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Low Risk, High Reward Trading Experiment

  • #3,001
  • Mar 1, 2007 12:21pm Mar 1, 2007 12:21pm
Thursday March 1 at 13:15 ET

USD/CHF has risen again to 1.2235, not as far as our stop, but forming a much more typical A-B-C pattern, (A more nearly = C) and is thus in an even superior set-up for a short at the current price of 1.2225.

_________________________________________________________
_________________________________________________________

Previous trade experiment:

Thursday March 1 at 2:45 ET
USD/CHF has seemingly completed an upwards corrective A-B-C wave pattern, come to a high probability reversal value, and created a system compliant low risk / high reward trade opportunity.
Trade Experiment #353 Sell USD/CHF at 1.2205
Stop is 1.2251
Target is 1.2100 / 1.1910
Risk is 50 pips
Reward is min. 295 pips
RRR is min. 5.9 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : good

For research purposes only.

Wave hypothesis: Wave 5 down.
  • #3,002
  • Mar 1, 2007 8:10pm Mar 1, 2007 8:10pm
Quoting matador
What target you think ? 1,5300 / 5250 / 5200 ?
As expected, EUR/CAD went up for one more (fifth) smaller wave to a new high of 1.5534. The target for the short trade is first 1.5200, then 1.5000. This suggests that USD/CAD is due for a strong sell-off.
  • #3,003
  • Mar 1, 2007 8:44pm Mar 1, 2007 8:44pm
Hi ITME, do you see any opportunity for GBP/JPY and EUR/JPY currently. It looks like they stuck right now and thinking where to go.
  • #3,004
  • Edited 2:01am Mar 2, 2007 1:15am | Edited 2:01am
Quoting itme
Wednesday February 28 at 10:15 ET
USD/JPY has completed an upwards corrective A-B-C wave pattern, come to a high probability reversal value, and created a system compliant low risk / high reward trade opportunity.
Trade Experiment #352 Sell USD/JPY at 118.80
Stop is 119.21
Target is 117.00 / 116.50
Risk is 30 pips
Reward is min. 176 pips
RRR is min. 5.9 to 1
Confidence level: good
Accuracy: high
Reward / Risk Ratio : good
For research purposes only.
Wave hypothesis: Wave 5 down.
This trade was picture perfect. USD/JPY descended 180 pips to the first target of 117.00 (actually 4 pips lower at 116.96) and then bounced up 84 pips to 117.80, before heading back down towards the second target of 116.50. The reward / risk ratio of this first part of the trade is 5.9 to 1
  • #3,005
  • Mar 2, 2007 1:52am Mar 2, 2007 1:52am
Quoting sajmeri
Hi ITME, do you see any opportunity for GBP/JPY and EUR/JPY currently. It looks like they stuck right now and thinking where to go.
When you posted your comment, sajmeri, GBP/JPY was at about 230.40, and was in the process of finishing its fourth corrective wave up. After that, when it rose to 230.61, it started down again and made it to 229.55, which is a drop of 106 pips.This represents 1-2-3 of the downwards fifth wave trend caused by the steep fall of both GBP/USD and USD/JPY over the past two days, which means the carry traders have been liquidating their GBP investments (gilts) and buying Yen to cover their debts. The target is about 229.00, 228.60, or lower.
  • #3,006
  • Edited 6:29pm Mar 2, 2007 2:29am | Edited 6:29pm
Regarding the recent failed trades going long on GBP/JPY, they were good trades technically, but there was a special circumstance - USD/JPY was falling through the floor and the hundreds of billions of dollars in carry trades were unwinding. (Hiroshi Watanabe, vice finance minister for international affairs and who's in charge of forex intervention, estimated the size of the yen carry trade at several tens of trillions of yen, and said that he expected the Japanese central bank to continue normalising interest rates.) It was time to suspend my technical trading method and recognise that a very large fundamental force was moving the market. I came up with the trade concepts without reading the fundamental news and only employing technical analysis, which was invalidated by the circumstances in the world. This was a case of world events over-riding normal technical analysis.

