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Saturday, October 30, 2010

Delving Deeper Into Your Trading Mindset

“We trade our psychology - our unseen beliefs and biases… The world the trader sees is colored by the mindset of the trader who observes the world. And this is where traders get in trouble.’’ – Rande Howell

Hello:

Robbie Burns managed to double his pension fund from 40,000 pounds to 80,000 pounds in less than three years; and soon after, he doubled it again, reaching 165,000 pounds. He’s made a tax-free profit of far above 900,000 pounds in several years: he has made a profit every year. Doubling your money in three years means you’re making roughly 33.3% returns on annual basis (something around 2.8% monthly). These are results that merit commendations. But sadly it goes against the thought of many traders. They believe in achieving at least 100% - 1000% monthly for this is the mindset they had when they decided to trade. They don’t want to accept the fact that even if they move ahead by 2% per annum, they’re really great veterans of the financial markets. That’s why many traders don’t survive a losing streak. Once again greedy people won’t accept this; they will never be thankful for small mercies. Marcus de Maria displays the amazing power of compound interest with a profit target of 3% - 7% monthly. Imagine yourself turning ten thousand pounds into millions of pounds in less than a decade! The position sizing increases with subsequence profits since the risk on each trade is constant and proportional to the current equity. The bigger the account grows the bigger the profits. Is the 40% of $500,000 not bigger than the 40% of $100,000?


There are certain so-called professional traders who can never be happy with consistent 150 - 300 pips monthly. What they want is 800 – 1500 pips monthly. They can’t be satisfied with 5% per month either. For many years, they’ve been searching for a magical system that can satisfy their wild imaginations. And for now, they can’t boast of any meaningful consistency. When would people learn their lesson? Don’t we all know better? Anybody who’s reasonably sane knows that they shouldn’t gamble indiscriminately. Is the cogent trading rule not simple? A successful trader uses a sensible, time-tested trading system and adheres to a no-nonsense risk control parameters. When you couple this with patience and discipline, then you’re already on your way to success. Traders know all these rules, yet it doesn’t mean that they’ll stick to them when they trade. They may think that the next trade might be the jackpot they’ve been waiting for. Those who set greedy targets with high lots often expect to win big; but they unfortunately fall into the gambling category simply because the more a trader wagers, the less is their ability to survive on the markets.

Trading results: Last week, I made 80 pips with my EURUSD-USDCHF strategy and over 90 pips with the GBPJPY strategy. With my long-term strategy, there are open profits of 1096 pips on the EURCAD, 165 pips on the AUDJPY and 24 pips on a newly filled order on the AUDUSD. The limit order on the EURAUD is still pending.

Delving Deeper Into Your Trading Mindset
The most important factor in trading success is the trader’s psychology. Psychology is critical to anyone’s success. It must be understood that emotions mean something different in trading than it does in other walk of life. This fact has been learned first hand by successful traders. If emotions are not managed properly when trading, the outcome can be frustrating. We need our power, our energy, in order to keep going in this daunting trading business. Therefore it’s essential to keep negative emotional feelings under control.

Mr. Rande doesn’t mince words when he declares that emotions are biological in nature and take over our psychology. They are not part of our psychology, but rather they are biological. They shape our psychology (our perception of the world). Fear, in particular, is the most primitive of our emotions. It is the mother of biologic survival. That is why a trader must learn how to manage fear, or it will continue to overwhelm the impartial, disciplined, patient, and courageous kind of thinking upon which successful trading is built. Though fear will never be eliminated from a trader’s psychology, its intensity can be regulated so that it does not sweep the mind away in a cascade of negative thinking that leads to catastrophic results. Once managed, fear can be directed to help build an effective methodology for risk management.

Simulation accounts are extremely useful in familiarizing the budding trader with the battle-like conditions on the market – which make the possibility of a margin call real and extant based on the ongoing market situations. The budding trader practices with the clear-cut aim of bringing his irrational emotions to subjection thru judicious trade management and plans. Live trades must be handled in similar fashion. While trading, brilliant minds often fall for the decoy of irrational expectations, and in the kind of thoughts that come out of irrational expectations, they ignore the lasting ramifications of the transiently irrational thoughts. They are intoxicated by covetous fallacies and their judgmental prowess would be diluted. Irrational emotional conditions exuded while trading are viewed in contrast with the sensible inference made from trading results at the end of a period of trading activity.

Traders don’t really apprehend the capability of their faculty and the results it could produce. If the potency of the faculty in managing the thoughts while trading isn’t rightly appreciated; as regards the irrationality of too high expectations and fearful responses, there can’t then be a conclusive technique or formula that can be utilized in harnessing the power of thoughts to produce a result-oriented emotion management. It’s therefore incumbent on any trader who desires consistent survival on the markets to delve deeper into his trading mindset and strategize effectively. You’d be glad you do so.

One more quote from the great Rande Howell ends this article:

“A calmer mind is necessary to develop the powerful skills of discipline, patience, impartiality, and courage that are so important to peak performance trading… With an open mind, you become what you were born to be. And trading is your teacher.”
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

Yahoo! Messenger ID: saazalmu

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com


NB: There is risk of loss in trading, but it is possible to be a successful trader.

Friday, October 29, 2010

MetaTrader Just Got Better

MT5 UP CLOSE

‘Competition in the Forex retail market is very strong. It is quite natural that brokers want to please traders and provide them with as much service as possible. Some brokers asked for the opportunity to simultaneously work on multiple markets.” --- Alexander Saidullin (Head of trading platforms in Metaquotes)

Hello:

Trading has always been a fantastic way of life, and Metatrader is one of the best trading software for retail Forex. Unlike some leading charting software, it can be used free of charge, even with free access to historical data. Its strength is and remains automated trading.

At the first glance, it seems there are no noticeable differences between MT4 and MT5. However, taking a closer look shows that the two versions aren’t similar fundamentally. MT4 is really a great trading platform, but it allows only the possibility of trading foreign exchange and CFDs – trading on the stock markets wasn’t intended. This is one reason why Metaquotes understandably developed the new version. MT5 was initially created for various financial markets, meaning that using it gives traders the possibility of trading shares, futures, options (in addition to Forex and CFDs). A whole new world is opened to the MetaTrader users indeed! There are also a number of new timeframes – 21 altogether. In the MT4 terminal, there are only 4 types of pending orders, but in this new one, there are 6 types of such orders. They are:
Buy Limit
Buy Stop
Sell Limit
Sell Stop
Buy Stop Limit
Sell Stop Limit

Compared to the MetaTrader 4, the analytical features of the new terminal have been widened. New technical indicators and analytical tools are present in the new terminal. A user now can use a redesigned management system of graphical objects. There are new capabilities that enable a sophisticated individual graphic surface to be prepared. There are new graphic objects with the possibility of including your own. The combination of new opportunities regarding graphical objects offers no limits anymore, and this isn’t applicable only to the development of indicators. If you can’t find an indicator among the 38 that are made available, then there’s no need to wait long. Looking at the indicators that the resourceful developers have made available in the old version, we can look forward to seeing more such exciting developments very soon.

It’s however agreed upon that the main innovation of the MetaTrader 5 terminal is the new development environment of EAs: MetaQuotes Language (MQL5). This is another reason why the MT5 had to be developed; to extend the MQL programming language. MQL4 was purely intended for structured programming, and that’s perhaps why some developers called it ‘spaghetti code.’ MQL5 at last makes the model of object-oriented programming (OO programming) enter the Metatrader world: a feature which had been on the wish list especially for advanced programmers for a long time. The capabilities of the MQL5 language have remarkably increased – a trader can create their own applications in MT5. High efficiency and performance allow you to create state-of-the-art trading robots with a great deal of computation. These types of auto traders are able to generate detailed signals. There is a good intention from the manufacturer that the new MQL5 language would increase the speed of orders execution by a factor of 4 to 20. Isn’t that a noteworthy progress in the use of EAs?

What about mobile trading? Manufacturers have promised to make a few MT5 terminals on popular platforms, such as iPhone, Android and Blackberry. They’ll do this, according to them. But they say business is getting worse and worse with Windows Mobile, and it’s most likely that they won’t support the Microsoft platform.

