Wednesday, September 3, 2008

Euro/Usd Hits 1.4400! --IFCN Wk 39 -Wed- Equity: $1,031.60

Weeks ago when the Euro was still threatening new highs I mentioned that the Euro could easily fall all the way back to 1.4400. I got a few chiding emails at the time, but that's fine. Markets always look great just before they fall, and look awful just before they lift off. The projection of 1.4400 was a coincidence of Gann rules and some retracement rules from an old wheat trader named Burton Pugh.

Burton Pugh had some very useful rules that he wrote in the small publication, “Science and Secrets of Wheat trading.” They applied to all markets, but since he mainly ran a wheat hedging operation, he promoted their use in wheat. He had many “Bull Market rules” and “Bear Market rules”, but one direction given in the “Bear Market rules” he indicated that after a market broke its uptrend line, (which the Eur/Usd had) it would return back to the lows of its last big advance before starting a new advance. In this case, the 1.4400 area. Gann often indicated that numbers like 144 are natural support areas.

So there you have a simple anatomy of a “return move” that worked perfectly to the numbers. Burton Pugh and W.D. Gann are both long gone and dead for more than 50 years. Maybe they had a few things figured out after all.

Pugh's publication is long out-of-print and likely only in the hands of a few older traders like me who hoard unusual market trading paraphernalia. There is and always has been a lot of refuse in the trading business, but never as bad in the past as we see available on the internet. Incredible in its uselessness for serious traders.

Not because everything is without merit, but most of the materials which contain meritorious content have equally offsetting bad content and there is no way a neophyte would ever be able to tell which is right and which the dross.

So, most information readily available is worthless because of its adulterations. It actually forces the determined trader to start completely from scratch to find trading truth, and that takes glacial time frames to get results.

My recommendation: GO OLD. Read very old trading books and material. Most systems and methods promoted in the past were simpler and more robust. Much of what was written 50 years ago wasn't incredibly powerful, but it was still much better than the tripe promoted by every third email you get now. And the older material is easy to test to give you a baseline for future study.


A potential “Turtle Trade” entry is imminent. A higher probability sell in the Usd/Jpy @ 107.59. (See chart attached below) The reason the Turtle method has enjoyed some greater than average success is because of a unique provision for the method to increase the size placed on their Donchian-style breakouts after a previous trade which resulted in a loss. All based on a simple 20-day breakout for going long and short.

Since the last Usd/Jpy breakout buy was at 108.00, if the market takes out the current 20-day low at 107.60 that would make the last trade a loss -- and according to the Turtle's algorithm -- that'll increase the new short trade's expectation. I've run the Turtle concept of the “last-trade-a-loser” position increase on all of the major markets many times and many different ways, even with non-Turtle type systems --- and I have to concur that there seems to be a measurable increase in value for trades after a previous loss.

Just thought you might find it useful to think about, and perhaps study for future use.


The FirstStrike shorts: Eur/Usd and Gbp/Jpy are still working and increasing capital.

This week's surviving FirstStrike entries:
Eur/Usd: Short @ 1.4584, stop 1.4644. Trade in progress.
Gbp/Jpy: Short @ 194.93, stop 195.83. Trade in progress.
Any FirstStrike trade not stopped out before Friday-- exits on Friday just before 15:00 CST.

I thought yesterday that there might be a good potential for my last two trades to diminish or even be stopped out this week. I would prefer that not be the case, but the dollar seems to be losing momentum. Whatever happens, we are at a new equity high right now. That is always a good thing.

Current equity is $1,031.60.

Joel Rensink

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