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Tuesday, December 29, 2009

Wishing You All A Happy and Prosperous New Year for 2010!

Wish to thank all of you who have stopped by this blog over the last few months. I hope you have found it useful.

The last week or so has been very busy for me on the personal side, but I am looking forward to continuing our service in the new year ahead.

Tuesday, December 22, 2009

Quiet Month

As we draw closer to Christmas, we are seeing fewer signals for the month of December. With a lot of major overseas players taking holidays around this Christmas period, we are seeing a lot of liquidity leave the markets, and a lot of whipsaw movement in tighter ranges.

Here is a current progress report thus far for December. Naturally if we get a trade signal between now and the end of the month, good or bad, these results will change.

Jupiter Signals :
GBPJPY :   +5 (from -175)
EURJPY :   +99 (from -150)
AUDJPY :   +350 (steady performer all month)
Total : +454

Pluto Signals :
+ 190

Although I shall continue to monitor the charts, I am not expecting too many more trades for hte rest of the month. If between now and then there none, please allow me this opportunity to wish you all a Merry Christmas (Happy Holidays). May you enjoy time with family and loved ones, and have a safe end of year/new year.

Friday, November 27, 2009

November 2009 Update

Hello all.

Well, it's been a tough month for me. I am the bearer of bad news for this month as we finish the month with a loss. Please find the details as per below. I do realise we still have Monday. I will naturally amend this if we get a trade call for Monday.

AussieYen :   -270
PoundYen :   -60
EuroYen :     -70
Jupiter Total : -400


Pluto :  +210

Biggest issues with this month have been the few number of calls to the number of losing trades among therein. We actually had quite a few break even trades, which is good for risk aversion for trades that didn't make it as far as the first target.

We contributed to our losses with stops being a little too close, so in situations where divergence trades don't follow through on the first entry signal, but follow through on the second instead. A little frustrating in hindsight, but stop losses are there for just that, stopping (further) losses. A lot of the secondary opportunities were unfortunately during late NY time (early AM Japan Time).

Here's chart example of what I mean. Now I didn't use stochastics at the time. Had I have had them it would have clearly led me to better entry *refer to the orange arrow). Indicators, however, are never always correct. I don't normally use stochastics because they can sometimes provide a little too many false signals for the system I am using. And times like this.....they can save me :)





Wednesday, November 18, 2009

Backtesting vs Live

It's been a little while since I have posted something. Jupiter is currently running at -270 pips. Trade frequency is very low for this very slow month. Pluto currently at +65.

OK...I want to talk about the importance of backtesting and furthermore the differences one sees between backtesting results and live results.

Back Testing :

Whether you have designed a system or strategy yourself, OR are learning one from a coach, before you even consider putting money down on it, you should backtest the system or strategy. Let's move out of trading for a moment. I'm into archery, so let's use that as an example. You shouldn't take up a new activity and immediately step into world class competitions. You would head down to the archery centre/field and practice, work with your coach to see where you need to improve, learn the importance of stance, anchor, aiming etc. Practice practice practice!

Ideally, like anything in life, you should have goals. Goals set to identify your level of experience and progression within the chosen field. Once you have established your shooting style, and have proven consistency in your practice, eg. maintaining a score of above 280pts at 30m, then should you consider competing. (Trechnically you can enter some competitions as a newb, but let's keep attention on wanting to win!)

Back to trading......you have the details of the system. In this example, let's use the age old moving average cross-over with a stochastic movement out of over-sold or over-bought. Simple right? Just like watching a guy tight rope across the distance between two buildings. He steps slowly and uses the pole to maintain balance. Yup, looks easy enough, let's jump in and do that now!

Hello pavement!

Trading is no different. Even the simplest of strategies require you to backtest them AND "train" for them. Backtesting is your training ground. If you don't have the patience to backtest, then I'm sorry trading isn't for you.

Utilising historical data, you would scroll through the charts and observe how the market reacts around your predescribed conditions (MA X-over and Stochs moving out of extremes). Effectively, you are preparing yourself, training your eyes to identify when certain conditions are more favourable than others.

More importantly, you are testing the strategy itself to determine if it truly is profitable BEFORE laying down cold hard cash on it. In your backtesting, how did the strategy work in ranging markets, trending markets? illiquid markets?

