Low Risk, High Reward Trading Experiment

Wednesday August 9 12:15 ET

GBP/CHF was riding along the upper trendline, showing good potential to dive downwards, and then the August 8 14:15 ET USA FOMC interest rate decision volatility caused a rise to 2.3412, triggering our stop, followed by a fall to 2.3303. GBP/CHF is now rising again in what appears to be a corrective wave, possibly to about 2.3375.

Some kind of defensive strategy should have been implemented prior to the FOMC interest rate decision data release, such as exiting at an opportune time prior to the announcement, or tightening up the stop a little. If the Federal Reserve had raised interest rates again, then GBP/USD would have fallen, instead of rising, and GBP/CHF would have moved strongly downwards. Instead, we were stopped out. C'est la vie.

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Previous trade signal:

Stop on GBP/CHF hit, but was adjusted slightly up
Monday August 7, 21:00 ETTwinchell, GBP/CHF went up another time, but only slightly higher than the previous high on August 4th. The stop we gave was met, when the price reached 2.3380, however a line drawn between the two highs on August 4th, carried into the future would have brought about an adjustment to the stop up to about 2.3388, so technically we are still in the trade.


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Friday August 4 at 16:00 ET
GBP/CHF has been trending upwards since July 3, and has gained 840 pips during that time, gaining an average of over 30 pips per day. Today's non-farm payroll figures sent GBP/CHF rising about 80 pips. Since this morning's high of 2.3360 at 8:35 ET GBP/CHF has been ratcheting its way slowly downwards, staying below a downward sloping trendline. A downwards trade taken off this trendline could be the beginning of a new downwards trend, and give us a low risk : high reward entry point.
TS #141 Sell GBP/CHF at 2.3330
Stop is 2.3375
Target #1 is 2.2600
Risk is 60 pips
Reward is 715 pips
Reward : Risk ratio is 11.9 to 1

For research purposes only
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<TABLE class=tborder cellSpacing=0 cellPadding=3 width="100%" align=center border=0><THEAD><TR><TD class=alt1 noWrap>Wed. 08/09</TD><TD class=alt1>4:30am</TD><TD class=alt1 align=middle>UK</TD><TD class=alt1>Trade Balance</TD><TD class=alt1 align=middle>http://www.forexfactory.com/forexfor...isc/mi_med.gif</TD><TD class=alt1 align=middle>-6.5B</TD><TD class=alt1 align=middle>-6.4B</TD><TD class=alt1 align=middle>-7.0B</TD></TR></THEAD><TBODY></TBODY></TABLE>

<LEGEND>Definition</LEGEND>

Measures the difference in value between total imports and total exports of goods. A positive reading means that more goods were exported than imported over the previous month. The Trade Balance has a sizable impact on GDP and at extremes can directly influence the country's currency value.

<TABLE borderColor=#000066 cellSpacing=0 cellPadding=0 width=738 border=0><TBODY><TR vAlign=top bgColor=#ccccff><TD class=cn_cont>BALANCE OF PAYMENTS AND TRADE </TD><TD class=cn_cont>Period </TD><TD class=cn_cont>Release date</TD><TD class=cn_cont></TD><TD class=cn_cont align=right> </TD><TD class=cn_cont align=right> </TD><TD class=cn_cont align=middle colSpan=2>Links</TD></TR><TR vAlign=top><TD class=cn_cont>UK's trade balance (£ billion) </TD><TD class=cn_cont>Jun 06</TD><TD class=cn_cont>09 Aug 06</TD><TD class=cn_cont align=right>-4.0</TD><TD class=cn_cont align=right> </TD><TD class=cn_cont align=right> </TD><TD class=cn_cont align=middle>More</TD><TD class=cn_cont align=middle>Guide</TD></TR></TBODY></TABLE>

http://www.statistics.gov.uk/instantfigures.asp

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR vAlign=top><TD>UK Trade
Deficit narrowed to £4.0bn in June 2006

</TD><!--@SOURCEDEPT--></TR></TBODY></TABLE>
<TABLE cellSpacing=0 cellPadding=0 width=418 align=center border=0><TBODY><TR align=middle><TD class=cn_caption>http://www.statistics.gov.uk/images/charts/199.gif
Balance of Trade</TD></TR></TBODY></TABLE>
The UK’s deficit on trade in goods and services was £4.0 billion in June, £0.7 billion lower than the level of £4.7 billion in May (previously published as £4.4 billion).

The surplus on trade in services was £2.5 billion in June, £0.2 billion higher than in May.

The deficit on trade in goods in June was £6.5 billion, compared with a deficit of £7.0 billion in May (previously published as £6.8 billion).

Following a change in the pattern of trading associated with Missing Trader Intra-Community (MTIC) fraud, identified by Her Majesty’s Revenue and Customs, interpretation of the breakdown between EU and non-EU trade is more difficult. Originally, most carousel chains only involved EU member states. More recently, some carousel chains have included non-EU countries, for example, Dubai and Switzerland. However, the import adjustment is applied only to EU imports as the goods return to the UK via the EU - but it is this part of the trading chain that is not recorded.

