Forex Trading Thoughts and....

In earlier posts I've shown a strategy of using the RSI(14) as a trigger to enter trades when it reaches extremes of 30/70. What I didn't realize until reading an old article by J. Welles Wilder, the creator of the RSI indicator, was that it was developed by him as a divergence indication of price and strength of RSI signal. I have been trading this signal with 5-min charts on EUR/JPY and GBP/JPY and it has been incredible. The idea is that you have to combine the divergent RSI with another solid support or resistance level such as monthly/weekly/daily high/low, daily pivot, S/R pivots, round number or fib level. Here are a couple of examples:

First off, I've abandned the stochastics I added to the charts just a month ago. I found nothing of value in their addition. The next thing is I've been looking at a new methodology showed to me by the hedge fund trader I blogged about just a few posts ago. It's called the Market Matrix and it's an offshoot of the Delta Phenomenon developed by Jim Sloman and J. Welles Wilder in the early '80s. The Market Matrix has been developed by Steve Copan. It involves cycles within the lunar month and lunar year. It also involves counting the number of points within the lunar months and then predicting where the next turn of the cycle will be. I don't understand it completely and until I do it will stay as a system in development in my arsenal.

Tonight we get to see how a losing trade progressed. I saw a valid signal, though not as high as I would like but price had made a higher high and still had just barely touched the RSI(14) 70 level. This is what I term divergence and usually a pretty solid signal. Price moved against me to -12 at one point. No big deal. Price has now moved back in my favor to about +4: Price has now moved back into negative territory and I'm beginning to feel it may be a failed signal: I've annotated where I exited the trade as price broke back above the previous high, but not as high as my stop loss. I thought I should cut my losses at this point. Well, I was wrong as price turned around and came back down into profits again where it is as I write this post. I made a couple of errors in this trade that brought it from a winner to a loser. One is I was unprepared to trade AUD/USD. I didn't know where the pivots or nearby high/lows. The other is I didn't stay with my stop loss. Had I sta

This past weekend was pretty cool. Friday night I went to a birthday party across town and met a professional hedge fund trader based out of Beverly Hills, CA. Our conversation lasted several hours and was eye opening and validating at the same time. The validation came in the revelations that we both have similar styles of trading and suffer many of the same trading maladies from time to time like impatience and greed. I also was given a book to read from another trader friend called 'Overcoming the 7 Deadly Trading Sins' by Ruth Barrons Roosevelt. It is an excellent read if you are having any kind of psychological troubles with trade management or money management. It reminded me of a few things I should be focusing on. Anyway, the hedge fund trader gave me a heads up on adding a couple of stochastic indicators to my charts to compliment the use of the RSI(14). As we've seen, the RSI(14) can find itself in no mans land(around the 50 level) where it's anyone's gues

That's right, we're relocating to Maui. Trading has been going so well that it's time to take it to the next level. We've put the house on the market and have offers as of this date. Hopefully, we'll be relocated Maui by April 15th or so. It's going to be a great experience trading full time from Maui. My hours of trading will be from approximately 7:00pm to 3:30am. Sleep until 11:00am. Exercise, meditate, surf, swim. Review the days financial and economic news and get ready to trade. Finally....the end of working two jobs. Hawaii is about the most stress free place to trade from that I can imagine. I'll be purchasing some additional equipment to bring my office up to snuff. Two 24" monitors, a small flat screen TV for CNBC financials and a new chair.

I know it's been a while since I've posted but I lost interest in the blog as no one comments or has even found it out there. Oh well. I've been working hard at my trading and it's been going very well. This trade is one I entered tonight at 10:45pm PST. The RSI(14) was at an extreme overbought level and coming down. Price was showing no signs of finding bids higher up. I entered at 156.18. Shortly thereafter price fell like a rock. The trade was closed at +54. Here's a series of screen caps showing the trade progression: