THE MARKET WAS SO CRUEL TO ME...

Yesterday was a real blunder in terms of my decision making whether to hold or not to hold the trades. Two potential good trades that turned out to be bad due to 2 bad decisions that were clouded by both my own technical rules as well as fear factors on the market price action and momentum.

The lessons here are :-

1. Always stick to your original plan and system.

2. Once you bended the rules, you start bending another and this is what happened.

I am talking about the GBP/USD pair movement yesterday, in fact since the past 3 days where if you look at the 1 hour chart closely (above, without any technical indicator), the market was actually ranging between 1.6270 to and 1.6070... making sharp reversal every now and then between these 2 levels...

These are the event chronologies.

1. I originally went long on GU @ No 1 @ 1.6210 with my stops set at 1.6110. My profit target was originally at 1.6310 but later I downgraded to 1.6260 @ No 2 (+50 pips). Guess what... It never hit.

2. The price later went down and against me during Obama's speech yesterday all the way to No 3 @ 1.6130, 20 pips shy from hitting my stop 1.6110. Base on the momentum, I decided to pull out at @ No 3 @ 1.6130 with -80 pips in losses... and you know what... it never hit that 1.6110 price. %^&#@%#$....

3. I later decided to went short @ No 4 @ 1.6153 with stops @ 1.6353 (200 pips!) and TP at 1.6053.

4. Again, cruelty upon me. The market went up against me all the way to 1.6274 before halted, making a few attempts to break that soft resistance at 1.6284 but failed. I was over -120 pips under the water and trapped in another decision making whether to hold or not to hold. Though my stop is 80 pips away but still I have this bad feeling that the market is going to attack that zone again. My judgment was clouded by fear... I knew by heart that if the price breaks that 1.6284 resistance, it could go all the way beyond my stop level.

5. Waiting and waiting and later the price went down for 2 hours below the 1.6250 level, giving me some sights for relieve. But later, once again the price making another attempt up @ No. 5. This time I decided to pull out at 1.6253. Another -100 pips in losses.

6. I surrendered my position again as it really look like there was no hope for the price to come back to that 1.6153 level but then later last night, kaboooommm. Anything can happen guys! In 2 hours, it ran like crazy horse coming back to my entry @ No 6 @ 1.6153 and stay below that level until this article is written. %#$$@##&*&^$%! What should I say... and it never broke that 1.6284 level....

You see, "frust I must be" (say it like Yoda)... but surely this one shows that nothing is impossible in this market. At once, it looked like there's no hope... and you knew by heart that trading by hope is one way to account destruction. It was all a matter of decision.

But in the above cases, I guess sitting with my position initially, putting some hope it would come back on both cases could be the best decision for the day with at least 50 pips in the bank.

The market is so cruel and it can do anything to your account. Though I did employ good risk management in both trades, but still two losses in a row, it somehow did psychologically damaged my trading confidence.

What I'm doing now is to short-live the memories on these 2 classic losses so that I would not repeat them again in my future trades.

Most importantly, take your trade decision seriously and stick with it until you are stop out. Or at least, if you decided to pull out earlier, do not take another trade until the situation really stabilize. I guess being either too fear or too greed will not do any good to your account. You just have to decide and take whatever consequences of your decision like a man.

In this case, my choices really prove to be costly with both decisions to pull out prior to hitting my Stop Loss were something for me to regret.

I believe the mistake was simply due to expecting break-out but in the end the market was in range.

I guess this is one of the market's uncertainties that we traders have to get use to, and it's the risk management that prevent me from catastrophic losses. Otherwise, I am doom already.

As for now, I'm saving my bullets for February. Though ended the month on the positive side, still my performance could be better...

UNCERTAINTIES ARE SO CERTAIN IN THIS MARKET...

Last week, I happened to watch one of the live interview with Warren Buffet conducted by either CNBC or Bloomberg, I can't really recall. There were so many matters discussed for sure but the one that caught my attention most was this...

"Uncertainties are your friend in any market... Be their friend and learn how to deal with it..."

You see, the key here was that so many market participants were asking his opinion on how the market would perform this year and beyond, and he deliberately answered that he doesn't know... though he does form certain opinions on how certain stocks would perform etc. At that moment, he was commenting on Kraft bought over Cadbury matters that somehow had a stint on the overall market movement... anyway...

Back to the gist of the discusson, the key point that I would like to share here in trading is no other than - UNCERTAINTIES...

Even a super-seasoned trader like Buffet can never tell what exactly will happen next, then what about us who hardly knew the real meaning of the market itself.

So learn to accept that uncertainties is an important equation in the game of trading. No one knew exactly what will happen next but of course, you could and you should take your chances base on fundamental and technical analysis plus most importantly... a calculated risk that employs sound risk management that would keep you in the game in the long run...

That is what being a real trader is all about...

Safe Trade Guys... waiting for FOMC report's market reaction tonight... staying out for a while... it's just too risky to stay in at the moment...

;))

A TEAM OF FOREX TRADERS...

Talking about trading, making or losing money along the way, most of the time we are on our own.

