Week 12: Waiting for the Bearish Trend

Last week has been good. Trading forex gave me a positive +10% gain because of the EUR crisis. This week I’m seeing the EUR and other affected currency to be consolidating before really going into the trend. My opinion on the matter is that, EUR and its affected currency will most likely start a bearish trend for the long term. Keeping eye on the news will most likely keep us informed should the trend start. But of course, technical is very important.

Last week I learned to control risk. Though some trades did manage to become a lost, it doesn’t affect me that much now even if its a profit or a loss. I think the fact that thinking of each trade as a probability detach myself from being self denial of the reality that my trade may go against me. It helps to keep an open mind rather than wishing that your trade must go into your direction. Bottom line is, I made profit, 10% return for just risking 1% risk each trade. I can’t be any happier.

Also looking to get into stocks, its never bad to be diversified. Once I get the setup running and my plan tested that is.

Week 24: Avoid the News in Forex Trading

I learned something. This is the thing I learned while learning stock investing. And I think it goes very well with trading in forex. I used to hear a lot of people saying this and I have never really understand the deeper meaning in it. Its about trading when there’s news.

A lot of traders have been saying that to never trade the news. And I have been a victim of greed over the past week. I try to anticipate news releases and have been wrong many times in doing so. I may have been right a couple of times, but results from news doesn’t last long enough to earn substantial profits.

I realized I was chasing something that I won’t be able to reach. And decided to trade only currency pairs that are not in the risk of news. I’ll let the news pass then I’ll return. Because of me, chasing the news, I realized I missed some great opportunities like in the currency pair NZD/USD. I was so caught up with EUR/USD, I missed the trend. It might not actually be a late time to enter but you get my point. Never trade the news. Go to currency pairs where there are no risk of news affecting it. Or in the words of stock investors, invest in obscure companies that are being ignored by professionals and traders.

I made money trading the USD/JPY on its way up. And got back to break even from the losses of EUR/USD hunting for the news. I’m still in good condition and still on my way to realizing my goal.

USD/JPY on Daily

USD/JPY could probably retrace now. Keep in mind though, if you’re going to take the short side, Bank of Japan have expressed their eagerness to intervene should the pair goes further down. Keep your stop losses tight. On a weekly note for this pair, its more of a sign to go long. I’ll try to catch the bottom of the retracement for the daily to enter. That position is less risky because you have BoJ on your side. The only problem now is the USD’s news affecting the currency.

Happy trading.

Why Everybody Should Trade Forex

I’m taking time off forex trading as I notice I have been getting a few consecutive losses in my trades. Time to learn and read some more and reflect why am I so dumb. I came across a great post by someone who is a professional forex trader. The original post is here. I just want to post it here for future reference and inspiration.

There are:
1. no rent of offices (that is, NO dealing with Realtors, Lawyers, and government departments…man, what a pain in the ass). Also no office fit-out costs

2. no staff, (man, unless you have had large numbers of staff depending on YOU for their paypacket each week, you cannot know what a huge pain in the ass it is. They ALL want you to solve their problems)

3. No inventory or stock to buy. No shrinkage (theft of stock) and no “slow moving” items. No massive amount of funds tied up in inventory

4. You can “borrow” as much as you want (by increasing your leverage), WHENEVER you want. (Try running a big business and going to the bank for a short term loan for $10 mill…it will take a month minimum). I am trading $10-12 mill all the time and I get it instantly through the brokers by the use of leverage.

5. If the business becomes a hassle for whatever reason, you can shut it down (that is, close all positions) instantly…and re-open (initiate new positions) whenever YOU want to re-open your “business.”

6. You can “scale” your business to whatever size YOU want simply by increasing/decreasing your positions.

7. Absolutely minimal paperwork. Simply send your 12 month summary Profit and Loss Statement to your Financial Accountant for tax payment purposes.

8. You can trade from anywhere in the world. My wife and I travel most of the year. (take your laptop or PDA or whatever else they will come up with and trade while sipping a nice drink as close by as your local cafe or as far as some open air cafe in some remote little town in beautiful Italy while you watch a bocce match at the park.)

I could keep telling you more of the benefits of this business, but suffice to say…this is the best “business” in the world. I run a multi-multimillion dollar business from my laptop.

And did I mention that it was exciting and fun????

But of course, not everybody can because of certain elements like willingness to learn and take risk. Only few people becomes successful and they control a market of $4 trillion dollar value.

