Look at trading risk in terms of Dollar Risk, NOT Pip Risk

One of the reasons I like to learn trading from Bob Iaccino and do some of the same trades that his firm does, is because you LEARN about trading as you trade and there is not just willy-nilly buying and selling in the FX market.

He teaches risk vs. reward. He has experienced and rookie subscribers...but the latter have a gameplan now, as opposed to no plan and just losing all their trading capital in the first two weeks.

He teaches how to deal with losing trades (which are inevitable) and so on. But today was great because we were taught a lesson that was given as a result of a rookie losing money on a trade, and then complaining about it...and I guarantee you he was complaining because he didn't understand money management or risk vs. reward.

Many of the lessons that you learn from these guys can be found in the hundreds of old seminars that are archived (for peanuts.) But, I will try to explain this one:

One of my losing trades from yesterday lost about 8o pips, whereas my only winner made a profit of 40 pips. Dollar-wise I lost out, Bob made money, even though we did the same trades.

Why? Because I forgot that the stop loss for the EUR/GBP trade was only 20 or 30 pips away...so I could have afforded to take a bigger risk AND the stop loss for the EUR/USD trade was about 120 pips so I would have lowered the position size. Bob's firm did a position that was 6 times the size of the EUR/USD trade. Needless to say they cleaned up. One of the things they don't do at this level is tell you position sizes...that's for us to decide.

To recap: The R/R ratio will make the trade with the larger stop have a larger reward… e.g. 20 pips of risk should equal roughly 40 to 60 pips of reward OR 100 pips of risk should equal about 150 to 300 pips of reward.

This was a great lesson and I really learned a lot...There is so much to trading besides just initiating and closing positions...understanding risk/reward is crucial...

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No trades went off today...pretty much every pair was flat as a pancake.

Out of trades

Took $600 profit on EUR/GBP...BUT
Got stopped out of both USD/CHF and EUR/USD for losses.

The reason why we diversify is because it's hard to go on a losing streak because of the different pairs. Many times we'll have three wins and one loss...rarely two losses and one win.

New statement coming.

Targets and Stops

for the preceeding trades (clicking on the chart gives you a clearer view):

In THREE trades

I am still short EURO/USD
I am short EURO/GBP
I am long USD/CHF

Details upcoming...

Weekly Down Triangle issued for Nasdaq

A few posts ago, I came up with some reasons for why I felt equities were going to come down (which is healthy if you trade equities.)

And today, Market Club came out with a WEEKLY down triangle on the Nasdaq. This excellent video by Adam pretty much confirms my belief that equities are going to continue down a little before we break up for good. Below is an image from that video where Adam shows the same MACD cross that I spotted on Saturday. (Clicking on the image gives you a clearer view):

I just doubled my EUR/USD short position (2 Lots.)

Significant breakout

On August 9, I wrote a post about the case for the bears. Jack Steiman drew a chart of the USD ETF UUP. Given the positive divergence, it looked like it was just a matter of time before this broke the wedge...

...I just got the following in my mailbox (I can't recommend enough for you guys to try this free for 30 days):

MarketClub Smart Scan Alert for UUP Price Breakout Above POWERSHARES DB USD BULL (PACF_UUP) has broken above your preset level of 23.58 and is now trading at 23.6293 +0.1793 (+0.76%)

UUP Streaming Chart
http://www.ino.com/info/190/CD3603/&dp=0&l=0&campaignid=8
UUP Chart Analysis Details
http://www.ino.com/info/190/CD3603/&dp=0&l=0&campaignid=8
POWERSHARES DB USD BULL (PACF_UUP)

Last 23.6293 Net Change +0.1793 (+0.76%) Score -55
Volume 390240

Open 23.6800
Day High 23.6800
Day Low 23.6200
Prev Close 23.4500

Updated Statements

As promised:

My Bob Iaccino account statement here. This acount has shown a decent profit since starting with them (see chart.)

I consolidated my main Forex account into cash at the beginning of June, but you will see a 72% profit since the beginning of January in that account.

My intermediate Forex account, which is up 24% since January (Zip file.) This account and the one above is a product of my analysis and research.

My options and equity account, which are titled in my children's names, so I can only recreate the trades.

Here are the account particulars:
--My Sprint trade (which I closed at around 13% profit)
--My Zion Bank trade. (26% profit)
--The Gold puts purchased to protect my long term gold position have expired with a $3000 loss.
--The Puts I bought (and sold) to protect my gold, the first time around. ($11,000 profit)
---My S+P puts which expired worthless with a loss of $3,100. I am considering buying them again.

