Live call on AUDUSD - 31 July 2014

This is just for practice. This is my prediction about the AUDUSD for the next few hours before NY opens. I'll be back at work so won't be able to trade this, but if I could, I'd look for an entry signal around here. I used a time filter here to help decide whether S/R will be respected or not.

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edit:

What actually happened...

Price didn't fully retrace as much as I predicted. I would've avoided any entry signals here.

Daytrade - AUDUSD - 31 July 2014

This was taken not long ago during the Asian session. Price had settled after the first few hours of the Asian open and the release of major AUD news, so I was pretty confident of trading the resistance level shown. After the first 3 hours of the Asian session, price will tend to range and you'll get some reversals / retracements of big moves during the Asian open. I saw a good LVHV candle and went short on its break. 

I moved the trade to breakeven once price has halfway towards my profit target, but then I saw a (relatively) large bullish candle. I closed the trade here for a reward of 0.75R. To manage or not manage your trade? That is the question! I think moving your stop loss to breakeven once you're halfway to your profit target makes sense. But managing your trade beyond that? The only other time where it'd be prudent to manage your trade would be just before price hits your profit target. If price is hovering above your target for awhile and refuses to hit, it might be prudent to sacrifice a tiny bit of profit and just close it.

There were some good LVHV candidates earlier, which I marked. I also think it's sensible to take into account the context of these candles. You want them behaving as reversal signals. If they're stuck in a range, they aren't tradable. If some big news is about to come out, then stay out of it's way.

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Low volatility, high volume candles - II

Some low volatility, high volume (LVHV) candles I spotted during the late NY session and Asian session today. This is from the USDJPY 5M chart. The candles have been marked in purple, and been given a green tick if you traded the range between the S/R levels and profited, and a red cross if the trade failed. The entry would've been the break of the candle's high if at a support level, or the candle's low if at a resistance level. There were a few other LVHV candles at S/R that weren't triggered.

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Low volatility, high volume candles

I'm still practising my daytrading on the AUDUSD. What I discovered with my forecasting was that it made me biased with the direction and size of my trades. I'm not sure if it was doing any good. My forecasts on volatility have been consistently close, but forecasting direction is more difficult. 

The lack of volatility on all forex pairs has also been awful. Yesterday, the AUDUSD only ranged 29 pips. I knew it was going to be quiet, given it was Monday and there'd be a lack of news. If you're the type of daytrader who trades breakouts, you'd be getting burnt time and time again. 

Range-trading methods are probably ideal in these low-volatility environments. I spotted low volatility, high volume candles which act as good entry signals near support / resistance zones. The contraction in volatility and spike in volume gives us two pieces of evidence that buyers / sellers are moving in at support / resistance. I marked the candles that have a smaller range and higher volume than their previous candle, near a S/R zone. Trading the break of these candles would've resulted in a win for most trades, provided that you traded within the S/R range. 

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AUDUSD Forecast for 22 July 2014

COT Sentiment: Bullish

Daily Technical Analysis: Slightly bullish. I'm still retaining technical outlook from 21st July 2014 although I'm becoming a little more bearish after yesterday.

Fundamental Analysis: Neutral. No changes in fundamentals.

Upcoming News Releases: A few RBA speeches are being held today. Major speech from RBA Governor Glenn Stevens.

Forecast: The major news item coming out today is RBA Governor Glenn Steven's speech. Naturally, he will talk down the AUD and maybe say the right key words in his speech to trigger some shorts and run some stops. I expect price to run down to 0.93200-0.93300 if this does occur. It will then find support and hopefully trap any news traders who didn't cover their shorts, so I expect a moderate rebound later in the day (perhaps 20-30 pips). I expect price to be close to ATR(14) today, or about 55 pips. 

Analysis of AUDUSD Forecast for 21 July 2014

The forecast for 21 July 2014:

Forecast: Being a non-news Monday, I expect volatility to be low. The day's movement will probably be around 67% of ATR(14). Price will be range-friendly with a bullish bias. Friday's high and the 0.94000 level will pose a significant obstacle to upward movement. I expect price to range between 0.93900 and 0.94000, and between 0.94000 and 0.94100 (Friday's high). If 0.94100 breaks, then an upward breakout is likely and I would look to enter on the retracement.

