THE KILLING FIELDS

                                       I know How You Feel Kid

It was a perfect setup and I was ready for it; click the sell order on the algorithm sell signal, only a few pips [about 13] off the high, and then place my stop about 18 pips away – perfect! Only …

“Sorry, your trade functions have been disabled. Please contact customer service for assistance.”

After my chat with the senior partner yesterday at Hotforex, I was assured my trading privileges for the PAMM wouldn’t be disabled until we are ready to make the transition to another brokerage house. Somehow, over the night hours they got disabled.

Since this is Friday, finding anybody in management in Europe actually working is nothing but a joke. Kudos to Diego for finally getting it fixed.

They finally got around to fixing the problem, but it wasn’t until 9:29 A.M. [Chicago time], a full 60 pips off the high in EURUSD that the system allowed us to trade. For those in the PAMM, you will see a small trade on your daily statement, in the EURUSD that resulted in a few pennies of profit. I made this trade to test whether or not we in fact actually have trading privileges. You don’t really know until you actually do something.

The frustrating thing about this is that I have been following the currencies [EURUSD, AUDUSD, and EURJPY] closely since I revised the algorithm on April 8^th. The buy/sell signals have been fabulous.

I was hoping we would see a rally today in the EURUSD that would trigger a sell signal. With elections in France and Greece this weekend that will most likely hurt the Euro, there’s no way it should be rallying. It was a perfect trade and would have netted us about 3%. “Thank you HotForex for screwing up [again].”

Not that it would have made any difference, because I would have gotten the same disable message anyway, but after the NFP report gold was a mess; very wide spread with very volatile price changes. When I saw this I immediately switched over my thinking to the currency pairs. Of the 3, Euro looked the most promising to short.

Anyway, water under the bridge.

Going forward I want to talk about 2 things specifically.

While I have had a pretty good relationship with HotForex, it is a blessing in disguise to be leaving. For some time, I have not been happy about fills and slippage in gold and the games there liquidity provider plays with the quotes and the spread. It has gotten worse over the months and years. And in all honesty, they have priced themselves out of the market [spread wise] with silver and the CFD’s. They seem to pay lip service to doing something about it.

Where we are going is totally different; we will be paying a few pennies more in the bid and ask spread on gold, but it has a WYSIWYG order system that is totally anonymous to the bank via STP [straight through processing]. What this means is simple; the price on my screen is what my fill is when I hit the button to buy/sell. No slippage; no games.

Now, this is also true in the currency pairs as well; no more dealer games. So, while our “official spread” might be a few pennies higher than what we have with HotForex, we save a ton of money with no slippage on our fills. Click, BAMM!, filled – all within a microsecond.

The other thing I want to talk about is the currency pairs. The algorithm really nails the turns. I’m getting emails from many people who are ecstatic about the algorithm revision, and who [amusingly] tell me not to worry about gold being stuck in a tight range with tough trading conditions.

“Uh yea, I know what the algo can do in currencies.”

So, to make a long story short, look for more daily currency trades in either EURUSD, EURJPY, or AUDUSD. We can do more volume, with tighter spreads, and in the EURUSD specifically I’m looking for volatility to pick up as Europe implodes.

While it would have been nice [don’t dwell on it vegas, don’t dwell on it] to catch today’s move in the Euro, the good news is that there is tomorrow and the day after that, and the day …

I’m in the process of finishing the paper work for the transition, and sometime next week our new PAMM should be created. I’ll keep you all informed. If you haven’t emailed me yet with your PAMM investor account number, please do so at your leisure within the next week; I will then send you detailed instructions on how to make the switch as easy for you as possible.

Have a good weekend everyone.

-vegas

P.S.
The cycle charts I will post over the weekend.

HOUSTON WE HAVE A PROBLEM

                                       Not Quite This Serious

First some market talk.

We got long a little after the third algorithm buy signal; the first two didn’t work and the third didn’t either. So, an incremental loss today going into tomorrow’s NFP report. I kept a short leash on this trade because of where the market is and the potential for disaster any time from now until the report. I’d rather take a small insignificant loss than trade up again with larger trade size with huge stops underneath the market.

We’ll see what happens tomorrow with the NFP, as things will go utterly nuts at 7:30 A.M. From where I sit right now, gold has the very real potential of getting totally clobbered from the Central Planners tomorrow.