The wave count was tricky on both USD/CHF and USD/CAD - basically very similar. In both cases there is a strong downtrend happening. USD/CHF has dropped 435 pips since January 26, and has one more wave down to go. That is what we are trying to catch. The same goes for USD/CAD which dropped 310 pips since February 8. What we had was the top of a Wave 3 of either Wave B or Wave C up, which I mistook for the top of a Wave 5. (Entering at the top of Wave 3 is not a bad thing, because there is almost always a sizeable downwards Wave 4, so we can either exit at the bottom of what always follows, which is either Wave 1 down or Wave B of Wave 4 down, and re-enter the short position at a better price when we see what comes next. Or at least bring up the stop to break even.)

Following our shorting of USD/CAD there was then a downwards move as predicted, but not the big move we were shooting for. USD/CAD went down from a high of 1.1737, just 12 pips higher than my conservative entry price, down to 1.1672, which is a drop of 53 pips from my entry price. This was the bottom of a completed five wave pattern, so we should have exited there. And then USD/CAD rose 77 pips to 1.1749 today, still slightly short of our stop, and it will probably go up one more time before the top of Wave 5 is met at about 1.1765. [USD/CAD rose to a weekly high of 1.1772 just before the close of trading. This could be the ultimate high, or there could be one more small upwards wave.]

So either exit if USD/CAD descends to 1.1700, which I expect it to do, [actually it fell to 1.1706] and also raise your stop accordingly to about 1.1806, or if not in the market, place an entry order to sell at 1.1765. The profit target is 1.1650 (115 pips lower) conservatively, because this could just be Wave A up of a fourth wave correction, meaning that it will fall in a sizeable B Wave then rise again in a C Wave before it descends in earnest.

I had exactly the same problem with my USD/CHF short trade prediction, which though still open, is in danger of being stopped out if it rises more before falling strongly. It also was an accurate entry, which also coincidentally fell 55 pips then also rose to almost our stop in the Wave B of the downwards Fourth Wave. We should exit at the bottom of the downwards Wave C at about 1.2225 and re-enter a short position at the top of Wave 5 at about 1.2260. [USD/CHF recently fell to 1.2227 and then rose to exactly 1.2260]

At the same time I came up with the USD/CAD and USD/CHF trades, I also came up with the USD/JPY short trade that worked perfectly as noted above.
  • #3,007
  • Edited 1:30pm Mar 2, 2007 4:06am | Edited 1:30pm
Thursday March 1

3:30 CHF Svme PMI 63.5 62.0 62.0
3:55 EUR German Manufacturing PMI 57.2 58.6 58.5
4:00 EUR Manufacturing PMI 55.6 55.7 55.5
4:30 GBP Manufacturing PMI http://www.forexfactory.com/images/m...act_medium.gif 55.4 53.0 52.8
4:30 GBP Net Lending to Individuals m/m 10.7B 11.0B 11.3Br
5:00 EUR CPI y/y (p) 1.8% 1.9% 1.9%
6:00 GBP CBI Distributive Trades Realized http://www.forexfactory.com/images/m...mpact_high.gif 19 22 30
6:00 GBP CBI Distributive Trades Expected 16 18 22
8:30 USD Core PCE Price Index m/m http://www.forexfactory.com/images/m...mpact_high.gif 0.3% 0.2% 0.1%
8:30 USD Personal Spending m/m 0.5% 0.4% 0.7%
8:30 USD Personal Income m/m 1.0% 0.3% 0.5%
8:30 USD Unemployment Claims 338K 330K 331Kr

8:30 CAD Current Account 3.0B 6.0B 5.3Br
8:30 CAD IPPI m/m -0.1% 0.3% 1.4%

10:00 USD ISM Manufacturing Index http://www.forexfactory.com/images/m...mpact_high.gif 52.3 50.0 49.3r
10:00 USD ISM Manufacturing Prices http://www.forexfactory.com/images/m...act_medium.gif 59.0 53.8 53.0
10:00 USD Construction Spending m/m -0.8% -0.5% 0.6%r
12:00 USD Treasury Secretary Paulson Speaks
Tentative USD Domestic Vehicle Sales 12.6M 12.5M 12.7M

