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Saturday, February 26, 2011

EURUSD-USDCHF Correlation Strategy

THE POWER OF PRICE MOVEMENT

“The market does not reward iconoclasts.” – Joseph Trevisani

Hello:

Technical analysis is essentially the study of human behavior. Many price actions can be used to the trader’s advantage provided that he understands how each price action functions. Correlation as a price action is of enormous importance. Markets are generally uncorrelated during consolidation periods and correlated while trending. We generally operate under the assumption that losses generated when the trend weakens will be recovered when the trend resumes.

The Pedigree of the Strategy

There had to be better ways of curtailing risk and correlation strategies are proving to be one of the answers. Correlation is good profit in itself, as well as being an effective check on risk. For those who weren’t aware of it, the EURUSD tends to be negatively correlated with the USDCHF, whereas it often gets positively correlated with the GBPUSD. Furthermore the AUDUSD and the NZDUSD generally get positively correlated; and so are the EURAUD and the EURNZD. Likewise, the EURJPY and the GBPJPY are positively correlated. There are other examples that time wouldn’t permit me to mention.

This article would focus on the EURUSD-USDCHF correlation. It’s very rare to see both the EURUSD and the USDCHF going up, but it isn’t rare to see both of them coming down. What would happen if the EUR is weaker than the USD while the USD itself is weaker than the CHF? Both the EURUSD and USDCHF would be caught in bearish moves (as evident on December 2010). With this strategy, I consider it sensible to call short trades only since it’s assumed that a pair that rises would eventually fall. Short positions are opened each on the EURUSD and USDCHF. A loss from one pair is recovered by a profit from the other pair. Plus profit would be maximized if both pairs are falling. It’s easier for spot Forex prices to drop than to rise, and there’s no such thing as a permabull market.

Entries and Exits

This is an NFA-compliant cum non-directional strategy: it’s a purely discretionary system – incorporating rule-based entry and smoothing techniques. In order to know when to enter and when to exit, the RSI (Relative Strength Index) 14-period is used. There’s a need to avoid too many or too scanty signals, and that’s why a 4-hour chart is used. The chart we watch is the EURUSD chart. We enter 2 ‘sell’ orders on the 2 pairs when the RSI is in the overbought region and exit when it gets to the oversold region (with the understanding that there would be a positive difference between the result of the EURUSD trade and the result USDCHF trade). We don’t enter the market again until the RSI reverts back to the overbought region. Please, bear it in mind that it may sometimes take a long time for the RSI to move from the overbought region to the oversold region and vice versa.

Trade Management

As said earlier, loss from one position is compensated for by profit from the other position. Moreover, profit is usually optimized in that the EURUSD moves faster than the USDCHF. A position size of 0.01 lots per trade is used for each $1000 (thus making it 0.1 lots for each $10000). The Stop Loss is 500 pips from the entry price and no take profit is set – for profits are always taken when the RSI is traded thru. The wider the Stop, the larger the annual returns, but the tighter the Stop, the smaller the annual returns (whereas tighter Stop reduces the exposure of a portfolio). The tighter the Stop, the higher the number of trades, and vice versa. The tighter the Stop, the lesser the trading accuracy while a wider Stop brings more accuracy (but lesser accuracy can also bring good results). Coupled with small position sizing, a tighter Stop brings higher drawdown whereas a wider Stop brings smaller drawdown.

A Trade Example

The accompanying chart depicts the EURUSD when it was falling and how I took an advantage of it. Between December 31, 2010 and January 10, 2011, the EURUSD fell by over 450 pips. You’d get more insight into this correlation methodology by trying to check the 4-hour chart movement on the USDCHF during and after this period. The vertical red line on the left shows where a short trade was entered and a similar line at the right shows where it was exited. The strategy you need to make money should be simple, but powerful.

Conclusion: It’s very much important that enough patience is exercise as regards the entry and exit criteria of this strategy. The article above is a free gift for all my readers (it shouldn’t be used for any commercial purposes), and therefore any questions and opinions about it are welcome. Finally, it doesn’t entail any solicitation to assume a market decision.

NB: An article about effective gap trading in Forex is coming soon (but only my clients would have access to the account on which it’s being traded).

I’ll end this article with a quote from Christian Lukas:

“The enormous effort that goes into collecting information can be considerable reduced by using a systematic approach … If a trader achieves profits after careful analyses, then these are based on his own skill, which creates confidence. And if he makes loses despite spending a great deal of time conducting an analysis, he knows at least that those losses are just part of the system.”

