Weekly Trading Update (January 21, 2011)

“Proper Knowledge is Power in trading; this means making money if you have it and losing it if you don't.” – Sam Seiden

"Markets can remain irrational a lot longer than you and I can remain solvent." - John Maynard Keynes

Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus my losses and profits. The analyses are based on daily charts, looking at the Big Picture. My preferred leverage is 1:100 and my position size is 0.01 lots for each $1000. My maximum drawdown in a week is 2% (worst case scenario). I use the Price Behavior rules for strategic decisions and customized indicators and a shorter timeframe 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 without predetermined exit target in mind, riding the trend for as long as it continues. 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.

Sam Seiden, quoted above, furthermore says: “I’ve noticed how so many students of the market can easily fall into the traps of over-analysis and to this day, I feel that this single aspect of trading is perhaps one of the greatest reasons why so many speculators find it increasingly difficult to maintain consistency in their performance. At first glance, the need to over-analyze could be interpreted as a means to find a way to win more often than not, thus resulting in a positive cash flow for the given trader. I would go as far to say that every single person trading the markets in some way, shape or form has fallen victim to this dynamic at some point in the journey. However, a deeper understanding of the mental aspects of "grail searching" tells us that really a trader is not looking for a system to help them win more frequently, but rather a system which will prevent them from losing more often than winning. This simple observation highlights the inner psychological frailty which is ever-present in all human minds and which needs to be conquered quickly in a speculator's trading career.”

AUDUSD

Primary trend: Bullish

There’s a very serious threat to the primary bullish trend on this pair. My last Buy Limit order was triggered, moved for sometime in my favor before it reversed. I closed about 56 pips when I got an exit signal and then went short with Instant Execution. If the price fails to rally against me, it means a nice bearish ride is imminent.

Order: Sell

Entry date: January 20, 2011

Entry price: 0.9958

Initial stop: 1.0065

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Open

Profit/loss: 79 pips

Percentage growth: 0.7%

NZDUSD

Primary trend: Bullish

This pair had a remarkable bullish ride last week and early this week, but it’s coming down right now. If the present bearish correction holds out long enough, the primary trend itself would turn bearish. Otherwise a new bullish wave would soon begin. My last ‘Buy’ order on it went in my favor, and I was able to move the Stop to breakeven before the current reversal against me. It’s all about knowing what to do irrespective of the market actions: the less you know, the more mistakes you will make.

Order: Buy

Entry date: January 10, 2011

Entry price: 0.7639

Initial stop: 0.7539

Current stop: N/A

Exit date: January 20, 2011

Exit price: 0.7639

Status: Closed

Profit/loss: 0 pips (breakeven)

Percentage growth: 0 %

EURCAD

Primary trend: Bearish

This cross’ act of defiance is taking it far in a contrarian bullish direction in the present southward outlook. Please don’t get mad at the Loonie if it doesn’t currently favor you – it simply can’t withstand the present assault from the Euro. There’s a need for some amount of weakness in Euro for this cross to come down.

EURAUD

Primary trend: Bearish

There also has been a serious threat to the present bearish scenario. The market bottomed out at 1.2928 and had over 600-pip rally to a new high of 1.3552. The next action for me is to wait and buy when a massive correction takes the price to a new demand level or when there’s a new confirmed ‘sell’ signal. The MA that was a kind of flat some weeks ago is now pointing in the present trend direction. Moving averages are trend following indicators. As such, they will only work well in trending markets - not when the market is trapped in a trading range.

Order: Sell Limit

Entry date: January 6, 2011

Entry price: 1.3153

Initial stop: 1.3253

Current stop: N/A

Exit date: December 10, 2011

Exit price: 1.3051

Status: Closed

Profit/loss: 100 pips

Percentage growth: 1%

EURNZD

Primary trend: Bearish

The current price movement on this instrument is similar to that of the EURCAD and EURAUD. The reason for this is that the fundamentals are currently in favor of the Euro. Nonetheless, should there be any weakness in Euro, things would come tumbling. This is likely; given the long-term bearish outlook that’s still intact. The price is still traveling far above the SMA 20. The ADX 20 level now indicates that the market seem to have gone too far. +DI crossed its –DI counterpart to the upside late last week and has remained in that format. I opened a Buy Limit order, but unfortunately the market didn’t retrace to my entry level before moving up. So I missed the present northward move. There are always opportunities in future.

