Cowabunga System Daily Update: Wednesday, 11/14/07

If this is your first time visiting this blog, read this first!

Main Trend

Current Trend= The trend remained up until 7am EDT. From 3am – 7am EDT, a new trend change candle formed and changed the trend from up to DOWN. After 7am EDT, the trend remained up the rest of the day.

Today I looked for long trades until 7am EDT. After 7am EDT, I only looked for short trades.

Today’s Surf

4:15am EDT- There was a good signal here, but it was right before the GBP Average Earnings Index so I did not enter.

10:00am EDT- There was a moving average crossover for a short trade. RSI was less than 50, stochastics were trending down, and MACD was positive and losing value. This was a valid entry. The entry was at the close of the candle at 2.0693 with a stop at the most recent swing high at 2.0732. Since I was 43 pips away from the nearest 50 or 00 level, I put my initial target at 2.0650.

Entry: Short at 2.0693

Stop: 2.0732

Initial Target: 2.0650

11:00am EDT- Not only was my first target hit, but the price dropped all the way down to 2.0600 which was my 2nd target. The price wasn’t able to go any lower than 2.0600 so I took my final profit there.

Trade Result: +93 pips; R-Multiple: 2.38

News events to watch for tomorrow :

For a list of all of tomorrow’s news events, check out our Forex Calendar

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  • JeffNLisa

    I got the 4:15a EDT indicator, but because of upcoming news events, I stayed out of it too. Watched the reactions to the news for a few minutes and went to bed.

    But I also got an indicator a little earlier, which would have been at 12:45 EDT. At the close of the bar at 2.0782, I got in, and got filled at 2.0784. I had a 22 pip stop, for the prior swing low at 2.0760, and so I set my target at 2.0808.

    Price did make a clean break of 2.0808, so I moved my stop to break even, and reset my target for more (I like to go in about 25 pip increments, since I don’t recall any rule for it in the Cowabunga rules).

    But price then turned around on me and stopped me out at break even, in the next bar.

    [URL=http://imageshack.us][IMG]http://img220.imageshack.us/img220/4458/gbpusd15min1114072ajk1.jpg[/IMG][/URL]

    Other systems instruct to always take some of your position off when you hit your first target. I do that on other trades, have not been doing it on Cowabunga. But after this experience, I may begin! If I’d taken half my position at 24 pips, I’d have broken even on the other half, and this would still have been a nice trade.

  • JeffNLisa

    Here is the direct url of the image, since it didn’t show in the comments:

    http://img220.imageshack.us/img220/4458/gbpusd15min1114072ajk1.jpg

  • pipbull

    There is something i find very confusing about this system. So, let’s take today’s trade as an example. You say that the pair did not make a clean break of the 2.0600 level, which was your second target so you closed it at that price. But how on earth could you know that until the candle actually closed? The way i am understanding is that if it did not make a clean break, it would have had to touch that level then not break through it. Wouldn’t you have to sacrifice some of the profit before deciding it did not make a clean break to close it?

  • gryat

    I suppose he has programmed his client to move the stop losses to different levels when price hits. That way he doesn’t have to worry about losing the profit, but can still stay in the trade. Maybe it’s possible to do in MT4 too. No idea how you would set it up with all the different levels though. Sound like EA programming to me :)

  • foodaba

    I could be wrong but i think we’re looking at momentum in this

    situation…..how many times has the candle tried to penetrate

    the 600 level….If you check the 5 minute chart for exit,

    the candle closed a few pips short of 600..

