Tuesday, January 30, 2007

Pound and Russell 1-30-07


The dollar has been strengthening against the pound since I took a pound short on the 24th. Last night things got a bit choppy and we saw a bit of a retrace as the MACD crossed over. I exited my short pound position at around 9:00 p.m. last night at 1.9623 for +132 pips.

The Russell has also been choppy this morning with little directional conviction. First and only trade of the morning was at 6:38 short at 796.8 for +1.5.

Net on the morning: +1.5
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9 comments:

Anonymous said...

Good morning Ted,

Care to elaborate a little
more on reasoning behind
6:38 short at 796.8 for +1.5 ?

I enjoyed reading your blog
about the quest for the holy grail.

That being said, I do have plan..
hard to stick with it, though.
In fact I have several plans.. and
can't really decide on one.
How long did it take you to arrive at your current "plan" ? Do you always go with a 1:1 risk reward ratio ?
Best Regards,
Jesse

Lord Tedders said...

Jesse,

Well the market gapped up slightly on the YM and Russell. Based on the price action it looked like buying was weak. This gave me a short term bias to sell.

When price bounced off of resistance strongly and RSX started to return from being overbought I pulled the trigger.

However, I also knew that we are in an uptrend (but one that is weakening). This helped me determine that a short-term profit target of around 1.5-1.8 ticks where the next level of support sat would be a good target.

As far as plans are concerned, I try to pick markets and time frames that interest me. It took me several months of intensely researching the Russell to determine a) that I enjoy the price activity that scares off many, b) that I could find a way to exploit that activity, c) that this method would suit my personality.

No I do not always choose 1:1 risk to reward ratio. However, because this is primarily a scalping methodology many of my trades have a risk to reward ratio of about 1:1.

However, as you can see last week I took several trades that were closer to 2:1 - but that was because the market activity and trend dictated that I should. Now the market is more choppy (at least today and yesterday) and so 1:1 is better.

Tedders

Anonymous said...

Ted,
Everything makes good sense
except the RSX indicator.
Can you show a screen shot of
where it went from overbought to oversold?

Do you use mental or actual stops?
I know you emphasize sticking with a plan..
but how much of your plan is subjective..
"looked like buying was weak"
and how much is mechanical?: "rsx cross + red line support"

Thanks again.
Jesse

Lord Tedders said...

RSX never became oversold before I sold it. RSX was overbought and was beginning to return from being overbought. You'll notice, however, if I had waited for an actual RSX cross I would have entered 2 candles later. This would have worked out but you'd have been sweating the stop a lot more.

This photo should make it clearer. I entered on the close of the candle with the down arrow.

http://i147.photobucket.com/albums/r303/LordTedders/ER2_1-30-07.jpg

I use hard stops always. For my system methodology - it relies on 2 things. One is the technical indicators which tell me that there is a possible trade entry, the second is market price action itself.

I listen primarily to my S/R and RSX indicators (I cannot enter if they do not agree), but if price tells me (as I watch time and sales) that the market will or won't follow through, I use this information to adjust my targets accordingly. I don't see price as being subjective - to me it is another indicator but not one that TradeStation can display (and hence why I do not automate this methodology like I have for some of my Forex strategies).

This might be confusing or seem subjective but really its simple and quantitative. I watch price over time and it tells me - are the bulls rampaging the market in seconds (they did at about 5 minutes after the opening bell yesterday), or are they lackluster and half hearted - as they were for the first 2 hours today (although price did go up)?

I hope this makes this clear.

Tedders

Gav said...

Well done Ted! Congrats on 132 pips gain.

Gav said...

btw, do you trade forex with Tradestation? or just for charting?

Lord Tedders said...

Gav,

Thanks. I use TradeStation for charting. Although I just got NeoTicker so when I figure it out (could take awhile) I may chart full time with NT. I use MBTrading for my Futures broker and EFX for my forex trading. EFX is owned by MBT. I really recommend them, they've got it together and charge a fair price (commissions).

Caravaggio said...

A short pound position (vs the USD) is the only currency position I have faith in over the medium term. A few years ago, this trade would have bled over 4% pa in carry, but now the carry is close to neutral.

Lord Tedders said...

Short Pound is definately looking like a strong play at the moment. We'll have to see