US GDP, Fed, End of the Month Pumps, Trade Ideas

Aloha Everyone-

Hope everyone had a great U.S session. I am preparing for the European Session, and have a few small shorts working in the Asian Session. EUR/JPY, took a few small shorts just because the run-up was so big. Usually window dressing for the end of the month, and there could also have been a great deal of covering on the JPY pairs due the weakness as of late.

U.S GDP came in at 6.1% contraction for Q1, which makes over 6% contraction for two quarters in a row, not good.  We will see where things come in during the Fall, I think that is going to be the most important factor when it comes to judging the true potential/progress of U.S recovery.  On this power-data day, we also had the Federal Reserve acting as expected, keeping key interest rates targeted for the 0.0%-0.25% area.  The Chairman of the Federal Reserve, BenBernanke, has some serious issues coming ahead, Treasury yields continue to climb in the face of Quantitative Easing (purchasing Treasuries by the U.S, and POMO cash printing)

I see the major movements of most currency pairs over the last two days as simply end of the month pumping. If you are caught short, I truly expect you will have an opportunity to get out on the JPY pairs and USD pairs.  It will be interesting to see where things move to in May, as on Wall Street, we traditionally get the "sell in may, and go away" effect.  Tradition, however, has taken a back seat during the last two years for good reason. Should be an interesting couple of weeks.  I am looking to nibble on short side trades in the EUR/JPY, GBP/JPY, GBP/USD andUSD/JPY over the next couple of days to weeks. I will post when I get into these trades and the setups I am seeing!  Please feel free to email with any questions.... Also, If anyone is interested in one-on-one coaching for FOREX or Futures, I am open and willing to do some coaching this summer. My rates are not posted because they are negotiable, and I do not wish to ever gouge traders for wanting to learn, like SO MANY other people do. I had the blessing of being given affordable coaching, and it has been a true beacon.  
Aloha and Happy Trading!

UPDATE: GBP/JPY 4HR Channel, "Throw-Overs and Throw-Unders"

Hello Traders-

This is an updated version of the GBP/JPY chart I posted yesterday, recommending a short trade on the breakdown of the channel.  Congratulations to any of you who took that trade, it was a great one, but also needed to be exited rather quickly as we approached the 'bottoming area'. This chart shows two very classic versions of inverse scenarios.  On the top label you will see the price action showing what is know as a "Thow-Over" and on to bottom label you will see what is known as a "Throw-Under".  As is the case with strong channels, fair price balance has a tendency to revert to the mean and recover the boundaries of a channel after they have been broken.  When channels do breakdown without a recovery, the profit potential is huge, but the risk is high wit regard to timing your entry.  Normally, I trade a lot of channel and trendline brakes, so I have developed a fairly healthy sense for when they are in fact breaking for good, throwing down/over, or simply coming back to "kiss the channel" and say goodnight.  The third effect is one in the same with the first, breaking for good.  Most times (unless huge news hits) prices will break channel boundaries with a SOLID candle that is supported by HIGH volume when the move is legit.  At that point I look for a quick turn around and a "kiss and goodnight", which is a complicated way of saying that the broken down price turns back up to quickly test the boundary, and if that fails, you have a tremendous trade opportunity.  Your stop is simply the channel boundary, and your trade can easily turn into a nice runner....

Happy Trading!

Price and Volume, Lessons in "Divergence"

Hello Traders-

I just wanted to post a very nice example of one of the key pieces of information I am always looking for on the charts/markets I trade. This is a 30min chart of the EUR/JPY pair, showing a very nice example of the price/volume relationship explained in this post. Enjoy!

