Fibonacci and Inflation! -Thursday, April 30, 2009

I was sent a very interesting link from a trader buddy who agrees with my long-time-held assessment that super inflation is on its way, whether anyone wants to believe it or not.

This is the beginning of the FIBONACCI SEQUENCE:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, ...

I'm sure most of you who have heard of Fibonacci's sequence probably think it's main application is in price movements and retracement levels-- it is highly revered by many in that use.

Where it finds greatest power is in the application of time cycles. Walter Roman wrote an interesting article about inflation and Fibonacci you can access here:

http://www.financialsense.com/fsu/editorials/2009/0430.html

I'll be adding this week's trades to this post.....

Joel Rensink
www.infiniteyield.com

April 13 - 20 recap

Last week's recap--

Letters from Readers! - IFCN WK 71 -Thu - Equity: $2,635.76

We've had a lot of swinging in the markets, mostly negative to my equity since posting earlier today.

XAG took it on the chin again. The Gbp/Usd dropped as did the Eur/Usd. In general, the market is listless. I'm glad the weekend is coming.

I got a few emails recently from readers who've had some success following this site. I'm reprinting them below:

Subject: Re: Happy IFC follower

Hi Joel-

I had the good fortune of finding the infiniteyield forex challenge eight months ago and have been consistently placing the trades ever since
All I can say is WOW , after trading for 4 years with little to no success it feels great to finally be on the right track , not only have I earned money in the last eight months but I have also gained a great wealth of knowledge following your blog and the Infiniteyield newsletters. I sincerely thank you for helping me and other struggling traders , you truly are a kind soul for sharing . I "KNOW" I am on my way to becoming a professional trader.
All the best to you and in your trades

Mxxxxx Rxxx
British Columbia ,Canada

--And from earlier in the week---

3 of the 4 orders came in beautiful today.
Whether they will hold for the week though, I dunno, I think the Eur/USD is going to head down, whether it will get stopped at 1.3123 we shall see.
(I primarily trade Eur/Usd exclusively, I'm placeing these FS orders on a demo, to see how they work, your equity growth has been pretty impressive with this method so far)
I've read the rules, but haven't yet tried placeing any orders until last nite.
I must admit, I do like the set-it-and-forget nature of this style; it takes out alot of guess work out of trades. If they get hit fine, if not, fine too.
Probably the most difficult aspect of this, is it has to be executed continually, even with drawdowns.
My normal stop is 100 pips, placeing a 191 pip stop is quite different for me.
Thanks for the effort you put into this, I'm learning about 4 different Forex methods, and at times my brain feels like toast.
I really enjoyed the presentation you did on Larry Jacob's DVD.

Great job Joel!

Thanks,
Jxxx Mxxxxxx

--And some comments about Nassim Taleb's books, "required" reading for traders---

Hi Joel,

I finished my second re-read of "Fooled by Randomness" by Mr.Taleb and been half way through his "Black Swan" book.

Frankly, I am still digesting what I've read. It seems that luck and randomness plays a much bigger role in forex trading than most of us are willing to admit. We attribute most of our success to our skills but many times it is just pure luck... Well, it probably takes some time until one is truly ready to accept Mr.Taleb's point.

Being just a very small fish in a forex lake (and influenced by Mr.Taleb), I am able to see your FSP method in a different light now. As I understand it now, every now and then, black swan occurs (or at least a gray one) causing bigger than average moves in the markets. Those who follow simple, robust methods will hit new equity highs if they are patient enough.

Pxxxx

-----

Thanks to MR, JM & P for your comments. I'm sure they'll help others who are also trying to succeed in the markets.

Trading is a journey where everyone starts from a different location. It's great to have someone else mention a landmark that can shorten your trip.

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, 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!

Taxing? - IFCN WK 71 -Thu - Equity: $2,870.23

Yesterday was "Tax Day" for the USA. It was the last day to file our taxes for 2008. And for those who have to pay, the deadline for paying.

Not my favorite day, as I always end up paying in since I'm self-employed. Fortunately, there are a few benefits from being a trader in the USA, tax-wise. Thanks to Ronald Reagan, our taxes are a bit lower when obtaining profits from trading forex and futures than stocks. And we can write off applicable expenses in the course of our occupation.

Another good reason to focus on forex and futures.

Last week there was an anonymous comment (I usually don't answer anonymous posts -- it could have been an oversight on the part of the poster) but the question was appropriate for the season.

It was as follows:

How do you account for the impact of TAXES on your lovely equity curve? Seems that would put a serious dent in the CAGR plans in fact...?

