My Trading Book

45 Ways to Avoid Losing Money Trading FOREX

2010-09-06T22:26:00.000+08:00

Reproduced with credits ...

Retired proven professional Bank FOREX trader with over 20 years of hands-on FOREX trading experience.

Email: jimmy@eurusdtrader.com
Web: http://www.eurusdtrader.com

45 Ways to Avoid Losing Money Trading FOREX, by Jimmy Young

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1) Knowledge Deficiency – Most new FOREX traders don’t take the time to learn what drives currency rates (primarily fundamentals). When news or a statement is due out they must close out their positions and sit out the best trading opportunities. They are taught to only trade after the market calms down. So essentially they miss the whole move and then trade the random noise that follows a fundamental price move. Just think for a moment about technically trading the aftermath of a price move; there is no potential.

2) Overtrading - Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to “just” make a few hundred dollars a day by locking in tiny profits whenever possible is a losing strategy.

3) Over leveraged - Leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the bigger the position the more spread income the broker earns.

4) Relying on Others – Real traders play a lone hand; they make their own decisions and don’t rely on others to make their trading decisions for them; there is no halfway; either trade for yourself or have someone else trade for you.

5) Stop Losses – Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop.

6) Demo Accounts – Broker demo accounts are a shill game of sorts; they’re not as time sensitive as real accounts and therefore give the impression that time sensitive trading systems, such as short-term moving average crossovers can be consistently profitably traded; once you start dealing with real money reality is quick to set in.

7) Trading During Off Hours – Bank FX traders, option traders, and hedge funds have a huge advantage during off hours; they can push the currencies around when no volume is going through and the end game is new traders get fleeced trying to trade signals. There is only one signal during off hours – stay out.

8) Trading a Currency, Not a Pair – Being right about a currency is half a trade; success or failure depends upon being right about the second currency that makes up the pair.

9) No Trading Plan - Make money is not a trading plan. A trading plan is a blueprint for trading success; it spells out what you see your edge as being; if you don’t have an edge, you don’t have a plan, and likely you’ll wind up a statistic (part of the 95% of new traders that lose and quit).

10) Trading Against Prevailing Trend – There is a huge difference between buying cheaply on the way down and buying cheaply. What was a low price quickly becomes a high price when you’re trading against the trend.

11) Exiting Trades Poorly – If you put on a trade and it’s not working make sure you exit properly; don’t compound the damage. If you’re in a winning trade don’t talk yourself out of the position because you’re bored or want to relieve stress; stress is a natural part of trading; get use to it.

12) Trading Too Short-term – If you’re profit target is less than 20 points don’t do the trade; the spread you pay to enter the trade makes the odds way against you when you go for these tiny profits.

13) Picking Tops and Bottoms - Looking for bargains works well at the supermarket but not trading foreign exchange; try to trade in the direction the price is going and you’re results will improve.

14) Being Too Smart – The most successful traders I know are high school graduates. They keep it simple and don’t look beyond the obvious; their results are excellent.

15) Not Trading Around News Time – Most of the big moves occur around news time. The volume is high and the moves are real; there is no better time to trade fundamentally or technically than when news is released; this is when the real money adjusts their positions and as a result the prices changes reflect serious currency flow (compared to quiet times when Bank traders rule the market with their customer order flow.

16) Ignore Technical Condition – Determining whether the market is over-extended long or over-extended short is a key determinant of near time price action. Spike moves often occur when the market is all one way.

17) Emotional Trading – When you don’t pre-plan you’re trades essentially it’s a thought and not an idea; thoughts are emotions and a very poor basis for doing trades. Do people generally say intelligent things when they are upset and emotional; I don’t think so.

18) Lack of Confidence – Confidence only comes from successful trading. If you lose money early in your trading career it’s very difficult to gain true confidence; the trick is don’t go off half-cocked; learn the business before you trade.

19) Lack of Courage to Take a Loss – There is nothing macho or gutsy about riding a loss, just stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Getting married to a bad position ruins lots of traders. The thing to remember is the market does crazy things often so don’t get married to any one trade; it’s just a trade. One good trade will not make you a trading success; rather it’s monthly and annual performance that defines a good trader.

20) Not Focusing on the Trade at Hand – There is no room for fantasizing in successful trading. Counting up and mentally spending profits you haven’t made yet is mental masturbation and does you no good. Same with worrying about a loss that hasn’t happened yet. Focus on your position and have a reasonable stop loss in place at the time you do the trade. Then be like an astronaut – sit back and enjoy the ride; no sense worrying because you have no real control; the market will do what it wants to do.

21) Interpreting FOREX News Incorrectly – Fact is the press only has a very superficial understanding of the news they are reporting and tend to focus on one element and miss the point. Learn to read the source documents and understand it for real.

22) Lucky or Good – Your account balance changes don’t tell you the whole story about your trading; fact is if your taking a lot of risk and making money you will eventually crash and burn. Look at the individual trade details; focus on your big loses and losing streaks. Ask yourself this; if I had a couple of consecutive losing streaks or a couple of consecutive big loses, how would my account balance look. Generally, traders making money without big daily loses have the best chance of sustaining positive performance. The others are accidents waiting to happen.

23) Too Many Charity Trades – When you make money on a well thought out trade don’t give back half on a whim; invest your profits from good trades on the next good trade.

24) Courage Under Fire – When a policeman breaks down the door to a drug dealers apartment he is scared but he does it anyway. When a fireman climbs onto the roof of a burning building he is scared but does it anyway; and gets the job done. Same with trading; it’s ok to be scared but you have to pull the trigger; no trigger – no trades – no profits – no trader.

25) Quality Trading Time – I suggest 3 hours a day of quality, focused trading time; that’s about all your brain allows. When your trading being 100% focused; half way is bullshit’ it doesn’t work. Don’t even think that time spent in front of the computer watching the rates has any correlation to profitability; it doesn’t. Spend less time but when your trading be 100% focused on trading.

26) Rationalizing – Killer. Absolute Killer. Put your trade on and let it run. If it hits your reasonable pre-determined stop your out. Think of yourself as a prizefighter; you just got knocked out. Moving your stop is like getting up after being crushed with a knockout blow; it’s pointless; things will only get worse. Don’t ignore the obvious; your wrong – get out. Come back the next day and try again. A small loss will not hurt you; a catastrophic loss will.

27) Mixing Apples and Oranges – Have you ever done this; you see the EURUSD trading higher so you buy GBPUSD because it “hasn’t moved yet”. That’s a mistake. Most of the time the reason the GBPUSD hasn’t moved yet is because its already overbought or some 4:30am UK news was bearish. Don’t mix apples and oranges; if EURUSD looks bid buy EURUSD.

28) Avoiding the Hard Trades – Bank FX traders have an axiom; the harder the trade is to do the better the trade. This I learned from experience; when I needed to buy EURUSD and it was hard to get them that’s when it’s necessary to pay up and get the business done. When it’s easy to get them then sit back and wait for better levels. So if your trying to get into a trade or more importantly get out of a trade don’t putz around for a few points; get your business done.

29) Too Much Detail – If your trading more than 2 indicators then you need to clean house. Having many indicators stifles trading and finds reasons not to trade. A setup and a trigger is all you need.

30) Giving Up Too Easy – Your first trade of the day may not be your best but certainly it’s no reason to quit. I have a preset daily trading limit and I use it; you can’t make money by making excuses; getting trades wrong is natural and should be expected.

31) Jumping the Gun – Don’t be penny wise and dollar foolish; wait for your trade signal to be clear; put on your trade and give it a decent size stop loss so that you don’t get knocked out by random noise. Do trades don’t’ buy lottery tickets (extremely tight stops).

32) Afraid to Take a Loss - trading is not personal; it’s business. Don’t think that a poor trade is a reflection on you. It could be your just ahead of your time or a commercial order hits the market and temporarily creates a small unexpected move. Again, place your stop beforehand and NEVER increase your pre-determined risk; if it’s going bad it will probably get worse; I think that’s Einstein “in motion stays in motion…”

33) Over-Relying on Risk Reward – There is zero advantage in risk reward; if you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose; actually with the spread its more like 4 to 1 (from entry point if it goes down 17 points you lose or up 63 you win; 17/63 is close to 4-1).

34) Trading for Wrong Reasons – Because the EURUSD is going up is not in itself a reason to buy. Buying EURUSD because its not moving so little risk is even worse; you’re paying the toll (spread) without even a hint that you will get a directional move. If your bored don’t trade; the reason your bored is there is no trade to do in the first place.

