Low Risk, High Reward Trading Experiment

Tuesday September 12, 2006 11:00 ET

EUR/CAD has been range bound between 1.4250 and 1.4050 since about August 23. It now appears poised to rise in a corrective wave up to between 1.4300 and 1.4400 before resuming its downwards trend. We thus advise exiting any residual short positions on this pair at the current market price of 1.4175.
Since this trade signal was issued on August 3rd to "Sell EUR/CAD at 1.4249" the price fell to 1.4100 on September 1st, 30 pips short of our first target, then rose back up to 1.4273, slightly higher than our stop, then fell to 1.4055 on September 7th, hitting our Target #1 located at 1.4070
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Previous trade signal:

Wednesday August 30 20:15 ET

TS #163 Sell EUR/CAD at 1.4249

Stop is 1.4266
Target #1 is 1.4070
Target #2 is 1.3950
Risk is 27 pips
Reward is 169 / 289 pips
Reward : Risk ratio is 6.2 / 10.7 to 1

For research purposes only

Tuesday September 12, 2006 11:30 ET

Successful trade: Re-Entry Opportunity Trade Signal #164A Sell CAD/JPY at 105.60 rose to 105.89, missing our stop by only 2 pips, then descended to 104.00 on September 10, 15 pips past Target #1, delivering a 3.3 to 1 Reward / Risk successful trade.

CAD/JPY subsequently rose 150 pips to 105.50. There is no clear imminent low risk / high reward trade opportunity on this pair at this time.

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Previous trade signals:

Wednesday, September 6 12:15 ET

Subsequent to the issuing of TS # 164 on August 31 CAD/JPY rose a little past our stop to 106.36. Our stop adjusting system would have adjusted the stop to 106.41 however, so the trade survived. The price fell 245 pips to come to a low yesterday of 103.91, short both of our targets. The price of CAD/JPY then rose 175 pips to a recent high of 105.66. There are many indications that this is the top of the corrective upwards wave, and that the downwards trend will now resume.

Re-Entry Opportunity Trade Signal #164A Sell CAD/JPY at 105.60
Stop is 106.91
Target #1 is 104.15
Target #2 is 103.30
Risk is 41 pips
Reward is 135 / 220 pips
Reward : Risk Ratio is 3.3 / 5.4 to 1

For research purposes only.
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Thursday, August 31 12:00 ET

Subsequent to the following quoted comment advising exiting of the short CAD/JPY trade to collect 75 pips of profit, the pair rose to a new high of 106.13 as predicted. This presents a better entry position for a long swing trade.

Trade Signal #164 Sell CAD/JPY at 106.10
Stop is 106.31
Target #1 is 103.50
Target #2 is 103.00
Risk is 31 pips
Reward is 240 / 290 pips
Reward : Risk Ratio is 7.7 / 9.3 to 1

Tuesday September 12, 2006 14:30 ET

TS #160 Sell EUR/JPY at 150.40 which was issued on August 29 and triggered on August 30 successfully hit its original target of 148.00 on September 7, and continued on past this target by 45 pips to 147.55. If we had adjusted our target on September 7 with all the information then available, then according to our model we would have set a conservative target of 147.90, ten pips lower than our initial estimate. Precision targetting would have placed the target at 147.63, only 8 pips short of the actual reversal point.

With the adjusted conservative target, the Reward : Risk Ratio would have been 4.9 to 1. With a 5% Risk Factor, the return on capital would be 4.9 * .05 = 24.5% (employing the Itme Theorem of Calculating Return on Capital).

As stated below, the initial target was estimated to be 148.00 on August 29 when the trade signal was issued, but as we approached September 5, the trading model we are employing would have adjusted the target to 148.25, which would have resulted in a winning trade on that date with a 4.2 to 1 Reward : Risk Ratio , providing a 21% return on capital based on a 5% Risk Factor. We could then have re-entered the short trade on September 7 - 55 pips higher at 149.80 and earned another 190 pips profit as we set the new target conservatively at 147.90, comprising another successful trade with a Reward : Risk Ratio of 3.7 to 1 , earning another 18.5% return on capital based on a 5% Risk Factor.

If we had exercised more diligence, we could have thus earned a total return of 43.4% in two trades instead of one trade with a 24.5% return on capital, based on a Risk Factor of 5%.

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Previous comments and trade signal:

Progress Report TS #160 Sell EUR/JPY at 150.40 <hr style="color: rgb(209, 209, 225);" size="1"><!-- / icon and title --><!-- message --> Our model clearly and precisely indicated a probable target for EUR/JPY of 148.25, which was met this morning. We should have adjusted our target to this figure from our original estimate of 148.00. EUR/JPY has recently retraced upwards about 100 pips to about 149.25, which presents a good re-entry opportunity on a short trade, with a target of 148.25 or lower.

