Friday, January 20, 2012

Examples of the USDCAD Hedging Trades

"For me the most important thing is intuition. The markets represent an ‘intelligent chaos’ globally. This is a fantastic idea. There’s not a deliberate intelligence in the markets, it’s more of structural intelligence. I think that the only way to have good performance in the markets and to earn money is with the help of intuition.Jochen Steffens


Here are a few examples of recent trades that were opened based on the rules of the strategy discussed here. This is what follows the optimization of the USDCAD Hedging strategy. Developing an extensive trading system is only worthwhile if one can be sure that the trading signals of the system can be implemented in real trading. A correct trade may first go in the forecasted direction before a trend reversal. One of the first signs of a trend reversal is the breaking of an important trend line. However, the violation of the trend line mayn’t only be a signal of a change in trend; it could also be a sideways trend or a price pattern, which later proves to be a reversal or a consolidation.

The current value of a price is also something that mustn’t be ignored. Value, and its relation to price, is a matter of future price gain. Future prices will emerge from what other people do after you get filled. Any transaction is an agreement over current price with a disagreement over future prices. Or as Buffet puts it: price is what you pay, value is what you get. If value for us is determined by future transactions, it can’t be known the moment we put in our order. Only afterwards will it become clear as the position starts showing us a profit or a loss. Therefore one needs to have a strategy that can handle this kind of scenario; even if it’s a choppy market. A hedging strategy is well adapted to handle choppy markets easily. The choppy market cannot make up its mind. It often changes direction for no apparent reason – something clearly visible on many timeframes. This means investors are torn between being bullish and bearish and neither the bulls nor the bears can gain the upper hand. This usually happens during periods of no dramatic news or just before a change in the trend. This market is usually difficult to assess and trading usually produces more loss than gains (unless one uses a hedging strategy). Entry into such a market, calling both long and short trades would therefore be recommended.

A market can definitely rip higher for long time, but at some point it’ll have to rest and consolidate, and sometimes it’ll even come back down to earth and reverse all those spectacular gains. When trading with this strategy, entry should be made in the medium to long term main direction, but having the possibility of a reversal in mind. A corresponding signal and an early entry may likely return or not return to the vicinity of the stops placed.

Trade Examples

There is a need to show you some trades that were taken based on the trading method discussed here. Spreads were not considered in these examples. The trades were only on the USDCAD. They were placed on the same day and nearly at the same time.

Example 1:

A. Order: Buy

Entry date: November 18, 2011

Entry price: 1.0268

Stop loss: 0.9768

Take profit: 1.0418

Exit date: November 23, 2011

Exit price: 1.0418

Status: Closed

Profit/loss: 150 pips

B. Order: Sell

Entry date: November 18, 2011

Entry price: 1.0270

Stop loss: 1.0770

Take profit: 1.0120

Exit date: December 2, 2011

Exit price: 1.0120

Status: Closed

Profit/loss: 150 pips

Example 2:

A. Order: Buy

Entry date: September 5, 2011

Entry price: 0.9869

Stop loss: 0.9369

Take profit: 1.0019

Exit date: September 12, 2011

Exit price: 1.0019

Status: Closed

Profit/loss: 150 pips

B. Order: Sell

Entry date: September 5, 2011

Entry price: 0.9862

Stop loss: 1.0362

Take profit: 0.9712

Exit date: September 16, 2011

Exit price: 0.9792

Status: Closed

Profit/loss: 70 pips

Note: Prior to the examples shown above, a pair of short and long trades was opened on August 22, 2011. The short trade hit its 150-pip target on August 31, 2011 while the remaining negative trade later got its loss reduced to approximately -50 pips on September 2, 2011 (owing to some rally on the USDCAD). The remaining negative trade was closed after the exit criterion was met. As you can see, one trade was closed at +150 pips and the other trade was later closed at -50 pips. The closed profit was bigger than the closed loss. That is the logic. Also remember that 4-hour charts are used only for the purpose of examples. The strategy is non-timeframe specific.

A Free Gift to Interested Readers

This strategy has already been sent as a gift to my trainees and subscribers, but I also want to give it free to 20 readers only. Only 20 of my readers would get it free, and therefore, it’ll be on first-come-first-served basis (for the early bird catches the worm). After 20 copies have been sent out, no more copies of this strategy would be made available by me. This is one way of compensating avid readers of my articles. Readers now have a chance to posses this strategy. It’ll be in form of an easily understood and do-it-yourself format. It comes with simple explanation, entry criteria, exit criteria, alternative exit, stop loss, effective trade management and other valuable hints. It’ll also contain recent trades and their accompanying charts. Please send me an email titled ‘A Request for Strategy’ to get your own free copy before it’s too late.

I conclude this article with a quote from Jochen Steffens:

“At the risk of oversimplification, you’ve to turn off the mind for trading. The mind is very powerful and helpful in all areas of life, but usually not on the markets. It’s more of a limiting factor here. That’s because the mind is completely overwhelmed. During trading we have ‘voices’ in our head that recommend doing this or that or expecting one or the other movements; but the many voices aren’t only needless but counter-productive. Use your mind when you define and test a setup – turn your mind off during trading. I think that trading is approximately 80% psychology and 20% technique.”

NB: Please watch out for my coming articles with these titles: ‘My Typical Trading Day,’ ‘A Trader’s Trick Entry Technique,’ ‘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?’ ‘Trading Signals,’ ‘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 (2),’ ‘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,’ ‘Before You Open that Trade,’ ‘Cogent Trading Biases,’ ‘Overview of My Signals Strategies - Can You Become a Super Trader?’ ‘Winning Trades, Losing Trades,’ ‘Uncertainty Has Become My Ally – An Interview with a Dogged Market Speculator,’ ‘The Cost of Discipline,’ ‘Monthly Market Review,’ ‘I Can’t Express How Grateful I’m to You!’ ‘Yearly Trading Update (2012) – The Big Picture,’ ‘What We’ve Decided to Do in the Markets - Trend Following It Is!’ ‘Annual Trading Results (2011) – I Was Perfecting My Trading Skill,’ ‘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


Yahoo! Messenger ID: saazalmu

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