35) Rumors – Rumors are rumors almost 100% of the time; think about where in the motion you heard the rumor; if EURUSD is up 50 points in last 15 minutes and the rumor is dollar negative, well then you missed it. Whenever you trades determine where in the motion you are entering.

36) Trading Short-term Moving Average Crossovers – This is the money sucker of the century. When the shorter term moving average cross the longer term moving average it only means that the average price in the short run is equal to the average price in the longer run. For the life of me I cannot understand why this is bullish or bearish. Easy to set up on software, complete with lights, bells and whistles, and good for the seller getting thousands for the software but in terms of creating profit it’s a zero.

37) Stochastic – Another money sucker. Personally I think this indicator is used backwards; when it first signals an overdone condition that’s when I think the big spike in the “overdone” currency pair occurs. To be overbought means strong and oversold means weak. Try buying on the first sign of overbought and selling on the first sign of oversold; you’ll be with the trend and likely have identified a move with plenty of juice left. So if %k and %d are both crossing 80; buy! (Same on sell side; sell at 20)

38) Wrong Broker – A lot of FOREX brokers are horrible; get a good one. Read forums and chats in several different places to get an unbiased opinion.

39) Simulated Results – Watch out for “black box” systems; these are trading systems that don’t divulge how the trade signals are generated. Great majority of them are absolute garbage. They show you a track record of extraordinary results but think about it; if you could build a trading system with half a dozen filters using the benefit of hindsight, couldn’t you too come up with a great system. Of course going forward is an entirely different story. High-speed number crunching capabilities allows for building great hindsight trading systems; BEWARE.

40) Inconsistency – Every business (FOREX trading included) requires a business plan (trading plan). Unless you have taken the time to write down a set of rules that you can and will follow, it’s likely your trading will remain unfocused and directionless. Make a plan, have rules, follow them set goals that are realistic and you will achieve them.

41) Master of None – Focus on one currency for technical trading; each currency has a unique way of trading and unless you get intimate with it you will never truly understand its underlying idiosyncrasies. Don’t spread yourself too thin – focus – master one currency at a time.

42) Thinking Long Term – Don’t do it. Stay in the moment. Especially if you’re a day trader. It doesn’t matter what happens next week or next month, if your trading with 30 to 50 point stops restrict your thought process to what’s happening right now. That is not to stay the long-term trend is not important; it is to say the long-term trend will not always help you when your trading a significantly shorter time frame.

43) Overconfidence – Trading is not easy; statistics show 95% failure rate. If your doing well don’t take your success for granted; always be on the lookout for ways to improve what you’re doing.

44) Getting Pumped Up – The trick is to maintain an even keel; when you are in a trade you want to think exactly as you would if you didn’t have a trade on. To do this requires a relaxed disposition; this is not a football game; don’t get psyched up; relax and try to enjoy it.

45) Staying in the Game – I don’t recommend demo trading because traders learn bad habits when trading with play money. I also don’t think “letting it all hang out” right away is wise either. Start off doing trades and taking risk that is relatively small but still makes a difference to you if you win or lose; about a quarter to a third of what you expect to reach as your trading matures is reasonable.

01 Sep 10 : The USD trades weaker ahead of ADP and ISM releases

2010-09-01T17:55:00.000+08:00

The Dollar Traded very weak against most pairs and into safe havens such JPY and CHF as uncertainty on the economic outlook continues. The uncertainty is due to the release of worse than expected core economic releases as well as Ben Bernanke's dovish stance on the US economy. ADP employment and ISM manufacturing is up today as they are expected to prepare the grounds for Fridays NFP report. US sentiment improved though and stocks were able to finish higher as June House Price Index showed a 4.2%y/y and CB Consumer Confidence increased to 53.5 in August. The DJIA closed +4 points at 10014 and the S&P closed +1 points closing at 1049. USDJPY price action on the day was between 84.59 - 83.81 despite Bank of Japan pledging an extra 10 trillion Yen in an effort to weaken the currency.

The Euro lows of the day were seen into the European session before a solid rally in EUR/JPY helped lift and then strong US data inspired risk on trades. German Unemployment at -17k in August was roughly as forecast. EUR/USD traded with a low of 1.2624 and a high of 1.2744 before closing at 1.2675. Looking ahead, July German Retail Sales forecast at 0.5% vs. -0.9% m/m previously.

Trend Following : The Most Popular Strategy In All Financial Markets

2010-08-31T20:13:00.000+08:00

Trend Following — The Most Popular Strategy In All Financial Markets

If there is one strategy in currency trading that is equally popular with retail and professional, technical and fundamental traders, it must be the age-old and proven method of trend following where traders pursue the main thrust of the price action over the long-term while disregarding short-term events as much as possible on the assumption that they are little more than noise.

Trend following can be highly profitable, but it requires a clear-cut, disciplined trading style in order to deliver its results. Let`s take a look at the details.

Trend following is a combination of technical and fundamental methods

Trend following combines the strengths of fundamental and technical methods in the framework of a long-term strategy. Fundamental tools are good for establishing what to trade, but poor in deciding when to trade. Technical methods are great in establishing concrete levels for risk management, but are weak for analyzing causality behind the price action. The trend following method is a synthesis of these two approaches.

The trend to trade must be chosen on the basis of fundamental analysis

Just pick up any chart, and you will be able to see a number of trends in different timeframes, and between just about any two points in the chart. This is possible because even if two points do not show a credible trend in one timeframe, we could change the zoom level of the chart, from monthly, to weekly, to daily, or hourly, for instance, and would end up with a number of configurations all of which could be termed trends. Although we could speculate about the strengths of each, there is no guarantee at all that a trend seen to be stronger from a technical point of view will being great profits in practice.

As such, we must choose the trend that we trade on the basis of something more than technical methods. And since we know, from previous discussions, that the only tool that allows us to determine a solid, strong trend with observable causes, is fundamental analysis, iwe will make our decision on the basis fundamental arguments. These arguments will differ from person to person, and the goal of the trade initiated, but the main indicators of fundamental strength are interest rate differentials, growth trends, and balance of payments/current account dynamics.

Technical tools can be used for the determination entry/exit points

But even as we determine which trend to trade by fundamental methods, we can`t manage our risk in holding a position, nor can we decide when to enter or exit a trade with them alone. This is a consequence of leverage. An unleveraged trader could be able to wait until the reasons that justify a particular viewpoint dissappear before exiting a long-term trend following position. But this is not the case with a leveraged trader, who has concerns other than the correctness of his viewpoint, such as margin calls, and short-term volatility which must be taken into account. To deal with these, a technical approach is necessary.

We advise traders to limit the role of technical methods in their strategies to the mere task of defining, more or less arbitrarily, the trigger points for various trades, without resorting to speculation about which technical tool or pattern works and which does not. The main assumption behind a trade must be that it is viable on the longer-term, and thereafter its risk must be measured by tools such as the 100-day MA, trend lines, or Fibonacci levels, without any notions about the predictive value of these tools. In short, always be on board to the longer-term movement, and use any short-term deviation from it for the build-up of positions. On a six month-long uptrend, for example, purchase the weekly down-swings, in anticipation that they are the noise of the market.

Being a contrarian in the short term, while following the market in the longer-perspective is the core of a trend-following strategy

So what the long-term, trend following trader does is, being a contrarian, and picking up reversals for entry/exit points in short-term fluctuations while following the already established up- or downtrend, "following the herd" in the longer timeframe. Most traders have an understanding that timing the market is a deadly endeavor that sooner or later leads to disastrous results that get worse the more confident the trader is. Yet with short -term movements the opposite is true. Even as we contradict a short term counter-trend movement which we exploit for opening a position, we are in fact confirming the longer-term movement that underlies it, and as such, are not timing the market at all.

Of course, the crucial point in successfully implementing such a strategy is establishing concrete values, or tests, which will allow us to quit the trade if the short-term fluctuations that we aim to exploit prove to be something more than noise. We will keep to our position until our assessment of risk does not justify our basic assumptions about the underlying main trend, and quit when this is no longer the case, or when technical concerns about loss lead us to liquidate the position anyway.

In the ideal case a trend follower never exits his position.