We saw in Jupiter how illiquid markets in September could have been improved by utilising 4hr charts over 1 hr. In my own backtesting, I didn't see such thin markets. Sure enough the targets were smaller than normal, but not so small that spread would have eaten any profits!

The Pitfalls of BackTesting :

Backtesting is easy stuff really. The Fog of War is completely removed. You can see everything there at once. It's all static data. It's not moving. The stage after backtesting is called forward testing. More on that later, but once you have backtested and then applied your strategy to live charts you will see the difference.

Live charts move! In backtesting, the Moving Average cross is clear. But in live charts, you will see occaisions where Moving Averages cross, and then uncross as the market ebs and flows.

With static data, results can obviously be produced very much in favour of profitability. The charts aren't moving, so there is no need to react immediately on the signal. You can sit there and ponder all you like as to whether the setup is acceptable or not.

With static data, you can cover months of market history in a matter of hours. In live charts it will take months of live chart movement to cover the same amount of data. I recently had an extremely frustrating trade that after 5 hours of watching price hit my signal entry, move up, come back down to entry level, move up, come back down to entry level, to the point I no longer could see which way price would go. This is what live trading is about. Eventually I left the charts and let the trade go. Trading frustrated is a BIG no no. The trade eventually went the way my strategy dictated, and to be honest there was enough movement for me to have locked in Break Even, but the bouncing would have taken the trade out at break even.  Hopefully this example displays how different back testing is to live trading.

Success Rate 80%+
They say to backtest something til it is at least 80% successful, preferably 90%. Any system that is more than 50% successful is profitable, but given the pitfalls of back testing, you want to create a buffer zone to allow for your own interpretations during live trading.

Even during bad and slow times, Jupiter is running at about 60-70% success rate. This is from 80-90% (depending on pair) from back testing.

Thursday, November 5, 2009

NFP Week - Not a good start to the month

After a couple of months of some very slow and thin markets, we finally have some liquidity returning to the markets. Jupiter saw some early signals, that unfortunately didn't pan out far enough for us to lock in Break Even at least, and we start the month off in the red.

Trading is about the long term results as opposed to each individual trade, although we all like to have a good run of winners!

As previously mentioned, liquidity is returning and enough so that the sleepy pair AussieYen is now starting to show enough range of movement to allow some good trades. I look forward to the rest of the month.

On a side note, I have noticed that during NFP week, although the original direction is well identified, the entry tends to be 12-24hours too early. Oviously that is based in hindsight after seeing how the markets played out after entry, but still none-the-less is important to notice a tendency like this. In review of past performance, it seems that rather than 1hr chart moves, we are seeing much clearer movement on the 4hr charts.

I make this observation public for a couple of reasons. Firstly, the whole point of this blog is for personal review and a step away from charts to see how things are going. Secondly, and just as importantly, to allow transparency for the subscriber. Jupiter Signal strategy is applicable to whichever time frame the individual prefers.

Anyway, let's see how the month unfolds. Tomorrow is NFP so we should see some good market movement!

October Summary

Another month is over and we move into November. Before commenting on the week thus far, here is the summary of October.

Jupiter Signals :
GBPJPY -    +470
EURJPY -    +240
AUDJPY -    -20

Jupiter Overall -    +690 pips

The Aussieyen still holding us back a bit, but the good news is Liquidity is back in the markets!!!!

Pluto Signals :
+357 pips

Total Overall Performance :
+1047 pips for the month!!

Needless to say I am very happy with this. I hope our subscribers are too.

Tuesday, October 27, 2009

The Hindsight Trade - The One That Got Away

When it comes to technical trading, we like to "stack the odds in our favour". What we look for are a series of reasons to enter a trade, or why a particular trade set up looked good.

In Jupiter Signals, we look for divergence, where price goes one direction, and whichever indicator we use, another. (Divergence or Convergence). Divergence trading is very simple in technique, and application. The only potential issue is - the market. Will it take this opportunity to rest and retrace, or will it decide to reverse the trend.......or in some cases, decide that the trend is not yet over and continue down.

Back to the simplicity of Divergence trading...Do you wait for the RSI or Stochastics to break above 20, or below 80 for your entry? Whatever signal it is, that's your "get in now" entry signal.

What I really like about technical trading is you can add to that. There are other technical trading techniques that lend their own to your own reason for entering a trade.

Yesterday was just such a day.

