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Thoughts of a shorting

  • #1
  • First Post: Oct 17, 2007 9:35pm Oct 17, 2007 9:35pm
Hey gang, I've been a bit quiet lately, off working on my own devious methods and what not, but I've hit upon a bit of a "burgeoning play" to my eyes, but I can't seem to quite put myself 100% behind it. The gut feeling just isn't quite there. Then again, that may be a bit of a shoot from the hip versus planned shot kind of thing. From every piece of evidence I have, it's a right play and a solid potential profit earner, but I can only put myself about 75% behind it. Even the fundamentals line up to corroborate what I see on the chart, but I just can't bring myself to pulling the trigger. What do you gents think?

The set up I see is shorting this sucker for at least a good 250 pips, if not a full 500. The other thing to look at is that the price has touched the EMA two days back and then pierced it quite well yesterday and is sitting on it today (It's two 13 period EMAs, one weighted on open prices, the other on close prices). Plus, the last four days have been a solid four day downtrend with each high quite successively lower than the last. Then from there, the fundamentals that we've been seeing thus far this week of weaker GBP figures and the forecast for more weaker figures definitely seem to nudge this supposition of mine in the profitable direction. Everything seems to be in alignment, but my gut instinct just isn't there (yet?). This definitely has the makings of one of those "I should've just done it and let it make me money" trades.

Bueller? Bueller?
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Never underestimate the powers of the Force.
  • #2
  • Oct 17, 2007 9:52pm Oct 17, 2007 9:52pm
you want to short a carry? ok.

I'd much rather buy it at a good price.
  • #3
  • Edited 11:06pm Oct 17, 2007 10:36pm | Edited 11:06pm
Although I agree with Duke that shorting a major LONG trending pair isn't the best way to trade, I think a solid trading system will permit one to short a pair like GBP/JPY and get away with it.

Having stated that, I do think that your "but I just can't bring myself to pulling the trigger" statement is the trouble that lies beneath your worry... not the fact that you are shorting or going long or whatever.

I think that you should trade with 1 - 2% or so of your leveraged capabilities, this way pulling the trigger would not be so difficult. If your bias is to the downside and your system can get you out of a bad trade ... go for it. Though I really think you may need to scale down your risk. Will you feel sick to your gut and be depressed if the bar goes up to those other green lines rather than the ones you project? If yes, take it easy. This is a marathon, one trade shouldn't worry you so much.

If I am off base, let me know. I am not a professional by any means and typically do not give advice. This is just something I feel may help out.

Lastly, I would not worry, if you even are, about not getting in on some good shorts. The key is this, will you have an account left when the bottom does fall out of pairs like GBP/JPY?

Quoting The Jedi
I see your point about using proper risk sizing per trade, and I do use proper money management (I'm a risk-taker at 3%, lol). It's not that I'd be afraid of using up too much margin or losing money, my gut instinct just isn't there.

I firmly believe in using one's gut instinct to trade with, mostly because it works for me. Kind of like how you can tell who your mate was on the phone with, even if you never heard a word of the conversation from either of them. You're not really sure how you know, but you just know. What can I say? The force works in mysterious ways...
Sounds like you are making a fine approach toward this. I personally wouldn't take the trade then. If your gut (along with your system) serves you well more times than not ... just let this one go. There will certainly be more trades.

Good trading to you!
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #4
  • Edited 11:23pm Oct 17, 2007 10:47pm | Edited 11:23pm
Quoting dunningduke
you want to short a carry? ok.

I'd much rather buy it at a good price.
Definitely a fair point, but I think I'm coming at it from the opposite view point:

One, I'd rather trade for a moderate and modest pip target than hold and carry for now. If I had the capital, I could invest some money into a hold and carry strategy.

Two, I'm after pips, not an interest payout. I'm willing to bet that it'd take no more than three days for that trade to reach the 250 pip profit mark forcing me to pay about ten pips of interest along the way, which is fine to me. If I thought that it'd take longer than that, I'd go nowhere near this trade.

Three, I won't disagree that the pair will more than likely correct itself going northward after that 250 pip or so move down, and that would be a very good point to reverse and go long (or just to enter long regardless). But in the interim, I see this as a good source of a couple hundred pips.

Edit: I got a bit defensive here, and I decided to edit this post to soothe my fevered brow.
Never underestimate the powers of the Force.
  • #5
  • Oct 17, 2007 10:53pm Oct 17, 2007 10:53pm
Quoting StockKJay
Although I agree with Duke that shorting a major LONG trending pair isn't the best way to trade, I think a solid trading system will permit one to short a pair like GBP/JPY and get away with it.