4 Useful Forex Tools and Resources

Hello my fellow forex trader. Today is my first post for the year 2011. It has been a late post because I’ve been busy. The usual boring stuff, business. Anyway, what I want to give you for today is a list of useful websites and tools that can help you learn or even master forex trading. The same tools and website I used to educate myself in this trade.

Before you spend your money on forex seminars here in the Philippines, read the list first. Most of the seminars that are offered locally are the same materials you’ll find online for free. Well… most of them. You want to save that money for investing. And in forex trading, you need all the money you can get.

#1 – Forex Education / Forex 101 / Forex Fundamentals

picture-3Babypips

There are a lot of forex education out there in the market and its for free. The one that’s particularly close to my heart is babypips.com. Simply because you have all the things you need to learn all in one place. And you won’t get overwhelmed by the information because you can learn at your own pace. Visit them and read some of their lessons. I’m pretty sure you’ll be spending a lot of time in babypips.

#2 – Forex Trading Journals

picture-4

MyFXBook

You need to keep track if you’re progressing or not. You need to know if you’re following your trading strategy. The use of forex trading journals is just that – to know if you’re diligently following your own rules. And to get into the habit of emotionless trading.

#3 – Forex Backtesting

Forex BacktesterForex Backtester

Before you go all out on live trading. I recommend doing demo trading for at least 8 months. At least 8 months should be at least 8 months profitable. The thing about forex backtesting or demo trading is that for you to be confident on your system and also be comfortable with your chosen trading platform. I personally don’t want to demo trade now because of time restraint. What I do is purchase a forex backtesting software such as forex backtester and trade in my computer anytime of the day. What this forex backtester software do is to import all the trading signals that happened for the last 10 years and you have a lot of information to work with. A lot of signals to test your strategy on. If you don’t have the money, forex demo trading is still good, but if time is more important for you than money then a forex backtester is the best investment to make for your forex education. (Absolutely than any forex semiar in my humblest opinion.)

#4 – A Forex Strategy to Follow


japanese-candlestick

Japanese candlestick charting techniques

Personally, this one is the hardest one to find, practice and decide. There seems to be a lot of different strategy in trading. And I recommend you try them all. See what works for you. Try them on your forex backtester or try it demo. Your forex strategy will be your main weapon to live, survive and thrive in the world of forex trading. Don’t forget that during your first 8 months practicing, should be spent on testing what forex strategy fits your personality. The reason why there are a lot of forex strategy out there is because there are a lot of people trading forex and each one of them will have a unique strategy based on their personality.

Diving into the world of forex strategy could be overwhelming as there are thousands upon thousands of them to choose from. In my personal opinion, your quest should start with this book. And your strategy should be based on candle stick chart readings. It is a technical way to reading forex charts that has been proven to be very effective.

Week 8: I Got Stopped Out and Now I Wait

Last week was pretty good. I thought I caught a top, earnings got to +100 pips. But then the price continued its upward trend. Its not a top yet. I got stopped and now I wait for it to finish its trend. I’m looking to go SHORT once there is a clear signal to where the currency is going. As you can see on the screenshot, its almost as if the currency is in the middle. You don’t want to be in that position, its the highest risk possible. You want to be at the top or the bottom to for less risk.

I got stopped for -100 pips. We’re still cool. Its all part of the plan.

My Cardinal Rules in Forex Trading

The more I lose in forex trading, the more I learn. I learn more things from losing than from winning. And as time goes by, I learn to adjust my thinking and strategy and learn to have a fixed set of ideas about the market that I use to trade with. These set of ideas are based on rules to help you become more successful in trading. These rules have changed the way I trade for the better and I hope it change yours too.

#1 – Never Lose Money

Rule # 1 is the most basic. Never lose money. The more you trade, the more you lose. That is why, you need rule number 1 to be picky on trades that will only result in winning. Keep in mind this rule every time. Before entering, while in the trade and before exiting the trade. Never lose money. You’ll last longer and learn faster.

#2 – Think For Yourself

Learn a forex strategy then stick with it. You enter and exit by those rules defined only by you. What your peers or your guru tells you is irrelevant. If he tells you to enter the trade, you are not trading, but he is. You are now dependent on him when to exit. Will you ever know when that is? Will you ever sleep at night?

#3 – Use A Non-Negotiable Stop

Stop loss should be non negotiable. You do not use a stop then try to adjust it because it will be hit by the price then hoping that the price comes back. Stick to the plan. Have a defined amount of risk, accept that risk and don’t whine if it got hit. Man up, take the loss, move on to the next trade.

