Forex Research

Strategy of the Day



Strategy of the Day

 Highlights

Monday, February 08, 2010 - New York Update - 11:07 AM EST The upside response in the risk trade has been very quiet today, which indicates the trend from Friday's market romp could be set to resume. I am canceling the 1.3650 bids, and leaving the remaining to 2 long units at work. Stay nimble in this trade because I could cut these two units in a moment's notice to minimize any drawdown. TG.

Monday, February 08, 2010 - New York Update - 11:07 AM EST Based on the corrective bounce in the risk markets I referred to on CNBC Fast Money - NASDAQ on Friday, I am going long EURUSD with hesitation for a corrective bounce only at current levels. I am long 2 units 1.3696 with bids for 2 more units at 1.3650, stops for all 4 units at 1.3615. I am leaving the upside targets in, but they are subject to change at any time as this 3-wave correction could be shorter than expected. On CNBC Fast Money at 12:45 PM EST today.

Thursday, February 04, 2010 - New York Update - 4:32 PM EST There's not much to say, but wow, did the wheels come off the jobless recovery theory today. It feels like we're back in the early days of this credit crisis when 3-5% down days in equity, carry , and commodity trades were an everyday occurrence. Tomorrow's NFP report will be critical to this momentum freight train that has all but left the station. Any report that comes close to the expected zero level, with a consensus range of -40k to +75k according to Bloomberg, will likely see a resumption of the “risk off” trade which equates to lower equities, commodities and bond yields, and higher bond prices and US dollar. Barring a huge upside surprise in the January Jobs report, a new environment of panic-driven risk position dumping with spiking volatility will be with us for a while.

I was not expecting this move down, especially after such blowout earnings from Cisco last night, to begin so soon. We had no positions working today, which is a bit frustrating, but in the interest of discipline and risk management the appropriate position was to not have one. I spent a long time today going through the longer term charts mapping our likely course over the next few months. The path of least resistance is for a stronger dollar and yen, and weaker commodity and equity prices.

I am going to focus on then golden boy of FX in 2009 which is AUDUSD. The RBA shocked the markets by leaving the overnight cash rate unchanged at 3.75% after 3 consecutive hikes. And that was before today's 3-5% dump in global equities. I'm thinking the RBA will be hard-pressed to raise rates any time in the future with a global economic slowdown. Keep in mind FX markets trade based on perceived interest rate direction, and not current interest rate differentials. So with monetary policy on hold, and Asian interest in Australian commodities likely to drop off, the Australian dollar could be in for a long summer. Don't forget their seasons are opposite of ours in North America.

I spent some time on this daily count today and I have a fairly high degree of confidence in it. 0.8740 was the key break today, which should setup continued selling pressure in coming sessions.

As I said, I did very little trading today and spent most of the day planning out the next 5-10% move. If you recall, we were long EURUSD for the correction higher in the S&P targeting first 1100, and then second 1120. As I said in prior editions of SOTD, I did not like the upside price action in EURUSD and if we were stopped out with a minor gain that would be just fine with me. S&P 1100 target traded, but little did I know at the time that wouuld wind up being the entire correction and today's trend resumption was the result. One thing I did NOT do today is start blindly hitting bids to get short anything that was moving. To do so is trading outside of our methodology, giving up all risk control measures, and to borrow President Obama's caution, like blowing money in Vegas.

So in the spirit of maintaining discipline I believe purple wave .4 is coming and should offer a re-test of the key 0.8730 level. I am going to leave offers out to get short 1 unit of AUDUSD at 0.8710 and get short another unit at 0.8810 with extremely large stops at 0.8920 just for now. I will be looking to get more aggressive with this position by adding more size and clamping down on the stop, but only after we see how NFP plays out tomorrow. Back with you tomorrow morning before NFP for a brief update. TG.

**ANNOUNCEMENTS**

TWITTER WOULD YOU LIKE TO BE NOTIFIED WHEN SOTD IS UPDATED? As of February 2009, I have begun posting on Twitter. Many of you have requested a way to be notified when I update the Strategy of the Day and I think Twitter is a great way to do that. For instance, if we need to make a quick move to take profits ahead of an intended target or cut a losing position because the market is not acting well and you are away from the FOREX.com platform, this is great way to be alerted via text message or email. To receive my updates, simply follow me on Twitter. If you do not yet have a Twitter account, take a few moments to create one. Once you are following me, you can go into your Twitter settings and choose to receive my ?tweets? via SMS messaging. This will allow you to receive update notices and other commentary from me right on your mobile phone. To set it up, go to your settings and select the devices tab. Enter your mobile number and check the box granting permission. Once you hit ?save? you are ready to get a daily dose of Todd Gordon right on your mobile device.

COMING MEDIA APPERANCES

CNBC Fast Money Half Time -NYSE Floor- 12:45 PM EST 2/9/10

CNBC Fast Money - NASDAQ STUDIO - 5:00 PM EST 2/10/10

CNBC Fast Money Half Time -NYSE Floor- 12:45 PM EST 2/11/10

PAST MEDIA APPERANCES

CNBC Fast Money Half Time Interview 2.8.10 CNBC Fast Money - NYSE.

