Saturday, November 12, 2011

Clarifying Some Issues – Part 5


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:

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, 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


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:

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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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