Order: Buy Limit

Entry date: January 18, 2011

Entry price: 1.7309

Initial stop: 1.7209

Current stop: N/A

Exit date: January 20, 2011

Exit price: N/A

Status: Cancelled

Profit/loss: 0 pips

Percentage growth: N/A

AUDJPY

Primary trend: Bearish

The primary trend has turned bearish. My last order was first profitable before going negative at the generation of a new short signal. I closed the position with a small loss, and I’d not want to enter short on the market at the present tempting price. I’d be looking for another sensible low risk, high reward entry price. I haven’t made any significant changes to my strategy for over ten months, since I know that the secret lies in money management. Even if things don’t go as we envisaged, we can still come home and dry. If you didn’t make money last month, you could make it this or next month. if you had no money to give your loved one last month, and you programmed your phone to say, ‘The number you’re calling is not available at the moment, please call back next year,” how would you fare with your loved one this ‘next’ year?

Order: Buy Limit

Entry date: January 13, 2011

Entry price: 82.00

Initial stop: 81.00

Current stop: N/A

Exit date: January 20, 2011

Exit price: 81.82

Status: Closed

Profit/loss: -21 pips

Percentage growth: -0.2%

Conclusion: Sagacious top traders don’t rush into making trading decisions, nor do they blindly follow popular opinions. Instead, they weigh their options and examine their trading rules before making decisions. There’ll be challenges in your trading life that’ll separate you from your trading goals if you allow them to. You can’t afford to fail to bring yourself in harmony with trading ideas that work. As long as you do your best to do what’s right while trading, you can be confident that your long-term survival is sure.

This article is ended with thought-provoking quotes from Nick McDonald, a very popular international trader:

1. “I worked in a support role alongside some of the best full service brokers that the country had to offer and they put me thru various training courses. I learnt a lot about the markets but the problem was I learnt how to ‘talk about’ rather than how to ‘profit from’ the markets.”

2. “The market dished up all the lessons that most traders get at the start of their careers, mine was just delayed a few years… Mindset as compared to ability or intelligence is what separates the winners from the losers. The same could be said of many professionals. I realized that I had to eliminate… emotional response and started to reward myself for good trading, not profit or loss.”

3. “I also knew that the best traders I knew personally were the most humble and I learnt a lot from them on managing emotions. I used to talk about my successes and rarely discuss my losses, exactly like amateurs tend to do. I now treat it in a professional way and I’m neutral on profit and loss. The main time I get emotional is if I break my rules. Losing money from trading badly upset me the most as I know I shouldn’t have done it. Losing money from trading well I can easily accept.”

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

Email: amustapha@fxinstructor.com

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Drawdowns: Treacherous Statistics

DO YOU CONTROL YOUR TRADING PORTFOLIO OR IT CONTROLS YOU?

“The market has symmetry: what can predictably lose you money should, if you do the opposite, make you profit.” – Clem Chambers

“A good trading system or strategy is absolutely worthless without a method of managing your money… Your number one goal as… a trader is to preserve your capital so that you can stay alive long enough to have some big winners that cover the costs of your losing trades and make a profit. You accomplish this through a sound money management strategy.” – Craig Ferguson

Hello:

“To make losses is human,” says Stefan Salomon without mincing words. We all need to recognize that the one thing none of us can escape in trading is loss. Accept this truth early in your career and things will improve by leaps and bounds. Try to avoid loss and inevitably, your actions will result in misery. I’ve always said that losses don’t matter as long as their average is smaller than the average derived from profits. Top traders know this and recognize the fact, but rookie traders think otherwise. This article was written so that you can appreciate drawdowns better and develop normal attitude towards them - something that matters in your personal evolution as a trader. Please see some trading strategy results below.

