Davit's Confluence Trading

Like a child with a mouth covered in chocolate saying they didn't eat the pudding, the Japanese government has always denied taking an active role in devaluing their currency. Bloomberg reported Deputy Economic Minister Nishimura saying “USD/JPY at 100 is no problem” on Thursday which is inline with the policies of unlimited economic easing and "fast, aggressive action to get the country's economy back on track" called for by new Japanese President Abe.

I only have ProfessionalCharts on this computer which won't move to allow extending lines beyond the current range so uploading a chart from here is pointless (and the accuracy isn't very reliable anyway), but I put a pull-back between 123.6 or 123.9 (could be 123.5 or 124). I have my Fibonacci for 23rd-24th the same as the move from the 15-17th and the 161.8% extension is the same range as 100% of the move from the 8th to the 13th though it doesn't line up with channel resistance I have, but again, ProfessionalCharts are not accurate -- i just use them to keep an eye on things when I'm not "working".

Looking at weekly and monthly charts, Yen pairs are still very expensive so I don't think that will be a reversal or correction; merely a pull-back to the support line of the bull channel with another leg up before we see a correction in April.

Be careful with that. Every time I set goals for myself and tried to make up for shortfalls I took chances which ended up setting me back even more.

Thanks for the advise KADC.Very true.

I do feel better because so far I resisted taking trades that were questionable.Got me thinking about this


The Stanford marshmallow experiment[1] was a study on deferred gratification conducted in 1972 by psychologist Walter Mischel of Stanford University. A marshmallow was offered to each child. If the child could resist eating the marshmallow, he was promised two instead of one. The scientists analyzed how long each child resisted the temptation of eating the marshmallow, and shows that waiting longer was correlated with future success.[2] The authors interpreted the result as showing that greater self control (as measured by ability to delay gratification) results in more life success.

So delaying to pull the trigger could potentially land you in better position of entry or exit.

That's certainly something I've found to be true. Every time I've jumped in because I think I've missed the action I'm lucky to break even.

I've placed a Fibonacci for just the range of Friday's move (120.7 to 122.8) for EUR/JPY and I believe I'm going to get my hourly RSI trigger when it hits 122.5 which is the 61.8% retracement and where the resistance (now support) will be if you connect highs from the 13th and 17th so I'm going to go long from there. If that fails I'll go long from 121.

While I was writing this it bounce right to the pip where it bounce Friday so it may not be going any lower than 121.67. I did get a five minute RSI trigger with confirmation so I hope I haven't missed my opportunity.

NZD/USD looks like it's heading for 82.5 if it breaks below 83 and AUD/USD is heading for 103.5 so you certainly made the right call shorting those; unfortunately your timing was just a bit too soon which is a problem I have far, far, far too often.

Looking at the weekly for GBP/USD it's clearly consolidated between 1.53 and 1.63 (if one can call a 10¢ range a consolidation) and 1.57 has never held as support before so I'd say it's going to keep falling.

With the Aussie and Kiwi and Loonie falling against what I believe are fundamental strength I'm going to stick with my EUR/JPY pair and maybe take a closer look at USD/JPY which I've avoided for quite a while after getting burned every time I've tried it in the past. I think the 100 USD/JPY target is genuine so I should probably try to get over my psychological dislike of trading this pair.

squeezing what I can
+22 pips

I got antsy and placed my EUR/JPY long too early thinking I'd missed my optimal entry point, used a 0.75 stop to cover the day's low using a modified Donchian channel breakout strategy, went to bed, got taken out when it retested rising support from the past few days just to rub it in that I need to always be patient, and it's right back where I placed my order for when I got up. Nothing is more maddening than getting up to see that you've lost money while going nowhere, particularly to someone like myself who hates using stops. All Yen pairs except GBP/JPY are poised, more or less, to break to the upside. Also look at GBP/AUD and GBP/NZD poised to make record lows. Record lows make me nervous, particularly with pairs that are moving as fast down as EUR/JPY is moving up, so I'll probably wait for a break lower and short from the retest; however, I'm happy to play the break out for the Yen pairs.

Sorry to hear the loss.I hope it was a minor.
My plan is to wait to see if Euro breaks out North from current range or south.EJ only short if Euro drops as well 23 is good number..
Watching both tonight.

Just $140 -- I was waiting for the break above then retest (or at least a 38.2% Fibonacci retracement and RSI signal) before I loaded up.