Trade Update

Covered my Gold short for a $350 profit...

and then proceeded to short 1 Lot EUR/USD. This is a Trader Outlook trade.

T1 is 1.4007
T2 is 1.3970
Stop is 1.4161

(For those of my readers who are keeping track, stay tuned for updated statements.)

Prediction: The rally is probably over!

...there, I said it!

For you 'equists' out there (is that a word?), I hope I'm wrong...but there is a lot of evidence that is pointing to a correction from here, and I want to show you some things that I have found.

I mean, it's bound to happen, right? We've come so far and it's not healthy investing in a market that is obviously overbought. Unwind those oscillators, darn it!

Reason 1, the trade triangles tell all

One of the biggest reasons that this account is doing so well is because of the Trade Triangles of Market Club. I often post my statements on this blog, and the triangles are a lot to do with their great success.

Check out the DOW chart I drew in Market Club. I went back to October 2008 because that is the Dow's all time high. In July, there was a green weekly triangle issued BUT, I suspect we will get a red DOWN triangle issued soon (clicking on the charts give you a clearer view):

Notice how far it retraced and how it seems to be stopping at the 38% Fibonacci line. Now in this next chart, I went closeup. Take a look at the MACD and see how it is crossing:

Reason 2, Dollar inverse Head and Shoulders?

I showed you a chart of a Dollar ETF that Jack Steiman drew, last weekend. You'll see that we are due for a breakout of some sort. Ok...now take a look at the following chart from Action Forex. See the inverse head and shoulders?:

Reason 3: Where's the inflation?

(fundamental)

(I am short 1/3 of a lot of Gold.) The Fed kept rates at 0-0.25%, which was expected. Normally, the Fed would actively try to maintain a specific rate of inflation, usually 3-4%. Now, obviously, the goal is to make it cheap to borrow. If rates continue to stay here, I would suggest that, at least for now, inflation is low, and it may be a while before Gold breaks $1000.

Consumer consumption is weak, unfortunately...because I have my own retail business. And CPI had its biggest decline in 60 years.

(technical)

Are commodities going to keep moving up? Well, here's another DOWN trade triangle issued by Market Club, this time for the CRB index. Also note the MACD about to cross. I'm not sure the exact percentage of Gold in this, but I think it's around 12% (clicking on the chart gives you a clearer view):

Reason 4: The 10 Year Treasury

It looks like the Dollar has based here. There are a few charts to show you, but the most significant is the 10 Year Yield chart:

Notice the top trend line. It just looks like we have hit a high in the 10 year yield. I don't trade this, but, to be safe, if there is a close below 3 1/4%, you can see treasuries rising from here, which will push the Dollar up. If the Dollar is done with it's correction, we will see equities and Gold go down.

Just shorted Gold

Gold was trading at the upper end of an obvious wedge that we discussed a few days ago, so I decided to take profits.

After that, the wedge was broken to the downside. So, based on that, I put a sell order in to go short @941. The position never hit...but then we broke again. So what I did today was short at the market a small 3 mini-lot position...and then I will add to it if we get a close on the 4H below 940...one of the fundamental techniques used by Bob Iaccino.

However, he determines these prices differently (proprietary.) My analysis here is based on my charts and Market Club...which just issued a new, red, DOWN triangle for Crude today, and I think Gold will follow based on the above trendline.

Both of the aforementioned have been very effective and crucial to my account's success...they are just very different.

That was quick!

I just placed a Buy Limit to go long on the same USD/Yen pair @94.12. This looks like an excellent trade because of Fibonacci support...Still trying to confirm...but I think I'll take this if it happens. Given the support here, I'll give myself a tight stop. This just looks like a retracement waiting to happen...

Dow down 129 while the USD/Yen travels toward my limit (hopefully.)

Trade Update

Out of US/Yen trade with almost a $1000 loss. If you are a Bob Iaccino fan, like I am, you'll know that they focus on CUMULATIVE pips and are doing great for 2009. (Also, they make all the trades that are recommended.)

Most times their trades work, sometimes they don't. Cumultively, they are even for the last 2 weeks...THAT'S TRADING! (You lose a couple of rounds, but win the bout.)
...and that's why I do my own research as well e.g. the trade before this one. Using multiple sources has given this blog's accounts the success it's had.

Searching for additional trades but looks like slim pickings...