Still learning little nuances of the Forex Market. Assian session, European session, US session ...

Exerpts from my post chat session today
2:58 PM [ki] today I was down at least 60 pips in 5 positions at about the same time coming into the US session at about 5am to 6 am. I was basicall short the USD in most of my position except for one where I was short EURGBP.
2:59 PM [ki] Positions Long against USD were: L EURUSD, AUDUSD, GBPUSD. Was playing the gap.
3:04 PM [ki] When the US market opened the account recovered to break even and at 11:30 - 12:30 I was profitable by 30% of daily target. However I didn't take profit and watched it go neagative again where I was down in the account by 10% which is almost 50% of tgt
3:05 PM [ki] Currently I am up again by 30% of daily target. Waiting for position to develop as planned when I entered it last night. It's not easy waiting for position to develop under these circumstance
3:07 PM [ki] Especially after sitting through a drawdown of more than 30% of your account.
4:47 PM [ki] Need emotional break for a bit. Had 5 pos running since yest. eve. Closed my Short $EURGBP position for +27 pips profit, Closed my Long GBPUSD position for +75 pips profit. Currently have 3 positions still opened: 2 Long EURUSD and 1 Long AUDUSD.

My riding these big draw down lately has helped me to realize what some of these great traders go through while they wait for their positions to develop. Especially those guys in "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History" by Gregory Zuckerman, whose positions moved against them while the subprime rally continued and they were almost wiped out or their investors pulling funds because the account is down just before or when the trade starts developing. Search Amazon.com for The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History

I believe the AUD position should rally when Austalian market open as it should follow the US market as the GS case seen as a non issue on the current market or economy. Last night when I entered the trade I thought the European market would have seen it that way but they didn't plus they have the issue of the vulcano ash that is crimpling their economy as far as air travels. Still learning little nuances of the Forex Market. Assian session, European session, US session all interpret the US news different. Seems the reaction to the news is exagerated as they try to figure out how the US market will react to it. Going into the US session if the interpretations and reactions are the same the move builds on it. If not the correction begins. I shall be testing on this assumption/observation. I say assumption also because sometimes the market can make you feel like is what you observe really what's going on.

My view on the GS, SEC CDS case

Fridays news with Goldman Saahs is bullshit IMO.
The way I'm looking at it is the SEC case is bullshit. It will probably get settled. The market was nervous and people was just waiting for some reason to sell. It was options expiration week and market had rallied substantially. It needed cooling down. They heard GS, SEC, and Sued in one sentence and they sold.

GS has returned substancially from the low. The range for the day was 155.55 - 186.41 and the close was 160.70. There has been a buy the dips attitude since the rally began last March. If earnings are good this quarter then I don't see why the attitude will change and so far Intel was good. So mantra is to keep doing what's working till it stops working.

My biggest problem with the case is that the transactions are between accredited institution investors who are supposed to be the smartest people on Wall Street with huge research teams. They made bad bets that's all. When the instruments that the SEC are talking about were created people betting against the sub prime were losing money on the bets and some people got wiped out or were near wiping out for betting againts the sub prime market too early. I found it hard to believe that these big banks selling the insurance policies that people would not default on their mortgages were a bunch of crazy people.

In a nutshell from what I gather from reading the book "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History" and listening the interview Lahde on Financial Sense

The instrument in question is something called collateralized debt obligations(CDO) and Credit Default Swaps (CDS). CDO in a nutshell are loans. CDS started out being the lender buying insurance to protect against the loan they just wrote. Pretty much the same as Private Mortgage Insurance (PMI) or those who know about mortgages. Lets say you buy a house with a mortgage; the lender usually make sure there is Private Mortgage Insurance (PMI) that the borrower pays every month so that if the you default on the loan the bank get paid back the loan from the insurer.

Wall Streat to that a step further now where instead of just the lender having the PMI on your house, anyone can take out an insurance policy that you are going to default on your house payment and get paid the value of the mortgage if you defaulted. On Wall streat it was done with a pool of loans or even against the company that issued those loans. Now the person who wrote those insurance policies usually do their homework and calculate the risk of the person defaulting and charge a premium based on their model if they decided the person was worth the risk of insuring.

Here is a Youtube video that explains CDS some more with diagrams There are other videos there that give a little more or another perspective.

The SEC is saying that GS did not disclose to the insurance company that the people who they were selling the insurance policy to were the people who picked out what loans would be covered in the policy.

