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