Cowabunga System Daily Update: Wednesday, 05/12/2010

The CFTC may be changing the rules for retail Forex traders in the US. This affects many of us in a negative way and we need your help getting our voices heard.

I can not find better words to describe my position on all this than those from Andrei Pehar, Chief Currency Strategist at fxKnight.com.  

Andrei says: "I am not opposed to regulation nor regulatory agencies. But that regulation needs to be fair, transparent, and open to public input. Otherwise it becomes corrupt and self-serving. Sure high leverage can get you into trouble if used thoughtlessly. Sure hedging when not done properly turns one loss into two. But I believe the cure is EDUCATION, not restricting what people can and cannot do with their investment decisions. Guide, don’t dominate – government was invented to protect people and their property, not to limit their potential.

We at BabyPips.com disagree with the CFTC proposal.

If you disagree as well, you may submit your comments to secretary@cftc.gov.  

Include “Regulation of Retail Forex” in the subject line of the message and the identification number RIN 3038-AC61 in the body of the message. Please, help us to spread the word!

I think this is a very important matter that affects us all, and we should try our hardest to ensure that things will be done for the best of the trading community.

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

Main Trend

GBPUSD 240 min chart

Current Trend

The trend stayed up the entire day.

Today I only looked for long trades.

News events to watch for today :

  • 4:30am EST- UK Jobless Claims Change
  • 5:30am EST- UK BOE Inflation Report
  • 8:30am EST- US Trade Balance

Today’s Surf

1:30am EST- There was a moving average crossover for a long trade. RSI was greater than 50, stochastics were trending up but MACD was already positive from the previous candle. This cancelled out the signal and I did not enter.

entry2

Trade Result: +0 pips R-Multiple: N/A

News events to watch for Thursday:

  • 4:30am EST- UK Total Trade Balance
  • 8:30am EST- US Initial Jobless Claims

For a complete list of news events check out our Forex Economic Calendar. If you have any questions, check out the Cowabunga FAQs or discuss the Cowabunga System in our Forex Forums.

  • shortpipin

    PipSurfer, why is it not a good idea to enter a trade when macd histogram has gone the way of the trend on the candle ahead of the entry. MACD histogram is also a momemtum indicator and if this indicator is showing increasing momentum, why not go ahead and enter the trade. I’ve always traded by the rules of the system but, please help me understand the histogram and its use as it applies to trade entry. thx

  • kulvadee

    Hi PipSurfer
    I am using demo account and had some experiences made me really upset that when the trade had reached my target order but it had not been filled and sometimes the trade even went further my target order a few times before it went against me and became a losing trade. I emailed the broker and asked them, they said they’re not sure why the order did not filled, but in the live system the dealing desk would ensure that this order was filled at the correct time. This situation stilled happened again after I emailed them.

    I heard about brokers with dealing desk and no dealing desk. My understanding is that if I use the no dealing desk broker, the problem I expereinced may not happen. Now I am looking for a new broker.
    If possible, can you tell me what broker do you use. Please advise. :) And thanks so much for your answers on the video to my last posts.

  • shortpipin

    PipSurfer, why is it not a good idea to enter a trade when macd histogram has gone the way of the trend on the candle ahead of the entry. MACD histogram is also a momemtum indicator and if this indicator is showing increasing momentum, why not go ahead and enter the trade. I’ve always traded by the rules of the system but, please help me understand the histogram and its use as it applies to trade entry. thx

  • travel9boy

    i have the same feeling as shortpipin.

    Going back to your previous update (05/11/2010), you commented that the MACD is losing value hence you took the short trade even though the MACD did not go from positive to negative. So in this instance, even though MACD did not go from negative to positive, but it was increasing in value. Shouldn’t that be a valid MACD signal, then?

    So help me to understand, too when do you use “positive to negative or vice versa” and “losing/increase in values”.

    Thanks so much.

  • kulvadee

    Hi PipSurfer
    I am using demo account and had some experiences made me really upset that when the trade had reached my target order but it had not been filled and sometimes the trade even went further my target order a few times before it went against me and became a losing trade. I emailed the broker and asked them, they said they’re not sure why the order did not filled, but in the live system the dealing desk would ensure that this order was filled at the correct time. This situation stilled happened again after I emailed them.

    I heard about brokers with dealing desk and no dealing desk. My understanding is that if I use the no dealing desk broker, the problem I expereinced may not happen. Now I am looking for a new broker.
    If possible, can you tell me what broker do you use. Please advise. :) And thanks so much for your answers on the video to my last posts.

  • travel9boy

    i have the same feeling as shortpipin.

    Going back to your previous update (05/11/2010), you commented that the MACD is losing value hence you took the short trade even though the MACD did not go from positive to negative. So in this instance, even though MACD did not go from negative to positive, but it was increasing in value. Shouldn’t that be a valid MACD signal, then?

    So help me to understand, too when do you use “positive to negative or vice versa” and “losing/increase in values”.

    Thanks so much.

  • PipSurfer

    @shortpipin & travel9boy- The reason the MACD must start in the opposite direction of the trend is because we are trying to catch the move at the very beginning of the trend. So for a long trade we want the MACD to still be negative and EITHER gaining value on our potential entry candle or just turning positive. This ensures us that we are catching the very beginning of the move and not jumping in too late.