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Thursday, August 31 13:00 ET

According to our system of analysis, EUR/JPY was likely to reverse direction at either 150.40 or 150.70. We therefore shorted it at 150.40, and placed the stop at 150.86. (The Elliott Wave count in this case was very challenging.) It rose during the night to 150.70, then fell 65 pips to 150.05. We are therefore still in this short EUR/JPY trade, and hopefully progressing towards our target at 148.00.

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Tuesday August 29 23:00 ET

EUR/JPY has been engaged in a very lengthy and grand corrective wave, or an upwards impulse wave, depending on one's interpretation of it, since we made the following comment on August 24th:

Quote:

EUR/JPY rose and fell, and will now rise again <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --><!-- message --> Friday August 24 11:00 ET

EUR/JPY rose as predicted to 149.45, then fell 74 pips this morning to 148.71. We expect it to do a corrective complex upwards wave now for the rest of the day before resuming its downwards trend, with a topside target of between 1.4915 and 149.40.

Unquote

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We now expect it to reverse at 150.40, which will be the beginning of a new downwards trend.

TS #160 Sell EUR/JPY at 150.40
Stop is 150.86
Target is 148.00
Risk is 50 pips
Reward is 236 pips
Reward : Risk Ratio is 4.7 to 1

For research purposes only.

Wednesday September 13 11:00 ET

EUR/USD may or may not have fulfilled our system criteria for shorting it when it met the price of 1.2734 at 8:30 ET yesterday morning, following our last prediction. At first we thought it had fulfilled our entry criteria, but upon more careful study, we believe that it may rise one more time to about 1.2750 as previously expected. It very nearly completed our criteria on the Elliott Wave pattern, but seems to have been short one step. On the one hour chart it looks fine, but on the one minute chart it seems to have "rounded off a corner". However, we believe that on some occassions the trend can reverse with one less than a complete set on a one minute perspective.
On our second model we had achieved a potential reversal point, but not a strong potential. A rise to 1.2750 would be much preferable. So we will wait and see, and learn from the next move. A short trade with a stop at about 1.2766 is likely to succeed. The entry point is still in question, but if it rises again to 1.2750, as it well could, then we would have an excellent trade opportunity.

Target is 1.2580

Entry point is uncertain.

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Possible trade concept:

Trade Signal #Hypothetical Sell EUR/USD at 1.2734

EUR/USD may have fulfilled our system criteria for shorting it when it met the price of 1.2734 at 8:30 ET yesterday morning.

Stop is 1.2766

Target is 1.2580

Risk is 36 pips

Reward is 151 pips

Reward : Risk Ratio is 4.2 to 1

For research purposes only.
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Previous comments and predictions:

Tuesday September 12 00:30 ET

The downwards Wave b on EUR/USD (currently at 1.2715) only descended to 1.2680, not 1.2650 which was possible, and the upwards Wave c is now headed back up towards a target between 1.2750 and 1.2790, which will be the top of the upwards Wave 4 corrective wave.

The top of the Wave 4 at about 1.2750 to 1.2790 (best guess 1.2775) will be an excellent opportunity to short EUR/USD, with a target of about 1.2550.

EUR/USD hit 1.2734 this morning?

Thanks, Akirax. It was yesterday, not today, that 1.2736 was met on EUR/USD. We misread our charts. We hope that EUR/USD rises again, so that we can find a low risk, high reward trade opportunity. Yesterday's high of 1.2736 would have been worth a stab, though it wasn't entirely clear that it was the top of the corrective wave.

Wednesday September 13 12:00 ET

USD/CAD rose 55 pips in a vertical line to 1.1235 at between 7:39 and 8:22 ET this morning, and has now technically fulfilled a complete upwards Elliott Wave pattern on the one hour chart, as well as meeting its minimum target of our second analytical model. So it is possible for it to reverse and begin its descent from this point. We are not sure whether a straight line on the five minute chart can constitute an entire five wave component wave, though we suspect it can.

So USD/CAD may continue down from 1.1235, or it may continue to rise much more towards our reversal target of 1.1315. We shall watch and learn.

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Previous prediction:

USD/CAD update <hr style="color: rgb(209, 209, 225);" size="1"><!-- / icon and title --><!-- message -->
Tuesday September 12, 2006 11:00 ET

There were some mixed economic data releases for the CAD economy during the night, which should not introduce too much directional bias into the USD/CAD market. This pair completed its downwards complex Wave 4 corrective wave, descending to 1.1155. It should now rise to complete its last upwards impulse wave, targetting 1.1315.

Any take on GBP/USD after completion of this wave and EUR/JPY moving forward...

Wednesday September 13 12:00 ET

Yesterday when USD/JPY rose to 118.13 at 14:20 ET it fulfilled our system criteria for a trend reversal point. If it rises again to this level or near to it, then we will have a low risk / medium reward trade opportunity. This downwards trend is only a corrective four wave. We would be trading the "c" of a complex corrective fourth wave. It is thus not an optimum trade, but we will enter it here to test our model.