My reply, in case you didn't read it:

Very good question---

Everyone has a different tax situation. If this trading account was the only income you had, very likely you would not have any taxes to pay. Standard deductions would have you paying very little or nothing.

Some of you trading forex are in other countries with varying tax situations - some taxed, others with no tax whatsoever.

In the USA, some trade forex from a Roth IRA, where there are no taxes to pay from the gains.

I've already paid taxes on the Challenge account's increase last year. I will probably continue paying the taxes from profits from my other trading operations until the equity gets over $50K.

I have a pretty good idea (based on my plans for increasing the account) that a majority of the profits will come near the end of the "challenge" and most of the taxable gains will be paid from the completed total.

JR

We have some decent trades this week.

The Usd/Jpy from last week has turned decidedly profitable. The Gbp/Usd was profitable out of the gate and has turned into a trend week.

The Usd/Chf short was good earlier, now backing up a little, with lackluster results so far in the Eur/Usd.

The short Gbp/Jpy trade from last week got stopped out when the long FSP trade from this week triggered, with less than half of it's original risk of 526 pips.

And silver (XAG) picked up a little. I'll be happier when it stays above $14. Then a bigger move should be on it's way.

All in all, a decent week. The trades follow:

FirstStrikePlus positions from last week:
*usd/jpy: Short @ 99.51, stop 101.12. Currently profitable.
*gbp/jpy: Short @ 146.66, stopped at 149.15 for 249 pip loss (less than ½ of original risk)

This week's executed FirstStrikePlus trades:

• eur/usd: Long @ 1.3314, stop 1.3123.
• gbp/jpy: Long @ 149.15, stopped at 146.83 for 232 pip loss.
• gbp/usd: Long @ 1.4783, stop 1.4632.
• usd/chf: Short @ 1.1454, stop 1.1601.

FirstStrikePlus trades will be exited on Mondays at 00:00 CST if profitable. (First-Profitable-Open Exit)
-----
Trading account equity: $ 2,136.23
Silver position equity: $ 744.00
(Current XAG price: $12.81 – 400 unit position average: $10.95)
TOTAL Equity: $ 2,870.23

Have a good morning.

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, 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!

Apr. 6 – Apr. 13 Update - IFCN WK 71 - Mon- $2,762.05

There were no OneNightStand trades on Friday, Apr. 10. Friday was a holiday in the USA and some places in Europe. The forex markets were open, but with slightly higher bid/ask spreads than usual. Still, there were no trades executed, of which I was glad. Funny things (usually not good) can happen on quasi-holiday trading.

On Monday April 13, 2009 at 00:00 AM CST I exited my short Eur/Usd and Gbp/Usd, and long Usd/Chf positions from the week's FSP trades. The trade prices are shown below.

Week of April 6, 2009---FirststrikePlus trade executions:

• eur/usd: Short @ 1.3441, exited at 1.3171 for 270 pips profit.
• gbp/jpy: Short @146.66, stop 149.15.
• gbp/usd: Short @1.4712, exited at 1.4666 for 46 pips profit.
• usd/chf: Long @1.1339, exited at 1.1565 for 226 pips profit.
• usd/jpy: Short @ 99.51, stop 101.12.

-----
OneNightStand trades executed Friday, April 10, 2009:
-None-

Trading account equity: $ 2,130.05
Gain from previous week: $ 86.93

Silver position equity: $ 632.00
(Current XAG price: $12.53 – 400 unit position average: $10.95)
TOTAL Equity: $ 2,762.05

It is nice to see that we had a small but definite gain from the forex trading side, and virtually unchanged equity position from the XAG (silver) side. Perhaps silver is taking a rest before beginning a move back above $13.00.

The market is setting up perfectly for some bigger moves this week. It is mostly a matter of putting in the orders. AND-- putting on the appropriate position sizes.

I'm looking forward to this week.

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, 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!

Corrective Week! Thu - Apr. 9, 2009 - Equity $2,733.35

It is a short week due to the Easter/Passover religious holidays. Nevertheless, the FSP trades triggered definitely.

Despite the likelihood of this week's trades being corrective in nature, they've been profitable as a group.

This week's FirstStrikePlus trades:

• eur/usd: Short @ 1.3441, stop 1.3602.
• gbp/jpy: Short @146.66, stop 151.92.
• gbp/usd: Short @1.4712, stop 1.5007.
• usd/chf: Long @1.1339, stop 1.1238.
• usd/jpy: Short @ 99.51, stop 101.28.