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

Are you facing any challenges in trading? You might want to explore the secrets of markets wizards and duplicate their success. Get the secrets from my past articles at:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

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

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, February 25, 2011

Weekly Trading Update (February 25, 2011)

“Because the market is unique, it does not follow most accepted cultural myths… That is why intelligent and educated people can succeed at any other business but fail at trading because the usually effective life-model that works in the real world is not the same paradigm that creates price action.”– Dr. Woody Johnson

Hello:

It’s no longer news that most traders (approximately 90%) lose. But the most important thing is that you MUSTN’T be in that group. What can you do to avoid being in that group? The simple answer is hard work, the knowledge of how the markets functions, and bringing yourself into harmony with trading truths. It’s better to stick with the market principles that work instead of going from one trading system to another. Successful trading isn’t for those who find it difficult to exercise patience (those who prefer instant gratification). It’s like hoping to harvest oranges in the same week you plant orange seeds. Digging a 50-inch hole while searching for water is better than digging many 5-inch holes in many areas of land. A 50-inch hole has a better chance of reaching water than a 5-inch hole.

AUDUSD

Primary Trend: Bullish

The G20 meeting over the last weekend didn’t produce tradable gaps: perhaps owing to the US bank holiday on Monday. The earthquake that rocked New Zealand affected the AUD since Australia is a major economic partner of New Zealand. My pending order was triggered and the market reversed in my favor before the Stop was hit.

Order: Buy Limit

Entry date: February 17, 2011

Entry price: 1.0015.

Initial stop: 0.9915

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Open

Profit/loss: 84

Percentage growth: 0.8%

NZDUSD

Primary trend: Bullish

The earthquake that hit New Zealand was a grievous event. The country’s economy is already fragile and the Kiwi plummeted heavily on Tuesday because of the natural disaster. This resulted in setups for those who’d buy a pullback on the NZDUSD in the context of the present uptrend. The market has now entered an equilibrium zone. My pending order was filled but the Stop was hit before the price had the chance of consolidating. Market prices are like faits accompli.

Order: Buy Limit

Entry date: February 17, 2011

Entry price: 0.7550

Initial stop: 0.7450

Current stop: N/A

Exit date: February 22, 2011

Exit price: 0.7450

Status: Closed

Profit/loss: -100

Percentage growth: -1%

EURCAD

Primary trend: Bullish

The market has succeeded in sustaining a bullish bias up till now. The price reached a peak of 1.3709 and retraced. If the present support holds, we may see a new rise in price, testing the previous resistance. If the 1.3700 level is broken, then the next price target may be 1.3800. However, there must be a continuous weakness in the CAD for this scenario to continue. I got a pending order on this market - trying to buy a pullback.

Order: Buy Limit

Entry date: February 25, 2011

Entry price: 1.3527

Initial stop: 1.3427

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Pending

Profit/loss: N/A

Percentage growth: 0

EURAUD

Primary trend: Bullish

When the bad news from New Zealand hit, it affected all the pairs and crosses that have the AUD and the NZD as base currency or counter-currency each. Since it had a temporarily negative effect on the AUD, the EURAUD understandably rose. Experts have long been puzzled over the market’s ability to process information rapidly. I have a long trade on this cross.

Order: Buy

Entry date: February 16, 2011

Entry price: 1.3499

Initial stop: 1.3399

Current stop: 1.3581

Exit date: N/A

Exit price: N/A

Status: Open

Profit/loss: 176 pips

Percentage growth: 1.7%

EURNZD

Primary trend: Bullish

The NZD is currently too weak to withstand the strength of the EUR. There’s a probability that the present scenario would continue. The price is now far above the SMA 20. The ADX 20 level is showing a very strong trend – something that could cause a new but transitory pullback. +DI has been gallantly above its –DI counterpart for days. I’m waiting to buy a correction on the market.

Order: Sell

Entry date: February 2, 2011

Entry price: 1.7832

Initial stop: 1.7932

Current stop: 1.7725

Exit date: February 4, 2011

Exit price: 1.7725

Status: Closed

Profit/loss: 100 pips

Percentage growth: 1%

AUDJPY

Primary trend: Bullish

This week has been bearish for this market, simply because there’s some strength in the JPY. This is also evident in the movement of the GBPJPY and EURJPY. It seems that the market is hesitating along the lower Bollinger bands. If the JPY’s strength continues to hold, the southward correction may continue, meaning the beginning of a new trend. And the primary trend would eventually turn bearish. Whatever you do on the markets, you’ll immediately get the feedback you deserve.

