Financial Yin and Yang

I’ve always been annoyed by trading books and teachers that separate fundamental trading and technical analysis into two camps as if they had nothing to do with one another.  Their usual argument is fundamental traders are longer term folks who don’t care about technical analysis while technical traders shouldn’t have to care about fundamental influences because their effect is “already priced into the market”.

I believe fundamental influences and technical analysis are bound together through a financial yin and yang of sorts. It is simple as this; whether they are interest rates or orders of institutional speculators fundamental factors drive the overall market trends while technical analysis drives trade entry. If you can learn to combine the two you will find the lowest risk, highest probability trades available.

The Remora system is primarily a trend following system which means the majority of losses will occur when a trend is ending and consolidation begins. It is your job as a trend trader to remain aware of market conditions and recognize when to reduce your risk by staying out of a trade or reducing your trade size.

Last week I started to get the impression the Dollar trend may have ran out of some strength and this week it will be interesting to see if the Greenback can make new highs against EUR, GBP, AUD and CAD.

Here are some thoughts on two pairs you may want to be cautious of.

AUD/USD

I see a well defined head and shoulders pattern forming which may signal a short term reversal is coming after the powerful dollar trend beat this pair to a pulp. Over the last four months Ozzy has lost nearly 2,800 pips!

Risk sentiment helps drive this pair and there are some noteworthy things happening that might confirm this pattern shortly. The equity market seems to have confirmed support at the 8,000 handle which might build confidence and an appetite for the carry trade.  Additionally, institutional contracts are trending to the net long side as speculative shorts seem to be unwinding and the pair may go net long again soon.

I don’t trade patterns outright like this but they do give us a feel for the sentiment which is driving price action. For Remora traders, the potential reversal pattern should be kept in mind when selling into rallies next week because you do not want to sell into a breakout rally. Should the pair break above $0.70 it might setup some short term Remora longs on it’s way to $0.78.

USD/CHF

Monthly resistance is in play along with a 61.8% Fibonacci level around $1.19 on this pair.  Again, Remora is a trend following system so we are not interested in selling this resistance level from a weekly or daily chart view; but we should be aware of it when planning a buy on this pair. Additionally, Institutional traders are unwinding their longs and the pair may go net short in the next week or so.

Good luck this week!

Ryan

Over dinner last night my Wife and I discussed all the emails I’ve received from readers working the Remora strategy to their advantage. I have one reader who has become a good email buddy and actually booked 1,900 pips since Sunday, simply incredible. I shared his story with Christine who jokingly asked “I’m really happy for him but why didn’t you book 1,900 this week?”.

It’s a very good question and points out how two people trading the exact same system can achieve very different results.

This week I had a number of personal distractions which affected my thought process. When I’m distracted I tend to “over think” the market when I should just pull the trigger. Last night I posted a sell trade on EUR/USD which I had waited two days to develop. When the signal came I over thought the entry instead of just trusting the system. Many of you pulled the trigger as you should have but I placed an entry order which I have since removed. Same system, same rules, same charts but you made money and I didn’t; the only wild card here is the trader.

The point is when you have a trading system, follow the rules. You’ve tested the system, you know it works, just plan the trade and then trade the plan.

Trading Post Financial Webinar Next Tuesday

Next week I am presenting a free webinar during Trading Post Financial’s “TP Tuesday” event. In this month’s presentation I will teach you how to create a trading system of your own and test it using Forex Tester. This is a free event and I hope to see you there!

Register by clicking here.

View the schedule by clicking here.

Can you share the Remora System?

Many have asked if I will post the Remora system and the answer is yes. I’ve been working on several videos over the last few weeks to post but they are not quite ready yet. Thanks for being patient on the videos, I’m not the worlds best audio / video producer!

Have a great weekend!

Ryan

The EUR/USD has entered the selling zone I was looking for from Tuesday’s post but I’ve decided to play this a little more cautious. I think the potential is there for EUR/USD to fall further but I want a better price to try and avoid expected volatility tomorrow.

You can see on the chart we have a plethora of converging resistance around $1.28 and in my opinion, if EUR can’t retake that weekly chart trend line running through the middle then look out below.

I’ve placed a sell order at $1.2825 with a stop at $1.2925.

Good luck,

Ryan

EUR/USD firmly broke down out of triangle consolidation today. The fundamental picture is getting worse for the Euro Zone following today’s 9.5 point drop in the German ZEW Survey. Combine that drop with last weeks 50bp cut and the potential for negative GDP / CPI numbers makes EUR look really weak against the world’s preferred confidence currency, the Dollar.

Additionally, sharp falling CPI numbers later this week may help speculation of further rate cuts which could fuel further EUR losses.

Everybody is talking about this breakout so expect some whips tomorrow. Triangles are not the most reliable patterns to trade but there is fundamental support for further EUR losses which makes this breakout interesting.  Just be patient, let the breakout traders get washed out tomorrow and we may have a short trade in the next couple of days.

Here is how I plan to play this breakout.

