Wednesday, August 27, 2008

Yen Volatility Creates 2nd Opportunity!--IFCN Wk 38 -Wed- Equity: $852.11.

It happened again. I was forced to sell more Usd/Jpy.

The Usd/Jpy fell like a Scud missile Tuesday night after my posting the information about the added size placed on the short FirstStrike Usd/Jpy trade.

Early this morning, when the market took out the Tuesday's low, I moved the protective stop on the second add-on to breakeven. And then, the unbelievable happened – the market shot right back up and stopped out Tuesday's add-on short at 109.63 for no loss/no gain.

I figured, if it can come back this far, it will probably march up and stop out my main trade put on Monday. I waited almost 4 hours as the market traded above 109.63, getting as high as 109.89 – but not going anywhere near my stop on the first position.

I re-entered my additional sell at 109.63 again, this time with a stop of 109.90. Meanwhile, the Gbp/Usd and the Eur/Usd started getting stronger. Right after 1:10 PM CST I got filled on my added position.

As you are likely aware, I don't often take additional trades in the Challenge account. This adding of size at the FirstStrike trade price is obviously elective and only done at this critical period because of my awareness of the method and my understanding of the greater potential of a FirstStrike trade that has resisted many attempts to fail.

To reiterate from yesterday: when I see unusual strength in a specific trade while the other pairs' trades fail, the abnormally strong pair needs to be rewarded with more size.

I am willing to accept additional losses if the larger, parallel trade doesn't work out. As I've said before, the way one ultimately makes large profits as a trader is by having large size in a market that is going your direction and keeps going.

If you have further questions about this trade you can read yesterday's post again.


The following is this week's only working FirstStrike entry:

  • Usd/Jpy: Short @ 109.63, stop 110.23. Currently profitable with additional size.
Any FirstStrike trade not stopped out before Friday-- exits on Friday just before 15:00 CST.

Current equity is $852.11.

The current equity is higher despite the 4 losses this week due to my increased size on the trade, explained above.

As an additional note warning the dollar's strength may be temporarily waning, look at the following chart of the Gbp/Usd.

The market patern displayed is the diagonal triangle formation. They are also known as “wedges” among the Elliot Wave crowd. These are highly reliable formations indicating temporary or significant bottoms or tops, depending on where you find them.

A diagonal triangle (falling wedge) is a bullish signal, and usually comes at the end of an downtrend. It combines a down trendline (drawn across lower high prices) with another downward-sloping (but converging) support line. When the market breaks out of the “funnel” created by the converging lines, it tends to make an important bottom for a while.

We'll see how strong the dollar is tomorrow.

Joel Rensink

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