Getting Ready for 2012

Well its been a while since I've posted anything on here.  I've spent much of the past two months following the stock market more closely and trying to learn how to trade it, so I haven't focused much on currencies.  Starting fresh for 2012, I've tweaked my currency strategy a little bit.  I'll be looking for some more longer term swing trades (not much longer than a week maximum though).  I'm going to be focusing on only about four majors (EUR/USD, GBP/USD, AUD/USD, USD/CHF) because I think it will help me better learn these pairs and gain an edge.  My position sizing will be small, with much more focus on trading correctly than making money.  I'm planning on doing a weekend analysis each week of what I will be looking at for the next five trading days (Under the Weekend Outlook tab!)

I think that stepping back the timeframes I trade on will help me gain a broader sense of how everything is moving, rather than scraping up pips intraday.  I'll be much busier with school this semester, but I'm hoping to get at least 2-3 posts a month done on top of the weekly analysis.  Good luck to everyone this week and this year.

Trading the USD/CAD by Jon Hewson

            My name is Jonathan Hewson and I am a sophomore finance major at the University of Pittsburgh. I am a member of @thetradingpitt with Jake and I will be writing a few blogs about my trading to go along with his. I am mostly a day/swing trader but I wouldn’t say I have exactly found my nitch yet.

            I have been working extremely hard this semester to put together a trading plan that will work logistically with all my classes while maintaining a consistent profit margin. I find it difficult sometimes to get the right intraday entry and exit points when I am only in my room at night, during the least traded hours of the day. I use a lot of indicators but one of my favorites is Pivot points (daily, weekly and monthly). These can be extremely powerful support and resistance levels but they require you to judge breakouts and bounces very efficiently. The trade that I am least successful with over the course of my career is definitely the breakout trade. I always seem to buy the highs, sell the lows and the breakouts never pan out the way I want.

            One reason I see for this is my innate desire as a trader to get the best price possible. There have been too many times when I buy or sell within four or five pips of a certain level and see price immediately shoot off the opposite direction. One example of this was with USD/CAD this week (10/30/2011). Price had worked its way up to the monthly pivot point (calculated at 1.018) during the first few days of November. I wanted to enter a trade at the break/bounce of this level because I saw a lot of $USD price action in the coming weeks. I saw price break the level and retest on the 15 minute charts so I bought at the white arrow seen in the picture (around 1.01890). As you can see price moved against me, eventually hitting my tight stop at 1.0149. Soon after my stop was triggered I decided to go short, thinking that price had rejected a move above the monthly pivot level. However, price again moved against me, passed the 1.018 level and my stop was again triggered. Two losing trades in a row.

            Seeing the charts now, my decisions seem incredibly stupid. The movements of the market weren’t nearly strong enough to warrant a break. So, where to go from here? I am writing this blog partly just to hammer into my own head that following the trend is far more profitable then attempting to get a perfect entry. In the future I am going to look at longer timeframes, BE PATIENT and WAIT for price to show a clear sentiment in a certain direction. 

ORCL 11/3

Today I'm going to give a quick rundown of my first trades in the stock market.  As of now, I'm still playing around with different ideas and strategies, but I figured I would jump right in and go from there.

I decided to trade Oracle today.  Its a name I'm somewhat familiar with, not too expensive, large cap, and liquid.  I like tech in general because its relevant to me.  Oracle has been stronger than the market since about mid August, although I didn't really recognize this until after my trades.  Below are daily charts of $ORCL (top) and the $SPY (bottom).

I started off looking at the one minute charts a little bit after 12 noon.  It looked to me that the SPYs might be stuck under the 125.30 level that had held resistance a number of times earlier in the morning.  Thinking it might fall back into the day's range, I shorted at 32.62 when it failed to break the falling trend line shown in the picture below.  My stop was at 32.72, and after shortly moving it my favor I was stopped out.  This should have tipped me off that both the market and $ORCL were stronger than I had expected.  Unfortunately it didn't and I tried to get short again near 1pm at 32.70.  This was a bad mistake, getting short a strong stock in a rather strong market (in addition, the SPYs had just made a new high).  Had I analyzed a longer timeframe I would have seen this.  @stevemcmannis let me know of my mistake and I was stopped out soon after.  $ORCL trended up all day, along with the market .

1 min ORCL (top) & SPY (bottom)

I learned that I need to be more aware of relative strength intraday.   I also need to think more about the time horizon for my trades.  My first trade moved for me immediately like I thought it would, but once the SPY's showed they weren't going to break down further I should have gotten out.  I'll be back at it tomorrow, following $ORCL and hopefully a few more.  Good luck, and have a great weekend.

