I day trade the Eur/USD futures (E6). If it looks like a trend day is forming, I will look to get in on a retracement. Because my costs for trading are so low (about 1/20th of a tick (pip) plus the spread if I chose to pay it), I can trade frequently if I want to. During directional moves I can exit when it gets over extended and enter again at a better price. In this way I can capture more than 100% of the move even if I miss the beginning and end of it. If the price is moving up and down in a range, I get in when it is at an extreme and exit a little over half way through the range. Then I wait for another extreme and do it again. I can also enter if the price gets a couple of tics out of line with the cash. These trades are for one to three tics. This is tricky because sometimes the futures get out of line with the cash because someone who is about to put on a large cash trade will load up on futures first (or the forex desk at a bank will front run a customerâs cash trade in the futures). Knowing the difference is more of an art than a science and comes with experience from watching the futures order book (depth of market) and the cash. My trades are discretionary and not from a system. I use chart patterns, support and resistance, moving averages, Bollinger bands, and order flow. I have studied a large variety of quantitative indicators but I have internalized most of it and don't display the indicators on the screen. Remember that most technical indicators are derived from price, so it is really all there on your chart to begin with. I still have the MACD w/histogram at the bottom of my EUR/USD charts, if for know other reason than I feel like my charts are naked if they don't have at least one squiggly indicator at the bottom. I look at charts of the market I trade in several different timeframes: 5 min, 15 min, 60 min, and daily. I use 7, 10, & 20 period EMAs and put the 200 day average on the daily. I also look at 15 min charts of JPY and GBP as well as the e-mini and the 10 year US treasuries. Other markets that I follow with a quote board (all futures except gold) are the 30 yr bonds (US), 5 & 2yr notes, Bund & Shatz, Dow, NASDAQ, Dax, Eurostoxxs, oil (WTI), gold, Footsie, EUR/JPY, EUR/GBP, & CHF. I go into major economic releases flat and trade when the number comes out. During really important releases I trade the 10yr treasuries at the initial release because of lack of liquidity in the EUR/USD futures. Stops are generally 1 to 10 tics, and are mental (not in the order book).
Re: baruch -------------------------------------------------------------------------------- Quote from SethArb: do you or some of the other posters here look ar cross rates ever ? i.e. EURO / CABLE -------------------------------------------------------------------------------- Baruch, Cross rates are the exchange rate between 2 currencies where neither is the USD. For example, if you are speaking of the EUR/JPY you would say the 'Euro Japanese Yen cross rate is....' Cross rates can effect the majors i.e. if there is a lot of buying of the Yen vs. the Eur it can weaken the Eur vs. the USD.
Hi TRADERguy, Thank you very much. How do you use: 1. Bollinger bands? 2. Order flow? 3. Your charts of bonds, gold and the indexes? You use a very small stop. Why?
Got a new idea for my system: If ma is flat - use filter If ma is steep - don't use filter Reason: When ma it flat, it's a tranding range. When ma is steep, it's a trending market. Will check it out.
Bollinger bands (I use the standard 20 period, 2 standard deviations) can help determine if the pair is overbought or oversold especially during range trade. If the price moves outside the bands you can be pretty sure that it will move back in since 95% of the price action is going to be inside the bands. They can also help identify trend days--if the price moves to a band and continues trading near the band (the band will be moving in the direction of the price movement) it is a good clue as to the strength of the movement and signals that the directional movement will continue. Also if you have a lower low (in price) but the 2nd low is farther from the Bollinger band than the first, this signals that the move is running out of steam (or has run out). Vice versa for higher highs. Order flow is tricky to teach and best leaned from watching the book. After watching for a long time you start to get a feel for the flow and it tells you things. You can see when moves run out of steam and is going to reverse (I'm talking short term, like within a 5 min bar). You can also get a feeling for whether there is going to be follow through or not. Was it 1 stop or market order that swept the price and is going to come back, or is there a lot of interest i.e. size on the bid or offer wanting to join the price move along with lots of orders paying the spread to get in right now. Gold tends to follow and move inversely to the USD these days but at other times it can lead during fears of inflation and for safe haven flows (a leading indicator of fear). Government debt and stock index futures can show correlations to currencies at different times for different reasons. Are TY prices being driven down because the market is shifting its consensus to an earlier date for a US interest rate rise by the fed? If so this is going to help the USD. Is it starting to look like it's going to be a bloodbath for US equities when the US stock markets open? IF so this will probably be bad for the USD because the deficit has to be offset by investment flows into the US (unless of course the stocks are heading down out of fear of the Fed increasing rates). My stops are small because I day trade. If I am only looking for a few tics I better not risk a lot of tics. If I am looking for a larger move and I have picked a good spot for entry, either I am wrong if it goes 10 tics against me or I have picked a bad spot to get in. If I get out and still feel that I am right on direction I can always get in at a better price. Of course there are the times that I get stopped out at the exact best price that I could have entered at, but that is life in the markets and just something that you have to deal with. If this game was easy, everybody would be doing it.
Thank you very much, TraderGUY. I wish I could see the order book. How do you trade the news? You said that you only traded AFTER the news, but then you must have lost a big part of the move? And what about whipsaws?
Most futures platforms have a Depth of Market (sometimes abbreviated DOM) feature. Double check to see if yours does. If not maybe you could open a small account somewhere else that does? When I first started I opened an account for $2,000 with an introducing broker and got depth of market through the old J-Trader platform. Their were no monthly charges for anything. One thing that my firm does not put up with is having a position on during an important (as in able to move the market) economic release; the risk is too great. However, we do get the news (Bloomberg & Reuters) fast and our connection speed to the exchanges is faster than most. So if it is a big number I trade the 10 year treasuries on the release if the number(s) come out far enough out of range to make markets move. When the number comes out I know exactly what I'm going to do (figured out before hand for all possibilities) and, if warranted, I send off an order immediately. After that initial trade there is usually enough liquidity to play in the currencies and I switch back to the EUR/USD.
I work for a prop firm that is an exchange member and does enough volume to get the discount: $.10 per side to CME and my firm charges about double that in commission (it will be less as I trade more).