The deficit with the enlarged EU was £0.1 billion lower than in May at £3.3 billion as exports and imports both fell by around £0.7 billion. Exports of oil rose while exports of capital goods, intermediate goods, and chemicals fell. Imports of cars rose while imports of capital goods and intermediate goods both fell.

The deficit with non-EU countries narrowed to £3.1 billion from the deficit of £3.6 billion in May. There was an increase in exports of £0.4 billion and a fall in imports of £0.1 billion. There were increases in exports to non-EU countries of chemicals and intermediate goods. There were increases in imports of fuels other than oil of £0.2 billion while imports of intermediate goods and oil each fell by £0.1 billion.


Excluding oil and erratic items, the volume of exports fell by three and a half per cent between May and June and the volume of imports fell by two per cent.

Wednesday August 9 19:15 ET

Re-entry opportunity TS #140A Sell GBP/JPY at 219.90
We expect some action downwards here soon, as GBP/USD descends.
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Previous trade signal:

TS #140A Sell GBP/JPY at 219.70
<HR style="COLOR: #d1d1e1" SIZE=1><!-- / icon and title --><!-- message -->Monday August 7 at 10:30 ET

GBP/JPY has gone up 150 pips since our short signal, hitting our stop. It has reached a probable reversal point. It has risen 1020 pips since July 10, over 40 pips per day.

TS #140A Sell GBP/JPY at 219.70

Stop is 220.11

Target #1 is 212.50

Risk is 50 pips
Reward is 711 pips
Reward : Risk ratio is 14.2 to 1

Wednesday August 9 at 19:15 ET

GBP/USD spiked up this afternoon all of a sudden, to help GBP/JPY reach its target and to reach its own target as well. We sold at 1.9065, but it could come up again to the same price or even a bit higher.

TS #142 Sell GBP/USD at 1.9065

Stop is 1.9086

Target is 1.8930

Risk is 24 pips

Reward is 132 pips

Reward : Risk is 5.5 to 1

For research purposes only.


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Itsme what your take on the EURJPY and USDJPY? Like the GBPJPY the EURJPY seem to be at multiyear highs -- but look extremely overbought.

Hi Yardie,

EUR/JPY is going down for a little while, perhaps to about 147.90, perhaps pulled down by a falling EUR/USD, but it will rise again I believe to a new high, perhaps when EUR/USD rises strongly in a day or two. That will be the time to sell it - when EUR/JPY sets a new high.

USD/JPY will be rising for a little while, to about 115.75 - 115.90, but it will fall a great deal more after that. If USD/JPY goes up again to a new high as I expect it will, then it will present an excellent opportunity to sell it.

Itme, Kudos. Way to call it... scott

Yep, Itme is on a roll.

Thursday, August 10, 12:30 ET

GBP/JPY has progressed 180 pips so far to 218.00 also, which is very good.
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Previous trade signals:
Wednesday August 9 19:15 ET
Re-entry opportunity TS #140A Sell GBP/JPY at 219.90
We expect some action downwards here soon, as GBP/USD descends.
__________________________________

TS #140A Sell GBP/JPY at 219.70
Monday August 7 at 10:30 ET
GBP/JPY has gone up 150 pips since our short signal, hitting our stop. It has reached a probable reversal point. It has risen 1020 pips since July 10, over 40 pips per day.
TS #140A Sell GBP/JPY at 219.70
Stop is 220.11
Target #1 is 212.50
Risk is 50 pips
Reward is 711 pips
Reward : Risk ratio is 14.2 to 1

We see GBP/USD correcting upwards today, then carrying on downwards tomorrow.

Here is one explanation for last night's strong movement of GBP/USD downwards as we predicted based on technicals, with speculation on tomorrow's movement:

"<!--StartFragment --> On the other hand, though fundamentals were not taking precedence at the moment of their release, their effects on valuations will be around long after fear subsides. For today, the headiest piece of data was June’s trade figure. As was expected, the deficit grew from May’s preliminary read to $64.8 billion. However, due to a sizable upward revision in the previous month’s gauge to a $65 billion shortfall, June’s figure actually represented a slight contraction. According to the Commerce Department’s statistics, imports rose 1.2% to $185.5 billion while exports advanced 2.0% to a record $120.7 billion. This ambiguous improvement in the goods and services trade account comes on part of stronger growth from foreign markets like Japan and the Euro-zone and a drop in the US dollar, which tallied 3.8% against the euro. Looking ahead to tomorrow, should fears subside that the terror plot runs deeper than is currently believed, traders will respond to July retail sales to gauge whether economic growth is improving in the third quarter. "

http://www.dailyfx.com/story/dailyfx...228604450.html

"Perhaps UK terror plot may be behind this USD positive move "


Perhaps, perhaps not. It really makes no difference. Price moved and moved the manner you described... Scott

Scott,

:-) I think it does somewhat matter. How can you predict a movement downwards if it's based on catastrophic event that hasn't happened yet. If the movement IS based on the UK plot, then the trade was simply a product of luck. Personally, I think it would have moved down either way, but perhaps not as quickly as it did.