XAG price: $12.35

Total Equity: $2,733.35

I just take the trades even if they turn out to be corrections. FirstStrike and ONS have decent edges per trade despite the overall trend.

There is a holiday this Friday in the US, but as we know, the rest of the world is still able to trade. I am still going to put in OneNightStand trades, even though a couple of the markets (like Gbp/Jpy and Gbp/Usd) have larger than normal spreads. The wider spreads are telling you, "There is greater-than-average risk in the market!"

It is always advisable to be cautious when trading on holidays. It is completely okay to trade half size or smaller to contain potential risks.

Have a good holiday weekend.

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, 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!

First One Way, Then the Other! - IFCN WK 70 - Tue- Equity: $ 2,673.65

The First-Profitable-Open exit sure worked great this week.

We had quite strong moves last week, many of which we were able to take advantage of.

Fortunately, the profits were taken at the open of the Monday, with little follow-through. After exiting, the markets all reversed course like they hit an anvil.

Everywhere you turn, you are hearing the R or D words-- recession and depression. I've said it before, but it bears repeating-- if we are going into a deep recession or depression, it is the most highly advertised one in history.

It is very difficult to imagine that with all the doom-saying out there, that people who feel threatened haven't already acted. Whether that means eliminating whatever assets they felt vulnerable about or ...?

Time will definitely tell, but it is likely we will benefit because we act so quickly as major capital flows force us into our trades.

For the last two days we've been experiencing sharp set-backs in the main currencies vs. the dollar. Most of the news sources trumpet the idea that the Euro, Sterling, Swissy and others will continue tumbling, with the dollar regaining prominence because of derivative market risks being too high.

Whether or not that will be the case, we got entered into five mostly profitable, FirstStrikePlus trades.

While the XAG still is pretty weak, it is encouraging to be getting some decent (at the moment) trades.

This week's FirststrikePlus current trades:

• eur/usd: Short @ 1.3441, stop 1.3602.
• gbp/jpy: Short @146.66, stop 151.92.
• gbp/usd: Short @1.4712, stop 1.5007.
• usd/chf: Long @1.1339, stop 1.1238.
• usd/jpy: Short @ 99.51, stop 101.28.

FirstStrikePlus trades will be exited on Mondays at 00:00 CST if profitable. (First-Profitable-Open Exit)
-----
Trading account equity: $ 2,125.65
Silver position equity: $ 548.00
(Current XAG price: $12.32 – 400 unit position average: $10.95)
TOTAL Equity: $ 2,673.65

Have a good morning.

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, 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!

Mar. 30 – Apr. 6 Update - IFCN WK 70 - Mon- Equity: $ 2,683.12

Quite a challenging week!

A number of readers contacted me to tell me about your great performance last week because you took the long Gbp/Jpy and Usd/Jpy trades. I'm sure you did very well. The Gbp/Jpy especially. Too bad the Challenge account didn't get them too.

Still, the currency trades we did have were quite successful.

On Monday April 6, 2009 at 00:00 AM CST we exited our long Eur/Usd and Gbp/Usd and short Usd/Chf from the previous week FirstStrikePlus trades. Also, we exited our two remaining OneNightStand trades, the long Gbp/Usd and Usd/Jpy. The trade prices are shown below.

Week of March 30, 2009---FirststrikePlus trade executions:

• eur/usd: Long @ 1.3375, exited at 1.3562 for 187 pips profit
• gbp/jpy: Short @ 136.47, stopped 138.90 for 242 pip loss.
• gbp/usd: Long @ 1.4385, exited at 1.4935 for 550 pips profit
• usd/chf: Short @ 1.1372, exited at 1.1263 for 109 pips profit
• usd/jpy: Short @ 96.21, stopped at 97.50 for 129 pip loss.

-----
OneNightStand trades executed Friday, April 3, 2009 – exited Monday morning
*Long gbp/jpy @ 147.88, stopped at 146.88 for 100 pip loss.
*Long gbp/usd@ 1.4783. Exited at 1.4935 for 152 pips profit
*Long usd/jpy@ 100.19. Exited at 100.84 for 65 pips profit

Trading account equity: $ 2,043.12
Gain from previous week: $ 154.18

Silver position equity: $ 640.00
(Current XAG price: $12.55 – 400 unit position average: $10.95)
TOTAL Equity: $ 2,683.12

This week turned out better than I thought it would considering the serious drop in XAG (silver) prices. It no doubt will recover on its own timetable. In the meantime, it sure dragged down the total equity.

