US Dollar Resurrection

I am a Trend Trader.

One of my most popular and simple indicators is a new high or a new low in a currency.

I particularly like a new 20 Day High or 20 Day Low. There is nothing magic about 20, so anywhere near 20 days will do.

This last week has seen the US Dollar make a NUMBER of new highs. Let’s have a look:

1. The USD dollar index went to a new 29 Day High.

2. USD Euro went to a new 20 Day High.

3. USD Aussie went to a new 18 Day High.

4. USD CAD went to a new 20 Day High.

5. USD CHF went to a new 17 Day High.

6. USD GBP went to a new 19 Day High.

7. USD South African Rand went to a new 42 Day High.

8. USD Singapore Dollar went to a new 18 Day High.

9. USD Norwegian Krona went to a new 32 Day High.

10. USD Hungarian Forint went to a new 32 Day High.

11. USD Swedish Krona went to a new 34 Day High.

When all these happen at once, this is known as convergence which is far stronger than if just two or three instruments signalled.

Also, the US Dollar Index has just come from its lowest level EVER on 4 May 2011.

There has been a massive one way bet selling the US Dollar short.

Am I saying that this is the turning point? I don’t know, I am a simple trend trader, but the charts tell me that something is changing.

On Friday before the close of trading I went long the US Dollar. I am only risking 1.3% of my trading capital, but if all the people who are short start buying back their short positions this move could accelarate and I will be long the USD near the beginning of the move.

The other thing I like about the signal is that it most of the breakouts show convergence on the MACD and RSI, which means both the MACD and RSI are breaking to new highs as the price breaks to new highs. This is also excellent convergence.

Happy Trading

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

 

 

Trading Symposium – Top International Traders

Starting NEXT WEEK:

An International Trading Symposium to raise funds for the Christchruch and Japan earthquake.

Speakers will include:

Larry Williams

Mark Douglas

Jake Bernstein

Linda Bradford Raschke

Jack Schwager

Van K. Tharp

Nigel Babbage

Nick McDonald

 

All proceeds will go to the Red Cross for earthquake relief.

Register for the Symposium here:

www.tradingsymposium.com

 

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

 

 

 

 

Donald Trump In Sydney 2011

News Flash!

Donald Trump to hold seminar in Sydney in late 2011.

This will be a ticketed event.

If you are downunder this is an opportunity to hear one of the great dealmakers alive today. Billionaire and empire builder, live in Australia.

More soon…

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

5:58pm on Tuesday 12 April 2011

I apologise in advance because this is going to be a cryptic post. I will update fully at a later date when I can show you proof!

At 5:58pm On Tuesday 12 April 2011, my trading transformed.

The reason I am putting this in a blog post is that I want to have a date stamped record.

I didn’t discover something new, I didn’t find a secret trading signal, I didn’t have a market revelation.

It’s much more radical than that.

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

Trading Failure

If you have read my blog posts from 15 March (Bearish), 19 March (Short Dow Futures), 19 March (Short Dollar Yen) and follow the market you will know that the last two trades I took (short USD Yen and short Dow Jones Futures) were both losing trades.

So let’s call a spade a spade – I failed in both of these trades.

My intention was to make money, and instead I lost money. I failed. But am I concerned? No!

Failure is a good thing.

You might wonder how I can say that, but every Failure is simply a stepping stone to success.

In my most successful trading year ever I achieved an annual return of 210.33% but my win-lose ratio was 187 losing trades verses 155 winning trades. I failed more times than I succeeded.

So why did I have such a good year, that year?

Because I cut my losers quickly and I let my gains run – as simple as that.

In these two recent losing trades, the total combined loss was less than 1% of my trading capital. I don’t need to be concerned about my small failures. You and I actually only need to be concerend about two things:

- big losing trades, and

- big winning trades (and how to hold on to the gains).

In life and in trading you fail over and over again. In fact the more you fail, the more you will win in the end. Let me show you what I mean:

Last summer our family went camping by a river with a big swimming hole and a long high rope swing. Most people swung out and dropped feet first into the river. But I was determined to do a full back flip. I failed over and over while I tried different techniques. I landed on my back, my ear (that hurt) and countless undignified big ugly splashes. But finally on the third day I mastered it. People even clapped when I did it. But it was only because I had failed again and again.

Do not be afraid of Trading Failure. It is simply a part of being a successful trader. More importantly every single losing trade is a learning opportunity.

If you want to do one thing TODAY that will radically improve your trading, look back over your last 20 losing trades and study them to see how and why you failed. Odds are that you will see a pattern or a reason you had not seen before. Imagine your profitability if you could eliminate the worst 10% of your trades!

Here are two links you should check out:

1. In my opinion the greatest trader alive today Paul Tudor Jones talks about Failure:

http://news.ycombinator.com/item?id=665705

 

2. On my Lifestyle website I have a video and a webpage on Failure:

www.LifestyleBook.com/failure

 

Yours for more successful trades, and less failures,

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

New Trading Interview

I was recently interviewed by the international trading site The Trading Elite.

The site has interviews with trading legends like Larry Williams.

I talk about how I got started trading, my trading philosophy, some of my best trades etc.

Please add a comment at the very bottom of the video page.  

Here is the video interview, I am sure you will enjoy it:

 http://www.thetradingelite.com/?p=53

Yours for successful trading,

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

Short Dollar Yen on Intervention

Let me say up-front that I have a terrible track record of trying to trade Bank of Japan Interventions. On balance I have lost money!

I only know one person who is good at it and that is my broker www.GrahamParlane.com who has been in the industry for 25 years.

This time however I have been able to take some money out of the market (so far).

It is an extremely difficult exercise in timing, and trying to outguess the BOJ. How far will they push it? How fast will they push it? What level/band will they feel comfortable at? What time of day will they intervene? How much money are they willing to spend?

