Dear 4X Following Friends:
I had a nice “Straddle on News” winner yesterday on the Swiss Franc in my demo account where I am putting Michael Stewart’s recommended procedure to a field test but there were plenty of valuable lessons to be learned from it.
The scheduled “news event” upon which it was predicated was the Swiss Consumer Price Index report for October which was released promptly at 1:45 am Eastern. I had gotten this off the Daily FX Global Economic Calendar, where it was a bolded event.
The ATR was approximately 17 off the hourly chart at that time and I added a generous 7 pips to it for my entry price to be sure I was on a “breakout” if it moved and to try to give me enough leeway to avoid a “headfake” move in the wrong direction that could trigger a leg improvidently. And on this occasion, it worked. Although there was a dip after the 1:45 open, it wasn’t deep enough to trigger my short leg. The open price at 1:45 am Eastern for the USD/CHF was 2789 which gave me an entry of 2813 long and 2765 short. I set 60 pip limits and 30 pip stops and I was ready.
The attachment shows you the result of the play. As is usual with SCHEDULED news events OTHER than the NFP, the movement was rather slow and graceful instead of violent and choppy and immediate, as it sometimes or even usually is with the NFP. Nothing happened for quite a while and then an upward movement began and the long leg of my straddle triggered at 4:59 am Eastern at exactly 2813 which is what my entry order specified and limited out at 10:32 am at 2873 for my 60 pip winner. The floating pip value of the CHF at this time of a measly $7.77 or so resulted in a profit of $466.09 or $4,660.90 on 10 standard lots – which is the level I aspire to trade on routinely. That’s not bad. If I can duplicate Mike Stewart’s results and win 3, 4 or 5 out of 5 of these every week, I will be feeling no pain. We shall see what we shall see.
So what are the big lessons to be learned from this?
First, if you look at the chart, you will see that the ultimate movement that resulted in the win did not begin until exactly 8:30 am, coincident with the release of the U.S. Non-farm Productivity report and the Jobless Claims number, additional bolded events. THIS was the catalyst that won this trade. The CHF report didn’t move the chart worth a fig!
Our own superb Economic Calendar doesn’t even list the CHF CPI report, let alone rank it! I did notice this since I routinely compare what the Daily FX calendar says with what our calendar says. Indeed, that’s why I went looking for this calendar in the first place! But I played the report anyway, just to see what would happen. And the answer is NOTHING. I won this trade from luck because the US report moved the chart in the direction I was in already and moved it enough to limit me out. But it could just as easily have gone in the other direction, stopped out my long, triggered my short and then come back again and stopped that out for a 600 pip combined loss!
So Lesson #1 I take from this is to shy away from the Swiss CPI in the future and possibly to shy away from any bolded event on the Daily FX calendar that is not confirmed by our own calendar.
Lesson #2 is essentially that it is probably wise to add a generous number of pips to the ATR to try to avoid having the wrong leg of the straddle triggered by zig zag movement which is pretty common. However, it must be noted that the higher and lower from the open price you set your straddle, the more likely it is that you won’t reach your 60 pip limit. But if you’re wise enough when you are in profit to realize that the trade has probably reached its peak – and you are monitoring the play instead of just setting and forgetting it – you can always close it with a lesser profit. As my old options guru always used to say, “Nobody ever went broke taking a profit.”
In closing, let me say this. The other day in the thread I started that outlined this play called “Straddles on News,” someone mentioned about “slippage” and the possibility of getting filled on straddles at much different rates than you specified, sometimes as much as 30 pips or so. With all due respect, I would get another broker. I HAVE NEVER HAD AN ENTRY ORDER FILLED AT OTHER THAN THE EXACT PRICE I HAVE SPECIFIED. Granted, my experience is short in this market but I have been paper-trading it since May, 2004 and playing it “live” since February, 2005, and I have set countless entry orders and never, ever had “slippage” of so much as ONE pip, let alone 30! That sort of nonsense is what I expect you to have to put up with in the other markets, not in the 4X! The incredible liquidity of this market should guarantee fills at your exact price at all times. And if you are getting filled 30 pips from where you specified you wanted to be filled, I would have a real serious heart to heart chat with my broker or else get another broker pronto! There’s no need for it and I think no excuse for it.
This is a GREAT market to trade! The money to be made in this market with miniscule investment is so mind-boggling, it practically defies belief.
Get enthusiastic and stay enthusiastic! Energized enthusiasm is the key, I'm certain of it! Avoid negative thoughts and people like the very plague itself! They have nothing to offer us but depression, doubt, devastation and defeat. Don't touch 'em with a 10 foot pole. Surround yourself with positive, supportive people only and think positively always. As one thinketh, so he is. Old wisdom.
Have a great, safe weekend and good trading, all!
