Friday, January 28, 2011

Weekly Trading Update (January 28, 2011)

“The market follows a set pattern with great regularity, one that can be exploited if recognized early enough. And just when market participants get most comfortable, the pattern is broken.” - D.R. Barton, Jr.

"Some of the best trades come when everyone gets very panicky. The crowd can often act very stupidly in the markets. You can picture price fluctuations around an equilibrium level as a rubber band being stretched – if it gets pulled too far, eventually it will snap back. As a short-term trader, I try to wait until the rubber band is stretched to its extreme point." - Linda Bradford Raschke


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 and a shorter timeframe 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.

There are many things many novice traders don’t know that they don’t know. They may think they’re great traders during easy markets but may quickly find out that they’re not during difficult markets. The markets can behave strangely sometimes. If you’re a good trader, you make money in easy market, and stay away or carry out minimal trading activities during bad markets. The losses in bad markets are then recovered when the market situations become favorable. It’s like presenting 43.60% annual profit regardless of 29.68% drawdown experienced during the year. You can see, it’s all about your ability to recover losses.


Primary trend: Bearish

On this pair there has been a serious power tussle between bulls and bears. The bias is now bearish, but the downward movement is being impeded, whereas price has constantly failed to rally above 1.0000 level. If this failure continues, the pair is expected to fall heavily on any surprise news that may weaken the Aussie or boost the Greenback. I still have an open position on the pair.

Order: Sell

Entry date: January 20, 2011

Entry price: 0.9958

Initial stop: 1.0065

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Open

Profit/loss: 46 pips

Percentage growth: 0.4%


Primary trend: Bullish

Unlike the AUD, this pair has been able to bring the USD to visible subjection this week; thus maintaining its long-term bullish outlook. Since the NZD is ahead of time, I try to evaluate trading possibilities on it during the Asian session. Early times are crucial because the markets are heavily influenced by the different sessions and entry of different volumes of traders around the world.

Order: Buy

Entry date: January 10, 2011

Entry price: 0.7639

Initial stop: 0.7539

Current stop: N/A

Exit date: January 20, 2011

Exit price: 0.7639

Status: Closed

Profit/loss: 0 pips (breakeven)

Percentage growth: 0 %


Primary trend: Bearish

Yes the primary trend is still bearish but there’s a serious threat to it. If the present bullish correction continues for a few more days (something that’s been going on for almost 3 weeks), then the bearish sentiment is no longer valid. If there should be a remarkable weakness in the Euro, this outlook may change.


Primary trend: Bullish

There’s no doubt about it, the EUR is very strong recently. Unless there’s something significant that can change the present scenario, the trend would continue. There’s a strong resistance at 1.3800: which may halt the current bullish move. If this level fails to halt it, the price on this market would skyrocket, especially given the much anticipated further weakness in the AUD. Whether a trader is bearish or bullish, a worse case scenario would often be avoided with sensible use of Stops - always respect your Stop orders.


Primary trend: Bearish

The former bearish aura was almost rendered invalid because of the special strength the Kiwi is presently exuding. This cross is now experiencing a pullback to the downside. I went short upon the generation of a southward signal. The price is now being quoted below the SMA 20. The ADX 20 level showing low volatility, +DI is traveling below its –DI counterpart. Time would tell how the market plays itself out.

Order: Sell

Entry date: January 26, 2011

Entry price: 1.7827

Initial stop: 1.7927

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Open

Profit/loss: 91 pips

Percentage growth: 0.9%


Primary trend: Bearish

This cross remains volatile; a scenario that has been going on for many weeks. Intraday traders would’ve gone short several times whenever the price hits the upper Bollinger Bands, while going long whenever it touches the lower Bollinger Bands – with a measure of accuracy. Trade management should also be constantly applied, since a sustained trend on this market is imminent. Keep in mind that markets often rise much higher than you can imagine, and also drop lower than you can imagine.

Order: Buy Limit

Entry date: January 13, 2011

Entry price: 82.00

Initial stop: 81.00

Current stop: N/A

Exit date: January 20, 2011

Exit price: 81.82

Status: Closed

Profit/loss: -21 pips

Percentage growth: -0.2%

Conclusion: The simplest answer is typically the right answer. No trader can be successful without having a deep understanding of how and why the markets move. By accepting the trading principles used by consistently successful traders, you can make necessary preparations in your trading activities and become a permanently successful trader yourself.

This article is ended with quotes from Mike McMahon, a seasoned real market speculator with over 20 years of experience:

1. “There must be a buyer for every seller or the markets would collapse… We cannot know in the absolutes what the markets can and will do, but we can learn to be prepared for the possibility of a change in the ‘weather.’”

2. “The psychology of the media is to create enough disturbances in the minds of the common people that they consistently make bad financial choices for themselves – therefore, the uncommon people, the professionals, profit.”

3. “There are always, at least, two levels of involvement – the retail and the wholesale. There are two kinds of players, the uneducated, who invariably pay – and the educated, who invariably reap.”

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


Get my Forex trading signals at:

And my past articles are also available at:

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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