Dollar melt down! All New Total Equity Peak--IFCN Wk 12 -Fri- Equity: $623.28

We have reached a key point this week. We have survived our first major drawdown and succeeded in attaining new equity highs!

What you find out the longer you trade is the single solitary fact-- you spend the majority of your time with substantially less wealth than you've had in the past. Drawdowns occupy more than 95% of your trading life.

Get used to it. I did, but I still don't like drawdowns.

So, weeks like this are some of the few times that you really feel validated. Charging to a new equity high (in just one big week) after a 16% drawdown (from $580.41) helps you get the feel of what high reward trading is all about.

FirstStrike Trading theory:
Drawdowns take place due to insufficient trends, so FirstStrike's small fixed losses do their jobs. As equity drops, so does the capital risk for each trading pair. Your drawdowns tend to slow to less than a linear rate. When the statistical trends re-emerge, you gain back the temporarily lost equity-- exponentially.

We have achieved a 24.6% total increase in the last 12 complete weeks of the Alpha account for the Ultimate Forex Challenge! That is an effective 105% annual return.

It will be very unlikely that we will continue at this pace for long. The odds are in our favor though,  that we'll hit our 50+% return goal later in the year.

I'll keep putting in the trades.  And, I'm glad to have you watching the progress.

If anyone put on trades similar to these this week, feel free to drop me a note. I'd be interested to hear how they worked out, and if you use a different platform than Oanda.

I got an email from a reader this morning after sending out the ONS orders:

Joel,

All my entries were like yours except the GBP/JPY. The 10 was over 40 so I set up a buy stop and not a sell stop. I am assuming you looked at the angle of the 10 and thought better to short? Or was it the news out of Japan last night? Thanks

C-----

My answer:

On my charting package, the 10 was under the 40 on the GBP/JPY. Hence the trade signal.

Breakouts, all by themselves; have an edge. Some breakouts edges are bigger than others, of course.

In the simple system of ONS, the moving averages just filter out some less favorable (read: lower probability) breakouts. So, a trader could figure: Since it is a close call, with the angle of the averages and how close the breakout is... etc., and decide to take it. I personally wouldn't have a problem with that, since the stoploss takes care of the risk. Maybe take that kind of trade with 1/2 size.

But in this case, my charting package showed the 10 day average just barely under the 40. So that made it a short.

Thanks C------

This week we had some good OneNightStand trades.  Just one loss, the Eur/Usd.

This week's Alpha account trading recap:
Start of week equity: $486.25

Completed FirstStrike trades:

• Eur/Usd:  Long @ 1.4867, exited @ 1.5176 for 309 pip profit
  
• Gbp/Jpy:  Short @ 210.64, exited @ 211.24 for 60 pip loss
  
• Gbp/Usd: Long @ 1.9709, exited @ 1.9856 for 147 pip profit
  
• Usd/Chf:   Short @ 1.0836, exited @ 1.0418 for 418 pip profit
  
• Usd/Jpy:   Long @ 107.91, exited @ 107.67 for 24 pip loss
  

Total of    84 pips in losses.
Total of 874 pips in profits.
-----
OneNightStand Exit(s) on 02/25/07:
Exited short Usd/Chf @ 10873 for 8 pip loss.
OneNightStand 02/29/08 entries:

• eur/usd: Long @ 1.5231, stopped out @ 1.5176 for a 55 pip loss
  
• gbp/jpy: Sold @ 207.94, unrealized profit of 147 pips
  
• usd/chf: Sold @ 1.0484, unrealized profit of 77 pips
  
• usd/jpy: Sold @ 104.57, unrealized profit of 73 pips
  

-----
Unrealized P&L:           $ 31.15
End of week equity:  $ 623.28 (includes unrealized P&L)
Total Gain on Week: $ 136.78 (28.1% weekly increase)

See you Monday!

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.

