Starting today, I’ll be making some forecast of what I think will be the movement of the forex market. The analysis will be done weekly on daily charts on some major currency pairs like EURUSD, GBPUSD, USDJPY. So if you’re trading with these pairs, I invite you to share your thoughts and analysis with me as we journey towards a successful trading week.
Forex trading is a damn risky business. Many people have went from millionaires to homeless in less than days trading the markets. And this week, aside from upping my equity to another 13.06%, I learned that it pays to be calm and collected when your trades goes against you. It is a must that you believe that you can not control the market. And you do not own the market. The market does not need anything from you, that is why, you don’t need to expect anything from the it. It is you, who needs money from the market. A place of unlimited wealth. So do not get angry if your trades goes against you. Always remember that you are in this, to get money. Why would you be angry if you lose money?
Many systems and techniques are there for the taking, but I will be bold enough to say that all of these systems DOES NOT WORK 100%. They can not predict market movements, they can not predict when the trend will start, stop or reverse. It has been a perversion of many people to control things and the market is one of those things that they can not control. You may hear alot of conspiracy theories, from your friend stock trader’s stories of why the stock will go up or news flash from your commodity trader friend, but all these are just odds and percentages that your decision might be right or wrong. But still you can not predict it.
Thinking that you can predict the market is all BULL CRAP! Here’s why.
What makes the price go up or go down? If many people buy, certainly, the price will go up. If many people sell / short, the price will go down. Let’s say you are a technical analysts who spends a lof of time drawing trendlines, graphs, fibonacci retracements and then finally you decided you wanted to buy and calls it a day, after drawing the hell out of the graph and make it look like a renaissance painting. Then you woke up the next morning seeing you are down 10%. Why?? Why is it wrong? You continue to ask yourself. “I spent the whole fucking day analyzing this god damn chart!”.
My friend, never fear, all those technical traders forgot to tell is that, not all elements in price action are included in the chart. Elements that can affect the price movement greatly, but are not included in the charts. And I’m here to tell you just that. Why? Because we’re friends.
Price, reacts to supply and demand and is reflected on the price chart. May it be candle stick or bar chart. “Yeah, so what? We already know that!” Well, do you also know when the other investors, traders that are on the sideline, will join the trade? How many of them will go against you? How many traders will get out? Most importantly, how many institutional traders will join in and trade with or against your position.
You can not see all of these in a chart. And you can not control it. So why bother?
Last week has been a good trade. I didn’t profit but I just broke even and capital preservation has been the most important goal. Still keeping the profit from week 1. I think that’s a good achievement in itself. The pullback from last week took me out and now I do not know where the market will go from this time on. So I’m sitting this one for the whole week and wait for some more price action.
USDJPY trade with 49% gain as of today.
USDJPY could trend down up to 78.00 so I’m holding my position up to that point. I’ll try to add more position on retrace which seems to be happening as we speak and for the next week.
UPDATE: I got stopped out of this trade making a 68% profit Friday night a few hours before the close.
I always remind myself when doing forex philippines to wait, wait and be patient. Sometimes, when I look at the chart and a setup is just forming. My mind tells my eyes what I want to see and not actually what is forming. Making me enter trades that are too early or the set up is not that established, wasting money in the process.
Note to self: Enter trades that have powerful indicators first…
In forex trading, I think its more of a psychological business for the most part and only 1% technical. Why did I say so? It’s quite simple, in forex trading, you only need to buy or sell, to long or to short. There always 50% chance to profit and 50% chance to lose. But why is that 95% of all forex traders fail? It’s because its a psychological struggle.
I am not in a way a professional or experienced trader. That is the purpose of this site. I keep my trades here so I can reflect back on trades I lost or won and hopefully gain experience in the process and also help individuals who find themselves at lost or struck with a heavy loss in the trade. For one thing, a loss in forex trading is always given and its how you manage your money that will separate you from a typical gambler to a successful forex trader.
Having your emotions affect your decision in a trade is the most common thing why people fail. Greed, fear and anxiety is most of the time, the culprit why you have negative pips in your account. I try to remind myself again and again to trade based on what I see and not what I want to see. If I’ll lose, I hope to lose less and if I win, I win enough to cover my next 2 or 3 trades. Most of it is money management.
The difference between a gambler and a trader is that, a gambler trades enough just to get his money back, in most cases, he won’t. A trader trades enough just to cover his future trades, giving him profit.
I think that the most important thing in trading is to not be attached with money. Once you realized that the money you are throwing away due to bad trades, is money that you need to feed yourself, you become attached to it until trading becomes impossible.
