Strategy Based On Chart Pattern

[fatdog1]

Sorry to hear you got fleeced as an unsecured creditor. I will proceed with caution. I guess that's another advantage for the big players like hedge funds to trade directly with the banks.

Before I post this, I want to tell anyone who strongly disagrees with me to
do the homework I did before they post a reply.

How do you propose to "proceed with caution"?

There currently are no laws to protect you the way futures traders are protected. I spoke to the attorneys at the NFA directly and they are powerless to help you the way the laws are right now.
They are deathly afraid of the senario I am laying out here.

No matter what any of these forex brokers tell you about how safe your money is, there is nothing you can do if they run into trouble and no one to help you.

If they are taking the other side of your trades and there is a
1987 type of move in the markets you will find out the hard way.
This may never happen and for your sake I hope it never does.

Even the brokers who trade directly with the interbanks are under no obligation to segrerate your funds in the event of a bankruptcy filing.

It is a loophole in the current laws that Refco's lawyers are expoilting.

Jim Rodgers, the famous futures trader who helped make George Soros a billionaire when he managed a currency fund for Soros is out 430 million and is being sued by several of his shareholders because Refco moved his money into an unregulated division called Refco Capital Markets just before they filed for bankruptcy. Rodgers is suing Refco for moving the money and that is his only hope to get his money back.

No one is safe until the do nothing Congress gives the NFA/CTFC more
control over the forex market.

This is what happened in the 1930's before FDIC insurance. At first a few banks failed and people felt sorry for the people that lost money. Then everyone got screwed.

Tell your forex broker to give you a personal guauantee in writing that they will return your trading capital to you and see what they say.
They will laugh all the way to the bank.

Again, I hope I am totally wrong and that this never happens to anyone else. I am not posting this looking for sympathy. I am posting this as a warning that nothing is being done to prevent the next Refco.

[Ali Son]

WEll, you are right there is no way to "proceed with caution" other than to not do it at all or to just not put as much money as I would like in Forex.

One minor way is to hedge risk, short of a correllated market crash, as you describe, is to spread the money around with 2-5 top brokers, so as to cut down on firm risk.

-OPTIONSWINGS

[Ali Son]

That is scary that a big shot like Jim Rogers could get hoodwinked or pickpocketed like that. : and in a fantastical way. It's not funny ha ha though.
-OS

[Ali Son]

How do these firms get into trouble anyway since it's such an easy business to make money in...just taking a part of the spread or a pseudo 2-3 pip commission. I didn't follow the Refco scandal but it sounds like they got into trouble with their own trading which brought everything down like a house of card with forex people as easy pickings?

-OS

[Ali Son]

Anyone else have any other ideas how to ameliorate this risk?

[fatdog1]

FATDOG1:

Could you elaborate on how well you find the msheiner levels line up with your own handmade S/R levels? Thanks. BTW, it's amazing how fast you come up with these multi-colored, alert equipped precision TL charts considering it's all done by hand.

BTW, how often do you update (i,e, "optimize") your charts and TL lines or hence have to do new charts?

Good morning Ali,

What kind of trader are you trying to be? Are you a scalper, trend trader, range trader, swing trader?

The msheiner levels are the day befores high, low, and middle areas in text form and with trendlines. It is useful information to see plotted on the screen for the right type of trader. It is not as useful for other types of traders.
I trade long at support and short at resistance. The area in the middle is no mans land to me. I don't have a method for trading in the middle yet.
Avery has some great stuff for doing that. I am impressed with his ability to take money out of my no mans land.
For breakouts, I use the 4 stage method to catch a trend or swing move.
I am updating charts all day long which takes a lot of time. That is why I like the DarvasBox strategy that Avery coded. I use it as an automated strategy so I can scan charts looking for areas of S/R to trade at. I run the long on one chart and the short on another by turning off the inputs for buy and sell on the short chart and short and cover on the long chart.
I only turn the strategy on to trade near support and resistance so I can cut down on the number of losers.

I have updated the EURUSD workspace to show the
breakout trade information on it.
Here is a screen shot for people who don't have TS version 3159.

Can you make money with the Euro trading in this tight little congestion area?

I mentioned that YHOO was in a trading range that could turn out to be a stage 3 trading range leading to a new stage 4 downtrend instead of a stage 1 range if it dropped below the low of the range.

That has just happened with the Euro.
The EURO has dropped below the low of the up flagpole in the last hour.
The breakout long trade was never triggered and is now dead.
The old support is now new resistance.
In terms of the 4 stages model, we now have a stage 4 downtrend, stage 3 trading range, and a new stage 4 downtrend since the breakdown line at 1.2561 was taken out. The Euro could now possibly fall to the next fresh area of support which is between 1.2460-1.2430.
At this moment, the Euro has made a new low at 1.2544 and is moving back up towards the breakdown line at 1.2561.
Now we look to short the pullback to the breakdown line per Weinstein.

.

[fatdog1]

How do these firms get into trouble anyway since it's such an easy business to make money in...just taking a part of the spread or a pseudo 2-3 pip commission. I didn't follow the Refco scandal but it sounds like they got into trouble with their own trading which brought everything down like a house of card with forex people as easy pickings?

-OS

Refco hid the customers losses for many years when they were a private company. They could have been losses going all the way back to the crash of 1987 according to one rumor. I believe it was money lost in the futures markets and not the spot forex.

They had a hedge fund that "loaned" them the money right before they filed their financial statements to cover up the losses.
None of the investment banks that helped take them public or the auditors caught it. Or if they did, they did nothing to jepordize their fees.

[fatdog1]

Here is a potential Nasdaq long on a 60 minute chart for this morning.
We are near old support and the breakout flag pattern is there.
It is sitting on top of a small breakout that has already had a pullback overnight.

[fatdog1]

I updated the EURUSD chart to show the pullback to the breakdown trade instead of the breakout long trade.
Here is the screen shot:

[fatdog1]

Same picture this morning on the Russell 60 minute chart.

Russell is pulling back to the lower bull flag breakout as of 6:15 AM Central.

If the market was open I would buy the pullback to the first bull flag breakout and have a very small risk as opposed to waiting for the breakout of the new flag to happen. I hate trading a illiquid market like the mini Russell in the pre-market where it is even more illiquid.