Secrets of Market Wizards

Trading Discussion
1

[B]“Life itself is a risky enterprise. Sometimes we fly high, enjoying great success. But then suddenly we fall into deep disappointments and the haunting reality of a failure, leaving our hearts wondering if there is anything worth looking forward to.”[/B] – Joe Stowell

There are super traders all around the world. If you don’t know them, I know some of them. They earn their livelihood by trading and they’re financially free. Now the question is: Who’s the best trader in the world? Indeed, the best trader exists. Now, I won’t mention names, but I’ll tell you how the best trader trades.

The best trader doesn’t argue with the markets - he always admits his mistakes. Most people tend to feel they’re right, even if facts prove them wrong. Extremely terrible speculators don’t accept their errors. It’s really a psychiatric condition that makes a person refuse to think he’s made a mistake, even if reality shows otherwise. Being overconfident in riding a position that’s determinedly negative is definitely not a good thing. Top traders always acknowledge their mistakes.

Likewise, the best trader may use any kind of positive expectancy system including fundamental strategies, and anticipate the market to move in a certain direction. If the price movement or fundamental figures happen to be against his expectation, he’ll smooth all his positions immediately. No arguments, no hope. Financial markets have no mercy upon anybody. If things go against you, then get out of the market without wasting time. Every good speculator I’ve studied is really good at cutting positions that seem to go determinedly against them. Yet, whenever the market proves them right, they run their gains for a considerable amount of time.

The greatest trader accepts the uncertainty that can affect any open orders; they even did this before they opened the orders. Uncertainty remains our ally, since speculation is a game in its own right. Negativity is also included in the game. The best trader doesn’t feel sad when a trade goes negative, nor does he feel too happy when a trade goes positive.

[B]Using A System Profitably Is Conditional[/B]

Are you a successful trader? Did you like the results you produced as a trader in the previous year? If not, what errors did you make and how can you improve your results henceforth? You may need a trading system that takes care of some cogent factors contributing to profitable trading. Do you have these factors in mind? Please consider some of them:

1). Do I have a rule to follow in my speculative activities? A trading strategy should be approached with the level of seriousness and enthusiasm with which one would approach any high level endeavor or business. The entry, exit, position sizing and other rules of this strategy must be followed to the letter.

  1. Do I have a worst-case emergency plan? A good system should have (a) rule(s) that can deal with any adverse movements that can affect an open trade, as well as a rule that makes you exit quickly if things are no longer going in your favor.

    3). Do I have a positive expectancy system that can enable me to survive the current type of market? A good system ought to make money in good market conditions and make as little drawdowns as possible in bad markets conditions. It should have positive expectancy incorporated into it, which means that at least, two dollars should be expected for each dollar that is being risked. In other word, one should be profitable on a long-term basis even with only 30% accuracy.

    4). Do I have a technique that will continue working even if the market conditions change without warning? Yes, a good trading system ought to survive all market conditions. A good trading system can work well in bull or bear markets. But you may stay out of extremely consolidating markets! You would just need to stick to its rules.

    5). Do I even recognize the current type of market? It helps to be aware of the type of the market one is trading and the current prevailing condition of the market. This can help you make informed trading decisions.

    1. Do I constantly condition my mindset in a way that makes me execute my trades flawlessly? You need to work on yourself. There are traders who use position sizing that is far bigger than the one recommended. Some enter additional trades based on analysis that is completely different from the rules of the system. Some do not even use stops at all – contrary to the system rule! A trader using a good system should learn how to control herself/himself and do the right things in the markets rather than doing things that would satisfy human emotions.

If you answered no to any of those questions, you have clues about why your results in the past have been undesirable. These, by the way, are only a few of the questions you could ask yourself. If you could take the factors above into consideration and work on them successfully, then you may find that trading can indeed be profitable.

Conclusion: When the markets go in our favor, we feel like a champion. We’ll assume that we are super trader and that we’re smarter than other traders. In most cases, only traders who’ve experienced the good and the ugly sides of the markets and survived them all are those who’re really qualified to be our mentors. You need to forget about your past and look forward to a brighter future. It’s important that you overlook your past failures and press forward.

This article is concluded with the quotes below:

[B]“Stephen Covey says - ‘Live out of your imagination, not your history’. Look forward, not in your rear view mirror - or you’re sure to crash. It’s not what happens to you, it’s how you handle it that counts. Your mistakes are completely separate from who you are as a person. Take pride that you’re moving one step closer towards your goals. Don’t cripple your future growth by shooting yourself in the foot because you made a screw up.”[/B] - Louise Bedford [paraphrased]

[B]
“One of the main issues that new traders have is that they have expectations of huge rewards in a short period of time. “I’ll take my $5,000 trading account and turn it into a million dollars in a year, and tell my boss where he can go!” That rate of return is a bit unrealistic. By increasing your account size just a couple of percentage points a month, the power of compound interest will make you wealthy, but over a long period of time. Trading as a career is a marathon, not sprint. Those who try to make too much too fast often over-leverage their account and take on unnecessary risks by doing so. One or two large losses can wipe out a few weeks or months of good gains! If you do that you have “worked for free” as your account takes these major drawdowns. Does anyone want to work for free? I know I don’t.”[/B] – Rick Wright (Online Trading Academy)

2

EURUSD
Primary trend: Bullish
From January to February 2012, the EURUSD went up. Then it fell by over 1400 pips, i.e. between February and July. Since then the EURUSD has been caught in slow but steady bullish pressure. From July to September, the pair rose by more than 1000, before it consolidated slightly to the downside. The consolidation to the downside took place between September and November – something that saw a loss of over 400 pips. Right now, the pair is upwards, and as a result of this, we have what can be called a Bullish Confirmation Pattern. Clearly, this is a bull market.

