea of a lower entry.

Well done, Seymour. I'm sure you understand where I'm coming from here, but if the dottie line on H1 had already passed up through 50 by the time that the faster charts (M1, M5, M15) started to pull back then I would probably have left the positions open. As it was, the H1 dottie line had only made it up to about 45 or so and, as such, was susceptible to failure.

I'm still inclined to think that the Monday low (162.35 or something) is likely to hold as support, but I can see it getting back down towards that area today for a retest.

I hope that helps you understand my logic. I'm still targetting that chopper ride for you.

:o)

I wonder if the 6 bars on mt4 on the daily is screwing up some of the readings on some of the indicators like rsi as well as I get different values depending on where i've downloaded mt4 from. I suspect it's affecting the H4 charts as well.

Top 10 Trading Lessons from 2007

Happy new year to you all.

It’s been 7 weeks now since I started to learn how to trade FX and hard work it has been. Things haven’t panned out the way I planned and in particular I haven’t been able to devote the time I would have liked.

In January I would like to make some paper pips in the first 2 weeks and some real money in the second 2 weeks. I hope this is possible as time is starting to run out for me now before I have to find another source of income.


There are basically 4 things I am now absolutely sure about with FX.
1. only ever trade with the longer term trend
2. the best entries are pullbacks once the longer term trend has been established.
3. you need a system which includes strong money management rules
4. you need discipline to follow your system

None of these are anything new to anyone but I feel if I can get these 4 things right 100% of the time I will start to make solid progress.


Below is the chart of my system.



Much of it is taken from http://www.babypips.com/blogs/pip-my-system/so_youve_finished_the_school_o.html

It is a trend following system. I have backtested the babypips system for the first 3 weeks of January and I’m satisfied that in principle it can turn a profit. However, it is clearly oversimplistic in some ways, particuarly in profit taking which I have attempted to address.

The long term trend is established from H4. If 5ema is above 10ema, 9rsi is above 50 and 10,3,3stochs are heading up then the long term trend is up. So, I would only be looking for longs on M15.
I enter a long trade close to the end of the relevant candle once I am assured that
1. when the candle closes the 5ema will have crossed the 10ema
2. 9rsi>50
3. 10,3,3 stochs heading up and not greater than 80
4. macd crosses from negative to positive in the same candle or is negative and rising and looks like it has a decent chance of going positive

no trades will be opened within half an hour of news events or in the candle of the news event.

For cable stops are placed initially at the most recent swing high/low or 43 pips whichever is smaller.
Stops will be moved up as new swing high/lows occur. As soon as the trade is 20pips in profit the stop will be moved up to lock in 1 pip. After that a stop will be trailed at 30 pips until the trade is 100 pips in profit at which point it will be trailed 40 pips unless there is a swing high/low closer to the market price. If the trade goes convincingly through a candle at 50 or 100 the stop will be moved to 45 or 95 unless the trade has been entered close to this level in which case this rule is ignored for the first 50 or 100 level.

Profit take occurs when either macd crosses in the opposite direction or the trade fails to complete a candle at the 50 or 100 level in which case closure will take place at about 45 or 95 unless the trade has been placed close to the first 50 or 100 level in which case this rule is ignored.
In addition 50% of the trade would be closed if R2 or S2 is reached. Another 25% closed at R3 or S3.

For clarification on my chart above, worse case is I’d have been long today at 1.9995 and maybe a few pips better as I would hopefully have anticipated the successful close of the candle. My stop would have been at 1.9954 I would have got stopped out at 2.0033 after trailing the stop 30 pips from the peak at 2.0063

The other indicators on my chart (psar, trend lines are just there for research - I am thinking that the psar can perhaps get in into the trade a big sooner or at worst it seems good confirmation of the trade). The thin dotted dark blue line shows the direction on H4. I am also watching a 34ema on M5 to see if this helps me keep in the trade. I would like to take the 34ema off my M5 and plot it onto M15 but I don’t know how


