Friday, June 17, 2011

Weekly Trading Update (June 17, 2011)

“I take little risk per trade in terms of the total portfolio.” – John Bollinger


The best position a market speculator can take is to follow the line of the least resistance. This is the easiest and the most profitable trading approach; which can be applied to any financial markets since it’s non-market specific. The strategies that enable traders to swim along the flow of the current, and not against it, have been identified as the most successful strategies. For many years they’d been tested and trusted, especially when they were used with sensible money management. When a rule-based discretionary method signals a trade in the direction of the prevailing trend, the trader would have better chances of success which enable her/him to take advantage of the market fluctuations in the direction of the major trend. As soon as the entry order is triggered on the broker platform then all that there’s left to do is sit back and let the strategy play itself out. Then you’d later manage the open trade based on whatever happens.

Below is the summary of some of my trading activities this week.

Primary Trend: Bearish
I’m still waiting for a clear signal. The market acted with frenzied movements this week. There was a bearish move at the beginning of the week, followed by a serious bullish correction in the middle of the week, then followed by a massive bearish resumption towards the end of the week. The lesson: Never trade against the trend.

Primary trend: Bullish
I was stopped out of my long position (at breakeven) by a strong downward move on this pair. The primary trend remains intact. It’s only a protracted downward move that can change the primary trend. Even if one is caught on a wrong side, a safe position sizing would allow only relatively low drawdowns.
Order: Buy
Entry date: May 30, 2011
Entry price: 0.8156
Stop loss: 0.8156
Trailing stop: N/A
Take profit: 0.8758
Exit date: June 13, 2011
Exit price: 0.8156
Status: Closed
Profit/loss: 0 pips (breakeven)

Primary trend: Bullish
There’s been a serious threat to the primary uptrend. From last week to this week, the market has fallen by over 500 pips. Yet it’s logical to wait for a clearer direction before one would enter. If the primary trend turns bearish, I’d need to sell a rally. But if the bears eventually fail, I’d go long.

Primary trend: Bullish
The movement of this cross is quite similar to that of the EURCAD. This was caused by the weakness in the Euro – something I’d anticipated. The market seems to have found a support at 1.3370. If the support holds, I’d need to look for a new buying opportunity. If not, the prevailing trend might turn bearish, and I’d sell. In a notoriously volatile market where fortunes can be made and lost in seconds, it’s judicious to trade what one sees.

Primary trend: Bearish
My last trade was stopped out with some profit. The NZD is having some difficult time gaining any meaningful strength against the Euro. There’s no clear winner at the present, since the market has been ranging throughout this week. Currently, the price is quoted below the SMA50 and SMA 200, suggesting a possible bearish resumption. The ADX 20 level is around 16, confirming a ranging market. The -DI is not clearly above the +DI, and the other way round. This shows a seriously ranging market. I’m staying out for now.
Order: Sell
Entry date: June 6, 2011
Entry price: 1.7916
Stop loss: 1.7926
Trailing stop: 1.7721
Take profit: 1.7592
Exit date: June 13, 2011
Exit price: 1.7694
Status: Closed
Profit/loss: 222 pips

Primary trend: Bearish
As I said last week, a strong rally on this cross gave a nice opportunity to sell in the ongoing bearish bias. The key is to look for another nice shorting opportunity. This may give us early signals to ride new bearish waves, though I admit there are many times these trends don’t move our way.
Order: Sell
Entry date: May 19, 2011
Entry price: 86.91
Stop loss: 87.95
Trailing stop: 86.91
Take profit: 80.95
Exit date: June 14, 2011
Exit price: 85.71
Status: Closed
Profit/loss: 120 pips

Conclusion: When asked about the most important thin he learned on his way to becoming a professional trader, John Bollinger, the creator of Bollinger Bands, mentioned the quotes above and below:

1. “I can tell you what it was: discipline. I believe that ultimately it all comes to that. I can remember a friend who was basically good at what he did. However, he tended to be impatient… In my opinion, this friend’s lack of discipline caused him to never have any success implementing his ideas. I have developed the discipline to enter the markets every day and engage in a struggle to manage complications, while proceeding in a focused and disciplined manner. I do this everyday and I think that this is exactly what matters: You just have to go thru with your plan day by day. That is the difference between successful trader and those who would very much like to be.”

2. “My first trade was the perfect beginner’s trade, and I will also tell you why… It was a total loss which from the start sensitized me to the risk inherent in the business of speculation – which is exactly what beginners need. If the first trade is a big win, there is a danger that you will overestimate yourself and subsequently commit big mistakes. A negative experience at the beginning may, as it were, be a huge win in the long run.”

3. “Psychology is key in trading. To put it in a nutshell, I would say that trading is nothing but a psychological game with yourself.”

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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