Why Forex trading SHOULD always be extremely profitable

Even though this account is doing very well (see one reason why)...I think I should be doing so much better.

By nature, I am an impatient person, so intermediate trades (where you have to learn to deal with positions that are down for a while OR where your positions are somewhat profitable, then down before being profitable again) require a great deal of patience.

This is why I have two accounts...one short, one medium term. But sometimes, I wish I could create a password to the intermediate account that wouldn't allow me in for at least three weeks! WHY? Because I have identified entirely too many trades since January that, had I waited three or four weeks, the profits would have been much more.

Here are two examples of trades that I identified a while ago that fall under this theme. I just did a little review...and there are a few more. Go to your charts to see where these pairs are today.

1. Sterling/Euro
2.Canadian Dollar/Yen

-----------------

Gold closed above $930 oz. I am pretty sure that is bullish. (My charts.)

Gold

WE WILL NEED TO CLOSE ABOVE 930 IN GOLD for me to be convinced by this rally.

Why We Spend Coins Faster Than Bills

This is a terrific piece on humans and money from Planet Money. It's also very, scarily true!

Apple Vs. RIMM

Interesting way to trade tech. We mostly do Forex in this account, but occasionally, we will stray. Here is a cool video on Apple Vs. RIMM. Excellent way of trading I've never seen before, using the FUNDAMENTALS of the companies directly with the technicals. Really...it's an artificial hedge.

By the way, if there is any doubt that Adam and his trade triangles work...Gold is now around 932 oz. Adam told us to buy it two weeks ago (I already owned it.) Try his software free...it really works, I did...and my account is rocking partly because of him.

Update euro and gold

---CPI numbers were flat to slightly higher.
---Numbers out of Europe last night were awful.
---Gold and commodity currencies hanging in.
---NY State Manufacturing index. The index had the second consecutive month of impressive improvements and rose sharply from -14.6 to -4.6 and is now way above March's low of -38.2.

Stay tuned.

Basic Strategy

I will probably not partake because I have large positions in both Gold and the AUD/GREENBACK pair, but it's pretty simple. Tomorrow morning, the Consumer Price Index number is published. If we have a decent hike in the number, say 0.3%...the Dollar will be crushed (EUR/USD will take off.) If it's less then expected, the opposite will happen.

I'm in the first camp. The solid channel I was so high on when I wrote this entry was seriously breached, and even though I refuse to believe this market will keep going higher, below's breakout didn't occur for no reason. I am a technician first. Fundamental analysis is a distant second place for me. (Clicking on the chart gives you a clearer view):

A case for Gold?

As I have mentioned from time to time, I am a big Kathy Lien fan...I own her book. She is very knowledgeable of the history and the factors that went into the Forex market we see today. Definitely knows her stuff. What she thinks about the Dollar short term, is what she thinks about it long term. Bearish...

Interesting, because this portfolio owns Gold in case of some crazy economic event. This is short, succinct and compelling:

At the same time, this past week, a number of arguments have surfaced questioning the long term viability of the U.S. dollar. On Wednesday, the Financial Times carried an Op-Ed piece about how the U.S.’ Triple A credit rating could be at risk which if true would crush the confidence of foreign investors. Today, the NY Times carried its own Op-Ed piece by Nouriel Roubini, aka “Dr. Doom” about how the Renminbi could challenge the dollar’s reserve status. Although he does not believe that the Renminbi would replace the U.S. dollar as the reserve currency within the next 10 years, he does argue that the U.S. government’s aggressive spending and borrowing habits puts the dollar’s status at risk. He also lays out why he believes the U.S. is following the path of Britain, whose currency was once the dominant reserve currency before losing that title to the U.S. after becoming a net debtor and a net borrower nation in World War II. We also believe that the dollar will not be “replaced” in the next 10 years, but central banks will start increasing their holdings of other currencies at the expense of the U.S. dollar.

WSJ Survey

According to a survey conducted by the Wall Street Journal, most economists expect the recession to end in August of this year. They expect the unemployment rate to climb to 9.7% by the end of the year, with two million more jobs lost over the next 12 months, even as growth returns to the economy (2% in the first half of 2010.)

Can't remember this English guy's name, but he is always so sure of himself when he comes on CNBC. For a while now, he's been saying that he thinks we'll see Dow 1000 before it's all over! They basically laughed him off the set after that. Who knows. I keep thinking of that evil (as my children call it) Elliot Wave chart that Jamie Saettele drew at the end of April.

Misc.

Interesting day in equities. The S+P closed at 893 today, up about 8 points...but the volume was light and I didn't see much conviction. Also, check out the 'Hanging Man' from a couple of days ago.

It is not a classic Hanging Man, but bearish nonetheless. Some might describe it as a 'Long-Legged Doji', I guess. (Clicking on the chart gives you a clearer view):



Nothing surprises me about this market any more, but I think we have more to go down (which is what equities need anyway.)

-------------------------

My AUD/USD trade has become an intermediate trade because I see the pickup in Gold. I have made some great profits with the USD/CHF pair, which was my hedge when the trade became intermediate. I am looking to get in again. See updated account.

------------------------

Kathy Lien of FX360 sees the opposite of what I see. She sees more Dollar weakness ahead, which is positive for oil and stocks. I discussed the break in the trendline a while ago, but I stubbornly remain bearish to equities!

------------------------

When you go to this page, you will see one of the biggest reasons this account is doing so amazingly well.

More on equities

There is definitely evidence that the recession is flattening. But, that doesn't mean that equities should just go up in a straight line...that's unhealthy.

Here is the chart that Adam discusses. There are two trendlines converging...DECISION TIME!

Remember, the bigger trendlines take precedence over the shorter ones (clicking on the chart gives you a clearer view):

We need banks to lend so that...

...we can get out of this recession. So, this excerpt about Libor is very encouraging:

Dollar LIBOR/OIS 3-month spreads on Wednesday were at their lowest level since June 16, as the grind tighter continued. Sterling spreads also narrowed again, although they are yet to get back to the levels seen prior to the demise of Lehman Brothers in mid September last year.

Is this the end?...Part 2

Time to take another look at the SP 500 again. You all know what I have been saying about this crazy market...

The SP 500 index is caught between two trend lines that are the dominant technical indicators right now for this market. If either gives way, it will point the direction of the next major swing.

In addition to the two trend lines that Adam graphically illustrates in this short video, he also showed two other tech indicators that flashed important signals on Tuesday.

Please enjoy it and give your feedback on my blog.