18:30 JPY Core CPI m/m 0.1% 0.1% -0.1%
18:30 JPY Tokyo CPI m/m -0.2% -0.1% 0.2%
18:30 JPY Core Tokyo CPI m/m -0.1% 0.0% 0.2%
18:30 JPY Overall Household Spending y/y 0.6% -0.2% -1.9%
18:30 JPY Unemployment Rate 4.0% 4.1% 4.1%
18:50 JPY Monetary Base y/y -21.1% -21.5% -2.1%

19:30 AUD Retail Sales m/m 0.9% 0.5% 0.2%r
19:30 AUD Current Account -15.1B -14.0B -12.6Br

20:30 JPY Average Cash Earnings y/y -1.4% 0.3% -0.1%
  • #3,008
  • Mar 2, 2007 4:17am Mar 2, 2007 4:17am
Friday March 2 at 5:00 ET

GBP/USD has seemingly completed a downwards corrective A-B-C wave pattern, came to a high probability reversal value, and thus created a system compliant low risk / high reward trade opportunity.

Trade Experiment #354 Buy GBP/USD at 1.9505

Stop is 1.9464

Target is 1.9750

Risk is 44 pips

Reward is min. 241 pips

RRR is min. 5.5 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : good

For research purposes only.

Wave hypothesis: Wave 5 up.
  • #3,009
  • Edited 6:31pm Mar 2, 2007 4:36am | Edited 6:31pm
Re-entry Opportunity for Trade Experiment #351A Sell USD/CAD at 117.42

Stop is 1.1767

p.s. - As in the case with USD/JPY and GBP/JPY, very strong fundamental forces are at work in the market right now. Everything else being equal, this trade experiment based on pure technicals might have worked. However, fundamentals overwhelmed pure technicals and extended the wave beyond the neutral mean, taking the price so far up to 1.1771.

There is considerable trepidation amongst conservative carry traders. When all options are considered, the carry trade is a relatively low risk investment for big market participants who shun leverage for the easy yield collection. Over the past few days the complacent and overbought carry trades have been pitched in a sharp unwinding. This meant wholesale dumping of Canadian dollars in favor of Japanese yen and Swiss francs. Now with the USD/CAD move maturing, market participants are beginning to see the fundamental and technical reasons for a retracement - or at least some consolidation before a continuing upward move back to 1.1880. At the moment, immediate resistance comes in at around 1.1775. This level represents a key support/resistance zone that has survived over the past few weeks; and more importantly, a 61.8 percent Fibonacci retracement of the 1.1880 – 1.1565 loonie-favorable slide. From the fundamental side, today's good GDP number could be the event to trigger a possible rally for the Canadian loonie.

8:30 CAD GDP m/m http://www.forexfactory.com/images/m...mpact_high.gif 0.4% 0.3% 0.3%http://www.forexfactory.com/images/m...us_revised.gif

____________________________________________________
____________________________________________________

Previous trade experiment:

Wednesday February 28 at 10:15 ET

USD/CAD has risen unexpectedly, right to a high probability reversal price, forming a complete A-B-C wave pattern, and created a system compliant low risk / high reward trade opportunity.

Trade Experiment #351A Sell USD/CAD at 117.25
Stop is 117.51
Target is 115.50
Risk is 31 pips
Reward is 170 pips
RRR is 5.5 to 1

Confidence level: good
Accuracy: high
Reward / Risk Ratio : very good

For research purposes only.

Wave hypothesis: Wave 3 down.
__________________________________________________ _____
__________________________________________________ ______
Previous Trade Experiment:

Tuesday February 27 at 20:15 ET

Trade Experiment #351 Sell USD/CAD at 116.77
Stop is 117.11
Target is 115.50
Risk is 39 pips
Reward is 122 pips
RRR is 3.1 to 1

Confidence level: good
Accuracy: high
Reward / Risk Ratio : very good

For research purposes only.

