Adsense

Wednesday, November 30, 2011

Weekly Trading Update (November 21 - 25, 2011)

“Success at trading, as with other performances, depends upon a developmental process in which intensive, structured practice and experience over an extended time yield competence and expertise. Many trading problems are attributable to attempts to succeed at trading prior to undergoing this learning process.” - Brett Steenbarger

Hello:

Super traders know how to cut their losses when they’re wrong and how to run their profits when they’re right, coupled with safe position sizing. Trading success has very little to do with the ability to predict the future movements in the markets. The ‘fortune-telling market gurus’ of today – experts in technical analysis, fundamental analysis, EA programming, trading systems development, coaching, and many other fields in trading – attempt to give impression that the markets can be predicted always with accuracy. Although many of such predictions are highly publicized by the media – and eagerly consumed by the public – they’re at best, educated guesses and personal opinions. In addition, for every opinion expressed, invariably there are numerous opposing opinions and counterarguments. The business of prognosis is insecure indeed. Nevertheless, if you want to be a winning trader, you’d need to follow your setups, remove the weeds (losers), water the flowers (winners), use position sizing that ensures you’re not harmed by your weeds, and discipline yourself to follow these simple rules. Can’t you see that trading need not be complicated?

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

AUDUSD

Primary Trend: Bearish

The bearish bias that started last week has continued after the primary trend turned bearish. Since then the price has journeyed downwards by hundreds of pips. There seems to be a bullish correction at the present – something that would give me a great opportunity to go short.

NZDUSD

Primary trend: Bearish

On this pair, the sell signal that was generated on November 14 has been valid till now. Like its AUDUSD counterpart, I’d need to sell the current price correction rather than seeing it as a turning point. Some indicators may appear overbought on lower time frames. This gives extended overbought signals, while the trend just marches on, making those signals as good as useless.

AUDNZD

Primary trend: Bullish

Yes, this bullish instrument clearly shows that the Aussie is stronger than the Kiwi; although the twain are currently defenseless against the Greenback. The SMA 50 is above the SMA 200. The price is below the SMA 50 but above the SMA 200 – indicating a bearish correction. Since the RSI 14 is below the level 50 and the Stochastic 14,3,5 is currently in the oversold region, this may be a good indication that I need to open a new long trade once the RSI reverts back above the level 50.

EURCAD

Primary trend: Bearish

Although the primary trend remains bearish, one would do well to stay away from this market right now. It doesn’t look safe to go short, whereas the bulls have come and messed up the whole thing without having the upper hand. The bears have the upper hand, but there’s a lack of appropriate news which would give the market greater dynamics.

EURNZD

Primary trend: Bullish

The northbound journey on this cross has remained slow and steady. The SMA 50 is above the SMA 200, while the price is clearly above the former. But the ADX 20 is now below the level 30, showing that the market is entering a quiet phase. -DI is trying to go above +DI, but with limited success. If it happens that the +DI crosses the –DI above once again, then it’ll be a ‘buy’ signal for me.

GBPCHF

Primary trend: Bullish

This week, there’s been a serious downward breakout on this cross; something that’s still valid. However the primary bullish trend is intact, though seriously threatened. If the present scenario continues for a few more days, the general outlook may turn bearish. Just make sure a safe position sizing is used so that no blowout will ever be experienced. The one word that injects fear into the heart of every trader is blowout. As in, “Honey, I blew out the account again…” and (Honey, please put the gun down..).

Conclusion: Many dedicated traders find that when they start facing challenges in trading (thus learning valuable lessons that would benefit their trading career in future), some of their friends would start discouraging them. Perhaps such friends don’t understand what trading is all about or the benefits of being a trader. Maybe you can help them understand better. In other cases, ‘friends’ may ridicule the real benefits that come to private traders. Some may ridicule your effort to stick to your safe risk control principle; as it mayn’t be popular. If that happens to you, you may have to choose another career they recommend to you. If you choose to be a successful market speculator, you’ll have chosen one of the best jobs in the world.

I’d like to conclude this article with more quotes from Brett Steenbarger:

1. “Trading, in this sense, is no different from chess, Olympic events, or acting. Inborn abilities (talents) and developed competencies (skills) determine one's level of success. From rock bands to ballet dancers and golfers, only a small percentage of participants in any performance activity are good enough to sustain a living from their performances.”

2. “No amount of talking with a coach or counselor will substitute for the training process: not in trading, not in athletics, and not in the dramatic arts. Training yourself to proficiency is the path to a positive psychology.”

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

If you want my coming trading articles delivered directly into your inbox (I don’t support spamming in any way), you can send me an email titled “Request for Trading Articles.”

