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Wednesday, September 8, 2010

Mid-week Trading Update (September 8, 2010)

“Although anyone can randomly make a profit by sheer luck, in reality, making consistent profits from the markets isn’t a trivial task. It requires level-headed professional behavior executing a reliable trading system with profitable expectation.” – Mark Jurik
Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus our losses and profits. The analyses are based on daily charts, looking at the Big Picture, though my entries are on a smaller timeframe. My preferred leverage is 1:100 and our position size is 0.01 lots for each $1000. My maximum drawdown in a week is 3% (worst case scenario). I use the Price Behavior rules for strategic decisions and customized indicators for tactical entries. I open primary positions without predetermined exit target in mind, riding the trend for as long as it continues. The value of patience will forever be emphasized. As long as we stick to our rules and keep our risk low, we’re immune to fear.

You need to be humble enough to accept reality while trading; your ego isn’t your amigo. There are no absolutes in trading. Nothing is ever guaranteed, and since we’re all at the mercy of the markets, stop losses should be set, at least as far as this strategy is concerned. If a system has 60% probability, it mayn’t survive the markets if the trading risk is too large. Who knows if the trader would get 40% losing trades first before getting the 60% winning trades? However would the portfolio still be existing when the winning trades show up?


AUDUSD
Primary trend: Bullish
A sell signals is possible at 0.9310, a price at which it would be clear that the market is overbought and a bearish reversal is highly probable.
Order: Sell Limit
Entry date: September 6, 2010
Entry price: 0.9310
Initial stop: 0.9460
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: N/A


NZDUSD
Primary trend: Bullish
The Buy Limit order I set last week is now invalid and the order has been cancelled. The bulls are now reigning though it looks like a bearish correction or reversal might take place very soon. I’ll enter a at a good resistance (preferably 0.7300)
Order: Buy Limit
Entry date: September 1, 2010
Entry price: 0.6940
Initial stop: 0.6790
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Cancelled
Profit/loss: N/A
Percentage growth: N/A

EURCAD
Primary trend: Bearish
I need to wait until this cross reaches an important level before I set any order. There’s no need to be trading day in day out with the hope of getting paid each day (though we’re used to being paid on daily or weekly or monthly basis). The market is different. We need to know that the market isn’t a remote Santa Claus that throws us dollars everyday.


EURAUD
Primary trend: Bearish
My order on this instrument was a failure. The EUR is too weak against the AUD. One might be tempted to join the bearish move, but it’s now dangerous to join since one didn’t start with the beginning of the trend. A bullish correction is likely anytime because the market is already in oversold region. I’ll try to put another Buy Limit order around a strong support.
Order: Buy Limit
Entry date: September 1, 2010
Entry price: 1.4090
Initial stop: 1.3840
Current stop: N/A
Exit price: 1.3840
Exit date: September 8, 2010
Status: Closed
Profit/loss: -250 pips
Percentage growth: -2.29%


EURNZD
Primary trend: Bearish
There was initial movement in my favor after the pending order on this cross was filled. I was able to break even before a bearish reversal against me. The next action is to try to pinpoint where the next turning point might be. The current price is clearly quoted below the Moving Average and the ADX –DI is now rising above the +DI, but the bearish momentum isn’t currently very strong.
Order: Buy Limit
Entry date: September 2, 2010
Entry price: 0.7840
Initial stop: 0.7690
Current stop: N/A
Exit price: 0.7840
Exit date: September 6, 2010
Status: Closed
Profit/loss: 0 (breakeven)
Percentage growth: N/A


AUDJPY
Primary trend: Bearish
I need to wait for a possible retracement to an area where I’d like to sell. Whatever decisions we make on the markets must have some statistical validity. I read about a statistics joke. An elderly prisoner has just been sentenced for a heinous crime and was returned to his cell. An inquisitive guard couldn’t wait to ask him about the outcome. Guard: “What did they sentence you to?” Prisoner: “I was given the choice of life or 100 years.” Guard: “And what did you choose?” Prisoner: “Well, life, obviously. Statistically speaking, that’s shorter.”
Order: Sell Limit
Entry date: September 6, 2010
Entry price: 78.15
Initial stop: 79.65
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: N/A



Conclusion: The value of risk management is without question. “Less means more.” The less your risk, the more your chances of recovery form losses when the markets are favorable to your trading system. We don’t know when a trend will start or come to an end; we simply need to stick to our rules.


Please, I’d like to conclude with this quote:

(Traders) understand that their job as an active trader is not to wake up each morning and trade; it's to wake up each morning and apply our rules to look for low risk, high reward, and high probability trading opportunities. When we find them, we take rule-based action and trade. When we don't, we don't trade. – Sam Seiden (brackets mine)


Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach

Senior Analyst
FX Instructor, LLC
Email: amustapha@fxinstructor.com

Are you facing any challenges in trading? You might want to explore the secrets of markets wizards and duplicate their success. Get the secrets from my past articles at:
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NB: There is risk of loss in trading, but it is possible to be a successful trader.

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