Thursday, October 20, 2011

Weekly Trading Update (October 21, 2011)

“It took me several years to become consistently profitable. I had the great misfortune of making a lot of money quickly and thinking that I knew what I was doing. I did not. I lost all the money I had made and a lot more before I realized I had no clue.” – Tom Alexander


If you want to play the markets triumphantly, you need to determine the direction of the trade based on the overall trend. Then you need to determine the best location for the entry and the stop. You must not make a trade that does not meet your exact entry criteria: you require rock-solid discipline to achieve this. You ought to compute the exact amount of risk; the position sizing, safety measures and the target. Trades should not be taken without seriously considering safety measures. Make certain that you are trading the best opportunity available; something that requires more work, some charts to view, etc., but it forces the trader to be more selective, which is very important to long term success.

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


Primary Trend: Bullish

The AUDUSD is precariously bullish, which means that the present outlook may be short-lived. A great resistance at 1.0370 was able to reject further bullish move. The price tried to go back to this resistance level, but with very limited success.


Primary trend: Bearish

The outlook on the NZDUSD looks convincingly bearish - something that may pull the AUD itself down if proven true. The SMA 200 is now serving as a resistance on the 4-hour chart. This is corroborated by the fact that the SMA line has been tested twice, but the line held out. The bearish move may become accentuated.


Primary trend: Bullish

The northbound movement remains slow, but steady on this instrument. The levels that tend to serve as demand zones have been slowly penetrated. At the present, it seems that some selling pressure is mounting, though only the time would tell if it’s a correction or a new potential trend.


Primary trend: Bullish

This market is very volatile right now. Both buyers and sellers may be whipsawed if they entered at wrong price levels. But this kind of movement wouldn’t go for time indefinite. Typical movements of some currency pairs/crosses have to terminate sometimes in their lifespan.


Primary trend: Bullish

This market is almost directionless, though still bullish. The SMA 50 is above the SMA 200 while the price is zigzagging along the former. The ADX 20 has moved below 15, indicating a very quiet market. +DI is above –DI, whereas it doesn’t give any conspicuous signal.


Primary trend: Bullish

The overall trend remains bullish on this cross. The present situation is more favorable to trend riders than short-term traders. Speculators would need to buy at a lower price and ride it. It shouldn’t take you too much time to enter the market if you find an opportunity. How many seconds does it take you to blow your nose?

Conclusion: According to Mr. Tom, you must understand how the markets really work. Most traders want to focus on set-up gimmicks, but long-term success will never be attained unless one has this understanding. Traders focus on making money by trading before they’re capable of making money consistently. You got to have a sound, solid foundation. Try and think of one profession that isn’t built on a valid foundation – medicine, engineering, law, etc, all have basic sound valid foundation. Traders focus on the superficial without even considering the necessity of having a valid foundation. Trading is difficult but it isn’t that difficult. 95% of medical students don’t flunk out of medical school, 95% of law students don’t flunk out of law school, and 95% of engineering students don’t flunk out of engineering school. Such a high percentage of traders fail because they focus on superficial things that have no validity. The material they rely on is mostly garbage.

The article is concluded by more quotes from Tom Alexander:

1. “I began as a stock broker, which I hated. But I loved the markets. I quickly was attracted to trading and began trading…”

2. “I’ve a lot of responsibilities and activities… so I can’t focus entirely on trading all day. However, in spite of that I still trade almost everyday. My trading is almost automatic at this point. If I see what I’m looking for in some market, I take the trade. There’s isn’t a lot of sitting there wondering should I take the trade; if it’s a trade that fits my trade plan and I’m lucky enough to notice the market setting up, I take that trade. I miss a lot of great trades, but as I tell our clients, there’s an infinite number of trade opportunities. I don’t worry about the ones I miss.”

3. “I don’t think markets are efficient in a certain manner. But they reach ‘efficiency’ through what’s sometimes a ‘messy’ and volatile process. To think that markets on a day to day basis are efficient is ridiculous.”

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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