Tag: FX

How big is the FX market?

Most of my trading time is currently in the Foreign Exchange (FX) market, so here’s a potted version of what it’s all about:

The FX market is a decentralised global market for the trading of currencies. It is by far the largest market in the world with an average turnover of some USD$4 trillion per day.

The main participants are the larger international banks.

And, the largest Financial Centres for these institutions are London and New York.

The FX market also comprises smaller banks, hedge funds, high frequency trading firms and the smaller trading firms/individual traders. Market share of all the smaller traders together is not more than 5% – but growing.

Trading is around the clock. Thank goodness the market is closed at weekends.

Most FX trading is speculative, that is the person or institution that bought the currency has no plan to take actual delivery of the currency; rather they were just speculating on the movement of that particular currency.

The large majority of currency turnover (roughly three-quarters) involves the United States Dollar (USD), next (but a third of the size) is the Euro (EUR), then the Japanese Yen, Pound Sterling, and further down is the Australian Dollar, the Swiss Dollar and the Canadian Dollar. The remaining currencies have a very small representation when compared to the USD.

As I currently trade the 5-minute charts, I prefer to trade just one currency pairing: and for me its the EUR USD.

November 11, 2015
Weekly Diary – Slow Trader Fund

Ashtead Group PLC (AHT) was a good buy for us, so far. The buy was at the bottom of a trading range, as we can see above. This has a 60% probability of climbing to, or near, the top of the range indicated by the target arrow. Of course, there is a 40% probability that the price will break higher from the trading range top. However, we have taken this for a ‘scalp’ rather than a ‘swing’. A swing would be where we would allow the price to retrace before going (hopefully) up higher. A scalp, on the other hand, is generally a movement from one extreme of a range to another without a retrace.

The picture for crude oil, WTI, has changed slightly from my suggestion last week. The COT, shown above, only works with some degree of sureness when it is in harmony with the trend. The little turn up, that we can see at the very end of the blue chart line above, represents a downturn in the price. That tiny turn up represents about two weeks of price movement. I like to keep the COT on a 3-year chart as I find this best for perspective. COT, we may recall, is big picture stuff only. And, again, is only to be trusted when in unison with the trend. Which, in this case, it is not.

Above, is the daily chart for crude oil. My own thought, is a move upwards soon, as indicated by the blue arrow, to provide a wide trading range. The price tried to turn upwards last week but failed. For another turn up we will need some price action confirmation supported by the COT.

Other activities include an introduction of swing day trades on the FX market in EUR USD. In day trading I find it benefits greatly to concentrate on one market. I scalp and swing in my personal fond on day trades. Slow Trader, for the time being, will be swings only in day trading respects. Swings tend to be lower probability trades, about 40%, but have bigger reward potential. They are also less intense to scalps. We will see how this progresses for the fund and, of course, I will keep you posted.

October 24, 2015
JPY does not play well with the COT

Some good opportunities in the foreign exchange pairings (FX) this week.

I am more and more concentrating on the FX market rather than the stocks and shares market. Particularly the major currencies. And my real angle is FX that is in association with the USD.

For instance, GBPUSD, EURUSD, NZDUSD and AUDUSD. Gold and silver, priced against USD, and WTI (light crude oil) as they are all on the COT watch-list.

This is because, with this selection, I can take advantage of the information from the COT report, providing the ‘C’ of my C.U.P. abbreviation (see ‘how I trade’).

Is the COT that important? Anything that helps us trade with an advantage is important to my mind; there are enough variables in the market not to take notice of any obvious areas of influence.

Silver gave a buy signal (retracement to the 21 day moving average) that we caught this week. Don’t chase this however, this signal has gone for the time being – possibly.

This buy was supported by the COT, but be careful of the trend:

You may have noted that JPY was not included in my primary watch-list. However, we do trade JPY against other major currencies, but without the support of the COT. We are currently in USDJPY and AUDJPY:

In both these trades we bought with the ‘C’ being the big trend only, and not the COT.

The COT, I find, does not play well with JPY.

August 19, 2015
Slow Trader Diary – week 32

No trades cashed-in this week.

We also had no costs against us.

This week we entered Pace PLC and DTE Energy Co, both on a December quarterly trade.

We are mostly short term swing traders: so are our trades taken as DFB (Daily Fund Bets) or quarterly futures trades?

The DFB gives us a tight spread (the difference between the buy and the sell price) but has a daily interest cost. A quarterly futures bet (near, mid or far quarter) has a larger spread the more distant the quarter but carries no interest charge. So which one to take – a DFB or a future quarterly – depends on time. In other words, it depends on the duration we think we will hold the trade.

Currency pairs (FX) can only be traded through a DFB. With shares and stocks, however, we have the option of a DFB, or a quarterly futures trade; I will look to take a mid quarterly trade where possible.

Here is our trade with DTE Energy Co:

DTE Energy is conventional electricity. Our conditional is simply a consistent ten years of positive earnings per share (EPS) percentage growth. As for recent trend, the stock is trending up which we can see from higher highs and higher lows. The 21 day moving average supports this. Our price, for us in this example, as there are many personal ways of determining price, is the confluence of a support line (a 61.8% fibonacci retracement line to be exact) and the pin bar the day before. We took the trade on limit, which meant the price did come down to a more favourable price before we bought automatically. We have set a target limit at 90.67. That gives us a risk reward of nearly 4 times.

Here is our trade with Pace PLC:

Pace PLC is telecommunications equipment. This trade has gone against us slightly and I’m not happy with my decision to take this trade. Our conditional, again, is ten years of positive EPS percentage growth. However, it is the trend that is our weak link. Over the last 18 months, except for a large gap up, the trend is down. This is made more so with the drop in price yesterday. A closer look at the recent trend confirms this. Our price, a confluence of support level and price action is fine but is secondary to the trend. Also, our price action, being the pin, in hindsight, is black where a white pin would have been preferable. I will tighten our stop to minimise any loss and if we get a rebound I will sell early at, or close to, break-even price.

