USD/JPY Bumpy Road Towards 111.80

USD/JPY Bumpy Road Towards 111.80

Chart Of The Day

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Although USD/JPY ended the day marginally higher (we’re talking 10 pips or so), the fundamental and technical picture hasn’t changed. U.S. data continues to disappoint with the Empire State manufacturing index dropping 10 points in July. This decline was much larger than anticipated and highlights the disconnect between U.S. data and Fed policy. U.S. policymakers may be talking rate hikes but so far, data has done more to refute rather than confirm their views. After last week’s shockingly weak retail sales and consumer price reports, we believe USD/JPY has more room to fall, especially with U.S. rates declining and no major U.S. data on the docket this week.

Technically, it could be a bumpy ride. There’s a lot of resistance below 113 and 114 (double Fib resistance) but there’s also multiple moving average support hovering between 111.75-111.85. We think USD/JPY will drop to 112 and maybe dip below there but buyers could swoop in at that level. That shouldn’t be a problem for our swing trade as we entered at 112.80 with a target well above support at 111.85.

Win, Lose or Draw – The Road to Successful Trading

Boris Schlossberg

The other day Bob Pisani who has been covering markets for more than 20 years from the floor of the NYSE was ruminating about why investors fail and his conclusion was that most investors never stick to their original strategy. Bob was talking in particular about Bill O’Neill who founded Investors Business Daily and who is known as the father of momentum stock trading.

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O’Neill had two very simple rules. If the stock fell by more than 8% from your purchase price, you sold it regardless of any macro or micro conditions that may have caused the fall. If the stock had quarterly earnings growth of 25% or more – it was candidate for a buy regardless of current valuation.

There were several other criteria that O’Neill used, but Pisani’s point was that it really didn’t matter if O’Neill was right or wrong in the short term. He was consistent with his trading and in the long run that mattered much more.

We all know that when it comes to investing the single best strategy is to buy a very low cost index fund with the same amount of dollars every month. Any investor who followed this strategy from 2000 onward through two brutal bear markets would be much better off than sitting in cash and would be way ahead of most hedge funds who jumped in and out of the market trying to outsmart it.The problem is that very few investors have the strength of mind to remain consistent in the face of risk and to follow the rules.

As traders we fall prey to the same human weakness. Very few of us can follow a strategy consistently through its inevitable drawdowns. Yet if we try there is tremendous value to be gained. First and foremost you becomes a realistic rather than an idealistic trader. If you trade a high frequency day trading strategy long enough you learn that there are days, week even months when you will constantly lose money. Although most us can appreciate this truth intellectually, few of us can accept it emotionally.

That’s why trading a system consistently win lose or draw can be the best training experience for a trader. Once you have gone through the rollercoaster ride of rising and sinking account equity, you can begin to accept your losses with poise, and that is the first step towards becoming a winner in the market.