You have much to gain, and very little to lose by familiarizing yourself with the new MT5. Why don’t you download a version of MT5 free from the MetaQuotes’s website or from a broker that currently offers it – all for free? Then you’ll do well to create a demo account and start practicing with it. I remember the year my broker announced they’d no longer support MetaTrader Version 3.0.
Although the MT4 is still very much used widely, it’ll eventually be phased out by the MT5 in the foreseeable future.

Yes the MT5 will blow away much competition!
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

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Wednesday, October 27, 2010

Mid-week Trading Update (October 27, 2010)

“It takes a very determined and self-disciplined individual to succeed in this high-risk and high-stress profession. You really do have to live and breathe the… market to have any chance at succeeding.” --- Josh DiPietro

Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus my 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 my 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 I stick to my rules and keep my risk low, I’m immune to fear.

Online trading is now very popular and there was nothing like that about a few decades ago. In the 1990s online trading became possible – and it was probably one of the biggest evolutions yet. As a result, millions of enthusiasts took up day trading. It was absorbing and fun - like gambling and you could do it from the privacy of your own home, with the possibility that it might even make your rich. The huge leap in technology meant that traders no longer needed to pay high trading costs, or listen to what many saw as misguided advice from their brokers, instead they could research the markets themselves, and they buy and sell with a single keystroke. Everyday, thousands of day traders could take their positions in front of their PCs and trade against the best traders on this planet, including the most powerful trading institutions. Of course, this led to some winners and some casualties.

AUDUSD
Primary trend: Bullish
The Aussie reached parity with the Greenback, and quickly reversed. If the bullish run would continue, the psychological level of 1.0000 might be broken; the level that later might serve as a support. You can’t tell when a trend would actually end, but when the AUD is finally weakened against the USD, the downfall would be of a great magnitude. And this is what I’m waiting for.

NZDUSD
Primary trend: Bullish
This pair is still in a bullish trend although the bearish pressure is becoming more and more noticeable. If the downside bias eventually prevails then I’d like to get in at a predetermined price. This price would then be shown. Showing my readers my trading activities is no different to trading when I’m alone. If I couldn't do this, it would be like claiming to be a great actor who can only perform when nobody is watching them!

EURCAD
Primary trend: Bullish
There’s a kind of threat to the bullish outlook on this market. But we need to know that in an uptrend, there’ll be occasional pullbacks (a trap to novice traders), only to see that the market resumes its movement in the direction of the trend. If the downside reversal is significant enough to generate a short signal on the chart, then I’ll close the present trade and find a way to go into the opposite direction. Please note that no immediate action should be taken whenever there’s a minor break to the downside and the price is only slightly below the upward moving line since this is often short-lived. It’s only a sustained break that forces the trader to act.
Order: Buy Limit
Entry date: September 9, 2010
Entry price: 1.3100
Initial stop: 1.2950
Current stop: 1.3819
Exit price: N/A
Exit date: N/A
Status: Open
Profit/loss: 1122 pips
Percentage growth: 11.2%

EURAUD
Primary trend: Bullish
The price on this pair is currently exuding some tricky moves. My long-term strategy has generated a ‘sell’ signal while the price is currently in a consolidation mode/acceptance zone. I still prefer to go long since the market is moving kind of sideways and the eventual weakness in the AUD (the Aussie would eventually weaken) would only add more strength to a new bullish momentum on the market. There’s now a form of Bollinger squeeze on this market. Whatever happens, make sure you utilize your knowledge of survival skills. With good money management tools at your disposal, you’ll never be sorry.
Order: Buy Limit
Entry date: October 1, 2010
Entry price: 1.4000
Initial stop: 1.3850
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: N/A

EURNZD
Primary trend: Bullish
In spite of the zigzag movement of this instrument, the bullish outlook is still valid. The price still revolves around the SMA 20 which tends to act as a support in an uptrend. The ADX 20 level is suggesting a quite market. +DI is still above its –DI counterpart. If bearish reversal is strong enough, then I’ll go short. But I think this cross would ultimately experience the same fate like EURUAD; for they’re positively correlated most of the time.

AUDJPY
Primary trend: Bearish
My pending order on this cross was filled, though the market is currently indecisive. The anti-cyclical Yen would have to give way, for me to win. With a factor of time the fate of this trade would soon be known. No matter what happens, there are predetermined actions to be taken whichever the way the price takes. Whenever a trader wins, he/she feels the thrill of victory, and a losing trader feels the agony of defeat. May you always win on the battlefield of the financial markets!
Order: Sell Limit
Entry date: October 19, 2010
Entry price: 80.50
Initial stop: 82.00
Current stop: 80.50
Exit price: N/A
Exit date: N/A
Status: Open
Profit/loss: 121
Percentage growth: 1.2%

Conclusion: I shake my head when I see people talking about what don’t matter in trading. How often do traders find themselves holding on to things that are as valueless as a piece of hair? You need to know the trading rules that are of great value and the great art of being a market player; you need to know what can hurt you and what can help you while trading. Many an inexperienced trader stops trading because they’re upset by poor performances that are in reality good performances. The problem is that they have little capital and their results are by consequence poor in absolute terms. Many beginning traders start trading during the worst years and they don’t realize that they simply have to trod ahead and slug it out.

As far as I’m concerned, there’s no going back in trading. I’ve learned a lot and I’ve gone too far as well. Another quote from Josh DiPietro concludes this article. It’s to do with the reason why he refused to quit trading completely despite a tough and discouraging beginning. He’s now a consistently successful trader. Hope you can learn something from him:

“I have invested blood, sweat, and of course cold-hard-cash into my struggle. Why stop after I learned so much? My mistakes were very expensive, so I learned to capitalize on those lessons.”



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

Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.Get my

Saturday, October 23, 2010

No Trends, No Gains

“Please note as well that you need a trend. No trend, no gain. When the (market) doesn’t move you cannot win anything. Trendless periods are therefore no winning periods. And believe me, there are… trendless periods. You therefore need endurance and patience.” --- Luis Lorenzo (brackets mine)

Hello:

The more difficult the markets are, the more creatively you’ve to trade. The best traders know that becoming a consistently profitable comes from having a plan and the discipline to stick with that plan. Becoming successful in trading profession can’t be fast-tracked. There’s no golden goose strategy to becoming rich overnight. If you find yourself not happy with making small profits all the time then you can quickly run into deep waters when your greed kicks in. The lesson is that patience in trading is the same as in business. Just consider the time it takes to build a company, to launch a new product, to acquire a large and loyal clientele, to build brand recognition. Business takes time and so does trading. There are no shortcuts.

As regards my trading results last week, my short trade on the USDCHF made a loss of 40 pips while the short trade on the EURUSD made a profit of 120 pips. The GBPJPY long trades are still open and negative, whereas the same logic applied to the USDCAD made a net profit of 320 pips. On my long-term strategy, the limit orders on the EURAUD and AUDJPY are still pending while the open trade on the EURCAD is currently having a profit of 1201 pips.

My article on Friday would highlight MT5 and its new features in contrast with MT4. On October 29, 2010, you’ll get specific timely suggestions for focusing on your trading goals and attaining them. My article on November 5, 2010 would be discussing the value of honesty as career persons in the trading world. By the middle of November the logic behind the EURUSD-USDCHF strategy would be expatiated on while its past results are being displayed. My subscribers are now enjoying trading signals on the EURUSD-USDCHF strategy as well. However while they’re being shown the trading orders that can potentially make them survive the markets over time, they can’t be given the discipline to actually follow the trading rules. They’re responsible for that, and if they could follow the extremely simple rules, they’d win.

No Trends, No Gains
Whenever a trading position is opened, there must be a market movement before you can realize any profits. The movement can either be against you or in your favor, and thus you need to control your account with nice risk management techniques, not letting the market control your account for you. This is what gives credence to the fact that an appropriate position sizing matters more than your entry points.

Events are the things that move the markets. For example, it’s known that the USD tends to gain a measurable amount of strength around Christmas season. I guess you know the reason why this is so. Strong trends invariably grow out of the market equilibrium. The price can move constantly up or down within a range and a strong breakout can be significant. Whether price moves seriously up or down, it can be an advantage to the seasoned trader since it helps to optimize the trader’s accuracy. A trending market adds to the trader’s possibility of consistent profits because nice trading opportunities would be created, reducing the risk of loss.