  • foodaba

    to jeffnlisa: My chart did not show an actual ema crossover

    at 12:45 am….just a compression of the ema’s. Sometimes

    you really have to zoom in to make sure it is a cross…

  • JeffNLisa

    On this example, the close was at .0597, and no you wouldn’t know that it didn’t make a clean break until after the close. In the next candle, you would have a chance to take profit at exactly .0600, but that is not always the case. I have had some where price pushed thru the target, but retraced and closed below the target, and never came back to the target in the next candle. At times I’ve lost a few more pips waiting for it to come back, too. If I am watching it at that point, if it is fluctuating a lot or if it pushed thru the target just a minute or two before the close and there was momentum, and if that candle is not right before the open or close of the London, New York or Tokyo sessions, I will watch the next candle for a chance to close at the target. If not any one or two of those things, I will close at the close of the candle, even if it does cost a few pips. Another choice is to set a t/p on 1/2 or 3/4 of your position right at the target, so if it hits you can lock in profit, then if price doesn’t make a clean break, you can close the remainder or if it does make a clean break, let the remainder ride.

  • JeffNLisa

    I have looked into them at times and based on only the close, the previous candle both EMAs were even. So based on only the close, the 5 was never below the 10, and it would not be a valid signal. But I’ve watched how the indicator works, and it fluctuates tick by tick. So in the prior bar, when it was at or near its low, the 5 would have been below the 10 for at least some ticks, and when that happens, once the 5 is back above the 10, the arrow lights up. This may be something that can be changed in how the indicator was written, I am using pipalot’s revision of the indicator. And also, some of the signals it has given, even when checking each thing manually are fully qualified signals, so it did its job, but in looking at the chart with eyes and intuition, I stay out of it anyway. In this case, I would have been fine if I’d just taken part of my position off at target. For the time being, that is what I plan to begin doing. Would have been real nice on this morning’s trade — 90+ pips on the first part of the position, and another 30 or 40 on the remainder. –Jeff

  • JeffNLisa

    Right now (4:39 PDT, 7:39 EDT) the current candle is up, at 2.0545 and the 5ema is higher than the 10ema by 2 pips. If in the next 4 minutes, it does fall back to the same, and then continues down after, it will trigger a signal in pipalot’s indicator. I hope it doesn’t though, becase RSI is greater than 50 so it would cancel out the indicator.

  • JeffNLisa

    I got the 4:15a EDT indicator, but because of upcoming news events, I stayed out of it too. Watched the reactions to the news for a few minutes and went to bed.

    But I also got an indicator a little earlier, which would have been at 12:45 EDT. At the close of the bar at 2.0782, I got in, and got filled at 2.0784. I had a 22 pip stop, for the prior swing low at 2.0760, and so I set my target at 2.0808.

    Price did make a clean break of 2.0808, so I moved my stop to break even, and reset my target for more (I like to go in about 25 pip increments, since I don’t recall any rule for it in the Cowabunga rules).

    But price then turned around on me and stopped me out at break even, in the next bar.

    [URL=http://imageshack.us][IMG]http://img220.imageshack.us/img220/4458/gbpusd15min1114072ajk1.jpg[/IMG][/URL]

    Other systems instruct to always take some of your position off when you hit your first target. I do that on other trades, have not been doing it on Cowabunga. But after this experience, I may begin! If I’d taken half my position at 24 pips, I’d have broken even on the other half, and this would still have been a nice trade.

  • JeffNLisa

    Here is the direct url of the image, since it didn’t show in the comments:

    http://img220.imageshack.us/img220/4458/gbpusd15min1114072ajk1.jpg

  • pipbull

    There is something i find very confusing about this system. So, let’s take today’s trade as an example. You say that the pair did not make a clean break of the 2.0600 level, which was your second target so you closed it at that price. But how on earth could you know that until the candle actually closed? The way i am understanding is that if it did not make a clean break, it would have had to touch that level then not break through it. Wouldn’t you have to sacrifice some of the profit before deciding it did not make a clean break to close it?

  • gryat

    I suppose he has programmed his client to move the stop losses to different levels when price hits. That way he doesn’t have to worry about losing the profit, but can still stay in the trade. Maybe it’s possible to do in MT4 too. No idea how you would set it up with all the different levels though. Sound like EA programming to me :)

  • foodaba

    I could be wrong but i think we’re looking at momentum in this

    situation…..how many times has the candle tried to penetrate

    the 600 level….If you check the 5 minute chart for exit,

    the candle closed a few pips short of 600..