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

Friday, November 18, 2011

Suicide Trading Techniques

“When I began teaching other traders…, I was shocked by their lack of… knowledge. They were trading with one hand tied behind their back. They were using a water pistol, and the insiders were using real guns.” – Joe Ross

Hello:

1. Maggie* is using a negative expectancy system without knowing it. She decides to trade without stop loss because she doesn’t like to think that she can be stopped out by a trade that could later go in her direction. Her funded account is $1000, and as a result of this she’s using 0.5 lots for each trade. She’s confident that the trading strategy she’s bought would definitely make her very rich in a matter of months. She starts to grow the account. The markets are moving very well in her favor. In less than 3 weeks, her account is up by almost $5000. She’s very happy, and she begins to think of how to withdraw some of her profit. However, she won’t like to do that until the 3 remaining open trades have been closed. Those trades are still negative, but not so bad. She waits for them to fluctuate favorably and hit their tight take profit levels, but something happens. Later that day, there begin surprise reversals of hundreds of pips per trade; things that wipe out her account. She stops trading and relocates to another state.

2. Phoebe always sets her stop loss level at 300 pips per trade and her take profit level at 50 pips per trade; something that gives her a risk to reward ratio of 6:1. She doesn’t know that with this kind of risk to reward ratio, she can’t be a permanent victor in the markets – even with 99.84% accuracy. She’s a counter-trend Forex trader; looking for turning points and always trying to identify support and resistance zones. Trading on multiple currencies, her kind of trading approach works for several months, and she goes up by over 80%, using 0.02 lots for each $1000 (which seems safe). Then the markets enter a period of extended trending mode which holds out for more than a few months. Many demand and supply zones are rendered ineffectual. All her gains evaporate in those strongly trending markets. Besides, her initial account balance is eaten deep.

3. Jeremy looks very optimistic, breathing the market. He has just learned how to use a Moving Average crossover strategy on the EURUSD. His target is about $100 per day on his $1000 balance, and he decides to use 0.3 lots per trade. He’ll sit in front of his system during the New York session and close his trade once the open profits are up to $100. He doesn’t know that targeting 10% profit per day is suicidal. He isn’t aware that it’s unrealistic to predetermine the amount of profit one will make per day (even per week or month or year) in an unpredictable market. He never intends to use stop loss because he thinks that stop loss is for the faint-hearted. He raises his account to $1600 within one week, thus feeling on top of the world. Eventually, one trade fails to move positive on the EURUSD throughout a whole day. The contrary move of -200 pips has been registered as -$600 potential loss on his account. Since he’s not using a stop loss, he decides to leave the trade till the next day. The trade is still negative after that, so he thinks he can leave it until it moves positive. But the EURUSD has just started a 1200-pip journey. This ultimately results in a margin call. Since then, he can pull out a gun if he hears about Forex.

4. Atimad is using a positive expectancy system but he doesn’t always follow his trading rules. The rule says that all the entry conditions must be met on a bigger timeframe and a smaller timeframe. This helps him take high probability trades and avoid bad signals in bad markets. Atimad’s problem, however, is that he tends to trade late and invalid signals – always violating the trading rules given to him. This has resulted in average losses that are much bigger than average gains.

5. Toby has experienced a margin call in the past due to attempts to live off a small account. Now he’s is using 0.1 lots for his new $400-account. A marketer has shown him how a profit of $1950 per month has been achieved on one $200-account, using pieces of account history on which only 3 trades per piece are shown. Toby wants to earn Miss Rose’s respect and love by proving to her that he’s a guru. The account grows up to $550, but later drops to $200. Since he has confidence in his strategy – something that simply lets him know when to buy and when to sell – he increases his position sizing to 0.2 lots. As if he hasn’t learned his lesson…

If I tell a client that I’d like to target only 1% to 4% returns per month, she/he would certainly not want to have anything to do with me. How could one target so small amount of income per month when there’s another trader over there who promises a profit of 170% per month? To many people, the idea of making 1%-4% per month doesn’t make sense. Nevertheless, with a profit of 170% per month, one can even resign one’s day job and continue smiling to the bank for the rest of one’s life. Many people think trading doesn’t make sense if you can’t put $2000 in your live account and pay all your bills and children school fees constantly from it. Should we blame the markets or ourselves for our grim experiences in the markets – the result of suicide trading techniques?

It’s very easy to do things that’ll later backfire: doubling down on losers, jumping in early to make the most profit, trading without stops because we think it will take us out too early (because we think prices will always come back), thinking that big position sizes make great returns, trading without clearly-defined trading rules, thinking that we can make as many trades as we want in a day, and thinking that the more trades we open, the more returns we’ll make.

You can’t be a permanent victor in the markets until you do certain things. Many traders would agree that money is difficult to come by, yet they won’t think of the safety of their money when they are trading. Using big position sizes while trading is a suicide trading technique. If you know what risk control means, you’d be more inclined to follow the principle that can keep your account safe, whether you derive immediate benefit from it or not. More importantly this can keep you from overtrading and help you stop making terrible trading decisions.

*Names have been changed.

I conclude this article with a quote from Bert Antonik:

“That statement may seem harsh or contradictory but the undeniable truth is confused traders are the necessary contributors from whom the properly educated derive their gains.”

