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


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.


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%


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%


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


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%


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%


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


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

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