We either rely on our gut feelings, third party signals or indicators in such a way we tend to miss the real understanding on the market movement when we initiate our trade. Hence, one of the thing that I am planning to embark, whether sooner or later is to have my own team of traders, consists of capable friends or families whom I can trust and rely on.

The best part of having a team (in my honest opinion) in this trading arena are:
1. Every trade decision will be treated as a serious business decision, just like an institutional trader who take their trade very very seriously.
2. You can counter check your analysis with your trading colleagues, whether or not a trade is feasible to be taken or otherwise.
3. You support each other in terms of analysis where one can focus on technical and the other on fundamental as well as market sentiments.
4. Though trading decision can and should be taken on your own personal basis, but having a team who really understands the market and what trading is all about will provide you with the cutting edge on either a position should be hold or exit.
5. A good team can always analyze each others trade and study where and when a good or a bad trade decision were made and record them accordingly for future reference.
6. Build a strong confidence and skills in taking any trade by having your own ways of looking at the market.
7. Achieves more by sharing what you know, think and see base on your own analysis.

So, if I were to have a team of traders, I would like to have someone who is expert in the following areas:

1. Technical Analyst - who will focus on daily pivot, resistance, support, fibo level as well as Stochastic and RSI strength. He needs to know all the relevant pairs chosen to be traded in terms of its technicality.
2. Fundamental Analyst - who will focus on weekly and daily major news release, oil & gold price movement, stock exchange performance, Bloomberg or CNBC breaking news, as well as market responds on each news release. He needs to know what the market is telling and doing from fundamental point of view.
3. Sentiment Analyst - who will focus on the general sentiment of the market, the news headlines, CNN News, geopolitical climate as well as major trend direction at the moment. (ie dollar weakness, euro strength etc)
4. Scheduler - who will identify and propose best trading hours on weekly basis. What is the best time and potential high volume trading hours. (for sure London Session is a must)
5. Risk Controller Specialist - who will determine on how much should be put at stakes, where to put stops and profit limit in any particular trade or day base on account levels.
6. Adviser - who will analyze the market generally from the daily range, character (ie ranging, trending or breaking) and volume whether trading is feasible or otherwise.

In short, it's all about having a team of my own market analysts who have faith in own capability and later work together towards a common goal - which is no other than making money.

You see, the point here is though trading is personal, we seldom have enough time to do a complete analysis on the market. Sometimes we focus too much on technical, at times we focus too much on the fundamental. Either way both are important So, when you have a team of your own, chances are you will make a better trading decision that could benefit every team member.

The only thing is that - still the final decision is yours and at your OWN risk, especially if you disagree among each other on the market's condition and analysis.

But no matter what, always trade what you see rather than what you wish to see... Having a team doesn't guarantee profit either, but will definitely help on a better analysis on the likelihoods of the market's movement especially if you have someone who is very knowledgeable, senior and experience with the forex market as your team member.

THE IMPORTANCE OF HAVING A STOP LOSS...

Volatility in the forex market is very normal and not for the faint-hearted... Though the market is not volatile all the time, but when it happens... you just knew that it is a place for you not to play around with your money.

In day to day trading, once you take a decision whether to go long or short on certain pairs, the next thing that matters really lies on your risk management, or how much you are putting at stakes.

You see, I do have a number of colleagues here who loves trading the forex market. They do trade quite well and make money quite consistently. The only thing that worries me is that most of them do not use stop loss at all. The reason behind this habit is that no matter what, they believe the price will come back to their entry level.

In certain sense, yes  the price do come back especially in a ranging market. But what about a major breakout? It could come back but you may be out for months waiting for it to come back.

The fact is, no one likes losses but in trading, losing is just part of the equation. You can't avoid it.

To me is simple. If you plan to trade small with solid account margin and no stop loss, by all means go ahead. But please consider these...

1. If you trade without stops, chances are you are trading without a system, or without any pre-define entry and exit strategy.

2. You hardly learn from your trading. You are like a blind man that walks around hoping to bump on a beautiful girl who is willing to marry you with unconditional love. Wake up man! There's no such thing... or perhaps once in a trillion.

3. You see... trading habit is just like a driving habit. If you do not develop a safe habit from the beginning, will you ever reach a level where you can safely grow your account to a six or seven figure levels?

4. What if you're wrong? The reason to have stop loss is to stop you from being wrong to the point where there is no return. Staying too long in the wrong trade is not a pleasure experience at all.

5. The market force is inevitable. You can never fight it... If you have no stops, you are like fighting a battalion (which is the market)  till the last drop of your blood. Chances are you will not survive.

Sure taking losses are painful but in real world, no one gets it right all the time. Plan your stops accordingly and implement it, in a way it is neither too small nor too big for you to absorb the losses.

Focus on accuracy and trade what you see base on your own analysis. If you're right, stay, if you're wrong - just get out and stay out... but with defined limit. Do not rush your decision and trust me, it is not easy. Most of the times, it's all about getting into the right trade that matters.

My simple advice is, regardless of what indicators that you may be using - Always take your chances base on calculated risk.