Having stated that, I do think that your "but I just can't bring myself to pulling the trigger" statement is the trouble that lies beneath your worry... not the fact that you are shorting or going long or whatever.

I think that you should trade with 1 - 2% or so of your leveraged capabilities, this way pulling the trigger would not be so difficult. If your bias is to the downside and your system can get you out of a bad trade ... go for it. Though I really think you may need to scale down your risk. Will you feel sick to your gut and be depressed if the bar goes up to those other green lines rather than the ones you project? If yes, take it easy. This is a marathon, one trade shouldn't worry you so much.

If I am off base, let me know. I am not a professional by any means and typically do not give advice. This is just something I feel may help out.

Lastly, I would not worry, if you even are, about not getting in on some good shorts. The key is this, will you have an account left when the bottom does fall out of pairs like GBP/JPY?
I see your point about using proper risk sizing per trade, and I do use proper money management (I'm a risk-taker at 3%, lol). It's not that I'd be afraid of using up too much margin or losing money, my gut instinct just isn't there.

I firmly believe in using one's gut instinct to trade with, mostly because it works for me. Kind of like how you can tell who your mate was on the phone with, even if you never heard a word of the conversation from either of them. You're not really sure how you know, but you just know. What can I say? The force works in mysterious ways...
Never underestimate the powers of the Force.
  • #6
  • Edited 11:14pm Oct 17, 2007 11:07pm | Edited 11:14pm
Quoting The Jedi
Edit: I got a bit defensive here, and I decided to edit this post to soothe my fevered brow.
Hi Jedi,

one, I don't post a lot because people tend to be overly aggressive.
Two, I didn't mean to put you down or attack your strategy. I am sorry if it seemed I had.
Three, I enjoyed your post; that's why I posted a reply.
Four, I only meant to say that gj carry has a propensity to go up by a lot...sometimes you can buy it really cheaply though. I am certainly not putting your system in question and myself believe that GBP is a bit shaky at the moment. However, if you re-read my post, you'll see that I was talking about myself not willing to short it...I am sorry to have offended you.
In the future, should I will not reply to your posts unless I agree on all points??
Finally, it is a good thing I only read the edited reply. I wish you a good luck with the trade.

Edit: Some trades I was uncertain about have turned out to be my most profitable in the past.
  • #7
  • Oct 17, 2007 11:20pm Oct 17, 2007 11:20pm
Quoting dunningduke
Hi Jedi,

one, I don't post a lot because people tend to be overly aggressive.
Two, I didn't mean to put you down or attack your strategy. I am sorry if it seemed I had.
Three, I enjoyed your post; that's why I posted a reply.
Four, I only meant to say that gj carry has a propensity to go up by a lot...sometimes you can buy it really cheaply though. I am certainly not putting your system in question and myself believe that GBP is a bit shaky at the moment. However, if you re-read my post, you'll see that I was talking about myself not willing to short it...I am sorry to have offended you.
In the future, should I will not reply to your posts unless I agree on all points??
Finally, it is a good thing I only read the edited reply. I wish you a good luck with the trade.

Edit: Some trades I was uncertain about have turned out to be my most profitable in the past.
Don't worry mate, I feel I overreacted a bit and I went back and tried to really put out what I meant instead of a defense, especially after I re-read what you had written. I too don't post mostly because I fear that too many people will get offensive for no reason or without a supporting reason, and then I went and didn't help the situation with that one. It definitely is good to get more than one view point, especially since that's what I was posting for.

Thanks for the well wishes mate.
Never underestimate the powers of the Force.
  • #8
  • Oct 18, 2007 9:49am Oct 18, 2007 9:49am
Hi Jedi;
I agree that the pair looks to be headed down - my problem with shorting it atm is that it isn't giving off long term sell signals yet, it's tendency to pull back is pretty strong (and expensive), it has a pretty wide variance, and the roll over charges (i.e. reverse carry) is pretty expensive. So for me it's a daytrade, mostly off the +DI(14) and -DI(14) cross (use the ADX(14) if you have MT4 for those) and the CCI(28) (the numbers aren't rigourous, they just seem to be practical, happy to hear other suggestions as I haven't run an analysis on them yet) off the hourlies, and only trading short. I'll probably miss the 500p down move, but then again I'll definitely miss the 500p up move, so I'm ok with the little ones (I like to look for a resistance 1 to 2x times the ATR(14) to put a SL). A day below about 235.40 might open up a longer term trade. But then again there's always the BoJ, ready to make these best laid plans "gang agly"..
  • #9
  • Oct 18, 2007 10:14am Oct 18, 2007 10:14am
You sure you wanna short GBPJPY at this precise junction? You might want to wait for that trendline and that S/R line to give way first...
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  • #10
  • Oct 18, 2007 11:06am Oct 18, 2007 11:06am
Seeing as how I'm halfway to my pip target, I think it was a good idea so far. Of course, we shall see how it ends, and then I'll probably come back to ride the long with you guys.
Never underestimate the powers of the Force.
  • #11
  • Oct 18, 2007 11:35am Oct 18, 2007 11:35am
Quoting The Jedi
Seeing as how I'm halfway to my pip target, I think it was a good idea so far.
One quick comment only: in my opinion, results do not grant validity to a trade. Good results based on a bad trade still makes it a bad trade. Bad results on a good trade still makes it a good trade.

