Medici trades the London open

Welcome to Islander's and Medici's European morning trading journal. We have similar trading backgrounds, each with 20+ years trading experience of which the last four years has been in fx.

Additionally, our fx trading focused early on trading around the European opens.

We developed our respective methods for this time period, and since we both trade with similar objectives - to achieve our daily profit target during the morning session - we have decided to combine forces in this thread.

This thread is consequently focused on short-term trading of Euro and Cable between 6am and 9am London time, in the sense that trades are entered and usually also closed within that time frame.

Even for the experienced, trading poses limitless opportunities for learning and development, and the purpose of the thread is the coming together of different perspectives and methods for trading the European morning.

Our objective is the further development and clarification of these perspectives and methods through a collaborative effort, with the expectation of consistent higher returns for all participants.

We hope to post pre-trade analysis, possible entries/exits, as well as analysis, charts and discussion - all with the focus of achieving the objective stated in the previous paragraph.

The thread is intended for experienced traders.

You are more than welcome to participate in the thread with questions and comments, but if you want to post your trades we'd like you to have some kind of method to your trading that is consistently profitable - a method that you document by a post to the thread.



You are welcome to join the journey,

Islander and Medici

It's gonna be interesting to see the outcomes...
Nice weekend..

Credit Crisis and Strengthening US Economy

The week started with post-NFP selling, and not even very dovish statements from Ben Bernanke Monday could deter dollar bulls. After some consolidation, the strong US consumer data today added to the bullish dollar scenario.

The second theme for the week was credit crisis almost everywhere - Greece, Ukraine, Dubai, Portugal, Spain - not to mention statements by Angela Merkel of possible credit crisis in German banks. The spectre of sovereign credit crisis should strengthen the dollar further just like it did during the previous credit crisis in the summer and autumn of 2008.

In all this points towards another week of selling euro and cable. The euro ended the week by penetrating the 61.8% retracement level, 1.4620, of last year's drop as well as its 100 day moving average, and next target will be 1.4182 which might be reached before the end of the month. For the coming week 1.4350-4400 or even 1.45 might provide support.

The 38.2% retracement level of cable's drop from 1.6743 to 1.5982 early July, at 1.6272, served as a pivot during the latter part of the week, and the 23.6% level was tested. For the coming week the targets are 1.5982 and the 50% retracement level of last summer's drop at 1.5811, and we might also visit 1.57 before the week is over.

Good weekend to all!

I look forward to this. I enjoy trading the London open. I have a open-range breakout strategy I use during that time that performs quite well. I am very interested to see your results.

I will stop by from time to time and give valuable feedback and insights to help you along your path to riches.

Thanks

Jeremy

Thanks for kind feedback, Shah and Jeremy. As for strategy, I close to never trade breakouts - it's pure support and resistance based on analysis of technicals and market sentiment plus a good dose of market structure, i.e. how the market is set up and the behaviour of dealers at the main banks, which tends to result in repeating patterns.

More about that as times goes by, but now weekend!

A little insight and wisdom to help you along your way.

Thanks for instructive chart. Jeremy. No offense, but that's a good example of what I don't do. I thought I said weekend, but still some time before my baby arrives, so here I go.

I base most trades on anticipated dealer behaviour. Today was a good example in relation to breakout of the Asian session. The pattern is that if there's been a breakout from a range during the Asian session, dealers will almost always place large orders back in the range, and then push the rate back into the range before take-off at 7am. Today was upside breakout, and yesterday downside breakout. Charts attached.

She hasn't arrived yet, so here's a comment on your GBPJPY chart, Jeremy. You say that your system requires clear trending momentum unlike this week, which prompts me to make a couple of remarks. First, that all systems work in trending markets, and, second, that if you want to make a living day-trading it's about making money consistently on a daily basis regardless of market conditions. Maybe you don't day-trade, but that's what I do.

I don't follow GBPJPY much, but I took a look at this week's action and found plenty of opportunities for my way of support/resistance trading, which the attached chart should indicate. Note that the levels indicated all come from back when the rate was in this area last.

Hope that was helpful. Now weekend, I hope...I should turn off my screens and open a bottle of wine!

This may give the dollar further boost tomorrow:

http://www.bloomberg.com/apps/news?p...WrxAz7jw&pos=3

Short euro at 1.4680 and cable at 1.6322 with tight stop on the anticipation that the relief rally after the Dubai government rescue will fade. 1.4680 is the 50% retracement of Friday's drop, and 1.6322 is effectively the top of last week's range.

A good morning with several nice opportunities to add to short cable positions (note in particular the 1.6272 level) , but now we seem to have got into equity index correlation mode with thin liquidity and no order flow. But daily pay check written from three hours of work.

Let's look for pullbacks up to resistance levels around 6am and 7am.

Long cable now at 1.6288. Target 1.6340.

Not the most exciting morning. Better close at NY high.

Now look to short the euro on retracements. This is obviously affecting things:

http://www.bloomberg.com/apps/news?p...x1dtzpUQ&pos=1

Sell-off in euro as expected, but illiquid whippy cable with bullish bias. Most importantly, another pay check written.

So far so good. I enjoy your market commentary. You have a very unique way of looking at things and I think we all could learn a thing or two about market behavior following your London Open Strategy.


Jeremy

Very informative....i' m set to camp here for your insight. Other side note, i mostly trade during London session so this is just appropriate.

Thanks medici

Thanks, guys. Glad if I can be of assistance. When it comes to learning about market behaviour, I can recommend the book Beat The Forex Dealer by Augustin Silvani. To my knowledge the only book that tells it like it is, even though he only tells part of the story.

For tomorrow expect very thin markets. Cable is stuck in the middle of the range that it's been in for some time now, notably at the 1.6272 level as I am writing this. Barrier option protection will very likely prevent the Euro to go below 1.45 before the FOMC statement, and much buying is unlikely.

The FOMC statement itself comes at a poignant moment when the US economy both in employment and consumer data has shown undeniable signs of strength. If tomorrow's statement sticks to the language used by Bernanke last week, the dollar will soften and cable and euro rebound; if wordings are added saying that the Fed will be ready to respond to signs that the recovery is self-sustaining or to signs of inflation, then the dollar will strengthen further. So a watershed of a FOMC statement and market participants will be unlikely to put much money on the line early tomorrow.

So it might be best to have a lie-in tomorrow. Then again, with cable you never know what's around the corner, so I'll probably be up to watch the morning action.

That lie-in was a good idea. Should have stuck to that. Not worth the risk entering this market.