EURUSD

I know a person for last 10 years. He is much more than a complete idiot and the biggest asshole I have ever met. His name is Thomas Gregory, lives in NY. He trades stocks and consistently nets 12% to 15% a year. Seeing this idiot of all times make profit in this market leaves no option for me but to believe in God.

What he does? He takes a trade, puts a reasonable TP and no SL. Twice in last ten years his equity fell by more than 25% on economic crisis but this asshole didn't know what to do and therefore could not do nothing. On both the occassions market came back to the level from where is fell.

The only thing this son of a bitch does is that he buys when market is going up and sells when market is going down.

made me smile and eventually laugh

The "Idiot" unfortunately does the right things that "gurus" set aside. He follows the trend and is patient. Yes there is need for stops but only for sudden death..else it is the ploy brokers use to fleece newbies of their money. If one does the right things and quit over-analysing it is pretty simple to make money here. Though it is far easier to follow trends intraday than on long calls

This exactly is the message.

Can you beat the rat? Several months ago some guy narrated an experiment on this thread how a rat outsmarted a group of Yale students and their probabilistic calculations by just following a simple method.

JOKE OF THE CENTURY

As a professional mathematician I recognise that all calculations/theorems are geared towards proving facts/reality..the so called "common sense". Isaac Newton referred to his paper about the laws of motion as " The mathematical Basis of natural Philosophy" . Raymond Kurzweil also believes that " Mathematical theorems exist as mountains do; it is better to think than to write"
Both above shows the beauty of simplicity and common sense. In the financial markets where millions of natural forces occur..obtaining Yale paper does not teach common sense.

Dont misunderstand my assertion about simplicity to make money. I meant it is the simpler the better. Not saying market is where you just go and pluck money without hard work, experience and mental capacity

Here is the orginal story. Like you said the beauty of simplicity and common sense.

Can you beat the rat?

Originally posted by FrankenPip: "Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.

The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."

P64 HOW WE DECIDE

I believe the rat will beat you"

The entire story of the EURUSD since the financial crisis began is written on the monthly chart. A break above the 12/11 monthly candle or a break below the 2/12 monthly candle have become the lines in the sand for 2012. I identify 2 bearish wave patterns in the monthly chart that I call here the short-wave and the long-wave cycles:

The long-wave cycle began in spring of 2008. It's a widely-oscillating downtrend that is presently in its 3rd bearish wave cycle. Projecting out a continuation of this cycle suggests that there is much further room for downside momentum in 2012; if the trend that began in 2008 extends throughout this year the Euro will close much lower than where it presently is. We will talk about how to identify when this trend has been broken or reversed shortly.

The short-wave cycle began in spring of 2011. It's currently in its 4th bearish wave cycle. The short-wave cycle is very precise and elegant in its formation--its behaved very reliably. In every single bullish correction of this downtrend, the tops of the bullish correction have always failed to break above the previous bearish months high. In fact, the highs of each bullish correction failed to break above the opening price of the last bearish candle that was formed. This is a very significant pattern/trend. There was a very slight divergence from this pattern in February where price broke slightly above the open (but not above the previous bearish candle's wick/top). I considered this divergence an anomoly however and I will explain why momentarily.

I noticed last year that the 3rd leg of the long-wave cycle was the first since the financial debt crisis and deleveraging began to experience several correctionary months. From 7/08 to 11/08 every candle closed lower in the first wave's down-leg. From 12/09 to 6/10 every candle again closed lower in the second wave's down-leg. However, in the third wave, heading into 2012, the bearish leg had experienced 2 monthly corrections already. This suggested to me that the Euro was finally starting to try to rally out of the long-wave cycle it has been stuck in since the financial crisis began. The 10/11 monthly correction was wider than the previous one too. This lead me to believe that price would begin to consolidate into a constricting range-bound market heading into 2012 which would determine whether or not the long-wave and short-wave cycles would resume or be broken in 2012.

My prediction was further confirmed when January and February closed two months of correction during the downward leg of the cycle for the first time since both wave-cycles began (the last two corrections had only lasted one month each).

I adapted my trading strategy this year to reflect that the channel we would be trading in would continue to constrict as the Euro is showing signs that it wants to break out of the four year trading cycle it has been stuck in.

