Wednesday, August 16, 2006

Trying something new

Instead of just posting my trades from one system, I'd like to start writing down my thoughts. In addition to posting my Alba trades, I will also try to make an effort to post more in-depth thoughts, not just on the EUR/USD but on any pair where I see potential trades. The idea is that hopefully my journal will serve as a guide for you if you trade full time or would like to see what goes on inside the mind of full time trader. You will see my thoughts, not just on the market, but my emotional thoughts. I will post trading rules, economic events, my game plan, and then I will analyze my actions and criticize what I did for the day. Did I stick to my rules? How did I feel about my trade? What can I do to improve? All these things will help give me a better perspective on myself as a trader and hopefully it will inspire you to do the same. By analyzing yourself you can figure out where you are in your trading career and make efforts to improve in your weaker areas. So with that said, this will be my first post :)

My overall view of the dollar right now is that it has reached a peak. We all know that the Fed is most likely halting its interest rate hikes, but the impact really lies in the fact that the BOE, ECB and BOJ seem to be on the verge of continuing to raise their rates. Interest rate differentials play a key part in trading and I can see the dollar going down throughout the next several months. We can already see the signs of it as US data is getting weaker. Strong data in other economies will also help accelerate the dollar decline so I would pay close attention to them.

Since it was my first day back to trading today I felt very refreshed and excited to trade. Normally, when I get excited, I tend to overtrade, but over the years I've learned to control my excitement and hold out until I actually see a good trade instead of just seeing what I want to see. I didn't take any trades today and although I would've rather had positive pips, I'm proud of myself for not making any dumb trades. It was especially tempting since there were plenty of economic reports to fuel the market movements but I did not see any good entries. I'm glad I controlled my temptation to jump especially since my chart was moving so fast during those times.

There is one pair that has particularly caught my eye and that's the AUD/USD. I see a potential for a good long trade on this pair. One reason is that I am dollar bearish and the second reason is that there is a perfect order lining up. If you don't know, a perfect order is when you have several moving averages ranging in different periods (fast MAs and slow MAs) and they all cross over each other so that they all line up. For example, if you have a 5, 13, 30, and 64 SMA, you would look for the 5 to be above the 13, the 13 to be above the 30, and the 30 to be above the 64 for a long trade and vice versa for a short trade. Perfect orders are great for determining trends and right now, the AUD/USD is showing a set up for a nice long trend. I am using a daily chart for this because this will be a longer term trade.

I am going to look to buy when the pair breaks its most recent high which is at 7712. I will place my stop a few pips below the most recent low which is at 7583. So I'll just place my stop at 7573. My target will be double my risk so that I will have a 2:1 reward to risk ratio. Since I will be risking 129 pips on this trade I will go for 258 pips. My target will be at 7970.

I'm not sure if this will happen tomorrow but I'd like to see this trade trigger within the next 2 days. If it doesn't I will re-evaluate the trade.

The only piece of news I will watch tomorrow will be the Jobless claims at 8:30 am EST. I don't know if this will have a strong affect on the market but if it's a big increase, look for the dollar to fall.

That's all I can think of for today. I don't see any other trades right now. I will continue to trade Alba, and I will also watch the Cable for potential trades.


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