1. Don’t take the breakout now, we are looking for a pull back.
2. Notice the Remora Indicator has turned negative, a close above would be a sell.

If I get in this trade, I will update the blog with my profit targets.

Best of luck,

Ryan

Regular readers of my blog know I rarely, if ever, post trades “after the action” but today I will because I think it has educational value.  I’m sorry for not getting this online in “real-time” but hopefully you’ll find it useful. If you are familiar with my “Remora” system you’ll recognize this setup.

Generally speaking we have a slight trend reversal on EUR/USD as depicted by the trend indicator and I bought into a dip last night when the market closed below the trend indicator.  I almost got tagged out but the pair rallied over 300 points to close this afternoon with a tidy profit.

At this point, the remaining lots should be moved to break even and allowed to ride. We are holding a positive carry position and will collect interest until we are either stopped out or the trend indicator reverses at which point we close the remaining lots.

Looking at the Fibonacci picture, I think the pair has the potential to reach $1.33 soon or more. There are questionable fundamentals but overall I like the technical picture.

I’m excited to know people are trading this system because I received a couple of emails from folks who took the same setup and made a decent profit.  Nice work Kulu and Doug!

I’ll update you as this trade moves along.

Where Have You Been!

I apologize for not posting over the last few days. The Dollar trend is really been in a consolidation phase ahead of the election so I’ve been busy getting ready for winter, trying to exercise more and learning how to make video content for the blog.

I’ve also found myself obsessed with playing my bass guitar in preparation for Thanksgiving; my Father In-Law is bringing his Fender Stratocaster with him.

I have a lot of updates for the blog to release shortly but in the mean time I’ll get back to regular posts.

I hope you are all doing well!

Ryan

This morning I presented a webinar for Trading Post Financial discussing how to trade around your day job. If you missed it don’t worry because it was recorded and I will make the slides available shortly.

During Rob Booker’s presentation on support and resistance the USD/CAD came up and a trader in the room stated they believed the pair was ready for a fall. No more than one hour later the pair rallied to a new daily high.

I bring this up because traders constantly try to pick the end of a rally only to get run over. There is no such thing as an “oversold” or “overbought” market. Regardless of what an indicator or expert tells you the market will run as long as it wants. My plea to you is this:

Stop trying to guess where rallies end and join the trend!

In an uptrend buy the pull backs. In a down trend sell the rallies.  It is simpler and makes an equity curve that is more popular at parties.

Ryan

I’ve been quite on the blog but that doesn’t mean I haven’t been hard at work. In my last post I asked for feedback on the blog and you certainly delivered! I received several emails containing fantastic comments or suggestions which I have taken to heart. Thank you for sharing your opinions with me!

The main reason I started blogging was to help struggling traders make some money and improve their trading skills. I suspected the majority of my readers are trying to trade around full-time jobs and given your feedback it is clear we need to focus on longer term trading. So here are some changes you can expect to see on my blog very shortly.

1. I have developed and traded (with live dollars) a system which almost anyone can trade around a full time job. We will discuss it on this blog in the coming days and trade it live.
2. For trading content, I will begin using video instead of screen shots to share the setup with you. I think this will be more enjoyable and allow me to explain my thought process better than a written post.
3. I do not post every trade I take to the blog for a variety of reasons but I think each trade has a lesson we can learn from so every Sunday I will try to post a wrap up video to cover all the activity of the week.

Will GotForex Doom This Blog?

As you know Rob Booker has invited me to blog at his website GotForex.com which is affiliated with InterbankFX. One reader questioned if this would affect the content of this blog which I think is an excellent and fair question.  The answer is no. My personal blog is focused on helping you find and make good trades. I actually put my own money behind every trade I post on this blog.  RyanOkeefe.com is your window into my personal trading desk which is not the content GotForex.com is looking for.

So please don’t worry that one will affect the other, we will all live happily ever after.

Online Seminar at Trading Post Financial

I’m excited to be a presenter at Trading Post Financial’s monthly online seminar this Tuesday the 21st at 8am Pacific Time. I will discuss long term trading techniques which are ideal for traders who work full-time jobs.

This is a free event and if you would like to register click here.

If you can’t attend don’t worry, everything I present on Tuesday will be discussed here on my personal blog as well.

I hope your having a great October!

Ryan

Photo Credit: samk

I wasn’t interested in trading during “bailout mania” but now I am back on the hunt for a good trade to blog.

Today however I want to catch you up on some personal news and ask for your help.

Good Friends

Last weekend I had the pleasure of showing off Seattle to my good friend Rob Booker whom many of you are familiar with. He came to town with Matt Schneider of Interbank FX to conduct a free trading seminar. If you haven’t seen a Rob Booker presentation you are missing out.

Rob invited me to blog for his website, GotForex.com which I am really excited about. I will have more details shortly but this news brings me to my next topic, which I need your help with.

Milestones

In October my blog turns a year old and is growing faster than I could have imagined. Last month was the busiest ever with over a thousand unique visitors nearly eight thousand visits!