This might sound puzzling, but we want to say is that, as long as there are concrete signs that a trend exists, the trader must maintain his position and ignore the short-term movements that frequently lead him to question the strength of his basic reasoning. The best way of trading a trend on this basis is establishing a test, frequently a technical one, but sometimes a fundamental method too, which will tell the trader to leave his bet. The aforementioned 100-day MA is an excellent example, since trends have been known to depend on this indicator as a support for months as they register new records. On the other hand, in forex, an excellent fundamental test for quitting a position can be established by referencing interest rates. We can decide to stick to a trade, for example, for as long as the interest rate gap between the two currencies is increasing, or decreasing, and choose to quit the trade when this is no longer the case. Of course, such fundamental tests must be tied to a technical value in order to quantize and minimize the risk being assumed, especially if the trade is leveraged.

Conclusion

Without a doubt, trend following is the most promising strategy available to any trader. The well-known record of trend followers has made this method the test of competence for a forex career. It is not that hard to master the strategy, but you will only succeed if you have a goal-oriented, disciplined, clear approach to your trading. Anything less than that is likely to lead to disappointment

31 Aug 10 : Back to reality

2010-08-31T14:45:00.002+08:00

U.S. Dollar Trading (USD) started the day on a weak footing on expectations that an emergency BOJ meeting will support global stock markets further. When the BOJ failed to meet market expectations the sentiment turned sour and the USD gained across the board on safe haven flows. US Personal Income gained 0.2% in July and spending rose 0.4%. In US stocks, DJIA -140 points closing at 10010, S&P -15 points closing at 1048 and NASDAQ -33 points closing at 2119. Looking ahead, June Case Shiller House Prices forecast at 0.2% vs. 0.5% previously. Also released, FOMC minutes.

The Euro (EUR) the Euro relief rally stalled in Asia and was dragged lower once again from heavy EUR/JPY sales post BOJ. August Economic sentiment increased to 101.8 vs. 101.1 previously. The selling continued in US and the Euro finished at day lows. EUR/USD traded with a low of 1.2658 and a high of 1.2757 before closing at 1.2665. Looking ahead, August German Unemployment is forecast at -20k and the rate to remain at 7.6%.

The Japanese Yen (JPY) USD/JPY hit day highs at 85.90 on BOJ optimism but then heavy selling emerged as the special meeting failed to directly address FX. Further losses were seen throughout the day on weak US stocks. Overall the USDJPY traded with a low of 84.47 and a high of 85.93 before closing the day around 84.50 in the New York session. UPDATE July Retail Sales forecast at 3.9% vs. 3.2% previously.

The Sterling (GBP) tracked general market movements topping in Asia before giving up all its gains and then turned negative in New York. Month end flows are expected to be slightly negative for the pound and may way on Tuesday with London closed on Monday. Overall the GBP/USD traded with a low of 1.5454 and a high of 1.5580 before closing the day at 1.5465 in the New York session. Update August Consumer Confidence improves to -18 vs. -22 previously.

The Australian Dollar (AUD) risk off selling in the US and heavy AUD/JPY sales after the BOJ helped push the Aussie back to lower 0.8900 and threatens to return the pair to the recent downtrend. Overall the AUD/USD traded with a low of 0.8912 and a high of 0.9029 before closing the US session at 0.8925. Update July Retail Sales forecast at 0.7% vs. 0.4% previously.

Oil & Gold (XAU) was very contained in a $5 range above $1230 an ounce. Overall trading with a low of USD$1233 and high of USD $1238 before ending the New York session at USD$1237 an ounce. Oil fell sharply after investor sentiment soured in the US session. WTI Oil Closed -$1.00 at $74.20 a barrel.

Cross and Bounce Areas‏

2010-08-31T08:35:00.001+08:00

From a web site that I respect a lot in my FX trading life. I think every trader should have this tool in my opinion.

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Fact : Intraday currency strength moves from low to high continuously.

The numerical value of its highs and lows will vary but a single currency, as measured against the performance of its peers, will always follow sine wave characteristics intraday. It will always move from strength to weakness and back again like an oscillator. In the last six years of recording currency patterns intraday, there has never been a single instance of any currency weakening and staying that way more than a day. They are continually going from + to - all day long. I remember the Yen having a hard time for a day or two several months back, but, as always, it bounced up to strength. They all follow the sine wave pattern.

The sine wave or sinusoid is a mathematical function that describes a smooth repetitive oscillation ( WiKi)

The essence of what we do as traders in the foreign exchange is displayed on a currency strength chart.

The AccuStrength program dissects the various pairs and looks at the changes taking place among the eight majors then displays information not available using pairs. Think about it. One currency is purchased and another sold at the same moment. That's a Forex trade. You buy one currency and pay for it in the other.

You need to know the real trending strength of each of the individual currencies involved. .

Currency strength is not determined by looking at one pair. If we superimpose all the available pair combinations that contain a particular currency, and measure the rates of change among them, (not the price changes), the rate and direction at which they are moving gives us an accurate look at the strength of an individual.

If we are looking at the CAD for example, we also have to take a good hard look at the other seven majors and observe how they are doing. This is how you measure strength. The formula isn't difficult. The speed at which the calculations are made is the crucial factor for intraday trading. Long term holders of currency can do it themselves, they have lots of time.

Here are some of the characteristics of a currency strength wave that I have observed.

First: A currency strength approaching a new high or low point is a signal.

It is clearly not the time to get into a buy on the currency that's been showing strength or a sell for the currency showing weakness. They may have peaked or hit bottom. Intraday currency strength repeats itself over and over again. If it hasn't gone much lower or higher than where its at in the past few days, its not hard to guess that it will reverse. Currencies follow a sine wave pattern alternating from strength to weakness.

Second: A currency strength never likes to be neutral against another. It always reacts violently immediately after the cross on the chart with another currency.

When any two currencies approach the same strength,( eg. cross) they do one of two things. Either it bounces away from the area of neutrality or it will pass through quickly. This is why a currency strength cross is so powerful. At the point where two currencies meet, there is usually a violent reaction. Its almost like a magnets response when it comes into another magnet of the same polarity. The sine wave polarity of one, matches the other for a moment. This crossing is seen all the time and each crossing results in a reaction.

Think of the proximity alarm on the AccuStrength this way.

When two currencies cross its considered 0. Without regard to where on the scale they cross, the proximity alarm will warn you when they come close together and appear ready. When you set the alarm for proximity, you select a number that represents how close they must come to that zero spot in order to trigger the condition. If you are setting proximity alarms to alert you when your selected pair comes close to each other, pick a number on the selector to indicate how close they should come before setting off the alarm. Check off the boxes for the pair you chose and press apply. When they come within the selected variance, a standard windows system alarm sound will go off until you go back to the tab and turn it off. Make sure your speakers are turned on for obvious reasons.

Some things to know before turning pro

2010-08-29T13:10:00.000+08:00

When something goes wrong during the trading day, you need to be prepared. One of the first things to backup is your internet connection. Make sure you have another way of accessing the internet when your regular Internet service provider goes out. This happens a lot more than you think once real money is on the line. The combination of your connection going out and having a trade in play at the time means you will have one of those" heart in the throat" moments.
Having at least two Internet providers is just common sense when you are moving large amounts of money.Either subscribe to two providers or get a dialup connection. The dialup backup can be used on a variety of computers and all telephone lines. Providers like Budget Dialup and many others will let you pay ten or twenty dollars up front and you are only charged for the time you use. No monthly or yearly fees. http://budgetdialup.com/index.htmThere are others out there but I am only familiar with Budget. They have been a special gift dozens of times for me. I have everything on my laptop and main desktop set up and ready to go in case things mess up.( I live in the country so its not like I can just go down the street to use someone else's machine or connection. Leaving my cache of passwords and login urls on someone else's machine isn't going to happen.)
Write down the full contact details of your broker and have them listed clearly in a small book you keep near you when ever you trade.A little book with all your login and contacts details could be the second coming when disaster strikes. You should write down all your logins and passwords. You never know what could happen. If your hard drive was to go down, what would you do? What do you need in order to set everything up on another computer. Every computer user, not just traders should have complete backups. I will not go into detail on that subject since its covered in a lot of other places. A small page book with a little lock and key like a diary would use is fine. You can also keep it in a safe or loacked drawer. Just make sure to have it. in times of need you can quickly access the important numbers and logins.
Make sure you have a UPS for your computer. A uninterruptable power supply (UPS) will keep your machine going if the electricity goes out.You can get various sizes and capacity at prices ranging from fifty dollars to several hundred depending on what special bells and whistles you want. My UPS has a 1200 watt capacity and I plug everything I need to keep going when the power goes out. There are 16 outlets on the back so I can run your telephone, monitors, computer and ISP box through it. I have a desktop light and a variety of things hooked up to mine and I still have half an hour of operation when the power messes up. Most UPS units will have a telephone line protector as well. UPS Software is easy to install and read. It estimates the amount of time you have remaining on the batteries until it will go through a standard shutdown. This is a good feature if I happen to be asleep and the power goes out which happens quite a bit here. The software goes through a normal shutdown and waits for you to reactivate or the power to come back on. Seriously, this is a vital backup piece of equipment for every trader.

