Oct 272011

I just realized it’s been 3 weeks since I updated my blog.  I didn’t plan on taking some time off but the last post was an important one as it was my update to a series that I had written a year before.  After that update, I didn’t really have much to write about.  I feel like I’ve said everything I’ve had to say.

I’ve been spending less time trading lately.  I’ve been really busy with family, some home improvement projects I had neglected, and playing music.  I was getting a bit burned out on trading and so cutting back a little has been very beneficial to me.

My latest work has been on reducing my stop size so that I can increase my trade size.  I’ve been taking choice setups with real money and practicing the rest on sim.  Results have been encouraging so far.

The market action the past few weeks has been really crazy.  I’ve found that if I am patient and wait for a few choice setups then I do quite well, especially during the Globex session. With the volatility, getting 4 pts is less difficult.

The Euro is currently at a 62% retracement from its last major high at 1.45.  This is a key area.  It’s a go/no-go for the bears.  If the Euro breaks above then this is no longer a retracement in a bear move and we can anticipate a retest of the high.  ES has been following the Euro so this is a critical moment for ES as well.

There is a question about whether the greek debt haircut will trigger CDS activities. I’ve read conflicting opinions. The bulls think because a deal was reached yday that the problem is over but IMHO I don’t think it is. A 50% haircut is a major increase from 21% agreed on last summer. And no one knows if 50% is enough. And if it triggers credit default swap activities no one knows what will happen. Not out of the woods yet. Doesn’t mean the market will go down right away though..

Good luck with your trading.


  5 Responses to “Euro at key retracement level”

  1. Just to update this post, the Fib was taken out. Now Euro is approaching the composite VPOC. We’ll see if it’s rejected or accepted.

  2. Michael, I think CDS activities will not be triggered because the bond restructuring is voluntary. This has been decided by the ISDA on Oct. 27th.



  3. Hi Michael,

    Here is a quote –

    “My latest work has been on reducing my stop size so that I can increase my trade size.”

    How has that been working out? Isn’t placing the stop a function of picking a good place on the chart? I have found the speed or size of a chart also have a lot to do with stop size.

    I enjoy reading your blog.


  4. Hi Mahlon,

    Stop size is determined mostly by entry but also by the structure. I always like my stop to be above some meaningful price level. So to reduce risk and stop size, I try to enter as close as possible. This is super important.

    Imagine the optimal entry is 50.00 but I enter at 49.00 and the next level is 47.00 and the stop needs to be above 52. With optimal entry I can take first scale at 47 and that’s a 3:2 reward risk. However if I enter at 49.00 then my R:R is 2:3. That makes a huge difference.

    To be honest my results have not been up to par lately. I’ve been changing a few things in my trading and it’s taking me time to adjust to them. Last month’s average was about 2/3 of the prior months and this months average is so far slightly lower. However, I’m reducing risk and often trading 1 contract (which explains part of the decrease). All this is in an effort to be able to comfortably increase size.

    Thanks for the compliments. I’ve had a bit of writer’s block lately and have been much more active on Twitter.

 Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>