Respectfully submitted,
Yr fellow 4X Trader,
hiyo
I had a nice “Straddle on News” winner yesterday on the Swiss Franc in my demo account where I am putting Michael Stewart’s recommended procedure to a field test but there were plenty of valuable lessons to be learned from it.
The scheduled “news event” upon which it was predicated was the Swiss Consumer Price Index report for October which was released promptly at 1:45 am Eastern. I had gotten this off the Daily FX Global Economic Calendar, where it was a bolded event.
The ATR was approximately 17 off the hourly chart at that time and I added a generous 7 pips to it for my entry price to be sure I was on a “breakout” if it moved and to try to give me enough leeway to avoid a “headfake” move in the wrong direction that could trigger a leg improvidently. And on this occasion, it worked. Although there was a dip after the 1:45 open, it wasn’t deep enough to trigger my short leg. The open price at 1:45 am Eastern for the USD/CHF was 2789 which gave me an entry of 2813 long and 2765 short. I set 60 pip limits and 30 pip stops and I was ready.
The attachment shows you the result of the play. As is usual with SCHEDULED news events OTHER than the NFP, the movement was rather slow and graceful instead of violent and choppy and immediate, as it sometimes or even usually is with the NFP. Nothing happened for quite a while and then an upward movement began and the long leg of my straddle triggered at 4:59 am Eastern at exactly 2813 which is what my entry order specified and limited out at 10:32 am at 2873 for my 60 pip winner. The floating pip value of the CHF at this time of a measly $7.77 or so resulted in a profit of $466.09 or $4,660.90 on 10 standard lots – which is the level I aspire to trade on routinely. That’s not bad. If I can duplicate Mike Stewart’s results and win 3, 4 or 5 out of 5 of these every week, I will be feeling no pain. We shall see what we shall see.
So what are the big lessons to be learned from this?
First, if you look at the chart, you will see that the ultimate movement that resulted in the win did not begin until exactly 8:30 am, coincident with the release of the U.S. Non-farm Productivity report and the Jobless Claims number, additional bolded events. THIS was the catalyst that won this trade. The CHF report didn’t move the chart worth a fig!
Our own superb Economic Calendar doesn’t even list the CHF CPI report, let alone rank it! I did notice this since I routinely compare what the Daily FX calendar says with what our calendar says. Indeed, that’s why I went looking for this calendar in the first place! But I played the report anyway, just to see what would happen. And the answer is NOTHING. I won this trade from luck because the US report moved the chart in the direction I was in already and moved it enough to limit me out. But it could just as easily have gone in the other direction, stopped out my long, triggered my short and then come back again and stopped that out for a 600 pip combined loss!
So Lesson #1 I take from this is to shy away from the Swiss CPI in the future and possibly to shy away from any bolded event on the Daily FX calendar that is not confirmed by our own calendar.
Lesson #2 is essentially that it is probably wise to add a generous number of pips to the ATR to try to avoid having the wrong leg of the straddle triggered by zig zag movement which is pretty common. However, it must be noted that the higher and lower from the open price you set your straddle, the more likely it is that you won’t reach your 60 pip limit. But if you’re wise enough when you are in profit to realize that the trade has probably reached its peak – and you are monitoring the play instead of just setting and forgetting it – you can always close it with a lesser profit. As my old options guru always used to say, “Nobody ever went broke taking a profit.”
In closing, let me say this. The other day in the thread I started that outlined this play called “Straddles on News,” someone mentioned about “slippage” and the possibility of getting filled on straddles at much different rates than you specified, sometimes as much as 30 pips or so. With all due respect, I would get another broker. I HAVE NEVER HAD AN ENTRY ORDER FILLED AT OTHER THAN THE EXACT PRICE I HAVE SPECIFIED. Granted, my experience is short in this market but I have been paper-trading it since May, 2004 and playing it “live” since February, 2005, and I have set countless entry orders and never, ever had “slippage” of so much as ONE pip, let alone 30! That sort of nonsense is what I expect you to have to put up with in the other markets, not in the 4X! The incredible liquidity of this market should guarantee fills at your exact price at all times. And if you are getting filled 30 pips from where you specified you wanted to be filled, I would have a real serious heart to heart chat with my broker or else get another broker pronto! There’s no need for it and I think no excuse for it.
This is a GREAT market to trade! The money to be made in this market with miniscule investment is so mind-boggling, it practically defies belief.
Get enthusiastic and stay enthusiastic! Energized enthusiasm is the key, I'm certain of it! Avoid negative thoughts and people like the very plague itself! They have nothing to offer us but depression, doubt, devastation and defeat. Don't touch 'em with a 10 foot pole. Surround yourself with positive, supportive people only and think positively always. As one thinketh, so he is. Old wisdom.
Have a great, safe weekend and good trading, all!
Respectfully submitted,
Yr fellow 4X Trader,
hiyo
Attached File(s)
CHFNewsStraddleWinner11-03-05.doc
220 KB
|
456 downloads