NB: Please watch out for my coming articles with these titles: ‘Making Money out of Losses – A Blessing in Disguise,’ ‘Achieve a Better Hit Rate with Gap Trading (Using the Logic Yourself),’ ‘Play the Markets Victoriously with Nano-cent Accounts,’ ‘Why It’s Difficult to Do the Right Things in the Markets,’ ‘How to Identify a Sideways Market – Be Safe!’ ‘A Negative Expectancy System – Pushing Against the Wind?’ ‘The Most Important Trading Skill – Who’s a Winning Trader?’ ‘An Intraday Moves Catcher – A Wealth Generating System,’ ‘Unlock the Power of Everlasting Triumph in the Markets (Parts 1 - 12),’ ‘How to Handle Uncertainties in the Markets,’ ‘The Issue of Stops (Come Back! Oh Come Back!),’ ‘A Hedge Funds Strategy,’ ‘My Hedge Funds Strategy Update,’ ‘Experiment with Different Exit Tactics,’ ‘Mastering the Market Equilibrium Zones – A Time-sensitive Method,’ ‘How I Apply Risk Management – Part 3,’ ‘A Simple Positive Expectancy System – Trading Effortlessly,’ ‘Testimonies from My Subscribers,’ ‘Resist the Lure of High Risk – Part 4’ ‘Worst-case Scenarios – Facts Are Sacred,’ ‘Effective Swing Trading in Forex,’ ‘Gap Trading Revisited,’ ‘3 Recent Gap Trades,’ ‘Developing the Right Attitude towards Losses – Part 4 (Losses Aren’t Abnormal) ,’ ‘The True Holy Grail – The Long Sought for,’ ‘Forex Trading Vocabulary,’ ‘ Clarifying Some Issues – Part 6,’ ‘Navigating Turbulent Markets – A Double Timeframe Analysis,’ ‘Optimization of the USDCAD Hedging Strategy – Bringing the USDCAD to Subjection,’ ‘Before You Open that Trade,’ ‘Cogent Trading Biases,’ ‘Overview of My Signals Strategies – Can You Trade Like Me?’ ‘The Cost of Discipline,’ ‘Monthly Market Review,’ ‘Uncertainty Has Become My Ally – An Interview with a Dogged Market Speculator,’ ‘2 Examples of the USDCAD Hedging Trades,’ ‘You Are a Blessing to the World of Trading,’ ‘Annual Trading Results (2011)’ ‘2012 – Another Year of Victory in the Markets,’ ‘Monthly Trading Report (December 2011),’ etc.

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

If you want my coming trading articles delivered directly into your inbox (I don’t support spamming in any way), you can send me an email titled “Request for Trading Articles.”

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

Weekly Trading Update (November 18, 2011)

"Finally, a way to control the emotion and systematize the process. Now I can just focus on making good trades and not worry about being right or wrong…. Your goal should be to make good trades not money. Good trades will make money often enough… When you make money on a trade, you have not beaten the market, you have blended with it.”Ryan Litchfield

Hello:

Indicators are nothing more than condensed information on past price performance. A 20-day moving average, for example, is the average of the last 20 closing prices. Technical analyses uses a multitude of indicators, the best known of which are MACD, CCI, RSI, ADX, sentiment, volume, volatility, etc. The relevant literature mentions more than 300 indicators used in a variety of combinations and variations. Despite the benefit that may be derived from the use of these technical indicators, they have their limitations. This means they’re not all you need to be successful. In trading, the use of technical indicators is good only if one uses risk control with it. Most traders think of using only stops for risk control. But risk control in trading should be achieved thru proper position sizing, not stops only. Traders fare badly when entering the live market because they fail to exercise discipline when real money is involved and a proper exit plan hasn’t been made.

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

AUDUSD

Primary Trend: Bullish

This week, the AUDUSD has moved in a perpetual bearish manner, though the primary trend outlook remains bullish. It’ll take only a few days of continued bears’ control for the primary trend to turn bearish.

NZDUSD

Primary trend: Bearish

The trend has turned bearish on this pair; driving home the point that it’s still early for sellers to join, providing the present bias would continue. But if no upside or downside price trend develops then sideways movement is likely and traders will be forced to exit their positions.

AUDNZD

Primary trend: Bullish

It makes sense to only buy a pullback on this cross. A long entry that was made on Monday went well in the forecasted direction before retracing a little, leaving an open profit of 60 pips. A breakeven that was set earlier has removed the risk even if there’s to be a reversal.

EURCAD

Primary trend: Bearish

One would do well to sell a rally in this market – for it seems that the southbound bias still has more room in it. There may be a ‘sell’ signal if price breaks above the levels at 1.3890 and/or 1.3900 and later breaks below each of them. The likelihood of this trend continuing depends on when the breakout occurs.

EURNZD

Primary trend: Bullish

The movement on this cross is becoming clearer and clearer. Now may be the time to start looking for a way to go long. The SMA 50 is above the SMA 200, while the price is above the former. The ADX 20 is above the level 30, showing that the current trend is getting serious. +DI is above -DI. A long trade which was opened on Monday is now up by over 120 pips.