Now it's time to explore what happened in February of 2012. When price first broke above 1.3444 I almost thought I had made a mistake as I was heavily short in the market at this point. 1.3444 was of course a key monthly fib-retracement area and it is the previous opening price of the 12/11 monthly price range. I considered several factors however. First I noticed that on the weekly time frame the top of the supply level didn't occur until 1.3485, so I decided that if this was a false break out that's where it would meet the most resistance. I also considered the final line in the sand to be 1.3548. The reason is because since April 2011 a correctionary phase of the short-wave cycle has never broken above the most recent bearish candle. I knew that 1.3548 would be defended as tenaciously by the bears as 1.296 is being defended by the bulls. I was off in where I predicted the top of the range would be, but not by much.

The reason I described the breakout above 1.3444 as an anomoly was because price doesn't exist in a technical vaccuum. Taken in the context of what was fundamentally happening at the time, it's obvious that a tremendous impetus must have driven price to these levels. Indeed, two things happened nearly simultaenously in the news in short order to spur this false break out. The 2nd Greek bailout, long, long awaited, finally came, and the sentiment amongst Euro buyers became one of slightly renewed although ephemeral confidence. Then the market began to price in the 2nd LTRO. Once I realized that this technical anomoly had only happened when two major fundamental forces converged at nearly identical points in time to drive it, I decided I was committed to defending 1.3485 and 1.3548 to the death. These prices ranges have the support of the Apr 2011 short-wave cycle and the spring 2008 long-wave cycle supporting them after all, and they also have a tremendous amount of fundamental analysis to support them which we will touch on later. The bottom line is that the short-wave cycle remained intact despite tremendous advantages the Euro was rallying off of in short order.

Technically, it's obvious the market remains poised to continue to test the southern border at 1.296. The short-wave and long-wave cycles are too pronounced to be broken without a serious struggle. Such a struggle cannot be said to have taken place in March and will likely not occur this month, since the month has traded on extremely low liquidity and nothing really major is left on the calendar. There is a sense of extreme caution and exhaustion in currencies (low liquidity) and equities (check the VIX) it seems. I continue to short this range with greater confidence because technicals and fundamentals both support further dollar gains in 2012.

The strategy for trading a tight range-bound market is to identify the tops and bottoms and then put yourself in front of the charging bulls and bears with wide stops knowing that the range is very well protected on both ends. Your bias should be toward the direction with a higher probability of breaking--for me this is bearish the Euro--although I continue to take long corrections within the range near 1.3 as long as no Euro-bearish news is nearby. This is how I have managed to do very well for myself in 2012, especially since I foresaw that the second Greek bailout and LTRO convergence would provide amazing long entries buying ahead of the news and amazing short entries selling the facts. This type of trading requires a degree of courage and confidence in your analysis and the ability to watch a charging market rush at you headlong which is always quite the rush. Due to my technical and fundamental bias, I am urging extreme caution to anybody going long the Euro near 1.3 around major news announcements or near future volatile events. Don't continue to hold a long in the event of a clear break below 1.2966 if you value your account.

Fundamentally there's a lot happening to support this technical outlook. I noticed that the EURUSD price action had begun to behave differently off NFP data which was my strongest indication that the correlations between currencies and equities were shifting again and that the risk-on paradigm that the Euro leeched onto and road like a parasite was shifting. When I shorted the last NFP release my suspicion was confirmed. One more rally of the dollar after positive NFP data will really put the stake in the heart of the Euro. Even negative NFP data can't seem to do much harm to the dollar at the moment since it suggests a risk-off atmosphere! Win-win? Perhaps. The Euro still benefits from risk appetite emerging out of positive US economic data I'm sure, but the US recovery favors the dollar even more presently because investors are looking to the dual likelihood of less QE and higher interest rates before 2014.

10 year US treasuries continue to rise despite the Fed's insistence rates must remain low, which is a signal the market agrees the economy is improving. If the yields reach and hold above the psych barrier of 2.4% before the EURUSD breaks below 1.296, I suspect it won't be long before this barrier is broken also.

Greece got its band-aid, but the contagion continues to spread. LTRO failed to relieve any pressure on Portugese 10 year yields. Investors are sending a clear signal to the EU bond market that their confidence in the southern periphery bond market is non-existent. The precedent of Greece using CACs to haircut its bond payments will leave a lasting sting on the global bond market for years if not decades to come. Fool me once, shame on you, fool me twice, shame on me. Spanish 10 year yields are beginning to rise above the 5% psych level again. The ECB further threw salt in the wound of the PSI when they deferred "higher priority" to themselves as European bondholders. The private sector will likely reward the ECB by not touching the southern bond market of the EU and letting the ECB do the dirty work of purchasing their debt.