Nevertheless, when the market is in equilibrium mode, trading can be difficult. If you don’t have an effective range trading system, then you’d do yourself a favor to stay out of the market during that kind of period. For traders who know how to navigate their positions in an equilibrium market, profits would likely be small and the spreads paid could be too much. The sideways market requires serious effort to be profitable. The markets that are particularly difficult require approaches that are particularly creative. Always view your money management plans in relation to the market trends. If you suffer occasional losses, as all professional traders would, the losses can be recovered over a period of time.

One of Dr. Van Tharp’s quotes below concludes this article:

“Making money has nothing to do with predicting what the markets are going to do. It has everything to do with making sure that when you are right you make a lot more money than when you are wrong. Last night at my talk we played a game in which people were only right 20% of the time, but almost everyone made money. Why? Because they made 10 times their risk when they were right and only lost what they risked when they were wrong. And if your total risk per position is small enough to tolerate long losing streaks, you can capitalize on the long term expectancy of the market.”
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

Yahoo! Messenger ID: saazalmu

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Friday, October 22, 2010

Weekly Trading Update (October 22, 2010)

“You will benefit greatly from putting in effort toward (trading) professionalism.” – Ken Long (brackets mine)


Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus my 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 my 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 I stick to my rules and keep my risk low, I’m immune to fear.

We’re dealing with active trade movement here; not passive trade movement which is a situation in which an instrument which demonstrates real move isn’t traded by the trader, and as a result, has no effect on the trader’s account. Only when an account contains open positions is the trade capable of realizing profits. While doing this, the golden rule mustn’t be forgotten – something that traders know very well but tend to forget once they’re in the markets.

AUDUSD
Primary trend: Bullish
The present AUDUSD situation is still an upward movement, although some temporary pullbacks may make us feel that the bearish reversal is in place. It seems that the northward push is getting very weak, but my technical conditions for a bear market haven’t been reached. I’d like to sell short when there’s a confirmed trend reversal. This should give us a nice trading opportunity.

NZDUSD
Primary trend: Bullish
We’re now in the midst of a corrective movement; and this shouldn’t be taken as a shorting signal. There are additional factors to be considered before the present bullish scenario is truly violated. If the present bearish correction continues seriously, then a ‘sell’ signal would be generated. Before then, I’ll not be trading this pair. A trade can be a mess if caught in the wrong direction. Is money missed not better than money lost?

EURCAD
Primary trend: Bullish
The northward journey goes on with this cross indefinitely. The more the CAD weakens, the more the trend continues. I presume the present scenario may continue until the end of this year.
Order: Buy Limit
Entry date: September 9, 2010
Entry price: 1.3100
Initial stop: 1.2950
Current stop: 1.3819
Exit price: N/A
Exit date: N/A
Status: Open
Profit/loss: 1198 pips
Percentage growth: 11.9%

EURAUD
Primary trend: Bullish
If the price doesn’t retrace to the 1.4000 that I’ve predetermined, I won’t enter a new position on this instrument. And if the bullish scenario continues, then all is well. The truth is that the AUD would be ultimately weakened and the bullish scenario would become stronger than ever. The bullish journey would continue until there’s a short selling opportunity. It’ll probably take a very long time.
Order: Buy Limit
Entry date: October 1, 2010
Entry price: 1.4000
Initial stop: 1.3850
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: N/A

EURNZD
Primary trend: Bullish
The outlook on the EURNZD is still bullish. The price touched the SMA 20 which tends to act as a support in an uptrend, only to move up seriously. while the ADX 20 level still calls attention to a strong uptrend, suggesting there’s still more leeway for the bulls to run. +DI is above its –DI counterpart. I don’t want to go long here (it’s an extended bullish run). Even if you’re a doubting Thomas; you could wait until a brand new signal in the opposite direction is confirmed, and you’ll reap some pips.

AUDJPY
Primary trend: Bearish
This cross is fundamentally moving sideways in a slightly bearish scene. When a shorting signal was generated, the price had gone too far for my liking. I only want to sell a rally in this kind of market. If you’d entered short on Tuesday, you could’ve been stopped out by now. I expect the price to move up to my entry point before my trade is filled: otherwise it’ll be eventually cancelled. If one signal is missed, another one would soon be forthcoming. Patience matters seriously in a long-term system. Impatient traders can enter bad trades when the markets are moving sideways, causing further losses. Yes shirts and socks can be lost, including a fiancĂ©(e). Why must one sell his house to pay up debt, just because of foolish trading decisions? Please try your best to retain your mate. I’m doing my best to retain my mate. I know the pains of getting separated from a loved one. Try to focus on important factors in your trading – enjoying yourself as much as possible. Right now, I’m enjoying a 50 Cent rap music track. If you make serious money from trading, wouldn’t you smile at the verse below?
“My flow, my show brought me the doe
That bought me all my fancy things
My crib, my cars, my pools, my jewels
Look nigga I got K-Mart and I ain't change…” Enjoy your trading.
Order: Sell Limit
Entry date: October 19, 2010
Entry price: 80.50
Initial stop: 82.00
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: 0%

Conclusion: There are different types of traders and trading styles. Some trade with relatively small amount of money, others bet everything on expensive, highly volatile instruments, some hold certain positions for months, years even, while some jump in and out of the markets in a matter of seconds. And if there’s one indelible truth we need to know, it’s that an averagely intelligent person can succeed at trading, and grow their portfolio substantially in a short amount of time. Regular people – trumpeters, carpenters, or contractors – have all achieved success on the markets. Some have to learn the hard way, others take a smoother part. Which one is applicable to you at this stage of your trading life? Just know that, like in any good battle, we got to have a trading plan.

A quote from Detlef Wormstall concludes this article. It’s about the kind of attitude needed towards trend trading:

“… Participation in the trend pattern should be extended as long as possible.”



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

Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.Get my

Does The Retail Forex Trading Work?

THE MAJORITY AREN’T ALWAYS RIGHT


‘Many traders, surprisingly, aren’t competitive at all: they’re drawn to trading because of a perceived easy lifestyle. These are among the least resilient traders. As soon as it becomes clear that trading out of a hole means real work, they lose motivation and interest.” – Steve Ward



Hello:

Why do some say they are no longer interested in trading? Some even believe that retail trading doesn’t work because they’re yet to see any consistently profitable retail trader! Some also think that only institutional traders are well equipped to make money thru trading – thinking that retail traders are simply incompetent. Some who abandon trading think there are many better ways of making money. Are they right? Before these questions are answered, please read the excerpts below, from the articles written by two great trading minds.

“The vast majority of market players will start with a trading book or seminar written or delivered by someone who writes books and delivers seminars, NOT a real market speculator. These books are filled with conventional use of indicators and chart patterns that simply don't produce consistent profits. If they did, the author would certainly not be selling the book to you. This leads to a novice trader thinking they can take a trading strategy short cut, and add a few indicators and oscillators to a price chart and let the computer find the parameters for each of those indicators that would have produced the best results in the past (back-testing). Typically, when the novice strategy trader begins trading with real money based on those quality hypothetical results and begins losing money, they take the next wrong step, they begin adjusting indicator settings and worse yet, they add more indicators. This is a path that leads to trading disaster, yet the novice strategy trader does not even know it. They say, "How can a strategy with such great back-tested numbers not work?" It doesn't work because the strategy is based on number crunching and curve-fitted, back-testing results.” – Sam Seiden

‘Many new traders begin by learning a variety of technical analysis tools. This usually comes from a seminar, a book or a website. Excited, the trader thinks he understands head and shoulder patterns and has just unlocked the secret to infinite wealth. He starts trading the patterns but finds them a lot harder to interpret in real time than in hindsight. Where exactly should he enter and exit? Having lost money on these patterns he hears another trader making money using the MACD indicator.

‘With renewed excitement he studies MACD and starts trading but still loses. The frustration is now building and confidence is low. A trader he met recently said he was making money trading gold. Perhaps that is the secret… so he switches… to trading gold yet still loses. A lady he met was using expensive charting software while he is still using free stuff. He purchases the fancy software, …more money down for doing so and still consistently losing in his trading. What could possibly be wrong? Perhaps the timeframe… he has heard that short-term traders make less than long-term traders, so he switches from one-hour charts to daily charts. Now the losses are larger and more drawn out over days and weeks. He understands the technicals but they’re simply not working out.