USDCHF
Primary trend: Bearish
There has been some perpetual bearish pressure on the USDCHF, showing the bears’ hegemony. From January to February 2012, the price fell by more than 600 pips. And from that period till April, it was in an equilibrium mode. Then it rose by over 800 pips (that was from April to July). Since then, the price has fallen by close to 800 pips. Yes, this is a Bearish Confirmation Pattern. Nevertheless, one should note that the price is going towards a major psychological level – something of a recalcitrant accumulation zone. The zone is the price level at 0.9000.

GBPUSD
Primary trend: Bullish
The Cable has been volatile in the year 2012; extremely volatile. The price actions included sharp declines and well as northward upsurges. From January to April 2012, the price rallied by over 1000 pips. After that, the price plunged by more than 1000 pips, especially in the month of May. From May to September, the price rose by another 1000 pips. Then it fell by another 400 pips (from September to November). Currently, the price is engaged in some northward attempts, though in a volatile mode. What is happening right now shows that buying pressure is extant.

USDJPY
Primary trend: Bullish
This is a bull market, a significant bull market. One should not assume that the market is overbought, because it has much room to go. From January to March, the USDJPY rose by more than 600 pips. It then fell by 600 pips (Between March and May), and range-traded from then till July. Since July till now, the price has shot upwards by over 800 pips. While some indicators are showing overbought conditions on this pair, the price continues going upwards. One reason for this is because of perpetual weakness in the Yen. It is likely that the price would reach the resistance zone at 87.00.

EURJPY
Primary trend: Bullish
From July 2012 till now, the EURJPY has moved upwards by more than 1800 pips, whereas from April to July, it fell by over 1600 pips! The bullish outlook is still valid. We should also note that, this same cross rose by close to 1400 pips from January to March. All JPY pairs are bullish, just as it has been said earlier. One wonderful thing about this unique class of pairs is that, in most cases, the weakness in the Yen would signify bull markets on all JPY pairs, while the strength in the Yen would make the pairs plummet. That is why those who trade JPY pairs can make hefty gains if they are caught the right direction.

Conclusion: It would be assumed that the current market biases would continue going as such, until there would be some confirmed reversals in the markets. When this happens, the bearish runs would be noteworthy. Moreover, the markets tend to skydive (go southwards) more rapidly than they shoot up (go northwards). To make the markets go upwards, there is a need for more buying pressure, generated by bulls, so that they can offer higher prices than the existing speculators. This scenario also has its boundaries. As soon as shorts trades are called, the boundaries would not matter as such. Please do not forget that you cannot outwit the markets. However, you can become victorious if you know how to truncate losing trades and allow winning trades to run.

This article is concluded with the quote below:

“Only if I learn from my mistakes and look for the reasons why I have missed certain sharp price movements can I improve my trading!” – Faik Giese

3

EURGBP: SELL
There is a Bearish Confirmation Pattern on the EURGBP chart as this analysis shows. 2 indicators are used (coupled with price action): the Simple Moving Average (SMA) period 21 and the Relative Strength Index (RSI) period 20. The price had been going upwards until the last week. The horizontal red line at the upper side of the chart shows where further rally was rejected. On December 28, 2012, the price started coming down. That same day, the price crossed the SMA 21 to the downside and closed below it. At this time too, the RSI 20 has crossed the level 50 downwards. On January 2, 2013, the price gapped down significantly, showing strong bearish pressure. There could be a short trade, with stop loss around 0.83000, while targeting the price level at 0.75110. At the time of writing this forecast, the EURGBP was trading at 0.81119.

4

Mark Joseph Carney is an economic giant who’s now constantly making headlines. Even his critics can’t deny his achievements.

Meet the Economic Giant
Mark was born in March 16, 1965. He was educated at Francis Xavier High School in Edmonton, Harvard University, St Peter’s College, Oxford and, Nuffield College, Oxford (bagging a PhD in economics in the year 1995). For 13 years, he worked for Goldman Sachs at their various offices in important cities. Between the year 2004 and the year 2007, he worked at the Canadian Department of Finance. From the year 2003 to the year 2004, he was a deputy governor of the Bank of Canada. In February 2008, he became the 8th Governor of the Bank of Canada. He’s also serving as Chairman of the G20’s Financial Stability Board (assuming that post in the year 2011).

What’s So Special About Mark Carney?
Mark is said to have saved Canada from the adverse financial circumstances of the late-2000s. And as a result of this, he was given accolades by top financial magazines. This feat was achieved by giving enough liquidity to the Canada’s financial system, keeping Canadian banks well funded, keeping interest rates very low, and other conservative measures. The Canadian economy has survived the global credit crunch, and is now doing well.

