Living la vida Trader

The daily chart trianle breakout on the USD/CAD reached the “prediction region” which is the shaded area on the chart.  The area is resistance as any prediction in the context of buy should be.

Since I posted the Fibonacci based moving average charts and video, I have received a ton of emails and it seems that many of you have been doing some testing and homework of your own and now can see the support and resistance these levels provide.  Awesome!  Let’s move forward from there.  The chart that I received the most questions about was by far the daily chart of the dollar-canada.  The 610 Fibonacci-based simple moving average acted as resistance.  The moving average alone is not a reason for me to “do” anything.  Like any other support or resistance level I watch, it’s a decision level.  I love the fact that the 610 has multiple confirmation with the 0.886 Fibo retracement helping out.  I think too many traders think that there is a magical top or bottom in a market.  Keep in mind that I watched this level with the same anticipation I had with the 0.786 and the 1.0500, 1.0600, and even the 1.700 psychological levels.  I know these are all decision levels and I simply wait to see which one is confirmed by price.

- Raghee

The subject of my next book has got be thinking more and more about the “trader lifestyle” I have been designing since I was 17.  At first it was just a dream, then a goal, but one I was willing to pay the price to have.

Then I got it.  It was not what I thought it would be.  You see, I thought I was trading for THE BIG BUCKS — when you are in your early 20s that seems to be the driving force of success.  Then I learned it wasn’t so much money but freedom I was after.

Back on the 25th of July I posed a question:  “What do you want from your trading?” and then followed that up with what I hope was a challenge, “Spreading myseld too thin? and Designing your ideal trading life!”

We all need to make a living.  I am not going to insult your intelligence and say that money is irrelevant.  But money itself is not the ends, it’s the means.  I think we spend too little time thinking about what the ends ideally could be.

Inspiration, Despiration, Persperation.

I am reminded as I type this that this morning my husband it at a judo tournament.  He’s not competing today.  He’s there with his “kids”.  He is a Sensei at a judo club in Ft. Lauderdale; he volunteers his time.  Each Tuesday, Thursday, and Saturday he coaches kids who probably would otherwise be roaming the streets, getting into trouble.  These are all “at risk” kids living in neighborhoods in Ft. Lauderdale that most people don’t even want to drive through.  He loves teaching these kids.  In many ways, it’s the fulfillment of a dream he’s had:  Help kids that other people have given up on.  A few of the kids will be in the Olympics some day soon.  I know it.  They are already competitive on an international and national level.

I think about this because that’s what the ends are.  It’s time well spent.

I think that often with all that our lives entail nowadays, we are really asleep through most of it.  Have you ever seen that movie “Joe Versus the Volcano”?  Yes, it’s a quirky movie, and actually a favorite of mine.  Meg Ryan’s character (one of the three she played), Patricia Graynamore, had a great couple of lines and summed the movie up:

“My father says that almost the whole world is asleep. Everybody you know. Everybody you see. Everybody you talk to. He says that only a few people are awake and they live in a state of constant total amazement.”

I am conscious of what what I do:  I am not no confusing myself with a hedge fund, managed account trader (tried it and hated it!), pit trader, or anything else like that.  I don’t have a monitor in my bedroom or bathroom (not anymore!) and I ditched the fancy trading office for a far less glamorous, much more comfortable home office (love the commute!).  I know what I do works for me and I am not tempted by other strategies although there are traders and authors that I still enjoy listening to.  I don’t need to put down someone else strategy or analysis to make myself feel better about my own.  And I’m never going to teach something I don’t actually do.

So back to my next book.  I’m working with the steps I have always followed and gave them an acronym.

D.E.C.I.D.E.

(working title for the section in the book:  “Mom was Right:  You Have to Do Your Homework Before You Get to Play.”

D is for Direction  (What is the market direction?)

E is for Entry  (What are your entry options?)

C is for Chart  (Chart the support and resistance)

I is for Investigate  (Investigate the market environment.  Research the hot zones, market correlations, confirmation indicators.)