‘This is a common problem and many traders could recognize themselves or others who have experienced a very similar situation…” Nick McDonald

I have a friend who passed out of a reputable tertiary institution. Before he got a job at a regulated commercial bank, he worked for a wonder bank as an accountant. A wonder bank is an investment establishment that promises exorbitant returns on the money deposited with them (something just like a high yield investment plan). A wonder bank may promise you anything from 50% to 200% or more on a monthly basis. Of course the wonder bank intended to make those high profits from the Forex markets. Many greedy members of the public who liked to hear what they wanted to hear deposited their monies with the wonder bank. Eventually the investment failed and the monies went down the drain. This friend of mine who was working as their accountant was a witness of this fiasco. He read more about Forex and saw some honest experts saying it isn’t that easy. After getting a job at a legitimate bank, he started telling many people that Forex doesn’t work for individuals. Who wouldn’t believe a banker that was even formerly part of some supposed Forex gurus. You’ll see many people propagating my friend’s wrong beliefs about Forex. There are traders in his bank; and he thinks trading only works for institutional traders.

There’s another acquaintance of mine who used to boast of making regular profits from the markets; as if he were the one controlling the markets. When I asked him about the strategy he’d used, he mentioned a system that wasn’t different than what an average trader can get. In addition, the kind of training he got was what I wouldn’t even recommend to my enemies. Anyone who heard him talking with self assurances would’ve been tempted to give him their retirement money to trade with. After some weeks, I met him somewhere and he started telling me how he had losses on losses. He concluded that he’d never trade again and would never advise anyone to do Forex. He told me there were other easy ways to make money online (It became clear that what he was looking for was easy money, and when he couldn’t get it from Forex, he decided to look for other ways of making easy money online). People tend to blame the markets instead of accepting responsibility for their failure.

I know another respected banker who’s won many awards. He doesn’t believe in individual trading and doesn’t even want to hear about it.

It’s amazing to see those who aren’t traders (who haven’t even seen a market chart) making strong negative statements about Forex. Their opinions were gotten from floored market novices. Yes, some think trading doesn’t work because a defeated novice (posing as a professional) has told them so.

One group of marketers (pretending as pros) used to come from another state to my state every month to sell a trading product. They had something new to sell each month, mentioning each product as a Holy Grail. If a previous product failed, they mentioned the new one as the final breakthrough. They were so popular that they got tens of thousands of followers. Alas, they were teaching beginners extremely high risk trading and poor money management – claptrap. Nothing like risk management or trading psychology was mentioned or taught. I’m yet to see anyone coming out of their numerous seminars who’s still surviving on the markets. Seminars are only good for information dissemination: they don’t make you a professional in any field. No wonder only 90% of those attending seminars (not only on trading, but on anything whatever) succeed in real life. Later these seminar organizers began to advertise seminars on solar power; later, seminars on fueless generators; later, seminars on how to print recharge cards; and later, seminars on how to export agricultural produce. I called them and asked about Forex and they told me they were no longer teaching Forex (their boss wasn’t even answering any calls again). So these supposed trading professionals were actually marketers who weren’t committed to trading! Yet their former students kept on spreading false ideas about Forex. Yes people believe them because they look at them as experts.

There are some others who ask me for help – either free or paid. Some solicited for my professional support, and why the negotiation was going on, they were secretly venturing into trading with some ‘hidden professional(s)’ and/or trading with some apparently magical trading systems. After they’d lost heavily, they’d announce to me that they were no longer interested in Forex because they’d lost their money in trading. They often said, ‘If we lost thru someone who called himself a professional, then what’s special about you?’ There are some who think they know a lot about trading, but they’re actually novices. Please let their account histories speak for them.

Now let me emphasize some points: Firstly, institutional traders are never more skilled than professional retail traders. They merely have huge funds to trade with, and that doesn’t make them better than somebody who’s trading consistently profitably on a live micro account started with $50. The one who started with that $50 may even be far more competent than the one managing millions of dollars. One quail isn’t taller than the other; except the one that stands on a ridge. When people want to choose a trading mentor, they feel that the mentor must be rich, without thinking whether the person actually made his money from trading. They look down on skilled traders who aren’t yet extremely rich.

Secondly, the fact that you or/and your brother or/and the group you know have failed in retail trading doesn’t mean that it doesn’t work. It works for some people. Your failure doesn’t mean that every other person is failing. If you don’t know those who succeed in trading, I’ll tell you confidently that they exist. You failed and you decided to quit trading forever. They failed and decided to move on; learning from their mistakes. Your misinformed opinion has no effect on the biggest market on the earth. Again, your expertise in one arena doesn’t mean that your dastardly opinions about Forex are valid
The fact that you were misguided about the markets doesn’t mean there aren’t market professionals who speak the truth about the markets. If some had been led to their downfall, it doesn’t mean that there aren’t those who are being led to victory.

Thirdly, if you or any other person threatens to quit trading, it has no effect on anybody. Your presence or absence in the trading world makes no difference. My presence in the trading world is just like a drop in the ocean. The Forex markets are like China; she doesn’t know that someone is leaving. For anyone who decides to leave the States, thousands are dying to enter. For each person who threatens to quit trading, thousands of people are willing to enter. So your absence on the markets doesn’t affect anybody and the markets. As far as the trading world is concerned, no-one is indispensable.

If you leave trading for another kind of easy venture which is supposedly better than Forex, it’s likely that you’ll soon be disillusioned as you got disillusioned with trading. Success in any endeavor requires perseverance, resilience and sacrifice.

Finally, I’d like to tell you unequivocally that retail Forex trading works. One of the most important factors in achieving success in any arena is being in that arena long enough to develop the skills, knowledge, understanding and experience to enable you to achieve your best levels of performance. Along the journey to success as a trader there’ll be many setbacks, periods of drawdown, times when you question you own motivations to start trading, and times when you’ll face yourself, and your barrier.

For those of you who’ve decided to continue your journey to financial freedom, strong motivation provides strong resilience. Take an optimistic perspective in terms of seeing things as being temporary, and not taking them too personally. Focus on what you want to happen and how to create it, and not on what’s happening and how to stay there! Consider the trading risk you take in relation not just to the potential profit, but to the potential downside. Take risk management serious.

Please read another quotes as a conclusion:

“Taking a common form of technical analysis and applying a new name to it helps authors to sell many new books each year. Knowing the names of these patterns unfortunately does not help traders make money. Profitability requires more than a name; it requires an understanding of the technicals and then the skill and discipline to follow a proven and tested trading strategy through both good times and bad.” – Nick McDonald

“When they’re losing, resilient traders delve deeper into themselves and deeper into the markets. They gain motivation to figure things out. Lesser traders become mired in discouragement and frustration, spinning their wheels by venting (or acting out) their emotions or by avoiding trading altogether.’’ – Steve ward

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

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal
Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Friday, October 15, 2010

A Non-directional Trading System

DIFFICULT MARKETS PRODUCE FINE RESULTS

“A trader acts in a discretionary manner if he uses his own judgment and feels compelled by a special situation to intervene in the clearly defined operations of a trading system. The discretionary part is understood to be part of a trading system that cannot be back-tested.” --- Faik Geise

Hello:

Traders sometimes are concerned with what are happening on the markets right now rather than what happened in the past. A non-directional trading system is also known as a market neutral strategy, for there are some forms of market neutrality about 70% of the time. This is a strategy that capitalizes on the market’s unpredictability. It’s designed to make some profits no matter the direction of the markets. You don’t need to bother whether the market would move up or down or sideways. No matter which direction it goes, you make a profit. So market neutral strategies involve the combination of short and long positions to reach a certain level of neutrality regardless of the price direction. This means that they’re expected to bring profits if the underlying price moves especially inside a price range during the lifetime of the trade.

Trading with this kind of method has become agreeable to some trading minds because they allow passive income generation regardless of the market direction and by the same token avoiding overtrading every time the market changes its trend direction – amounting to lower trading costs in terms of spreads.