< CNBC Fast Money Interview 2.4.10 CNBC Fast Money - NASDAQ.

CNBC Fast Money Interview 2.4.10 CNBC Fast Money - Goldman.

CNBC Fast Money Half Time Interview 2.2.10 CNBC Fast Money - NYSE.

CNBC Fast Money Half Time Interview 2.1.10 CNBC Fast Money - NYSE.

CNBC Fast Money Half Time Interview 1.29.10 CNBC Fast Money - NYSE.

CNBC Fast Money Interview 1.21.10 CNBC Fast Money - NASDAQ.

CNBC Fast Money Interview 1.15.10 CNBC Fast Money - NASDAQ.

CNBC Fast Money Half Time Interview 1.15.10 CNBC Fast Money - NYSE.

CNBC Fast Money Interview 1.06.10 CNBC Fast Money Half Time Report.

CNBC Fast Money Interview 12.23.09 CNBC Fast Money.

CNBC Fast Money Interview 12.23.09 CNBC Fast Money Half Time Report - Floor of the NYSE..

CNBC Fast Money Interview 12.22.09 CNBC Closing Bell..

CNBC Fast Money Interview 12.22.09 CNBC Fast Money Half Time Report - Floor of the NYSE..

CNBC Fast Money Interview 12.14.09 CNBC Fast Money Half Time Report - Floor of the NYSE..

CNBC Fast Money Interview 12.10.09 CNBC Fast Money Half Time Report - Floor of the NYSE..

CNBC Fast Money Interview 12.8.09 CNBC Fast Money Half Time Report - Floor of the NYSE..

CNBC Fast Money Interview 12.2.09 CNBC Fast Money.

Bloomberg Interview 11.25.09 Bloomberg.

CNBC Fast Money Interview 11.13.09 CNBC Fast Money.

CNBC Interview Part of 1-of-2 with Dr Doug Hirschorn CNBC Part 1.

CNBC Interview Part of 2-of-2 with Dr Doug Hirschorn CNBC Part 2.

COMING SEMINARS, TRADE SHOWS

International Traders EXPO - New York, NY February 14-17 Todd Gordon, Brian Dolan and FOREX.com will be attending the International Traders Expo in New York City on Feb 14-17. Click Here For Details.

Topic: Forex Trading with FEWL--Advanced Fibonacci/Elliott Wave
Date: Monday, February 15, 2010 5:00PM - 5:30PM
Appearance by: Todd Gordon, Senior Technical Strategist, FOREX.com

Topic: Trading Strategies of a Professional FX Trader
Date: Tuesday, February 16, 2010 8:00AM - 9:00AM
Appearance by: Todd Gordon, Senior Technical Strategist, FOREX.com

Topic: Currency Trading Strategies for 2010: A Discussion with FXStreet.com Contributors
Date: Tuesday, February 16, 2010 1:30PM - 2:30PM
Appearance by: Todd Gordon, Senior Technical Strategist, FOREX.com

DVD RELEASE We recorded a presentation I gave in Chicago back in January 2009 about the tools I use here in Strategy of the Day- FOREX Trading Using Fibonacci and Elliott Wave.

STRATEGY OF THE DAY - What's New in 2009 Strategy of the Day, or S.O.T.D., features in-depth analysis of the FOREX markets based on Elliott Wave and Fibonacci principles, Intermarket analysis, as well as more elementary technical analysis methodologies. SOTD is not just a traditional research piece, however. SOTD is actually a written game plan and trade journal of how a professional fund trader approaches the FOREX markets. Todd executes the trade ideas shared in SOTD in his G.C.A.M.(GAIN Capital Asset Management) account. All aspects of the trade are shared including the analysis, position sizing, entry, stop loss, and take profit levels. SOTD readers can follow Todd's trades as he puts his ideas to work in the market in real time, and with real dollars. SOTD is updated at least once daily on the FOREX.com platform.

POSITION SIZING To begin the new year, I am going to introduce some new features of SOTD. In the past I have shared with you all aspects of a trade idea including analysis, entry and exit levels. Going forward, I am going to include my position sizing for each trade idea as well. Essentially, the smallest position I trade will be referred to as a ?unit?. The maximum size I will put on in a single position is 50 units of a notional USD position. For an average sized position, I will have anywhere from 5 to 10 units at work. The more units in a position you can work with, the more flexibility you will have in entry and exit tactics. If you are only able to trade 1 or 2 units, I would adjust your account size to ensure you have the proper flexibility.

WAVE ANNOTATIONS Much like the original wave annotations introduced by Ralph Nelson Elliott in the early 20th century, I am going to introduce a standardized labeling procedure custom to SOTD. This will allow you the reader to quickly identify the location and degree of my Elliott wave counts on the charts. As you can see on the chart below, I have listed 9 possible degrees of wave counts and the corresponding chart time frame that is likely to use a particular annotation. Now obviously you will not see just one degree of wave annotations on any chart. My purpose within this framework is to align a certain degree wave annotation with the primary price trend on a given chart. For example, if you see a blue underlined roman numeral labeling, the price move I am studying is probably best viewed on either a 30 or 45 min timeframe. Once you see black Arabic numeral labels, the move is probably best seen on either a 60 or 90 min chart.

Questions or comments?

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.