Beating Markets Update and Changes

Hey all.  Its been a while since I've posted anything on here (been spread really thin with school, growing our university trading club, my own trading), but I'm making it a top priority to keep up with the blog from now on.  I recently spoke with another good young trader from Pitt named Jon Hewson (@Hew_Dat) who is going to be hopping on board and helping me run Beating Markets.  He is a forex swing trader and is also involved with equity options, so he'll be bringing a slightly different perspective to the blog.  

Also, my interest in the stock market has been increasing a lot lately, so I just opened up a demo account and will be trading equities.  Right now I plan to focus on swing trading while occasionally trading intraday with in-play stocks to see which method suits me best.  I've always followed the stock markets with my forex trading but I've never focused on individual names, and I'm excited to jump right in.  I plan on being as transparent as possible on Twitter and will hopefully be posting at least 1 or 2 trade reviews/videos a week on here.  

I'm pretty excited about these changes to the blog.  I'm expecting this blog to be much more active than it has been the past few months, and I think it will be great to discuss the stock market as well as forex in our posts.  Keep an eye out for new posts in the next week or two and good luck with your trading!

Beating Markets, Fall 2011

I've been thinking a lot about new ways to upgrade the blog, making it a little bit more helpful for everyone who checks it out as well as for myself.  I've thought of two main ways of accomplishing this, with Chart of the Day/Week and videos reviewing my trades and short term market outlooks.  A detailed trading log has also been in my considerations so that I can be ultra transparent.

Within the next few days, I hope to start implementing these upgrades as regularly as possible.  Any suggestions for additional ideas would be sweet too; I'm open to just about anything.

Happy Trading to all!

CHF Devaluation

This morning, the Swiss National Bank took extreme measures to rapidly and powerfully devalue their currency. The SNB has announced a formal base price for the franc vs the euro at 1.20.  They have said they will defend this level with "utmost determination" and that they are willing to buy unlimited amounts of foreign currency.  This is an unprecedented move by the SNB and is certainly the most drastic and acute central bank intervention I've ever seen.

First, lets think about why this intervention happened for those who haven't been following this currency.  The ongoing economic issues in the euro zone and in American have caused investors to seek a save haven from risk in the Swiss franc.  This has caused the USD/CHF to move from 1.00 in Dec. '10 to this year's low of 0.7066, and has caused the EUR/CHF to move down from this years high of 1.3240 all the way down to 1.0067 (the pair was also above the 1.50 mark back towards the end of 2009, so this downtrend has been quite long term).  This puts deflationary pressure on the Swiss economy.  The Swiss economy is highly dependent on exports (they make up about 50% of the nation's GDP), and a strong currency chokes out the profits of exporters.  In general, things cost more for the Swiss people, and the rate at which their currency has rose in the short term is unhealthy for the Swiss economy.

Second, lets think about how this will affect us as traders in the short and medium term.  If the SNB keeps their word, the 1.20 level will act as a stiff bottom to play off of and a great spot for large and small investors to get long at.  In reality, 1.20 is still much lower than we were even 2 years ago, so don't think this level will be attacked in the short term.  No one outside the SNB really knows how long this level will be defended, but some are saying that it may last only up until the October 23 elections.  Nonetheless, this drastic intervention has structurally changed the CHF's outlook.  We've gotten above long-term resistance at 0.8550 in the USD/CHF, so we could start to see some bids in this pair in the short term.  I'm still seeing a 50% fib level on the daily's at about 0.8565 that has held today, so we'll see how the markets react to that level for the rest of today and into tomorrow.

There's no need to rush into any franc trades today.  There will be plenty of opportunities that will present themselves in the next few days as new short term levels are carved out.  I want the market to determine some intraday price levels that I can reference before I start playing off this currency.  I definitely have a long bias right now (I'm in no position to trade against a central bank), but I'm curious to see how this will play out in the midterm.  The Swiss economy is still much better than that of the US and Eurozone, so from a fundamental standpoint, buying francs is still a good play.  The SNB will also have to decide what to do with all the excess euro's they are buying to maintain this rate.  I doubt this will be my only post about this event, but that's all I have for now.  Good luck trading, wait for good opportunities, and keep your risk covered (I realllllllly hope no one was long francs without a stop last night; I can imagine how shitty it would have felt to be woken up by a margin call this morning).

Back at it USD/CHF 8-29-11

Well now that work is done and school's starting, I'm back into trading during the day.  Just paper trading this week to ease back in and feel out the markets, but I figured I'd review a trade I made this morning.