PPS: Please do not use AOL or Yahoo addresses. Nothing personal, but 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! HUGE email storage too.

Alpha account is up 22 percent-- --IFCN Wk 12 -Thu- Equity: $593.66

What great action this week!

The account is sitting at $593.66 current equity, including unrealized profits!

This is what the currency markets look like when they want to go somewhere. If the Usd/Jpy short had been entered, we would have had another 250 pips.

FirstStrike trade status this week:

• Gbp/Jpy: Short @ 210.64, stopped out @ 211.24 for a 60 pip loss.
  
• Usd/Jpy: Long @ 107.91, exited @ 107.67 for 24 pip loss
  
• Eur/Usd: Long @ 1.4867, stop 1.4807. Currently 300+ pips
  
• Gbp/Usd: Long @ 1.9709, stop 1.9649. Currently 150+ pips
  
• Usd/Chf: Short @ 1.0836, stop 1.0896. Currently 300+ pips
  

Also, it looks like a number of OneNightStand trades might get triggered on Friday.

When it rains, it pours.

See you tomorrow. Have a good night.

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.

PPS: Please do not use AOL or Yahoo addresses. Nothing personal, but 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! Huge storage too.

Quick! Adapt or Perish!--IFCN Wk 12 -Wed- Equity: $563.78

The Alpha account had a very good day.

It is currently at $563.78-- up more than $75 from last Friday.  We are still long Eur/Usd and Gbp/Usd, and short Usd/Chf with substantial open profits.

This week's volatility, in the currencies and other important markets highlights the question of why do traders do what they do?

Almost all people trying to trade apparently do it to make gains or money on their capital. How traders accomplish that task is where they all differ.

Most know that traders make profits utilizing many different techniques. Timeframe and risk tolerance filters out which basic style a trader will primarily inhabit.

There are two primary successful groups who trade; the totally mechanical traders (or at least those who wish to be as mechanical as possible) and those who trade low risk setups and have a more "fluid" approach to trading the markets. Both only succeed if they have an definable edge.

The benefit of the first group's style is that entries and exits are well-planned and usually very executable by design. The benefit of the latter group's style is they can find numerous opportunities that are situational in nature and can take advantage of them with little prep time. A significant number of the second group occasionally get stunning trades, which seems to validate their style for those who favor it. Often the people who trade this way have a personal nature that makes it difficult for them to follow a strict approach.

I have observed that members of the mechanical group tend to regard the "fluid" types either as anomalies or unexplainable exceptions and consider them an annoyance similar to a webpage pop-up.

I find both styles have tremendous merit.

What most newer traders don't realize is--- the longer one trades, whichever of the groups you start in--- as you get more successful you will gravitate towards the other group and adopt more of the other's style.

I had a very busy day today, answering the phone every few minutes between trades. Watching 20 markets for potential orders and following up on fills that get held up is enough by itself most days.

I talked to 9 different traders (most of them commodity fund managers) about the "crazy" volatility we are experiencing.

Lenin once said that Wheat was the ultimate currency. What we've seen the last few weeks in Minneapolis and Chicago lends credence to his words.

Today, Chicago Wheat went from up 60 cents to limit down-- down $1.35 from the previous close ($6,750 contract) to limit up-- $2.70 higher ($13,500/contract) within an hour. Wheat actually jumped the last $2.10 ($10,500/contract) of the move in less than 3 minutes.

Minneapolis Wheat for March dropped $5.40/bushel right after the open. From the high put in Monday at $25.00/bushel the market's low today at $17.00 meant that it had a 32% drop in 2 days. That is $40,000 per contract loss in 44 hours. I know a guy who had 30 contracts through the last 2 days. He isn't happy.

In every case, the primarily-mechanical-trading professionals I talked to had to trade differently than their models typically require.

To make the necessary deviations each of them had to go back to their personal belief system drawing-boards and determine what it was they were ultimately trying to accomplish when they started--- and if that concept still applies. If it does, are they accomplishing their mission the best way possible by following their current method? Maybe all they need is a contingency plan for high volatility. Or maybe their system was never really "right".

