Monday, July 7, 2008

Euro is Skittish! --IFCN Wk 31 -Mon- Equity: $714.40

After very interesting closes last week in most of the currency pairs, I figured this week could be challenging.  I hate being right about that.

It is very rare for a market to reverse to the downside like the Eur/Usd did and not at least make an attempt at correcting. When the market doesn't correct, you have a great opportunity because most traders count on a correction for their methods.

The market is correcting as I write this, and we have entered all five of our FirstStrike trades for the week. Two have already been stopped out. I don't have great expectations for the other three either, even though currently we have small profits overall.

This brings up a question(s) sent to me by a reader-

Dear Joel,

Do you exercise some discretion in exiting trades in the First Strike system?

For example, from 6 PM (CDT) last night until 3 AM this morning, price indicated bearish divergence for the Dollar (Price going up, MACD going down) which was confirmed by a bearish candle closing out of Overbought at 9 AM. At the time we were long the USDJPY and short the GBPUSD which both promptly stopped out.

One question is, do we stay with the program when there's a high probability of being stopped out or do we use discretion and exit early? Unfortunately, we've only been with the program for a short period and, as you know, neither the First Strike or One Night Stand has been performing well. Fortunately, we're only trading [reasonable size] until we get comfortable with the system (I refuse to demo because I'm the world's greatest trader when its only play money}. Another question, how about red news events affecting the pairs we're trading?

My gut feeling is that these programs work because they have proven themselves over time so don't meddle - my cautious side says lets move stops, etc., to preserve some of the gains. I don't expect a detailed response but would like to know if you do exercise some discretion in your serious money account....

Happy Trading,

Kxxxx & Mxxxx

Thanks for the note:

Appropriate question.

I take the trades whether or not I like the trades. Especially in the Forex Challenge account. In my personal trading for serious money, I do occasionally use some discretion.

You are right about "these programs work because they have proven themselves over time so don't meddle."

But, for me to indicate you shouldn't be prudent about large positions facing extreme conditions would be incorrect.

In my personal trading of FirstStrike, I am able to increase overall returns by 50% to 100% over time. The majority of additional edge comes from exiting at better levels than the standard exit at the end of the week. Occasionally by getting in a little sooner, when it is "obvious" that the buy/sell price will be hit.



Thanks again for the questions---K&M--

The best thing I can add to this is this-- If discretion works out so well for you, maybe you should be trading completely discretionary.

FirstStrike is admittedly a simple method. What is particularly good about that is, you can improve the results of it quite easily.

But not if you can't trade it straight up. If you can't make yourself enter at the times you should, with the appropriate position size without discretion, you will never learn how the method works over the long haul and see how some simple discretion may actually help or perhaps hinder your profitability.

There was an additional question about news. For all intents and purposes, FirstStrike doesn't care about news. News will likely improve our profitability. If we have entered a market, haven't been stopped out after a few days-- there are better odds for our continued profitability than sudden loss due to any news event.

I stay in through news reports!

The following are this week's FirstStrike entries:
  • Eur/Usd: long @ 1.5691, stop 1.5631. Trade in progress.
  • Gbp/Jpy: short @ 211.23, stop 212.13. Trade in progress.
  • Gbp/Usd: short @ 1.9717, stopped out at 1.9777 for a 60 pip loss.
  • Usd/Chf: short @ 1.0251, stop 1.0311. Trade in progress.
  • Usd/Jpy: long @ 107.75, stopped out at 107.15 for a 60 pip loss.
Note: Any FirstStrike trade not stopped out before Friday gets exited on Friday just before 15:00 CST.

Current equity is $714.40.

Joel Rensink

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: and tell me to which address you would like it sent. Please do not use AOL, Yahoo or Hotmail addresses. Nothing personal, but they've been known to filter out more good mail than actual spam. Try a Gmail address. It's free, simple and perfect for traders!

1 comment:

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