I'll let the fact that each picture tells its own story do just that, but also notice how the 1 horu chart is ALSO supported by the SAME technicals on the 4hour as well!

What the heck was I doing at this time to miss such an obvious entry @.@

(Actually I was being stubborn and wanted a true test of the .00 level. You can see we missed it by 5 or 6 pips. Stubbron, in that entries like this have missed me by because I have this thing about 00 flat!)



 

Although we had no previous tests of the Resistance to be Support, it is a common scenario that the very first retest of such S/R interchanging roles results in a bounce at least. Sometimes we can get caught up in the "perfect" entry, and miss a good trade. Those 5 or 6 extra pips cost me 100 :)   But after all that, No trade is a winning trade! (Cause we didn't lose did we?! :) )

Take care in this cold/flu period of the year.

jupiter out....

Monday, October 26, 2009

Monday Morning Pluto - The Rainy Day Blues

Bit of a down start to the morning. Euroyen stopped out at Break Even twice. Second time, kind of over-stepped the target shooting for 20 pips as we saw 15. Thems the breaks as they say.

EURUSD trade was a little premature in signalling. The trade plan did play out though, lending proof to the original analysis applied. Just played the trade a little early. Will see what London brings us. Currently -15 pips for the day..

PreLondon....our 4th and final trade for the day. Stopped out at Break Even. Not too bad, as the trades themselves only fell short of designated goal by a few pips. Better luck tomorrow!

Jupiter is at this stage yet to identify an entry for us.

Friday, October 23, 2009

No real update Update

Just a quick post to show all is well in the land of Jupiter Signals.

Yet again, today, the ASF as I shall hereby name it (Asian Session Feint), provided an entry signal, started to move in the direction of the signal....then promptly died.

From November onward, no signals will be given during the Asian Session (until 3pm Japan Time) until Asian markets pick up liquidity. This constant lack of follow through is cheating us of pips in getting better entries by waiting for European and London opens.

Cheers

Monday, October 19, 2009

The Market Giveth and the Market Taketh

One thing a trader must prepare for, amongst many others, is the fact that not every trade can be a winner. There will be losers. Last Thursday's huge buy in on the carries again broke some serious levels of resistance for the GBPJPY (both 4hourly and daily levels), and also brought the Aussie and Euro -Yens up with it. This resulted in a series of losing trades.

On that point, it certainly reinforces the fact that the FX markets are not just technical. There are MANY different factors involved, and all the more reason why Stop Losses, even arbitrary 50pip or whatever, SHOULD be used in every trade. I'd rather be knocked out at -100 because some Hedge Funds believe the GBPJPY was a good buy at 144 than be sitting deep in -400pips :)

As mentioned in an earlier entry, the Asian markets of late have been 50/50 on whether follow through will occur or not, and what is worse, has mostly ended up as being too early an entry.

What started as a fantastic month with about 800 pips in the bag, is now sitting at approximately 370pips. With still over a week to go for October, this is a bit of a setback, and serves as reinforcement of the idea that GOAL SETTING is important! If you reach your daily/weekly/monthly target, switch off the charts and enjoy life. :)

Wednesday, October 14, 2009

New Service Coming Soon! PLUTO SIGNALS!

I'll be releasing a new service for our customers called Pluto Signals. We will need to update the home site first, but just an advanced notification of what it's all about.

Pluto Signals will be aiming to provide 10 - 50 pips a day. Doesn't sound like much does it? But as simple as it seems, a LOT of people are unable to achieve that goal.

We will be looking for a maximum of 4 calls a day, so if our target range is hit, even in just one trade, then there will be no further signals for that day (by principle). This is for several reasons. No one likes being tied to their PC for hours on end (sometimes it feels that way with Jupiter Signals in the current markets @.@).

Goal setting is EXTREMELY important in any endeavour, and especially so in trading. Overtrading leads to bad decisions and burn out real fast. By setting a target goal of pips AND maximum trade number, we are limiting the risk of overtrading.

Risk? Oh yeah that! Basically, it will be straight 1:1 Risk/Reward. This is to help me maintain a timely signally service, and also keep the email message content to a minimum. For example, if the signal comes in :



Pluto Signal is there just to highlight that this is indeed the Pluto signal (as I am sending from jupiter.signals@...). Hopefully this won't confuse anyone. :)

The pair being highlighted, in this case, the EURUSD appears next in line.

