Friday, November 30, 2007

The Never Ending Post; a FOREX Scrapbook

This post will go on forever. I'm going to keep updating it with tidbits of info I find on the net about FOREX or technical analysis of FOREX. I like to keep notes in point form, and if I need more, there's always Google. To read this really fast, read the red text until something catches your eye.

Best time to trade (Eastern Standard Time)
Only trade when there is a market open somewhere, or risk getting reamed by a dealer (of course this only applies to day traders and scalps)

  • New York open 7:00 AM to 4:00 PM
  • Japanese/Australian open 7:00 PM to 3:00 AM
  • London open 3:00 AM to 11:00 AM
Often, the best times to trade is at the beginning 3-5 hours of the above mentioned opening times, because the major currency pairs tend to move the most in a particular direction.

The best time to trade is from 3 AM to 11 AM EST. The New York and London trading sessions overlap between 7 and 11 am EST. The volatility is much higher and trading opportunities are much more frequent with bigger moves, especially in these four hours.

The currency pair that moves the most during these hours are the USD/CHF, then the GBP/USD, then the EUR/USD, then the USD/JPY. This is when you can make 30-100 pips trading in just a few minutes or hours.

Notes from a "TraderInterview"
  • trade from 7am to 12 noon EST
  • use trendiness, pivot points from previous day
  • GBP - more range than EUR
  • JPY - all over the place
  • CHF - great trend and conservative
  • stops at 15 to 30 pips
  • 5 min. chart - reversal shows up here first
  • 15 min - pattern direction
  • 60 min - main trend direction
  • 5min and 15min match direction pull the trigger
Notes from a "TraderInterview"
  • FOREX is indicator driven
  • Linear regression channel (LRC) - use on any time frame from daily to 4 hour
  • LRC shows trend
  • when price goes below LRC it usually snaps back quick
  • weekly or monthly charts used to detect trend reversal
  • 10am EST is a common time for a reversal for most currencies
  • another reversal that is common is 11:30 am EST
  • reversal will seek its first support level

Highest High & Lowest Low

Here is an interesting chart of USDCAD that automatically plots the highest high and lowest low for a pre-defined period. I like the chart automation but I don't really like the pre-defined period. I would like to have a period that adjust automatically but I'm not sure what I want to use for the basis of the adjustment. I was think about using volatility like ATR or perhaps SAR to determine the look back period. The formula uses the moving average cross of the highest high and lowest low, that's why some lines are longer than others.

If you look closely and examine the chart, you can't really find a consistent pattern of support break through. I'm looking at the break through of support or resistance, specifically looking for a close above or below, and watching what happens to price.

The chart below has my special DOTS on it. This is a weekly chart. I'd say it still has some upward movement to work off. This week it briefly broke through the 1.00 level. About a month ago it hit 0.9054, what a profit that could have been eh? The weekly doesn't show any sign of this upswing weakening but the daily chart shows it's running out of gas. I'm going to wait for the downswing then jump on board.

A short using $2000 with 50:1 leverage at 1.0000 and covering at 0.9054 gives you some serious cash, not that this is possible but part of the move could be caught. The cash grab is about $10,000 for that move. It's nice to know the possibility. Remember, with this also goes that you could lose the $2000 just as fast. Practice risk management.

Monday, November 12, 2007

A quick FOREX trade

Today I looked risk in the eyes and shorted the USDCAD pair. The chart was screaming pull back. I used my developed signals to tell me when to pull the trigger, and actually ended up pulling the trigger twice, the first time taking a small loss.

The Word stated in a recent post "the Canadian dollar is in a power full bull trend". It is. However, looking at the chart, it seemed too powerful, it hit a low last month of 90 cents, great for Canucks living near the border, a quick 1 hour drive and save 20% on a new car, what a deal!! Maybe a car is not the best example because it sports miles and gallons, the old fashioned system based on arms and legs and feet, we use metric up here, based on water (I think?). I still get confused. Oh, back to trading.....

I was reading tradewhileworking blog earlier today and decided that it was time to find a little time to take on a trade, since I've not been able to trade for the past month or so. Great inspiration at his blog, how he manages to trade in a management role. I chuckle when I read about the issues he faces while trying to trade at work, it's familiar.

In the end I came out a couple of hundred bucks on top, but more importantly, played and learned with live dollars. At $2.50 a trade, I can afford to be wrong. I picked the right place for the stop, it got hit. Once USDCAD stopped climbing again, more signals showed up, on three different time frames, and I jumped in, setting the stop and the target in a bracket order. Then I shut down and drove home. Ate dinner, played with the kids, put them to bed, and turned on the 'puter. All right! Kicked 'risk' square in the balls. Moved the stop twice in and hour and it got hit.

The last few problems of my auto trading system are being worked out. I am inspired by reading about others that have their server located at the brokers, and they sit at home and check their account. Brilliant. If they can do it, so can I. The best part is, 'puters don't have emotions, that's why I'm so interested in a system. Low commissions too, the time is right. This is a revolution. If your a programmer, what are you waiting for?

Sunday, November 11, 2007

The fallacy of Canadian gold stocks

A few weeks ago, I was asked to post something about the Canadian dollar. The only thing I had to say about that currency was that it is in a powerful bull trend. Given that we may be at a critical point in the Canadian market, I wanted to "clone" the latest analysis I did on my own blog believing that this might be of interest to the readers of the TSX Trends blog followers. I would like to thank Brian for the invitation to post here from time to time.

