+10.25 points in last two operations in the Emini

Daily Review 04/25/2010

Today we would like to start the weekend review by discussing Slips because during this last week some users experienced a slip of up to 15 pips with Interactive Brokers causing the stop to trigger for the GBP/USD and we are referring to a broker which normally does not experience any slip between the stop and executing price. 

Last September, we wrote you about HFT or High Frequency Trading which, although it has not made a lot of noise recently, continues to operate in the market.  Let’s review what we wrote then.

High frequency trading programs make up 70% of market volume. Let’s take a look at how they operate.  One investor places a buy order for 15 thousand shares of stock X between $10 and $10.07; a limit order with a $10.07 maximum.  The order is entered in the market and, at that moment, the HFTP detects that an investor has made a large order and it starts to buy before the large order can and it buys 100 at $10.04 or everything in that position and then they put these shares on sale for 1 cent more than their purchase price so as to make 1 cent per share.  These shares are instantly sold to the investor who wants 15 thousand. It appears transparent as the large investor only loses one cent per share and doesn’t even notice.  Although this may appear innocent, currently 70% of all transactions in the US are made by HFTP with a daily volume of $1.5 billon.  These programs were created to, in theory, make the markets more liquid but we see that this liquidity is fake.  These are simply computer programs which send orders microseconds ahead of time.

Take a look at the data regarding the impact of these programs: GOLDMAN controls 21% of HFTP trades and, in their latest results, they declared a $21 billon profit from this trade type. Therefore, if the market collapses, the HFTPs will simple stop trading and 70% of the current market volume, which is poor to begin with, will disappear.

And why are we reviewing HFTPs.  Because now, Forex brokers are doing something very similar in the current low-volume market.

We recommend Fxcm and Ib and, as you have witnessed, we have had quite a bit of slippage.  We can’t imagine what traders who use non-regulated brokers are experiencing. 

Let’s look at an example of what is happening.

Let’s suppose the prices offered by liquidity providers to brokers are the following: 

Provider 1	Provider 2	Provider 3
1.4364 - 65	1.4363-64	1.4365-66

The broker applies various algorithms and their trading rules to generate the market prices which are sent to traders and are seen in their trading platforms.  The formula used to generate prices could be more or less complicated but we aren’t going to focus on that aspect.  Let’s suppose, for example, that the trader receives a price of 1.4363-66, with a 3 point spread.  The trader sees a clear sale sign, decides to sell and sends the broker a sales order at 1.4363. The broker receives the order, conducts several checks, both internally and with their liquidity provider, and confirms the traders order through the platform.  The broker applies probability studies to determine the operation’s risk and they decide whether or not to send the order to the market or to act as the counterpart, internally matching the order with other traders’ orders. Continuing with this example, let’s suppose the order is sent to the market.  In this case, the broker requests the sale in EUR/USD to one of its liquidity providers, selecting the best price offered.  In other words, they sell to the highest possible Bid.  In this case, they will sell to provider 3 who offered 1.4365. With this trade, the broker obtains 2 points of extra profit with regard to the trader’s order price (1.4363).

Having executed the order, the broker covers the spread, in this case 3 points, and the trader’s account is debited 30 USD.   The broker’s account is credited 30 USD from the spread as well as 20 additional USD from the price advantage from the sale price of the liquidity provider compared to the trader’s price.  

Therefore, we have no other option but to live with this.  Now brokers are anything but our friends. 

As we do every weekend, we are going to analyze the market and review the success of our techniques over the past week.

FOREX

First of all, the following chart demonstrates the evolution of our Fx account since we opened it in January, 2009. As we have reminded you many times, with us you won’t become rich in two days but you also won’t lose money. You will simply make constant, gradual gains, without large DD in your account as the following chart demonstrates. Obviously, you must be prepared to have both positive and negative trades but, as you know, all our signals have a target as well as a stop so you always know the risk associate with each trade.

As of Friday’s close, we had gained 11.109 pips, setting a new total high last Thursday with a total of 11.121 pips, which will be the new amount to beat next week.

As we said, we advance little by little with the intention of taking advantage of market volatility to really make pips. 