Portfolio Development Period (July 1, 2002 – June 27, 2008)

Trading style: Swing trading

Parameter: Long and short positions

Initial stop: 20%

Starting Capital: $100,000

Ending capital: $1,448,715

Net profit: 1348.72%

Annualized gain: 52.20%

Exposure: 39.7%

Number of trades: 1342

Average profit/loss %: 2.04%

Average bars held: 4.93

Winning trades %: 63.79%

Average profit: 6.43%

Average loss: -5.69%

Maximum drawdown: -16.35%

Profit factor: 1.79

Faik Giese (a swing trading maverick and funds manager) is the one who presented the candid results above in one of his articles. The lesson is straightforward: a good trading system will intermittently experience drawdowns, but will recover ultimately. It also means that part of the accumulated profit would sometimes be given away. You may’ve observed that as good as the portfolio performance above is, it has losing trades and periods of considerable drawdown. You may check the average loss and maximum drawdown again. There were losing months, plus some years were better than others. It’s also noted that the wider the Stop, the larger the annual returns, but the tighter the Stop, the smaller the annual returns (whereas tighter Stop reduces the exposure of the portfolio). The tighter the Stop, the higher the number of trades, and vice versa. The tighter the Stop, the lesser the trading accuracy while a wider Stop brings more accuracy (but lesser accuracy also brings good results). A tighter Stop brings higher drawdown whereas a wider Stop brings smaller drawdown. The same trading system exemplified above, coupled with the initial Stop of 5%, has a maximum drawdown of -20.01%, annualized gain of 29.63%, net profit of 373.86%, and average winning trades of 49.47%. This is still a good result which recovered irrespective of drawdwons. Trading rookies and impatient traders may conclude that a trading system is bad during a losing month and a period of drawdown. A trading system that worked well in the past would soon survive any present losing streak. You shouldn’t abandon your trading idea because of a losing streak: just as you shouldn’t abandon a loving, caring, faithful, honest and humble spouse because of a mistake on their part. Someone who treated you well in the past might continue doing so in future in spite of occasional shortcomings on their part. If you abandon you good system for another, you’d soon experience drawdowns with your newly-found system; just like someone who experiences the same problem with a new mate after divorcing the former good mate.

Trading systems require extensive tests prior to being used. If you see that you’re still ahead after several weeks of practice, no matter how small the profit is, why can’t you then go live? Nothing is worse for a trader than seeing how the system performs on paper but finding that they themselves haven’t consistently implemented the trades. Your strategy is most likely to work as it did in the past. This doesn’t mean you won’t have losses; but it simply means you’ll be able to preserve your trading capital. Therefore you need to work seriously on your trading mindset rather than blaming your trustworthy system. The problem lies with the trader, not the trading system. In spite of alternating losing and winning streaks, a skilled trader remains effective because he patiently handles every situation, faithfully keeping at his trading rules in the face of occasional and transitory disappointments.

Mr. Stefan, quoted earlier, continues saying that it’s not we as individuals that control the market, but it’s the market that’s always right. All we can do is subject ourselves to the market action, but we exercise no control whatsoever… So the first step on the way to success is to accept that the trader is no superman, but just a human being with all the innate and acquired automated behavior patterns that are downright counterproductive in trading… Ultimately it’s all about recognizing and changing old behavior patterns that are either innate and\or acquired but not sensible in your trading.

You cannot control the markets but you can control your money and your risk on each and every trade that you make. Even, most good funds managers, who deliver 15 – 20% per year, are highly commendable for their results (however most traders are deluded by seminar people and deceptive marketers that they can make 15 – 20% week and go scot-free in the long run.) The whole secret to winning in the market is to lose the least amount possible when you're not right. You need to accept this fact or go do something else.

Drawdowns versus My Strategies

I’m completely aware of how drawdowns may affect each of my current 4 trading strategies and how I’ll move ahead despite these. This is revealed so that my existing and potential subscribers can better understand.

