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Tuesday, November 9, 2010

Mid-week Trading Update (November 10, 2010)

“You shouldn’t let anyone discourage you from working towards consistent success on the markets. There are ways of managing risk, making better trades, making more than you lose over a long period of time, and reaching financial freedom.”

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. My preferred leverage is 1:100 and my position size is 0.01 lots for each $1000. My maximum drawdown in a week is 2% (worst case scenario). I use the Price Behavior rules for strategic decisions and customized indicators for tactical entries. I believe that a ‘buy’ signal that fails is a ‘sell’ signal; and a ‘sell’ signal that fails is a ‘buy’ signal. 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.

Trend following trading is of interest especially to the semi-active trader since entries and exits need to be made less frequent and so they don’t interfere with one’s day job. Trades should be entered with the attitude that ‘every trade is a loser until proven otherwise.’ So if you plan for the contingency of a loss. You should naturally, tend to keep your capital exposure at a minimum. A gambler may acquire unjustified profits. In this case, the unjustified reward may increase a trader's tendency to abandon trading plans in the future because he or she has been rewarded for doing so in the past. But the positive outcomes are usually short-lived, and a lack of discipline ultimately produces trading losses. Yes, anyone might win short term, but it's difficult to continue winning on a steady basis. More consistent winning requires self-discipline. I have no open positions at the moment.

AUDUSD

Primary trend: Bullish

The major trend remains bullish, though it looks like a strong bearish correction is imminent. The present threat to the bullish outlook would either be temporary or sustained. If sellers clearly prevail, then I’d find a good entry point to go short. I’ll never go long at this time.

NZDUSD

Primary trend: Bullish

This pair is in the experience of a reversal, but just like its AUDUSD counterpart, the pullback may be permanent or sustained. If it’s sustained, then I’ll need to find a way of going short. One effective survival method is aborting one’s losers and riding one’s winners; unless you’re trading on short-term basis. Without doing the right things on the markets, there can’t be any lasting success (doing the right things go against our psychology and the way we tend to think). However some marketers wouldn’t tell you this: deceptive marketers are a bane to the Forex world.

EURCAD

Primary trend: Bearish

The bears have come to power on this cross. A sell signal formed on November 18, 2010, and since I preferred to enter at the highest price of the day, I missed the signal. Price might still retrace to 1.4078, and it’ll be a nice entry point for me. This conservative measure is because of my reduction of the initial stop, as you might’ve noticed.

Order: Buy Limit

Entry date: September 9, 2010

Entry price: 1.3100

Initial stop: 1.2950

Current stop: 1.3819

Exit price: 1.3975

Exit date: November 8, 2010

Status: Closed

Profit/loss: 875 pips

Percentage growth: 8.7%

EURAUD

Primary trend: Bearish

My protracted pending order was eventually triggered and the price went the wrong way (what went against me well moved in some other traders’ favor). The market is now in a bearish mode. Immediate resistance and support levels have less significance when the market is in a strong trending mode.

Order: Buy Limit

Entry date: October 1, 2010

Entry price: 1.4000

Initial stop: 1.3850

Current stop: N/A

Exit price: 1.3850

Exit date: November 5, 2010

Status: Closed

Profit/loss: -150 pips

Percentage growth: -1.5%

EURNZD

Primary trend: Bearish

The NZD is still more powerful than the EUR. While it’s true that a weaker NZD might lead to the rise of this instrument, the present trend is bearish. The price is now far below the SMA 20. The ADX 20 level is above 38, suggesting a strong downtrend. +DI is below its –DI counterpart. It might be too late to go short now, since this would give a poor risk-to-reward possibility. The next best option is to wait for a possible rally and find an appropriate time to go long.

AUDJPY

Primary trend: Bullish

This market seems to be ranging at this time, after which it may resume its bullish journey or experience a strong bearish reversal. If the last assumption comes to pass, then I’d want to sell. Then I’d mind my risk control rules. Any trading strategy pales into insignificance if compared to the value of risk management. Risk control often leads to resounding success. But if one ignores this, risking too much, one might find himself kneeling down when things go awry. True, one might find oneself on his knees praying, ‘Please Lord, get me out of this trade and I swear I’ll never trade again.”

Order: Sell Limit

Entry date: October 19, 2010

Entry price: 80.50

Initial stop: 82.00

Current stop: 79.50

Exit price: 79.50

Exit date: November 1, 2010

Status: Closed

Profit/loss: 100 pips

Percentage growth: 1%

Conclusion: Why do most people trade? Obviously, it's for the profits and what the profits can get you. The great irony, however, is that the single-minded pursuit of profits usually doesn't lead to success. It is crucial to focus your energy looking inward. There are absolutely no guarantees in trading, and you’ll never be right all of the time. But if you have an edge that’s utilized correctly, it’ll give you a tremendous advantage over 80% of the traders.

The quote below concludes this article. It’s a food for thought:

“... Don't let your net worth define your self worth. It's tempting to let your account balance dictate what you think of yourself. The winning trader, however, doesn't care about profits. When you focus on profits as a source of self-worth, you start putting contingencies on the value you place on yourself. When you are doing well, you feel good, but when you are doing poorly, you feel inadequate. It's wise to remember that you have value regardless of your account balance. You are a creative, intelligent, and worthy person no matter how much money you have in your account.” – Joe Ross.

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.

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