Conclusion: Dan Zanger has achieved excellent trading results over the last 12 years. He turned $11,000 to over $42 million in 24 months (making roughly 29,000%). He’s now a world record holder. While his position sizing may be considered high (given his RRR over time), it’s worth noting that his trading approach has worked for him consistently for many years. The main point here’s that a trading approach that works doesn’t change with time or changing market conditions. Despite his knowledge and experience, Dan Zanger also has had to accept losses. Regardless of occasional losses, he moves ahead.

Remember, if you have an effective trading system, you’d continue to move ahead irrespective of losses. But very few people would be able to survive the markets using big trading volume like Mr. Dan. In other words, low risk remains the key for long-term survival.

This article is ended with more quotes from Dr. Woody Johnson:

1. “One of the most important tenets of trading is to follow you plan and engage in ‘rule-based’ executions. Rule-based trading is the cornerstone of getting the results that you want and experiencing profitable returns. Rules are also part of life… Now, if your behavior is based on solid, effective rules, then you are going to get more of the results that you want; but if your rules are weak and based on illogical or ineffective foundations, then your results would no doubt suffer.”

2. “You must trade with your best when you are in the markets; nothing else will provide you with consistent winning results (where winning is defined as planning your trades, trading your plan and following all of your rules religiously). Your mental game is critical. Trading is a 100% mental game. Your performance is not based on anything physical; it is all mental hence, mental and emotional tools are required.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Senior Analyst

FX Instructor, LLC

Email: amustapha@fxinstructor.com

Are you facing any challenges in trading? You might want to explore the secrets of markets wizards and duplicate their success. Get the secrets from my past articles at:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

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

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.

Saturday, February 19, 2011

How Top Traders Think

“You cannot be a successful trader if you are not willing to have both profits and losses… "It’s like only wanting to breathe in and not wanting to breathe out." Both are a significant part of the trading process... The other half of the equation is also important (and equally puzzling). You can’t put too much importance in gains. People who value profits too highly, tend to take them quickly. Why? Because if they don’t take them, they are afraid they will get away.– Dr. Van K. Tharp

Hello:

It’s true that if you continue to work hard on the market, you’d eventually achieve constant survival that you dream of.

Last week, my GBPJPYUSDCAD Hedging strategy experienced some tolerable drawdown – something that would be recovered soon. In addition, I saw about 7 gap trading setups on Monday and I traded accordingly. On Friday, I closed all open positions with roughly 500-pip profit. Yes my clients’ appetite is being whetted in advanced, since they’re ready to become beneficiaries of this effective trading methodology.

Last week, I was again invited by another former trainee of mine. As a financial expert, he served in the federal civil service for 35 years. After retirement, he dabbled into agriculture without expert knowledge – only to lose a lot of money. Can you now see that trading isn’t the only business that entails serious challenges? However, he was lucky enough to have started Forex training on the right path. He practiced rigorously for almost 3 years before deciding to play the market with real money.

When I saw the account he was managing, I was amazed. He’d made over 2600 pips in 4 months! I saw 500+ pips as open profits and they increased to almost 700 pips before I left. I was extremely glad that he’d stuck to the risk management parameters I recommended to him. He was able to survive December and January as well, plus he suffered occasional drawdowns which were recovered eventually. If you feel that 26% returns in 4 months are a small profit, then it’s high time you did something else.

He and the engineer I visited earlier had something in common. This thing would soon be revealed to my clients. Yes my trainees and clients are the direct beneficiaries of my trading methodologies.

How Top Traders Think

Top traders believe in their trading systems (systems that have positive expectancy) and their own ability to remain calm whatever happens on the market. They know that trading is a game of probabilities.

They know that all trading strategies in the world would have periods of losses each, and therefore survival is all about limiting your risk and giving away as little portion of a trading portfolio as possible. Whenever a strategy experiences a drawdown, they know it’s just part of the game – for the strategy would recover in due course. It’s only a matter of time. They know that they don’t need to expect every trade they take to win: what they need to do is trading according to their entry criteria and managing each trade according to their predefined rules. They don’t ignore a trading signal merely out of fear, nor do they increase their risk because of overconfidence. Their main goal is to be more effective in trading, not struggling to force out higher hit rates.

Dr. Van, quoted above, says further: “Most people… want to be right all the time. They want to make money on every trade. Yet that will not happen because losses are a part of the trading process. When you understand the relationship, however, you can come to terms with losses and make them okay. A natural part of the trading process is to have a point at which you must unload a position or trade at a loss in order to preserve your capital. Those losses will happen to most people about half of the time or more. And you must make them okay or neutral. If a loss is not okay, you will not take it. When you’re not willing to take a loss, it usually gets a little bigger. When it rains, it pours. As a result, it becomes even harder to take—much more painful. If you didn’t take it the first time, as it becomes bigger you will be even less likely to take it. What’s likely to happen? It probably will become even bigger. The cycle typically continues until the loss becomes so big that you have to take it. This typically occurs when you get a margin call from your broker.”