Paralysis by Analysis or Extinct by Instinct?

2010-08-26T10:41:00.002+08:00

Forex traders can gravitate towards one of two extremes, though most traders fall somewhere in between. One extreme is called “paralysis by analysis,” while the polar opposite extreme is called “extinct by instinct.” When a trader is faced with these two extremes, the wisest choice, as is often the case in life and the markets, is to take the middle path.

Paralysis by analysis is a very common affliction, especially among technical traders. It is the tendency to become obsessed with analyses, studies and indicators, to the point where the trader seeks endless confirmations before taking any action. There are many traders who are utterly unable to pull the trading trigger unless all of the many stars in the galaxy are perfectly aligned. But perfect star-alignment almost never happens. While there is a lot of good in being cautious and conservative when deciding to take trades, becoming paralyzed by the decision-making process can be completely counterproductive. Having all of the latest and greatest indicators on the chart all pointing in the same direction can be exciting, but does it really help one become a better trader? Maybe, but probably not.

Extinction by instinct, the polar opposite of paralysis by analysis, is characterized by arbitrary decision-making in one’s trading. The best example of this is the trader that initiates trades recklessly based on instinct, or “gut feel,” alone. Traders who have had some experience with the markets often become over-confident in their ability to “feel” and predict market movement. So they replace deliberate decision-making based on careful analysis with blind trading action based on feelings and emotions.

Paralysis by analysis can be considered over-analysis, while extinction by instinct can be considered under-analysis. While most prudent traders may consider paralysis by analysis to be the lesser of the two evils, both of these afflictions can be extremely detrimental to forex traders.

The best remedy for paralysis by analysis is a combination of solid risk control and money management. Technical analysis can be very helpful in setting risk management measures like logically-placed stop losses and other types of exits. And elements of prudent money management are absolutely essential for any trader who wants to be successful over the long run. With these safety measures in place, traders need not be paralyzed by the trade entry process. Traders should realize that they will never come anywhere close to being 100% correct, even with 101 indicators, oscillators, lines and squigglies pointing in the same direction at the same time. But that’s perfectly okay, as long as one’s risk and money management practices are in good order.

Unfortunately, the best remedy for extinction by instinct is probably an expensive loss or series of losses. Only through an event that truly inflicts substantial pain will an afflicted trader likely learn that instinct alone is probably not the optimal approach if one wishes to trade on a consistently profitable basis.

23 Aug 10 : How does Australian elections affect AUD

2010-08-23T10:00:00.001+08:00

U.S. Dollar Trading (USD) was strong on Friday as stocks markets around the world remained heavy and the Euro lead majors lower. The outlook is a little mixed going forward however as the US itself may further expand easing measures to support the economy and potentially weigh on the Dollar. In US stocks, DJIA -57 points closing at 10213, S&P -3 points closing at 1071 and NASDAQ +1 points closing at 2179. Looking ahead, FOMC Member Hoenig Speaks.

The Euro (EUR) fell quite sharply after the ECB's Weber was quoted as saying the central bank should provide unlimited liquidity for the banking system for the rest of the year. Also weighing was heavy EUR/GBP and EUR/JPY crosses. EUR/USD traded with a low of 1.2664 and a high of 1.2832 before closing at 1.2708. Looking ahead, August PMI Services forecast at 56.2 vs. 56.7 previously and PMI Manufacturing is forecast at 55.5 vs. 55.8 previously.

The Japanese Yen (JPY) continued to trade in the recent range with buyers supporting dips towards Y85 whilst topside progress has been severely limited. There is a lot of speculation that the BOJ Governor will meet with PM Kan this week to discuss the recent Yen strength. Overall the USDJPY traded with a low of 85.20 and a high of 85.85 before closing the day around 85.60 in the New York session.

The Sterling (GBP) was beholden to the rest of the market remaining under pressure and being sold on rallies. EUR/GBP selling is providing slight support as is the GBP/USD 1.5500 level. Overall the GBP/USD traded with a low of 1.5464 and a high of 1.5597 before closing the day at 1.5530 in the New York session.

The Australian Dollar (AUD) rallied quite aggressively off intraday lows in Europe when support was found at 0.8850. The outlook is cloudy with the market expected to remain under pressure after the Weekend Election ended without a clear result. Weak commodities are also adding to downside risks. Overall the AUD/USD traded with a low of 0.8843 and a high of 0.8932 before closing the US session at 0.8924.

Oil & Gold (XAU) dipped in Friday below the $1230 on profit taking. Overall trading with a low of USD$1222 and high of USD $1233 before ending the New York session at USD$1228 an ounce. Crude Oil remained under pressure but found support at $73.50 on multiple occasions. WTI Oil Closed -$0.40 at $74.10 a barrel.

USD Trading Risk Aversion Spike

2010-08-20T15:37:00.002+08:00

U.S. Dollar Trading (USD) risk aversion spiked on the back of weak US data. Weekly Jobless Claims were 500k vs. 476k forecast for the highest reading this year. Also surprising, August Philly FED fell to -7.7 vs. 5.1 previously. In US stocks, DJIA -144 points closing at 10271, S&P -18 points closing at 1075 and NASDAQ -36 points closing at 2178. Looking ahead, July Canada CPI is forecast at 1.8% vs. 1.7% previously y/y.

The Euro (EUR) rallied above 1.2900 in the European session briefly on the back of weak US jobs numbers but was unable to maintain the rally and fell heavily on the back on EUR/JPY sales after US stocks plunged at the open. German PPI was up 0.5% vs. 0.1% forecast m/m. EUR/USD traded with a low of 1.2771 and a high of 1.2904 before closing at 1.2820.

The Japanese Yen (JPY) was sold in Asia as USD/JPY pushed towards Y86 on hopes that the BOJ may hold an emergency meeting to talk about the strong Yen. When this failed to eventuate and US data came in weak and the market pushed lower once again and tested Y85. Crosses were very heavy with AUD/JPY falling over sharply in the US session. Overall the USDJPY traded with a low of 84.89 and a high of 85.93 before closing the day around 85.30 in the New York session.

The Sterling (GBP) found support and rallied in the European session helped by very strong retail sales figures. July Retail Sales surge 1.1% vs. 0.4% forecast. Resistance and then selling emerged later as sentiment turned sour but EUR/GBP was able to hold most of its move lower. Overall the GBP/USD traded with a low of 1.5507 and a high of 1.5674 before closing the day at 1.5580 in the New York session.

The Australian Dollar (AUD) was sold after rallying in Europe on the drop in stocks during the US session and heavy AUD/JPY sales. Traders are slightly cautious ahead of the weekend's election with the chance of a hung parliament. Overall the AUD/USD traded with a low of 0.8888 and a high of 0.9020 before closing the US session at 0.8920.

Oil & Gold (XAU) was very contained above $1230 testing day highs in the US session. Overall trading with a low of USD$1227 and high of USD $1237 before ending the New York session at USD$1232 an ounce. Crude Oil fell after the weak US manufacturing data. WTI Oil Closed -$0.99 at $74.43 a barrel.

18 Aug 10 : Market Rally Back On ?

2010-08-18T10:09:00.002+08:00

U.S. Dollar Trading (USD) eased throughout the day as market fear subsided and stocks rallied in Europe and the US. Economic data was upbeat with July Industrial Production +1.0% vs. +0.5% forecast m/m. Also released, July Housing Starts +1.7% although still weak. In US stocks, DJIA +103 points closing at 10405, S&P +13 points closing at 1092 and NASDAQ +27 points closing at 2209. Looking ahead, Weekly Crude Oil Inventories forecast at -1.1mln vs. -3mln previously.

The Euro (EUR) was able to rally on a combination of positive risk sentiment and strong bond auctions from Spain and Ireland to test resistance above 1.2900. August German ZEW Economic Sentiment Survey slipped to 14 vs. 21.1 previously. EUR/JPY hit month lows in Asia but was able to rally throughout the day to end above Y110. EUR/USD traded with a low of 1.2803 and a high of 1.2917 before closing at 1.2870.