  • foodaba

    to jeffnlisa: My chart did not show an actual ema crossover

    at 12:45 am….just a compression of the ema’s. Sometimes

    you really have to zoom in to make sure it is a cross…

  • JeffNLisa

    On this example, the close was at .0597, and no you wouldn’t know that it didn’t make a clean break until after the close. In the next candle, you would have a chance to take profit at exactly .0600, but that is not always the case. I have had some where price pushed thru the target, but retraced and closed below the target, and never came back to the target in the next candle. At times I’ve lost a few more pips waiting for it to come back, too. If I am watching it at that point, if it is fluctuating a lot or if it pushed thru the target just a minute or two before the close and there was momentum, and if that candle is not right before the open or close of the London, New York or Tokyo sessions, I will watch the next candle for a chance to close at the target. If not any one or two of those things, I will close at the close of the candle, even if it does cost a few pips. Another choice is to set a t/p on 1/2 or 3/4 of your position right at the target, so if it hits you can lock in profit, then if price doesn’t make a clean break, you can close the remainder or if it does make a clean break, let the remainder ride.

  • JeffNLisa

    I have looked into them at times and based on only the close, the previous candle both EMAs were even. So based on only the close, the 5 was never below the 10, and it would not be a valid signal. But I’ve watched how the indicator works, and it fluctuates tick by tick. So in the prior bar, when it was at or near its low, the 5 would have been below the 10 for at least some ticks, and when that happens, once the 5 is back above the 10, the arrow lights up. This may be something that can be changed in how the indicator was written, I am using pipalot’s revision of the indicator. And also, some of the signals it has given, even when checking each thing manually are fully qualified signals, so it did its job, but in looking at the chart with eyes and intuition, I stay out of it anyway. In this case, I would have been fine if I’d just taken part of my position off at target. For the time being, that is what I plan to begin doing. Would have been real nice on this morning’s trade — 90+ pips on the first part of the position, and another 30 or 40 on the remainder. –Jeff

  • LittleHeadThinker

    Hello, I’m new to Forex trading and the site. Thank you BabyPips and Pip Surfer! I have done quite well with my demo account using the Cowabunga System. I have a question about EDT. Most world clocks don’t offer EDT (-4 GMT) for the States,but instead EST (-5 GMT). I understand that New York is one of the few places that uses it during Winter months. On the most recent Cowabunga update it says for example that GBP employment rates came out at 4:30 EDT. Shouldn’t that be 4:30 EST? Am I totally lost? Thanks in advance.

  • JeffNLisa

    Right now (4:39 PDT, 7:39 EDT) the current candle is up, at 2.0545 and the 5ema is higher than the 10ema by 2 pips. If in the next 4 minutes, it does fall back to the same, and then continues down after, it will trigger a signal in pipalot’s indicator. I hope it doesn’t though, becase RSI is greater than 50 so it would cancel out the indicator.

  • LittleHeadThinker

    Hello, I’m new to Forex trading and the site. Thank you BabyPips and Pip Surfer! I have done quite well with my demo account using the Cowabunga System. I have a question about EDT. Most world clocks don’t offer EDT (-4 GMT) for the States,but instead EST (-5 GMT). I understand that New York is one of the few places that uses it during Winter months. On the most recent Cowabunga update it says for example that GBP employment rates came out at 4:30 EDT. Shouldn’t that be 4:30 EST? Am I totally lost? Thanks in advance.

  • PipSurfer

    Wow! I’m glad to see all the comments and participation on this blog. That shows true dedication on becoming better traders.

    Now to address all the issues:

    Jeff- Foodaba’s comment is the same as mine. I didn’t actually have a moving average crossover, but rather just a compression.