Trade Signal #167 sell USD/JPY at 117.98

Stop is 118.26

Target is 117.25

Risk is 29 pips

Reward is 70 pips

Reward : Risk Ratio is 2.4 to 1

For research purposes only.

Thursday September 14 1:45 ET

Between September 5 and September 13 AUD/USD fell 3.1% or 238 pips from .7721 to .7483. It then rose 61 pips in a first upwards wave, then retraced 34 pips in a corrective wave. It should now proceed up towards its target of .7723 or higher, to complete the upwards trend which commenced June 28, 2006.

Trade Signal #168 buy AUD/USD at .7514

Stop is .7489

Target is .7723

Risk is 29 pips

Reward is 204 pips

Reward : Risk Ratio is 7.0 to 1

For research purposes only.

Thursday September 14 4:15 ET

GBP/USD has risen slightly past the best guess level of 1.8790 we predicted it to turn around according to the information available two days ago ( "Our target for the top of the upwards corrective wave on GBP/USD (currently at 1.8690) is between 1.8785 and 1.8900 (best guess 1.8790)." )

Our current best prediction for a turnaround point is between 1.8806 and 1.8835.

After this tipping point we expect a long downwards trend. The first target is at about 1.8600.

Thursday September 14 4:45 ET

EUR/GBP has fallen to .6740, at or near to the bottom of its current trend. GBP/USD has been rising (latest high is 1.8820), while EUR/USD has been stationary at about 1.2685. This allowed EUR/GBP to fall to where it needed to go. Now that EUR/GBP has hit its target it is possible for EUR/USD to rise and catch up somewhat with GBP/USD. Another alternative is that GBP/USD will fall to catch down with EUR/USD.

There is a batch of U.S. data releases in a few hours, at 8:30 ET, by which time both GBP/USD and EUR/USD should have reached the top of their upwards corrective trends and be ready to resume their downwards trends.

Thursday September 14 6:45 ET

Trade Signal #169 Sell GBP/USD at 1.8852

Stop is 1.8883

Target is 1.8600

Risk is 34 pips

Reward is 249 pips

Reward : Risk Ratio is 7.3 to 1

For research purposes only.

Thursday September 14 6:45 ET

EUR/USD rose as predicted above, right on queue ( "Now that EUR/GBP has hit its target it is possible for EUR/USD to rise and catch up somewhat with GBP/USD"), as soon as EUR/GBP had reached its lower target.

Because EUR/USD hadn't risen as much as GBP/USD, however, the stop on EUR/USD has to be larger ( 55 pips risk on EUR/USD compared to 34 pips risk on GBP/USD), so the Reward : Risk Ratio on this trade isn't as good as the one shorting GBP/USD above.

Trade Signal #170 Sell EUR/USD at 1.2720

Stop is 1.2773

Target is 1.2550

Risk is 55 pips

Reward is 170 pips

Reward : Risk Ratio is 3.1 to 1

For research purposes only.

Yeah i have got in on GBP/USD hoping make around 100 PIPS

Also looks like a very good time to buy Oil already got one open postion +50 pips already today going very long on this trade hope to make +300 PIPS

Thursday September 14 7:30 ET

We double checked our calculations, and found that according to our trading model the stop on this trade should be 1.8891, not 1.8883.

Trade Signal #169 Sell GBP/USD at 1.8852

Stop is 1.8891

Target is 1.8600

Risk is 42 pips

Reward is 249 pips

Reward : Risk Ratio is 5.9 to 1

For research purposes only.

GBP/USD stoped at 1.8865 i got in on 1.8857

Thursday September 14 13:00 ET

GBP/USD rose 315 pips since September 11, from 1.8603 to an interim high somewhat higher than expected (the top of our expected range was 1.8900), to a recent high of 1.8918 so far, hitting our stop at 1.8891. The current expected top is 1.8955. We advise exiting any short GBP/USD positions at the current price of 1.8880 or lower, and re-enter at or above 1.8940. If GBP/USD falls as low as 1.8815, then we should take a long position and trade it up to a target of 1.8955 to 1.9000, keeping in mind that the current downwards corrective wave could be a complex wave.

We should watch how the next movements play themselves out before commiting ourselves to a trade concept, because it is very possible for GBP/USD to go down to 1.8815 before reversing and later up to 1.9030 and even higher before reversing again.
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Previous trade signal:

Thursday September 14 7:30 ET

We double checked our calculations, and found that according to our trading model the stop on this trade should be 1.8891, not 1.8883.

Trade Signal #169 Sell GBP/USD at 1.8852
Stop is 1.8891
Target is 1.8600
Risk is 42 pips
Reward is 249 pips
Reward : Risk Ratio is 5.9 to 1

For research purposes only.

