The View DownRiver

Good morning everyone. I have been posting a few updates this week on the EURUSD, GBPUSD and USDJPY. If anyone would like to see a Daily River Level Chart for another pair, please let me know. I will try to post the chart only without any analysis. You can use it as a guide.

Hope everyone is doing well.

Not sure if anyone really cares about this, but just in case I updated the EURUSD thread that discusses the buy exteme....

I am assuming that you folks are not registered for my automatic updates, if you are just disregard.

Stay nimble today. Good luck.

Hello Dear DRT, it would be very much appreciated if you can add the daily levels of GBP/JPY. Even if you dont put any comment, it would be really great as a great reference guide.

Thank you very much in advance

Sincerly

shreem

I do not follow the crosses, but let me consider it. I would need to do some initial analysis to plot the static supply/demand lines every few weeks. Right now things are a little hectic, but I will try.

Very interesting method. I'll try my best to spend my weekend to understand your method.

Hello Dear DRT, Thank you very much for considering making a daily chart for this pair. I know you are very busy and really appreciate the time you take to help us all.

Have a great week-end with your family.

Your river picture, is it the view that you got from your window's house?<

Just curious

sincerly

shreem

I hope everyone had a good weekend. It's actually starting to get warm (just barely) here on the Chesapeake Bay. Won't be long now!!

I think I am going to concentrate all my posts from now on only here in my journal. Spreading things out is not working that well and this way we can comment in one place and I can more easily transfer info over from my blog.

Take care.

As we head into a new week, I am continuing to watch for a new directional flow for the Euro currency. If you just use a commonsense look at this pair and many of the currencies, you can attribute the consolidations and lack of trend to uncertainty in the market. Our global central banks are at various stages of their monetary policies. Looking at the ECB...will they continue on their path of tightening? Or has vigilance escaped them for the moment. They don't know, so how should the market know? We just continue to focus on value since we have no control over the market direction. As many of you know, I watch the order flow on Euro Futures which are traded on the CME globex. I am usually able to see central bank and other large activity here. It has been noticeably absent in my opinion of some time.


If you recall on Friday, I had suspected we may see a buy extreme on a drop in value down near the 3063 level. Well the drop in value came and buyers emerged, but it was certainly not overwhelming. I remain long as we build value in the Transistion area and continue to focus on the 3063 level as my risk area. This area is eveident in the Monthly Price Distrubution Chart. I continued to add to my long positions on Thursday and Friday as the market gave me the opportunity at a good value.


Okay back to River Theory....


We closed on Friday under the Transition Level of 3132 and the River Level of 3142. The close was not significant in my opinion and only a few ticks under as we continue to resolve this key area. This close could be our first warning sign that a move is coming. Monday's price action should be key at determining the directional flow away from this level. Remember, our goal is capture the move away from this area. Ideally, we would like to take 100% of Zone 1. This would represent a move from 3132 to 3353 or 221 ticks.


If you are long stay long, using a close below 3063 as your risk. Traders can look to establish new longs on a move above River at 3142. Your short term risk level should be below the Transition Level at 3132. Targets are 3214, 3242 and 3353.


I do not recommend establishing shorts until the 3063 level is resolved. Again, refer to the Monthly Price Distribution Chart for guidance. If you are inclined to set up shorts, use the 3132 level as your key. Risk would be above the River Level at 3142. Downside targets are 3069, 3046 and 3007.


NEUTRAL UNTIL RIVER LEVEL OF 3142 IS RESOLVED


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Last week, I recommended setting up longs around the 9251 area. If you are long, then stay long as I continue to look for a move up to River level at 9383 and on to Transition at 9594. This would represent a move of approximately 201 points. Please take a look at the updated Monthly Price Distribution Analysis for this pair to get a longer term overview of the suspected move.


Traders should continue to look to establish longs on a move down to the 9251 area. We may get a push through this level down closer to 9200 which would represent an excellent buying opportunity. Set your risk area below 9175, which would indicate that this view is incorrect in the near term. Upside targets are 9383, then 9443 where I would expect strong supply to come in the market. Give this area some room to build value and look to reset for the continued move up. You could also take partial profits at this level and then re-establish longs on a continuation through the 9443 level looking for 9594.

NEUTRAL UNTIL RIVER IS RESOLVED AT 9383.



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We have had some wonderful profit on our short positions on the USDJPY over the last several days. However, last week I was warning about near term USD strength in this pair. On Thursday and Friday the USD strength materialized and price moved up in a range of around 261 points. My conclusion was inflenced by the out of balance state of our Monthly Price Distribution Analysis. Please remember to review these charts to get a overall view of value on this pair and help with your shorter term trading plans.


On Friday the River Level was at 117.05, I recommended to set up longs at this level . I hope you were able to catch this move of over 100 points. Our first target was at 117.99. You may have chosen to take partial profits here.


So what now?


It is very important to review our PDA chart. You will see that we are at a key topside level in the short term distribution. If we build value here and don't move up, then the downside will likely materialize rather quickly so be very nimble with current longs or new longs as we are at critical mass in the short term strength.
If you are long stay long and continue to look for 119.35 where longs should exit for the short term. I will likely look to set up shorts at this level, but lets see when(if) we get there. I would now manage my risk by using the River Level at 117.43 as a downside guage. A move below here and I would cover any longs and stand aside.
If the market gives us the chance, look to get long ahead of 117.43 with risk below this area as we look for 117.99 and 119.35. I think the market could possibly range trade the 117.43 / 119.35 zone this week but let's see where we are in the next couple sessions first.