My argument is that this is totally irrelevant. The insurance company only needed to know what they were insuring to make their decision which they knew. The person buying the policy or the person who created the policy is not as relevant as what is being insured. The way I understand these CDS usually work is that someone wanted to make a loan and then they ask thier broker to shop for someone who would provide insurance for the loan. Thus the person wanting to buy the CDS was usually some involvment in the loan and/or the creation of the CDS.

We'll just have to see I guess what comes out of it.

Broker pocket 119 pips on my trade. Real bucket shop job.

I was long EUR/USD from last week. I had a target sell or take profit sell set for 1.3505 from then. Sunday I tried to delete the take profit orders before market opened but that's not allowed so I called the broker and emailed them @ 17:35 EST when the brokerage was open. They told me the could not change or delete the order as they had to wait for it to open just like I was.

Sunday at 18:00 EST when the market opened the EUR/USD gapped open at 1.3624 The broker filled my order at 1.3505 immediately. EUR/USD even after 18 hours still have not traded that low. That is more than 119 pips difference. The broker pocketed 119 pips of my trade. OUCH!!

I Should have gotten the open price b/c if I was short w/ a stop order I would have had to accept the 1.3624 as best price. Is it a standard thing for customers to get lousy fills on Gaps in their favor b/c they had a lower target price than open price? Kinda reminds me of Jessie Livermore book about bucketshop jobs they did against the customers. This is BLATENT SKIMMING here by my broker.

The broker is Interbank FX (IBFX.com). That was a real bucketshop job.

If I was short and had a stop in place they would have filled my order at 1.3624 as best filled and I totally agree with that. I would have eaten the 119 pip loss and accept it as part of trading. I should also get the best filled on the upside also. That is some really crappy thing they did. I find INTERBANK FX (IBFX.com)actions of not filling me at the gap open price as deplorable

Here is the broker side
My discussion with IBFX about the lousy fill.

Chat start time Apr 12, 2010 9:42:20 PM EST
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Client Services 30: Do you have the Order# of the specific order you discuss?
Ki6080944 : 41497479
Client Services 30: 4149749 doesn't relate to slippage because it closed at a take profit. With IBFX, take profits always close at the exact price of the take profit. In contrast, stop losses with IBFX have slippage because they close at the best, available price after the price gap. Since this order had a take profit, the order closed correctly at the exact price of the take profit even though the price gapped well above the price of the T/P at Sunday's opening.
Client Services 30: You just need to realize that with IBFX as your broker with price gaps, stop losses close at the best, available price; but take profits close at the exact price of the take profit.
Client Services 30: Do you like to leave trades opened over the weekend often?
Ki6080944 : yes
Ki6864844 : I leave trades open till I am right
Client Services 30: So you understand the risks of leaving trades opened over the weekend on stop losses? If the price gaps alot, the best, available price where your stop loss closes could end up being far from the exact price of the stop loss.
Ki6864844 : I sat in that trade for 1 week through the down move waiting for the news. I even added additional funds to obsorb the draw down
Client Services 30: Unfortunately, price gaps won't work in your favor on take profits with IBFX. IBFX does execute take profits at the exact price of the take profit even with a price gap.
Client Services 30: In contrast, price gaps can work greatly against you on stop losses.
Ki6864844 : It's not fair that I have to feel the pain of the gap but not the benefits
Ki6864844 : With my other brokers I have never had to worry about this. I would expect I get filled at best price offer if available
Ki6864844 : 1.3505 still have traded after 21 hours.
Client Services 30: I can't speak for other brokers, but I understand your feedback and appreciate it.
Ki6864844 : So someone got the benefit of my trade without any risk
Client Services 30: With IBFX, this is the way take profits work in the event of price gaps.
Ki6864844 : we are talking 119 pips. So imagine how upset I was. I had even sent an email before market open to cancel the order and also made a phone call to cancel or modify order before market open
Client Services 30: You can't cancel, open, nor close orders before market opening. Neither can an IBFX rep. When the market is closed, it is closed so no transcations can take palace until Sunday's opening time.
Client Services 30: That is why it is so risky to leave trades opened for the weekend. You cannot modify, close, or open new orders until Sunday at 6 p.m. EST, so your trades are subject to whatever prices are offered at Sunday's opening times.
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Ki6864844 : I took all the risk in that trade.
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Client Services 30: I appreciate your feedback about how if a client has to accept risks of stop losses closing far from the price of the stop loss because of slippiage and price gaps, it seems appropriate to benefit from price gaps on take profits. I will definitely forward that feedback to my supervisors. However, Order# 41497479 was closed at the correct price per IBFX's decision to close take profits at the exact price of the take profit.
Client Services 30: No technical error occurred on the close of 4149749 at its take profit.
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Chat end time Apr 12, 2010 9:42:20 PM EST