Wednesday, July 30, 2008

No One Worries About Your Fire, When They Have One Themselves! --IFCN Wk 34 -Wed- Equity: $671.33.

After dropping more than 200 points in trade the other day, the
Eur/Usd has basically spent the last 30 hours sitting and
waiting for..., something.

The focus in the currency markets has obviously moved from fears
about the US economy to concerns about the rapidly deteriorating
economic conditions in the European Community.

If another European financial “shoe falls” there will be
little to hold the Eur/Usd from pirouting lower.

The conditions in the functional European world indicate
immediate and dramatic declines in demand.

The same problem exists with the Switzerland. This country
which manages huge amounts of currency still is a slave to the
money and doesn't produce much extra value in these oscillating
financial times. High taxes and low productivity make it tough
for their demand to increase. And the current pattern in the
Usd/Chf is showing it.
____________________

The Turtle Method as it applies to Forex. Why the
Technical
funds are long the Dollar

The Turtle trading method has been talked about for decades,
with equal amounts of awe and derision. I will not go into the
story of the system-- so many words have been written about it
already any interested person can do a simple search and then
read for days, different ideas pro and con.

Nevertheless, it is still traded by those who appreciate and
understand its power and have learned to withstand the flipside
of large profits-- large drawdowns. Other negatives of the
method are the large stops and large capital requirements to
trade a reasonable portfolio.

The Turtle method is a long term, viable method for trading
Forex. It is also well known for the success it bestows users
when a trend it identifies continues for a long time; such as
the very long, very profitable trade in the Eur/Usd for the last
2 years.

I won't go into the systems rules, except to mention that the
majority of the trades taken are due to breakouts of the last 20
day's highs or lows. You can find the complete rules of this
historic, original system in seconds from an internet search of:
"Original Turtle Trading Rules".

Most people, after a thorough investigation of the ruleset,
decide not to trade it. Not because it won't work, but usually
because of the substantial capital commitment.

As you probably can figure out for yourself, you can trade the
Turtle system yourself at firms like Oanda with just $500, not
the $500,000 that you would need for a proper futures trading
account. This also means that you won't make very much either
on an annual basis unless you use above average (dangerous)
position size, and you will not get the balancing effects of a
well-rounded portfolio either.

The reason I mention this system is because many hundred of
millions of dollars still follow this or very similar systems in
the exact markets we are trading. We are currently trading at
the Turtle trading "action points" of a number of currencies right now.
  • Long Usd/Chf @ 1.0401 July 24
  • Long Usd/Jpy @ 1.800 July 29
  • Short Eur/Usd @ 1.5610 July 29
  • There is a pending short order for Gbp/Usd @1.9647
Most of the breakouts are still profitable. Time will tell if
these will be great trades or not. They should be, but markets
can move a lot in the short term, as you have seen in the Forex
Challenge.

----------

I am still currently long the Usd/Chf, and reasonably
profitable.

The following is this week's remaining FirstStrike entry:
  • Usd/Chf: Long @ 1.0407, stop 1.0347. Trade in progress.
Note: Any FirstStrike trade not stopped out before Friday gets
exited on Friday just before 15:00 CST.

Current equity is $671.33.

Have a good evening.

Joel Rensink
www.infiniteyield.com


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:
newsletter@infiniteyield.com 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
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2 comments:

The Archiphage said...

Joel,
You forgot to mention the other big reason why people decide not to trade the Turtle Rules! (Or quickly give up trading them.)
I didn't calculate the 'N' values for these trades, so it's probable that most of the stops were closer since full size wouldn't have been reached, but just using the simple 20/10 Donchian channel breakout idea on the EUR/USD:

5/1/08 Short @ 1.5515
5/16/08 stopped out @ 1.5601 for a loss of 86 pips

5/27/08 Long @ 1.5814
6/03/08 stopped out @ 1.5462 for a loss of 352 pips

6/9/08 Long @ 1.5819
6/13/08 stopped out @ 1.5363 for a loss of 456 pips (nice!)

Also, 1.5363 is both a new 10 AND 20 day low, so:

6/13/08 Short @ 1.5363
6/25/08 stopped out @ 1.5652 for a loss of 299 pips (Hey, could be worse.)

7/2/08 Long @ 1.5844
7/24/08 stopped out @ 1.5669 for a loss of 175 pips

So if anyone was left to take the 6th signal, I hope it works out for them. Of course, we all know that any idea which produces more than 3 losses in a row is not a winning idea, because being a trader means being right 98% of the time and winning 2000% on every trade. And now I have to go make sure my staff is washing my yacht to my exacting specifications. Take care...

Joel said...

Great comment-

You hit it right on the head.

The Turtle method makes more of its money from behavioral influences than anything. People have a hard time stepping up to take another system entry after getting hit 6, 8, 13, 15 times.

But it tends to be the profitable thing to do, if you are trading a robust method.

FirstStrike is similar to the Turtle method in that it has long strings of losses before big profits. You just more trades, oftener.

Joel