    Pipbull- There really is no hard rule on the clean break, but I try to just “feel” the momentum. I don’t always get out at the exact target, but I try to get as close as I can. Try not to get too technical with it. If you feel like the market is slowing down, take your profits. In yesterday’s example, I was already up 90 pips which made it even easier for me to take my final profit :)

    LittleHeadThinker- Glad you are catching on fast! I believe its EDT at this time and in the spring time it will move back to EST. I could be wrong but that’s how I understood it. If anyone else has input, feel free to comment

    Happy trading everyone!

    -PS

  • lonnie

    starting to get it, like it, and appreciate your work on posting your decision process. thanks.

  • LittleHeadThinker

    Thanks for the response Pip Surfer,
    I can’t wait to see your update for today. I went short and grabbed 59 pips last night before bed :) My limit was reached just before GBP/USD started to to go completely sideways. Luvin’ me some Cowabunga!!!

  • gryat

    @LittleHeadThinker the only signal arising then was the 2.30am ET signal. That was two hours before the 4.30 news (something in London). I think it would’ve been prohibited to enter that one (newstrading), but i’m not sure

  • PipSurfer

    Wow! I’m glad to see all the comments and participation on this blog. That shows true dedication on becoming better traders.

    Now to address all the issues:

    Jeff- Foodaba’s comment is the same as mine. I didn’t actually have a moving average crossover, but rather just a compression.

    Pipbull- There really is no hard rule on the clean break, but I try to just “feel” the momentum. I don’t always get out at the exact target, but I try to get as close as I can. Try not to get too technical with it. If you feel like the market is slowing down, take your profits. In yesterday’s example, I was already up 90 pips which made it even easier for me to take my final profit :)

    LittleHeadThinker- Glad you are catching on fast! I believe its EDT at this time and in the spring time it will move back to EST. I could be wrong but that’s how I understood it. If anyone else has input, feel free to comment

    Happy trading everyone!

    -PS

  • lonnie

    starting to get it, like it, and appreciate your work on posting your decision process. thanks.

  • LittleHeadThinker

    Thanks for the response Pip Surfer,
    I can’t wait to see your update for today. I went short and grabbed 59 pips last night before bed :) My limit was reached just before GBP/USD started to to go completely sideways. Luvin’ me some Cowabunga!!!

  • LittleHeadThinker

    gryat – That is exactly why I am trading a practice account. I read about the predictions for the GBP retail sales report and didn’t feel that it would have a negative effect on the trade. Got lucky I guess. What about today at 17:30-17:45 GMT? I missed that one, but wasn’t there a valid entry to go short at that time? Looks like about 20 pips could have been had using the most recent swing high as a guide to set the limit.

  • gryat

    Well.. after all it seemed as it was a valid entry. You just had to close it one candle before the news. Well, you learn something new everyday as we say here

  • gryat

    @LittleHeadThinker the only signal arising then was the 2.30am ET signal. That was two hours before the 4.30 news (something in London). I think it would’ve been prohibited to enter that one (newstrading), but i’m not sure

  • LittleHeadThinker

    gryat – That is exactly why I am trading a practice account. I read about the predictions for the GBP retail sales report and didn’t feel that it would have a negative effect on the trade. Got lucky I guess. What about today at 17:30-17:45 GMT? I missed that one, but wasn’t there a valid entry to go short at that time? Looks like about 20 pips could have been had using the most recent swing high as a guide to set the limit.

  • gryat

    Well.. after all it seemed as it was a valid entry. You just had to close it one candle before the news. Well, you learn something new everyday as we say here

  • foodaba

    Please help me understand the decision to stay with the trade

    @ 2.0650…. My chart shows the candle just barely touching
    0650

    not penetrating thru ” robustly”, as your system

    describes…

    what went into the thinking to grab those xtra 50 odd pips??

    p.s. The best strategy i”ve seen, going on 2 years trading…

  • foodaba

    Please help me understand the decision to stay with the trade

    @ 2.0650…. My chart shows the candle just barely touching
    0650

    not penetrating thru ” robustly”, as your system

    describes…

    what went into the thinking to grab those xtra 50 odd pips??

    p.s. The best strategy i”ve seen, going on 2 years trading…