The Japanese Yen (JPY) USD/JPY failed to break through Y85.20 supports and grinded higher for the rest of the day on strong US data and talks in the market that PM Kan will meet with BOJ Shirakawa. AUD/JPY led the market higher in Asia and remains in good demand. Overall the USDJPY traded with a low of 85.17 and a high of 85.70 before closing the day around 85.45 in the New York session.

The Sterling (GBP) struggled to track the Euro and the Aussie higher as July CPI came in at 3.1% vs. 3.2% previously y/y. The big move came in the EUR/GBP which rallied back towards 0.8300 after heavy selling last week. Overall the GBP/USD traded with a low of 1.5549 and a high of 1.5698 before closing the day at 1.5575 in the New York session. Looking ahead, BoE Meeting Minutes released.

The Australian Dollar (AUD) was able to rally from the start of Asia for a big move back above 0.9000 to test 0.9080 resistance. AUD/JPY was strong as were most crosses with the high yielding Aussie outperforming in the 'risk on' environment. RBA minutes offered little extra to direction reiterating current policy was appropriate. Overall the AUD/USD traded with a low of 0.8944 and a high of 0.9082 before closing the US session at 0.9050. Looking ahead, Q2 Wage Price Index forecast at 0.9%.

Oil & Gold (XAU) Gold was very quiet in a tight range above $1220. Overall trading with a low of USD$1222 and high of USD $1229 before ending the New York session at USD$1225 an ounce. Crude Oil made small gains ahead of tonight's key US Oil data release. WTI Oil Closed +$0.53 at $75.77 a barrel.

Patience is needed when you start trading a new system

2010-08-17T08:00:00.000+08:00

Any system you choose will need work to be successful as a trader. And the system is only one part of what it's going to take to be profitable. Almost everyday I see a new advert for a very alluring Mega Super Pip Maker or some other BS, promising riches in minutes. But all these things take time understand & use. If you aren't going to put in the time & effort & keep switching systems or looking for 'something' that works, the holy grail, you won't get anywhere.

If you think about it, it can take a few weeks to get used to something as simple & straightforward as a trading platform (eg MetaTrader). Why then, do some people expect to learn a new trading system within a week & then start trading profitably? And then there are others who have never traded and expect to be successful immediately - in a completely new profession.

Have you noticed that doing something as simple as changing companies (but doing the same job) can take a few months to settle in to? People that have unrealistic expectations make themselves frustrated, increase pressure on themselves, lower their confidence and make themselves trade badly - and it has nothing to do with the system.

Be realistic. Find a system that you think will work for you & then put in the time with it. Don't get distracted. Be patient with yourself.

16 Aug 10 : Risk Down Again

2010-08-16T13:18:00.002+08:00

U.S. Dollar Trading (USD) had a good day striving in the risk off environment. USD/JPY short covering and more Eurozone concerns helped push the Dollar to day highs. July Retail Sales was Slightly weaker at 0.4% vs. 0.5% forecast and US CPI increased 0.3%. In US stocks, DJIA -16 points closing at 10317, S&P -4 points closing at 1079 and NASDAQ -16 points closing at 2173. Looking ahead, NY FED Manufacturing is forecast at 8 vs. 5 previously.

The Euro (EUR) was unable to sustain gains after some surprisingly strong German Q2 GDP at 2.2% vs. 1.3% forecast. The market then eased as US stocks came under pressure and Q2 EU GDP showed the rest of the union doing worse than Germany. EUR/USD traded with a low of 1.2753 and a high of 1.2906 before closing at 1.2755. Looking ahead, July Inflation is forecast at -0.4% vs. 0.0%.

The Japanese Yen (JPY) pushed higher once again as Japanese government chatter about the strength of the Yen intensified and talk the BOJ was rate checking helped encourage short covering. EUR/JPY failed above Y110 and the market is still looking to test the BOJ/MOF's resolve. Overall the USDJPY traded with a low of 85.58 and a high of 86.28 before closing the day around 86.39 in the New York session.

The Sterling (GBP) the sentiment towards the Pound continued to sour and a rally in Asia sold to fresh week lows. EUR/GBP continued to test lows though as the Euro is relatively worse hit from the USD strength. Overall the GBP/USD traded with a low of 1.5572 and a high of 1.5680 before closing the day at 1.5590 in the New York session.

The Australian Dollar (AUD) did well as USD/JPY rallied in Asia jumping up above 0.9000 before weakness in US stocks sent the pair back to week lows at 0.8920 supports. The risk sensitive currency will continue to follow the stocks markets over coming weeks with a slight downside bias currently. Overall the AUD/USD traded with a low of 0.8928 and a high of 0.9035 before closing the US session at 0.8930.

Update Oil & Gold (XAU) was well supported holding above $1210 the whole day. Overall trading with a low of USD$1211 and high of USD $1217 before ending the New York session at USD$1214 an ounce. Oil struggled as stock markets remained under pressure. WTI Oil Closed -$0.35 at $75.39 a barrel.

13 Aug 10 : Euro Fears Returns

2010-08-13T16:25:00.000+08:00

The Dollar traded weaker overnight giving up most of yesterday's gains as Asian equities rebounded. However with US stocks remaining under pressure and Euro Zone peripheral risks resurfacing the Dollar may resume its strength across the board as safe haven appetite comes back. Weekly Jobless Claims caused concern again at 484 vs. 465k and is creeping higher in recent weeks. The DJIA traded down -58 points closing at 10320 and the S&P traded down -5 indicating fear over the pace of US economic growth. Looking ahead, July Retail Sales are expected to come in at 0.5% vs.-0.5% previously. Also released, August Consumer Confidence forecast at 69.3 vs. 67.8 previously. USDJPY price action yesterday was between 84.93 - 86.18.
European banking concerns remained in the spotlight as well as renewed fears over the funding abilities of EU peripheral economies such as Ireland and lower than expected GDP growth for Greece which spooked the markets. As fears intensified Euro crosses were sold across the board whilst the JPY, CHF and USD benefited due to safe haven demand. EUR/JPY was volatile on Japanese intervention fears but a rally in Asia was sold aggressively in Europe after weak economic data. June Industrial Production fell -0.1% vs. 0.7% forecast. EUR/USD traded with a low of 1.2781 and a high of 1.2934 before closing at 1.2830. Looking ahead, Q2 German GDP forecast at 1.3% vs.0.2% previously and Q2 EU GDP forecast at 0.7% vs. 0.2% previously.

Currency to watch out for: EURUSD & USDJPY

The EURUSD pivot point is at 1.2900 with a preference to enter into Short positions at 1.2890
The USDJPY pivot point is at 85.75 with a preference to enter Long positions at 85.80
Today's calendar and market movers:

Germany GDP Q2 is forecasted at 1.3%
Euro Zone GDP for Q2 is forecasted at 0.7%
United States Retail Sales for July is expected at 0.5%
Michigan Sentiment for August is expected at 69.3
Equity Markets:

US equities closed negative yesterday with the S&P500 at -0.54% and the DJIA at -0.57%. The European bourses were mixed with the FTSE up 0.4% the DAX and the CAC closing at -0.31% and -0.20% respectively. The NIKKEI and the HSI at the time of writing is 0.47% and 0.07% respectively.

11 Aug 10 : USD mixed after FOMC meeting

2010-08-11T15:03:00.001+08:00

U.S. Dollar Trading (USD) risk aversion ahead of the US interest rate meeting helped the Dollar to day highs before a change in the FED monetary measures helped stocks lift into the close. The FED announced it would continue to buy 2-10 year treasuries and this could lead to the expansion of the QE program if the Economy falters further. In US stocks, DJIA -54 points closing at 10644, S&P -6 points closing at 1121 and NASDAQ -28 points closing at 2277. Looking ahead, June Trade Balance forecast at -42bn vs. -42.7bn previously.

The Euro (EUR) fell aggressively at the start of Europe to break below 1.3100 as a correction set in from the recent rally. The market shot higher after the FOMC to reclaim 1.3200 but remained heavy and started to slipped into the close. EUR/USD traded with a low of 1.3073 and a high of 1.3230 before closing at 1.3180.

The Japanese Yen (JPY) USD/JPY fell towards Y85 after the FOMC news which hurt the USD but the market is finding support in this lower region over the past week and could be putting a short term floor. Finance Minister Noda is increasing his talk to the market and providing support. The BOJ held at 0.1% as expected. Overall the USDJPY traded with a low of 85.15 and a high of 86.25 before closing the day around 85.30 in the New York session. UPDATE Japanese August Machine Orders at 1.6% vs. 5.5% forecast.

