Thursday, February 23, 2012

Weekly Trading Update (February 24, 2012)

“Learn to change if necessary. If you always do what you've always done, you'll always get what you've always gotten. And, if you always think what you've always thought, you'll always do what you've always done.” - Dr. Woody Johnson


The health of a currency isn’t necessarily reflected consistently in the underlying country. A currency is a measurement of value at any moment derived from the supply and demand on it (which is often manipulated). If that’s the case, then the currency wouldn’t move so much in between news and especially economic reports. As far as economic reports, there’s another misconception. A country may generate ‘positive news’ and the value of their currency can still fall. A country can release bad economic figures and their currency value could still rise. In between those periods, the currency would move around over all the place. The bottom line is that there’s no consistency on a day-to-day basis and there’s no tremendous misinformation in books and on the Internet. This fact should be factored in when designing a mechanical trading system. A great semi-automated mechanical system re-calibrates itself. However, systems alone don’t design themselves. The designer has to be selective, administer constant discretion that’s tempered with proper pacing and risk control. This is always work in progress.

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


Primary Trend: Bullish

There’s been a serious bearish sell-off this week – and in the context of an uptrend. Since the market opened with a gap-up this week, the price has dropped by over 200 pips. There’s a bullish correction at the moment – something that mayn’t hold.


Primary trend: Bullish

Like its AUDUSD counterpart, this pair - which opened with a gap-up this week – has fallen by over 160 pips. At the bottom of a very strong bearish pressure, prices are not low, they’re ludicrous. Because of this you can be lured in early, if you start thinking things are cheap. At the bottom of a strong bearish dive, a price is so low that when you go to buy there’s no seller there to fill your order the market is broken. This is the true bottom.


Primary trend: Bearish

A noteworthy rally is following the recent bearish dive in this market. The trend remains bearish, however. The SMA 50 is still below the SMA 200, and the price finds it difficult breaking the former to the upside. This means the price is below it. The RSI 14 has moved clearly above the level 50, supporting the current rally. The Stochastic 14,3,5 is almost going to the overbought area. This remains an opportunity to sell high in a bearish situation.


Primary trend: Bullish

After finding a recent bottom at 1.3017, this cross has jumped up by over 200 pips. One would need to look for a buying opportunity in the present scenario. Last year, we were perhaps in a long-term bear. If this was the case, recoveries would be sharp and short-lived followed by long-term sliding prices, punctuated by crashes and recoveries.


Primary trend: Bearish

This week, the market has rallied constantly by over 300 pips. The SMA 50 still stays below the SMA 200, thought the price has broken the latter to the upside. The ADX 20 is above the level 35 - showing a strong bullish pressure. +DI is far above -DI. It makes sense to look only for opportunities to go long. The bearish bias may soon be rendered invalid. The level at 1.5900 is expected to act as a great support, giving a nice buy signal.


Primary trend: Bearish

Since February 12, this instrument has fallen by over 300 pips. The best thing to do is to find a shorting level in this market. Then you’ll set a stop in case there’s a rally against you. It takes painstaking effort to be a surviving trader. In the end, you’ll surely succeed. No doubt, you’ll feel your painstaking efforts are not in vain.

Conclusion: Fear and greed influence every part of our lives but they’re particularly evident in trading. Greedy traders use big position sizing to make great fortunes… if they last long enough, as they’re also more disposed to blow up their accounts. It’s sometimes possible that 90% of profits would come from 10% of positions opened. This is the power of letting your profits run. You must be aware of this; for awareness precedes clarity, which precedes choice, which precedes action, which precedes success.

In the early part of March 2012, I’d reveal how I apply effective risk management to my trades in an easily understood method. This would highlight basic risk control tools and effective trade management. I hope the article would greatly benefit many readers out there. Don’t forget also the part 2 of the series of articles bearing the topic: ‘Unlock the Power of Everlasting Triumph in the Markets – Part 2.’

I’d like to conclude this article with the quotes below:

“My best trades in the past mean nothing if I’ve a losing trade in the present and vice versa. Experience in and of itself is the most important experience, if you make effort to analyze it along the way. That sounds corny but it’s just like saying that the journey is the reward. The markets move so fast that there is a point where pondering too much on the past or any series of trades can be more of a detriment than a benefit. An insight from the past applied to foresight is most important. Humanoids need boundaries. Boundaries give closure and allow logic to flow seamlessly. Without closure, there’s cognitive dissonance, which causes stress and irrational behavior and actions that can start small and snowball into full blown destruction. The market loves to give a little and take back incrementally until you’re at its mercy without realizing how you got into that situation.” - Jea Yu

“Why can't most market speculators get it right? In my opinion, it's a combination of human emotion and just plain old laziness. People tend not to want to put in the hard (and smart) work it takes to develop the market skills needed to get paid from the "unskilled." There are no short-cuts. If someone is not interested in putting in the hard work it takes to attain proper trading skills, profitable trading opportunity will equally not be interested in them. The most rewarding opportunities always go to those who enjoy working hard, not those who lack interest in hard work.” – Sam Seiden

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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