My non-directional trading system is used on GBPJPY with consistent weekly profits (no matter how small or big). My minimum weekly profit target is 25 pips and my maximum weekly profit target is 370 pips. I seek to open both long and short positions on the GBPJY at an optimum time. My weekly total trading time on this pair never exceeds 30 minutes. Thanks to a brilliant gentleman named Efe (I named the strategy after him). He explained his trading hunches to me, and I suggested that we try the idea for eight weeks. Amazingly, after the trial period, we were still in a plus zone; we had more profits than losses. We had over 600 pips. Then I decided to create another demo whose account history was attached with this article. Since August 8, 2010, another eight weeks have passed, and we’re still making profits - another profit of approximately 600 pips. What’s the secret?

This trading logic works well on GBPJPY. It’s extremely difficult to find other pairs/crosses on which it works, except on USDCAD. The only problem in using it on the USDCAD is that profits can’t be closed on weekly basis; they may be closed every fortnight or three weeks. Soon the results on USDCAD would be announced by the middle of next month. There are some characteristics peculiar to the GBPJPY which make this trading method ideal on it. My profits in the past two months are displayed below:

Period Percentage Growth

Week 1 0.8%

Week 2 1.6%

Week 3 1.2%

Week 4 6.33%

Week 5 0.79%

Week 6 1.26%

Week 7 0.6%

Week 8 0.73%

You can see that I made roughly 6.5% profit per month. If my position size was three times bigger than this, then I’d have made roughly 40% returns in two months. But my survival secret lies in the use of small lots (I use 0.01 lots for each $500), and rock-solid discipline to stick to my exit rules. Trade management is also critical in producing the expected results: it entails the survival tactics needed to trade another day. Once the exit criteria have been met, the next best action is to get out of the market. Don’t think that the markets could move further much in your favor. Too much confidence about a market direction is definitely not a good thing.

Nevertheless this strategy has two drawbacks:

The first drawback is that this strategy uses no stops, although it’s survived the market consistently for sixteen weeks in a row. This strategy has demonstrated its ability to survive without stops. There’s a technique I apply so as to deal with an open position if things get out of hand, and there can be some improvement to this strategy in the foreseeable future. I’m still thinking of incorporating the use of stop loss into the strategy. A final decision about this would be made in a month’s time. Right now there’s another demo account that’s being traded with this trading logic, and it’s in a profit zone. It uses a wide stop. The possibility of a considerable drawdown exists when a stop is being hit, but recovery is guaranteed (it’s only a matter of time). I’ve seen a swing system which uses wide stops and has been surviving the markets for 5 years! When I was still practicing with EAs, there was one EA called Forex Megadroid. It uses a wide stop and accumulated consistently small profits. It sustained occasional big drawdowns, yet always recovered over time. In fact, the trading premise, “back your winners, cut your losses” doesn’t seem to be always true of non-directional strategies.

The second drawback is that this strategy can’t be used on the trading platforms belonging to NFA-regulated brokers. In a really fair trading world, a good broker should definitely welcome all trading styles and strategies. Albeit certain traders’ freedom of trading styles and strategies are impinged on, NFA certainly think they got good intentions for enacting their recent rules. There are scores of dependable brokers the world over (with all other credibility factors being taken into consideration) that allow hedging. Please note that my other strategies are NFA compliant.

Conclusion: Looking for a trading system that fits you? Then devise a strategy that suits your personality. Successful trading styles are the ones that take advantage of people’s natural strengths; trading will test you to the limit, so make sure your style reflects your personality. Fabio De Castro advises that as with any other type of trading system, one requires a trading plan where the exit points for profits and losses are prepared in advance; and respected. ‘Planning the trade and trading the plan’ is largely recognized by all successful traders as the most important aspect to succeed in trading. And it’s never enough to repeat it again and again.

One of Dr. Van Tharp’s quotes below concludes this article:

“You probably spent years learning how to perform your current job at a high skill level. Do you expect to perform at the same high level in your trading without similar preparation? Most people spend years learning how to do their professional work. Doesn’t it make sense to put the same kind of effort into learning to trade? Financial market trading is an arena filled with world class competition. Additionally and most importantly, trading requires massive self-work to produce consistent, large profits under multiple market conditions. Prepare yourself to succeed with a deep desire, strong commitment, and the right training.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

Yahoo! Messenger ID: saazalmu
Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

A Non-directional Trading System

DIFFICULT MARKETS PRODUCE FINE RESULTS

“A trader acts in a discretionary manner if he uses his own judgment and feels compelled by a special situation to intervene in the clearly defined operations of a trading system. The discretionary part is understood to be part of a trading system that cannot be back-tested.” --- Faik Geise

Hello:

Traders sometimes are concerned with what are happening on the markets right now rather than what happened in the past. A non-directional trading system is also known as a market neutral strategy, for there are some forms of market neutrality about 70% of the time. This is a strategy that capitalizes on the market’s unpredictability. It’s designed to make some profits no matter the direction of the markets. You don’t need to bother whether the market would move up or down or sideways. No matter which direction it goes, you make a profit. So market neutral strategies involve the combination of short and long positions to reach a certain level of neutrality regardless of the price direction. This means that they’re expected to bring profits if the underlying price moves especially inside a price range during the lifetime of the trade.

Trading with this kind of method has become agreeable to some trading minds because they allow passive income generation regardless of the market direction and by the same token avoiding overtrading every time the market changes its trend direction – amounting to lower trading costs in terms of spreads.

My non-directional trading system is used on GBPJPY with consistent weekly profits (no matter how small or big). My minimum weekly profit target is 25 pips and my maximum weekly profit target is 370 pips. I seek to open both long and short positions on the GBPJY at an optimum time. My weekly total trading time on this pair never exceeds 30 minutes. Thanks to a brilliant gentleman named Efe (I named the strategy after him). He explained his trading hunches to me, and I suggested that we try the idea for eight weeks. Amazingly, after the trial period, we were still in a plus zone; we had more profits than losses. We had over 600 pips. Then I decided to create another demo whose account history was attached with this article. Since August 8, 2010, another eight weeks have passed, and we’re still making profits - another profit of approximately 600 pips. What’s the secret?

This trading logic works well on GBPJPY. It’s extremely difficult to find other pairs/crosses on which it works, except on USDCAD. The only problem in using it on the USDCAD is that profits can’t be closed on weekly basis; they may be closed every fortnight or three weeks. Soon the results on USDCAD would be announced by the middle of next month. There are some characteristics peculiar to the GBPJPY which make this trading method ideal on it. My profits in the past two months are displayed below:

Period Percentage Growth

Week 1 0.8%

Week 2 1.6%

Week 3 1.2%

Week 4 6.33%

Week 5 0.79%

Week 6 1.26%

Week 7 0.6%

Week 8 0.73%

You can see that I made roughly 6.5% profit per month. If my position size was three times bigger than this, then I’d have made roughly 40% returns in two months. But my survival secret lies in the use of small lots (I use 0.01 lots for each $500), and rock-solid discipline to stick to my exit rules. Trade management is also critical in producing the expected results: it entails the survival tactics needed to trade another day. Once the exit criteria have been met, the next best action is to get out of the market. Don’t think that the markets could move further much in your favor. Too much confidence about a market direction is definitely not a good thing.

Nevertheless this strategy has two drawbacks:

The first drawback is that this strategy uses no stops, although it’s survived the market consistently for sixteen weeks in a row. This strategy has demonstrated its ability to survive without stops. There’s a technique I apply so as to deal with an open position if things get out of hand, and there can be some improvement to this strategy in the foreseeable future. I’m still thinking of incorporating the use of stop loss into the strategy. A final decision about this would be made in a month’s time. Right now there’s another demo account that’s being traded with this trading logic, and it’s in a profit zone. It uses a wide stop. The possibility of a considerable drawdown exists when a stop is being hit, but recovery is guaranteed (it’s only a matter of time). I’ve seen a swing system which uses wide stops and has been surviving the markets for 5 years! When I was still practicing with EAs, there was one EA called Forex Megadroid. It uses a wide stop and accumulated consistently small profits. It sustained occasional big drawdowns, yet always recovered over time. In fact, the trading premise, “back your winners, cut your losses” doesn’t seem to be always true of non-directional strategies.