I am going to demo trade this on cable and eurusd for the next week or so but what I wondered is if people think this might work in the real world. I’d be grateful for any views at all as this month I have to make some real progress.
Is this system worth persuing?
If so what else should I be thinking about to improve it?
I feel that the rules for determining the long term trend are lacking. Particuarly at the end of the long term trend where there might be opportunities none appear with this system. Today for example the rules have kept me out of catching falling knifes which is fantastic but no opportunity for a short has been thrown up. Should I perhaps be watching the H1 as well or looking more closely at the slope of the trend on H4?
I am wondering whether the concept of negative divergence would help. I just about understand this but am still finding it difficult to apply in real time. Is it worth my time to understand this well enough so that I can apply it in real time as easily as say RSI? I strongly need something to tell me there is danger afoot and the long term trend could be coming to an end – would this help?
The profit take rules are the most difficult part. I am finding it hard to get a good balance between leaving enough room on the stop so that I don’t get whipsawed out and actually taking profit before the stop is employed. There seem to be millions of systems out there on how to enter your trade but the discussion on take profit seems sadly lacking.

I should say that I am now sure that my trading psychology seems to suit M15 and M30 pretty well as it gives me time to think. I am also pretty happy with the idea of only a couple of trades a day. I really cannot see much chance of me succeeding on M5 as the spread and the whipsaws are prohibitive until I can trade in whole lots. I am also too indecisive for trading on this timeframe. I also seem well suited to trading H4 and have actually found it easy to just sit in trades for days on end with my demo money. My demo account is up over the last month on H4 but I’m not sure yet whether that’s luck or skill. I’m just using trendlines and overbought/oversold indicators for this. Profit take rules seem to be the biggest problem here.

Sorry for such a long post. As you can see there's a million things buzzing round my head but I don't know what to do or where to go with most of them

2 trades today marked by the vertical red lines.

first trade short at 1.9861. stopped out on trailing stop at 1.9921. result +40

second trade short at 1.9832. candle failed to convincingly close below 1.9800 on the green candle 2 periods later so took profit at 1.9810. result +22.


On both occasions the when the candle hit the 1.9800 it did so early in the 15 minute period and spiked up badly for me so I was not able to close close to the 1.9800 area. In the first case stochastics had hooked up and in the second they looked at the time like they were about to do so as well. However, stochs can remain overbought/sold for a long period so I am not sure if is a good indicator in the long run for an exit.
S1 was 1.9799 today. given that 1.9800 was at a round number and always going to see some price action I think I should have exited half there.

Off to research how often S1,S2 and S3 are hit on an average day on cable to see if this would give a better dimension to the take profit rules.


there was a potential trade on eurusd today as well but it was voided because it occured in the news candle. Entry would have been at long 1.4704 and a stop would now be in at 1.4717. Given the nature of the candle and how obvious it was that it was going to close as a valid trade the entry could possibly have been 10-15 pips earlier. Going to stick to not trading the news candle for the moment and monitor the outcome on similar events

Very nice CC. I'm watching with great interest. Keep posting.

There was a valid signal at 6:00 (clock is 2 hours ahead on my chart) this morning but I was asleep then. Entry would have been at 1.9811.
According to the rules the candle at 7:00 is not an entry because macd was already negative so I didn’t trade that either. However, from tomorrow I will trade if macd is only very slightly negative as long as the other indicators look ok. If I had taken this candle entry would have been at 1.9800. 30 point trailing stop would have been hit by just 2 pips at 1.9893 (i.e. from the low at 1.9878 + 3 pip spread +30)
Profit would have been +7

Further signal at 14:00 at 1.9751. I dithered. This time the macd and rsi looked ok but the lower stochastic was already nearly oversold. Price rose to 1.9756 and in the end I decided to take the trade as those few extra pips made my mind up.
It turned out I was right to be concerned about the stochs as price drifted away from me for a while. Price eventually dropped and I got my stop in for +1. Unfortunately the 30 trailing stop never kicked in (got to 29) and it missed S2 by 12 pips then I got stopped out.
Result +1.