OK, now for the news you know is coming.

HotForex is closing down the PAMM and getting rid of all U.S. clients thanks to the CFTC.

Now, no need to rush out and take your funds out of the PAMM just yet. We have until June 5, 2012 and after talking with the partners, they are allowing me to trade while we transition to another brokerage house. So, just relax and take a deep breathe; occasionally this stuff happens in this industry.

I have spent the last 15 hours talking with a bunch of my contacts in the industry and I already have a solution in place. It will take me a few days to get the paperwork done [creating the new PAMM], but in about 10 days to 2 weeks we can make the seamless transition to the new brokerage house. We will still be able to trade all the things I trade now.

I want to assure everyone, that after talking with management at our new location, they will do everything to make us comfortable and happy. Yes, this is irritating, but in the scheme of things it isn’t that big of a deal. Of course, they have excellent customer service, strict segregation of customer funds, and are regulated. Once everything is in place for you to move your funds, I will provide to you details.

What I need you to do is this: 1) don’t close your PAMM investor account yet; I’ll let you know when to close it in the next couple of weeks, and 2) if you are a PAMM investor with me at HotForex, please email me with your PAMM investor account number and I will provide detailed instructions as to how to make the transition very easy.

Once I get everything set up [from my side] I’ll change the details of the 2 web pages to reflect the changes. This site will remain just as it is and for the purpose intended; tracking what I do with verifiable results.

So, hang in there and give a chuckle to the idiotic apparatchiks in US Government; I have already solved the problem and will make it an easy transition. If you have any questions, please email at vegasxau@ymail.com

Have a good day everyone.

-vegas

DANCING ON THE HEAD OF A PIN

                                          Sounds Like A Plan

Round up the usual suspects: low daily range [$17 but was really $14]; numerous spikes/drops in a microsecond [7 in 2 hours]; go to the high, make a new low, rally a buck or two and then zzzzzzzzzzzzz into the close with a minor bump up. Yippie-Yip.

We got long on the disappointing ADP employment report; a few minutes later on the spike above 1659 I liquidated and took the incremental gain.

I want to use today’s post to talk about my trading game plan and what I’m trying to do. I’m all about treating trading as a “probability” event.

As you know, on April 8, 2012 I revised [in a major way] my trading algorithm. This was the first major revision since 2001. Through the last decade I have made some minor changes, but this had some major changes affecting the way I trade.

Since the start of trading during that week of April 8, and including today, we have had 18 trading days; 15 of the 18 days have had lower than normal daily trading ranges, most well below normal [$20]. All 3 days that had normal daily ranges [$20 - $30] came right at the start of the April 8 week as I was implementing the algorithm.

Make no mistake, daily range is important. Over time you can’t ignore the implications it has on your results. Do not attach major importance to algorithm signals [in gold] where the daily range is between $7 - $15. In all likelihood the move isn’t over yet, so why would you want to fade it?

Most of the time [not always of course], if I get a signal [buy or sell] when the daily range is under $20, I will ignore it. Why? Because the probability of a further move in that direction is high to put in the “range” for the day. Reversal days [after a $10 range] happen less than 10% of all trading days; double reversal days less than 1%.

Outside of the first few days, we haven’t had any normal trading range days since the algorithm revision; today is the 13^th day in a row of sub-normal daily range trading activity. I don’t want to commit to higher trade size [and therefore more leverage] when and until the range is reflective to the point of allocating capital to the trade.

When I get trading signals where the range is over $20 [concurrent with the signal], I will almost always take the trade; in some cases I will even be early to the trade [anticipating a plum line slope change]. Under these circumstances I will also increase my trade volume [leverage] and look to hold the trade longer: even to the point of taking it into the next trading day if necessary.

This allows us, with lessened risk most of the time and no risk some of the time, the chance for big percentage gains.

However, when the market doesn’t put in any kind of normal range, and therefore no buy/sell signals I usually take, I will scalp lower volumes for incremental gains. Not every day is a lottery winner. This makes perfect sense when the probability for success isn’t as high as I want it.

Now, I can’t make the market move. I don’t have that magic wand that allows me to say, “Mr. Market you have to have a $20 - $30 range today.” If I did, I’d have all the money in the world within 2 years. So, while I wait for “normal” to reappear [and it surely will], I add value without adding extra risk. Remember, trading is a probability distribution, not an exact science. Every financial market has hyper, normal, and slow periods of trading. Hyper and normal I love and make up the vast majority of trading days.