BUY/SELL should be fairly self-explanatory.

10pips refers to the target pips for this specific trade.

(1.4880) Is simply meant to be a reference price. Showing the indication price that I am using at sending the email. This does not mean that if you can't get this price, the trade is void. Trading signals are meant to be an aid or supplement to your own trading portfolio. Use your own analysis to determine if by the time you finish checking the charts, that you can still achieve your target. In most cases, however, there will be more than enough movement to cover the initial target pippage and more!

During the Jupiter Trading System, while waiting for Divergence entries to form, other trading chances often appear. Support/Resistance bounces, triangle breakouts, Divergence, any number of opportunities. But as they are not part of the Jupiter Signal Trading System, cannot be sent on behalf of them.

As the final format has not been decided, the [PLUTO SIGNAL] may simply be replaced with the pair in question.

OK, so wew have the signal, onto how to handle it. Everyone has their own acceptable levels of Risk/Reward based upon their own account size and analysis. However, the following is a guide as to how Pluto Signals can be managed.

As you can see in the table below, the idea of this is to mitigate Risk as soon as possible. Once a certain number of pips have been achieved, the trade will either be closed entirely, break even locked in, or in cases where 30+ pips are targetted, Break Even + Profit will be locked in.



Note : Target Pips of 30pips should be Close at +30, not as shown above.

Here is a quick look at the progress so far in the last couple of weeks.


I have been blessed so far with only one loss. But you can see so far how even short targets can add up to decent rewards. Obviously, this is but a couple of weeks worth of data, what is important with any trading plan or strategy is long term results. Even good systems have bad days/weeks/months!

Cheers

What every trade should have - the 3 E's

Whenever you go for a weekend trip, or want to travel somewhere even just to meet a friend somewhere, you need to know where you are going. Trading is no different. In fact, it is very important that each trade that is placed, is planned accordingly.

I don't remember who coined the term, but "Plan the trade, and then Trade the plan!". If you don't do your due diligence in any business endeavour (and yes trading IS a business endeavour), how can you expect to succeed? In planning trades, I always ensure that they contain the 3 E's.

E is for Entry
Where is it that you want to enter the trade? A specific price? A price level? A cross of two moving averages? What is it that says to you, "Hey! Here's the entry!"

All trades start with the Entry. It is from this point that the next two E's are derived.

E is for Exit 1
Exit 1, or Trade Exit/Take Profit, is the destination point. Where, in this trade, are you planning to go? 10 pips later, 20pips? Until the two moving averages cross against you? When the RSI breaks below 20 or above 80? Basically this is the point where you will want to close your trade, in full or just partial, and feel good about a successful trade.

E is for Exit 2
Exit 2, is there for when the market, although gave you some good indication your trade plan is going to work, just decides that, nope, not today, and then turns against you. If you haven't already guessed, yes, this is the Stop Loss. You want to protect your trading capital as much as possible. Stop Losses are there for when the trade plan, for whatever reason, just doesn't pan out.

I won't go into it here, but the Risk/Reward of the trade depends upon Exits 1/2. Ideally you don't want to be risking too much, for too little gain.

Jupiter Signals uses initial default Stop Loss values. 80 Pips for the AussieYen, 100 Pips for the EuroYen and 150 Pips for the PoundYen. These stops have been systematically tested to provide immediate coverage. The initial calculation is for approximately 1:1 Risk Reward, utilising two targets.

The initial Risk/Reward Ratio is calculated at targetting Target 2, the farther target. One way of mitigating Risk, is by moving the Stop Loss to Break Even once Target 1 has been reached. Target 1, through systematic testing has shown to hit far more frequently than Target2.

Lately, we have been in some particularly slow or range bound markets, with bursts of liquidity. Although the default Stop Losses are of considerable size (although appropriate or hourly charts) the stops can, and are often suggested to, be moved closer as the trade progresses - aka Trade Management.

Let's take a look at a good potential trade set-up.


There a lot on there but let me summarise below. This would be a VERY good Divergence entry at 143.15  That price level was alreadyan established level of resistance. Going back further you can see it also acted as support.

Divergence has formed twice. Now the orange line on price is horizontal, it is neither moving away from the indicator orange line, nor to it. Remember though, that Divergence (Convergence) is when price and the indicator are doing separate things. If you weren't too sure about that particular bit of divergence, then it was followed up with some more typical Divergence indicated by the red arrow.