Dis for Deal  (Deal with price action.  Let price dictate your trade, in forex quotes are called “dealing rates”.)

E is for Exit  (Plan your exits.)

I am also going to discuss a lot about trading correlated markets.  If you are a forex traders and are not looking at the “market pulse” charts of the dollar, Dow, crude, and gold you are not only missing out on how and when the Dollar Index is going to move, but you’re missing out on related trades in the futures and stock market.  This last weekend I was in San Francisco.  I was doing a presentation at the Money Show and doing a lot of shopping with my sister who came along for the trip.  After my first talk, an attendee asked a sincere question:  “How well have you done with forex this year?”  I said basically, “pretty good”.  Summer stunk for daily chart trades which are my preference for summer months, but I’m well ahead on the year.  And then I added “Now ask me how my TRADING has been going this year.”  He seemed a little confused until I said, “I trade forex, but I am not a just a forex trader.  Trade all markets.  Forex gives you a terrific vantage point to do this.”

I hope he got my point.

Here are a few things to remember.

(because common sense is not so common)

Think about what you want from your trading.  Let it be what propels you through the good and bad days.  Let it be what keeps you on the straight and narrow when you are tempted to try some new piece of software, magical indicator, or follow someone else’s buy and sell signals without caring to learn the how and whys.

No one cares more about your money than you do.  Know why you are buying and selling.  Know when you trade is no longer valid.

Understand your investments.  The people on the TV and in the magazines don’t necessarily know more than you do, they just practice sounding like they do.

Back to Joe Versus the Volcano:  After being told he had a brain cloud…”You have some time left, Mr. Banks. You have some life left. My advice to you is: live it well.” Well Joe Banks didn’t have a brain cloud but he finally designed his life.

- Raghee

For those of you who read my post “The Downside of the Trading Life”, I have been doing Beach Body’s P90X which I have to say is the most intense workout I have ever done. And I have done everything from boot camp workouts to kickboxing and boxing to jiu jitsu to judo and this just blew them all away.

I am also trying the new 10 Minute Trainer which I am doing before trading each morning.  It’s intense but since it’s a shorter time commitment I find that I am following through with more consistency.  It’s better than a cup of coffee - better than a Red Bull for just waking up your brain! Plus I can be done in 10-20 minutes which I love.

I have to say that I am a little more motivated to get in shape as well because Wiley is going to put me on the cover of my new book. Sure it’s vanity…but I want to look good.

I joined Team Beach Body so I could log my workouts in and have a group that I work out with each morning…it’s a cool interface where you log into something they call WOWY and it’s a community which I think is great support and motivation.

If you are a Team Beach Body member or want to work out email me at ragheehorner (at) yahoo.com or leave a comment and let me know, I’ll add you to the my “buddies” list.  A few of my buddies and I chat before we train either by phone or Skype about the markets and then go workout so it’s been fun for me.  Since I’ve always up for a chat about the markets and get a quick, good workout in the morning this has been a fantastic way to do it and I love that I am accountable to my trading/workout buddies.  I train twice a day sometimes so it can be either a morning or evening workout, sometime both.  Like I said, I want to look GOOD for the next book cover!

As for the workouts themselves.  They are world class.  I have worked out with bodybuilding champs, UFC title holders, Golden Gloves champs, my husband…who is just an eating and training machine, and I am continually impressed with the results I am getting from popping in a DVD.  Go figure.

So if you’re serious about getting in shape and you’re up for a some market chat, let me know.   I look forward to welcoming you into the group.

- Raghee

- Raghee

I received a question today and I wanted to address because it’s yet another great way to use Fibonacci numbers.

I have been using the Fibonacci-based trio of moving averages, my students call it Raghee’s Cycle Indicator aka the “Wave”, but you can call it a bologna sandwich, doesn’t matter, it’s still just the three 34 period exponential moving averages: one on the high, one on the low, and one on the close.

Why “34″? It’s a Fibonacci number ofcourse.

So here’s the question I received:  “Raghee maam, I have been using your Wave and wonder if you use it as a trailing stop in a trending markets.  Thank you.”