Unless EUR/USD breaks above 1.35 sooner, I am thinking that Euro pairs will continue to trade sideways until Monday which happens to be the 4th which happens to coincide with my casual observation of a 27-29 day cycle of EUR/USD lows. Not being able to extend TWS charts (Interactive Brokers) into the future, I sometimes forget to look forward (using NetDania charts) so I may have to sit on my hands a while longer, which is particularly hard when I see I missed another RSI-based entry to go long EUR/JPY at six this morning when I'd normally be trading but my sleep schedule has been altered to deal with getting my car repaired and detailed so I can sell it.

Learning to use RSI "properly" has really been a game changer for me. When I first started trading I thought it was simply for 30/70 oversold/overbought and had never imagined drawing trend lines there as well as in the price action. Sadly, TWS doesn't support RSI-based alerts or triggers, so I have to actually be in front of a computer to take advantage.

It's been suggested that I look at Ninja Trader or Amibroker or Ensign, and certainly I am long-past being fed up with TWS chart rendering errors, but I am loathe to subscribe to yet another monthly chart service/data feed until I'm convinced it would be worthwhile.

I don't want any novices that might be reading this to get the wrong idea (reminder/warning: do not risk more than you are willing to lose), but your 10%/month now seems doable to me (though I've never achieved it myself). Going all-in (maximum margin) on the 24th I gained 25% in the following 24 hours then I made a 33% gain over the 24 hours ending last Friday. I should point out that this account had only $2,000 USD in it (the minimum to trade futures and Forex) so there was no significant risk if things went horribly wrong, and the account now has $3,300 in it after what was essentially two days of trading, so by trading far more sensibly (though still using more leverage than is probably advisable) 10% should be achievable. This was all in EUR/JPY, NZD/JPY, and USD/JPY weighted 3,2,1 in that order.

On the 24th it was a matter of waiting for the right entry point (and missing a few beforehand); however, last week none of my triggers were hitting. With EUR/USD having made an inverse head-and-shoulders and heading for 1.42 or higher and USD/JPY targeting 100 there just weren't any EUR/JPY sellers to create a "proper" pull-back. I decided to break at least three of my rules and go long on the first 5-minute bear candle at 4pm on the 31st which is short-term foolish but I knew I'd come out ahead in the long-run (though I'd get out if I started losing money regardless and wait for a better entry point).

I'm back to waiting for proper entry points now. We've seen a pull-back in EUR/USD today so if I was right about the 28 day Euro low cycle, we'll finally get a "real" pull-back today. One of the analysts on DailyFX noted that the beginning of the week has been bearish for Yen and Euro crosses for some time and so it might be prudent to wait until Wednesday or Thursday to go long. I'll stick to my RSI triggers but I've noticed the same thing so I won't get too antsy if I don't have any trades for a few days.

...

I took a long position on EUR/AUD which seems fundamentally wrong since think the Euro, Kiwi, Aussie, and Loonie (in that order) are the "strong" currencies, but looking at this chart it seems poised for reversal. I prefer the red parallels to the blue fork, but both are pretty close. The 23.6% retracement is also 100% of the Thursday-Friday move and 1.3000 is a strong psychological level which has proved significant last may and four times in 2011.

[Update: I'm now out of this position but potentially going to re-enter if I see a bullish hourly candlestick pattern and 5-minute candles confirming EUR/AUD has returned to this channel as 5-minute RSI is showing clear support.]

I should have waited until the RBA, or at least until the Australian Trade Balance figures. Once the 100% retracement was breached I changed my Fibonacci range to the low on the 29th to the high on Friday, putting the 61.8% retracement (it shows 38.2% -- I drew it upside-down) as support where it eventually bounced. Note how RSI support on the 5-minute chart is being respected.

[Update: RSI and the 61.8% were breached so I should have shorted way back when it broke below my initial call. The bear channel I drew is being respected which confirms that I should have shorted. I tend to have too much inertia when trading and I end up looking for new entry points rather than reversing my position. I went long twice and instead of moving my stop to break-even when I was in profit on each trade let myself lose $45 twice. I really need to work on that. ]

[Addendum: Either the 28-day Euro low cycle or "reversal Monday" or both seem to be happening. I'm going to go to bed and let the pull-backs complete else I'll end up trying to be clever by getting in too soon. I hope you are doing better than I did today.]

My indicators suggest that the NZD/USD should reverse south as it has been making LL and LHs. But generally it has been chopping around. Frustrating....

Took ass whipping loss -400 pips
Placed my sell orders on EJ and confident and went to work.5hrs later 200pip move up.I didn't place SL and I know how amateurish that is and it is not excusable.
I took a week off to hummer on trading psychology and market structure.Currently reading Mark Douglas "The disciplined trader"
I am saying this in public because this could of been you.
Will come back very soon refreshed and ready.

It was me, but in the opposite direction!