I got lucky on Thursday and took a short position early in the day and took my profit before the close of trade. A few hours later intervention started, and USD JPY rose over 3 Yen in just a few hours. I wanted to sell again but i was patient. I waited for a number of hours until the price got in to the high 81s.

I knew that before the Japan quake the recent high in USD JPY was 83.27. I felt sure that with USD JPY up over three Yen already, it was very unlikely the BOJ would push it above and beyond the pre-quake high of 83.27 so I was able to take a position with only a 1.53 Yen stop loss.

I got short at 81.78 which fortunately was just 19 points (pips) short of the high of 81.97.

The market closed the week at 80.56.

It is my expectation that the rate will drift (or fall) lower to at least a new low below the 76.29 low set on March 17.

Here is the daily chart, showing an amazing 5.67 Yen range in just TWO days!

[Click the chart to enlarge.]

Your for successful trading,

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

Short Dow Futures

As I said in my post four days ago, I was ready to go short the Dow. I am now short.

I waited for the Zweig 4% model to signal. NB I use a modified daily version of Zweig’s model and it triggered -4.69% on March 16th.

Again I was patient and I waited for the Dow to rally on Thursday because it was so far below its Moving Averages. Then on Friday when the G7 intervened to weaken the yen, the Dow spiked up again. I sold it during the spike up and I am now nicely placed for a medium to long term short position. I expect to hold the position for a number of days at least and most likely a number of weeks. I will only exit the position if I get stopped out or Zweig’s model signals the other way i.e. +4%.

All but one of my indicators is bearish. The final indicator is very nearly bearish.

Your for successful trading,

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

Bearish and Ready to Trade

My blog has been very quiet this year while I have waited patiently for a good opportunity.

That opportunity seems about to be presented.

I am bearish on the Dow for three reasons, and none of them is the situation in Japan.

Reason 1 – Dow Technical

The Dow Futures contract is now at a new 20 day low having been bought up this year in a huge move. In fact the whole up move from March 2009 has been one of the fastest and strongest in history. Even people who are bullish admit there is room for a pullback.

A new 20 day low is one of my favourite sell signals.

Reason 2 – Martin Zweig Model

I update and follow Zweig’s brilliant 4% Model. NB This model has not yet signalled but it is very close. I expect it to trigger a sell signal within days. Once it triggers I will go short.

If I had not waited for this signal I would have taken the 20 day low that signalled on 9 March. Note that price has not gone above the high of the trigger candle (9 March).

[Click on the chart to enlarge it.]

Reason 3 – Elliot Wave

I am not an Elliot Wave theorist but I greatly admire Bob Prechter and Robert Folsom.

Today they released a special extremely bearish post. This is VERY unusual for them to come right out with a strongly one-sided recommendation. You can read it in full at:

http://www.elliottwave.com/single-issues/ff/FFS99-Bearish-You-Bet-You-Will-Be-Too-Once-You-See-What-We-See.aspx?code=CG

How will I trade it?

I will most likely sell the June mini-Dow Futures contract.

In my 20 years of trading the markets I have found that the best trades are the ones that go strongly in the direction you expect, and don’t look back i.e. when going short the price does not go above the top of the break candle (i.e. the candle that made the break). This is a very low risk way to trade because you can use a tight stop. In addition I may also use the weekly pivot as a protective stop.

Happy trading.

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net

Trading Edge – You HAVE to Have One

When you start trading your precious capital you must have an edge in the market. To explain what I mean, think about a casino. The Casino has an edge in every game in the casino. For every bet placed there is a probability that the Casino will win. That means that the Casino is happy to lose some bets because it knows over a period of time it will win.

You might think that in any trade you take in the financial markets there is a 50% chance of winning or losing. This is NOT the case. In fact if you believe that you should not trade at all because after you have paid commissions etc you must LOSE over time.

A lot of new traders make the mistake of starting to trade without an edge i.e. without working out a way to put the probability in their favour. Any Trading System is a system that has been designed to have a probability of profitability.

Critical Principle Do not start risking your capital until you have developed or adopted a Trading System that has an edge in the market.

How do you find an Edge?

A Technical System is one based on market price information only. This is different to a Fundamental System which is based on the understanding of the actual underlying economic and instrument-specific information that moves the market you are studying.

You can have an edge in both types of system. However it is my belief that unless you have significant in depth knowledge of macro-economics or of a specific commodity (for example you know almost all there is to know about how wheat is grown, cultivated, marketed, and consumed) then you are far better off trying to develop a Technical System that has an edge.

The essential assumption of a Technical System is that there are recurring patterns in financial markets. In its simplest form therefore a Technical System with an edge is one that:

1. Has identified a pattern in a specific market.

2. Has identified a way to profit from this pattern reoccurring.

3. Has been backtested (tested over historic data) and shown to be profitable.

4. Has been forward tested (tested in a live situation) over current data and shown to be profitable.

For more details see: www.tradingbook.org/technical-analysis

Whilst it is possible to purchase systems that purport to have an edge in the market, the vast majority for sale DO NOT actually have an edge in the market. Think about it. If you developed a Technical System that was consistently profitable would you sell it? No, you would trade it. There are some exceptions, but very few.

For that reason my strong recommendation is that YOU research, find and develop your own Technical System with an edge.

Yes it is a lot of work. But remember trading for a living is a business. There are no free lunches.

If you insist on trading your precious capital without finding a system with an edge, I can make life much easier for you. Give all of your trading capital to charity. The result will be the same (your money will be gone) but at least you will have a warm feeling, and a tax deduction!

Yours for Trading Success

Oli Hille

Author

“Creating the Perfect Trade”

www.TradingBook.net