It is important to make that distinction.

the antisipation of news/event often has more affect on the market than the news/event it self.

fear factor


Dave

Well I can agree with the speed of the move. but the point is true that it headed that way. It often seems like a move is just waiting for a catalyst and if not a terrorist plot perhaps something else.

I have never been a big fundy trader. I like to trade what I see now

Thanks Scott

David, I think you misread the quote. It is generally believed that the actual release of the news was the catalyst for the movement today. How was this news event anticipated? Perhaps I'm just misunderstanding what you are saying because it isn't exactly relevant to what I said. That doesn't necessarily diminish the importance of what you said...but today, I think is the exception, not the rule.

I'm not saying that short the GBP since last night was a bad call, I'm just saying we all need to be wary of why this turned out to be a FANTASTIC call...and that is because of a little luck. You definitely have to realize that we'd be singing a different tune had the UK terror plot news didn't reach us today...the trade deficit narrowed only marginally, but was still substantial...that could have easily have been a catalyst in the other direction.

I personally feel we were over extended and that a short was the natural call...but I am surprised at just how quickly targets were reached today.

The Patterns formed in the charts reflect morphic fields that underlie and give shape and form to all events in the universe - physical and human. Those morphic fields interact with human free will to produce all eventualities. When human free will does not alter events, then events unfold according to the morphic fields that are produced by an even deeper layer of causation.

By studying the patterns created in the past, future events can be foretold. These events are already in the making on a deeper level, and are predestined to occur, absent a pertinent act of human freedom, which is infrequent. The forces that are giving shape to future events have already given shape to past events. Thus by studying the patterns evident anywhere in creation, the pattern of forces underlying those patterns of manifested form can be discerned. Then, by the projection of either those patterns of force or those patterns of form into the future, based on archetypal patterns which can be discerned by careful observation of processes over time, the future can be reliably and accurately foretold.

Just as by studying the way a tortoise shell cracks when a hot stick is applied to it can foretell the fate of kings, and the way that yarrow stalks divide can predict what will happen in a military confrontation, all information about the universe is contained in everything else, if one knows how to decipher the code. This was called by Carl Jung synchronicity. A study of the I Ching oracle can reveal this process at work. Thus seemingly unpredictable events in the world can be forecasted by perceptive market analysis.

Friday August 11 at 4:15 ET

Re-entry Opportunity TS #142A Sell GBP/USD at 1.8975

Target #1 is 1.8850

Stop is 1.8991

Risk is 20 pips

Reward is 121 pips

Reward : Risk is 6.0 to 1
________________________________

Previous trade signal:

Wednesday August 9 at 19:15 ET
GBP/USD spiked up this afternoon all of a sudden, to help GBP/JPY reach its target and to reach its own target as well. We sold at 1.9065, but it could come up again to the same price or even a bit higher.
TS #142 Sell GBP/USD at 1.9065
Stop is 1.9086
Target is 1.8930
Risk is 24 pips
Reward is 132 pips
Reward : Risk is 5.5 to 1

For research purposes only.

Friday August 11 at 11:00 ET

Since we shorted GBP/JPY two days ago at 219.90 it descended 190 pips to 218.00, then bounced back up to (hopefully) bounce off the upper trend line another time before its expected descent.

Re-entry opportunity TS #140B Sell GBP/JPY at 220.20

Stop is 220.48

Target #1 is 218.00

Risk is 37 pips

Reward is 211 pips

Reward : Risk ratio is 5.7 to 1
_________________________________________________________

Previous trade signals:

Wednesday August 9 19:15 ET

Re-entry opportunity TS #140A Sell GBP/JPY at 219.90

We expect some action downwards here soon, as GBP/USD descends.
__________________________________

Monday August 7 at 10:30 ET

GBP/JPY has gone up 150 pips since our short signal, hitting our stop. It has reached a probable reversal point. It has risen 1020 pips since July 10, over 40 pips per day.
TS #140A Sell GBP/JPY at 219.70
Stop is 220.11
Target #1 is 212.50
Risk is 50 pips
Reward is 711 pips
Reward : Risk ratio is 14.2 to 1
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Friday August 11 at 12:30 ET

Since we shorted CAD/JPY four days ago at 103.00 it descended 95 pips to 102.05, then bounced back up to 103.75, which according to one of our models is a high probability reversal point.

TS #141A Sell CAD/JPY at 103.75
Stop is 104.21
Target is 100.15
Risk is 56 pips
Reward is 350 pips
Reward : Risk is 6.2 to 1

For research purposes only
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Monday August 7 at 18:30 ET
TS #141 Sell CAD/JPY at 103.00
Stop is 103.28
Target is 100.60
Risk is 38 pips
Reward is 230 pips
Reward : Risk is 6.0 to 1

For research purposes only.
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Great week itme. Thanks for your input in my thread.

I want to tell you I like the way you lay out your analysis. It blows mine away.

Very professonal.


Have a great weekend


Dave