The Sterling (GBP) was the worst hit currency after some weak housing data put the GBP on the back foot in Asia and Europe. The RICS house price balance slipped -8% for the first negative reading since July last year and prompted talk of a double dip recession. Overall the GBP/USD traded with a low of 1.5709 and a high of 1.5911 before closing the day at 1.5860 in the New York session. Looking ahead, July Claimant Count forecast at -16.5k vs. -20.8k previously.

The Australian Dollar (AUD) was hurt by the drop in investor confidence throughout the day with stops hit under 0.9100 and the market finding support at 0.9060. The outlook is still bright but the Aussie is beholden to stock market direction and AUD/JPY flows. Overall the AUD/USD traded with a low of 0.9057 and a high of 0.9167 before closing the US session at 0.9120.

Oil & Gold (XAU) continued to trade around the $1200 level falling in Europe before jumping to day highs after the FED announcement. Overall trading with a low of USD$1190 and high of USD $1208 before ending the New York session at USD$1203 an ounce. Crude Oil tracked stock markets lower finding support below $80 a barrel. WTI Oil Closed -$1.23 at $80.25 a barrel.

10 Aug 10 : USD weak ahead of FOMC Meeting

2010-08-10T15:44:00.001+08:00

Last week's currency trading review

The Dollar remained under heavy selling pressure with Friday's weak Jobs Data accelerating the selloff. July Nonfarm Payrolls missed at -131k vs. -65k forecast. Stock markets where able to brush off the negativity however as talk emerged of possible further easing measures from the FED to help the US recovery continue. The Euro traded above the medium term bull targets of 1.3300 on Friday and the outlook is continuing to improve with solid economic data from the Eurozone and improving investor confidence. The ECB held at 1.0% as expected. The EUR/USD gained +1.72% closing at 1.3278, after opening the week at 1.3050.

The Japanese Yen strengthened further to test the key Y85 level on Friday but when this held firm the pair was able to stabilize. EUR/JPY and AUD/JPY grinded higher but the major's losses capped gains. The USD/JPY fell -1.13% closing at 85.48 vs. 86.45 previously. The GBP tested 1.6000 on Friday but failed to breach the option protected level. The Pound rally over the last month is reaching overbought levels and without further good economic news may struggle to continue. EUR/GBP is orbiting the 0.8300 level as traders wait for further direction. The BOE held at 0.5% as expected. The GBP/USD gained +1.61% closing at 1.5940 after opening at 1.5684. The AUD pushed higher with Oil and Gold and stocks breaking above 0.9180 resistance. The RBA held at 4.5% but did note that wage pressures were growing and the labor market tightening. The AUD/USD gained +1.49% closing at 0.9180 after opening at 0.9043.

The Forex Trading Week Preview

In the States; On Tuesday, FOMC Rate Meeting forecast at 0.25%. On Wednesday, June Trade Balance is forecast at -42bn vs. -43.3bn previously. On Thursday, Weekly Jobless Claims are forecast at 465k vs. 479k previously. On Friday, July Retail Sales are forecast at 0.5% vs. -0.5% previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Thursday, June Industrial Production previously at 1.0%. On Friday, German Q2 GDP is forecast at 1.3% Q/Q whilst EU Q2 GDP is forecast at 0.7% Q/Q. In the UK, On Tuesday June Trade Balance is forecast at -7.6bn vs. -8bn previously. On Wednesday, July Claimant Count is forecast at -18k vs. -20k previously. Also Released, June Unemployment Rate is forecast unchanged at 7.8%. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; The BOJ decision is due on Tuesday and June Industrial Production on Thursday previously at 17%y/y. In Australia; On Wednesday, August Consumer Confidence previously at 11.1%. On Thursday, July Unemployment Rate is forecast at 5.1% with an employment change of +20k. Also on Thursday, Q2 New Zealand Retail Sales are forecast at 0.3% vs. 0.2% previously. We will provide our previews and reviews of these data releases in the daily summary.

09 Aug 10 : Weak US jobs news hurting USD

2010-08-09T12:31:00.001+08:00

U.S. Dollar Trading (USD) came under pressure after the July Non Farms Payrolls fell -131k and June’s figures were revised lower by another 100k. The USD/JPY tested the key Y85 level and EUR/USD broke above 1.3300 although some riskier assets like Oil came under pressure. The July Unemployment Rate increased to 8.0% vs. 7.9% previously. In US stocks, DJIA -21 points closing at 10653, S&P -4 points closing at 1121 and NASDAQ -4 points closing at 2289.

The Euro (EUR) with little technical resistance seen the on the topside the market surged after the US data to test and break above 1.3300. Further gains are seen as the market turns aggressively bearish on the USD and the Eurozone concerns fade into the background. June German Industrial Production fell -0.6% vs. 0.7% forecast. EUR/USD traded with a low of 1.3158 and a high of 1.3333 before closing at 1.3290. Looking ahead, August Sentix Index forecast at 1.6 vs. -1.3 previously. Also released, June German Trade Balance forecast at 12.5bn vs. 10.6bn previously.

The Japanese Yen (JPY) reacted aggressively to the US data as well falling to the key Y85 level but failing to break before recovering timidly for the rest of the day. The market is now waiting for comments from the Japanese Government on Monday as recent rhetoric has been getting louder. Overall the USDJPY traded with a low of 85.03 and a high of 86.22 before closing the day around 85.38 in the New York session.

The Sterling (GBP) surged with the Euro but failed to break the 1.6000 level on multiple attempts with talks in the market of heavy option related selling. June Industrial Output unexpectedly dropped -0.5% vs. 0.2% forecast m/m. Overall the GBP/USD traded with a low of 1.5841 and a high of 1.6000 before closing the day at 1.5960 in the New York session. Looking ahead, July BRC Retail Sales previously at 1.2%.

The Australian Dollar (AUD) broke briefly above 0.9200 after USD weakness post NFP but fell back sharply on the drop in US stocks. AUD/JPY reacted more aggressively to the downside and is a better representation of risk appetite. Overall the AUD/USD traded with a low of 0.9136 and a high of 0.9221 before closing the US session at 0.9185.

Oil & Gold (XAU) broke above $1200 an ounce on speculation after weak US data that the FED may initiate fresh monetary easing measures. Overall trading with a low of USD$1193 and high of USD $1211 before ending the New York session at USD$1205 an ounce. Crude Oil fell back after risk was taken off the table in the New York session. WTI Oil Closed -$1.30 at $80.70 a barrel.

Another Trading Advice: Assuming, Believing, Knowing

2010-08-06T23:00:00.000+08:00

Assuming and Believing

Assume -- To presume something to be true without substantiating it.
Believe -- To presume something to be true without undeniable proof.
Assumptions and beliefs are similar but not identical. A belief is usually a whole collection of corroborating assumptions and facts strung together into a convincing argument to support a hypothesis. An assumption is generally a single instance of an uncorroborated presumption. The two are also somewhat interchangeable in many circumstances.

Believing and Knowing

Know -- To directly perceive.
There is a vast difference between believing and knowing though they often seem rather similar and many people get the two confused. Almost alll confusion about the markets and trading can be traced to someone not clearly understanding the difference between these two terms and incorrectly storing their experiences under the wrong headings of either believing or knowing.
The greatest danger is when someone thinks they know and they don't -- but are only believing something. The second greatest danger is when someone thinks they don't know when they do know.
Example: Let's say you have done a lot of fundamental and tech analysis and you are confident the USD will rally against the EUR. You have a tip from your uncle who happens to be Alan Greenspan and he also said to expect a rally. You have lunar charts, stellar and planetary charts, and you found a lucky rabbit's foot just as the moon was rising last night. You short the EUR/USD and wait for the USD to rally against the EUR. Let's say that the news announcement that you were expecting from Uncle Greenspan comes out and instead of rallying, the USD begins to drop in price. Ok, now stop for a second and answer this question -- at this point what do you know? If you answered "the USD is dropping, or the EUR is gaining" you are correct. That is what you are directly perceiving -- a falling USD.

Anything else like "I was wrong" is only a belief at this point. Did you set a stop? Has the stop been taken out? If you placed your stop at exactly the point where you think the probability of a rally is no greater than random, and that stop has not been taken out, then you may believe you were wrong but you don't know you were wrong until that stop has been hit. Once the stop is hit you acknowledge the loss and move on.

In this situation the degree to which you believe the USD should rally will determine to a large degree how difficult it will be for you to exit with a loss if it does not rally. Such behavior as moving stops, adding to losers as the market is heading for the stop, and re-entering with larger positions after stops are hit are common manifestations of situations where a trader's beliefs begin making new temporary trading rules that reduce his system to a random betting strategy.

