Sunday, 31 January 2010

Dollar Yen.....working my way up from Monthly to daily

Here are some long term $Yen charts( see posting of charts Feb 1st ). There are several reasons i am showing different time frames. Firstly long term (monthly & weekly & to some extent daily) median lines affect price as you will see. For me they are somewhat similar in essence to what in the UK are called 'Ancient Lay-Lines'. These invisible 'Lay Lines' lines (much vaunted by Druids and 'new age' folk) are supposed to contain energy and power and maps are produced of huge areas of the UK where these lines run and where they intersect. This is similar to Median Lines and if we are looking at say a 240 min or 60 min chart we should at least be aware of what lines run through the chart and could cause price to stop or reverse. This also goes for Fibonacci levels and Pivot points and also psychological levels of big significant round numbers. I am not sure if these longer term lines are dominant over shorter time frame lines but think that price cycles and movement are like the toy 'Russian Dolls' within another, within another or like the layers of an onion. So your Median Line drawn in a 30min or 60min time interval will be part of a bigger wave on a 240min (and median line) and that will be part of a bigger median line on a daily/weekly chart but all are affected by the dynamic of the wave and it's direction. Another reason for displaying these longer terms charts is to show that often many important swing highs and swing lows can be directly correlated to a median line or ML parallel in a higher timeframe where the line has provided support or resistance. At this point is should say that great care should be taken to be objective (not subjective) when drawing ML's as there are many that could/can be drawn and it is important to not to look for ML's that support your market view(if you have one). I am assuming that any reader here has basic understanding of this tool and the rules as per Mr Andrews and his works and the Action-Reaction course. The bottom line here is that bona-fide ML's work and price interacts with them and within them. Many ML's can be drawn that do not have any price interaction and should be discarded as they help little and some ML's i have drawn may have one or two price touches then become totally redundant. The two exceptions (for me) to this is to draw a ML that has no price 'touches' but where price either fails to reach the ML and then reverses. I use this as a trade confirmation tool but will normally have other active ML's on the same chart. (see crude oil chart above in seperate posting)
The other is the so called 'Discretionary' pitchfork or ML & this is a dangerous little thing where you can 'tweek' P0 or P1,P2 so the wave is perfectly captured in the ML.

This it is a good juncture to mention that often i find price data is distorted due to various reasons such as extended Market holidays (Xmas& NewYear see JapYen 2009/10) or contract expiration. Another reason to consider price tick charts?Perhaps... Another problem is that if i try to reproduce what appears to be a perfect ML in Metatrader in E-Signal it often does not fit as well or violates the ML or MLP to severely to be a viable ML or at the least, to be of any use.

My personal advice is to check your ML's in more than one charting package if possible. On this point there is no doubt that ENSIGN WINDOWS is the best and has great sophisticated options for your ML and E-Signal's pitchfork/Median line tool is the worst. The bottom line here is that all but Metatrader cost money but in my opinion it would be money well spent.

Thursday, 28 January 2010

As Mary Poppins says......

'Lets start at the very beginning, its a very good place to start'

Below/above are some very long term charts either monthly/weekly showing possible Median lines and possible support. To start with lets look at $/CHF which is the most troublesome candidate for a $ reversal & then $Yen and the $Index(ICE) and then the other 'Big Boys'
Eur and Gbp and the Cad.

In the down sloping dominant and active ML (blue esignal/green Metatrader) 'Price' has found support in the (central) median line (as oposed to its upper & lower parallels) itself and has now found support on the lower MLParallel (pink in esignal and red in metatrader) at the area of confluence of both ML's. If price can hold and find support and has enough momentum to rise to the pink/red ML itself (which it must do for this 'fork' to be confirmed or price could fall sharply if it fails) then we maybe in business. I should at this point draw your attention to a very nice Double Bottom which although small and well formed on the weekly chart is a whopper (with a nice gradated curvature and 'Mirror' bisected by the price volatility of the 'Autumn/Winter 08 banking crisis) on the daily chart with a previous low of .96340 on March 17th 2008 and .99170 just this last November 26 2009. The most recent low being obviously higher and thus a viable potential bullish signal. Price has already started to move up-up and away . If you look at the very long term ML in say a weekly/monthly chart it could easily be said that price was held and supported by this lower MLP (Red-Metatrader & pink-Esignal) although there is some penetration of the lower MLP. Of course if you were to change the designation of P0 on the pink up sloping ML from the current low to the swing low of 1/10/98 @ 1.2734...then it fits perfectly
There are a lot of 'what-if's' here i know but i have only just started my 'pitch' and i suspect price has 'just started' as this cycle will/would take years!
First things first:
We will look at the basics first then market 'structure' then indicators/divergence and Fib levels, pivots,basic wave structure/count & smaller time frames (60&240min and daily) etc to build up my case...and then you can decide. 'Price' itself will ultimately decide if it takes out previous resistance levels and makes higher highs and if it eventually breaks out of the long term down sloping ML through into the ascending ML and then 'Hey Presto'...... we will have confirmation of the reversal. But in the meantime we will return to lower time frames which have greater trading application.
Next post more detail on $Swiss and more positive/exciting possibilities for $Yen. Plus a 'cracker' of a very recent Crude Oil 60min chart (CL #H09) plus another current chart showing price oscillating off multiple ML's& MLP's.
Remember... Each of these currency 'pairs' above may not put forward a high probability case for a change of direction for USD in the short/medium/long term, however if you take all the currency pairs( i intend to cover) and some of the currency indices and add a pinch of fundamental common sense then there is a strong case and could be a scenario well worth watching develop.

Hello & Welcome (Please: NO Religion, No Politics,....just price dynamics)

This blog will follows a wide and eclectic range of trades/price observations in the futures and forex/markets by a solitary trader.

The only personal information pertinent to this blog is that from 1980 until 1994 i was employed by several companies (EF Hutton, ContiCommodity/Refco, Merrill Lynch and Credit Lyonnais) in the City of London. I left the markets behind in 1993/4 when (recently married and + child) i started to pursue a 'vocational' business in horticulture and away from London.

 I should remind readers that in the early 80's and as a very junior assistant it was my job it was to update the many charts that adorned the trading room walls manually with a pencil. Some of the lower time frame charts stretched around the trading room walls for up to 20ft plus and due to them always being removed from the walls daily/hourly for manual updates resembled The Dead Sea Scrolls!

By the time i was leaving the business charting software was in its infancy and compared to what is available today was abysmal and (in my opinion) almost worse than the hand drawn charts. Weekly or bi weekly CRB printed charts were then the name of the game and arrived with a hefty subscription to be studied by many or most in the front office. For historical amusement i will reprint some scanned mid 80's charts in the coming weeks/months.

I hope you will find something of interest as my approach developed over the years since 2005/6 and of the many hard lessons which I learned along the way. There is no short cut for screen time and the more i know the less i know..

However here is a FINAL word of warning. I recently spoke to an old colleague of mine who works in retail futures and Forex and was told that retail traders are no more profitable now in 2010 with all the charting & technical software now available than they were with pencil and ruler and paper drawn charts back in the days when i started in the early 1980's. It is certainly true that over 90% of so called private traders loose money so just to preserve capital should be your first priority along with managing your risk.

Lastly,the chart images and text i publish are in no way to be interpreted as trading recommendations and i accept no risk or liability for any individuals actions as a result of material published and read on this blog.
Trading foreign exchange and futures on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange or futures you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange and futures trading, and seek advice from an independent financial advisor if you have any doubts.