Look at the chart carefully, study the price actions, daily high & low, and where likely the market is going. Make your trading decision base on these factors rather than blindly entering a trade base on signals. The signals or indicators are simply helpers, and there is no indicators or signals that are 100% accurate. Just remember that...

THE MARKET DOESN'T KNOW & DOESN'T CARE ABOUT YOUR PRESENCE...

The first week of trading in the new decade didn't look good to me generally with 3 days in a row encountering losses. I made more bad calls rather than good one. Followed the system with tight stops and in most cases, I got stop out every now and then.

I guess I need to review back my strategy as volatility did kill my position quite often... Anyway...

The thing is, whenever you have these string of losses coming to you, you start thinking that as if the market knows where your positions are and keep on going against you.

But looking back at every broker's charts and candlesticks, you realize that all these charts are similar and we are talking about trillion of dollars turnover in a day with perhaps millions of traders all over the world trading this one particular market. There's no way this trading is all about attacking my position. If you get what I mean, I am pointing out a fact that it was just co-incident that I got it wrong (as with the majority, perhaps) that consequently brought me in getting all these losses.

So if we talk about 90% traders who lost money most of the time, I guess I am among the 90% in this case for the past 3 days. Got to get out and review back the whole thing.

I believe the market movement are made from the majority's decision but somehow its the combination of big money from the institutional traders that really create the impact when breakout or rally is happening.

I guess though I hate losing, this is what we called as part of the game. If you are not in proper control, you can easily take revenge trade, risk bigger blindly in order to recoup your losses, and jumping into a trade that you would regret.

Really, I'm telling you that it's DEFINITELY NOT EASY....

ONE OF MY SIMPLEST FOREX TRADING STRATEGY IN 2009... THAT WORKS...

Finally 2010 is here and this is my third year as a Forex Trader... and yeah I started this venture exactly on 1st January 2008... having a real money account with FXDD... and now with several other established brokers as well. I do not consider demo experience as part of my calculation since I hardly learned with my demo account until I put real money at stakes, and for sure learned the hard ways like most of the experienced traders out there... 

Though technically this is my third year, I do learn from at least 10 forex old-timers who has experience trading the market for at least over 10 years each... so if say I get to grip 30% from each of these traders experience, it means 3 years times by 10 traders (3 x 10 traders) equals to 30 years plus 2 years of my own experience will bring to a total sum of 32 years of trading experience. Is that a fair judgment? Or is it just something for me to boost my own confidence in becoming more profitable this year? Well... you tell me ;)

Anyway, back to the main topic... I guess I would like to share one of my simplest strategy that I myself do not recall from whom did I learn... but most importantly - was working well for me in year 2009.

So, this strategy is pretty simple. All it requires is for you to use the Daily and Weekly candlesticks, with 10 or 15 EMA, and I prefer 15 (Exponential Moving Average - Close) as main reference. No need RSI, Stochastic, CCI, DDX whatsoever...

All you have to do is by the time New York close at 5PM EST daily, watch the previous day range (say 150 pips for GU) and see where the price close at 5PM. If the price close above the 15 EMA, chances are good for buying especially if it is still early days (Mon - Wed) of the week, and vice versa.

But, you must analyze the line direction as well as there are instances when the trend is either strongly bullish or bearish, or close to the 15EMA line, it could potentially be either a strong support or resistance to the price movement. The easiest and safest way is for sure to stick with the main trend since breakout or reversals hardly happened in a strongly trended market. You can verify this by changing the time frame to Weekly instead of Daily.

Secondly, to be much safer in using this strategy, wait for London Session to begin, especially after all the UK and Eurozone economic news have been released before making a decision whether a trade can be taken or otherwise. Of course you can apply this right after 5PM EST after New York close if you see a strong setup, you just have to decide.

I believe this is called a position strategy and normally we could hold the trade until at least the end of London Session before closing it with at least 50 pips as Profit Limit target. I normally set 100 with 70% hit when I employ this method, but of course depending on market's condition and pairs that you are trading.

You can set your Stop Loss at 25 pips (max) below or above the previous day high or low. Position size should be base on 3% calculation from your account balance divide by your stops distance. Smaller distance will allow you to take bigger lots... (ie 3% from 10000 = 300 dollars divide by 100 pips SL = 30k minilot position). Email me if you're not clear on this...

Two important things to note though:

1. The only day that you cannot apply this is when the market is showing a Doji signs with balance in power between the Bulls and the Bears, playing along the 15EMA lines, with high volatility and volumes... so better stay out or just scalp using 15 minutes timeframe.

2. Study the daily range the pair has reached for the day (say already +55 pips above opening price). Chances you can go along with the market for at least the next 50 pips, but of course time your entry base on smaller time frame, at least with either 1 hour or 15 minutes candlesticks... Do not jump blindly.

OK guys, my only reminder is you must bear in mind that NO strategy is perfect for sure... but I do recommend you to consider this one... most of the time, a simple approach is all you need to become profitable with your trading. And I believe this one will work just fine for me in 2010 too...

Wishing you guys Happy New Year and safe trade...