The second drawback is that this strategy can’t be used on the trading platforms belonging to NFA-regulated brokers. In a really fair trading world, a good broker should definitely welcome all trading styles and strategies. Albeit certain traders’ freedom of trading styles and strategies are impinged on, NFA certainly think they got good intentions for enacting their recent rules. There are scores of dependable brokers the world over (with all other credibility factors being taken into consideration) that allow hedging. Please note that my other strategies are NFA compliant.

Conclusion: Looking for a trading system that fits you? Then devise a strategy that suits your personality. Successful trading styles are the ones that take advantage of people’s natural strengths; trading will test you to the limit, so make sure your style reflects your personality. Fabio De Castro advises that as with any other type of trading system, one requires a trading plan where the exit points for profits and losses are prepared in advance; and respected. ‘Planning the trade and trading the plan’ is largely recognized by all successful traders as the most important aspect to succeed in trading. And it’s never enough to repeat it again and again.

One of Dr. Van Tharp’s quotes below concludes this article:

“You probably spent years learning how to perform your current job at a high skill level. Do you expect to perform at the same high level in your trading without similar preparation? Most people spend years learning how to do their professional work. Doesn’t it make sense to put the same kind of effort into learning to trade? Financial market trading is an arena filled with world class competition. Additionally and most importantly, trading requires massive self-work to produce consistent, large profits under multiple market conditions. Prepare yourself to succeed with a deep desire, strong commitment, and the right training.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

Yahoo! Messenger ID: saazalmu
Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

Clarifying Your Issues (Part 2)

MORE QUESTIONS ANSWERED

“Simplicity in your trading systems is one of the keys to making money.” – Dr. Van Tharp

Hello:

Here are more intriguing questions from my potential and existing subscribers, with detailed answers. These questions are in the mind of certain traders and the answers to them are supposed to help traders greatly. Please enjoy!

  1. If the markets aren’t really predictable, how come some analysts are still predicting? – K. A

Answer: The thought that the markets would behave in a certain way is futile: you’ll often be disappointed. Thinking that the markets are predictable is even more dangerous to your trading mindset because you’d not want to get out of a trade if you’re wrong, since you may feel that the market may soon reverse, and which mayn’t happen. You don’t need to predict the markets before you can make consistent profits. We trading analysts are humans like you, only that we use complicated trading jargon to impress. One thing I don’t like (and which would no doubt, continue) is the fact that most professional analysts like to create impression that they know what the markets would do in the near future. It doesn’t matter whether the person is talking on the most respected trading news program on earth. How many of them can mention with certainty when they’re going to die, where they’ll die and what’ll be the cause of their death? They predict the market and continue predicting, but you don’t see their personal trading results. Novices are angrily forlorn because they think gurus don’t lose. If I say I make 300 pips last month, some trading rookies may say: ‘Hey, that’s the geek who doesn’t lose!” If they ask me for signals and the first 2 signals lose, they become mad. But if I display my losing trades and winning trades, plus how I still survive. Then if people ask me for signals, they won’t get furious after 2 or 3 losses because they’ve seen how I display losses with profits and they know our profits would soon outgrow those losses. The purpose for trading isn’t to avoid losses, but to make more money than you lose. You don’t need a complicated strategy to achieve this; only a simple and stupid trading idea you need. However, vendors would always be pushing complicated strategies to traders (How would they have something to sell if they don’t do that?). Most people won’t learn their lessons until they’ve learned thru harsh personal experiences.

  1. I’m skeptical about your signals since I don’t know the reasons why you take your trades. Is having more reasons not important? – T. S.

Answer: How good and pleasant would it be if the markets were able to move in our favor because we have reasons for taking trades! Apart from certain no-rule traders, majority of trades are rule-based market players. Yet majority of traders lose. For example, a price action might be pushing up the upper band of the Bollinger Bands, when the RSI is overbought, when the Stochastic reading is in the overbought region, when a candlestick reversal pattern has formed, and many analysts are saying they’re expecting a reversal based on a certain fundamental event. You might still take that trade and lose. Making the best trading decision in the world is no guarantee that a trade can’t move against you, neither would the market respect you just because you know what’s going on in Bhutan or Vanuatu. Your survival on the markets requires something more than mere reasons for taking trades. Most trading reasons come from strategies (the least important factor in trading success). I’m not saying it’s bad to have reasons for taking a trade – for having no reason is even worse. I’ve reasons for taking my long-term trades, but my survival secret lies in cutting my losses and running my profits. With my short-term trades, I know that giving myself a nice risk-to-reward ratio is far better than having a reason. With my non-directional trades, I simply capitalize on the market unpredictability and stick to my exit criteria.

  1. Why do you use stop loss in some strategies whereas you don’t use it in your GBPJPY strategy? – D. I.

Answer: I’m an ardent advocate of the use of stop loss in trading. The importance of stop loss is without question and can’t be overemphasized. Nevertheless, this doesn’t mean that no-one on earth can survive the markets without the use of stops. The stop is a money management tool, but not a perfect one. There’s no perfect money management tool in trading. Both wide and tight stops have pros and cons. There are great traders who don’t use stop loss and make consistent profits. How? They use very small lots in proportion to their capital base and know exactly where to get out of the market if they’re wrong. They know if their trade isn’t going in their direction and they have the discipline to get out with a small loss. The use of stop loss is good on the condition that it’s respected. Stop loss is pointless if it’s widened further to avoid being hit or it’s later cancelled to avoid its being hit during a negative trade. And if your risk is too high (high lots in proportion to your account), then your stop won’t make much sense, since the drawdown would be too much anytime it’s hit. If you don’t respect your stop loss, then someone who uses very low risk and honors his exit criteria is far better.

As for me, I use stop loss in all my long-term and near-term trading techniques except the GBPJPY strategy which has been surviving the market consistently for 4 months now. Its secret lies in the optimal entry period, low risk (0.01 lots per $500), respect for exit rules and the unpredictable nature of the GBPJPY cross that’s being used to my advantage. I’m presently testing this same strategy with a wide stop and would see how it survives the markets with that. And to this end, it remains 4 weeks for me to reach a final decision, after which a stop might be incorporated into the strategy. For now, I’m enjoying small and consistent weekly profits on this strategy. As far as I’m concerned, making a consistent 10 pips every week is better than -10 pips weekly.

  1. Why do you announce more trading strategies and tweak the existing ones? - E. R.

Answer: Trading mastery is an ongoing journey. If you’ve been toiling and suffering in your quest for trading mastery, hope and help will come your way one day. If you don’t relent, there are many trading secrets you’ll stumble upon. While trying to play safe, I also figure out how to improve my trading results over time. For example, when the markets are ranging you could sell resistance and buy support safely. When the market is in a strong trending mode, then you simply need to sell support or buy resistance. Two consecutive losses in one week – amounting to a maximum of 3% drawdown - are enough to indicate to me that the market condition has changed. A strategy can survive any market condition if it’s flexible and adaptable according to an existing condition. I’m being exposed to numerous trading ideas on daily basis, but I need to first test them privately before deciding whether they’re worthless or worthwhile. There’s nothing wrong in tweaking your trading system to produce better results, or adding more systems to increase the overall profits. All roads lead to Rome!

  1. Could you please show us your past performances? – M. S.

Answer: I need to let you know that I’m much happier if my trainees and clients have good results on their trading portfolios. Past performances on my strategies are displayed in my Sunday articles. For my long-term trades, the entry times and prices, exit times and prices, plus trade management and profits and losses are explicitly stated in my Wednesday articles. You can monitor the trades on your own. A summary of my long-term trading results would also be displayed on monthly basis. There are strategies that show results in weeks and some show results in months. Long-term systems are good for investors who prefer to evaluate the returns on their investments on long-term basis. You got to know the kind of trader you are. Impatient traders should avoid systems that show results only after some months. Whatever you preference is, you’re welcome; whether you prefer to evaluate your trading results after weeks or after months.

  1. Why do you recommend the use of Yahoo! Messenger to your subscribers? - S. O.

Answer: Subscribers to trading signals ought to have more than one way of receiving the signals. There are trading rooms, secure web pages that display current trades in real time, email, SMS and IM. These means of receiving trading signals depend on the signals strategist, subscribers’ preferences, and the types of facilities available. Subscribers should have at least, 2 ways of receiving trading signals because only one means of signals receipt isn’t adequate. I currently send trading signals primarily thru email, but I seriously advise my clients to add me to Yahoo! Messenger so that they also receive instant trading alerts. Signals and messages are delivered via email and IM, and so is my customer support effort. IM is also good for knowing when I’m online. For all signals services, access to the Internet is mandatory. Even if you aren’t online, you can’t have access to a trading room.

