Boris and Kathy's FX Blog www.bktraderfx.com

Welcome to our weekly review. We’ve had good and busy week and have many topics to cover, so let’s get started.




Trading Adjustments



We’ve modified our trading approach to better accommodate both - requests from you and the format of the newsletter. Instead of trading two units on each position with a very short term profit target on the first unit and a longer profit target on the second unit we are now trading just one unit with a more intermediate target. Why did we do this?



1. Using two units on every trade unnecessarily increased our risk. (a –35 point stop turned into a –70 point loss)
2. The short term target of 15-20 points was just too short term for many traders who weren’t glued to their computers as it often happened in a matter of a few minutes.



Clearly the change has produced much better results as it created trades with an average profit of 40 points or more that was achieved in much more relaxed fashion over three to twelve hours of trading. In fact for those of you looking to get an approximate idea of the types of trades that we do the above serves as a good description. Essentially we look to put on trades that will last anywhere between an hour and twelve hours ( with most probably lasting 6-8 hours ) targeting anywhere between 40 to 90 points of profit per trade.



If you missed any particular trade. DON”T WORRY. We run one the most intense advisory newsletters on Wall Street, generating more trade ideas in a month than most people do in a year. This month alone we traded more than 20 times and the month is not even over. Furthermore, we run a full 24 hour operation with Boris managing the book during late Asia and early Europe and Kathy taking over during North America and through the Asian open. You – our subscribers are dispersed from Sydney to London to New York and all points in between and we will generate ideas during all time zones, so everyone can participate during their waking hours. Furthermore on certain strategic trades we’ve introduced the use of the stop entry order this week which allows you pre-plan your entry into the market. (For more info on stop-entry please refer to our earlier emails)



One final critical point. As most of you know, but some of you may not – the FX market is a decentralized market. That means everyone may see a slightly different price and a slightly different bid-ask spread. For the purpose of the newsletter we trade an account at Oanda and use their price feed as the reference source for all of our trade calls. Some of you have asked why we do not execute our trades through FXCM since we are both strategists there. Several reasons. First, the BKForexAdvisor is a completely separate venture from our duties at FXCM and has absolutely no connection to it. Second and far more important reason is that we simply can not trade through our own firm due to conflicts of interest since FXCM is a market maker.



We by no means endorse Oanda or for that matter any market maker in FX. We suggest you find the one that suits your needs best. Our only recommendation is to trade with a NFA regulated market maker – but even that is certainly your own choice. For the purposes of the newsletter however you should understand that we use Oanda as reference point for our trades and your own trades may at times be done at somewhat better or slightly worse prices depending on when and with whom you trade. So please understand that ahead of time and make adjustments accordingly.




Trade Delivery Channels
The Internet is a wonderful place, but sometimes it can be unreliable. We understand that issue quite well. That is why we are in the process of setting five separate channels for delivery of trade signals, so that if one source fails you can still get timely information from another source. In the next week we plan to do the following:

1. Delivery of text messages to North American cell phones.
We will be able to send a text message directly to your cell phone number. You will not need to provide us with any other information expect the phone number itself. This will make the process much easier for everyone.



2. Global access to one way chat room with audible as well as text alerts.

This week we will create a java based chat area on the bkadvisor website that will require absolutely no additional software from you except a web browser. This chat room will deliver the full text of trade alerts along with an audible alert ( for those who choose to have their computer alert them) This will by far be the fastest and easiest way to get the latest alerts since it will post to the chat room the instant we hit the submit button.



3. Delivery of text messages to Global cell phones

We are working on this capability and will hopefully have it implemented within the next 10 business days. We’ll keep you apprised.





In addition we also have plans to deliver alerts by Instant messenger and cell phone accessible web pages – and will keep you informed on the status of those projects.



Now let’s finally get to the trade review


USDCAD +15



This was a very fast trade based on an rebound in oil theme. The move started to go our way but quickly reversed as CAD remained very spiky due to the volatility in the oil market. We went to breakeven right away after reaching T1. For those of you who did not get the exact print the important thing to remember is that when we send out an alert that we are going top break even you should move your stops there regardless of whether you’ve been executed or not. Given the fact that we will not be trading two units anymore this problem should not arise going forward.


NZDUSD + 40



This was a good trade based on the idea that carry trade demand would push the kiwi higher and we exited it quite properly just as upward momentum was beginning to tire.


EURGBP + 11

A great trade and we only wished we could have gotten more, but it illustrates quite well the real time decisions you have to make when trading. The entry was just right since we had a bullish hammer formation on the daily and very dovish remarks from Mervyn King suggesting that for now BoE was done. The trade went our way and we went to breakeven when its was 11 point in the money. After the release of Bow minutes the price action spike to +25 in our favor but retraced so quickly we had no chance to take advantage of it. At this point we had a very difficult decision to make. Do we risk losing all our built in profit or do we try to lock some in? The logical move of the stop was to 6575 See chart here. http://docs.google.com/View?docid=dn8z7zs_53drpmgb

However, that would mean our profit would be miniscule, so we opted for a Solomonic compromise of moving the stop to 6580 for +11 and alas were take out before price returned to 6695.


AUDJPY +40 AUDJPY +35

Both of these trades were terrific uses of the major story of the week which was the shockingly low AUD inflation numbers that essentially put a halt to any speculation that RBA would raise rates further and caused massive carry trade liquidations in AUDJPY. Many of you complemented our time exit on the second trade but we simply used the spike low as the reference point. See chart here. http://docs.google.com/View?docid=dn8z7zs_57fpdncs


GBPCHF +5

This was a trade that really didn’t work, based it was on the assumption of further carry trade unwinding. When Japanese CPI came in very flat we were smart enough to recognize we were wrong and high tailed it out of there before it moved against us. This trade serves as a good example of the motto we live by, first spoken by the greatest trader/economist the world has ever seen – John Maynard Keynes. Keynes remarked, “When facts change, I change. What do you do sir?” We try practice that approach as much as we can.



Have a great week-end. Look for the Sunday Night Huddle in your email boxes and we will talk to all of you next week



B & K