Most people will believe that investing in Canadian Gold stocks is the way to participate in the rise of Gold. This is a myth. It is not true all the time. For this to be true, gold needs to rise, of course, and the economics need to be conductive to growth. Furthermore, value (the price of a stock) is created only is profit margins are stable or increasing when a commodity increases in price. When the price of the commodity or the price of profitability falls, the price of the stock will follow. I suspect that the costs to produce gold are rising faster than the price of gold thus creating pressures on margins.

Another falsehood that I have read on the Internet in the past month or so is some people finding precious metals somewhat “overbought” on a technical basis and thus recommending shorting Canadian gold stocks. That may be the right course of action but fundamentals are the right reason to short Canadian gold stocks not the price of Gold.

Agnico Eagle is currently trading at a double bottom support around $50.00. After reaching a high of $55.00, it has been building a triangle where the short term downtrend line has been resistance. The triangle was broken down and we have the potential for a sell signal which would also break the next short term uptrend line.

Please “Click” on the image for a larger view

This set-up looks like the TSX composite index set-up of a few days ago. A break below the low of $47.00 would confirm an intermediary downtrend with 2 lower highs ($55 and $54) and 2 lower lows ($47 and $46).

The conflict between the fundamentals of a firm and the price of the commodity it sells is illustrated in the following chart which relates the price of the stock to the price of gold.

Please “Click” on the image for a larger view

It is quite clear to me that fundamentals have taken over recently as investors are no longer willing to pay premium prices if they believe the economy is going into a recession.

This phenomenon is not unique to Agnico Eagle. Here is the picture for other Canadian gold stocks:

Please “Click” on the image for a larger view

For those who prefer to invest in a diversified portfolio of Canadian gold stocks, the Barclay’s Gold iShares provided the following tracking error to Gold!

Please “Click” on the image for a larger view

If you are using Horizon’s Gold Bull and Bear funds as a tool to participate solely in the rise and fall of the price of Gold, you will be sorry. This is tracking the performance of Gold stocks, not gold. You need to be aware of the fundamentals of the industry as well in order to make the correct bet.

Please “Click” on the image for a larger view

And the correct bet may soon be available to you in a not too distant future. Wait for a breakout at $14.25.

Please “Click” on the image for a larger view

There are two links on the right side of the page which will send you to Danny Merkel and Merv Burak’s web sites. They do a great job of following precious metals although Merv has another site where he posts his gold thoughts. I highly recommend these sites for a more thorough analysis of that sector.

In Conclusion:

Canadian Gold stocks have been leading the pack in the recent market uptrend. Even though the market appears to be topping into a new downswing, gold stocks have been resilient as their relative performance is still positive. That may be starting to change.

The Word

Saturday, November 10, 2007

The Q's

Here is my current system applied to the QQQQ. I have turned off all of the other lines, dots and stuff that clutter the chart and just left on the training stops that show when a buy and sell occured. I didn't participate in any of these trades. I find the system to work better on high volume issues such as the Q's and FOREX. I don't use volume in the system, but I do look at it when considering an order.

Amibroker Code - Zero Lag

I'm working on a bit of code that will plot a small line at recent high and lows in an attempt to highlight the "highest highs" and "lowest lows". I find that my eye doesn't catch that too quick, and that I have to stare at a chart for a while to determine what the trend is. I also know why I haven't learned to pick it up as quick as others, I don't "practice" enough. This is the main reason I'm trying to build a system, so I don't have to watch for trades all day long.... I can't anyways, I have a day job.

Here is some code I use called the "Zero Lag". I discovered this at and modified it a bit. Enjoy.

When I post the code directly to the blog, the HTML screws up some of the text. Rather than figure out what the HTML switch is to post just text, I have posted the code to google docs.

Zero Lag Code

The World keeps me away

Over the past few years I have travelled to remote places within Canada and some foreign countries, a mixture of exotic and warm, rich and populated, and to various third world nations. The last place I happened to be was Panama.

Quick summary of the "look and feel" of Panama City: Poor nation trying to develop, US money is pouring in, the rich areas have a high Jewish population, perhaps baby boomers are looking to retire, I hear the weather is a allot like Miami the whole year around. It was too humid for me.

A few months ago I watched a documentary on the Panama canal. It was very interesting, and there is much more to the story than just a canal. Being from Ontario, Canada, locks don't thrill me much, we have tons of them. While in Panama I did go see the canal, but more to see the size of the ships and the little tugs on rails along the side of the canal that pull the boats along, making sure they don't hit the side. The boats actually use their own engines, and are captained by a guy that works for the canal.
There have been allot of new condos and office towers built over the past 5 years. There are even more under construction right now. "The Donald", Trump that is, is putting up a sixty something tower. Here a a few shots of Panama.

Why am am telling the Internet about this trip? Because I haven't had allot of time to work on my system or study FOREX in any great detail. I actually forgot why I did some of the stuff in the code. Travelling takes it toll. This is all I have to offer, and I thought it was interesting.


The information presented on this site is for educational and entertainment purposes only. This site contains no suggestions or instructions that you must follow, do your own research and due diligence before committing your cash to the markets. Your on your own.