A. GBPJPY/USDCAD strategy; swing cum hedging trading (not NFA-compliant).You could get its password and login of the account on which it’s traded on request. The target profit for this year is a minimum of 2000 pips. A few considerable drawdowns are envisaged with this trading system this year, and each of it would be eventually recovered – especially with the present combination of two instruments.

B. Effective Gap Trading (NFA-compliant). The setups for this trading system are rare, but once they occur, just note that it’s time to collect money from the ATM of the financial markets. The system would be explained in the middle of February 2011, after which you could opt to have an access to the account on which it’s being traded. Risk per trade is limited to 1% while Stops are moved to breakeven wherever prices move in predefined directions. The risk-to-reward ratio is 1:2, making it possible to move ahead nicely with easily achievable 50% probability.

C. Results-oriented EURUSD-USDCHF Correlation Strategy (NFA-compliant); to be released early March 2011. This is another income-generating strategy which makes you profit regardless of the market directions and uncertainties, although there are times when trades won’t be taken... The proper use of correlation is even profit on its own! The login and password of the account on which it’s being traded would soon be made available, so that real trades can be accessed. This kind of trading idea is against what the majority of traders would like to do (remember that the majority aren’t always right). No matter what happens on the markets, the trading risk is inherently compensated for, therefore reducing the potential drawdown on each trade. Open position are smoothed whenever there’s a minimum predetermined positive difference between an open negative position and an open positive position. On demo accounts, 0.01 lots size is recommended for each $500. For live accounts, 0.01 lot size is recommended for each $1000. This ensures long-term survival on the markets.

D. Sure-fire Strategy: The minimum target with this trading strategy is 1000 pips this year. The drawdown sustained from this strategy is limited to 3% per week. Trading is stopped for the week whenever the loss reaches the predefined minimum (so that we avoid further drawdown in a bad week). If the accumulated profit is 20% and a bad trading week takes away 3%, thus reducing the profit to 17%, trading is stopped. As long as there are winnings, trading continues. This strategy is on its way to becoming a possession of each of my subscriber.

Similarly, the fact that majority of traders fail doesn’t mean that trading is a dead end activity. Traders who are successful prove otherwise. Occasional losses leading to transient drawdowns are inevitable but not insurmountable challenges in trading. The secret to success lies in developing deep love for trading and willingness to apply trading principles that work.

NB: Effective Gap Trading system would be explained in the middle of February 2011, after which you’d gain an access to the account on which it’s being traded.

In my penultimate article last year, I featured some recent trading results from Thomas Stridsman, a CTA and well-known trading systems developer). I’d like to conclude this article with more quotes from him.

1. “As far as where to enter and exit, let’s just say I strive to keep things as simple as possible… There’s no way around the fact that you’ll have to suffer through many losing trades as a trend-following trader, but in the end your patience will be rewarded.”

2. “In my experience, knowing how to trade is much more important than knowing when to trade… Then comes positive expectancy, which doesn’t mean that you should expect a positive outcome everyday and every trade, but in the long run. That’s why you need psychology first.”

3. ‘‘Building trend-following systems that perform reasonably well is easy. Making your strategy competitive relative other good trend-following fund managers is the really hard part. This has everything to do with money management and very little to do with when you enter or exit a trade.”

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

Email: amustapha@fxinstructor.com

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:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

And my past articles are also available at: www.ituglobalforex.blogspot.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Weekly Trading Update (January 14, 2011)

"The financial markets generally are unpredictable. One has to have different scenarios. The idea that you can actually predict what's going to happen contradicts my way of looking at the market." - George Soros

“… We are NOT predicting what is going to happen in the future. That is a waste of time. Instead, we are reacting to whatever the chart tells us to do.” – Craig Ferguson

Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus my losses and profits. The analyses are based on daily charts, looking at the Big Picture. My preferred leverage is 1:100 and my position size is 0.01 lots for each $1000. My maximum drawdown in a week is 2% (worst case scenario). I use the Price Behavior rules for strategic decisions and customized indicators and a shorter timeframe 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 without predetermined exit target in mind, riding the trend for as long as it continues. 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.