So our trade plan would have had an excellent start. Even in the face of the Asian Session coming in, the odds were stacked positively in favour of a short.

The Blue circle is where abouts I opened the charts and saw price. Ideally 143.00 would have been a good entry, and had price retraced to that level, I certainly would have taken the trade. So why didn't I? I missed the boat. It already left the pier. I don't plan on getting wet, so I'm not going to take a running jump and HOPE that I land on the boat as it berths away from the pier (or is it only berth when it is docking?). Trade plans run on sound analysis, NOT HOPE.

Albeit for a system that targets 100+ pips, you might think 25-30pip late start is acceptable. But, let's return back to the 3 E's. Where are you going to now place the Stop Loss? In hindsight now, anywhere above that 143.15 mark is acceptable. But what if the market, from that entry point, then proceded to retest that 143.15 mark? There's a better entry right there, or, if you just jumped in with HOPE, there's -40 pips worth of movement.

Obviously in hindsight now with several hours since having passed and a good 100plus pips of southbound movement there, the whole what if scenario is moot. But each time you plan a trade, you need to take these things into consideration. Your Entry is an Entry for a reason. If you miss that Entry, then too bad. Move onto the next the trade.

Reminds me of another phrase, I think Dustin Pass used to (or still does) say, "Better to be out of a trade wishing I was in, than to be in a trade wishing I was out!". The latter part of that phrase is often what happens to people who miss the appropriate entry for whatever reason, and jump in anyway.

Thank you for your time.

Cheers

Saturday, October 10, 2009

Mental Flexibility Is Always a Good Thing

You've read an earlier post about how underperforming the Aussie-Yen has been of late. No doubt this is tied into the increased AUDUSD strength as China and India etc. buy up natural resources to build up their infrastructure. If you weren't already aware, when trading cross pairs, the relative strength of the parents (AUDUSD, USDJPY) is extremely important. It doesn't matter which is the weaker, or which is the stronger. As long as there is a difference, you will have the opportunity to trade.

When the AUD is gaining in strength at relatively the same pace as the YEN, then the AUDJPY pair just sits there in fairly tight ranges. Take a look at the hourly chart. Don't forget that the AUDJPY can typically have a 5-6 pip spread. This makes going for tight range bound scalps pretty difficult unless you are after 2-5 pips. Jupiter looks for 40+.



So, as one should do as part of their trading business, I went back and reviewed the last couple of month's. Why has trading performance been so mediocre in this pair? Basically, two reasons. The AUDJPY was in some very tight ranges most of the time. Which in turn impacted trade call frequency so that it was very few in number. Extending onto that, some of the range breaks often appeared to be divergent at first, but continued through to stops. Successful trading was at the end of these bursts. (If you remember an earlier post, you will see that Divergence doesn't always play through the first time it forms.)

In review, I was thinking what could have been done better? How could I have adapted to these markets in a more pip friendly manor for our clients? There's that mental flexibility starting to work.

I clicked one button....



Wowzer.....Like many a trader is prone to do, even the experienced ones, you stay locked into the one thought pattern, or in my case, the one time frame! When the current time frame you are on is providing unsuitable conditions, step back and take a look at a bigger picture!

Now, I have highlighted some pretty pip targets in the picture. I am not saying every last pip is possible for the taking. I'm trying to highlight the difference between a 1 hour chart (20-40 pip ranges) and the 4 hour chart (some movements ranging from 180-300pips). Surely you can agree that the latter provide far better potential.

Whenever you don't like looking at something, change your perspective of it. You may just find a more pleasing view :)

Cheers and much pippage to you all.

Thursday, October 8, 2009

Judgement Calls - The Human Element to System Trading

My goodness what a long day it has been. I cannot express really what I am feeling for the AussieYen of late. :) Emotional trading is a bad thing, fortunately for me I have a system in place.

Let's start off with the AussieYen.


Looking good except it's like 11am in the middle of the dreaded Asian Session. The pair is overbought, our system flags us an entry. Just something about this setup doesn't click for me. System wise, it meets the entry signal. For conformation, let's look at it's parent the AUDUSD.

Things seem to meet up. Both are way overbought, we have our system entry signalling at the same time for this pair.