I am very happy with the revised algorithm and the changes that were made; it is performing well. Even with all the spikes/drops, all we need now is more normal daily ranges [over 1.25% of nominal value], which make up over 85% of all trading days.

So, going forward, you now have a better idea of what performance should and will look like.

Have a good day everyone.

-vegas

UPDATE

Two days ago we had an official $22 range in gold; the financial medias "fat-finger" trade, where we went down $15 in one second then 20 seconds later we are $5 higher off that low. So, in all honesty I can't say there was no normal range; make it 12 out of the last 13 days gold has had sub-normal trading ranges. It only felt like sub-normal.
 

WORLD HOLIDAY

                                         Propaganda For All

That people actually celebrate “May Day” tells you an awful lot about the state of the world. What a bunch of pap.

Of course, give Europeans any excuse to take a day off and they will seize it, so overnight trading was pathetic in terms of price action; a little drift higher and a little drift lower. Basically, the same old crap only a different day.

The Central Planners now use news releases to dump on the market as it gives them cover. The sycophantic financial news media can blame the raid on some hedge fund guy in Timbuktu who hit the sell button out of panic due to the report. Perfect cover; mission accomplished.

Today, we had 2 5M candlesticks that provided 90% of the days range; the first at the ISM report released at 9:00 A.M. that took the market lower $6 in a matter of a couple minutes, and the second a $5 stop hunt around 9:30 A.M. that lasted a few seconds and put in the low of the day. In essence, we had about a 2 ½ hour trading day.

I knew coming into today that we had a pretty good chance of seeing the 70 handle on price [as in the 1670’s]; the only question would be how it would be done, and what the risks would be waiting for it.

We got long and as the price spiked above 1671 I hit the liquidate button. My fill? Try 1670.36; the dealer held my order for about 3 seconds, the market dropped, and we are filled a good $0.75 from where I thought we should have been. Even when you do it the right way [sell on the way up] you can still suffer slippage. No matter, we still made money. [By the way, when I use the term “incremental gain”, I am referring to gains that are from 0% to about 0.5%.]

The range today was only about $14, and the only reason it was that large was due to the mystery tick down to the low. We got a buy signal off the algorithm on this move; I didn’t take it because the range is so small and the fact that we have been up in price 5 days in a row. Ahead of Friday’s NFP report we will get some profit taking from this move and we need a deeper correction than a buck or two.

Meanwhile …

The RBA cut interest rates 0.50% last night sending AUDUSD sharply lower, and EURJPY moved lower with Yen buying. Hopefully the ranges here can improve some. I’d like to trade these pairs, but I don’t want to get caught in some 5 day wait to make 20 pips because of low ranges.

So, we start May with Holiday trading conditions; low volume and small range. Given that, I’ll take the incremental gain. That will surely change.

Have a good day everyone.

-vegas

THE FED DECIDES

                            The Federal Reserve Decision Makers

There’s almost no trading anymore; everybody just waits for the Fed to manipulate intervene and reacts from that. Today is total evidence of that.

As I stated on my other post, for the first 15 hours of trading today we didn’t even have a $5 range. Then, in one second [literally] gold got hit $15 to the downside. The market recovers; the algorithm gives a buy signal; we get long; the market chops for a while before heading higher; we get out on a minor price spike and make a little money.

I realize the market rallied farther up, but you can’t count on a reversal day every single time gold goes lower.

A lot of traders got hurt today; I can tell from the action and the way it traded after the manipulation from this morning. There seemed to be more than the normal price spikes and prices jerked upward rather quickly each time, telling me people were reversing.

Trading is a mess right now. Nobody is willing to trade overnight because they know of the potential carnage that may possibly come when the U.S. opens; that leads to a very tight range. Since the range is so tight, it doesn’t take much to hit a new high or low or both within minutes. Make no mistake; this is the havoc the Fed wants in the gold market.

The market lacks follow through; all you have to do is look at the all of the candlestick tails on the daily chart over these last months. It is difficult to judge this flow, as one second it looks good and the next it looks like a death trade.

In any event, all that really matters is money. In that regard, we added some incremental returns today.

Have a good day everyone.

-vegas