For certain people, it may take many years to develop a normal trading mindset; for others, they speed up their personal evolution as traders and survive their learning curve more quickly than imagined. If you can cultivate the kind of the mindset discussed here, you’ll soon see the seed of trading genius germinating within you. The team here at Fxinstructor.com is doing everything in their capacity to help you become the best trader you can be. You’ll do yourself a great favor by capitalizing on the services they offer.

NB: An article about effective gap trading in Forex is coming soon. Plus my article next Sunday would discuss the power of correlation.

Please let me end this article with another quote from Joe Ross:

Accurately gauge your trading skills and trade accordingly. If you're a master trader, then it's important to trust your instincts. But if you are a novice trader, it's prudent to be a little more cautious. Don't trade beyond your skill level. Realize that you may not have the experience to trust your instincts unconditionally. Trading takes experience and practice, and until you reach the status of a master trader, manage your risk, take it easy, and hone your trading skills.” – 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

Yahoo! Messenger ID: saazalmu

Are you facing any challenges in trading? You might want to explore the secrets of markets wizards and duplicate their success. Get the secrets from my past articles at:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

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

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, February 18, 2011

Weekly Trading Update (February 18, 2011)

“One of the highest orders of trading success is the ability to rapidly change market opinion… One could even say that limiting risk is the most important point in trading.” – Marko Graenitz

Hello:

A novice trader is happy when he wins a trade but becomes angry when he loses a trade, whereas a professional trader is indifferent to both winning and losing trades. What matters most to a professional trader is the discipline to follow his rules and trade accordingly. Being a master trader isn’t something that is beyond your reach; only that you must accept some established trading facts. If you fail to accept these facts, I can guarantee you that you’d accept them the hard way (usually thru your personal experiences).

You’ve no control whatever of the markets. The markets will do what they’ll do: they move without having you in mind. Their movements can be in your favor or against you, and that’s why you need to risk as little as possible when trading. This little risk is your personal choice. It ensures your survival when things go against you. You can determine when to trade and when not to trade, plus how you’d trade. You’re responsible for whatever you do on the markets. You can’t predict the future, nor can you predict the markets correctly always. There’s no way around these facts.

AUDUSD

Primary Trend: Bullish

The AUDUSD experienced occasional pullbacks in price but never went lower than 0.9940. It seems that the pair is posed for another bullish run, provided the dollar fails to gain any meaningful strength over time. I got a pending order on the pair.

Order: Buy Limit

Entry date: February 17, 2011

Entry price: 1.0015.

Initial stop: 0.9915

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Pending

Profit/loss: N/A

Percentage growth: 0

NZDUSD

Primary trend: Bullish

There was some weakness in this pair, but it now looks like the weakness is coming to an end. Should there be any meaningful strength in the NZD, then this pair would rise steeply. I set a pending order with the hope buying some correction. The expectation is not 100% guaranteed, yet whatever happens on the markets should be properly handled. That’s why trading psychology and risk management are far more important than any strategy. Well, for those who think that trading systems are the key, it’s a matter of the tail wagging the dog.

Order: Buy Limit

Entry date: February 17, 2011

Entry price: 0.7550.

Initial stop: 0.7450

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Pending

Profit/loss: N/A

Percentage growth: 0

EURCAD

Primary trend: Bullish

There has been a serious correction in the midst of the current bullish outlook. This bearish correction was being limited. However the bullish run is also currently very limited. Time will tell whether the buyers would regain power or sellers would succeed in turning the present correction to a new bearish trend.

EURAUD

Primary trend: Bullish

This market has been ranging for sometime now. There were some bearish attempts that failed, whereas bullish attempts were also limited for now. An experienced trader should be prepared for any moves; whether bearish or bullish (using predefined rules). This is tangible. A tangible action is based on realities rather than something theoretical. Theoretical models are based on several unrealistic assumptions.

Order: Sell Stop

Entry date: January 28, 2011

Entry price: 1.3700

Initial stop: 1.3800

Current stop: 1.3528

Exit date: February 9, 2011

Exit price: 1.3528

Status: Closed

Profit/loss: 170 pips

Percentage growth: 1.7%

EURNZD

Primary trend: Bullish

Like I said last week, the bullish movement on this cross has continued because of a noticeable weakness in the NZD. There’s probability that the present scenario would continue. The price is still above the SMA 20. The ADX 20 level is now showing strong volatility. +DI is has been clearly above its –DI counterpart for several days in a row. I have no open trade on this market yet.