#4 – Let Your Profits Run

I used to have a take profit when trading. But I soon realized that it doesn’t make sense. Why would I settle with a fixed profit if the market is willing to give me more? Throwing your greed aside, putting your stop loss on break even, then letting the trade run is a 0% risk with greater profit potential. Its definitely better than a measly profit for small risk.

#5 – Define Your Risk and Forget About The Target

In any trading and investing books that I read, these lines always comes up “Cut your losses short and let your profits run”. Its a combination of #3 and #4. In my own words, this also means, never add to losing positions or adjusting your stop loss because you are “afraid” to take a hit and then defining your profit target instead of “risking” for a chance to earn more.

#6 – Take Note of Your Mistakes

Reflect on each losing trade. What made you lose it? Did you follow your plan? Is it you who messed up the trade because of greed and fear? Or is it some underlying factor that you might have missed like news? Whatever that is, always reflect if you are following your system and what is wrong or missing with your system so you can adjust and adapt to the ever changing market.

#7 – Victory Loves Preparation

Waiting for the perfect time to enter is what makes forex trading exciting. Its damn hard to sit still while you wait for the perfect time to make that order. And then wait some more for the trade to unfold itself. Trading is waiting game. Its a damn exciting game I must say and usually, the person who waits and “prepare” himself for the high probability trade would be the winner. Not being swayed by the crowd is the hallmark of a great trader.

I got burned a few times because I got in so early. And got frustrated when I got left out by the trend. Patience is a virtue they say, but in forex trading, patience is money.

Forex Trader Primer in the Philippines

Though, I have been on the look out for forex seminars here in the Philippines. I’m somewhat disappointed that most seminars that do come out are for 100% newbies. Most of these information can be found on the internet. But in the Philippines, not much information (offline).

It got me thinking. Maybe, I should create some series of forex trading primer so people who are behind the fence might be able to go in and try forex trading. Forex trading is just one way of trading different markets. Once you are good at it, stock market can be easy as a breeze. Although in a newbie perspective we know that the stock market can be kind of daunting.

Together with my forex forecast. I’ll try to get some articles up for newbies and hopefully get my forex forecast weekly before the market opens. That is, if I get enough time on my hands. I’m currently managing a couple of businesses.

I do apologize. But stick with me. This will be really cool.

Till then

Week 5: Oct 3 – 7 Taking Forex Trading Seriously

September is a great trading month. I almost, just almost, reached my 2nd goal. But the market took it away from me when I became over confident. This month, I will never let that happen again. I’ll remind myself to take only high rewards and high probability trades.

A new month has begun. Its a great thing feeling to be able to start a new. So lets get on with the forex analysis.

AUDUSD

I managed to take a trade on AUDUSD. Shorting near the peak and added positions as they break the support @ 0.9700. On Daily, it seems we have a downtrend forming and we can expect to at least touch the next support line @ 0.9516. On weekly, its still a downtrend. But we should be careful as to when the downtrend will stop. It is advisable to keep the stop losses tight to prevent further losses as we are nearing a support line. On monthly, its definitely an uptrend. BUT, with a large bear candle that formed, this might be a start of reversal. I’ll say take downtrend trades.

USDCAD

It seems we have a breakout. I kind of missed this opportunity and now will be waiting for a pullback or reversal. Opportunity missed. I’ll just leave an alert for next time.

That’s it for now. I’m spending my weekend learning a new technical trading principle. I’ll have more analysis for you when I have more time. But all in all, last week is a good trade and I’m very positive that this month will be even better.

Trading Tips from The Pros

Do you know how professional traders make millions? Here are some tips from them.

Jesse Livermore: The Worlds Greatest Stock Trader by Richard Smitten
1. Don’t Lose money
2. Always Establish a Stop
3. Keep Cash in reserve
4. Let the (Successful) Position ride…until you have a Clear Reason to Sell.
5 Take the Profits in cash…and place 50% in a separate account

Lessons From the Greatest Stock Traders of all Time by John Boik
1. Trade with the Trend
2. Cut Losses short
3. Let Profits run
4. Manage Risk

How Legendary Traders made Millions by John Boik

1. Understand the General Trend of the market
2. Use the Knowledge of History in your Study and Observation of the Markets
3. Use your Own Research and Don’t Listen to Others
4. Buy the Leaders
5. Buy only on Breakouts and Use a Pyramiding Strategy to add to those Winners
6 Cut Your Losses short
7. Hold on to your Winning Positions until Classic Sell Signals tell you to unload your Positions