Very good question and very polite email.  I like those.  Folks, politeness counts.  Of the 50-150 emails I get a day, you better believe I answer nice people first.  Thank you for your question Andres, your mother raised you right.

Consider that these three lines of Raghee’s Cycle Indicator are simply dynamic support and resistance.  I say dynamic because opposed to static or horizontal levels, these levels adjust.  Here’s the key though:  The market must be moving up at 12 to 2 o’clock or down at 4 to 6 o’clock.  In other words it must be a trending market!  So the answer is yes, I do use the Wave as a trailing stop after I have transitioned from my risk based and break even stops.  Trailing stops are the third type of stop I use and the last transition in my trade management plan.

Here are a few examples of the RCI (Raghee’s Cycle Indicator aka the Wave).

Beyond the psychologically relevant 200 SMA, all my moving averages are based on Fibonacci numbers.  Fibonacci is a MATHEMATICAL LAW OF NATURE.

1    2    3    5    8    13    21    34 55    89    144    233 377    610 987    1597    2584    4181    6765

(I have tested this entire series over hundreds of charts and multiple time frames…yeah even the 6765!  The three bold numbers are the most successful as dynamic support and resistance.)

For those of you who are wondering “Can I use these settings on any time frame?” the answer is YES.  I do use the 34 EMA H/L/C, 144, 233, and even the 610 on all my time frames.

One last thing about support and resistance as your stop loss.  Make sure you do not put your order AT the support or resistance but instead JUST BEYOND the level.  You want to give price a chance to reverse before hitting your stop.

- Raghee

I think of charts as a psychological “EKG”; both mapping of behavior and condition. An electrocardiogram (commonly referred to as EKG), is a measurement of the electrical activity of the heart and a price chart is a measurement of fear and greed (buyers and sellers) of the market.

The U.S. Dollar bulls had a great Thursday and Friday but this is a new week and the follow through from the huge Friday rally has not found buyers willing to surge through the 76.61 high.  Not that you can blame them.  The current thinking is that with the global picture looking a little dimmer, the dollar is shining in contrast.

There are a whole host of surrounding stories that are giving pause to the dollar bulls.  Not the least of which is the persistent worries about the banks and brokers.  Enter the XLF.

The XLF is the Financial Select Sector SPDR…translation?  Look at the list below.

(Source:  CNBC.com)

The stock and forex trader in me watches the chart of the XLF closely.  The XLF is the link to the Dow recovery and a currently is a drag to dollar movement.  The correlation between the dollar and XLF is not a tight one as you can see in the chart below.

But take a look a the XLF correlation with the Dow.  The SEC’s restrictions of shorting nineteen financial stocks certainly helped the XLF and now that restriction has expired.

If you are a forex trader who has been following anything I have written you know I emphasize being a TRADER first and watching ALL markets because no market trades in a bubble.  Finding and measuring the correlating markets will allow you to make better trades and move with fluidity from market to market:  One mind, many markets!

 - Raghee

I had a fun-filled four days in San Francisco at the Money Show.  You know I am always a little hesitant to present at Money Shows mainly because the overall feel of that show is typically stocks and investing…but I now definitely stand corrected!

I don’t know if it’s a California thing or simply the fact that traders and investors are much more open to alternate markets (markets other than equities).  The investors and traders are much more knowledgeable about currencies and the commodities markets than ever.  I attribute this what I am seeing on the internet, in blogs, in websites that don’t specialize but rather discuss all markets like Trading Markets and CNBC.  Consider that  there is a lot of consistent and quality discussion and coverage of what I call the “market pulse” on CNBC and this is a good thing.  The correlation of the impact from the dollar, Dow, crude, and gold has consistently been discussed on my favorite trading show, Fast Money.

I have to admit, it was a blast to present the day after the HUGE move in the U.S. Dollar.  Even more fun when you consider that the move in the greenback really opens the door for the run higher on Friday.  Linking all those pieces into one larger picture was sheet bliss.