GBPCHF

Primary trend: Bullish

The overall bullish market seems to be caught in a kind of consolidation, since there’s no clear victory between buyers and sellers in this upward context. I’m planning to enter, should another entry criteria be met. Knowing how to take advantage of this technical bias in the market can help you identify opportunities and reduce risk.

Conclusion: Success is available to you in trading, but the only person standing in your way is you. You can achieve your objectives in trading, become a proficient market speculator and enjoy your career. You just need to make it happen. Limit time spent with negative friends and family members who don't buy into your trading vision for your future. Say 'no' to people so you can say 'yes' to yourself. Claim your destiny and serenity in the financial markets.

I’d like to conclude this article with the Chartist's Prayer. Thanks to Anna Coulling:

May my assessment of today's price action be based upon the facts, all of the facts and nothing but the facts. May I not be influenced by fear, greed or the ill advised comments of others, which may be made in their interests and not in my own. May I take into account the past history laid before me on this chart and make my assessment based on my knowledge and logic, and not on my emotions.”

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

If you want my coming trading articles delivered directly into your inbox (I don’t support spamming in any way), you can send me an email titled “Request for Trading Articles.”

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

Saturday, November 12, 2011

Clarifying Some Issues – Part 5

Hello:

This article raises questions you may’ve asked and gives you answers that work. I’m humbled to discuss these answers with you. It’s been a privilege to use several examples to show people the permanent solution to their trading problems. I feel very happy to be part of the greatest trading secrets the world will ever know. I warn traders against the trading styles that threaten their interests and accounts. This article, the fifth in the series bearing the topic above, contains more questions from my readers, existing and potential subscribers. The answers may benefit you too.

1. How can the merit of a good trading system be judged? - S.O.

Answer: There’s nothing too dreadfully complicated about trading. A good trading system is a positive expectancy system. This means that for each dollar you risk, you must target at least, 2 dollars. For position traders, the higher the reward, the better the survival probability. For position traders, the risk-to-reward can be 1:3, 1:4, 1:5 even 1:10 or more. The trader’s patience would, however, be tested. The more the reward, the less the trading accuracy needed to survive. I must say that swing traders mayn’t go for more than 1:3 or 1:2. This is because prices tend to hit fairly tight targets more often than wide targets. A bad trading system is a worse expectancy system if it has more risk than reward. It’s a bad idea to risk 2 dollars with the hope of gaining 1 dollar. A risk-to-reward of 4:1 or 5:2 or 10:1 is bad. You shouldn’t risk more than you hope to gain. If a certain trading approach is wrong, it’ll always be wrong. A bad trading system is the one that doesn’t use stops. It’s great to take a very small loss and forget about it, rather than fretting over a trade that remains negative for a long period of time (something that mayn’t come back). Actions have consequences; and this is true of trading. A good trading system is a system that follows the trend, though there are times when sustained trend movements are few and far between. Yet it pays to look only for pairs/crosses that trend well at this time. Counter-trend systems don’t survive in the Forex markets; since Forex markets are the best trending markets that exist. A good trading system must be designed in a way that makes you abort your losers and ride your winners. Once profit is made, it’s very difficult to retain the profit for a long time. However, a good system must be designed in such a way that drawdowns are strictly controlled in a period of losing streak (this ensures quick recovery in a winning streak). It must also spell out safe and stingy position sizing. Otherwise the trader could be looking up their timetable to lugubrious negativity. Currency markets are particularly interesting. It doesn’t matter where you live in the world. Every person is affected by their country’s currency and most important their country’s economy. You may want to stay with these markets and unlock the key to consistency in trading. Trading is hard work that involves self-sacrifice yet brings rich reward. That’s what successful traders have found out.

2. Don’t you ever use robots? - M. E.

Answer: I’ve written articles about the pros and cons of expert advisors (EAs). During my novice years, I turned to EAs for help when it was clear to me that I couldn’t handle the mercurial nature of the markets. One research group had great faith in robots, but the group learned bitter lessons as a result of this. Most robots are worse expectancy trading systems. Besides, they use dangerous position sizing to accumulate colossal returns in a short period of time so that the returns can appeal to greedy clients. These are the reasons why most robots don’t survive the markets in the long run – contrary to what their marketers say. As with large position sizing, there’s no second chance for a losing EA. Personally, I don’t use robots in my trading and I’ll never use them to make trading decisions for me. Why? I’m a rule-based discretionary trader and I hardly spend more than a total of 3 hours per week placing trades and managing them. I’ve devised a way of seeing an opportunities earlier and taking advantage of them later. The rest of my time online is used for research and articles and clients support. I don’t need a robot, except a robot that can copy all my trades (with their stops and targets and small sizes) and duplicate them on all the accounts I manage. This robot should be able to implement my breakeven, trailing stop and exit orders.

3. What’s your definition of low risk, and what do you consider to be high risk? – P. B.

Answer: You can be a permanent victor on the markets only if your losses are inconsequential. Some pros tend to emphasize that low risk and high reward are gotten from some apparently awe-inspiring entry strategy. Low risk is a very small position sizing, not an accurate entry. With a superb strategy, one won’t survive the markets for a long time if one uses too high lot sizes. A generation of traders have learned the hard way the dangers of leveraging too much. With small lot sizes, one has a chance of reaching one’s objectives with a terrible trading system. Do you really believe that safe risk control parameters are for your own good? You need to set reasonable boundaries. It takes great discipline to say no to position sizing techniques that are harmful to the existence of your portfolio. No matter what experts may be saying concerning a particular strategy, no-one can predict the markets. Praising a particular entry system is tantamount to saying that the markets can be predicted. Supply and demands zones or resistance and support levels tend to work more in consolidating markets than trending markets. When the currency markets are in strong trending modes, supply and demand levels or resistance and support levels are prone to fail. Currently, I can’t speak for other financial markets, but those who look for turning points in Forex markets will often be sliced up. You only need to follow the trend. You may even buy lower in an uptrend or sell higher in a downtrend, but don’t go against the trend. I’m saying this out of many years of experience. If a clear reversal would occur, then I’d see it on the hourly chart and capitalize on it when it’s still early enough. If I think a market would turn, I’d rather wait for that to happen. After all, technical analysis isn’t about predicting the future. It’s about measuring the present. Just as the thermometer won’t tell you tomorrow’s temperature but remains a useful device. Just as it isn’t the math doing the trading; it’s the trader. Expectations rather than facts are traded on the markets. As with any other job, you have a choice: You can either make wise trading decisions or you can ruin your capital out of greed (spurred on by confidence in a supposedly magical entry system).

4. When do you post your articles? How many articles do you post per week? – E. V.

Answer: In most cases, I post 2 articles per week. Weekly trading updates are usually posted on Fridays, and articles on miscellaneous trading topics are usually posted on Saturdays or Sundays – unless otherwise indicated. There’s a possibility that the weekly articles can be increased to 3.

5. I appreciate the trading strategies you’ve given me free. Could you give me more unique strategies? – D. F.

Answer: Some of my past articles contain trading strategies that can be used to play the markets. Some of my future articles would also contain other strategies that can also be used – with the accompanying trade and risk management. For example, the USDCAD Hedging strategy would be given free to my readers; and very soon. Nevertheless, the strategies that I used to generate trading signals to my clients remain our secret. These particular strategies are mentioned in my articles, but I don’t expatiate on their entry and exit criteria. Honestly, it’s completely unfair to reveal the secret that are paid for by loyal clients. There are effective trading tips in my articles, but it’s bad to reveal the exact secrets that others pay for. As far as the strategies I use are concerned, the best is in the offing.

6. How do you offer your trading signals? - K. O.

Answer: Although I reveal trading principles that work to my readers. It’s only my clients who see how I implement these principles in real life. They see how I place trades, set stops and targets, abort losers, set breakeven, apply trailing stops, and order exits. To me, sending trading signals thru email and SMS seems a waste of time. My clients are provided with the demo accounts on which I place trades. They see this and trade accordingly. They’re often notified of the time I place trades and do subsequent modifications. With reliable brokers, I obtain almost similar results on live and demo accounts; only position sizes are different. My clients are advised to set moderate goals. Small drops of water can make a mighty ocean. Changes of magnitude don't happen overnight, they take time. We make an average of 1000 pips per month and this can only be improved. We make thousands of pips in a few months, yet our accounts increase gradually as a result of small lot sizes. Without this, the most knowledgeable trader in the world would only have a short-lived career. We’ve averaged about 4% per month, and we’re happy even with less than that per month. As a client, you just follow my trades. The hard analysis would be done for you. You can join me at: http://www.fxinstructor.com/en/analytics/ituglobal

Summary: Trading is a wonderful experience and being an independent trader is a precious privilege. When you set realistic goals for yourself, your trading career has direction and purpose. You’re also more likely to avoid exaggeration and situations that could hinder you from accomplishing what you’ve set out to do. In addition, FXInstructor.com has helped many traders to reach their goals, to make wise decisions regarding the currency markets, and to progress in their trading career. I’d recommend their services to any traders – beginners and advanced. Please take advantage of their services.

I’d like to conclude the fifth article in this series with the quote below:

“We are often misled in the early stages of our trading education into believing that there is some magic formula or system which only a select few traders around the world are privy to. Also, when you combine this smoke and mirrors attitude with the simple fact that most market speculators are constantly damaged by their lack of emotional discipline, it really is no wonder why the vast majority of novice traders around the world endure disappointing results time and time again and continually search the internet for the ultimate answer to their questions.” – Sam Evans

NB: Please watch out for my coming articles with these titles: ‘Making Money Out of Losses – A Blessing in Disguise,’ ‘Why It’s Difficult to Do the Right Things in the Markets,’ ‘How to Identify a Sideways Market – Be Safe!’ ‘A Negative Expectancy System – Pushing Against the Wind?’ ‘The Most Important Trading Skill – Who’s a Winning Trader?’ ‘An Intraday Moves Catcher – A Wealth Generating System,’ ‘Unlock the Power of Everlasting Triumph in the Markets (Parts 1 - 12),’ ‘How to Handle Uncertainties in the Markets,’ ‘The Issue of Stops (Come Back! Oh Come Back!),’ ‘A Hedge Funds Strategy,’ ‘My Hedge Funds Strategy Update,’ ‘Experiment with Different Exit Tactics,’ ‘Mastering the Market Equilibrium Zones – A Time-sensitive Method,’ ‘How I Apply Risk Management – Part 3,’ ‘A Simple Positive Expectancy System – Trading Effortlessly,’ ‘Testimonies from My Subscribers,’ ‘Resist the Lure of High Risk – Part 4’ ‘Worst-case Scenarios – Facts Are Sacred,’ ‘Effective Swing Trading in Forex,’ ‘Gap Trading Revisited,’ ‘3 Recent Gap Trades,’ ‘Developing the Right Attitude towards Losses - Part 4 (Losses Aren’t Abnormal) ,’ ‘The True Holy Grail – The Long Sought for,’ ‘Suicide Trading Techniques,’ ‘Forex Trading Vocabulary,’ ‘ Clarifying Some Issues – Part 6,’ ‘Navigating Turbulent Markets – A Double Timeframe Analysis,’ ‘Optimization of the USDCAD Hedging Strategy – Bringing the USDCAD to Subjection,’ ‘Before You Open that Trade,’ ‘Cogent Trading Biases,’ ‘Overview of My Signals Strategies,’ ‘The Cost of Discipline,’ ‘Monthly Market Review,’ ‘Uncertainty Has Become My Ally – An Interview with a Dogged Market Speculator,’ ‘2 Examples of the USDCAD Hedging Trades,’ ‘Monthly Trading Report (November 2011),’ etc.

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

If you want my coming trading articles delivered directly into your inbox (I don’t support spamming in any way), you can send me an email titled “Request for Trading Articles.”

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

Thursday, November 10, 2011

Weekly Trading Update (November 11, 2011)

“Always remember that we get paid on the quality of our trades, not the quantity.” - Rick Wright

Hello:

How do you determine a trend using the trend position and the price position? When making a trading decision, do you look at risk and remember that losses are inevitable? Do traders make sure that they aren’t wiped out by their losses thru a lack of discipline?

When trading, you need to take note of rising and falling trends. Rising trends are a sequence of changes after which the end value is higher than the starting value, and a falling trend is one in which the end value is lower than the starting value, and a sideways trend is one in which the end value is the same as the starting number.

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

AUDUSD

Primary Trend: Bullish

This pair experienced a serious bearish move this week, following what seemed to be an uncertain market at the beginning of the week. The bullish trend still holds, although seriously threatened.

NZDUSD

Primary trend: Bullish

Like its AUDUSD counterpart, this pair also experienced a bearish move this week, following what was a consolidation at the beginning of this week. In one of my analyses, the lower trend line was broken to the downside – something that poses a serious threat to the longer-term bullish outlook. The trend line represents one of the most powerful instruments of technical analysis.

AUDNZD

Primary trend: Bullish

The price is still caught in an equilibrium zone because the outlook on the Aussie and the Kiwi is nearly identical. Looking more closely at the present, there seems to be more strength in the Kiwi than the Aussie, but the price would have to break the support at 1.2940 before a bearish move can become more pronounced.

EURCAD

Primary trend: Bearish

The bearish outlook here is still nascent: which means sellers may just be at the beginning of their domination of the markets. From the top of 1.4120, the market has fallen by roughly 300 pips. The market will never listen to you, but it will speak to you if you will listen.

EURNZD

Primary trend: Bearish

The critical situation on this cross remains. Even the price is trying to break the SMA 200 to the upside, whereas the trend is bearish. The SMA 50 is below the SMA 200. The ADX 20 is still around the level 20, something indicative of a somehow weak trend. +DI is above -DI. Could this mean that the infirm bearish trend on this cross would soon be rendered useless?

GBPCHF

Primary trend: Bullish

On this cross, a bearish signal that tried to form last week was a good example of a false signal. With risk control, the false signal mayn’t be a big deal after all. The cross opened with a gap up this week, followed by some southward correction, before resuming its bullish course. If you happened to enter this bullish course at the right time, it could have made you look like a Cinderella in trading

Conclusion: Technical analysis tools have a good chance of revolutionizing the way we look at the financial markets. This unique knowledge contains insights that’ll take your trading to the next level as it shows you how to look beneath the surface of financial markets and spot the manipulations they are prone to.

I’d like to conclude this article with a quote from Joe Ross:

“The more you focus on honing your skills rather than merely making big profits, the more you will reach a higher level of skill… Don't fall for the conventional view of success as making huge profits even when you aren't psychologically fit.”

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

If you want my coming trading articles delivered directly into your inbox (I don’t support spamming in any way), you can send me an email titled “Request for Trading Articles.”

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

Saturday, November 5, 2011

The Most Difficult Aspect of Trading

RECENT MARKET CONDITIONS

"Winners learn more from losses than from profits. When a profit is earned, there may be little room for improvement. When a loss is taken however, a trader's self-discipline is the first thing to be examined. The second aspect of a loss is to understand how the actual price action caused the loss. Was there a trend reversal? Was there an unexpected gap?" Joe Ross

Hello:

It’s extremely important that everyone around the world has an idea where their currency is trending, especially if you’re trading. As we all know, whether you like it or not our governments and institutions influence currencies to their benefits. Nevertheless, trading hasn’t always been easy in recent weeks for many private and institutional market players. It’s vital that every trader around the world has an idea of the most difficult aspect of trading and how to handle it. The most difficult aspect of trading is the attempt to retain the profits you’ve gained. Money is easy to make, but keeping it safe is very difficult.

When the markets enter a period of protractedly irrational volatility and/or consolidations, many traders suffer; especially trend-followers. For instance, someone who bought the recently consolidating USDJPY would be stopped out with a loss. The buyer might blame herself/himself for buying the pair, without knowing that someone else sold the same USDJPY at the time she/he bought and was stopped out with a loss as well. When the market conditions are favorable, most traders make money easily, but when the market conditions aren’t favorable most traders lose all the money they’ve made. Some even suffer big drawdowns on their accounts after losing their accumulated profit, while some eventually receive margin calls. Yes, the most difficult aspect of trading is an attempt to retain your hard-earned profit. The best traders in the world are those who can suffer as small drawdowns as possible during bad market conditions who hold out long enough. One who makes money in easy market conditions isn’t a good trader whereas one who can successfully defend her/his profit in difficult market conditions is.

As I hinted before, pro traders also go thru technical issues and uncertainties, so don’t feel like novice traders are the only ones suffering. It was reported that the markets, which sometimes seem to be rotten, didn’t spare even the most successful funds managers. For examples, hedge funds titans, including Steven Cohen, Dan Loeb, David Einhorn and John Paulson were all hit by the global market activities. Let’s sum up their losses.

In the month of August 2011, they’d following losses:

Cohen’s SAC Capital Advisors lost about -3%.

Loeb’s Third Point Offshore Fund fell -2.8%.

Einhorn’s Greenlight dipped -1.4%.

John Paulson was reported to have lost -34% so far this year. And so on.

Which one of these market titans would find it easier to recover his loss? You can answer it yourself.

In some of his articles, Thomas Stridsman (CTA), usually talks about risking 0.25% per trade. Do you think he doesn’t know what he’s doing? It’s one way of losing in a professional way. By doing this, it’ll be very difficult for him to have substantial losses on the funds he manages. Unfortunately, many people out there assume that big position sizing is the key. That’s the assumption that’s being punished in the market time and again. One funds manager who’s long been using very small position sizing declared that over the years of trading with real money, there have only been insignificant losses – things that don’t last long – while enjoying annualized returns of 20% - 50%.

Short-term oriented traders love fast, dynamic markets, high volatility and, of course, significant trends – no matter whether the charts’ lines are going upwards or downwards. At the moment, the market proves to itself that it works even in apparent times of crises and emergency. Ultimately, the bottom line is this: After every market phase, after each irrationality, there’s eventually a good opportunity for entry into a stable and long-term trend. Of course, the current market environment of increased volatility also offers opportunities – especially to traders. If you’re active in short-term or swing trading, you can sometimes take moves in one day or some days that might otherwise take many weeks. And there’s also something else that the market turmoil can teach us again: Without any loss limit and conservative risk management, the game is over.

Paul Wallace, a former Royal Air Force controller of jet fighters, admits that trading is war. I conclude this article with his quote:

“Wherever possible it’s better to live to fight another day than waste your resources.”

NB: Please watch out for my coming articles with these titles: ‘Making Money out of Losses – A Blessing in Disguise,’ ‘Why It’s Difficult to Do the Right Things in the Markets,’ ‘How to Identify a Sideways Market – Be Safe!’ ‘A Negative Expectancy System – Pushing Against the Wind?’ ‘The Most Important Trading Skill – Who’s a Winning Trader?’ ‘An Intraday Moves Catcher – A Wealth Generating System,’ ‘Unlock the Power of Everlasting Triumph in the Markets (Parts 1 - 12),’ ‘How to Handle Uncertainties in the Markets,’ ‘The Issue of Stops (Come Back! Oh Come Back!),’ ‘A Hedge Funds Strategy,’ ‘My Hedge Funds Strategy Update,’ ‘Experiment with Different Exit Tactics,’ ‘Mastering the Market Equilibrium Zones – A Time-sensitive Method,’ ‘How I Apply Risk Management – Part 3,’ ‘A Simple Positive Expectancy System – Trading Effortlessly,’ ‘Testimonies from My Subscribers,’ ‘Resist the Lure of High Risk – Part 4’ ‘Worst-case Scenarios – Facts Are Sacred,’ ‘Effective Swing Trading in Forex,’ ‘Gap Trading Revisited,’ ‘3 Recent Gap Trades,’ ‘Developing the Right Attitude towards Losses - Part 4 (Losses Aren’t Abnormal),’ ‘The True Holy Grail – The Long Sought for,’ ‘Suicide Trading Techniques,’ ‘Forex Trading Vocabulary,’ ‘ Clarifying Some Issues – Part 5,’ ‘Navigating Turbulent Markets – A Double Timeframe Analysis,’ ‘Optimization of the USDCAD Hedging Strategy – Bringing the USDCAD to Subjection,’ ‘Overview of My Signals Strategies,’ ‘Uncertainty Has Become My Ally – An Interview with a Dogged Market Speculator,’ ‘The Cost of Discipline,’ ‘2 Examples of the USDCAD Hedging Trades,’ ‘Monthly Market Review,’ ‘Monthly Trading Report (November 2011),’ etc.

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

If you want my coming trading articles delivered directly into your inbox (I don’t support spamming in any way), you can send me an email titled “Request for Trading Articles.”

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

Thursday, November 3, 2011

Weekly Trading Update (November 4, 2011)

If officers aren’t thoroughly drilled, they’ll be anxious and confused in battle; if generals aren’t competently trained, they’ll suffer mental anguish when they face the enemy.Sun Tzu

Hello:

This is an update on some of the movements in the markets and what I’m doing about them, plus my losses and profits. The analyses are based on 4-hour charts, looking at the trend. My preferred leverage is 1:100 and my position size is 0.01 lots for each $2000. The risk per trade stands at 0.5%. The Stops are my life insurance policy. I use the Price Behavior rules for strategic decisions and customized indicators 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 with a risk-to-reward of 1:3, riding the trend until the target is hit or I’m stopped out. 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.

Some mayn’t agree with what I say or do as a trader. They’d need to do some work and prove me wrong. They’d need to risk a minimum of 10% per trade with or without stops, and then see if their capital is still intact after 3 years. They’d need to do what the majority of traders do. With all the acclaimed experts, books and trading systems out there, they might feel trading ought to be complicated before they could make it. It’s not that complicated if they were fair with themselves. They’d need to be fair with themselves in establishing the validity of survivability with the use of large position sizes in trading, especially with those so-called high probability systems. They might use big position sizing with whatever magic they believe in and then look at the results after a few months. Randomness shouldn’t be confused with positive expectancy. Almost anything would ‘work’ sometimes. Having a few winning trades doesn’t prove a technique has any longer-term statistical dependability.

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

AUDUSD

Primary Trend: Bullish

There’s been a sharp sell off this week, but a bullish strength seems to have resumed. Time would tell whether this would be a correction that would give sellers a big opportunity to sell at a higher price. Some swing traders went short at the beginning of this week. Most of their take profit levels would have been hit before the current reversal.

NZDUSD

Primary trend: Bullish

The weakness of the Kiwi is obvious, although it seems that it’s gathering some energy right now. The bullish trend has been seriously violated and may be rendered invalid if the current bullish attempts fail. If this is so, then it’ll be prudent to go short at a good price. At the same time clear trading signals are generated that require no interpretation,

AUDNZD

Primary trend: Bullish

Here, the bullish run remains intact - a scenario that has been going on for a long time. Whenever there’s a dip in the price, an opportunity comes for buyers to jump in, with slow but steady returns.

EURCAD

Primary trend: Bullish

I would suggest staying away from this market at the present. The market is quite volatile. Both buyers and sellers would’ve been stopped out if they entered at wrong entry prices. The bullish outlook is in serious jeopardy, yet I believe things would soon be normalized. Moreover, once you’ve figured out the trend this will definitely keep your trading on the correct side of the market.

EURNZD

Primary trend: Bullish

This instrument is currently in a critical situation. The SMAs 50 and 200 are now aligned together. The ADX 20 is pointing below level 20, indicating less and less activity in the market. -DI and +DI are also aligned together – just like the SMAs 50 and 200. One would do well to stay out of the market until there’s a clear direction.

GBPCHF

Primary trend: Bearish

The current bearish bias remains precarious until something decisive happens. The Cable is weaker than its counterpart. If the support at 1.4050 is broken, the next target could be 1.4000; for this action would not likely be a trend reversal. What most traders tend to believe has no sound basis and don’t work.

Conclusion: As every trader should know, the most important aspect of trading is safe position sizing. You determine where you get out if the trade fails and based on your entry and exit you can determine how many lots you can trade given your account size and the risk you allow for the trade. Position sizing techniques help you make this kind of calculation.

The article is concluded by quotes from Paul Wallace, a trader and a former Royal Air Force controller of jet fighters:

1. Like airline pilots and emergency room doctors, constant training in basic skills is conducted until they become an automatic response. This means the individuals will automatically do the right thing when overwhelmed during periods of intense stress and pressure. As an aside, how many traders or trading education firms train their people until their responses to situations are automatic?

2. “When the bullets start flying you have to be able to act decisively and do exactly what needs to be done right away… That’s exactly the same for traders. You need to do what to be done when the market doesn’t do what you think it’s going to do (which it’ll do a lot).”

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

If you want my coming trading articles delivered directly into your inbox (I don’t support spamming in any way), you can send me an email titled “Request for Trading Articles.”

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.