On April 1st, we had gained 10.862 pips and, as you can see, we closed the week with a total of 11.109 pips after last Friday’s trades.

As we have mentioned on many occasions, our techniques work best when the

market is volatile.

Take a look at the following data we extracted from the previous chart regarding our account’s progress.  This data represents the number of pips we made or lost per day.  As you can see, each day we make or lose a very small number of pips. 

2010-04-13; -29

2010-04-12; 40

2010-04-09; 142

2010-04-08; 46

2010-04-07; -8

2010-04-06; 38

2010-04-05; -13

2010-04-01; 8

2010-03-31; 38

2010-03-30; -6;

2010-03-29; -5

2010-03-26; -24

On the other hand, look at our results for the same dates last year.

2009-04-22; 100

 2009-04-21; 63

2009-04-20; 95

2009-04-17; 127

2009-04-16; 99

2009-04-15; -08

2009-04-14; 97

As you know, our techniques adapt to market volatility: The more volatility, the more aggressive our targets.  Having seen market volatility increase on Friday afternoon, we are hoping to now be able to set more aggressive targets for our signals, which would be a good sign for our techniques as well as for our performance.

MINISP FUTURES

Now we will turn our attention to the Sp.  The Sp finally began to experience an increase in volatility after 32 sessions of having moved less than 1%.  As we have commented, our techniques depend on healthy price ranges as our targets are between 4 and 5 points. We have seen many sessions recently with ranges of 5 points for the entire session.

This week the Sp finally began to move, rising almost 30 points over the week.

One of the best indicators of volatility is the reaction of the markets to news at 10:00 EST, as happened last Friday.  Here you can see how the Sp rose from 1201.5 to 1208 in 15 minutes after macroeconomic data was announced at 10:00 EST only to later rise to 1210.25 and then fall to 1201.  This is a demonstration of typical movement when macroeconomic data is announced which is why we don’t trade the opening those days but, never-the-less, this is the type of market we like and in which our techniques flourish. 

This last week we made the following trades for the MiniSP.  As you can see, they were few; a total of 7 of which 5 were positive and 2 were negative for a gain of 4 points.

We continue to be unsatisfied with these results compared to what we are used to but, little by little, as the Sp begins to move to its normal rhythm our numbers will surely improve dramatically. 

Have a good weekend. 

Daily Review 04/17/2010

Good morning/afternoon.

As we do every weekend, we are going to analyze the market and review the success of our techniques over the past week but, before we do, we would like to share something with you. 

Over the last several months, we have been working to find new, low risk trades that vary from our standard techniques for both Forex and Sp (and Stocks, when we start trading them again). 

We believe we should not pass up on market opportunities and we should therefore be flexible and send you emails with these opportunities without being limited by our standard trading schedule.  These will be signals with a bit more risk than usual and, therefore, the possible benefits will be double or triple of our risk. 

Starting this Monday, we will send these signals, if we see the opportunity, and we will send them with ample time so that you all have time to place your orders.  We will call them Optional Signals. 

An example of one of these optional signals is the Cad/Jpy trade from Friday morning.   As you can see, our entry price was at 92.10 with a 20 pip stop and a whopping 90 pip target.

Take a look at this pair.  Once it lost strong support at 92, there existed a profit opportunity of up to 160 pips.

These Optional Signals will not follow the pattern of any of our standard techniques, rather they are trades we will recommend if we consider the gain/loss ratio to be high enough.  These signals will be sent by email, as usual, for both Fx and Sp.

These optional trades will help us overcome some of the limitations we have for the Sp.  For example, on Friday, macroeconomic data was announced, which doesn’t allow us to place our normal trade, and we didn’t have any other opportunity to enter the market.  And, with a market like the one we are currently experiencing, it is necessary to be able to deviate a bit from our techniques.  Take a look, for example, at what happened on Friday with the SP after having lost support at the 1196 level or at the rebound that occurred after hitting a strong support at 1183.  We cannot pass up these trades if volatility increases next week with the change of expirations. 

As we do every weekend, we are now going to analyze the market and review the success of our techniques over the past week: the third week of April.