The dollar franc made my watch list last night because yesterday it had wicked above the 38.2% fib retracement from December '10 til early August.  We were also near resistance at ~0.8275 and a little bit further out the 100 day MA.  I figured with all this resistance on the horizion, there may be some good selling opportunities in the morning.

This morning I saw that the pair was nearing yesterday's high at 0.8240.  We began to consolidate just under this resistance around 0.8230 and I decided to get short targeting 0.8187 w/ stop above yesterdays high.  Caught a nice down move from there and I sold more at ~0.8212.  Resistance at 0.8205 held solid and we saw a nice bounce from there, so I manually closed half of my position and eventually was stopped out at 0.8217 for +8 pips.

I was pretty satisfied with this play for it being my first day back.  One of my goals for this fall is to improve on adding to my positions.  I think I did a good job of this today.  One mistake I made this morning was rushing my trade a little bit.  I didn't notice the resistance at 0.8205, and that would have changed my whole plan for the trade.  There was also a little uptrend that was carved out on the 5 min chart that I missed.  Had I seen this I would have seen that 0.8205 was a perfect spot to target for a quick trade like I was making.  I think it will still make it to 0.8187, but it won't happen the way I saw it playing out.  

I'm probably going to just watch the rest of the morning and get a feel for how everything is trading.  US Consumer Confidence will be out in about an hour, so heads up for that.  I'm hoping to be blogging at least one trade review everyday, so keep an eye out for those.  Good luck and happy trading.

A Little Psychology...

Well, it’s been a while since my last post (been busy with repairing the shack I called home this past year, moving out, working on stuff for the Trading Pitt, etc.) but I decided now is a pretty good time to think about where our head needs to be at as traders, especially in markets that have been as wild as the ones the world’s been experiencing lately.

I’ve spent a good chunk of today reading Andrew Menaker’s blog (which can be found at http://www.andrewmenaker.com/ideas/blog/), and he always offers great self-evaluation ideas and food for thought.  One of his latest post talks about the need to be right.  This need is kryptonite to a trader.  The feeling of being correct is almost like a high for some people, and they constantly need to feel it.  Problem is, most of the best traders aren’t even correct half the time.  So to be successful, it’s absolutely essential we can deal with being wrong and don’t let our predictions dictate whether or not we are profitable.

Think about everything that’s been going on in the markets lately.  The nauseating roller coaster we’ve been on has opened the door for everybody to provide their opinion on what will happen next.  Many have been wrong, some have been right, some haven’t had a clue what’s been going on.  This is exactly the type of situation where we all need to be flexible as traders.  Use of if/then statements is absolutely key.  Sure, you always want to do a thorough analysis that provides you with a good idea of where the market might go but you need to have a Plan B if it doesn't go as planned.  As Menaker says, there is "a subtle but critical difference between anticipation and prediction." Traders who anticipated moves but ultimately took what the market gave them profited during the past two weeks; traders who made unwavering predictions got sauced.

Another great little post from Menaker's blog talked about trading the market or your P/L.  Its been said a million times but tons of traders, especially beginners, still struggle with it.  We CANNOT trade worrying about how much money you make or lose.  I'm still working on this concept myself.  I can't tell you why, but most of us (especially beginners) trade differently when we know we've lost money or are losing money.  The best way I've learned to deal with this is to completely remove your P/L from the screen.  Obviously, we still need to respect daily stop out and tolerance limits, but hiding your P/L allows you to concentrate more on price action and objectively make and manage our trades.   Try it if you don't believe me, I can guarantee that you will feel a lot more relaxed and confident when your not worried about your account.  

School will be starting up for me in about two weeks, so I'll be back to trading live during the days.  I hope to start doing a chart of the day and posting video reviews of my trades as often as possible.  I hope everyone has a great, relaxing weekend!

FX Outlook for 7/8/11: Pre NFP

I'm expecting tomorrow to be the biggest trading day of this week, notably because of US employment and payroll data. CAD also has some important employment data, so there should be some fireworks early on tomorrow morning in all markets.