In both these trades above you can see the price tanked after I closed. Frustrating but rules are rules. Just need to find better indicators or rules !


Buy signal at 10:15. I ignored the marginally positive macd having looked at more history after missed cable trade earlier.
Entry at 1.4736. closed half just above R1 at 1.4775. got a stop in as close as I could on the challenger job data at 12:30 for the rest which got taken out at 1.4762 a couple of minutes later.
Result +32.5


Comments. I am pretty sure this system is going to work a lot better in the mornings than the afternoons. The trades created by the general direction on the European/London open seem a lot more reliable than those created in the afternoon due to noise from other markets. There were some good trades on eurjpy and gbpjpy to be had today but I didn’t take them, I was just watching for information.
Candles with big wicks seem to be most troublesome with regard to stops. Not sure what to do about this.. get out before being stopped out? Dunno really.
Wondering for tomorrow if I should close half the trade before news is announced.
Knowing when to take profit is still doing my head in.
I think this needs alot of improvements yet. However, at least for the moment I seem to be worrying about where to take my profit rather than looking at horrible losing trades

Happy New Year :)

You made an early start on the Merlot, Hils? ;)

Choccie: Dunno about Hils, but had a fun day so had a large Bombay Sapphire on returning to Chez MM. And I could still see the little box at the bottom of the thread. I can only guess what "dottie lines" might be in this context . . .

Bombay Sapphire does it for me....

Too right, Dezza - you can only guess :o)
And err, Mr G - does it? You don't know what you're missing ;)

Lenders in the United Kingdom intend to tighten household credit further in the first quarter, even as default rates are forecasted to rise. Banks also plan to reduce corporate credit significantly. Results of the Bank of England''s Credit Conditions Survey for the fourth quarter showed Thursday that banks "reduced materially" the availability of secured credit to households over the three months to mid-December. This contradicted the expectations in the third quarter survey, when banks forecasted secured credit availability to households to remain largely unchanged in the fourth quarter. According to the survey, the reduction in secured credit availability was due to lenders lowering their risk appetite, and targeting a slightly smaller market share.Lenders now expect further decline in credit availability in the first quarter, mainly reflecting reduction in risk appetite and concerns about macroeconomic outlook. The financial market developments started to affect the credit supply to households. Household unsecured credit availability also fell from the previous quarter. This is expected to slightly decline further in the first quarter. Meanwhile, overall demand for secured lending increased in the fourth quarter, but less than expected during the survey in the third quarter. Respondents forecast a fall in demand for secured credit in coming three months. The survey was conducted between November 19 and December 12. Corporate credit availability reduced "significantly" during the fourth quarter, in line with expectations in the third quarter survey. Banks revealed a "material reduction" in credit made available to the commercial real estate sector during the fourth quarter. The decrease in lending to corporates was driven partly by apprehension on economic conditions, risks associated with specific sector, reduction in risk appetite and rigid lending conditions. Lenders project further reduction in the availability of credit to corporates in the first quarter. Private non-financial corporations'' credit demand declined in the fourth quarter, while financial corporation reported significant increase. Further, banks reported that default rates on secured lending to households remained broadly unchanged from the prior three months. Looking ahead, lenders estimate higher default rates and losses in the first quarter. Banks said that default rates on medium-sized corporate loans increased as expected in the third quarter survey. On the other hand, default rates on large corporate loans remained unchanged. Lenders'' unwillingness to dole out more credit reflects the higher cost and reduced availability of credit. The survey result added to speculation of a further cut in interest rates. The nine-member Monetary Policy Committee of the central bank voted unanimously to cut the key interest rate by 25 basis points to 5.5% in December. It was the first rate cut in more than two years and the first instance since November 2001 that the rate-setters took a unanimous decision for a rate cut.During the December rate-setting session policy makers found the level of interest rates to be "already restrictive" in December, given significant monetary policy tightening last year. In its latest Inflation Report, released in November, the MPC had already hinted at a possible rate cut in 2008 as it expects economic growth to slow.