Order: Sell

Entry date: February 2, 2011

Entry price: 1.7832

Initial stop: 1.7932

Current stop: 1.7725

Exit date: February 4, 2011

Exit price: 1.7725

Status: Closed

Profit/loss: 100 pips

Percentage growth: 1%

AUDJPY

Primary trend: Bullish

Since the gap that occurred at the opening of the market last week, this exotic cross has moved upwards by over 300 pips. The weakness in the JPY is corroborated by the fact that the EUR and the GBP have also been rising against it. The odds are against the Yen recently; something that are expected to continue unless there’s a significant change. Out of myriads of ineffectual trading opinions, there would be some effective opinions. Like any river of gold there’s a ton of dross for every ounce of gold nugget.

Conclusion: If the Euro continues to gain strength, we’d see continued bullish movements in EURCAD, EURAUD and EURNZD. Otherwise, these crosses would depreciate considerably. It’s also possible that the USD may gain some sustained strength very soon, and if it’s so, there may be some prolonged bearish moves on the AUDUSD and NZDUSD. If the USD continues its weakness, however, the AUD and the NZD may be able to shrug off any downward moves against the USD.

I conclude this article with more quotes from Scott Andrews, a highly efficient gap trader:

1. “I started studying and by 2004 I knew that trading was something I wanted to do for the rest of my life…I would say I started with an account that was significantly larger than my trading skills justified. After some initial success, I began struggling and scaled back quickly. I then slowly increased my position size as my confidence and results improved.”

2. “The only concern I ever really had was how long it would take me to achieve consistent profits and how long my wife would continue to support me and my new passion. Thankfully, she was very patient.”

3. “The only thing that still “frustrates” me from time to time is getting stopped out right before a trade becomes a big winner. It does not happen often, but still more than I would like.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Senior Analyst

FX Instructor, LLC

Email: amustapha@fxinstructor.com

Are you facing any challenges in trading? You might want to explore the secrets of markets wizards and duplicate their success. Get the secrets from my past articles at:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

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

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.

Saturday, February 12, 2011

Recent Trade Results

“The willingness to be wrong can lead to excellent trading results.” – Ken Long

Hello:

Knowledge is power only when it’s applied properly. Knowing the right things about trading can’t do you any good: it’s the disciplined application of those rights things that brings desired results. In spite of any adverse circumstances that might’ve affected your trading career in the past, you can go ahead and achieve your goals. Successful traders today also had challenges in the past. Once you taste consistent success in trading, I can bet that you’ll be hooked.

As regards my recent trading performances, you should be able to track the profits and losses of my weekly trading update (as mentioned in my articles). In addition, the account on which I use the GBPJPYUSDCAD Swing Hedging strategy now has a long-term profit of about 1500 pips, whereas the one I later made available to my clients currently has a (closed) profit of over 450 pips. My gap trading strategy, which would soon be made accessible to my clients, made these profits in less than 5 trading days:

AUDUSD = $1567.50

AUDJPY = $977.27

NZDUSD = $1309.45

EURJPY = $2014.90

GBPUSD = $2100.65

EURUSD = $2098.20

EURNZD = -$506.10

EURCHF = $2005.25

It’s very heart-warming to know that some clients and past trainees are able to duplicate my trading ideas – with measurable success. Last week, based on invitation, I visited one of my past trainees. This cool-headed gentleman attended a one-day trading seminar about 4 years ago (hosted by a renowned media house), paying a sizable amount of money. But when he started practicing with demo, he quickly realized that the he had no trading skills. He was later advised to hire one man for further training. Unfortunately, the so-called coach collected his fees and taught him for 2 weeks - with no applicable sound risk management – only to sell him a robot at the end of the whole show. This trainee still knew that he didn’t have enough skills to play the market successfully.

He knew that there must be secrets of successful trading somewhere, only that certain people who claimed the possession of the secrets still needed further training. A man’s worth is measured only by what he gives others. Someone told him about me and he arranged for an audience with me. The way I talked about risk management, trading psychology and making profit regardless of the market directions touched his heart. He therefore arranged for a personal training…

It’s now a testimony for him. I was happy that he’d made over 24% returns on his account in 4 months. I wasn’t particularly amazed that he survived the December and January easily – something most traders find difficult. He’s a gainfully employed engineer, yet he knows that one day, his employer would say: “That’s enough. We got to let you go.”

