Currency Condors spread wings and Identifying new trends.

So, my week long test drive of FXE did not work out as I had planned. But by exploring the possibilities of using currency ETF's as viable Reverse Iron Condor trades, I have come across an interesting phenomenon.

A trade on FXE or FXB can be set up for a good risk/reward ratio for times that extend far beyond that of weekly options.

First I'll go over my trade entries this week, and then I'll bring it back to the currency ETF's and go over why I chose the trades that I did. The entries are:

• FXE May 18 '13 130c/132c/129p/127p RIC
• FXB May 13 '13 152c/154c/151p/149p RIC
• C Apr 26 '13w 46.5c/47.5c/45p/44p RIC

The currency ETF's are interesting in that if you compare it with something like GLD, which has a similar price point to FXE, You'll see that you pay more premium for a shorter period of time to expiration based on the anticipated movement. Lately, the GLD may not be the best example for this due to it's generational decline last week. But a comparison of the price action of the last couple of months may point to why it may be better to have a monthly RIC in FXE, vice a weekly RIC in GLD.

Mid week pause for writers block...

Hmm. It's going to take much more time for me to get together this data for the comparison in GLD and FXE than I thought. I'm on vacation in Osaka, and this is the first month that I've even tried FXE, FXB and the other currency ETF's anyway, so more on that later I guess.

Update on this weeks trades so far. C is nearly in the money after the Tuesday U.S. session, as is FXE. If there is follow through tomorrow, the C trade may close profitably before the end of the week. There is still much more needed to the downside for FXE to profit, but with the problems in Europe and three weeks until expiration, a good chance for profit remains. FXB has not moved at all, but with 3 weeks for news events on the Economic Calendar, FXB is still wide open.

With Currencies, my breakout strategy is off. The robots have been shut down. As I get the picture for how my current strategies are playing out I'll get more into explaining what I'm doing. Basically I have moved to a strategy of manual entries in the direction of a trend. Using the Parabolic SAR for entries and stops, and FXCM's SMI or Stochastic Momentum Indicator as a trend filter. Here's how my screen looks with my current AUD/USD trade short:

Ok, so using the SMI as an trend filter, my clear bias for Aussie in this example is to sell the AUD against the USD. this I have done on the first reversal opportunity on the 4 hour chart after the SMI showed the bearish crossover. So far so good. My plan now is to trail down the stop with SAR dots manually whenever I get on the trading station. The most current picture shows a couple of green dots showing that price action may reverse. So, to allow price some room to move around, I have stopped trailing until I get another red SAR dot showing resumption of the trend.

Then, since my first lot is profitable, I will enter with a second lot on the reversal to capitalize on a bigger breakdown.

Cheers from Osaka.
STT