No buy or short signals in FX this week. FX requires a regular watch so as not to miss the opportunities. By regular I mean a once daily detailed review of daily bars. This can be done, because of the timing of the FX New York close daily bars, at 9pm or 10pm, depending on UK/US time difference; or, as is my preference, early, before 7am, UK time. Then a look every 4 hours where possible, to match the 4-hour bar close times. However, I find that as we get close to a buy or short opportunity the best way is to set an automatic (ambitious) entry.

Particularly looking this coming week for a buy opportunity in GBP/USD.

August 8, 2015
Being conditional helps us win the pub quiz
With the possible exception of day trading, all trades or investments follow a simple process:
- Conditional
- Trend
- Price
This applies no matter what my preferred method.

Conditional is something that gives us a clue as to the probability of something happening in a defined way. In other words, its like taking a sneaky peak at an answer sheet before a pub quiz.

Conditional can be any number of things. For example, our conditional could be as simple as knowing how popular a product is, or how well somewhere is managed, or we have a particular take on how to calculate a future value of a company, or we might have a particular talent in astrology!

Whatever it is, we need something conditional to give us an advantage. Without it, with regards to the big picture, we’re guessing.

I use different conditional guides for different items. For shares and stocks over the shorter term its consistent EPS (earnings per share) percentage growth over the past 10 years. Sounds complicated but is easy to obtain with most trading software.

For longer term buys its future value, what Benjamin Graham coined Margin of Safety (MOS). I couple the MOS with consistency of growth. If you’ve seen my early blogs this is difficult to do well. However, you would be daft to trade (invest) long term without it – or something that gives us a similarly advantageous condition. Maybe Nick, the author of the calculations I use, can provide this information on-line in the future.

Also, a current favourite of mine in the medium term time frame for foreign exchange pairings (FX) and commodities is the COT (commitment of traders) report. A simple chart but one, I have learnt ,through lots of trial and error, that takes many consistent weeks and months to understand properly and use well.

Ask yourself (or your fund manager) what ‘conditional’ you (fund manager) use. Are you happy with it. Does it work. Or are we guessing?
July 27, 2015
How goes it? week 24

This week most of our shares came up nicely. But it is early days in this swing and we have some way to go (possibly this coming week) to reach our sell targets.

Our only share to stop out was DaVita Healthcare Partners for a loss of £216. This is still an excellent possibility if I get another buy signal. On this occasion it dropped below my previous buy signal and I took our loss early.

We are currently in the money in all our other shares:

….of note: In the weekly reports I show the points up and down, rather than how much we are up or down monetarily. I find this helps me stay separate from the money emotion of it all. I will trade an amount on each share depending on an acceptable risk level. This is governed by several things but mainly the value of the share. For example BT Group may have £30 per point risked whereas Under Armour has 0.9 pence per point risked…..

Arm Holding up 7.8 points. This share has provided a lower high and I will move my stop up close or will come out soon for a small profit.

BT Group up 11.7 points. This share has climbed nicely over the last few days bouncing off a 50% retracement line. We are holding.

Halliburton up 63 points. In the oil equipment sector. This share came down 70 points on Friday. However, we bought at a good price and the possible up side is well worth risking our present 63 points. I will move our stop however so that at worst we will break even.

ITV PLC up 6.4 points. We bought this at a good price and the last 3 days have seen a reasonable jump. A hold.

Moneysupermarket.com up 5.4 points. This took a large drop a week or so ago. It provided a good buy signal for us, and the share moved up nicely during the end of last week. A hold for us.

Monster Beverage up 35 points. This came down close to our stop. We were lucky not to have a loss on Monster. Price moved up on Friday but we are not out of the woods yet. A nervous hold.

Under Armour Inc. up 275 points. This has been level for a few weeks. It jumped up nicely a week ago then stayed level again. Stop moved to break even. We will hold.

Foreign Exchange currency pairs – I’m still struggling to master the FX market and I’m down on those trades. However, we have made a clear adjustment to our strategy and potential benefits are well worth the perseverance.

I will include FX in coming weekly reports so you will see the (larger than shares) ups and downs of the market.

B

June 13, 2015
How are the funds doing?

As I’ve said, our trading approach has changed a lot. Your funds are now income rather than growth. But we still have two funds:

1. SlowTrader – trades the FX (foreign exchange pairings) gold, silver, WTI (light crude oil) and S&P index. This fund takes short term trades both long and short using daily, 4-hour and 1-hour charts.

2. Ferrari – trades Nick’s top shares in FT 350 and S&P 500. This fund also takes short term trades but is primarily long using daily charts only.

Your monies have been split equally between each fund. If you have an overriding preference on a certain fund just let me know.

Here’s a snap shot of the funds:

The running P&L still has a share in both funds from my old system. The share is down and expires mid May. I’m hoping between now and then this share will come back up.

Remember this is a snap shot only. The running P&L could be in the green this afternoon.

Even – for both funds – is £15,000. Anything over this amount, at this time each month, you will get half your percentage profit. Those that have the maximum of £6,000 in their fund will receive the profit as tax free income. Those with a fund that is less than £6,000 will have their profit reinvested until their fund is at £6,000.

Here’s how it stands:

What I can now do in my short term trading has taken hard work, (dedication to the point of obsession really!) money and time. Anyone that tries to sell you a trading system and tells you its easy don’t believe them!

Anyone can withdraw their funds at any time. But please don’t miss on the good time, you’ve come this far.

Talk soon – B

April 21, 2015