I am not saying that you were wrong entering short, please don't missunderstand me. I'm just saying that trade quality should not be equalled to the results obtained.
  • #12
  • Oct 18, 2007 11:35am Oct 18, 2007 11:35am
Whatever you do, if shorting, think about building the same position in the futures market to avoid the carry interest - especially if you plan on holding for a while.
Man who scratches ass should not bite fingernails
  • #13
  • Oct 18, 2007 11:57am Oct 18, 2007 11:57am
Quoting WTB
One quick comment only: in my opinion, results do not grant validity to a trade. Good results based on a bad trade still makes it a bad trade. Bad results on a good trade still makes it a good trade.

I am not saying that you were wrong entering short, please don't missunderstand me. I'm just saying that trade quality should not be equalled to the results obtained.

It depends how you look at it. From a longer term perspective, I would much rather make "bad trades" and make money than "good trades" and lose money. To say a trade is good is to mean that you stuck to your plan, however if your plan consistently loses money, well then collectively you are making bad trades - In theory, every trade sounds good if it is profitable over time and sounds bad if it loses overall. That is unfortunately the hard truth.

If trade quality is not directly proportional to the results obtained then what are you trading for. Entering quality trades that consistently lose money doesn't make any sense to me.

I understand what you are saying, but not everything is one dimensional; while making good trades in terms of soundly executing a sound trade plan is part of quality trading, without this whole process being results(profit) oriented - well...you will be one smart broke ass.

So if you made money - it was a good trade.Period. If you lost money, it was a bad trade. No need to complicate this. As you trade more and more, you will try to make more good trades(ie, ones that make money) and less bad ones(ie lose money).

A good trader makes money, a bad one loses money. You can be a good trader and make bad trades and a bad trader with good trades, the reason doesn't really matter as it is only justified after the fact.
Man who scratches ass should not bite fingernails
  • #14
  • Oct 18, 2007 12:08pm Oct 18, 2007 12:08pm
Quoting Leugimp
Whatever you do, if shorting, think about building the same position in the futures market to avoid the carry interest - especially if you plan on holding for a while.
You still in effect pay the interest in the futures market. It's just built into the pricing. Like GBP/JPY contracts are around 100 pips apart for each month further you go out
  • #15
  • Oct 18, 2007 2:49pm Oct 18, 2007 2:49pm
While that gap does close in time as you get closer to expiration, I have found that their is an inefficiency in this adjustment over the term of a week, depending on where you are in relation to the contract month, which doesn't account for the carry interest paid, making the range in trading, although at different prices very similar(enough to justify a move to futures in that case if execution is not a problem) - remember, this adjustment in price is true for opening and closing of positions - as long as you make your price adjustments, you can usually pick up the same range without having to pay the interest.
Man who scratches ass should not bite fingernails
  • #16
  • Oct 18, 2007 5:08pm Oct 18, 2007 5:08pm
Quoting Leugimp
It depends how you look at it. From a longer term perspective, I would much rather make "bad trades" and make money than "good trades" and lose money. To say a trade is good is to mean that you stuck to your plan, however if your plan consistently loses money, well then collectively you are making bad trades - In theory, every trade sounds good if it is profitable over time and sounds bad if it loses overall. That is unfortunately the hard truth.

If trade quality is not directly proportional to the results obtained then what are you trading for. Entering quality trades that consistently lose money doesn't make any sense to me.

I understand what you are saying, but not everything is one dimensional; while making good trades in terms of soundly executing a sound trade plan is part of quality trading, without this whole process being results(profit) oriented - well...you will be one smart broke ass.

So if you made money - it was a good trade.Period. If you lost money, it was a bad trade. No need to complicate this. As you trade more and more, you will try to make more good trades(ie, ones that make money) and less bad ones(ie lose money).

