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


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.


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.


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,


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.


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.


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.


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


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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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