Trade Team Update

Well we certainly had heightened volatility acrossed the board today thanks to the commodities market... if today was a little frustrating with your trading, I was left feeling the same way...

Once again we saw the euro get punished for the sell-off's with gold and oil. Oil lost over 3% of its value today while gold dropped over $25... the euro simply didn't stand a chance to hold any ground against the dollar with those kinds of moves...

The dollar also got a boost with the 10-year pushing over 4.10% and the Dow making some healthy gains. Really, all market correlated variables were against the euro and working in favor of the dollar. Obviously we saw the end result with the euro dropping almost 200 pips.

Now, it's confession time... I took a loss today and I want to discuss it in the hopes of using this as a lesson for the traders, last night I was buying the euro on the dips. I made a few profitible trades, but the euro wasn't quite behaving as it should have been. I saw this, I recognized this, but I ignored what my gut was telling me and I thought I could squeeze in one more trade to snag a few quick pips... wrong.

I took a 1.5624 euro long... the euro went up to the 1.5640 level and I thought about taking profits as it inched over 1.5640, but then I got a little greedy and thought I could hold for a few more pips. Price started to fail. I took a 1.5644 euro short actually but didn't close my long, nor did I put a +1 on the trade. This was pure stupidity on my part.

The end result? I had to close the 1.5624 long for a loss at 1.5577. I took a euro short 1.5577 to cover my loss, which I did on the way down this morning but there was no need for me to even be in that situation in the first place. Pure and simple, I broke my trading rules, I went against my gut, and I went against what price action was clearly telling me.

I'm not beating myself up over it because I covered my loss and still ended the day with good profits. But, what does make me mad is that I broke my rules and it cost me. Not only did I break my rules, I went directly against what the market was telling me. I ignored price action, I ignored what oil and gold were doing at that time, and tried to fight against the market. Not very smart of me was it?

As a trade I have exactly two objects... and these are my own personal objectives...

1. I want to be right.
2. I want to be on the right side of the market.

Anyway, I wanted to communicate this to you for a few reasons... don't do what I did by breaking the rules. When I break my rules, it costs me. If you don't have risk and money management and trading rules, establish them ASAP. The other lesson is to not fight against what the market is showing you... if price action and the market correlated variables are all in agreement, don't fight the market because you will lose almost every time.

Tomorrow:

We have another mega fundamental day tomorrow... my forecasts are as follows:

German Retail Sales: EUR-
Eurozone CPI: EUR+
Core PCE: USD+
Personal Spending: USD-
Chicago PMI: USD+
Michigan Sentiment: USD-

The flavor of the week is still commodities... the fundamentals will likely take a backseat to commodities tomorrow unless of course we get a big upside or downside surprise with the data.

It's really very simple: should oil and gold continue to give up gains and get sold-off the euro will come down with it. Pretty much no-brainer stuff here...

EUR/USD:

As I've mentioned several times the past two weeks I'm still overall bearish on the euro, but this is for fundamental reasons that are yet to really begin playing out. The signs are there though and will continue to get more clear as the weeks and months roll along.

As far as trading goes, I'm sticking to the same exact plan -- buy the dips, short the rises. It's be a great plan for making great ROI, so I'm sticking with it until I see to do otherwise.

The euro went down to the 1.5490 level to take out stops as we indicated it would and now it's slightly recovering. I believe we're due for a bit of a retrace back up. I took a euro long at 1.5508 and will hold for now. I'm sure a bunch of nervous traders took some knee-jerk shorts sub 1.5500 which tells me the market will take the euro back up to knock out those stops... isn't it fun how this game works?

Key downside levels:

1.5501
1.5481
1.5462
1.5448
1.5423

Key upside level:

1.5524
1.5544
1.5558
1.5573
1.5589

I'm not expecting any mega price swings tomorrow, but no matter, I will be playing cautiously as we wrap the week up. I will not have any new open trades by the time the market closes tomorrow. I will not have any new trades that could be subject to a Sunday gap move.

Please be smart with your trades, your margin, and do not overleverage your accounts! Keep a close eye on the market correlated variables as we draw close to Tokyo's close and London's open and all during the NY session... use them as your guide.