Wave hypothesis: Wave 3 down.
  • #3,010
  • Mar 2, 2007 5:03am Mar 2, 2007 5:03am
Friday March 2 at 6:00 ET

Trade Experiment #350C Buy GBP/JPY at 229.03

Stop is 228.62

Targets are 232.35 / 234.00 / 235.85
Interim target is 231.00

Risk is 50 pips
Reward is 316 / 481 / 666 pips
RRR is 6.3 / 9.6 / 13.3 to 1

Confidence level: good
Accuracy: high
Reward / Risk Ratio : very good

For research purposes only.

Wave hypothesis: Wave 3 upwards of a WAVE 5 up. Alternatively, Wave 1 up of a WAVE 5 up. Alternatively, Wave C upwards of a Wave B up of a large downwards correction.
 __________________________________________________ _______
__________________________________________________ _________

Tuesday February 27 at 4:50 ET
Re-enter Trade Experiment #350A Buy GBP/JPY at 234.90
Stop is 234.34
Target is 240.10
Interim target is 239.50
Risk is 65 pips
Reward is 511 pips
RRR is 7.9 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : good

For research purposes only.

__________________________________________________________
__________________________________________________________

Previous Trade Signals:

Re-enter Trade Experiment #350B Buy GBP/JPY at 233.00

 Tuesday February 27 at 4:50 ET
Stop is 232.49
Target is 238.50
Interim target is 236.35
Risk is 58 pips
Reward is 326 / 541 pips
RRR is 5.6 / 9.3 to 1

Confidence level: good
Accuracy: high
Reward / Risk Ratio : very good

For research purposes only.

Wave hypothesis: Wave 3 upwards of a WAVE 5 up. Alternatively, Wave 1 up of a WAVE 5 up. Alternatively, Wave C upwards of a Wave B up of a large downwards correction.
 __________________________________________________ _______
__________________________________________________ _________

Tuesday February 27 at 4:50 ET
Re-enter Trade Experiment #350A Buy GBP/JPY at 234.90
Stop is 234.34
Target is 240.10
Interim target is 239.50
Risk is 65 pips
Reward is 511 pips
RRR is 7.9 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : good

For research purposes only.
__________________________________________________ ______________
__________________________________________________ ______________
Previous Trade Signal:

Monday February 26 at 11:30 ET

Trade Experiment #350 Buy GBP/JPY at 236.10 (in the future)
Stop is 235.59
Target is 240.10
Interim target is 239.50
Risk is 60 pips
Reward is 391 pips
RRR is 6.5 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : good

For research purposes only.

 Wave hypothesis : Wave 5 up of Wave 3.
__________________
  • #3,011
  • Mar 2, 2007 6:23am Mar 2, 2007 6:23am
sorry itme for keeping ask u about this crazy pair gbpjpy
can't know where it's heading
it's keep droping down ( about 1000 point till now ) 227.53

there isn't any calculating work with it
there is a point to retrace at 227.15
could it goes down to 225.28 with out retracing ?
or what u see ?
If you count on hope in any trade ……. Get out of it
  • #3,012
  • Edited 6:34pm Mar 2, 2007 6:30am | Edited 6:34pm
Friday March 2 at 7:15 ET

Unwinding of the GBP/JPY carry trades has caused a tailspin in both GBP/USD and USD/JPY. GBP/USD has seemingly completed a downwards corrective A-B-C wave pattern, with a highly exaggerated fifth wave down in the Wave C. The price has come to a high probability reversal value, and thus created a system compliant low risk / high reward trade opportunity with a very good RRR value. This is not a safe trade, just an experiment. Under these kinds of conditions, one should confirm a trend reversal, not attempt to predict it.

Trade Experiment #354A Buy GBP/USD at 1.9442

 Stop is 1.9418

Target is 1.9750

Risk is 26 pips

Reward is min. 304 pips

RRR is min. 11.8 to 1

Confidence level: not good
Accuracy: good
Reward / Risk Ratio : excellent

For research purposes only.

Wave hypothesis: Wave 5 up.

p.s. - Note that the stop was ridiculously small for this trade experiment in consideration of the strength of this downwards trend, fueled by the liquidation of GBP/JPY carry trades, which has brought GBP/USD down 260 pips since February 27, and 233 pips since yesterday. The current low is 1.9411, slightly below this anaemic stop.