The moment you place a trade -- you want your belief to be true. This is normal and it is also possible to have a belief that the market will go in the direction of your trade and make a profit without being the least bit disappointed if it does not. Some people marry their beliefs to such a degree that they'll do almost anything to continue holding onto the belief -- as though the belief in itself has some kind of value that is worth even more than their money.

Let's get one thing straight:
With respect to trading -- no belief is worth more than your money is.

In other words whether you believe the market should do this or that -- if you see that your belief is not confirmed by success -- there is no belief that is worth keeping beyond the point where failure has been confirmed. Beliefs tend to develop a life of their own that impose upon their believer a sense of importance to continue on a course that is destructive even though there is no rational or statistical basis to continue.

Going back to the difference between knowing and believing: There is no more important concept to understand than the difference between these two. All emotional instability and turmoil of every kind is based on some confusion between these two.

How can I make such a radical statement? Consider this:

The two dangers of being hung up on these are:

1. Believing you know when you don't.
2. Believing you don't know when all the evidence you need is within your perception.

This problem generally manifests in a tricky way in that the individual keeps trying to discover something that is not apprehensible. The Holy Grail quest is a common example.

In order to trade correctly you must think correctly.

The single most powerful tool in thinking correctly is the ability to distinguish between when you are knowing and when you are only believing. Very few people understand this very well and even fewer have effectively incorporated it into their thinking. Believing you know when you don't renders you incapable of discovering your own ignorance and rectifying it…

A Trader's Mantra

2010-08-05T22:56:00.000+08:00

Repeat this to yourself every day.. at start of trading day, at lunch and at end of trading day.

I am a professional trader. My job is to take risk. I am able to honour my stoplosses because I am a professional trader. It is my job to trade consistently. If I manage my losses I will be profitable because I am a professional trader. I pride myself in my ability to let my profits run until the market tells me to cut. I feel good about being able to not let my emotions rule my actions. I am a professional trader and will make $1,000,000 by year end. I will achieve this by following my stops and profits to conclusion and not allow my emotions to overrule my actions. I am a professional trader and therefore flexible in thinking and will not allow my current position in the market to overshadow new information being accumulated. I am allowed to make mistakes as it is part of being a professional trader, I forgive myself easily for making mistakes and move on to the next opportunity. Letting losses run is not in my own best interest. Cutting profits short is not in my own best interest. What I have read here is the truth and I believe in my own ability as professional trader to always act in my own best interest.

05 Aug 10 : Wondering what to do with Noble Group

2010-08-05T13:34:00.002+08:00

Noble Group Ltd

TRADE IDEAS :
Short Stop : $1.65 (with a down candle stick at close)
Stop loss 1 : $1.73 to $1.74 (or a close above $1.70)
Profit Target 1 : $1.58
Profit Target 2 : $1.54
Profit Target 3 : $1.495

Technical

Downtrend is in place with prices moving below MA 20 & 50. A break with the recent short term trend line at around $1.69 with a decrease in volume on 2nd Aug on a up candles indicate weakness of this counter in junction with the general upbeat in the markets. Possible increase strength of a downward move is possible with ADX crosses that just took place these few days. MACD is below 0 and seems to be looking at a dead cross again. A retest of $1.70 to $1.71 resistance should see possible further downward move. to a potential level at 1.54 formed in May or a fibo extension (from the break at 1.69) to $1.495. A downward candle close will also indicate a "3 black crow" to support this possible trade. This is a projection that market has extended its move upwards with a retracement in mind in conjunction with this Friday US data, non farm payroll.

05 Aug 10 : USD enjoy a relief rally

2010-08-05T13:08:00.002+08:00

U.S. Dollar Trading (USD) enjoyed a relief rally as US data surprised and traders took profit from recent USD selling. July ISM services jumped to 54.3 vs. 53.8 previously. Also solid, July ADP Private payrolls at 42k vs. 19k previously. In US stocks, DJIA +44 points closing at 10680, S&P +6 points closing at 1127 and NASDAQ +20 points closing at 2303. Looking ahead, Weekly Jobless Claims are forecast at 455k vs. 457k previously.

The Euro (EUR) eased back after solid strength over the previous two trading days and the market fell back on the stronger US data. July EU PMI Services were revised to 55.8 vs. 56 previously. The pullback did not threaten the uptrend with support seen at 1.3100 and 1.3000. EUR/USD traded with a low of 1.3130 and a high of 1.3242 before closing at 1.3170. Looking ahead, August ECB Rate Announcement is forecast to remain at 1% but attention will be on the following press conference.

The Japanese Yen (JPY) traded at year lows below Y85.50 but was bought back up on the strong US data to finish above the Y86 level. The market is still bearish on the outlook with Y85 the bears first target. AUD/JPY was especially strong as the risk trade remained the cross of choice. Overall the USDJPY traded with a low of 85.31 and a high of 86.43 before closing the day around 86.20 in the New York session.

The Sterling (GBP) fell back below 1.5900 as the market took profit in New York and ahead of the Bank of England Policy meeting today. July Halifax Prices increased 0.6% vs. -0.3%. EUR/GBP stalled its decent with the pair bouncing back to 0.8300. Overall the GBP/USD traded with a low of 1.5854 and a high of 1.5967 before closing the day at 1.5887 in the New York session.

The Australian Dollar (AUD) was able to set fresh month highs in spite of the USD strength as June Trade Balance figures set a record at 3.5bn vs. 1.6bn previously. AUD/JPY led the market higher in the US session but AUD/USD topped out at 0.9180 resistances. Overall the AUD/USD traded with a low of 0.9093 and a high of 0.9185 before closing the US session at 0.9165. UPDATE New Zealand Unemployment increased to 6.8% vs. 6.0%.

Oil & Gold (XAU) tested resistance above $1200 but failed to break above the psychologically level. Overall trading with a low of USD$1188 and high of USD $1203 before ending the New York session at USD$1195 an ounce. Struggled at $83 before pulling back to support at $81.50. WTI Oil Closed -$0.08 at $82.30 a barrel.

04 Aug 10 : Stock Market Update

2010-08-04T13:00:00.000+08:00

Overnight Summary

Stocks slipped on Tuesday as Dow component Procter & Gamble Co.'s (PG.N)
lackluster results, coupled with weaker-than-estimated data on consumer spending and housing, prompted investors to exercise caution
a day after the market's 2 percent rally.

Federal Reserve officials are increasingly worried about the U.S.
economy's health, making it likely the U.S. central bank will soon take further steps to try to lower borrowing costs..

U.S. manufacturing grew in July at its slowest pace this year as a
stream of new orders tapered off, pointing to further slackening in the economic recovery.

China will allow its banks to export and import more gold as part of a programme to
push forward the development of the country's market in the precious metal, the central bank said on Tuesday

04 Aug 10 : USD/JPY Edging towards Decade Low

2010-08-04T12:56:00.000+08:00

U.S. Dollar Trading (USD) was unable to gain even as stocks fell slightly as the market digested weak US data. June Pending home Sales fell -2.6% and Personal spending and income both came in flat at 0.0% m/m. In US stocks, DJIA -38 points closing at 10636, S&P -5.4 points closing at 1120 and NASDAQ -11 points closing at 2283. Looking ahead, July ISM Services forecast at 53 vs. 53.8 previously. July ADP National Employment forecast at 40k v. 13k previously.

The Euro (EUR) took another leg higher as the market focused on USD weakness and the Euro as the world's secondary reserve currency. June PPI increased 0.3% vs. 0.4% previously. EUR/JPY struggled as the Yen also benefited from the USD woes. EUR/USD traded with a low of 1.3146 and a high of 1.3264 before closing at 1.3230. Looking ahead, July EU PMI Services forecast at 56 vs. 56 previously.

The Japanese Yen (JPY) was strong against the USD breaking below Y86 in the European session on market talk the FED may increase the Quantitative easing program as the US recovery falters. Traders note that the low from last year Y84.83 could act as a line in the sand where the Japanese Government may get involved to cap the recent strength. Overall the USDJPY traded with a low of 85.66 and a high of 86.63 before closing the day around 85.80 in the New York session.

The Sterling (GBP) consolidated recent gains but was unable to push above the key 1.6000 psychological level as the market recovers from overbought conditions. July UK Construction PMI fell 4.3 to 54.1 previously. Overall the GBP/USD traded with a low of 1.5859 and a high of 1.5971 before closing the day at 1.5940 in the New York session. July Halifax House Prices forecast at -0.3% vs. -0.6%.

