Tuesday, August 26, 2008

High Volatility Creates Unique Opportunity!--IFCN Wk 38 -Tue- Equity: $847.61.

Today, I decided to risk a little more to make some multiplied return on the yen's strength against the dollar. I will explain why and how.

Anyone who is following the FirstStrike trades saw the entries yesterday and the stop-outs of the first two trades. Then today, the astounding final smash of the Gbp/Usd and upward jolt of the Usd/Chf early this morning would force any trader to be impressed with the strength-grabbing hold of the dollar.

It appears to me we are viewing the final grand rush of the first leg of the dollar's emerging move to strength. Who is left to sell the Sterling or Euro who has not already done so? A great setup for a correction.

Through all of this tumult, the lone FirstStrike Usd/Jpy short did not succomb to the dollar's strength and get stopped out. Very amazing! That fact told me this – the dollar was finally about to take a rest.

So far, it looks right.

When the dollar/yen wasn't stopped out after such carnage, I greatly boosted the size of my short position early this afternoon when the price fell to 109.63 again, only this additional position had a 20 point stop. So far there has been no threat to the stop. But this is only Tuesday. Long week ahead until Friday.

If the increased position loses, I will only experience a reasonable additional loss. If it is successful, I will geometrically increase the profitability of the trade.

Why did I bump up my position size on the short Usd/Jpy?

At the London Squeeze workshop held here in Minneapolis on Aug. 16th, I described to the attendees (who I refer to as the Magnificent 7 – every one a brave and intelligent guy) the powerful edges that can result from information that comes to you after you are in a trade. (There will be more information about this in a coming newsletter)

Information has incredible potential. But not always. Some of the greatest value comes from within; your own experiences with your trading method, and other times new, valuable information comes from without – the trading environment. Today, we had a combination of the two.

I've traded FirstStrike for a very long time. When I see abnormal strength in a specific trade while the other pairs' trades fail, the abnormally strong pair needs to be rewarded with more size. So, if I am right and the Yen gains substantially over the dollar, this could still be a very good week for the IFCN challenge account.

I will accept the additional loss if it doesn't work out. When the risk is the lowest is the best time to capitalize on your advantage.

The following is the status of this week's FirstStrike entries:
  • Eur/Usd: Long @ 1.4767, stopped out at 1.4707.
  • Gbp/Jpy: Long @ 203.61, stopped out at 202.71.
  • Gbp/Usd: Long @ 1.8471, stopped out at 1.8411.
  • Usd/Chf: Short @ 1.0962, stopped out at 1.1022.
  • Usd/Jpy: Short @ 109.63, stop 110.23. Currently profitable.
Any FirstStrike trade not stopped out before Friday-- exits on Friday just before 15:00 CST.

As I write this the “snap-back” of most of the currencies is progressing.

See you tomorrow. Have a good night/new morning.

Current equity is $847.61.

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: newsletter@infiniteyield.com and tell me to which address you would like it sent. Please do not use AOL, Hotmail or Yahoo addresses. 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!

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