If price falls, I expect strong support to hold at 0.93650. Price should rebound and head upwards.

Here was the 5M chart for yesterday (21 July 2014).

Was direction correct? I predicted an overall bullish direction for the day, with heavy resistance between 0.94100 and 0.93900. The direction was wrong, but I was correct in identifying that 0.94000 would provide resistance. I predicted that if price fell, it would find support at 0.93650. It found support at 0.93700, about five pips away, so this was about correct. 

Was price action correct? I predicted the day would be range-friendly. There were basically two 15-pip ranges for the day, with a bearish bias, so I see this forecast was correct. However, I was expecting a strong price rebound from support at 0.93650-0.93700 which didn't happen. 

Was volatility correct? I believed the day's range would be about 67% ATR(14). ATR(14) was 57 pips at the close of Friday, so 67% would be 38 pips. The day's range was 30 pips, or 53%. It was relatively close. 

AUDUSD Forecast for 21 July 2014

I'm focusing on my forecasting skills, trying to combine different data to come up with a story. 

I know many people will ask how is it possible to develop an informational edge as a retail trader, considering that we are usually the least-informed traders on the market. The edge is not informational per se. The edge lies in our size. Putting it another way, an informational analysis should show us what the smart money intends to do. Our small size allows us to enter and exit the market quickly. If we know what the smart money is doing, we can anticipate their orders. We're not smarter than the smart money, but we can anticipate their action and "front-run" them while they're trying to get their multi-million dollar orders filled. 

At the end of each day I intend to compare my forecast with the actual outcome, and hopefully hone my forecasting skills. 

COT Sentiment: Bullish. Last week's COT shows speculators adding to longs.

Technical Analysis: Slightly bullish. Price is showing some strength, remaining in upper half of range. The strong rejection off resistance during 2nd July 2014 failed to break the swing low, so the small uptrend within the range is still in effect. I expect price to retest resistance this week. 

Fundamental Analysis: Neutral. Ukraine and Israel / Gaza don't seem to have shaked the AUDUSD much. Any fear-driven movements should've taken place by now. 

Upcoming News Releases: None for today.

Forecast: Being a non-news Monday, I expect volatility to be low. The day's movement will probably be around 67% of ATR(14). Price will be range-friendly with a bullish bias. Friday's high and the 0.94000 level will pose a significant obstacle to upward movement. I expect price to range between 0.93900 and 0.94000, and between 0.94000 and 0.94100 (Friday's high). If 0.94100 breaks, then an upward breakout is likely and I would look to enter on the retracement.

If price falls, I expect strong support to hold at 0.93650. Price should rebound and head upwards.

Update on the USDHKD carry trade

Sadly, I closed my USDHKD trade last week when my broker changed it's overnight swap from +2.1 points per lot to -6.6 points per lot. I was disappointed since I was hoping to hold this trade in the long-term. 

To add insult to injury, I exited just as price crashed and began to hover around 7.75000, meaning I actually lost money. 

I had opened my longs 20 pips above at 7.75200. In terms of pips I lost, it's not alot, but it still meant that my "low-risk" trade finished in the red, especially once transaction costs were taken into account. 

It was possible for me to keep my longs open and wait for the USDHKD to eventually rise again, but the negative overnight swap would add up, and there was no guarantee that the USDHKD would rise enough to cover the negative swap I'd accumulate. 

When the original premise of my trade became invalid, I thought it was prudent to get out. 

Ever got the thought that something was too good to be true? I always had that feeling in the back of my mind. Oh well. One key lesson I learnt is that the overnight swap rate is much more fluid than I thought, and can significantly differ between brokers. 

The statistical edge of trading against retail sentiment - part 2

I finished examining all the other pairs on OANDA's historical position page. It confirmed the finding in my previous post, that trading in favour of retail sentiment will lose you money.