When faced with simultaneous, completely unbelieveable action in wheat, some of the metals, petroleum products and currencies-- many systems were not up to the challenge.  Systems break down when liquidity fails.  

Systems, whether mechanical or subjective, are products of the markets themselves. When the markets turn into something that is unrecognizable by the human who is attempting to extract gain, the core beliefs of the trader are tested in a way that no simulator could ever conceive.

Truth is stranger than fiction. This mandate applies to markets also.

What are your core beliefs? Can they, and your current systems handle crazed markets?  Currency markets can also get extreme.  Do you have a contingency plan for that time?
 
Stay sane. I'll attempt to do the same.

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 which address you would like it sent.

Dollar hits an air pocket! IFCN Wk 12 -Tue- Equity: $536.24

Looks like a good week for FirstStrike so far. It took a while for the market pairs to pick a direction, but when they did-- we've gotten some line moves.

A recap of our entries today:

Usd/Jpy: Went long yesterday @ 107.91, exited today @ 107.67 for 24 pip loss. I simply got out early. The market failed at an area it should have held if it was going to go higher.

I saw no reason to take a bigger loss just to prove a point. Also, the Euro, Swiss and Pound all were gaining strongly on the dollar. Under these circumstances there was no reason to wait for the inevitable loss.

• Eur/Usd:  Long @ 1.4867, stop 1.4807.
  
• Gbp/Usd: Long @ 1.9709, stop 1.9649.
  
• Usd/Chf:   Short @ 1.0836, stop 1.0896.
  

Any trade above not stopped out before Friday-- exit on Friday just before 15:00 CST.

It is always surprising how quick one can rebound from a drawdown. The week isn't over yet, but at least we're seeing positive action.

See you tomorrow.

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 which address you would like it sent.

Gbp/Jpy first to lose again! -IFCN Wk 12 -Mon- Equity: $479.34

A very quiet start to our week. I exited Friday's short Usd/Chf OneNightStand trade for a 8 pip loss on Monday's open.

We've gotten 2 entries early Monday and are still live on one of them, and waiting for direction in the other pairs.
-----
Gbp/Jpy: Short @ 210.64, stopped out @ 211.24 for a 60 pip loss.
Usd/Jpy: Long @ 107.91, stop 107.31. Currently holding a small profit....
=====Any FirstStrike trade not stopped out before Friday gets exited on Friday just before 15:00 CST.=====

Not much to report, and very little news out there except about the Presidential race, which is not much use to forex traders at this time. Maybe later in the cycle when it gets more certain who will be in the running.

We'll see what the markets will bring this morning. Current equity stands at $479.34.

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 which address you would like it sent.

Woody Allen said - 90 percent of life is just showing up- IFCN Wk 11 -Fri- Equity: $486.25

Woody Allen may not be a trader, but he knows the right ingredients to success.

We had another week with 5 FirstStrike losses.

There was some fairly decent action at the beginning of the week, but no follow-through. Perhaps next week.

The business of trading is more mental discipline of taking trades than nearly any other factor. Plus decent money management when you actually get your trade executed.

One ultimately makes money trading by having on a correctly-sized position when the winners show up, which they inevitably do.

WE have to show up BEFORE they show up!!!

This week's Alpha account trading recap:
Start of week equity: $508.87

Completed FirstStrike trades:

Eur/Usd: short @ 1.4631 -stopped out for a loss of 60 pips
Usd/Chf: long @ 1.0995 -stopped out for a loss of 60 pips
Usd/Jpy: long @ 108.30 -stopped out for a loss of 60 pips
Gbp/Jpy: short @ 211.14 -stopped out for a loss of 60 pips
Gbp/Usd: short @ 1.9575 -stopped out for a loss of 60 pips

Total of 300 pips in losses.
Total of 0 pips in profits.
-----
OneNightStand Exit(s) on 02/18/07 :
-None-
OneNightStand 02/22/08 entries:
Short Usd/Chf @ 1.0865
OneNightStand losses: None
-----
Unrealized P&L: $ 1.85
End of week equity: $ 486.25 (includes unrealized P&L)
Total Gain on Week: $(-22.62) (4.4% decrease)

See you Monday!