FOREX

We’ll start by showing your how our Fx account has grown since January, 2009. As we have reminded you many times, with us you won’t become rich in two days but you also won’t lose money.  You will simply make constant, gradual gains, without large DD in your account as the following chart demonstrates.  Obviously, you must be prepared to have both positive and negative trades but, as you know, all our signals have a target as well as a stop so you always know the risk associate with each trade.

As you may remember, here are the results for Forex for Q1, 2010.

As we have mentioned on many occasions, our techniques work best when the market is volatile.

Take a look at the following data we extracted from the previous chart regarding our account’s progress.  This data represents the number of pips we made or lost per day.  As you can see, each day we make or lose a very small number of pips.  

2010-04-13; -29

2010-04-12; 40

2010-04-09; 142

2010-04-08; 46

2010-04-07; -8

2010-04-06; 38

2010-04-05; -13

2010-04-01; 8

2010-03-31; 38

2010-03-30; -6;

2010-03-29; -5

2010-03-26; -24

On the other hand, look at our results for the same dates last year.

2009-04-22; 100

 2009-04-21; 63

2009-04-20; 95

2009-04-17; 127

2009-04-16; 99

2009-04-15; -08

2009-04-14; 97

As you know, our techniques adapt to market volatility: The more volatility, the more aggressive our targets.  Having seen market volatility increase on Friday afternoon, we are hoping to now be able to set more aggressive targets for our signals, which would be a good sign for our techniques as well as for our performance.

MINISP FUTURES

Now we will turn our attention to the Sp.  Yesterday, the Sp finally began to experience an increase in volatility and it did so very suddenly after 28 sessions of having moved less than 1%, as we commented on last weekend.  As we also commented then, our techniques depend on healthy price ranges as our targets are between 4 and 5 points.  We have seen many sessions recently with ranges of 5 points for the entire session.  

We hope you enjoy the weekend. 

+5 points with Opening MiniSP Futures

Our entry point.

And +5 points.

+94 pips tonight with the Gbp/Usd and the Eur/Jpy

Short at 126.74 in the Eur/Jpy +34 pips.

Short at Gbp/Usd at 1.5407 , +60 pips.

+144 pips in the Eur/Jpy

 +144 pip profit for the trade which opened at 125.49 and closed now at 126.93 after the market opened with GAP.

Dailymarketadvice Review 04/10/2010

Good morning/afternoon.

As we do every weekend, we are going to analyze the market and review the success of our techniques over the past week: the first week of April.  These first days of April were unusual as the European markets were closed for the Easter holiday, so we really only started trading this past Tuesday.

FOREX

As you may remember, here are the results for Forex for Q1, 2010.

And here are our results so far this month.

For Forex, we have been a bit unlucky in these last few sessions.  For example, allow us to remind you of what happened in Thursday’s session. 

These were the signals for the European Morning trades:

First of all, for the Eur/Jpy, we had a target of 123.43 which, not being a round number, generally helps prevent a problem. Can you imagine what the low for the day was?  123.435.   Only 0.5 pips from our target.  In the end, the price went the other way to hit the stop-profit of +10 points.  It was a shame this trade didn’t go our way as we would be up +110 for the month having added 40 pips if it hadn’t been for that darned half a pip.  

  Also, look at what happened with the European Morning trades:

 

These were the entry prices and both hit the target but, before doing so, the market made us sweat it out. The Eur/Jpy target was 124.72 and you can see in the chart below that between 19:48 (10:48 EST) and 19.58 (10:58 EST) the price went to 124.71 three times before finally hitting the target at 20:30 (11:30 EST).  

And for the Pound, the target was 1.5259 and you can see in the following chart that the price reached 1.5258 at 17:06 (8:06 EST) and 17:07 (8:07 EST) before finally reaching 1.5259 at 17:57 (8:57 EST), 50 minutes later. 

It appears this market isn’t making it easy for us and luck is not always on our side but we continue to work hard to protect our capital.   

Let’s analyze what happened yesterday.

First, we gained +38 pips with the European Morning Technique GBP/USD without any difficulty.