Last time the NFP came out in May we saw very disappointing results (added 54k with expectations of 170k, unemployment rose to 9.1%). Afterwards, just about everyone sold dollars for the rest of the day. This time around, were expecting an increase of at least 100k with some expecting the number to be as high as +175k. Since there has been a string of good US data lately on top of recent strength in the US markets, I believe the markets have already accounted for these payroll and unemployment figures, so in order for the data to be bullish for the dollar they must come in significantly higher than expectations. Sure, we will probably see a nice pop even if they are in line with expectations, but it may not carry through the day. On the other hand if we see data well below expectations, I'm expecting a hard dollar selloff. The SPY and IWM are both near significant resistance and have just seen strong runs in the past two weeks. There could definitely be some panic selling in US markets if bad numbers come in. I have a hard time seeing either the SPY or IWM moving through resistance unless we see some extremely good numbers, but I'm not expecting it. The dollar index, which is still in a very long term downtrend, looks to be flattening out a bit and showing a little bit of strength.



Some predictions for dollar-denominated pairs:



The EURUSD has been consolidating on the daily's for some time now, and off line data could set us off in one direction or the other. The euro has been struggling to stay afloat as the ECB raised key interest rates and Portugal received a downgrade earlier this week. If the numbers come in at expected or higher, I think we’ll definitely start selling off. The next support looks to be around 1.4140, so that could be a good initial target.



The AUDUSD has moved higher in the past two weeks due to US market strength and investors seeking higher yields. If dollar strength continues, this move higher could very well continue. We’ll definitely be running into some traffic on the upside though, so keep that in mind. If data comes in weak, there are at least 100 pips of possible downside that we could see today, depending on how much we come up short. Short-term downside support looks to be around 1.0725, then 1.0680, then 1.0650.



Another pair I’d be interested in in the long term if we see good US data is the USDCHF. This pair has been trending down forever and while it hasn’t quite broken out of the downtrend yet, it may have found some support near 0.8325. This is a very well-defined and obvious trend that people will be looking at, so I think there is nice upside potential if we can break out. Strong NFP numbers may be a perfect catalyst for this to occur.



All of the dollar denominated pairs will be in play this morning; these are just a few I will be following a little bit more closely. I always try to avoid any exposure before huge data like this, and I like to wait 15-20 minutes at least to let any type of kneejerk play out. Don’t chase moves you’ve missed, just be patient and wait for pullbacks. And finally, remember to listen to the market and take what it gives you! Be flexible, because it’s easy to get burned if you’re stuck on a particular idea. Any questions, please feel free to ask. Happy Trading!

FX Outlook 7/4-7/8

Alright, after a little camping trip last week I'm back from hiatus and ready to trade this upcoming week.  Since Monday is Independence Day here in the States, I'm expecting volume to be lighter across the board.  The US equity markets showed a very strong rally last week, but most of it was on lower volume and we're now entering the resistance area near this year's high's between 135 and 137 in the SPYs.  I'm not expecting a ton of movement in the US markets ahead of Friday's NFP data, but I think those numbers will be very important for the markets in the coming months.

EUR/USD

The euro gained on the dollar last week and appears to be out of immediate danger since Greek austerity measures were passed and are in good position to receive approval from the IMF for their next tranche of bailout money.  We look to be consolidating a little bit on the daily chart, and I expect most people will be trading the news this week.  As QE2 comes to an end & the Eurozone is pulling itself together at least in the short term, the dollar needs some strong numbers this week or it may continue to slide.

GBP/USD

The dollar also gave some ground to the pound last week, but the pair is still in a downtrend that's looking a little bit steep on the daily's.  Again, I think the beginning of the week may be a little bit slow but the BoE rate decision and NFP's at the end of the week should be a catalyst for movement.  I think we'll continue to move downwards in the short term mainly on pound weakness rather than dollar strength.

AUD/USD

Greek austerity has helped the aussie dollar a lot in the past week as many people's appetite for risk has returned.  Another strong week could put it up near yearly high's against the dollar, and we're still in a long term uptrend dating back to about a year.  This week we'll be seeing a RBA rate decision and employment data, both of which need to come out at or above expectations to keep this short term upmove going.  Anything under expected could lead to a bullish outlook for the aussie.

USD/CHF

This pair has been downtrending forever now, but we may have put in a little double bottom 0.8315.  I'm expecting to consolidate between this level and the downtrend line, but the mid-term outlook might hinge on this Friday's NFP's.  Also, look for some minor swiss data this week that may cause some movement, but Friday's numbers will be the most important.

That's probably all I'll really follow this week, maybe the NZD/USD as well since the kiwi has GDP numbers coming.  As always, the market's opinion is much more important than my opinion.  Trade what the market gives you, not what you think the market should do.  Hopefully I'll trade a little better than I played golf today (lets just say I definitely got my money's worth with how many swings I took), and I'm hoping to get one more post up this week at least.  Have a good holiday if your in the US, and good trading to everyone this week!