By gradually building good track records for yourself, you’ll soon see that success would constantly target you. You’ll discover that you steadily inch your way to the top. No-one can retire you from your profession as a private trader. Many had been making consistent profits from the market before I was born and they still enjoy their job as traders. Dr. Van K. Tharp - a word-renowned trading coach - reached the age of retirement early this year, but he would continue doing what he likes indefinitely. He’d already retired himself since early 1980’s, doing what he enjoys. John Burley, a multi-millionaire and former financial planner, retired himself at the age of 32. John Paulson made a profit of around $3.5 billion in 2008, and he’s set to take home around $1.2 billion this year. How many employers can give you that as a salary? An employee would resign, get retrenched, dismissed or retired; whereas looking for another job could be a frustrating and humiliating experience. You mayn’t become a billionaire thru trading, but you can attain the financial freedom you dream of. Think about the long-term benefit of trading and make your mind to learn the trading principles that work and discipline yourself to apply them.

What are your trading challenges? No matter what they are, you can overcome those challenges and move ahead. The best traders in the world have managed to overcome the obstacles they found on their way to becoming successful traders; and you can do that too. My past and future articles would continue to reveal what it takes to be a successful trader. Showing you how to be the best trader you can be is what we do here at Fxinstructor.com. Yes, doing the right things on the market will make you share testimonies later.

NB: An article about effective gap trading in Forex is coming soon.

This article is ended with quotes from Dr. Woody Johnson:

1. “Personal mastery teaches you to choose. Choosing is a courageous act; it is about picking the results and actions which you will make into your destiny. Personal mastery is like holding a conversation with yourself. One part speaks of the future you want; another talks about the realities of what is going on around you and a third says, "...I choose to be the trader I want to be and I choose to get the results I want to get and I accept what I must do to get it!" And, you'll want all of these voices in the conversation, knowing that the power which pulls you toward your vision emerges from the relationship between them.”

2. “Achievers have mastered self-programming. It doesn't mean that they are not challenged or that things aren't difficult, but they use these situations as opportunities to ramp up their focus on what matters most in both their trading and in their lives.”

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

Are you facing any challenges in trading? You might want to explore the secrets of markets wizards and duplicate their success. Get the secrets from my past articles at:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

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

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, February 11, 2011

Weekly Trading Update (February 11, 2011)

“When I am stopped out on a trade, I consider it the cost of doing business as a trader.” – Scott Andrews

Hello:

Traders should think about the consequences of their position sizes and exit techniques before they act. Your exit strategy consists of two parts: Where will you get out of the trade if the market does not go in your favor? Where will you take profits if the market does go in your favor? You only act according to trading rules and then determine a safe position sizing method. In either case, you should always determine where your stop is going to be and how you are going to take profits before you get into the trade. Have a solid plan in place (write it down). This will take all of the emotion out of the trade. Then you can relax and trade the “map” that you have created. This will make your exit strategy easy to follow and it will put you on the path to success.

AUDUSD

Primary Trend: Bullish

This pair tried to move up at the beginning of the week, but an effective resistance at 1.0200 rejected further bullish move. The market reversed, hit my adjusted Stop. My long trade closed with some profit.

Order: Buy

Entry date: January 31, 2011

Entry price: 0.9968

Initial stop: 0.9868

Current stop: 1.0059

Exit date: February 10, 2011

Exit price: 1.0059

Status: Closed

Profit/loss: 100 pips

Percentage growth: 1%

NZDUSD

Primary trend: Bullish

No sooner had the primary trend turned bullish than there’s a serious threat to it. The Kiwi eventually yielded its strength versus the Greenback. The initial signal was missed, but there may soon be a good opportunity to sell a short-term rally in the context of a downtrend. Intraday traders are concerned about what’s happening on the market now, rather than what happened on the market in the past.

EURCAD

Primary trend: Bullish

There’s been a constant restriction to a further bullish move beyond 1.3720. It appears that the Canadian dollar is getting very weak; because the Euro is getting stronger against the NZD. The initial weakness on the market has generated a nice ‘sell’ order, which would be entered as soon as possible.

EURAUD

Primary trend: Bullish

The short trade I had on this cross reversed against me and I was able to exit with some gain. It’s a kind of the market is trying to go into an overbought region. However this is not a ‘sell’ signal. The market can be in an overbought or oversold condition for a long time - new

Order: Sell Stop

Entry date: January 28, 2011

Entry price: 1.3700

Initial stop: 1.3800

Current stop: 1.3528

Exit date: February 9, 2011

Exit price: 1.3528

Status: Closed

Profit/loss: 170 pips

Percentage growth: 1.7%

EURNZD

Primary trend: Bullish

The bullish bias on this instrument remains intact. Plus this bias may continue if the NZD has further weakness. The price is above the SMA 20. The ADX 20 level is still showing low volatility. +DI is now clearly above its –DI counterpart. I may buy when the price experiences a pullback. I have no open position on the instrument (this is also true of other pairs and crosses).