For the USA Morning session, the following were our signals:

For the GBP/USD, the short trade was placed at 1.5331 and the price went to 1.5315 until new rumours about Greece surface and, as you can see in the chart below, in a span of only 15 minutes we hit the stop.  News regarding Greece gave us trouble with several trades three weeks ago, also on a Friday, and yesterday afternoon they resurfaced to cause us problems.

But, here is the best example.  We took a chart from Netdania which will help us illustrate our point.  Some subscribers yesterday who trade using Fxcm entered short by 0.5 pips while other subscribers who trade with Ib did not enter short by 0.5 pips.  Even so, we are going to call this a valid trade. 

After the new came out about Greece, the trade hit the stop, triggering the long operation which came within 10 pips of the target.

Therefore, the long operation was at 125.74 when the market closed on Friday.  We’ll hopefully close this operation with a gain this Sunday. 

As you can see, in these last three sessions we have seen things that had never occurred and they demonstrate the importance of 1 pip or even of half a pip.  We hope this is a passing occurrence so that we can go back to making solid gains in more normal market conditions.

MINISP FUTURES

Now let’s review the Sp, where our techniques have had difficulty due to the fact that market conditions have changed and now price ranges are much narrower than they once were.  This makes it impossible to reach 4 point targets in the morning, 5 at midday and 4 in the evening because the market simply does not offer these opportunities.  The following chart shows a statistic which will help you understand current market activity: it is the number of consecutive sessions in which the Sp has not varied more than 1% in recent years.  This year alone, we have had 24 sessions which meet this criteria and this has not happened in this same time period since 2007. As you can see, we are faced with truly abnormal market conditions. 

Let’s now analyze the results our techniques as designed (normal) as well as how we would have done trading exactly the opposite (inverse) of what our technique prescribed.

DAY	TECHNIQUE	OUTCOME Normal	OUTCOME Inverse
Monday	Morning	1	-1
	Opening	0	0
	Evening	0	0
Tuesday	Morning	0	0
	Opening	5	-4
	Evening	0	0
Wednesday	Morning	1	1
	Opening	-4	5
	Evening	2	-4
Thursday	Morning	0.25	0.25
	Opening	-4	5
	Evening	0	0
Friday	Morning	0.5	-0.5
	Opening	-4	5
	Evening	0	0
		-2.25	6.75

From this analysis, we see that our problem has been the Opening Technique.  In any case, the numbers aren’t good and this is also due to the fact that, both for the Morning and Evening Techniques, there was little we could do to make gains of 4-5 points in this market completely lacking volatility.

 We hope that, after the expiration of options next Friday, the Sp begins to move a bit more in session and that the market returns to its behaviour from last year or the beginning of this one, when it was a little more normal. 

As always, we continue to work hard to improve our techniques, as best we can, for you.

Have a great weekend!

+38 pips this morning in the Gbp/Usd

It reach the strong resistence and target for us.

Today, 4 positive trades and only 1 negative.

Today we had a good day with 4 positive trades and only 1 negative one, but it actually could have been even better.  Look at what happened:  These were the signals for the European Morning trades:

First of all, for the Eur/Jpy, we had a target of 123.43 which, not being a round number, generally helps prevent a problem. Can you imagine what the low for the day was?  123.435.   Only 0.5 pips from our target.  In the end, the price went the other way to hit the stop-profit of +10 points.  It was a shame this trade didn’t go our way as we would be up +110 for the month having added 40 pips if it hadn’t been for that darned half a pip.  

  Also, look at what happened with the European Morning trades:

 

These were the entry prices and both hit the target but, before doing so, the market made us sweat it out. The Eur/Jpy target was 124.72 and you can see in the chart below that between 19:48 (10:48 EST) and 19.58 (10:58 EST) the price went to 124.71 three times before finally hitting the target at 20:30 (11:30 EST).  

And for the Pound, the target was 1.5259 and you can see in the following chart that the price reached 1.5258 at 17:06 (8:06 EST) and 17:07 (8:07 EST) before finally reaching 1.5259 at 17:57 (8:57 EST), 50 minutes later. 

It appears this market isn’t making it easy for us and luck is not always on our side but we continue to work hard to protect our capital.   

This morning we made 38 pips in 5 minutes trading Gbp/Usd

And +38 pips in 5 minutes.