Thursday, January 19, 2006

Traders Helping Traders Big Weekend Edition - Part One

Need help with Entries, Exits and Trade Management? Don't get left behind! This is only Part One of the two part publication that is broadcast each Sunday. Watch for Part Two! There are also two daily trade follow ups every trading day, one each from Erich and Tom, to keep you abreast of what they see happening and what they're doing in the markets.

In This Issue- Part One

1. Member Links
2. Shootin' the Breeze
3. The Markets
4. Pick of the Letter
5. Lesson du Jour
6. Score Card
7. Homework
8. The Legal Stuff

In This Issue- Part Two
1. Opening Comments
2. New Trades
3. Tom's Education Page
4. Asher's Daily Trading ranges
5. The Commercial Stuff

Please Note: The Test Drive version contains only one or two random markets, and little of the content that our Members get with their subscription. To get the full version ON TIME with both parts One and Two, please go to http://www.supportandresistance.com/subscribe.html

Shooting the Breeze!

It seems I might have underestimated the demand for the mentoring service which we announced last week! Thank you everyone for your interest in the program. I have gotten a lot of emails and I'm getting back to everyone, although I have to admit that I am a couple of days behind. If you don't hear from me by the end of the holiday weekend, please re-send your email as it might have been accidentally caught by the spam-catcher.

I had a feeling that the mentoring program would be a good idea though. How? Because this is what I would have wanted when I was starting out, that's how! There's nothing like being able to bounce questions off someone with more experience or to be able to go through some charts with them. Unfortunately I never had that luxury; however I'm glad that I'm able to make it available to you.

In spite of the large number of inquiries, I might be able to schedule a few more people into the program, so if you think this would be something you might find useful, drop me an email at [email protected] and let's discuss the options.

Enjoy this week's issue,
-Erich

Currencies Market Overview

Many of the currency markets were in limbo last week as rates contended with daily and long term resistance levels. If you take a minute to look at your weekly and monthly charts you will see that quite a few markets are at significant resistance. While some markets like the British Pound had a very aggressive Friday, most of the markets were fairly subdued and remained within their trading ranges.

There were a couple of good currency markets shaping up to trade this week. The Aussie Dollar particularly has my attention as rates are against daily and long term resistance, yet the trend is up. It will be interesting to see how the market resolves this issue over the next few days, and with a bit of luck we might even get to put a trade on.

US Dollar Index

The US Dollar Index is looking like the most promising currency market this week given the sideways channel that developed last week. The sideways channel clearly shows us the market's upper and lower limits, allowing us to plan a breakout trade to either side. In fact, Thursday's session sums up the support and resistance areas quite nicely for us.

Therefore I will bracket Thursday's range and trade the breakout to either side. Given the current direction I would much prefer to see a bearish breakout than a bullish one; however I'll let the market tell me which way it wants to go.

On the upside we seem to have a bit of resistance running from 8950 – 8955, so I'll want to make sure I enter at least a couple of ticks beyond here. You could give the market a little more room still; however the more room you give it before committing, the greater your risk amount and the greater the likelihood you end up buying the high of the day (just ask me how I know that!)

I would probably use the support at 8920, which is the reactionary low from mid-December to pull the pin on the trade. We've also got a little bit of intermediate resistance in this same region at 8930; however I think that would be a little too close for comfort. Profit target is resistance at 9097, just short of the 9100 resistance; however I'll be paying pretty close attention when/if rates get to 9000.

The downside is the same scenario, but in reverse. Here we're looking to sell the bottom of the channel, or the support at 8852. 8852 is the same as 8850, and since we want to sell below here, I'll be shorting from 8847. I will use the resistance at 8875, which has a little bit of support from this last week as well as last October, to get out of the trade.

This might prove to be a touch too tight, but since this is the direction of the trend I don't mind pressing the trade a little harder to behave. Profit target is the support at 8730, which you can see has some historical support, especially from last June. If rates continue to fall off however, this is probably not the last stop for the market and a full retracement to the 8580 – 8600 support is likely.

BUY March US Dollar Index at 8957
Exit Order: 8919
Approximate Risk Exposure: $380 per contract
Profit Target: 9097
Approximate Potential Profit: $1400 per contract
RRR: 3 1/2:1
Degree of Risk: Moderate to HIGH

OR

SELL US Dollar Index at 8847
Exit Order: 8877
Approximate Risk Exposure: $300 per contract
Profit Target: 8733
Approximate Potential Profit: $1140 per contract
RRR: 3 1/2:1
Degree of Risk: Moderate

Charts are all courtesy of Gecko's Track 'n Trade. You may request a free CD or download a free demo here.

Energies
Energies Market Overview For a detailed analysis with charts, entries, exits, stops, risk/reward ratio, potential profit for specific markets in this group, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

Financials / Indices
Financials/Indices Market Overview For a detailed analysis with charts, entries, exits, stops, risk/reward ratio, potential profit for specific markets in this group, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

Grains
Grains Market Overview For a detailed analysis with charts, entries, exits, stops, risk/reward ratio, potential profit for specific markets in this group, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

Meats
For a detailed analysis with charts, entries, exits, stops, risk/reward ratio, potential profit for specific markets in this group, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

Metals
Metals Market Overview For a detailed analysis with charts, entries, exits, stops, risk/reward ratio, potential profit for specific markets in this group, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

Softs
Softs Market Overview For a detailed analysis with charts, entries, exits, stops, risk/reward ratio, potential profit for specific markets in this group, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