What might be convincing technical levels for trend reversal in quiet markets, will not be able to stand up to momentum based on further carry trade flows or a fundamental push. This week has taught us what we have thought of before (but became complacent concerning as late), which is that a pure technical based trading system is vulnerable when fundamentals overwhelm the normal pulse, ebb, flow, and rythms of the market, and generate strong trends which trend traders thrive on, but Elliotticians and other technical analysists might be thrown off by in certain cases.

All traders, to avoid shocks and preventable disasters, should keep one eye ever vigilant on the fundamental news in order to be able to adjust their strategy when Gale Force and Hurricane Force events sweep the market into a different mode of travel.
________________________________________________
_________________________________________________

Friday March 2 at 5:00 ET

GBP/USD has seemingly completed a downwards corrective A-B-C wave pattern, came to a high probability reversal value, and thus created a system compliant low risk / high reward trade opportunity.

Trade Experiment #354 Buy GBP/USD at 1.9505
Stop is 1.9464
Target is 1.9750
Risk is 44 pips
Reward is min. 241 pips
RRR is min. 5.5 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : good

For research purposes only.

Wave hypothesis: Wave 5 up.
  • #3,013
  • Mar 2, 2007 6:53am Mar 2, 2007 6:53am
229.03 entry for long have missed but I am seeing reversal point 227.50 for gbp/jpy. Does anybody feel that it will reverse to back 232/238/241 soon.

For me it looks like gbp is oversold and it needs strong reversal.
  • #3,014
  • Edited 2:33pm Mar 2, 2007 6:56am | Edited 2:33pm
Quoting mandoaddam
sorry itme for keeping ask u about this crazy pair gbpjpy
can't know where it's heading
it's keep dropping down ( about 1000 point till now ) 227.53
there isn't any calculating work with it
there is a point to retrace at 227.15
could it goes down to 225.28 with out retracing ?
or what u see ?
I'm having some sport with GBP/JPY, but it keeps getting the better of me. The current low of about 227.15 is a high probability reversal point, and the wave count on the intermediate level looks good, but on the one minute chart it may need one more pulse down. The bottom has either been reached, or is very near I believe. This could be the bottom of a Wave A of a Wave 4, or it could be the bottom of a downwards Wave 1 of a five wave set.

p.s. -The GBP/JPY has experienced a very strong corrective decline from 241.54. It has dropped 1,494 pips to the current low of 226.60, which is probably at or near to the end of this downwards corrective trend. The decline is in its latter stages and has made it to the 61.8% of 217.34-241.54 at 226.64. The pair might have reversed at the earlier bounce point of of 229.45 (which is the 50% of (217.34-241.56). 228.75 is where the C wave (beginning at 238.21) would equal the A wave (241.54-232.14). This level also coincides with the 4th wave of one lesser degree – so support should theoretically be strong just below that price.

The lesson here is that when there is a super strong trend underway on one of the strong moving pairs, one should be extremely conservative when trying to assign a reversal price. The standards of proof must be raised all the way to the top. Obviously there is considerable trepidation amongst conservative carry traders. When all options are considered, the carry trade is a relatively low risk investment for big market participants who shun leverage for the easy yield collection. They also enjoy the returns from the appreciation in GBP/JPY, EUR/JPY, NZD/JPY, etc. when they are advancing, which has been the case for the most part over the past years. The decline in the carry trade currency pairs is their worst nightmare, so they dump their positions in concert to mitigate this risk factor. This creates extreme price volatility.

It is also worth noting that the current GBP/CHF low at 2.3632 is at major support – the 78.6% fibo of 2.3332-2.4765 which is at 2.3639. As is the case with GBP/JPY, the decline from the top is in 3 waves, suggesting a rally is due.
Attached Images
  • #3,015
  • Mar 2, 2007 6:57am Mar 2, 2007 6:57am
I see the area betwen 227.15 and 226.92 is good for retrace
but I need itme opinion

opps I post that before see your post itme
thanks for reply

>> I made some thing so stupid
I went long from several points with out stop lose ( first time doing that)
and now I hope It retrace to close this positions ( actually I hope to get profit to )
If you count on hope in any trade ……. Get out of it
  • #3,016
  • Edited 8:12pm Mar 2, 2007 1:32pm | Edited 8:12pm
Retail sales from Germany were significantly weaker than expected overnight, coming in at –5.1%, but they failed to produce the expected bearish impact on the EUR/USD. However, an ECB interest rate decision may be a more powerful deterrent for the EURUSD to go much higher. With the economies of Italy and France showing further weakness, labor unions becoming more vocal about stopping the tightening cycle, and Eurozone CPI remaining consistently below 2.0% (and last seen falling), and EUR PPI m/m coming in at less than expected at 0.1%, there is increasing pressure on the European Central Bank to treat the March hike deviation from the previous once-per-two-months pace as an insurance move. Going forward, it should be progressively more difficult to rationalize further tightening.

In the US, the University of Michigan consumer sentiment survey came in weak, undoing some of the feel-good factor arising from yesterday's stronger than expected US manufacturing sector PMI.

The pound was trading at week lows against the dollar, as well as being slightly weaker against the euro, as it reversed some of its solid gains yesterday on the back of strong surveys on UK manufacturing and the retail sector.

Friday March 2

2:00 EUR German Retail Sales m/m http://www.forexfactory.com/images/m...act_medium.gif -5.1% -1.3% 2.6%
4:30 GBP Construction PMI 57.3 57.9
5:00 EUR PPI m/m 0.1% 0.3% 0.0%
7:00 USD St. Louis Fed President Poole Speaks http://www.forexfactory.com/images/m...act_medium.gif
8:30 CAD GDP m/m http://www.forexfactory.com/images/m...mpact_high.gif 0.4% 0.3% 0.3%r
10:00 USD Consumer Sentiment (r) http://www.forexfactory.com/images/m...act_medium.gif 91.3 94.0 93.3
23:00 USD Fed Chairman Bernanke Speaks http://www.forexfactory.com/images/m...mpact_high.gif
  • #3,017
  • Mar 2, 2007 2:05pm Mar 2, 2007 2:05pm
Quoting itme
Friday March 2 at 7:15 ET

Unwinding of the GBP/JPY carry trades has caused a tailspin in both GBP/USD and USD/JPY. GBP/USD has seemingly completed a downwards corrective A-B-C wave pattern, with a highly exaggerated fifth wave down in the Wave C. The price has come to a high probability reversal value, and thus created a system compliant low risk / high reward trade opportunity with a very good RRR value. This is not a safe trade, just an experiment. Under these kinds of conditions, one should confirm a trend reversal, not attempt to predict it.

Trade Experiment #354A Buy GBP/USD at 1.9442

 Stop is 1.9418

Target is 1.9750

Risk is 26 pips

Reward is min. 304 pips

RRR is min. 11.8 to 1

Confidence level: not good
Accuracy: good
Reward / Risk Ratio : excellent

For research purposes only.

Wave hypothesis: Wave 5 up.
________________________________________________
_________________________________________________

Friday March 2 at 5:00 ET

GBP/USD has seemingly completed a downwards corrective A-B-C wave pattern, came to a high probability reversal value, and thus created a system compliant low risk / high reward trade opportunity.

Trade Experiment #354 Buy GBP/USD at 1.9505
Stop is 1.9464
Target is 1.9750
Risk is 44 pips
Reward is min. 241 pips
RRR is min. 5.5 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : good

For research purposes only.

Wave hypothesis: Wave 5 up.
hi itme, pedicting cable has been a tough task. you really think of a completed a-b-c pattern?

it seems to me that we are in wave-5 of a large wave-c in a larger wave-4.

so today was a strong wave-3. we should be going up now to about 1.9500-1.9510. this should be the termination point of wave-4. from there itīs going south again for a final wave-5 of a wave-c of a wave-4.

what do you think?