A serious risk-event looms for Greece in April as well with elections set around the 22nd I believe. The possibility of a government averse to austerity implementation being elected seems very high if a person monitors the sentiment of the Greek people and not its government officials and their propaganda machines. French elections will also follow and be monitored closely. Spain already showed an unwillingness to adhere to the fiscal treaty, opening up the road for further dissent. The idea that one austerity fits all will continue to become more unpopular since austerity and growth can be counteractive forces.

The revised 4thQ GDP numbers for Greece also proved that on their economy's current course if a major improvement doesn't come like now-soon, their debt to GDP levels will require further bailouts. Most astute investors in the market understand that its a bogus ploy the economists are playing that try to predict growth and deficit spending outward until 2020 and beyond. I'll be watching their Q1 GDP numbers closely, and laughing when they reveal the utter horror that is the state of their economy (laughing only at the economists and their bunk forecasts while pitying the people who tolerate this outlandish scheme while profiting off the entire fiasco). Everyone seems content to breath a very temporary sigh of relief and let the EU play this game of buying time for now as most people sense they are simply jockying for time to minimize their exposure to Greece and make preparations before the poor little pawn known as Greece is forced to be maneuvered on the chessboard again.

I mentioned the equities markets and the VIX earlier, because the VIX is at historic lows again (it's only been this low two other times if I remember correctly). This usually heralds a correction in equities is imminent historically, and there's a lot of head-scratching on the street as to how much longer this rally can sustain itself at present. US equities are historically trading far above their trendline averages once again (something that usually happens before major corrections ala Great Depression, NASDAQ, and the debt crisis). A major correction in US equities will certainly not prove well for anything related to risk appetite. Most analysts agree at present that a correction would actually be healthy for the market at this point, and the longer it is in coming the more pronounced it will likely be.

There's some concern that QE is just around the corner in the US still, but with inflation being part of the dual-mandate of the Fed, investors shouldn't worry too much about QE talk this early in the year yet. In the words of one of the best bond analysts in the states, "...QE is out of the question until gas prices [inflation] stabilize."

Until some major sea-change occurs, probability and facts will continue to favor the dollar in the near-term most likely. Most analysts expect modest to moderate growth trends to continue presently. I don't suggest the US isn't without our share of problems: our debt to GDP and our deficit spending are horrendous and unsustainable indefinitely, but unlike Greece we are the reserve currency of the world with our own central banking system and the ability to distribute federal funds to member-states as needed. Our creditors will continue to support our currency for decades to come most likely because they have an interest in protecting their existing dollar reserves and because a failed US dollar would have an "unthinkable" outcome in many esteemed estimations, but come Jan 1 2013 America's deficit spending will no longer be something politicians can hide or ignore any longer it seems. But for now, that is still a much more distant problem then the challenges the EU will continue to face in 2012.

let me tell you something, i look at the monthly chart and i dont see shit, the down trend you are talking about from 2008 is done and dusted. there is no long term indication. i have to look at the yearly chart to see if i can see any shit there

I'll consider myself told and trolled. Have a nice life and good luck with your trading and your trolling.

Your analysis is fascinating... thank you for taking the time to post it here...

I recently came across this article on ff...

http://www.reuters.com/article/2012/...81N1X420120224

The question is... Is the recovery we are seeing genuine?... Or are we just made to believe it is?...

You are damn right!
My main toolbox for successful trading:

1. Recognizing Support and Resistance
2. Sit on hands ability (also called Patience)
3. Money Management
4. Understanding Risk Tolerance
5. Common Sense

In any specific order

Try to find 1 basic necessary item that I forgot to mention that is not already covered here.

Maybe it would become more clear when the brokers provided us with yearly, 10 yearly and 100 yearly charts.

I had a look at the monthly and this is what i see...

So, now that you have seen and studied the monthly chart, I'm sure that you are confident now that you can make 40 pips tomorrow, right?

yes I can. but not necessary need to be EU; lol. I wonder why everyone here is glued to the euro just because it is cheap. silly

Do you use pivots KW?

No, I do use fibs though.
Always thought I should make more use of pivots but there are so many of them. We have different pivots calculations and different closing times for dailies and 4 hourlies depending on your broker, so if anyone could tell me what reliable pivots are I would sure be using them.

let add few more words

support & resistant (1) not a iron wall , it's there to be taken out, so use your knowledge (5) to calculate your risk (4) and manage trade wisely (3), if you don't feel comfortable just Sit on hands (2).

don't forget all undertaken trades are winning trade with +0 pip tp