  1. I seriously need help in trading consistently profitably on the markets. How can you help me or is there a strategy you could give me? - T.P

Answer: Free advice doesn’t mean anything to most people. Apart from those I’m training personally, a good way to get trading help from me is to read my articles – past and present. And more importantly, you may want to subscribe to my one-month free trading signals trial even if you don’t have much money. Why is this so? While it’s professionally unethical to give any guarantee, there’s a possibility that you could make some money during the free trial period to continue your journey to financial freedom. I also treat each of my clients as an honorable individual, not like a number.

I conclude today’s article with another quote from Dr. Van Tharp:

“System development software publishers know that most traders want to be able to predict the markets with high accuracy; therefore, most of these software packages allow people to optimize system parameters to their heart's content. Given enough leeway, a system developer can create a system that perfectly predicts market moves and makes huge returns on paper with certain historical data. In the live market, however, such a system will likely perform miserably—all that effort created a meaningless system. Worse, the confidence that these software packages can instill in a trader can be outright dangerous. By just clicking the mouse, you can overlay numerous studies over past market data. With certain historical data, you might even believe that the right combination of indicators can make the markets practically perfectly predictable. Using such systems to trade real money in the live markets has been the downfall of many traders just like you.”


Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &CoachEmail: amustapha@fxinstructor.com

Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com

And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.Get my

Thursday, October 14, 2010

Weekly Trading Update (October 14, 2010)

“Winners learn more from losses than from profits. When a profit is taken, there may be little room for improvement. When a loss is taken, a trader's self-discipline is the first thing to be examined. The second aspect of a loss is how did the actual price action cause the loss? Was there a trend reversal; an unexpected gap? Most beginning traders sustain losses due to emotional reactions. Traders should ask these questions: How could I have improved the trading results on this trade?” – Joe Ross

Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus my 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 my 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 I stick to my rules and keep my risk low, I’m immune to fear.

Always note that with sound money management even the worst trading system can succeed. Without it, the best trading system in the world won’t make you money. So when it comes to any type of trading, minimizing losses is the only way to stay profitable. This means that you got to develop the right trader mindset and the skills and discipline to stick to your strategies thru all the ups and downs that the market will throw at you. No-one said trading was going to be easy but the good news is that it’s very possible for those with drive and patience.

AUDUSD
Primary trend: Bullish
The present AUDUSD situation is still an upward movement. It’s not easy for a trend to change. Since prices don’t move in a straight line, it’s never advisable to try to pick top and bottom when the market is in a strong trending mode. Resistance and supports are merely trading assumptions (there are no absolutes in trading), though markets seem to respect them sometimes. But this doesn’t mean that they can’t be violated – as it’s true in this case of the AUDUSD. I’d like to remind you that the only action I’d like to take is to sell short when there’s a confirmed trend reversal. This should give us a nice trading opportunity.

NZDUSD
Primary trend: Bullish
There’s presently no end in sight to the bullish control on this pair. Short sellers should stay away from this market for now. But if you bought this pair about 2 or 3 weeks ago, then you simply need to continue riding the trend, locking some of your profits along the way. My next plan is to wait until I’d be able to sell short on this pair, and there’s a simple way to confirm this. Forget trying to memorize the names of hundreds of chart and candle patterns before you can place a trade – it’s completely unnecessary.

EURCAD
Primary trend: Bullish
I don’t need to regurgitate what I said last week about this cross. I’ll continue riding the trend until it’s definitely over, then I’ll try to enter into a good bearish ride. This is a position trading, so there’s no need to take a quick profit and run.
Order: Buy Limit
Entry date: September 9, 2010
Entry price: 1.3100
Initial stop: 1.2950
Current stop: 1.3696
Exit price: N/A
Exit date: N/A
Status: Open
Profit/loss: 995 pips
Percentage growth: 9.9%

EURAUD
Primary trend: Bullish
I can tell you that no matter what happens, the bullish power is just beginning on this cross. There may be some pullbacks on the market, but I can tell you that it’s going to be temporary. The eventual weakness in the AUD would only cause the market to rally nicely. There’s still a possibility for me to enter this trade at the price level 1.4000 if there’s a retracement to that level, and if not, I’ll never enter. The bullish journey would continue until there’s a short selling opportunity. It’ll probably take a very long time.
Order: Buy Limit
Entry date: October 1, 2010
Entry price: 1.4000
Initial stop: 1.3850
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: N/A

EURNZD
Primary trend: Bullish
The outlook on the EURNZD is still bullish. Unless the present scenario is seriously violated, I don’t see myself entering trading on this market. The price is still quoted above the SMA 20 while the ADX 20 level still lies below 40, suggesting there’s still more leeway for the bulls to run. +DI is above its –DI counterpart.

AUDJPY
Primary trend: Bearish
I broke even on my short order on this instrument. The present market condition poses a serious threat to possible bullish outbreak on the cross. In fact, I presently have a ‘sell’ signal, and I may set a pending order after the posting of this article. This pending order could be highlighted in my next trading report. I simply may need to sell a minor rally. When you see a nice set-up, why should you start an emotional tug of war within you? "Should I take this trade? What if I’m wrong? I need a little more confirmation before I pull the trigger! It’s here; pull the trigger before this one slips by? Are you sure?" Even if your mom was still nursing a baby, you might take the trade if your entry conditions have been met. LOL !
Order: Sell Limit
Entry date: September 15, 2010
Entry price: 81.00
Initial stop: 82.50
Current stop: 81.00
Exit price: 81.00
Exit date: October 6, 2010
Status: Closed
Profit/loss: 0 pips (breakeven)
Percentage growth: 0%

Conclusion: There is no system that won’t have its losing periods and it’s not good to abandon a system quickly because of a few loses in a row. If a system performs well in the past, it may do so well in the future. You must be willing to first become aware of your thoughts, emotions and behavior in order to effectively address them. With self-observation, introspection and self-reflection, you will begin to discover why your issues seem insurmountable; and why you continue to do things that you say you don't want to do; and why you don't do those things that you say you must do. Get rich slowly!


Another quote from Joe Ross concludes this article:

“But keep in mind that it takes more than an entry strategy to be successful. In fact, I have seen traders place orders by entering the market randomly. The traders then have to manage the trade from where they entered the market rather than starting with the perfect entry point. Amazingly, these traders are still able to come out profitably because of their risk management skills (percentage risk to their accounts) and because of their focus on their exit strategy. That's how important it is to know where you will exit!”


Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Weekly Trading Update (October 14, 2010)

“Winners learn more from losses than from profits. When a profit is taken, there may be little room for improvement. When a loss is taken, a trader's self-discipline is the first thing to be examined. The second aspect of a loss is how did the actual price action cause the loss? Was there a trend reversal; an unexpected gap? Most beginning traders sustain losses due to emotional reactions. Traders should ask these questions: How could I have improved the trading results on this trade?” – Joe Ross

Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus my 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 my 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 I stick to my rules and keep my risk low, I’m immune to fear.

Always note that with sound money management even the worst trading system can succeed. Without it, the best trading system in the world won’t make you money. So when it comes to any type of trading, minimizing losses is the only way to stay profitable. This means that you got to develop the right trader mindset and the skills and discipline to stick to your strategies thru all the ups and downs that the market will throw at you. No-one said trading was going to be easy but the good news is that it’s very possible for those with drive and patience.

AUDUSD
Primary trend: Bullish
The present AUDUSD situation is still an upward movement. It’s not easy for a trend to change. Since prices don’t move in a straight line, it’s never advisable to try to pick top and bottom when the market is in a strong trending mode. Resistance and supports are merely trading assumptions (there are no absolutes in trading), though markets seem to respect them sometimes. But this doesn’t mean that they can’t be violated – as it’s true in this case of the AUDUSD. I’d like to remind you that the only action I’d like to take is to sell short when there’s a confirmed trend reversal. This should give us a nice trading opportunity.

