Where I Believe The Next Big Gains Will Come From In Forex
FX markets kept on doing more of what
they did thru Wednesday night / Thursday morning.
These are definitely times of
continuation trend moves right now in the major pairs… which is what big gains
are made of. That said, the next consolidation period will be where further
high-odds trade setups emerge.
EUR/USD (+$10
per pip)
Euros continue eking their way upwards in
rather staccato fashion. No valid trade setups in sight for me… waiting for a
bit of sideways coiling before I look seriously at this symbol pair.
GBP/USD (+$10
per pip)
British Pound kept on rolling upward, and did
not pull back into deeper support listed here yesterday afternoon. In the
overnight hours, GBP did give a buy signal near 7960 for those awake in the
European hours while those of us on the east coast are usually asleep. Since
then it has traded +140 pips higher without me aboard… and more on that in
tonight’s email Q&A section.
USD/CHF (+$8
per pip)
Swiss Franc pulled into our listed sell area
with 2580 hitting the ask, but not the bid. Depending on how orders were set =
brokers fill them, short here was either hit or missed by a hair. If hit, that
signal went for +100 pips since then.
No further trade signals visible for now…
awaiting next period of consolidation to measure targets from then.
USD/JPY (+$9
per pip)
The Yen continued to reach +200 pips from wedge
break signal to current lows. When those consolidation dams break, they really
wash over the land!
In the late morning today, JPY did give a sell
signal near 111.35 that has since worked for modest gains heading into evening
hours ahead. With a big directional move already under its belt as Friday’s
end-week close of trading arrives, not expecting great continuation from here.
{Price levels posted in charts above are
compiled from a number of different measurements. Over the course of time we
will see these varying levels magnetize = repel price action consistently}
Email Of The Day
Each day I’ll answer one (or two) emails from TM readers in this
section. Today’s question: “What do you think of mechanical systems for
currency trading?”
I have personally both purchased and written
100% mechanical systems for currency FX markets. I’ve traded them off & on since
early 2004 and in retrospect should have never ceased along the way. Currency
markets trend nicely and/or make swings thru a large range that give mechanical
systems a chance to catch solid profits. The dynamic nature of currency markets
creates great opportunity in system trading not currently found in the stock
index arena.
Of the literally hundreds of systems I’ve
written, only a handful have been methodically profitable these past two years.
How can one tell potentially good from bad? First of all, the equity curve
should be on an upward slant 45 ~ 60 degrees from left to right on a chart.
Systems with erratic equity curves that gyrate upward & down are bound to have
some frightening drawdown periods. Systems with a smooth historical equity curve
show themselves as “in synch” with trending market action.
The systems I use are not currently available
to public, nor is that where this conversation is headed. For readers interested
in system trading the FX, there are a host of viable systems for sale or lease
advertised in about every trade magazine. A little bit of digging around on the
web will also uncover a host of candidates as well.
Staying Power
Mechanical systems in the FX do what no human being can: stand ready to
operate from the open of markets Sunday night straight thru the cessation of
trading on Friday. Mechanical systems can trade FX around the clock, five days
per week without a break.
That of course does not mean systems trading
full-time can outperform skilled humans trading part time. Nor is systems
trading a tactic one should have short-term vision or judgment of. system
trading is a much more long-term and actuarial approach by nature than
individual, discretionary trading.
I personally use mechanical FX systems that are
trend following in nature to ride the big moves as they unfold. Any system in
operation for me must be net profitable over the long term thru a host of
different measures, with sideways market periods creating an expected pause or
drawdown in equity curves.
Bottom line? Systems trading can be a complete
solution for some. It is a part of my overall FX approach. There is much more to
trading a mechanical system than plunking one’s money down and watching the
results night after night after night. We’ll leave all that for future articles
to follow. For now let me state that mechanical systems in the FX market are
probably more viable over the long term than any other market to trade. That is
due to the sustained trending nature of currencies compared to most other
markets or symbols.
Summation
Major pairs offered plenty of potential profits this week, most of which
came in rather large chunks. No reason to believe anything different will result
next week or the weeks to follow!
Trade To Win
Austin P
Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.
Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.