But the real fact of the move was that Friday was follow through from the move on the Thursday.  Take a look:

This is Thursday the 7th and it’s clear see that it was Thursday that really set the stage for move — the follow through — we saw Friday.  Two major levels were in play:  First, the 74.31 ceiling was broken and second, I think it was just as important that the prior resistance at 74.00 was tested and rallied above.

Here’s Friday move and now notice the Thursday ramp up.

Has the dollar moved too far, too fast?  It’s arguable that the rally needs a small window of profit taking to take the price down to a level that will attract the next wave of buyers.  I think it this can happen while maintaining support at 76.00 this would be a very bullish sign for the greenback.

- Raghee

I love NEW projects…so much so that I often put waaaay too much on my plate.

Whether it’s my third book which I am SO EXCITED ABOUT that I can hardly stand it (more in that in a moment) or my trading three markets (forex, futures, stock, and options…ok make that FOUR markets), running my software business, or updating any one of my websites, writing for sites like FXStreet, Trading Markets…WHAT AM I THINKING?

Every now and then it dawns on me that at some point it’s going to yield diminishing returns and I have to consider pulling back a little because really in the end the only thing that matters is my trading and investing.

My students keep me focused because THEIR focus is the markets and that’s good for me.  It keeps me walking the talk.

My third book is going to be a bit of a departure from my first two.  It reflects where I am heading now going into my second decade of trading.  It’s going to be focused on designing the trader life and how to do what I do, balancing trading multiple markets, my love all of things “internet”, and he introduction of D.E.C.I.D.E. - which is in essence how to analyze any market, set up your entry, manage the trade, keep an eye out for investments and — here’s the clincher — do it in anywhere from 30 minutes to three hours a day.  I know it’s possible because that’s what I’ve done for almost two decades.

Realize that when I first starting trading the markets there wasn’t an internet and I updated my charts with a pen, calculator, and ruler.  Back then I would pour over my charts at a snail’s pace looking for just three patterns!  And only in the futures stock and futures market!  And ONLY on end of day charts.  I managed to kill about 90 minutes a day doing something that takes me about eight minutes now.

I think we try and keep ourselves busy at the expense of really being productive.  Good trading (and investing) just doesn’t take that long if you follow a plan, know what tools to use, and ignore what you simply don’t need.  That’s what D.E.C.I.D.E. teaches you.

In the next few weeks I’m consider taking on some apprentices as I write the book.  I’m not sure how it’s going to work but it will be specifically for people looking to design a trading life.  I can tell you what that has meant to me over the years:  making time to trade, write, teach, build my websites, and work out.  Working out is my “new” old thing, and it’s about time!  I used to train every day,  That was before my first book came out and now well, I have plenty of excuses and plates to spin and my training took a back seat.  Heck it’s actually in the trunk!  I think I’ll have to start a work out club/trading group to keep me focused!

So what does YOUR IDEAL TRADING LIFE look like?  Can you picture it?  No one WANTS to spend all day and night in front of their computer monitors.  It’s just a means (trading) to an end we want (money).  And in the “employee” mindset most of us we brainwashed in we think time = results.  I can tell you that being a trader means living in the “results economy”.  Time spent means nothing!

Over the next few months, as I get the book written we will talk more about this.  In the meanwhile, don’t be shy, tell me how I can help you achieve YOUR IDEAL TRADING LIFE.

- Raghee

Usually I record longer “seminar-style” videos as I think that’s the best way to show a strategy:  tell you what I want to tell you, show you, and then tell you again.   And it takes time…so most of the video can run 30-50 minutes. It’s a feast for the mind.

Lately I want to also offer some appetizers.  These are my *crash course* clips.

These will run about 10-15 minutes.  So let’s check out the first one and it’s a follow up to all this Dow discussion I’ve has here lately, specifically relating to Dow 1-2-3 patterns.  There are ways to better set up and confirm this reversal set up and that’s what I have outlined in detail in this video.

Let know what you think of the crash course videos!  I have another three coming this week before I head out to San Francisco.

- Raghee