Only a move through and settle below River at 117.43 would cancel my short term bullish bias


SHORT TERM BULLISH WHILE ABOVE RIVER AT 117.43


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nice analysis, as usual. thanks!

Thanks DR- It's great you take the time to post analysis on the market. Consolodating the threads will make it easier for all of us!

A close below River today shows weakness in the USD Index. Keep your eye on it tommorrow for confirmation.


SHORT TERM NEUTRAL UNTIL RIVER IS RESOLVED


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We did move up above the River level today as anticipated and discussed in the post yesterday. It may be helpful to review yesterday's post.


The EURUSD was up around 70 pips today. Hopefully you have been able to establish long positions over the last few sessions and have taken advantage of the move away from the River Level. The market has given us several occaissions to buy.


Remember, I continue to look for a move to 3353 at this time. We would capture the entire zone 1 of 221 pips if the up move continues. If you review the Price Distribution Chart, you will see that the 3262 area will be a difficult area of supply to push through. Be prepared if we do move up.


If you are long, stay long. The River Level comes in today at 3166. If we get a close below this level, then that would be a warning that the move up could be fading. Targets continue to be 3242/60 andthen 3353 where short term traders should cover and take profit.


NEUTRAL UNTIL RIVER LEVEL OF 3166 IS RESOLVED


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It was a volatile day for sterling that produced some good opportunities. Hopefully, you were ready and took advantage as 2 of our upside targets were hit and then a reversal back down to our buy area at 9251 (actual low was 9249). These supply and demand levels proved extremely accurate today. As time goes on, I hope you will become more comfortable with River Theory and it will be easier trust the levels when opportunity like today occurs.
If you are long, stay long and continue to follow yesterday's analysis with the only exception being our River Level which is now at 9385. Review the Price Distribution Analysis for Sterling in the PDA section and also review the 3-12 post for guidance.

NEUTRAL UNTIL RIVER IS RESOLVED AT 9385


http://downrivertrader.squarespace.c...03-13-2007.PNG

What about stop losses?


This question understandably comes up often so I thought it may be helpful to talk about my opinion on using stop losses when trading. More specifically, when trading River Theory on a daily time frame. I want to emphasize that my view may not be suitable for your risk tolerance or current trading method, so this is in no way a recommendation. Let's call it a MasterTrader observation of the markets. You should manage your risk based on your individual situation and capital and consult the advice of an expert.


I learned a lesson a good while ago concerning stop losses. Where ever I decided to place my stops, the market (like a heat seeking missile) decided to go after them. And then you know the story....the trade turned around and continued in the direction I planned while I sat on the sidelines with a loss. There is nothing more irritating than this when it happens. You were correct about your trade theme, but you were lousy at setting your stop loss. If you think about it, when you choose a stop loss level, chances are everyone else in the trading world is thinking the same thing. It is not unusual for these orders to sit on the books and dealers begin to magically work price toward them. Usually while you are asleep or eating your dinner during the Asian session.


After observing this for some time, I decided to try an experiment and trade without any fixed stop losses. Guess what? My profits increased and my winning trades increased. Did I get burned a few times? Yes, but I will not get in a situation where this is devastating to my trading capital because I have control over my risk and position sizing. How can it not happen? I take my excess equity out of my trading accounts every week and put them someplace safe. I trade some fairly large sizes and I hold overnight and over the weekends and holiday periods also.


So how do I manage risk on a trade-to-trade basis? Here's what I do....


As you may know, I am a value trader. What I am looking for is the price level that the market would need to build value at to prove me wrong. Notice I said, "build value" and not "trade". I am waiting for price to prove my particular trade theory wrong. Think of it as a zone and not a specific price.This may be a daily close or trading in an area over a couple sessions (building value) and not moving in my intended direction. I think it is really unbelievable that traders think they have the ability to forecast a stop loss at a specific tick level. Makes no sense in a market the size of the global currency exchange.


So in summary, I know my value area that would prove my trading decision incorrect. I wait for price to build value around this area and/or move completely through before deciding to close my trade or in other words acknowledge that my trade theme was wrong. Sometimes, I lose more than I had planned but if I have done my homework and forecasted a proper value area for supply or demand, more often that not I will come out ahead in terms of profits and loss. I give myself time to make a sound business decision. I don't close the store just because a manipulated rumor about ECB insiders providing information that there will be no more rate hikes, or the avian flu breaking out in Iceland. Just think about it in terms of common sense.


Instead of an exact stop loss level, try to think in terms of stop loss zones. To be successful at this you must always know your risk level based on your position sizing and forecasted value level for proving yourself incorrect.

Great post DRT keep them coming. I realy appreciate your Master Trader insight.

Keep up the good work

vest1

Thanks vest1. appreciate it.

Hello there, Mr. DRT! Was just checking the calendar this a.m. and saw a familiar title under the journal factory listing. It's great seeing ya back on the 'airwaves' - some of those dudes over at the other joint wouldn't know a good thing if it slapped 'em upside the head - heheh. A quick perusal of your journal indicates to me that your efforts are appreciated here - and that is only as it should be. Just wanted to say hey - have switched to trading the ES, but will be keeping one eye over here now also. Wish ya continued success in your endeavors ...

All the best,
mephisto

P.S. A note to anyone who hasn't figured it out already - this gentleman is the real deal ...

Thanks for the kind words Mephisto. Indexes huh. Well since you were so kind....

this one is a buy.

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