Long-term survival is a situation experienced by real traders, not gamblers. Real traders take price itself (the most important indicator) serious because in trading, price is king. By taking price itself serious, how the financial markets truly function is not that difficult to figure out. It’s a well known fact that trading can be profitable in bull and bear markets.

AUDUSD

Primary trend: Bullish

This pair reached a high of 1.0226 early this year but soon after that, it was corrected to a low of 0.9803. The pair has been caught in a remarkable rally since then. Clearly, the correction from Swing High to Swing Low was a good opportunity for professional traders to sell high (and of course buy low and sell high). I got a pending order on this pair.

Order: Buy Limit

Entry date: January 11, 2011

Entry price: 0.9907

Initial stop: 0.9807

Current stop: N/A

Exit date: N/A

Exit price: 0.9910

Status: Pending

Profit/loss: 0 pips

Percentage growth: N/A

NZDUSD

Primary trend: Bullish

I’ve an open position on this pair. The pair, though generally in a bullish run, is now in the midst of price consolidation. The Bollinger Bands on the 4-hour chart clearly testify to this fact. Even while doing normal things, you may discover that the trading returns aren’t too smooth; they are realistic. Real life trading goes through peaks and troughs.

Order: Buy

Entry date: January 10, 2011

Entry price: 0.7639

Initial stop: 0.7539

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Open

Profit/loss: 46 pips

Percentage growth: 0.46%

EURCAD

Primary trend: Bearish

This exotic cross has been trending down nicely for some amount of time, and it’s now clear that the price has bottomed out. I’m currently looking to enter at an optimal price. There was a recalcitrant support around level 1.2750, and as this held out long enough, as it were, the bears might say, “That’s enough!” Then it’d be no wonder if the present bullish attempt is sustained. The present bullish attempt has been truly sustained.

EURAUD

Primary trend: Bearish

My last short order on this instrument made a profit, and later was prevented from turning into a loss. For technical analysts who’ve also been following some economic news coming out of the Eurozone and Australia, the reason for the recent protracted bearish scenario will that not be difficult to figure out. Please note that there’s been a series of bullish corrections that each later led to a selling pressure. At this junction, it’s now clear which direction the market would eventually go: whether the each correction would metamorphose into an extended bullish rally or it would culminate in another heavy selling pressure. A popular candlestick pattern may form – yet the market would still behave contrary to the expectation. What many traders don’t know is that many candle patterns have lost their effects. Heresy? Nope!

Order: Sell Limit

Entry date: January 6, 2011

Entry price: 1.3153

Initial stop: 1.3253

Current stop: N/A

Exit date: December 10, 2011

Exit price: 1.3051

Status: Closed

Profit/loss: 100 pips

Percentage growth: 1%

EURNZD

Primary trend: Bearish

The price action panning out on the cross is similar to that of the EURAUD. It appears that it makes sense to look for a way to go long as soon as a sensible entry criterion is met. The price is traveling far above the SMA 20. The ADX 20 level shows that the market volatility is again increasing, and now significantly strong. +DI has crossed its –DI counterpart to the upside. The price would’ve moved up nicely if one entered at a good price.

AUDJPY

Primary trend: Bullish

I’ve set a pending order to buy at a lower price. This market has been so volatile recently. Buyers and sellers with tight Stops would have been stopped out. Yet it seems the bulls would ultimately prevail, and if that doesn’t happen, professionals know when to do. They’d either stay away or apply their risk control measures. Therefore, before telling your employer that the salary he gives you is no longer needed, you got to make sure that you have what it takes to survive on the markets, and of course earn a decent income.

Order: Buy Limit

Entry date: January 13, 2011

Entry price: 82.00

Initial stop: 81.00

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Pending

Profit/loss: 0 pips

Percentage growth: N/A

Conclusion: The best way to learn is by example. Top traders have given us great examples to follow. Kathleen Brooks mentioned in one of her articles that the most successful traders are not necessarily the most well-read; instead they can think clearly, formulate rational trading strategies and remain disciplined. One such trader was Nicolas Darvas. He made $2 million in 2 years trading the… market during the bull market in the 1950’s. He wasn’t a fund manager or investment professional. In fact he was a professional dancer. As for me, I’ve come to grips with the fact that I don’t need to sit in front of my PC all day to make money; and there are strategies that can take care of this.