Hours later and millimeters of chart movement in candle sizes, a nice tight stop of 79.95 finally gets hit. Even now, while writing this, both pairs are drifting sideways in very small candles. The AUD news that came out earlier in the day was pretty good. What I was intending to play on here was some retracement of the impulsive move up. we got neither no retracement, nor any substantial continuation. Please return 9 hours of my life AY!! :)

Trade 2, and where the true Judgement call comes in. The GBPJPY. I miss sending the signal at 142.20. Price receded back too quickly for me to visually confirm that that was a good price level to enter. I get in at 141.85. We see some downward movement, as the GBPUSD is also very toppish at this same time. VERY good factors in OUR favour. The interesting thing with FX is, that it doesn't matter how much everything lines up in your favour, that is NO guarantee the trade will be a winner.

Here is the chart. 3. depicts where the exit at a -30 pip loss (for me, soon after sending the email to exit, price retested 142.00 for a -15 pip loss for some of our subscribers).



9:30pm rolls around and US news comes out not so bad for the USD. I'm no fundamentalist, but right now, we are looking at 2-3 hours of no solid movement in either direction. Even now we are still sitting on the 142.00 level and the original trade call may still end up being a winner.

So why call it CLOSEd? We are sitting on weekly and monthly level support for the USDJPY pair. My guess is at these levels, not many people are too keen to sell into the face of such strong support. No trade is really worth waiting hours to play out unless you are already on 4hrly or daily charts. It works or it doesn't, and after seeing the signal and acting upon it, I'm just not that confident that after London and now NY coming into bat, that 88.25 level of the USDJPY isn't going to break tonight.

Erase 130 pips off that 800pips start to the month :(

Wednesday, October 7, 2009

Performance Thus Far

Jupiter Signals went live with signals in June. They were opened up to the public via www.signal-haishin.com in the beginning of August. Most unfortunately, August was a very bad month for me, and from what I understand for a lot of people as well. It's all well and good posting charts of the trade that was, but I thought I would post the results so far.

August was quite a volatile month, and as FX traders we love volatility. Unfortunately as a divergence trader, it meant some very strong continuous trends. Divergence forming does not always mean that a retracement or trend reversal will occur right there and then. In some cases Divergence will be flagged as much as three times before the retracement/trend reversal occurs. System trading is about having a systemand sticking to it, even in the face of losses. A lot of the August (and September) losses were due to the low frequency of calls to losses.

Anyway, here is the progress thus far.



This is in no way intended to be boasting, simply publicising the results.

September, my goodness, I almost denounced my nationality over the AussieYen. VERY mediocre performance mostly due to it being in very tight ranges. Perfect for the scalpers among us. On the last day of September the market gave me some nasty losses on this pair driving it to -300pips for the month. Brining the over all service month from 800 pips down to 500 pips over all. OUCH!

Even now, as I write this, the bloody AussieYen is trying to see how narrow it can get.

We are entering some very historical times now with the USD so low. It will be interesting to see where we go from here.

Cheers!

Tuesday, October 6, 2009

The One That Got Away?

To be honest, I don't really like the Asian Markets for this system. The Japanese have an expression called Chuutohanpa. Half-arsed. It is almost down to a flip of a coin to see if there will be enough liquidity to take a move to its proposed destination or if price just idles sideways until London gets in.

Yesterday was one of those days.

Here is the GBPJPY 1 hour. The entry would be about where the end of the orange arrow is.


The GBPJPY comparatively does have a larger range of movement. And now in hindsight I can see it bounced about in a 100 pip range before continuing. System trading is all about following the system in place. The entry was around the arrow point (technically about where that blue candle closed).


The designated Take Profit area also highlighted. So why didn't I take the trade at the entry signal, or an hour or two later once the top of the range was identified? Let's take a look at the other pairs.

The AussieYen :
 

No indication of which direction, if at all, it wanted to go. Last thing we wnat to do is step onto a slow moving conveyer only to have it suddenly switched to overdrive as soon as London comes in.

The EuroYen :

Same as the AussieYen. Not in a hurry to go anywhere, and very typical Asian Market movement. Don't get me wrong here, this doesn't mean you can't trade the Asian Markets. There are plenty of opportunities for good trading. Just, I personally don't like an entry signal taking 6-8 hours before the planned trade takes a move.