So far EUR/USD has risen to 1.2750, which could be the ultimate high as predicted yesterday, but according to the latest information there is likely to be another step up. The trade signal #170 shorting EUR/USD entered at 1.2720 appears to be somewhat at risk (the stop at 1.2773 is somewhat vulnerable). Based on the latest information, we advise exiting this trade at the current price of 1.2730 (or lower) for a small loss, and re-enter at about 1.2755 to 1.2765, with a stop above 1.2800, or else simply raise the stop to 1.2802

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Previous predictions and trade signal:

This analysis was quite good:

Monday September 11 13:00 ET

After bottoming out on Sunday September 10 at 1.2647, EUR/USD rose 93 pips last night in a corrective first upwards Wave b of a complex upwards Wave 4 to 1.2740. It is now descending to about 1.2650 again, after which we expect it to rise to between 1.2715 and 1.2750 in a Wave c of Wave 4 before resuming its downwards trend in earnest towards a target of 1.2550.

This analysis has turned out to be accurate (so far):

Tuesday September 12 00:30 ET

The downwards Wave b on EUR/USD (currently at 1.2715) only descended to 1.2680, not 1.2650 which was possible, and the upwards Wave c is now headed back up towards a target between 1.2750 and 1.2790, which will be the top of the upwards Wave 4 corrective wave.

The top of the Wave 4 at about 1.2750 to 1.2790 (best guess 1.2775) will be an excellent opportunity to short EUR/USD, with a target of about 1.2550.

This analysis was also quite good:

Wednesday September 13 11:00 ET

EUR/USD may or may not have fulfilled our system criteria for shorting it when it met the price of 1.2734 at 8:30 ET yesterday morning, following our last prediction. At first we thought it had fulfilled our entry criteria, but upon more careful study, we believe that it may rise one more time to about 1.2750 as previously expected. It very nearly completed our criteria on the Elliott Wave pattern, but seems to have been short one step. On the one hour chart it looks fine, but on the one minute chart it seems to have "rounded off a corner". However, we believe that on some occassions the trend can reverse with one less than a complete set on a one minute perspective.

On our second model we had achieved a potential reversal point, but not a strong potential. A rise to 1.2750 would be much preferable. So we will wait and see, and learn from the next move. A short trade with a stop at about 1.2766 is likely to succeed. The entry point is still in question, but if it rises again to 1.2750, as it well could, then we would have an excellent trade opportunity.

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This following trade signal shorting EUR/USD at 1.2720 was based on a miscount of the Elliott Waves, and not waiting for a more favorable (higher) entry point according to our second analytical model :

Thursday September 14 6:45 ET

EUR/USD rose as predicted above, right on queue ( "Now that EUR/GBP has hit its target it is possible for EUR/USD to rise and catch up somewhat with GBP/USD"), as soon as EUR/GBP had reached its lower target.

Because EUR/USD hadn't risen as much as GBP/USD, however, the stop on EUR/USD has to be larger ( 55 pips risk on EUR/USD compared to 34 pips risk on GBP/USD), so the Reward : Risk Ratio on this trade isn't as good as the one shorting GBP/USD above.

Trade Signal #170 Sell EUR/USD at 1.2720
Stop is 1.2773
Target is 1.2550
Risk is 55 pips
Reward is 170 pips
Reward : Risk Ratio is 3.1 to 1

For research purposes only.

Thursday September 14 14:00 ET

Although our trading model identified the point of 118.13 as a likely trend reversal point on USD/JPY, we only noticed this after the fact. We hoped for a rise to close to this level, to achieve a mediocre trade opportunity by trading down the "c" wave of this corrective trend. Careful inspection indicates that the top of the "c" wave occured at 1:20 ET on September 13 when USD/JPY rose to 118.00. This would have offered a fair low risk: high reward trade opportunity. However, we missed this opportunity.

Since then USD/JPY has fallen 70 pips to an interim low of 117.31. Our predicted low for this corrective trend is between 117.00 and 117.20, which will present a good opportunity to trade up the next impulse wave towards a target at about 118.40.
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Previous comments and trade signal:

Wednesday September 13 12:00 ET

Yesterday when USD/JPY rose to 118.13 at 14:20 ET it fulfilled our system criteria for a trend reversal point. If it rises again to this level or near to it, then we will have a low risk / medium reward trade opportunity. This downwards trend is only a corrective four wave. We would be trading the "c" of a complex corrective fourth wave. It is thus not an optimum trade, but we will enter it here to test our model.

Trade Signal #167 sell USD/JPY at 117.98
Stop is 118.26
Target is 117.25
Risk is 29 pips
Reward is 70 pips
Reward : Risk Ratio is 2.4 to 1

For research purposes only.