In support of this, 3 quotes from Philipp Kahler (a highly experienced and renowned technical analyst) end this article:

1. “I’d rather look out of the window now and I’m not obsessed with five-minute charts; weekly charts can make you money as well without the hectic pace of high-speed trading. This reduces not only the amount of time that you’re glued to the computer but also the risk of making crucial mistake in the hustle and bustle of workaday life, ruining everything in the process.”

2. Paracelsus knew that the dose decides whether it’s poison or medicine, and it’s similar for us traders when we’ve to determine the size of the next position… This ensures that we don’t ruin our portfolio with successive losing trades. On the other hand the position size is large enough to promote the development of our portfolio in case of a win.”

3. “…Trading carries a lot of responsibility, and it’s something you can make a living on. It can make you good money but only if you have a well though-out plan that you implement with discipline.”

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

Email: amustapha@fxinstructor.com

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:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Weekly Trading Update (January 14, 2011)

"The financial markets generally are unpredictable. One has to have different scenarios. The idea that you can actually predict what's going to happen contradicts my way of looking at the market." - George Soros

“… We are NOT predicting what is going to happen in the future. That is a waste of time. Instead, we are reacting to whatever the chart tells us to do.” – Craig Ferguson

Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus my losses and profits. The analyses are based on daily charts, looking at the Big Picture. My preferred leverage is 1:100 and my position size is 0.01 lots for each $1000. My maximum drawdown in a week is 2% (worst case scenario). I use the Price Behavior rules for strategic decisions and customized indicators and a shorter timeframe 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 without predetermined exit target in mind, riding the trend for as long as it continues. 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.

Long-term survival is a situation experienced by real traders, not gamblers. Real traders take price itself (the most important indicator) serious because in trading, price is king. By taking price itself serious, how the financial markets truly function is not that difficult to figure out. It’s a well known fact that trading can be profitable in bull and bear markets.

AUDUSD

Primary trend: Bullish

This pair reached a high of 1.0226 early this year but soon after that, it was corrected to a low of 0.9803. The pair has been caught in a remarkable rally since then. Clearly, the correction from Swing High to Swing Low was a good opportunity for professional traders to sell high (and of course buy low and sell high). I got a pending order on this pair.

Order: Buy Limit

Entry date: January 11, 2011

Entry price: 0.9907

Initial stop: 0.9807

Current stop: N/A

Exit date: N/A

Exit price: 0.9910

Status: Pending

Profit/loss: 0 pips

Percentage growth: N/A

NZDUSD

Primary trend: Bullish

I’ve an open position on this pair. The pair, though generally in a bullish run, is now in the midst of price consolidation. The Bollinger Bands on the 4-hour chart clearly testify to this fact. Even while doing normal things, you may discover that the trading returns aren’t too smooth; they are realistic. Real life trading goes through peaks and troughs.

Order: Buy

Entry date: January 10, 2011

Entry price: 0.7639

Initial stop: 0.7539

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Open

Profit/loss: 46 pips

Percentage growth: 0.46%

EURCAD

Primary trend: Bearish

This exotic cross has been trending down nicely for some amount of time, and it’s now clear that the price has bottomed out. I’m currently looking to enter at an optimal price. There was a recalcitrant support around level 1.2750, and as this held out long enough, as it were, the bears might say, “That’s enough!” Then it’d be no wonder if the present bullish attempt is sustained. The present bullish attempt has been truly sustained.