NZDUSD
Primary trend: Bullish
There’s presently no end in sight to the bullish control on this pair. Short sellers should stay away from this market for now. But if you bought this pair about 2 or 3 weeks ago, then you simply need to continue riding the trend, locking some of your profits along the way. My next plan is to wait until I’d be able to sell short on this pair, and there’s a simple way to confirm this. Forget trying to memorize the names of hundreds of chart and candle patterns before you can place a trade – it’s completely unnecessary.

EURCAD
Primary trend: Bullish
I don’t need to regurgitate what I said last week about this cross. I’ll continue riding the trend until it’s definitely over, then I’ll try to enter into a good bearish ride. This is a position trading, so there’s no need to take a quick profit and run.
Order: Buy Limit
Entry date: September 9, 2010
Entry price: 1.3100
Initial stop: 1.2950
Current stop: 1.3696
Exit price: N/A
Exit date: N/A
Status: Open
Profit/loss: 995 pips
Percentage growth: 9.9%

EURAUD
Primary trend: Bullish
I can tell you that no matter what happens, the bullish power is just beginning on this cross. There may be some pullbacks on the market, but I can tell you that it’s going to be temporary. The eventual weakness in the AUD would only cause the market to rally nicely. There’s still a possibility for me to enter this trade at the price level 1.4000 if there’s a retracement to that level, and if not, I’ll never enter. The bullish journey would continue until there’s a short selling opportunity. It’ll probably take a very long time.
Order: Buy Limit
Entry date: October 1, 2010
Entry price: 1.4000
Initial stop: 1.3850
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: N/A

EURNZD
Primary trend: Bullish
The outlook on the EURNZD is still bullish. Unless the present scenario is seriously violated, I don’t see myself entering trading on this market. The price is still quoted above the SMA 20 while the ADX 20 level still lies below 40, suggesting there’s still more leeway for the bulls to run. +DI is above its –DI counterpart.

AUDJPY
Primary trend: Bearish
I broke even on my short order on this instrument. The present market condition poses a serious threat to possible bullish outbreak on the cross. In fact, I presently have a ‘sell’ signal, and I may set a pending order after the posting of this article. This pending order could be highlighted in my next trading report. I simply may need to sell a minor rally. When you see a nice set-up, why should you start an emotional tug of war within you? "Should I take this trade? What if I’m wrong? I need a little more confirmation before I pull the trigger! It’s here; pull the trigger before this one slips by? Are you sure?" Even if your mom was still nursing a baby, you might take the trade if your entry conditions have been met. LOL !
Order: Sell Limit
Entry date: September 15, 2010
Entry price: 81.00
Initial stop: 82.50
Current stop: 81.00
Exit price: 81.00
Exit date: October 6, 2010
Status: Closed
Profit/loss: 0 pips (breakeven)
Percentage growth: 0%

Conclusion: There is no system that won’t have its losing periods and it’s not good to abandon a system quickly because of a few loses in a row. If a system performs well in the past, it may do so well in the future. You must be willing to first become aware of your thoughts, emotions and behavior in order to effectively address them. With self-observation, introspection and self-reflection, you will begin to discover why your issues seem insurmountable; and why you continue to do things that you say you don't want to do; and why you don't do those things that you say you must do. Get rich slowly!


Another quote from Joe Ross concludes this article:

“But keep in mind that it takes more than an entry strategy to be successful. In fact, I have seen traders place orders by entering the market randomly. The traders then have to manage the trade from where they entered the market rather than starting with the perfect entry point. Amazingly, these traders are still able to come out profitably because of their risk management skills (percentage risk to their accounts) and because of their focus on their exit strategy. That's how important it is to know where you will exit!”


Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Sunday, October 10, 2010

Should I Take NFP Serious?

‘The consistent application of an edge, even a small one, can make all the difference between trading success and failure (or mediocrity).’’D.R. Barton, Jr.

Hello:

It should be noted that I use pending orders mostly for my long-term trades. Pending orders hardly suffer slippage – only running the risk of not being filled. Instant executions are almost always filled but one can get filled away from the price one had in mind. A pending order also acts as an additional filter of potentially bad trades. With a long-term trading outlook, one mayn’t need to be bothered with some serious market gaps (caused by volcanoes, earthquakes, landslides, oil leaks, fraud, assassinations, terrorism, geo-political unrest, etc). Bad news is more likely than good news.

As you already know, taking a high probability trade implies common sense. You must always think of how much you are willing to lose provided you’re wrong. Whatever the amount is, simply multiply it by three, and based on what your charts are telling you, you then decide if you could achieve that kind of profit. If not, please forget about that trade.

You risk management parameters must be sound, for we all get caught occasionally; and that’s trading. Trading isn’t about the avoidance of losses; it’s all about making more money than you lose. Moving ahead in a week by 10 pips is far better than going backwards by -10 pips. Like what great Mr. Koala likes to say (aren’t you familiar with him on the FXInstructor’s blog?), “Hope you end your trading week in the green.” Kermit the Frog sang: “It’s hard to be green.” I’m happy when traders are in plus territory. May all your trades be green!

Here are my trading results last week:

Long-term Strategy

EURCAD

Order: Buy

Status: Open

Profit/Loss: 987 pips

AUDJPY

Order: Sell

Status: Closed

Profit/Loss: 0 pips (breakeven)

EURAUD

Order: Buy

Status: Pending

Profit/Loss: N/A

Short-term Strategies

Order: Sell

Status: Closed

Profit/Loss: 135 pips

Order: Buy

Status: Closed

Profit/Loss: -107 pips

EURUSD

Order: Sell

Status: Closed

Profit/Loss: -40 pips

EURUSD

Order: Sell

Status: Closed

Profit/Loss: 120 pips

EURUSD

Order: Buy

Status: Closed

Profit/Loss: 120 pips

USDCHF

Order: Sell

Status: Closed

Profit/Loss: 120 pips

My article this Friday would feature intriguing questions from my potential and existing subscribers, with detailed answers. These questions are in the mind of certain traders and the answers to them are supposed to help traders greatly. On October 22, 2010, my article would discuss the reasons why some respected bankers say they don’t believe in retail Forex trading, why some have developed strong hatred for Forex and whether their opinions are correct or not. On October 24, 2010, the past results on my GBPJPY strategy would be displayed while the concept behind the strategy is explained. On October 29, 2010, my article would highlight MT5 and its new features in contrast with MT4. As from next week, my subscribers would start enjoying trading signals based on the EURUSD-USDCHF strategy, in addition to the ones at hand right now.

Should I Take NFP Serious?

While fundamental analysis explains the causes of price movements, it is not easy to be used to identify exits and entries (an area in which technical analysis is by far superior). I used to have a fear of Non-Farm Payroll, but I saw that it did not improve any statistics on my portfolio. There are other news items that are nearly more powerful than NFP. I sometimes tried to close running positions to avoid NFP; only to regret seeing it pushing the market in my forecasted direction. I know some traders who avoid NFP, and still lose their sweat and socks to other market factors. At times, NFP would merely cause insignificantly temporary counter-trend or trend-following effects.

The Non-Farm Payroll shouldn’t be seen as a culprit for traders’ margin calls (by calling it ‘a margin call NFP’). Margin calls are usually a result of traders’ poor trading decisions. NFP or no NFP, trading risk managers could always survive all market conditions whereas gamblers couldn’t. For gamblers, it’s double or nothing. This has nothing to do with NFP, since it’s not only on NFP days that traders are at risk.

My aim is to trade only what I see, following the present sentiments of the markets, and not giving myself a headache about the unknown. I don’t want to idolize NFP, since it has only 50% chance of moving in my direction. Risking a very small amount of my account per trade has made it easy for me to be indifferent and unemotional about an individual trade. If a top trader like George Soros was happy with 40% returns per annum, why shouldn’t I be content with even 5% per month?

The quote below concludes this article:

“In the world of professional trading, I have found that the majority of the time, less choices often equate to better profits.” – Sam Evans

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

Yahoo! Messenger ID: saazalmu

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

Nice trading tips are available at: www.ituglobalforex.com

And my past articles are also available at: www.ituglobalforex.blogspot.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

The default minimum deposit amounts are: $100 for Micro accounts, $500 for Pro-Managed accounts, and $2,000 for Pro accounts However, an optional "suggested deposit amount" parameter may be used.