Order: Sell

Entry date: February 2, 2011

Entry price: 1.7832

Initial stop: 1.7932

Current stop: 1.7725

Exit date: February 4, 2011

Exit price: 1.7725

Status: Closed

Profit/loss: 100 pips

Percentage growth: 1%

AUDJPY

Primary trend: Bullish

There’s been a steady rise on this cross. Any further significant weakness in the AUD could make the cross go down. Money would be made in any market conditions, and that’s what’s also been put in mind. No matter what happens, I’d remain cool because I know that doing the right thing would ensure my long-term survival. I’ll just need to enjoy myself, knowing that my risk is under control. Would you advise me to drink Champagne?

Conclusion: Do you have a realistic trading goal? What do you want out of trading? Do you have reasonable expectations, or do you fantasize about things that may be beyond your ability and trading realities? Wise traders don’t pursue unrealistic goals. They, therefore, try to be content with whatever profit they have. As long as their trading portfolios are safe, they’re satisfied with any increment they have on it.

I conclude this article with more quotes from Scott Andrews, a highly efficient gap trader:

1. “I knew there were hundreds, if not thousands, of ways to make money in the markets, I just needed to find the right one for me.”

2. “I would say that sticking with my system when it has a drawdown is probably the toughest aspect for me.”

3. “Since there are no bosses to provide feedback on a daily basis, it is easy to link one’s sense of self worth to one’s performance in the markets for a given day or week or month. But do not! It will only make your trading worse. It took me quite a while to dissociate my trading results from my self-esteem and to avoid letting my daily results affect my mood.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Senior Analyst

FX Instructor, LLC

Email: amustapha@fxinstructor.com

Are you facing any challenges in trading? You might want to explore the secrets of markets wizards and duplicate their success. Get the secrets from my past articles at:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

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

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.

Saturday, February 5, 2011

I Won’t Go Into Forex Again!

THE EASIEST WAY TO IDENTIFY A NOVICE

“Because, you see, I’m trading for profit in the long run. I’m looking for consistent gains over time. I don’t want a huge windfall one month and a massive loss the next.” – Forex Round-Up

Hello:

Petro* had made 200% profit on his trading account within 2 weeks. He was already smiling to his bank. The one-day seminar he attended was paying off. He attended the seminar as a beginner, and he bought some advanced charting software which generated signals automatically. The backtest was fine and he’d already been promised the sun and the moon at the seminar. He started trading with $1000 and he initially used $500 for each trade, thinking it was a safe way to play the market. He’d started planning how to surprise his wife and his in-laws with fabulous gifts so that his wife could regret calling him a ‘bloody fool’ earlier.

The EURUSD was in a sustained bearish move that week, in what was an easy market and almost a no-brainer market condition. When his account became $3000, he decided to withdraw some of the profit once the account became $4000. He increased the position sizing to $2000 for a trade so that the account could become $4000 quickly. After he entered another short position, the market moved in his favor by 6 pips, and he was so happy. Trading was the best thing in the world he could ever imagine. But all of a sudden… the market turned sharply and there was a steep rise in price. Petro was too inexperienced to know that the market had been in an oversold condition for a long time and as such, a bullish reversal was imminent. He’d not been using Stops, believing things would always go in his favor: he had hitherto gone unscathed. He thought he was going to survive it. Alas! He was wrong. The EURUSD sprinted northward by 350 pips in less than 48 hours.

He received a margin call. You ought to know what a margin call is. Contrary to what some might be thinking, a margin call isn’t a call from a pretty girl.

“My wife is going to kill me!” he lamented. He had to abscond for a few months so that he could avoid confrontation with his wife. The money he lost was fairly large, given the poor standard of living of the country where he lived. Poverty was rife. Though poverty was no respecter of any country, some lands were more affected by others. Some children even had to do hard labor before they could eat.

I you’ve some trading experience, I can bet you know the reasons why Petro suddenly became a crashing failure. If he knew about effective position sizing and sound risk control, he surely would’ve survived that kind of market condition.

Since then, whenever he heard anyone mentioning anything about Forex, he’d warn the person never to try it. He liked to tell others that he’d done Forex before and he lost his investment. He always gave impression that he knew very much about trading, and the best thing was that people should stay away from it.