EURAUD

Primary trend: Bearish

My last short order on this instrument made a profit, and later was prevented from turning into a loss. For technical analysts who’ve also been following some economic news coming out of the Eurozone and Australia, the reason for the recent protracted bearish scenario will that not be difficult to figure out. Please note that there’s been a series of bullish corrections that each later led to a selling pressure. At this junction, it’s now clear which direction the market would eventually go: whether the each correction would metamorphose into an extended bullish rally or it would culminate in another heavy selling pressure. A popular candlestick pattern may form – yet the market would still behave contrary to the expectation. What many traders don’t know is that many candle patterns have lost their effects. Heresy? Nope!

Order: Sell Limit

Entry date: January 6, 2011

Entry price: 1.3153

Initial stop: 1.3253

Current stop: N/A

Exit date: December 10, 2011

Exit price: 1.3051

Status: Closed

Profit/loss: 100 pips

Percentage growth: 1%

EURNZD

Primary trend: Bearish

The price action panning out on the cross is similar to that of the EURAUD. It appears that it makes sense to look for a way to go long as soon as a sensible entry criterion is met. The price is traveling far above the SMA 20. The ADX 20 level shows that the market volatility is again increasing, and now significantly strong. +DI has crossed its –DI counterpart to the upside. The price would’ve moved up nicely if one entered at a good price.

AUDJPY

Primary trend: Bullish

I’ve set a pending order to buy at a lower price. This market has been so volatile recently. Buyers and sellers with tight Stops would have been stopped out. Yet it seems the bulls would ultimately prevail, and if that doesn’t happen, professionals know when to do. They’d either stay away or apply their risk control measures. Therefore, before telling your employer that the salary he gives you is no longer needed, you got to make sure that you have what it takes to survive on the markets, and of course earn a decent income.

Order: Buy Limit

Entry date: January 13, 2011

Entry price: 82.00

Initial stop: 81.00

Current stop: N/A

Exit date: N/A

Exit price: N/A

Status: Pending

Profit/loss: 0 pips

Percentage growth: N/A

Conclusion: The best way to learn is by example. Top traders have given us great examples to follow. Kathleen Brooks mentioned in one of her articles that the most successful traders are not necessarily the most well-read; instead they can think clearly, formulate rational trading strategies and remain disciplined. One such trader was Nicolas Darvas. He made $2 million in 2 years trading the… market during the bull market in the 1950’s. He wasn’t a fund manager or investment professional. In fact he was a professional dancer. As for me, I’ve come to grips with the fact that I don’t need to sit in front of my PC all day to make money; and there are strategies that can take care of this.

In support of this, 3 quotes from Philipp Kahler (a highly experienced and renowned technical analyst) end this article:

1. “I’d rather look out of the window now and I’m not obsessed with five-minute charts; weekly charts can make you money as well without the hectic pace of high-speed trading. This reduces not only the amount of time that you’re glued to the computer but also the risk of making crucial mistake in the hustle and bustle of workaday life, ruining everything in the process.”

2. Paracelsus knew that the dose decides whether it’s poison or medicine, and it’s similar for us traders when we’ve to determine the size of the next position… This ensures that we don’t ruin our portfolio with successive losing trades. On the other hand the position size is large enough to promote the development of our portfolio in case of a win.”

3. “…Trading carries a lot of responsibility, and it’s something you can make a living on. It can make you good money but only if you have a well though-out plan that you implement with discipline.”

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

Email: amustapha@fxinstructor.com

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:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

And my past articles are also available at: www.ituglobalforex.blogspot.com

Yahoo! Messenger ID: saazalmu

NB: There is risk of loss in trading, but it is possible to be a successful trader.

2011 – A year Of Opportunities

“…Most people believe the opposite of what is necessary for success… Society tends to program you with certain beliefs, most of which are not true.” – Dr. Van Tharp

Hello:

Happy New Year!