Back to the original topic...Was this GBYJPY trade the "one that got away?" I'd happily say no. The entry signal was about where the orange arrow on price was. Not the top of the range that formed over the next 6-8hours. Yes, you could argue that that was the price level at which the original trade was planned, but not the entry candle.

I'd say no again, even as I sat there watching candle for candle to see how the markets were going, the Aussie and Euro Yens gave no indication of continued movement.

Trading is about stacking the odds in your favour before placing the trade. This is why a lot of systems have 2-3 entry criteria. Unless all entry criteria are met, no trade is placed. it is a way of filtering out not just bad trades, but also filtering out trades like this that just leave you with too big a question mark as to whether it will play out or not.

Cheers

Monday, October 5, 2009

Jupiter Signals are Based on a Divergence Trading Strategy

As mentioned in the About Me section, the basis of Jupiter Signals is that of Divergence trades. Divergence occurs when a trend is about to run out of steam, or needs to take a break before continuing on. It is a good strategy for trading retracements and/or trend reversals. I made a PDF document, but for the life of me can't see a post file option anywhere so allow me to cut and paste some of it herein.



Introduction.


Firstly, allow me to thank you for purchasing the Jupiter Signal Service and adding it to your portfolio of Forex trading. Whether it be an individual pair, or the package deal, my goal is to help you further your profitable endeavour in Forex trading.


I have been involved in Forex for the past 4 or 5 years and have watched the Forex markets grow from barely a 1.2 trillion dollar a day flow to its current 4.3 trillion dollar a day flow. There is more than enough pips there for all of us to make a comfortable living.


In my effort to learn as much as I could about Forex, I have spent over $10,000 on books, reports, and courses. The market has “charged” me over $20,000 for me to learn that the market does what it wants, not what I want it to. I have also had the wonderful opportunity to coach up and coming FX traders across the globe. One thing I can say for certain is that there is NO Holy Grail to FX trading. There is hard work and effort. There are many systems that can and do work. FX is wonderful like that, there are literally many, many different ways to successfully trade it – scalping, news trading, fundamental trading, technical trading, etc.


Along my travels in this wonderful world of Forex I realized that there is more than enough pips in the market to make a comfortable living without having to try to get ALL the pips. Based on my experiences, I developed my own system and I present it to you through www.Signal-Haishin.com as Jupiter Signals.


Hereafter, I shall give you a basic overview of the system and how to apply the signal calls to your trading experience.


Thank you again and may I wish you constant pippage!


Sincerely,


Jupiter Signals






Jupiter Signals – Divergence Trade Calls


Introduction to Convergence/Divergence


You are driving along the Shuto Expressway, and ahead the Number 2 Highway leads to Meguro. It leads away from your current path, the C1. So Highway 2 is diverging from C1 as it leads away.  Further along, you see an Interchange where cars are joining the Shuto Expressway. They are merging or heading to the Shuto Expressway. They are converging (technically with traffic it is called merging.)


Let’s look at some mathematical expressions. The < sign. If we read left to right, we can see that on the right hand side, the two lines are moving apart. They are diverging.


Conversely, with the > sign, again reading left to right, the two lines are coming together. They are converging.


Now, take one step closer to Forex. In Forex we have price action. Whether it be bars, ticks, or candles, price is generally moving up, down or even sideways. So we can designate the top line in both these cases (<, >) as being price action.


So then, what is the lower line of these expressions? Many people trade Divergence by matching price action against an indicator. (Technically it is Convergence-Divergence, but for short, I will continue to reference it as simply Divergence, but in meaning either case.) Some commonly used indicators are, and not limited to, MACD, Stochastics, CCI, RSI.




Let’s have a look at some examples.


In Pic.1. below we can see an example of CCI Divergence. Price is making higher highs, whilst the CCI Indicator is making lower highs. Price and the indicator are Diverging.




                                           Pic. 1. Price and CCI Divergence.



Furthermore in Pic.2. Stochastic Convergence is evident in Price forming lower highs, whilst Stochastic oscillator signal lines are forming higher highs.





                                          Pic.2. Stochastic Convergence


Divergence As A Trend Reversal Opportunity.


Divergence is a good indication of when a trend is about to reverse, or even retrace somewhat before continuing the current trend. Pic. 3. below identifies Divergence that signifies the end of an uptrend, and following on from that, Divergence again that indicate the end of the subsequent downtrend. Leading onto a third Divergence occurrence.