There are many people like Petro around, whose mission is to warn people against trading. They like to discourage people because they’ve done it and failed or because they know someone who did it and failed. They feel they know about trading. They’re never going to do it and they’re telling others the reason why they shouldn’t do it. There are some who don’t even know how to set up a trading platform, yet they have strong opinions against trading.

On the other hand, successful trading experts won’t tell you this. I know those who’ve made millions (even billions) of dollars from trading. They’ve been surviving on the markets for many years. These experts once faced challenges in trading, but they went ahead and overcame the challenges. Successful trading experts will never berate trading. Therefore, the easiest way to identify a trading ignoramus or a failure is that the person would try to discourage you from trading and ask you to find better things to do. A novice discourages others because she/he doesn’t know the secret to successful trading and she/he has given up.

Normally certain people wouldn’t come to trading if they had another means of attaining financial freedom. In fact, in most cases, you’ve more to lose by not doing anything. To be a professional in anything – in any walk of life whatsoever, you have to be in the top 10%. No matter what your field is, all the money is being made in the top 10% of that field. It does not matter what field it is, all the money is being made in the top 10%. That is why the top 5-10% of the world makes more money then the rest of the 95% combined. All the money is in the top. If you tried to avoid realities by avoiding trading, the realities would eventually face you somewhere else. So some are misguided when they think there are better things to do. Given the challenges and competition they’ll face in those ‘better things’ to do, it’s more likely that they’ll end up with average or mediocre results in whatever fields they choose. Please think of any professions or areas of business, some would try them and fail; some would try them and succeed. Such is life. Many desire extraordinary success, but are unwilling or too lousy to make the necessary commitment, sacrifices and exercise enough perseverance to attain their goals. Without spending enough time, energy and resources, dreams will only be dreams, not achievements. It takes some rare secrets to be a master of any walk of life.

Dr. Woody Johnson, quoted more below says: “Trading is a journey in self discovery," and "Trading is an art and must be practiced like practicing the medical arts, or practicing law or any other endeavor that requires a high level of proficiency." Furthermore, like medicine and law, the attentive, attuned and serious trader understands that you must approach the markets from a position of continuous learning (both about the markets and more importantly about yourself). But, learning does not occur in any enduring fashion unless it is sparked by curiosity. When that spark is not present, people approach their training and education as a purely academic exercise without ardent application. In this scenario, the training and education last for a while, but without commitment, the novice trader soon stops using the new tools and concepts. They gradually forget them…”

Someone’s exit from the trading world has no effect on anything or anybody. It’s better to find the secrets of those who’d been surviving on the markets for decades, rather than listening to a failure or an ignoramus.

Many spend their sweat and blood and money to get a good university degree; only to be begging to be employed. The ways job beggars are treated are deplorable. Many aren’t happy with the kind of jobs they’re currently doing: but they got no choice. I knew many years ago that even if I had a first-class university degree, that wouldn’t make me the greatest man in the world. Graduates would be paid only for what they do, not what they know.

I you do the right things on the market, you’ll see that online trading is one of the few businesses that are recession-proof. I know that trading can give me the type of financial freedom I long for. I’m aware of my goals in trading and I’m on my way to the attainment of the goals. I’d rather take advice from a successful market speculator, not from an ignoramus, or a failure or a novice.

*That isn’t a real name.

I conclude this article with quotes from 2 successful traders:

“Day trading is a lifestyle choice among other things and it gives the freedom and flexibility to work around other things. For this reason I do not have a set routine. My office is at home and I have a two year old son there whom I love to spend time with whenever I wish. That alone was one of the things that drove me to be a successful trader, well before my little man came along I was determined not to be a dad who left at 7am and got back at 7pm or even later… I also have a successful business with staff and clients who need my time.” – Nick McDonald

“Some will have limiting beliefs about their ability to achieve the vision. They may say to themselves, consciously or unconsciously, "I'm not good enough to do this;" or "I'm not smart enough;" or "I don't deserve it." These are fear-related "emotional tensions" that stem from those limiting beliefs. The important thing to do at this juncture is to confront rather than deny them. They are part of the current reality and therefore, must be identified clearly in order to address them, one limiting belief at a time. Personal mastery is about what the vision does, not so much what the vision is; even if it seems impossible but still conjures within you a deep desire to have it, then your passion and your energy is in the service of driving you to the results you want.” – Dr. Woody Johnson

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

Are you facing any challenges in trading? You might want to explore the secrets of markets wizards and duplicate their success. Get the secrets from my past articles at:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

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

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.