Sunday, August 3, 2008

Dollar Strength Now Obvious- to Some! --IFCN Wk 34 -Fri- Equity: $681.21.

An old rule for trading goes like this: When the majority of
participants finally realize a new trend is present, you are
likely at the midpoint of the move. I have seen the
ramifications of this rule played out countless times, in
futures, stocks and definitely the currencies.

I'm not absolutely sure that the majority of participants
realize a new trend starting in favor of the dollar yet, but
most active participants of the market are beginning to fear
being short the dollar for any period of time. Especially
those who have been royally faked-out by news reports this week.

I wouldn't be surprised to see the Eur/Usd getting down to the
146 – 147 level before the end of the year. It has increased
vs. the dollar for a very long time. Every bull/bear market
gets overdone. Even if the Eur/Usd has farther to go in the
future, nothing fatal to the major trend will happen if it has
a shorter-term retracement for while.

I don't attempt to predict what will happen, but I allow myself
to anticipate what is most likely to happen.

I would rather be the one surprising the masses instead of being
the one surprised!

Here's last week's recap:

The data below is as of Friday's close, Aug. 1, 2008:

Start of week equity: $675.94

OneNightStand Exit(s) on 06/28/08 :

Completed FirstStrike trades this week:
  • Eur/Usd: Long @ 1.5767, stopped out at .5707 for a 60 pip loss.
  • Gbp/Jpy: Short @ 213.75, stopped out at 214.65 for a 90 pip loss.
  • Gbp/Usd: Long @ 1.9946, stopped out at 1.9886 for a 60 pip loss.
  • Usd/Chf: Long @ 1.0407, exited Friday at 1.0508 for 101 pip profit.
  • Usd/Jpy: Short @ 107.31, stopped out at 107.91 for a 60 pip loss.
Total losses: 270 pips
Total profits: 101 pips
Net losses: 169 pips

OneNightStand 08/01/08 entry(s)

End of week equity: $681.21 (includes unrealized P&L)
Total Gain for Week: $ 5.27 (0.7% weekly increase)

Before anyone sends me emails on how was it possible to gain on
a theoretically losing week, there is only the truth:

I had substantially more size on the winning Usd/Chf trade than
on my losing trades. The losers had less initial position size
than normal. My position-sizing algorithm was responsible for
the strong deviations in both cases.

As I've stated numerous times in the past, the way one profits from
trading is by having substantial size on your substantial winners.

Which worked out fine this week. The dramatic improvement in
return from my money management is rarely this dramatic.

I look forward to next week.

Joel Rensink

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Allan said...

Hello Joel. Very thankful for your blog and insight into the market place.

Your money management system seems to be very good and helps you achieve greater returns than normal fixed fraction that most of us are using.

That being said, is it still possible to be successful and make big return simply trading First Strike with a fixed risk of say 1% per trade or will I suffer a terrible death as so many traders have done befor me without that little bit of extra edge that a properly built money management system provides to the equation.

What advice can you give a new trader like me trying to learn as much from your blog as possible and following along with your trades on how as you have stated in the past, make sure that your winners have sufficient position size to overcome your losses?

Thanks for all the information you provide us on a daily basis.



Joel said...

Taking these trades with even small size will help you get an idea of what the markets are really capable of and are really wanting to go.

A trader of my acquaintance used to harp on the concept: WWTMW- "Want what the Market Wants." He is absolutely right. Never fight the market, it is always right.

The more you learn the greater your edge can become over the other participants in the market who only enter erratically and with no particular method.

You will end up holding larger positions longer, and losing with much less position size by following the WWTMW code.