The Australian Dollar (AUD) in a big day for Australian data the market finished roughly unchanged as some weaker than expected Retail sales was offset from an upbeat RBA assessment of the Global economy. June Retail Sales were at 0.2% vs. 0.3% forecast and the RBA held at 4.5% as expected. Overall the AUD/USD traded with a low of 0.9069 and a high of 0.9151 before closing the US session at 0.9130. Update June Trade Balance at 3.54bn vs. 1.65bn previously.

Oil & Gold (XAU) Gold pushed higher on the US Fed quantitative easing talk which helped the alternative investment. Overall trading with a low of USD$1179 and high of USD $1191 before ending the New York session at USD$1186 an ounce. Crude continued with its uptrend up over $1 a barrel. WTI Oil Closed +$1.30 at $82.40 a barrel.

Why The Bull Run in Gold Could Just Be Getting Started

2010-07-31T19:11:00.001+08:00

Why The Bull Run in Gold Could Just Be Getting Started

U.S. debt is skyrocketing with no end in sight. And while the dollar has recently functioned as a short-term safe haven, its long-term fundamentals are deteriorating.

To put it in perspective, U.S. public debt in 2000 was $3.4 trillion. That has now more than doubled to $8.6 trillion. The rate of increase is skyrocketing, with deficit spending of $1 trillion in 2008 and $1.9 trillion in 2009 alone. Current Congressional Budget Office estimates total debt of $5.8 trillion in 2008 to more than double to $12.6 trillion by 2014. That means in the six years (from 2008 to 2014) the country will borrow and spend as much money as it had since its founding in 1776 all the way up until 2008.

A currency is typically as strong as the economic fundamentals behind it. The Government Accountability Office (the U.S. government's auditor) recently said the United States is on a fiscally "unsustainable" path. This skyrocketing debt will likely cause a devaluation in the dollar, and many are forecasting runaway inflation if we don't get our fiscal house in order.

As a result, many predict the dollar will resume its plunge during last decade when it fell more than -40% against other major currencies.

So if the dollar can't satisfy the world's penchant for safety amongst unprecedented uncertainty, what can?

How about gold?

Gold serves as a safe-haven investment, holding intrinsic value in uncertain economic times and isn't tied to the fortunes of any country or currency.

Gold prices have more than quadrupled since 2001 when it traded for less than $300 per ounce, but this could be just the beginning. Today's uncertain markets are prompting a trickle into gold that could turn into a flood in the months and years ahead. Just this year, the price of gold has risen +23% to about $1200 an ounce from the average monthly price of $972 in 2009.

Recent strength in the price of gold portends well for the future. The last time gold had a sustained bull run, the price increased 40-fold from an average of about $35 an ounce in 1970 to a high of more than $800 an ounce in 1980.

SPDR Gold Shares (NYSE: GLD) is an exchange-traded fund (ETF) that seeks to replicate the performance of the price of gold bullion. The fund is a pure play on the price of gold as it holds the physical metal itself as opposed to equity shares of gold mining companies or other less direct gold plays. Each share represents about one tenth of an ounce of gold bullion at current market prices.

This ETF is a fantastic modern day investment that makes owning gold just as easy as buying a stock or mutual fund. Unlike the old fashioned way of investing in gold which involved taking possession and storing the actual metal, GLD enables investors to own gold through an easy to purchase vehicle with NYSE liquidity. Investors can buy or sell shares at will any time the market is open.

Gold is a great way to hedge a portfolio against inflation and a falling dollar, but it is a tricky investment. It's not necessarily a hedge against down or volatile markets. In fact, gold prices actually fell below the yearly averages in the peak months of the financial crisis in late 2008 and early 2009. As well, gold doesn't necessarily perform badly in up markets. While U.S. and world markets soared in the past decade, before the financial crisis, gold prices rallied at the same time.

More than anything else, gold is a safe haven currency substitute during times of uncertainty or inflation. And these uncertain times are enticing investor appetites. According to The Wall Street Journal, central banks are increasingly shifting money out of euros and into gold. This led to gold hitting an all time record high price of $1243 an ounce on the New York Mercantile Exchange in early July. If uncertainty continues, so could the exodus into gold.

Action to Take --> In the short term, the price of gold can be volatile and unpredictable. But, given the extraordinary degree of uncertainty in today's economy and the possibility of inflation in the future, it's a prudent hedge to have some exposure to gold. GLD is a great way to not only hedge a portfolio, but also gain exposure to a possible massive run in gold in the years ahead.

30 Jul 10 : USD under pressure

2010-07-30T11:21:00.001+08:00

U.S. Dollar Trading (USD) risk aversion helped the USD off lows but for most of the day the world's reserve currency was under pressure with EUR/USD leading the market higher. Q2 Company results were a little weaker than expected but Weekly Jobless Claims fell to 457k vs. 464k previously. In US stocks, DJIA -39 points closing at 10497, S&P -7 points closing at 1107 and NASDAQ -23 points closing at 2264. Looking ahead, Weekly Jobless Claims are forecast at 459k vs. 464k previously.

The Euro (EUR) was strong in Europe pushing to month highs above 1.3100. The German Unemployment Rate fell to 7.6% in July with a drop of 20k unemployed. The market stalled above 1.3100 and when stocks turned negative in the US session the pair fell back to 1.3050 supports. EUR/USD traded with a low of 1.2976 and a high of 1.3109 before closing at 1.3070. Looking ahead, June German Retail Sales are forecast at -0.2% vs. 0.4% previously. Also released, July EU CPI forecast at 1.7% vs. 1.4% previously.

The Japanese Yen (JPY) dollar weakness in Europe was compounded in the US session due to stock market weakness to help the Yen perform well on the day. USD/JPY is close to the month support at Y86.30 and a break of this level targets Y85. Overall the USDJPY traded with a low of 86.55 and a high of 87.47 before closing the day around 86.70 in the New York session.

The Sterling (GBP) was strong tracking the Euro higher but the market stalled at 1.5660 twice and this prompted a pullback late in the day towards 1.5580 supports. The GBP/JPY was especially heavy falling near 2 Yen over the past 2 days. July Nationwide July House Prices fell -0.5% m/m. Overall the GBP/USD traded with a low of 1.5578 and a high of 1.5665 before closing the day at 1.5620 in the New York session.

The Australian Dollar (AUD) Broke back above 0.9000 in Europe as the market bought dips on the commodity currency aggressively. Weak US stocks put a lid on gain for now but the market is in a strong uptrend ahead of next Tuesday's RBA decision. Overall the AUD/USD traded with a low of 0.8921 and a high of 0.9045 before closing the US session at 0.9010.

Oil & Gold (XAU) Gold kept to a $10 range inside $1160-70. Overall trading with a low of USD$1159 and high of USD $1170 before ending the New York session at USD$1166 an ounce. Crude rebounded on USD weakness reversing 3 days of losses. WTI Oil Closed +$1.37 at $78.36 a barrel.

29 Jul 10 : Profit Taking Takes Place

2010-07-29T15:54:00.001+08:00

Profit taking stalls Rally!

Weak economic data and a further pull back in Oil led the stock markets lower overnight but the selling was subdued and the sentiment remains positive. The USD continued to range trade against most majors with small gains against commodity currencies.

The Euro (EUR) market orbited the 1.3000 level after failing to break resistance forming at 1.3050. German CPI remained low at 1.1% y/y in July but support was seen from a successful 13yr Portuguese Bond Auction. EUR/USD traded with a low of 1.2951 and a high of 1.3047 before closing at 1.2990.

The Sterling (GBP) broke above 1.5600 in Asia and but was quite range bound from then on in with GBP/JPY weakness stopped further gains and the market lacked little news to work with. Overall the GBP/USD traded with a low of 1.5544 and a high of 1.5641 before closing the day at 1.5595 in the New York session.

Oil & Gold (XAU) Gold consolidated recent losses sticking to a $10 range. Overall trading with a low of USD$1156 and high of USD $1166 before ending the New York session at USD$1163 an ounce. Oil struggled with weekly inventory data showing a 7.3m barrel surged. WTI Oil Closed -$0.30 at $78.80 a barrel.
Currency to watch out for: EURUSD & GBPUSD

The EURUSD pivot point is at 1.2965 with a preference to enter into Long positions at 1.2965
The GBPUSD pivot point is at 1.5565 with a preference to enter Long positions 1.5565