Remember that trading can be tough. Its a mental game. And a lot of decision making involve. It also takes a toll on your mental health. Look at Jesse Livermore. Before you can really say “Fuck You Money!” ignoring its value and not be attached to it, I think you have to invest your money.
But I think, investing has its merits as it gives you more security on your financial future, should you have a lot of losing streaks in trading. Investing gives you residual income.
Investing can be fun for those who likes big big gains over the course of many years. For a trader, it might not be an attractive proposition. You literally have to wait a lot of years for it. But I think, investing has its merits as it gives you more security on your financial future, should you have a lot of losing streaks in trading. Investing gives you residual income. Stock dividends, real estate rental properties and brick and mortar business. It might not be a huge business or huge profit, but over the course of the year, it will compound. Slowly but surely.
Planning your financial future and before getting into forex trading, fix your finances first. Invest a portion of your money to passive income, have an emergency fund and the rest goes as your trading fund. I think that is the best course of action to take.
Just a quick note. If you’re going to invest your money in mutual funds or UITF, I’d rather not put it there. I think its a redundant thing. Mutual fund managers trade with the money you gave them, but you are already trading, you don’t want your investment money to be traded. Not to mention the high fees. You want it to be invested. I think buying the index as an investment is the best way to go.
Before you start trading forex for full time, make sure that you have everything covered. Though, not all people are risk takers and will quit their day job on a whim (like me), you must be prepared on to a new journey of your life. You will look back and if you become successful at this, you’ll realize that its the best decision you’ve made in your life. There’s no better feeling than being your own boss and eating your own kill.
#1 – Money To Keep You Afloat
Save at least 8 months worth of your expenses. Compute all of your expenses per month and then set aside money to pay that expenses for 8 months. This should keep you out of worrying where to get the money to pay for your rent, electricity, water etc. should you take consistent lose on your trading.
#2 – Trading Capital
This is probably will come from a personal preference. But for starters, I’ll try to give a more concrete estimate on how much should your trading capital be. Forget about the trading system for now. Let’s say that your trading system (thru backtesting) produces consistent profits at the rate of 10% per month. And your monthly expenses is let’s say, P20,000 per month. How much funds do you need to produce P20,000 for 10%?
x = TARGET INCOME / % RETURN
x = 20,000 / 0.1
x = 200,000
The answer is P200,000. If you need P20,000 to live with 10% increase per month. You need P200,000 of initial funds. Whatever your target income per month, just use the formula above.
#3 – Money Management System
You also need, and probably the most important thing, to have a money management system. This is not merely how much money should you risk per trade. This is also, how much money should you risk again should you know you are right. And how much money should you take out if you’re right and how much money should you cut off if you’re wrong. There’s a lot of things going on in a money management system, please do a careful research first before trying to broke yourself in trading. Victory loves preparation.
There’s a lot of books in money management. But there’s only one that comes to mind.
#4 – Trading System
A trading system is a system that will tell you when you will enter and exit the trade. In searching for a system, give more emphasis to the exit strategy than the entry strategy. Why? Because it can either be the profit taking or the cutting of losses in which either case can affect your account and your mental state. Don’t get too hang up on trading strategy, just a simple trading strategy will do. The most important part in your trading is money management and trading psychology.
There’s a lot of books that teaches trading systems. But I guess its up to you on what you will choose. I’ll just refer you to a book about different successful traders of our time so you will know what trading strategies they are using and decide for yourself:
#5 – Trading Psychology
Emotions are the main enemy in trading. That’s why you should learn to control them. Read books about trading psychology to be aware if you’re acting on emotions or rational decisions. There are times when you will suffer consistent winners and consistent losing streaks. Having the mental toughness to overcome that will make you a great trader so never try to skip step and proceed trading without practice. If there is one book I would recommend for this topic, its:
Managed to close my trade for week 26 with a 48% gain in my capital. I think the Euro is on a slight rebound, probably profit taking. But the main reason I closed the trade is because of this chart:
I wanted to have enough funds to place a sizeable position on this pair. I do think its cooking to go up, with a lot of dojis and a respectable support (green line) with the red lines as resistance.
I’m still bearish on the EUR/USD though and a sizable upswing can be advantages for me to get more positions on the short side. The target is 1.2800.
I think the best way to describe ichimoku is that its a trend following indicator that gives you a graphical picture of where the support and resistance lines are. Contrary to most trading system, support and resistance lines are not a straight line in ichimoku. They vary depending where the price is going.