Thursday, June 12, 2008

Turn The Machines Back On!-- IFCN Wk 27 -Tue- Equity: $781.74

When I see the action of the Euro this week I am reminded of that famous phrase spoken at the end of the 1983 movie, “Trading Places” with Don Ameche, Dan Aykroyd and Eddie Murphy. The Duke brothers had made a ruinous position bet on a market they were absolutely sure of – and they were absolutely wrong. The market went where it had to go--- against their huge, completely wrong positions.

"Mortimer Duke" starts yelling, "Turn the machines back on!  Get those traders back in here!"

If that could only work. It doesn't when you are on the losing side. Some financial giants are finding that out this week.

For us, it has been a pretty good week!

It is always gratifying to see the benefit of your labor, that of putting in orders faithfully every week, making sure that you are risking the correct amount for each trade relative to your total account size.

I have gotten numerous emails that have indicated that they too got stuck in winning FirstStrike trades this week, and are up substantially too.

Volatility breakout systems tend to work well when volatility raises its head.

The only reason why anyone ever takes a trade in forex or any other market is because they believe they know something which gives them an edge.

This must be true, otherwise those who are in actuality “gambling” in the markets would just take the money from their accounts and blow it on wine, women, and song, and then waste the rest.

Even gamblers think they have an edge. Theirs is a belief in Luck being on their side. The latin quote I put in the other day about “against a lucky man a god scarcely has power”, is very true. But luck always runs out. If that is what you are depending on, you will be poorer but no wiser.

Bull markets turn into bear markets. Oil, which seems to be so rare, suddenly gets found in large quantities by individuals who knew it was there all along and found a great time to spread the news – when the prices are really high.

A currency which is so highly valued for a number of years is found to have “feet of clay” when it is finally vulnerable. Sell programs start appearing out of nowhere.

Volatility breakout systems take profits from these shifts in mass perceptions of reality. When people and nations vote with a large portion of their resources – suddenly, this is when traders of FirstStrike and ONS tend to profit. My daily VBO forex method mentioned in The Holy Grail: Learning to Handle Variance in ReturnsLondon Squeeze – has had a couple of banner weeks in all 4 currencies it trades.  As daily volatility ranges increase, its chances increase for profits. (Ray is at new equity highs faster than he thought possible!)

While most market watchers are trying to figure out what is happening, traders with good systems reap the benefits of other participant's lack of resolve and fear that “the market isn't the same as last month, and I don't know what to do with this losing trade”.

As stated in an earlier post, the stoploss order for the Gbp/Usd short trade would be placed at breakeven. As circumstances would have it, the Gbp/Usd, short @ 1.9642, was stopped out there for a breakeven trade.

Current FirstStrike trades:
  • eur/usd: short @ 1.5730, stop 1.5730. Trade still in progress.
  • gbp/jpy: long @ 208.18, stop 207.28. Trade still in progress.
  • usd/jpy: long @ 105.83, stop 105.23. Trade still in progress.
Any trade not stopped out before Friday-- exit on Friday just before 15:00 CST.

The way the markets are setting up, it is very possible we may get some OneNightStand trades in a few pairs. Always good to get some more opportunity.

Current equity is $781.74.

Joel Rensink

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