Friday, December 23, 2011

Weekly Trading Update (December 23, 2011)

“Quite often it's what you choose to not do that determines the success of your trading… The winning trader is the trader who knows how to cope with uncertainty… Coping with the uncertainty of the markets is vital for enduring success in the markets. The more you can accept uncertainty and find some way to deal with it, the more profits you'll realize… Although the markets are uncertain, it doesn't mean that you won't profit if you control your risk and trade with sound methods. Think of the big picture. You may not know the outcome on any one trade, but across a series of trades, you'll come out profitable if you use trading methods that put the odds in your favor.” – Joe Ross


When new traders enter the markets many believe that they miss out on great trading opportunities. New traders play these mind games with themselves all the time. If they feel that they’ve missed an early opportunity, then they should study the market, so that they won’t missed the same opportunity the next time it happens. It could be said that precast belief can plunge the trader into ruin, or as Jochen Steffens explains it, if the trader’s bullish or bearish or leaning any other way, she/he can’t observe the market objectively. The trader sees what she/he wants to see and not really what happens. If the trader trades discretionally according to her/his beliefs, she/he is successful only as long as the market goes in the direction aligning with those beliefs. The market isn’t interested in the trader’s beliefs and markets change from time to time – sometimes fast and furiously. As a trader you’ve to be unbiased, as difficult is it is. And to be honest: Even though we know that we mustn’t have any precast beliefs, they sneak into the subconscious. Especially during longer bull or bear markets when even the most neutral trader develops expectations – the often biased media coverage is simply too powerful. That’s why the trader has to constantly ask themselves if they’re still unbiased or if they’re already forming an expectation.

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


Primary Trend: Bearish

This pair, in a context of a downtrend broke a major resistance at 0.1200. But further bullish move was rejected soon after that, and the price retraced seriously. It’s making another attempt to go up; thereby creating another selling opportunity for short-term sellers.


Primary trend: Bearish

Here too, a bullish outbreak was soon stalled, resulted in a bearish retracement and created a tricky situation for traders. However, a new southward move may be resumed if subsequent economic data show a negative performance.


Primary trend: Bullish

The price situation of this instrument is difficult for buyers – though the major trend remains bullish. The SMA 50 remains above the SMA 200, but the price has broken the latter to the downside. The RSI 14 has been situated constantly below the level 50 – experiencing difficulty in breaking that level to the upside. The Stochastic 14,3,5 didn’t reach the overbought position and is going to the oversold region. It may be wise to stay out of this market right now.


Primary trend: Bearish

The outlook on this market remains bearish. One would do well to find suitable shorting price levels and periods. This kind of scenarios doesn’t currently exist in all other markets; for absolute prices don’t mean a thing and different markets have different volatility.


Primary trend: Bearish

Sell and sell short! Yes, just like the outlook on the EURCAD. The SMA 50 is still below the SMA 200. The ADX 20 is above level 30 and pointing upwards, meaning that the bearish move could just be starting (it still has much room to run). -DI is above +DI, indicating a domination of the bears. I’d assume only a bearish position here.


Primary trend: Bullish

One should’ve gotten a good result here if one bought in dips. The price seems to be stalling around major supply zones right now, yet one would do well to buy the dips. What more? A safe position sizing method would even be salubrious as one’s position reacts to the unknown.

Conclusion: Though future long-term price value may be estimated by fundamental analysis, short-term future price value depends mostly on the perception of those people watching closely the most recent price action. That’s, people just having their orders filled or wanting to put one in. Consensus and perception of market value, after all, originate from comparing things to each other. And previous prices are the closest thing to compare price with, both in time and in place (on a chart).

Let me conclude this article with the quotes below:

“The insiders of financial markets know the inner working of the financial system and can use this knowledge for their own personal benefit, but at the expense of the society at large.” - Richard Olsen

“When our trades lose money, whatever our logic, we can be sure we were not alone. But we can equally be sure that we were in the minority. Had we been in the majority the market would have performed as anticipated.” - Joseph Trevisani

“The biggest thing that got me from a losing trader to a winning trader was the realization that I did not have to know the future to be successful. Many new traders think that trading is all about knowing what is coming next, but of course no one can really predict the future. So for me realizing that this business is all about playing the odds rather than knowing the future was the single biggest epiphany that got me over the hump.” - Derek Frey

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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