I have ran a survey for nearly a month which indicates 58% of the survey participants work full-time and are trying to trade around their careers.  With this information I question how useful it is to blog trades based on the four hour time frame.  How many of you can actually trade off that time frame if the trade comes in the middle of the day?

I have some ideas to make this blog more useful to everyone but I’d like to hear what you think.

What would you change? What topics or content would you like to see? What don’t you like?

Email your thoughts to pipcoach@gmail.com.

I want you to know that I truly appreciate the time you set aside to read my blog. Thank you for a great first year!

September Results

Richie posted a comment asking why I hadn’t updated the blog with my September trading results. Truth is I didn’t realize anyone cared to know. My goal is to make you a better trader by blogging solid trade setups and letting you learn from my mistakes (I mean experience). I haven’t posted my personal results regularly because I take trades that aren’t blogged and I’m not trying to prove anything, I just want to help you out. But for those of you who are dying of curiosity September was slow month. I booked 125.8 points with four winners and four losers.

Ryan

Photo Credit: smcgee

With the fall television season opening this week I hardly expected the most entertaining show would be on Fox News. I watched the House of Representatives debating (glorified public speaking, if you want a debate watch the British Parliament) the bailout, excuse me, Economic Intervention Plan live on my iMac this morning.

I figured the bill would pass easily until one Republican express concern it may not during his speech, at which point I thought things may get interesting.

The crown jewel of today’s “debate” was Nancy Pelosi’s speech in which she pondered:

“How did it sneak up on us? So silently, almost on little cat’s feet.”

Indeed Madam Speaker, this one was a mystery. Who would have thought there was something inherently wrong with the “system” when a bland tract home sporting concrete counter tops would sell for $850,000 in an area where the median annual salary barley cracked $50,000 and those already financed were pulling equity out of said “American Dream” via their HELOC’s at historic levels year after year after year?

I’m not an expert like those smart guys on Wall Street or the “esteemed” and “distinguished” folks in the halls of government but come on, little cat’s feet?

If Pelosi needs an analogy, how about this one to cover the warning signs that were available:

I’ll never forget suggesting to a friend of mine in February of 2006 to delay buying a home in California because the bottom was about to fall out. He told me I would miss out if I kept “waiting on the fence.” He bought two homes and lost more than $100,000 in value within the first two months of closing.

Look I don’t want to see people lose their homes but let’s get real here. The growth and prosperity of the past few years was financed and resold at leverages up to 60:1 and it is time to pay the piper.

I think the most interesting shot of the day was a split screen between the house vote and the Dow Jones big board on Fox, the image below says it all.

Enough commentary, let’s get back to trading!

Ryan

Since most bloggers are pontificating on the coming congressional bailout I thought we could look at a lighter topic for today’s post.

My Favorite Trading Tool

Every trader has a favorite tool or indicator to enter a trade but what is your favorite tool to keep your mind off trading while a quite market bores you to tears?

In the corporate world you are rewarded for daily output and many people have a hard time adjusting their work ethic to include doing nothing day after day when a trade just isn’t there.  Consistent waiting can drive some people mad and many relieve the stress by forcing a trade when they shouldn’t so I am curious, how do you prefer to break the monotony of a slow or volatile risk filled market?

I keep a bass guitar by my trading desk and when I am not spending time with my Wife I play the crap out of that guitar. I also find it useful for keeping me away from the market once I have a trade open so I don’t take profit to early. Even though I’ve been trading for years, I still take profit too early sometimes.

How do you avoid making stupid, unnecessary trades just because you are board?

Share your thoughts or comments by clicking here.

What about that USD/JPY short?

I had to laugh this morning when I saw Rich’s comment about my USD/JPY short. He thought we hadn’t made money on that trade proclaiming “yall got screwed on that one”. Reality is by using proper trade management a lot of you, including myself, made plenty of money on that trade.

The only mistake I made on this trade was not taking 400 points I had floating ahead of the Fed interest rate announcement last week. I really thought Dollar would fall further but I was wrong and my trailing stop was tagged.

I had a 125 point trailing stop ahead of the Federal Reserve rate announcement so I made 200 points on the first half and 125 points on the second.

When will I trade again?

While this kind of volatility is sought by some traders I prefer to stand aside and watch the fun which is why you haven’t heard from me in a couple of weeks. I’m not going to trade when I read liquidity is so bad some financial institutions actually shut down their FX trading desks temporarily.

I haven’t taken a trade since the 10th of September and I plan to stay flat for a few more days. Once Congress hammers out this bailout plan and the world has time to absorb it we should see better trading conditions. I’m not going to ramble on about the financial meltdown or the actions of Washington except to say it boils down to a stunning failure by people who know better to manage their risk.

This should be a good lesson for all of you trying to make a buck through trading:

Regardless if you trade mortgage backed securities, currency, soybeans or Bennie Babies risk is the only factor you can determine when you enter a trade, understand your exposure at all times and be merciless when cutting a loss short.

Let’s start watching for some good trades in September post bailout!

Have a great weekend!

-Ryan