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 which address you would like it sent.

Ben says- "It's Just Some Campers Grilling Some Steaks"-IFCN Wk 11 -Thu- Equity: $484.40

Have you ever tried fundamental trading in Forex? By this I mean trading on the news released and doing the whole "macro" thing-- trying to figure out how the different financial bodies of the the different major countries all interact.

I'm sure there is somebody out there who is successful at it, but it must be tiring. Especially when most of the moving lips out there are lying.

Example:
The Fed just reduced its projections for economic growth for 2008 because of the (extremely well-publicized) credit issues and soft housing market. They also indicated that they see larger future unemployment nmbers and higher inflation.

The Fed is now predicting the unemployment rate will be around 5.2% to 5.3% in 2008, up from the previous forecast of 4.9% and the 2007 average unemployment rate of 4.6%. They also think that the GDP will grow between 1.3% and 2.0% in this year, down from earlier forecasts of 1.8% to 2.5%.

Now is where I think it gets interesting:

The Fed now expects inflation to be somewhere between 2.1% and 2.4% this year, above the previous estimate of 1.8% to 2.1%.

• Anyone check the price of gas today? Crude oil, as well as heating oil and unleaded gas (before taxes) are up exactly 5 times the price they were 6 years ago this month.
  
• Anyone check the price of a bushel of wheat today? $18.50/bushel Minneapolis Wheat (5 times it's price just 2 years ago) and $10.50/Chicago Wheat (3.5 times it's price 2 years ago)
  
• Gold and silver? (3 times their price 6 years ago)
  
• Copper? (6 times it's price 6 years ago)
  

You could add 100's more items to the list. Even houses-- as troubled as the current market is-- are more than double what they were 6 years ago.

These are the costs of the main staples of life in this country. Anyone who doesn't live on the street or by the charity of others is paying a tremendous amount more each year than the TYPICAL projected "joke" inflation numbers the Fed releases.  (I can't believe that ANYONE can choke down the figures the government releases over and over..., but somebody obviously does.  They keep doing it!!!!)

If the Fed was responsible for reporting a forest fire burning 10,000 acres-- they would probably report that the smoke everyone's smelling is some campers grilling some steaks and there's really nothing to worry about.

How much more are you earning than you were 6 years ago?

Anyway, the reason I bring this up is simple....

You cannot expect to trade your hard earned capital based on news and data that governments choose to bestow on you. It isn't just the Fed. The other countries are interested in managing their currencies to their best advantage and will tell what ever it takes to get you into bed..., with them.

You need a method to trade that has risk controls and an edge that you can prove. Which doesn't care what Ben Bernanke has to say. The method needs only to care what the prices say.
------------------------

On to the trading account:

I've been stopped out of the following 5 FirstStrike pairs:

• Eur/Usd: short @ 1.4631 -stopped out for a loss of 60 pips
  
• Usd/Chf: long @ 1.0995 -stopped out for a loss of 60 pips
  
• Usd/Jpy: long @ 108.30 -stopped out for a loss of 60 pips
  
• Gbp/Jpy: short @ 211.14 -stopped out for a loss of 60 pips
  
• Gbp/Usd: short @ 1.9575 -stopped out for a loss of 60 pips
  

------------------------
Current positions: None
Equity: $484.40
------------------------
It will be very unlikely that we will see any OneNightStand trades on Friday. The necessary breakout points are excessively distant.

We will recap tomorrow.

Joel Rensink
www.infiniteyield.com