Pick of the Letter

For a detailed analysis with entries, exits, stops, risk/reward ratio, potential profit for specific markets in this section, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

The Score Card

The purpose of this section is to give you a feel for which markets might be worth trading and which you might pass on given your own set of circumstances. The figures quoted are based on the price levels outlined in the ezine, trading single contracts and do not accurately account for slippage, commissions or other trading related fees. The Score Card is updated monthly. Summary for the Month of November 2005 (none for December)

Date Position Market In Out Profit/Loss
November 1-3 Buy January Rice 750.5 770.5 400 profit
November 3-9 Buy December mini-DOW 10513 10549 180 profit
November 3 Buy December mini-S&P 1223.5 1219.5 200 loss
November 2-8 Sell December Wheat 313 ¾ 313 ¾ 0
November 3-9 Buy January OJ 120.80 120.60 270 profit
November 4 Buy December Canadian $ 8543 8517 260 loss
November 4-8 Sell December EuroFX 119.37 117.61 2200 profit
November 4-8 Sell December Gold 458.7 461.3 260 loss
November 4-11 Sell December Cotton 5147 5043 520 profit
November 7-9 Sell December Bean Oil 2267 2303 216 loss
November 7-10 Sell March Sugar 1143 1137 67 profit
November 8-9 Sell December Cocoa 1319 1343 240 loss
November 9 Buy January Soybeans 591 ¾ 586 ¾ 250 loss
November 9-15 Buy December Silver 771 775.5 225 profit
November 10-17 Buy December Mexican Peso 93.125 93.300 87 profit
November 10-11 Sell January Unleaded Gas 158.95 154.15 2016 profit
November 10 Sell January Heating Oil 179.35 180.55 504 loss
November 11-14 Buy January Soybeans 592 ¾ 594 ¾ 100 profit
November 14-16 Sell September Eurodollar 95.025 95.090 212 loss
November 14-17 Buy December US Dollar 9217 9217 0
November 15-16 Sell January Heating Oil 177.85 175.65 882 profit
November 15-22 Sell December Wheat 307 ¾ 298 ¾ 475 profit
November 17-22 Sell December Lean Hogs 6265 6100 660 profit

Daughter's Wedding in Mexico - no trades for the rest of the month!

Gross Profit per contract: $8082
Gross Loss per contract: $2142
Net profit per contract: $5940 before commissions and fees.

* NOTE!!! Trading commodities is RISKY!!!! These figures are estimates in the interests of tracking the trades. Erich may or may not have a real money position in any market covered at any given time. This Score Card does NOT apply to Tom's Trades. This is neither a solicitation to trade nor a recommendation of any strategy. Always consult your broker or advisor before attempting any trade. Commodity trading involves substantial risk of loss. See full disclaimers at the bottom of this email.

Lesson du jour -

This week we've got a fantastic lesson for you from a fellow member, Jim M. Jim wrote me regarding a formation he was seeing in the markets in regards to pullback moves and it just so happens that I was watching the same thing! I've enclosed our email conversation below for you to learn from. Thanks again, Jim! "Hi, Erich,

You have been very successful trading breakouts, but lately markets have given many false breakouts, some of which I have been caught in...." The rest of this Lesson is posted in the Members Area. To access this lesson and much more, please go to http://www.supportandresistance.com/subscribe.html

Got a question that needs answering like an itch you can't scratch? Send it along to [email protected] and I'll be happy to try and clear things up for you.

Homework

Last Week's Question:

Break down the key elements of analysis from start to finish (ie. how would you put together a trade?) What do you do first? What do you do second? And so on.

Answer:

I would hope that you took the time to do this exercise on your own, even if you didn't choose to share your results at the forum...which I would prefer however. There is a lot to be learned from the sharing of ideas, and I encourage you to post your questions and observations when you have a chance; however, I know that life is much too busy at times.

I "borrowed" this week's answer right from the forum, from Dino Dave's post, since I couldn't improve on it any...except for that comment about using forks. ;-)

How do you put your trades together?

How I analyze my trades:
Weekly chart: For overall direction of the market.
Daily chart: Draw a trend line. ( I also use a fork).
Plot the strongest of S&R lines.
RSI: Trend or test point.
Volume & OI: Strength of the trend.
Moving Average: Over the 20 day look for a buy. Under the 20 day look for a sell.
Fibonacci Retracements: How do the support and resistance lines coordinate with the Fibonacci numbers?
Support and Resistance lines: Look for the strongest from which to plan the trade. Look for the strongest to plot stops and targets. Look for others that could spoil the trade.
Gaps: Look for gaps as they are strong areas of support and resistance.
Bias: Determine a directional bias to plan the trade.
RRR: Calculate the risk-reward-ratio. 3:1 minimum.
Lay in Wait: Lay in wait for the market to get close to my lines before entering the trade.

Great trades to you all! Dave

Right on the money Dave. That was a great answer!

Futures Trading is Risky! Never trade with money you cannot afford to lose! This publication is neither a solicitation to trade nor a recommendation of any strategy. Always consult your broker or advisor before attempting any trade. Commodity trading involves substantial risk of loss. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

Traders Helping Traders Publications, including this one, are all copyright Traders Helping Traders, all rights reserved.

SupportandResistance.com - 204 Cowichan Avenue East, P.O.Box 157, Lake Cowichan, BC, V0R 2G0. Phone: 250.749.4191
Part Two of this publication with Tom's Trades to follow shortly.