The example put forth in this chart is known as a "divergence", simply implying that conflicting information is being produced in opposition to what would either normally be expected, or required to confirm a signal to buy, sell, or hold.  I do not look for "confluence" or agreement in my signals, I look for "divergence" as this is a sign of imbalance, traders being on the wrong side, or simply something that has become long in the tooth and the trend is reaching a point of exhaustion.  When combined, Volume and Price can tell an incredibly powerful story with regard to true strength and or validity of a price move.  When we see Volume, we are seeing a valuable gauge for measuring participation in the market. How valid is the move taking place?  Can we expect this trend to continue because we see a strong move in price backed by a strong move in volume, or can we expect this move to be short-lived or simply a 'head-fake' due to a thin market?  We know when there is a strong agreement between prices and volume, the trend has support and strength. A trend like this must be respected, not ignored.  When we have rising prices and rising volume, the move upward in price is confirmed, and we can make further decisions based upon this information.  When prices are moving down, and volume is moving up, we also know that this move is powerful and has support for further movement.  The key "divergence" we are looking for is when the price and volume DO NOT AGREE.  That is a key sign that something in the market is not right, and most likely it is not sustainable either.  When we see falling prices WITH falling volume, we know that less and less participation is taking place as the prices fall. People are withdrawing, and waiting.  When we see prices moving up WITH falling volume, we similarly know that the movement up is not supported by the majority of market participants.  Find volume trends and corresponding price trends, and you will also find that your entry/exit points become much more accurate.  Of course, we cannot ignore everything else as we know that prices can be affected by all sorts of unknowns, but as traders, volume and price relationships are one of the most powerful signals we can use to determine when to get it, when to get out, when to hold, when to sit out, and so on and so forth.  Happy Trading!

GBP/JPY 4 hour chart with TCCI

I hope some of you were able to take the break-down of this GBP/JPY setup I posted earlier in the day. The trade at the break of this channel netted a nice 3 digit gain in pips,  +155, with another 30-40 left on the table...I am going to start posting more and more FOREX charts with the setups I am seeing and taking.  Please feel free to send me an email with questions and or ideas for things I should cover.  Since the true pain began in this financial crisis, I have shifted trading styles and markets to adjust to the current environment. As traders, we are constantly faced with changing environments, but the normal pace of such changes has taken a fairly drastic increase in pace. When the information we use to make decisions in our day to day trading becomes impossible to gauge due to abnormal circumstances (as in the case of the ongoing government tampering in the financial markets) it's always a good idea to evaluate your trading styles, strategies, methods, and markets.  Even during times when things are constant, doing this type of system evaluation on a yearly or even monthly basis is a good idea. Our edge is our weapon, and without a sharp and properly wielded edge, trading becomes an entirely different ball of wax.  Stay sharp, and your edge will too. 

There Comes A Time.......

Well, well, well, Ladies and Gentleman.....

April 5th 2009 was a Sunday, and a beautiful one at that on the Island of Maui.  I finally got the courage, and took the plunge!  Best part is that my long-time partner in crime SAID YES!

I know we try to stick to PURELY FINANCE and TRADING related topics on the blog, but it is a momentous occasion, and I wanted to share it with everyone. After-all it's Good Friday, and there's no trading to be had.

I will be back this weekend with some market coverage, trading analysis, and FOREX ideas for next week!

Regards and Aloha....

Nigel (HawaiiTrader)

2009! New Year, New Trades. Get Pumped up!

Aloha Traders-


Happy New Year and Happy New Trading Year. Clean the slate, and freshen up, get ready for a great year. Although we can't erase our P/L breakdown, we can learn from and improve upon those things that were both positive and negative during our trading year. For those of you following, I would REALLY APPRECIATE ANY feedback in regards to topics, questions, and or comments/critique you might have to improve the blog and the information you can pull from it. Feel free to send these to nigel4sher@gmail.com. This will help to keep things current and focused, with a goal of vast improvement both on the site and in every one's trading. A trading room could even possibly be something that could work out, we'll see.

Regards
Nigel/Hawaiitrader

Short Euro, Long Dollar, Long Oil, Long Nat Gas

These are things that I am CONSIDERING taking positions in and out of.

I have been scalping the Euro on the short side, bouncing in and out, but I am not willing to hold anything for any significant period of time. It is just entirely too dangerous right now, especially coming into the end of the year. I made no trades today during the U.S open market hours, but I did make 4 Euro Futures trades between last night's currency open, and today's U.S. market close. These were all very small, only 1 contract. It's always good idea to slow your position size, entries/exits, and overall trading if you are going to participate during this period of the year. A lot of 'nonsense' takes place on the accounting side of things from Wall Street.