I missed most of the move up on both EUR/JPY and EUR/NZD so I got in late else it wouldn't have been a problem, but I was nevertheless up to nearly $3,800 from $3,200 at midnight (15% account gain from Friday's $3,300) after doubling both positions (back to maximum margin) on the pull-back at 10pm and went make something to eat. I dozed off watching TV confident that all was well and a couple hour nap to refresh my mind would do no harm. Well, I woke up at 2am to a margin warning. That $600 gain was lost and another $100 to teach me a lesson to at least set stops at break-even and move them up to keep half the profit from now on even if this is an experimental account.

I set an entry for both with long trails but tight stops and had another nap, both stopped out when I woke up, so after doing some more account maintenance on my investment account I decided I should go to bed before I do any more damage.

This experimental account now sits just above $3,000 which is still a 50% gain in 12 days but lesson learned (again) which is probably just as well lest I get cocky and attempt full-margin trading with real money.

Here's my read of the fundamentals at the moment:

With the head of the BoJ "stepping down" (he was opposed to Prime Minister Abe's aggressive Yen weakening policies so that's not surprising) I wouldn't bank on Yen strength yet. Certainly other nations need to devalue their currencies to stay competitive, but none are as aggressive as the Japanese plus long-term charts show plenty of room for the Yen to fall so I'm still targeting April for the correction or reversal.

The Pound is getting pounded lower (someone had to say it) and a GBP/USD fall to 1.53 seems like almost a certainty. My problem with the Pound is it's so expensive I hate buying even if it does look like shorting it is the safest call, plus it is far less volatile than the Yen; but for now I still prefer the Yen as my primary short.

Eurozone issues are returning to the forefront which may make signal Euro weakness, but I think there's been hints of trying to bring England into the Eurozone which a continued weakened Pound and strengthening Euro would help facilitate. EUR/USD needs to fall below 1.35 (where it's sitting now) before I can consider shorting the Euro and even then it's not as definitive as Yen or Pound weakness so I don't see myself engaged in Euro shorting in the near future. [Edit: I should clarify that though 1.35 was broken this morning it promptly returned above it and I'm looking for a break and retest of 1.35 from below whereas currently it seems like it's retesting 1.35 from above.]

Until the US dollar index breaks above 80 or below 79 I'm going to stick with seasonality for US$ and look for general continued weakness compared to the other majors until May which is coincidentally when the debt ceiling has to be dealt with, so if EUR/USD fails to breach 1.35 it shows me at best US$ will continue sideways leaving going long EUR/JPY as my primary choice for strength/weakness pairing.

There's employment data this evening for both Australia and New Zealand, but barring any surprises:

1. The AUD/USD weekly chart looks like its topped out and is headed lower even if it did bounce off 1.030, so I'm looking at the October low of 1.015 at the very least, and if that fails a return to 0.970 is my next target which makes it my weak risk currency of choice.
2. On the other hand the weekly chart for NZD/USD looks ready to break upwards so the Kiwi is still my choice for strong risk currency unless there's terrible employment data in two hours.

The Loonie may be moving sideways against USD but it's strong everywhere else, and it's less reactive than the Kiwi so if I wasn't so aware of how my government is actively trying to destroy my country I'd probably replace the Kiwi with the Loonie for strong risk currencies, and if the New Zealand employment figures are bad that's exactly what I will do despite my political reservations. The GBP/CAD should therefore be the "safest" pair to short following my own logic, but the long term daily chart doesn't give me much confidence in further downside so long CAD/JPY will be my alternative to long NZD/JPY if I have to abandon Kiwi pairs though there's no significant carry as there is with the Kiwi.

In summary, I'm still looking long EUR/JPY and NZD/JPY (pending employment data). I realize this is at loggerheads to your outlook but that's good because it forces me to consider the alternative and it helps to keep me from getting too emotionally attached to trading in this direction. The last few weeks have favoured my longs at the end of the week and your shorts at the beginning of the week, so perhaps I will try to be more flexible and short from the high on Friday (assuming that is the case) and see how that works out.

...now I just have to deal with my not placing sensible stops...

I haven't heard from you in a while -- I hope you're doing well and your trades are profitable.

EUR/JPY is what I've been almost exclusively focussed on, and it's heading down faster than I can draw a chart so I don't know if the chart will be valid by the time you see it, but this pair is reacting nicely to trend lines so, provided it doesn't punch down through support, I'm expecting it to land somewhere in the green circle (though it's really RSI that I rely on for direction ...and though this is an 8 hour chart, I only use daily, hourly, 5 and 1 minute RSI).

Cool thread, confluence trading is the way to go. btw, nice paintings!