    Kulvadee- Take a look at our broker guide which is under the “tools” tab. Unfortunately I cannot reveal my broker because I do not want to make any endorsements. Our broker guide will help you filter out your requirements. Also I suggest you go in the forums and start asking your questions. There are several places you can ask your questions where people who are no doubt smarter than me can help you out. Hope that helps!

  • Pasewalk

    Hi there
    Could you tell me with regard to the 240 minute chart that you use to determine the trend of the market. When you look at the overall trend at the beginning of the days trading, do you apply that trend to all your trades for the day. What if the overall market trend changes during the session, does your position then switch ?

  • PipSurfer

    @shortpipin & travel9boy- The reason the MACD must start in the opposite direction of the trend is because we are trying to catch the move at the very beginning of the trend. So for a long trade we want the MACD to still be negative and EITHER gaining value on our potential entry candle or just turning positive. This ensures us that we are catching the very beginning of the move and not jumping in too late.

    Kulvadee- Take a look at our broker guide which is under the “tools” tab. Unfortunately I cannot reveal my broker because I do not want to make any endorsements. Our broker guide will help you filter out your requirements. Also I suggest you go in the forums and start asking your questions. There are several places you can ask your questions where people who are no doubt smarter than me can help you out. Hope that helps!

  • talisman

    hi there
    do you use trailing stops, or do you keep your stop where you originally set it until you get to your target?
    also, do you often have a target with a r:r less than 1?
    i m new here and couldn t find anything about your expectancy, do you have any info on that?
    this is an awesome system and i thank you for it.

  • Pasewalk

    Hi there
    Could you tell me with regard to the 240 minute chart that you use to determine the trend of the market. When you look at the overall trend at the beginning of the days trading, do you apply that trend to all your trades for the day. What if the overall market trend changes during the session, does your position then switch ?

  • talisman

    hi there
    do you use trailing stops, or do you keep your stop where you originally set it until you get to your target?
    also, do you often have a target with a r:r less than 1?
    i m new here and couldn t find anything about your expectancy, do you have any info on that?
    this is an awesome system and i thank you for it.

  • Chuckitallin

    Hey PipSurfer
    You have me scratching my head, LOL, I thought I understood this better. My OscE on MACD read 0.0001 on that candle. How can it get any closer to going from negative to positive than that? Thanks for answering this again if you can.

  • Chuckitallin

    Hey PipSurfer
    You have me scratching my head, LOL, I thought I understood this better. My OscE on MACD read 0.0001 on that candle. How can it get any closer to going from negative to positive than that? Thanks for answering this again if you can.

  • johannes

    Hello,
    first of all thanks for sharing you approche to fx with everyone!
    I have a small question that wasnt covered yet, concerning the big picture analysis in the 4H chart:
    EMAs crossed a while ago, since than they are short, at the moment of the “change-candle” Sto and RSI were as needed for shorting, but since time passed Sto and/or RSI are flipping around while EMAs stay short. Question: you keep trading short although the indicators arnt clean? or do you suggest to hold trading until there appears a new “main-trend”-signal in the 4H (with clean indicators)?

    I hope you can understand the question and appreciate your answer!
    best regards johannes

  • johannes

    Hello,
    first of all thanks for sharing you approche to fx with everyone!
    I have a small question that wasnt covered yet, concerning the big picture analysis in the 4H chart:
    EMAs crossed a while ago, since than they are short, at the moment of the “change-candle” Sto and RSI were as needed for shorting, but since time passed Sto and/or RSI are flipping around while EMAs stay short. Question: you keep trading short although the indicators arnt clean? or do you suggest to hold trading until there appears a new “main-trend”-signal in the 4H (with clean indicators)?

    I hope you can understand the question and appreciate your answer!
    best regards johannes

  • mbras

    Hi there Pipsurfer,

    I’ve been following you for a long time. Great system IMHO, totally disciplined, you have what it takes. Congrats!! And still, you’re kind enough to share your experience with others, just like the rest of Babypips’s team. Thank you all.

    My question: I read your rules, but it came up to me that, besides risking only 2% of your account, at a given moment, into the market, you sometimes risk 60 or 70 pips just to get 30 ou 40. That’s barely .5 or .6 rewark/risk ratio. How come you feel that comfortable with it. Did you decide to act like this even at the first stages of your system?

    Thanks for all

  • mbras

    Hi there Pipsurfer,

    I’ve been following you for a long time. Great system IMHO, totally disciplined, you have what it takes. Congrats!! And still, you’re kind enough to share your experience with others, just like the rest of Babypips’s team. Thank you all.

    My question: I read your rules, but it came up to me that, besides risking only 2% of your account, at a given moment, into the market, you sometimes risk 60 or 70 pips just to get 30 ou 40. That’s barely .5 or .6 rewark/risk ratio. How come you feel that comfortable with it. Did you decide to act like this even at the first stages of your system?

    Thanks for all

  • Pasewalk

    Hi there, I have another question if you dont mind
    Regarding Stop losses, you use the recent swing high or low
    I am wondering if it you would ever use the amount you are targeting as a profit. So if your target is 20 pips away, set a stop loss also for 20 pips ?
    Thanks

  • Pasewalk

    Hi there, I have another question if you dont mind
    Regarding Stop losses, you use the recent swing high or low
    I am wondering if it you would ever use the amount you are targeting as a profit. So if your target is 20 pips away, set a stop loss also for 20 pips ?
    Thanks