When silver eventually rallies back up, the additional profits FSP and ONS have been adding to the account will be pretty obvious.

Right now though, it seems like we are robbing Peter to pay Paul.

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, 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!

Drawdown Deepens! -IFCN WK 69- Fri- Equity: $2,670.62

After Friday's close, I realized that I held an additional trade that I shouldn't have.

My FSP trade of short usd/chf from 1.1372 with a stop at 1.1497-- should have been stopped out when the price rallied up to 1.1506 on Wednesday April 1st. It turns out that I read my stop order wrong and placed it 20 pips higher than I should have. Of course, this mistake resulted in a missed loss, and potentially a profitable trade for Monday's open. In my experiences, mistakes usually cause larger losses. This time it seems to have benefited me. Even so, this has been a tough week.

Also, we had three OneNightStand trades executed. They were all long entries:
gbp/jpy, gbp/usd, usd/jpy. The gbp/jpy got tagged for a 100 pip loss and the other two (not stopped out) await Monday morning's open for their exits.

A point of note: This was one of those weeks where the Gbp/Jpy gave us grief. If we had not gotten elected on the short side at virtually the low of the week, the FSP long entry would have given us another 850 pips so far- and a welcome $100 at my current account size. Then, the ONS Gbp/Jpy stop-out on Friday at the low of the day just before recovery to closing at the high of the week...

I got a few emails from readers asking if I thought others (read: funds) were following our trades just to stop us out.

I doubt it. I have seen the markets doing many things over the years, and close calls happen all the time, for us and against us. Still, I don't enjoy getting my stops hit and then the market going merrily in the direction I was positioned. It can be hard to not take it personal even if it is part of the reality of trading.

The week's FirstStrikePlus trades:

• eur/usd: Long @ 1.3375, stop 1.3184.
• gbp/jpy: Short @ 136.47, stopped 138.90 for 242 pip loss.
• gbp/usd: Long @ 1.4385, stop 1.4179.
• usd/chf: Short @ 1.1372, stop 1.1497.
• usd/jpy: Short @ 96.21, stopped at 97.50 for 129 pip loss.

FirstStrikePlus trades will be exited on Mondays at 00:00 CST if profitable. (First-Profitable-Open Exit)
OneNightStand trades executed Friday, April 3, 2009
*Long gbp/jpy @ 147.88, stopped at 146.88 for 100 pip loss.
*Long gbp/usd@ 1.4783. Exiting Monday, 00:00 CST.
*Long usd/jpy@ 100.19. Exiting Monday, 00:00 CST.

Trading account equity: $1,942.62

Silver position equity: $ 728.00
(Current XAG price: $12.77 – 400 unit position average: $10.95)
TOTAL Equity: $2,670.62

As the markets would have it, we gained nicely on our FirstStrikePlus and OneNightStand trades as a group, yet lost again in the XAG section of the account. When silver helps the account it can be amazing. When it hurts the equity, it is equally amazing.

We'll see how the markets work out Monday where we should be exiting most, if not all of the currency trades.

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, 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!

March 23 - 30 update -IFCN WK 69 - Mon- Equity: $2,836.94

On Monday March 30, 2009 at 00:00 AM CST we exited FSP trades from the previous week's entries: short the Eur/Usd and long the Usd/Chf. The total equity below is from 00:00 AM- Monday morning.

Shortly after the open the Usd/Jpy long trade got stopped out at 96.21, the short entry price for the new week's FSP trade.

Week of March 23, 2009---FirststrikePlus trade executions:

• gbp/jpy: Long @ 140.94, stopped out at 138.90 for 204 pip loss
• gbp/usd: Long @ 1.4727, stopped out at 1.4426 for 301 pip loss.
• usd/jpy: Long @ 97.77. Trade exited 3/30/09 at 96.21 for loss of 156 pips
• eur/usd: Short @ 1.3405, exited at 1.3232 for 173 pip profit.
• usd/chf: Long @ 1.1455, exited at 1.1466 for 11 pip profit.

-----
OneNightStand trades for Friday, March 27, 2009
-None-

Trading account equity: $1,888.94
Loss from previous week: $ 43.20

Silver position equity: $ 948.00
(Current XAG price: $13.32 – 400 unit position average: $10.95)
TOTAL Equity: $2,836.94

Losing on both the FSP trades and equity from XAG caused a sizable drop in total equity. That is what drawdowns are made of. We can expect more of the same since we've had such large increases in previous weeks.

We soldier on.

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, 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!