Over 90% of the people break their New Year’s resolutions in the month of January. Over 90% of traders eventually lose their socks on the markets because they tend to be conservative with profits and risky with losses. Many top market speculators are perplexed by a new generation of traders who don’t seem to have a clue about the skills necessary to preserve their trading portfolios. Patience has become a virtue that most people tend to ignore. The world is promoting instant gratification – something the markets don’t offer in the long run (traders would obviously be wiser if they knew the adverse long-term effects of instant gratifications). Joe Ross states that novice traders envision extreme wealth and advantages they will reap... [and] Media images don't help matters [either]. They show that expensive cars and luxurious homes are associated with happiness and bliss, and it's reasonable for people to think that making huge wins will produce ultimate contentment. There’ll always be marketers out there who would be showing you extremely gargantuan profits in ridiculously short period of time, presenting a trading idea as if it were the Golden Goose strategy. This kind of tendency is dangerous to the formative trading mindset of innocent beginner traders. Your sense of greed will first need to be appealed to before you can be ripped off. It’s therefore no wonder that many people won’t eventually become successful traders. There’s no way around the established principles that lead to eventual survival on the markets. If you risk little, you win little. If you risk too much, you eventually run to ruin. There’s no way around that.

Dr. Woody Johnson, who’s an expert of trading psychology, writes that one thing that you must come to grips with is that the change you seek cannot happen until and unless you become aware of your issues and problems. Yes, you may be aware of the fact that you are getting results that you don't want, but that is not enough. You must become aware of your underlying self-sabotaging thoughts, emotions and limiting beliefs that drive what you do. If you don't, you will continue to do the same thing and you'll get the same result. Trading is serious business and you must be prepared with the best that you have in order to do battle in the trading trenches. “I would be a liar if I said trading did not involve some level of hard work and effort. In all aspects of life, if you want to be good at something, it takes commitment and time to learn your craft. This is certainly no "get rich quick scheme" and I advise you to ignore anybody who tells you otherwise. If you have aspirations of just rolling out of bed, clicking a few buttons and doubling your account in the blink of an eye, then I am sorry to say that you are misguided. Don't fall into the trap of thinking trading is easy, but take comfort in knowing that it can become easy over time, only if you keep things simple. Anyone can be taught by a master, but this does not lead to mastery itself. That is completely dependent on the student's willingness to learn, observe, learn and make the effort. This is not a game of passive learning, but rather an art of active participation. Instead of searching for the non-existent Holy Grail, realize now that the real secret weapon is just all in your head… The real difference between a novice and a professional trader is that the latter knows the rules and sticks to them, while the former knows the rules and tends to ignore them… And if you were thinking that the more hours you spend in front of a screen, the better you will be, then you have been truly misinformed,” explains Sam Evans, a Forex trading instructor. Every successful trader knows: the proper position size for any trade setup on any timeframe is one of the most important keys to long-term success. You got to have modest and realistic expectations. The markets eventually reward those who show an earnest quest for trading mastery.

This year is full of wonderful opportunities on the markets. There would be losers: there would be winners. And we’d like to belong to the group of the winners. There are effective strategies that can be used to generate income, apart from the one I have now. Two of such wonderful strategies would be revealed within the next two months, while giving you access to how they’re applied on the markets. I truly consider it an honor to be of service to my clients and stay in touch with them. Few things are more fascinating as making money in trading after you know the secret of successful trading. But some people mayn’t be pleased that you’re trading. Don’t be discouraged. Your hope of enjoying financial freedom eventually depends on doing the right things on the markets.

NB: My article next Sunday would deal with drawdowns on trading accounts and how to handle them.

Another 2 quotes from Dr Van Tharp end this article:

1. “Without a proper mental approach to trading, someone trading a “Holy Grail” system could produce mediocre results or even large losses.”

2. “…Most people are not going to make the effort to understand the psychology of trading—which gives those who do a huge edge in the markets… Most importantly, the human brain is wired such that the average person is inclined to trade poorly without ever understanding why. Psychology matters more to traders than to perhaps any other income producing activity. Ignore this at the risk of your own financial peril.”

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

Email: amustapha@fxinstructor.com

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:

www.fxinstructor.com/blog/author/amustapha

www.fxinstructor.com/blog

Get my Forex trading signals at: http://www.fxinstructor.com/en/analytics/ituglobal

NB: There is risk of loss in trading, but it is possible to be a successful trader.