PS: the last wave-5 of this wave-c is either a failure or a extension.
  • #3,018
  • Mar 2, 2007 4:44pm Mar 2, 2007 4:44pm
Quoting Wallboroff
hi itme, pedicting cable has been a tough task. you really think of a completed a-b-c pattern?
it seems to me that we are in wave-5 of a large wave-c in a larger wave-4.
so today was a strong wave-3. we should be going up now to about 1.9500-1.9510. this should be the termination point of wave-4. from there itīs going south again for a final wave-5 of a wave-c of a wave-4.
what do you think?
PS: the last wave-5 of this wave-c is either a failure or a extension.
Thanks, Wallboroff, I'll take a fresh look at this pair and give you my assessment over the next two days. After every major market move we should wash the slate clean and take a fresh look at what the patterns are telling us. Not only should we develop a wave hypothesis, but an assessment of its probability of being correct, and one or more alternative hypotheses, along with their probability of correctness. From this point, careful contemplation is required to evaluate the strategic implications of these hypotheses. Once this is done, the economic fundamental context can be factored in and weighted appropriately in order to develop a working game plan or trading strategy. The economic fundamental context includes both the underlying market sentiments and both recent and impending data releases as well as other "risk events".

In this case, the duration of this corrective wave pattern deserves consideration in the light of previous patterns. This direction of research might shed some light on the question of whether Wave C is likely to be complete or not.
  • #3,019
  • Edited 5:37pm Mar 2, 2007 5:08pm | Edited 5:37pm
Quoting itme
This trade was picture perfect. USD/JPY descended 180 pips to the first target of 117.00 (actually 4 pips lower at 116.96) and then bounced up 84 pips to 117.80, before heading back down towards the second target of 116.50. The reward / risk ratio of this first part of the trade is 5.9 to 1
___________________________________________
___________________________________________

Wednesday February 28 at 10:15 ET
USD/JPY has completed an upwards corrective A-B-C wave pattern, come to a high probability reversal value, and created a system compliant low risk / high reward trade opportunity.
Trade Experiment #352 Sell USD/JPY at 118.80
Stop is 119.21
Target is 117.00 / 116.50
Risk is 30 pips
Reward is min. 176 pips
RRR is min. 5.9 to 1
Confidence level: good
Accuracy: high
Reward / Risk Ratio : good
For research purposes only.
Wave hypothesis: Wave 5 down.
We've had a very educational week gaining increased appreciation for the importance of factoring fundamental analysis into a comprehensive trading system. We experienced repeated losses in trying to predict the turning point of a 1,500 pip rapid downtrend in GBP/JPY as well as similar, though less drastic impacts on GBP/USD, USD/CHF and USD/CAD - all effected by the unwinding of huge carry trade positions in the context of global economic jitters and a possible major imminent economic turnaround.

Meanwhile, we were on the right side of this landslide in our short trade experiment on USD/JPY in a trade experiment which worked like a dream, first dropping 180 pips and hitting our interim target nearly to the pip, then bouncing 84 pips, then descending another 130 pips to hit our second target nearly bang on again - forming a low at 116.43, just 7 pips below our second target.

This strong downwards USD/JPY trend may have one more downwards low order pulse left to go.

This trade experiment illustrates that if one is trading with a Gale Force fundamental trend, then technical analysis can be highly successful at generating a very high return on capital. Conversely, if one positions oneself trying to trade upstream against a strong current or even torrent of momentum, then one can experience repeated system failures.

We anticipate a higher frequency of Gale Force and even Hurricane Force fundamental events and trends in the coming year, so the lessons we learnt this week should come in very handy in coming months.

Does anyone know of a technical indicator or other objective measure which is a reasonably reliable early indicator of a strong, enduring trend developing, or is study of fundamental economic news and analysis the only way to stay abreast of this side of the market?
  • #3,020
  • Mar 2, 2007 9:12pm Mar 2, 2007 9:12pm
It may just be a G7 wave. LOL

It just seems like after the G7 group had a little discussion on the Yen, it cranked out this 1500 pip move.

Is it possible that maybe, just maybe, there is something more behind this colossal move for "YEN".

We may need to start calling "When" will it stop?

I am counting the "bye-bye Wave"

Have a great weekend all.

Ken
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