WHERE WILL THE DOLLAR AND YEN GO FOR 2010?

Today is the final day of 2009, as well as the trading day. The market will close early (with European Banks already close for New Year's Eve) and will open a new calendar on 4th January 2010. Anyway...

Most of us may wonder and think what would it be and how would the market behave in 2010, including myself. If only Nostradamus is still alive, I believe most are willing to pay thousands just to get his prediction on the market so that we all can position ourselves precisely with maximum profit potentials.

The question is... should we predict the market or should we just react base on what the market is doing in 2010?

I bet the answer is YES and NO for both of the questions above. Why?

Depending on the way you trade, swinger, position or scalping mehod, the best is always to analyse and emphatize on what the market is doing on daily, weekly as well as monhly basis.

The main reason to this is simply because that the market is made of humans. Though humans behavior are predictable in certain ways, you must remember that sentiments do change from one point to another, mostly clouded by the fear and greed factors of these market participants.

So, for us to predict the whole year movement? No way... I bet even Mr Soros would probably put a general analysis on probabilities rather than a specific one. Why am I saying this? This is because the fact is NO ONE REALLY KNOWS.

Yes, no one really knows. Do not talk about a year from now, even what will happen in the next 5 minutes remain as a big question to everybody.

In some cases, yes you have to speculate where the market is going base on technical and fundamental probabilities. But most of the time, all you have to do is actually wait, see and follow what the market is doing. Pretty simple actually provided you have a strong heart as well as good money management in hand. You can't win it all the time after all...

Talking about speculative skill, this is something that I develop from within in year 2009 that I hadn't discover in 2008. I knew most gurus would say that you don't have to... but if you ask me, I don't believe it. I knew this based on my own experiences from the past 2 years.

The thing is, when you do speculate, you must not afraid of being wrong. This is normal and it's just part of the game. All it takes is simply a good risk management in order to protect you from total burnout. To remain in the game as long as possible with wealth creation along the way, you just have got to play the game by its rule.

Some of the important rules of trading that you must know are:

1. This is not a fair game. Not everybody will make money here. It's a zero sum game but... do it correctly with a winning-edge sytem plus splendid risk management, you surely can make it.

2. Trend is your friend, but not the market. The market's intention is always to take away your money from your pocket. So always be careful... and exit your trade when it is not in your favor. Stop giving away your money! Protect it and take it back later...

3. There are lots of gamblers in this market, just don't become one. The one who stays at the top 10% who makes money all the time are those who learned to become traders, not gamblers. Gamblers do win big at times, but they don't survive.

4. Market is made of humans, not signals. So, do not blindly buy or sell base on signals. You have to check several other things too before taking any trade decision. At times during thin liquidity, yes the market makers can and will manipulate the price by attacking stops and creating price spikes. I learned this from Beat The Forex Dealer book, and base on my experience, I have reasons to believe that it is true. The point is - avoid the market during thin liquidity period especially during Asian Session or holiday seasons like these past 2 ending weeks of December.

5. Focus on quality rather than quantity. Making money in forex is all about getting into the right trade. If you can get it right 100% of the time, then money management is not applicable. But then, the reality is - no one get it right all the time, NO ONE and that is the sole reason you need to have a good risk management system in order to protect you in case you are wrong.

6. You must have your own style. If you don't have one, develop it slowly. Honestly, I learned more about myself rather than the market since I started my trading career. You must know who you are in the first place, learn to be patience and remain discipline all the time in following your own pre-define system. The fact is, it is so easy to become impatient and undiscipline in many cases, and this is the fact to the majority of market players, the bottom 90%. So, if you wish to become the top 10% or 3% in the market, really all it takes is to master yourself in behaving appropriately in the market. There is no guarantee for sure, but chances are better that you will become successful.

7. Last but not least, never add to a losing position and always use STOP LOSS. Just define it upfront because anything can happen here. I did burn my account a few times when MAMA calls (ie margin calls)... Main reason was simply trading without stops. You could survive with a well funded account, but the fact is market can go against your position indefinitely. There is no point holding a losing position with -1000 pips and no clear sign of come back... It hurts man.. just dont do it... I knew a guy who has to wait 7 months before the price ever come back to his entry point... 7 months!

In a nutshell, my simple advise, read all you can read but do not trust them blindly. The best guru is no other than the market itself. Look at the market objectively and try to understand what the market is doing, especially on the pair that you choose to trade. If either the bulls or bears are in clear domination, just don't go against them... simple. This is because you just don't know how far these bulls or bears can go and you alone can never fight the strength of their stampede... you can hold on in certain cases but you must define your limit before they crush you.

So if you plan to trade without Stops, think back... you may survive especially with well funded account, but it only take one mistake to burn you out. Just learn to position your stops accordingly... simple rule of thumb, put your stops at location where you see/believe the market will likely not to go technically or fundamentally. If happen they go there, raise your white flag, surrender and come back later... Do this and you'll become a better trader with higher precision.

So now... What is my forecast on the US Dollar and Yen in 2010?

Hmmm... Actually I don't have one. I would prefer to see what happen in the 1st week, trading what I see rather than what I wish to see. Or frankly speaking, I don't care. All I care is my account and whether I make money or not.. haha.

Anyway, from market fundamental and technical point of view, I would say that if the US Feds keep on broadcasting the idea of increasing interest rates and exit strategy on all these TARP Funds, chances are dollar will continue to rally, depending on the market buy-in's on such sentiment.

Further to that, there are also worries on the Eurozone economic's climate that may further push the Euro as well as Sterling down even further.

And the Yen? Aha this one from the way I see it will become a funding currency, taking back its status from the dollar this year since Yen has been rallying crazily in the past two years against everyone else. The Japs do not like the yen strength either so the outlook for Yen in 2010 is more on the bearish side, whereas dollar on the bullish side.

As usual, I could be wrong. But let's see what happen in January 2010 first...

Finally, adios to year 2009 & Happy New Year 2010 to everybody... especially to my fellow traders and you as a kind reader of this blog.

Take care and safe trade for 2010 and beyond...

As for my trading, I am committed to reach my first 6 & 7 figures this year... It's definitely not easy, but I'm going to try... ;))