A good trader makes money, a bad one loses money. You can be a good trader and make bad trades and a bad trader with good trades, the reason doesn't really matter as it is only justified after the fact.
No one makes money on the long run with bad trades (we all heard the 95% thingy, haven't we?). You might get lucky and get away with it once, twice, three time... but in the long term there's only one way to achieve consistency, and that's taking sound trades. Any monkey can make money randomly pushing buy/sell buttons over a short time span, but only a good trader will sustain his account in the green in 5 years time.
  • #17
  • Oct 18, 2007 5:36pm Oct 18, 2007 5:36pm
Quoting WTB
No one makes money on the long run with bad trades (we all heard the 95% thingy, haven't we?). You might get lucky and get away with it once, twice, three time... but in the long term there's only one way to achieve consistency, and that's taking sound trades. Any monkey can make money randomly pushing buy/sell buttons over a short time span, but only a good trader will sustain his account in the green in 5 years time.
Before I get confused, were you saying the first time around that you thought I was making a bad trade on this one? By my count all the evidence pointed to a good trade. It fit my trading style and plan first and foremost. The technicals showed me a trade setup, price action showed me a trade setup, and even the news fundamentals showed me a reinforcement of the trade direction. By my counts, that's almost a perfect trade setup since everything came into line, painting the same picture.

I took the trade and so far things are definitely looking good.
Never underestimate the powers of the Force.
  • #18
  • Oct 18, 2007 6:08pm Oct 18, 2007 6:08pm
Quoting The Jedi

I took the trade and so far things are definitely looking good.
Good for you! Man, I'm glad you took it.
  • #19
  • Oct 18, 2007 6:09pm Oct 18, 2007 6:09pm
Quoting blueruby
Good for you! Man, I'm glad you took it.
Thanks mate, always good to see some supportive voices on here!
Never underestimate the powers of the Force.
  • #20
  • Oct 18, 2007 9:48pm Oct 18, 2007 9:48pm
Quoting WTB
No one makes money on the long run with bad trades (we all heard the 95% thingy, haven't we?). You might get lucky and get away with it once, twice, three time... but in the long term there's only one way to achieve consistency, and that's taking sound trades. Any monkey can make money randomly pushing buy/sell buttons over a short time span, but only a good trader will sustain his account in the green in 5 years time.

Well, that is very subjective and your comment is living proof. We are basically saying the same thing while using different definitions for good and bad. What I'm trying to say is a "good setup" rationally, with "good analysis" rationally, with "good execution" rationally and bad results is a bad trade. You could go through the motions a million times and have every reason to believe they were good trades, but in the end, if you worked for me and were net negaitve, I would fire you. Just the same, replacing the word good above with the word bad and coupling it with positive results and I would give you a raise. Bottom line is - you and I are nobody to judge what is good or what is bad until after the fact. We can have opinions, but in the end, our opinions do not matter, it is what is on the P&L. People need to stop separating the two. Dont learn how to go through the motions alone, learn how to profit. Tailor everything in your business to make money - Dont kid yourself, everything counts and in the end it is the penny here and the penny there that makes the difference. Ask my first broker. I had a real money learning account that I blew with a decent enough starting sum to make me feel it but not enough to make me cry. I traded this account for approx 1 year and in the end I blew it. After taking some time off I went back to review what happened and the one thing that stuck out more than anything else was that the net comissions paid(in spread) during that time was almost 3 times what I had lost - bottom line is that If I had put more time into getting the best deal with a reliable broker(which was very possible at that time) for half of the spread that I was really paying my account would have ended that time period up 50% everything else being held equal. The reality is - at one point, all of those trades were bad trades as a whole because they lost money - but one little inefficiency turned around and I was all of a sudden a genius. The rest has been history. Now I am no genius, but being stingy has really paid off for me. It has caused me to become not only a much more disciplined trader, but just more disciplined in general - in every aspect of my life. I may be coming across arrogantly to you, but I will be the first to say that I am nothing more than just a conscientious person and I hate to waste. Trading to me is no different and without being 150% results oriented it would just be a big waste of time and money and sanity.

I have jumped around too much here and your point is well taken. My point is that good and bad are truly only determined after the fact. If it lost money and you call it good just because you ran through sound motions, than you are of the insecure type that needs that bullshit psychological pat on the back when you make a bad trade. Seperate yourslef from the trade will you - you can make bad losing trades and still be a good trader if you are net profitable. That will be hard to accomplish though if you are calling losing trades good trades.

Just an opinion

I guess another good way to make money in forex is to start a blog and sell a course on trading.
Man who scratches ass should not bite fingernails
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