Overall its been a challenging year for traders, but the volatility has been something, which if properly respected, presented many amazing opportunities. I hope everyone has had a great year and is preparing for another interesting and exciting one in 2009!

I will most likely not be taking any major Index Option Scalps into 2009, my plan is to wait for things to calm down into some early year data, and the complacency that I believe will set in once President-Elect Obama is President Obama. Do not be surprised if you see the market trading lower a month from this post....

Regards,
Hawaiitrader

$RUT scalps, /6E scalps(EURO fx futures)

Aloha Nui Loa traders....

A few trades just closed up...My apologies for not posting, but it was hectic open, had to execute. Remember, our Zen/Samurai trader energy....Stay in the zone.


$RUT

RUW AZ 500 strike calls..
bought to open 20 contracts @ $21.20
sold to close 20 contracts @$24.20... booya trade. I could probably get a little more, especially with all the bullshit that the option writers are trying to get done today on the upside, but oh well. Profit is a profit, and that's a nice one. $6k in about 45 mins.

I also closed out a /6E futures scalp (Euro FX futures) . I had a short on 3 contracts from the break of the H+S pattern that formed and confirmed last night on the 1 min, 5 min, 30 min, and even the 1 hr chart. It was thing of beauty. With the currency trading, as of late especially, traders are finding the fundamentals which usually drive this market place are being given up for panic-book-squaring and massive liquidation/hedging by foreign banks and governments as everyone reacts to the quantitative easy and ZIRP environment. Expect further volatility throughout the end of the year. Things should become less PURELY technically based (currencies always are fantastic technical trading vehicles) an return to little bit more normal environment. What? 12 handle range on the EURO in 48 hours, that's not normal? I WISH!

Anyway my short /6E was taken at 1.4250 EURO and covered at 1.3970, 1.3960, and 1.3950. Very nice profit indeed, and we are on a bit of a run here, so I am super pumped that the weekend allowes for a natural break. As traders, taking breaks at the right moment can extend streaks, break slumps, and in general can be thought of as being similar to proper execution of entries/exits, but instead for your psychology. Do not ever assume that you can trade every day, all the time, and exercise a consistent ability to implement your edge in a way that is cold, objective, and unemotional.

GOOD LUCK!
Aloha...

HELLO TRADERS!

Aloha Everyone! I am back, refreshed, and ready to rock with plenty of new blog entries, trade strategies, and some interesting adventures into new markets. My apologies to all of you who follow the blog (its a small group of us!), the past two months have been extremely busy and challenging to say the least. Ebbs and flows, ups and downs, such is the life of a trader. I hope everyone is managing to do well, or at least hedge off portfolio risk during what has been a most historic period of time. In regards to my own trading, I am chugging along day by day, but I have picked up a few more markets than I have traded in the past, so I have been busy learning, researching, and trading. I hope we can all learn from these new experiences, as well as continue to do so with the core of my trading, option inflection scalping. Just wanted to let everyone know that there will once again be current updating of my ongoing trading, and definitely feel free to once again ask any questions via email!
Regards,
Nigel/Hawaiitrader

Uncharted Waters

Hello Traders-

I hope everyone was able to relax, get refreshed, and do some homework on personal finances as they apply to our current world-wide financial system collapse...This puppy is just getting started, and I personally do not like the sound of that. Global bank nationalization, a return to currencies backed by gold, and the continual printing of money by the Federal Reserve/Central Bank systems have my antennas on alert. I am in no way a tin-foil monetary conspiracy-conspirator (many have come out of the wood work lately to take credit for their doom/gloom predictions), but I do take this situation with the utmost of seriousness. Therefore, even if things do somehow unravel less than expected, and the world finds a safe and feasible way to maneuver out of this situation, I still have planned access to 5 years worth of funds needed to live. Everything else is available for market trading and other expenses. No matter the end game, it is always safe to have a plan. The same goes for trading.