                                          Pic. 3. Divergence as a Trend Reversal opportunity.






Divergence trading is a consistent method of trading. However, Divergence forming does not always mean that price will reverse. Sometimes it takes Divergence to continue building up before the actual market breaks to the divergent pressure. This is identified below.


Pic. 4. Below signifies a time when Divergence forms, but there is no subsequent retracement or trend reversal. No system is 100% accurate 100% of the time.





 Pic. 4. Divergence doesn’t always play through to sufficient retracement or reversal opportunities. No system is 100% accurate 100% of the time.




Pic. 5. Identifies an example where Divergence builds up before actually following through. Even then, the market then simply proceeded to range. Had you have been looking for a good opportunity to exit, however, Divergence preceding the range was a good indication.





                                           Pic. 5. Divergence building up before following through.


I hope this introduction on Divergence has helped you understand it more. I personally find that there is too much information on Divergence and people look too deeply into it deriving terms for all sorts of cases. Hidden Divergence, Regular Divergence, Common Divergence, whatever! All you need to know is whether Price action is moving to or away from your indicator! KISS is the best policy - Keep It So Simple.




Trading Advice


FX is unfortunately miss-represented by advertising hype and system sellers who will try to paint a dream of being rich tomorrow. You would probably have better luck going to the casino and putting it all on black and leaving it to the spin of the roulette wheel. Trading is not about luck. Like any business endeavour it requires hard work, effort and persistence. With Jupiter Signals, you are able to utilise that hard work and effort put into developing the Jupiter Signals system to add to your current FX portfolio. If you are just starting out in FX, then you will be able to employ Jupiter Signals as your stepping stone into the world of FX.


Change your pattern of thought from the media brainwashing of getting rich quick, to a mindset of one focussed on capital preservation. Consistency is the key to being successful in FX trading. Consistency in mental attitude, consistency in approach to FX trading, consistency in methodology. This and this alone will bring you consistent results.


It is often said that on should never trade with capital they cannot afford to lose. Many misunderstand the meaning behind this thinking that they can be flippant with their approach to FX trading. The true meaning behind this expression is to trade with capital that you are not emotionally tied to. If you are trying to squeeze every last pip out of the market because last month’s rent needs to be paid, then you are on the fast track to blowing up your account (again maybe?) and emotional burnout. That approach to trading is not consistent (apart from consistently making bad trading decisions!), and will keep you in the 95 percentile group of people who leave FX within the first 6months to 1 year of trying it.


Having said that, it is also important to understand that trading systems and methodologies do not produce positive results 100% of the time. Markets have different phases, trending sometimes, ranging another. Some systems work well in certain phases and not so well in others. August 2009 was specifically a difficult time for Jupiter Signals. Call frequency was low and the volatility often caused stop losses to be hit prematurely before going on to profitable trades. This can and does happen. What is important is the consistently applied methodology or system, does, in the overall picture, produce positive results.


Lastly, on an individual level, never expect to be right. Understand that there is no right or wrong in the result of a trade. The market is uncaring about right or wrong. There is good planning of a trade, and waiting for the market to determine if the trade follows through, or doesn’t. If a trade plan doesn’t follow through, fine. Accept it. Move on. This is why consistent application of trading methodology or system is important. Even though the trade didn’t work this time, you know that your system, in the long term, is a winning system.


I sincerely hope that this introductory guide has been of benefit to you, not only in giving an overview of what the Jupiter Signal system is, but also on an individual trading level as well. With a (currently) 4.2 trillion dollar a day flow through the FX markets, there are more than enough pips for us all to live very comfortably.


Happy and successful trading to you.


Kind regards,


Jupiter Signals






Welcome To FX Jupiter Signals

Hi and welcome to my little blogspot. This is my first blog so bare with me while I get used to the idea. Jupiter Signals are a FX trade signal service based in Japan. The home site for it is http://www.signal-haishin.com As the signal provider I have had moments whereby I would like to verbalise some trade thoughts and ideas, but did not want to send as part of the service. This blog will serve the purpose of allowing me to unofficially put trade ideas out there, and if people actually start to follow this blog, open the floor to discussion.

If you are into Forex, please take the time to also visit http://smartpip.blogspot.com/ Chris is a very well-informed and experienced trader. His blog is also very informative and enjoyable.

Thanks for your time.

Cheers

Jupiter Signals