On November 2012, George Osborne (the British Chancellor of the Exchequer) made it public that Mark would be the next Governor of the Bank of England. He’s expected to succeed Sir Mervyn King at the end of June 2013. He’ll be the 1st Governor of the Bank of England who’s not a Briton, since the founding of the Bank in the year 1694. The official term for a governor of the Bank of England is 8 years, but Mark has mentioned the possibility of stepping down after 5 years. His annual remuneration is close to $1 million USD – far more than his predecessor.

Mark Carney has enjoyed enviable academic career, professional career, and the glare of publicity. He’s highly paid and would even be paid higher. Because he shielded Canada from the adverse effects of the world financial crises (while many other countries languish), he’s now seen as someone who can bring Midas Touch to the British economy. In order to achieve this, the Bank would be given more powers.

I wish Mark Carney the best of luck in his career. I hope he’ll be able to meet the expectations of the British people, and return the British economy to an enviable position in the world scene. However, the strategies that work in one context might fail in another context. What works in one country might fail in another, as a result of many factors that space and the time would not permit me to mention. The best central bank governor isn’t a magician. In the midst of these accolades and honors, Mark should tread very carefully, for the whole world is now watching him. If he does well, the accolades and honors will continue, thus increasing. If not, the praises and commendations would turn to morbid criticisms. Rather than being realistic, the public are often idealistic. This moment, the public may say: “The crown is ideal.” The next moment, the public may say: “The crown isn’t ideal.” So that ‘Blessed is he who comes in the name of the Lord!’ won’t be turned into ‘Crucify him! Crucify him!’

Conclusion: Whatever the Bank of England does under Mark will have profound impacts on the British economy and the Cable (and perhaps Europe and/or the world). Nevertheless, the good news for Forex traders the world over is that, whatever happens to the Cable; whether it goes up or it goes down, we can make money from it by going long or going short.

This article is ended with the quote below:

“…However, ensure that you never get too optimistic and take bigger and bigger risks as a result of overconfidence.” –Steven Giles

5

EURUSD
Primary trend: Bullish
The EURUSD has been in a moderate bullish mode – save for the last bearish week (December 31, 2012 – January 4, 2013). Really the moderate bullish outlook still has much room to go, but there would be some serious short-term and medium term pullbacks along the way. These pullbacks could provide nice opportunities for day traders to make some quick bucks. The short-term pullback could take the price downwards to the support line of 1.3000, while the medium-term pullback could take it downwards towards the support line of 1.2500. Generally, this year’s rallies could take the pair towards the resistance line at 1.4000.

USDCHF
Primary trend: Bearish
The USDCHF pair has been caught in some moderate bearish mode – save for the last bullish week (December 31, 2012 – January 4, 2013). Ultimately, the price on this market could fall towards the support level at 0.8000, even breaking it downwards in this year. We should note that this assumption does not rule out the possibilities of short-term and medium term rallies in this context of the overall southward bias. These rallies could take the price to the support levels at 0.9500 in the near term and 0.9900 in the medium term. But the US Dollar and the Swiss Franc would not come to parity this year.

GBPUSD
Primary trend: Bullish
The Cable is in for an exciting year, as a new Governor of the Bank of England is expected to assume office by the middle of this year. There are chins in the air, and I can say without mincing words that the Cable would trend upwards for the most past of the year 2013 – though there would be some southward corrections along the way. The corrections might push the price lower to the accumulation zone at 1.6000, and another accumulation zone at 1.5500 (this may be the worse-case scenario for the year). Normally, the primary trend should take the price towards the distribution zone at 1.7000.

USDJPY
Primary trend: Bullish
For about 15 weeks, this pair has been in a significant bullish mode. Can we say that the price has gone too far (when most indicators are showing overbought conditions)? Nope. It is yet assumed that the price would continue going upwards, and may do so for the rest of this year. At least this rally would eventually reach the supply territory at 89.00; going towards the supply territory of 90.00. The northward move would be slow but steady. On the downside, some near-term and medium-term bearish retracements could take the price towards the demand territories at 88.00 and 87.50 respectively.

EURJPY
Primary trend: Bullish
This cross is in a bullish mode, and would be predominantly bullish for the most part of this year, with some pullbacks along the way. Talking about these expected pullbacks, the price might retrace towards the demand territory at 115.00 in the near term. Experienced intraday market speculators would be proffered with excellent money-making opportunities when these pullbacks materialize. In the medium term, it might pull back towards the supply territory at 114.00. But in the long term, the primary trend might push the price upwards to the supply territory at 116.00, and eventually towards another supply territory at 117.00.

[B]Conclusion:[/B] Current price levels are the products of buying and selling pressures in the markets. When there is a long trading signal, there would be a pullback at some point. This is the ideal place to enter a new long order (the same is also true of short side). For the analyses above, weekly charts are used.

This article is concluded with the quote below:

[B]“Technical analysis is like a set of headlights on a car. It doesn’t show you all the way home, but it does illuminate a patch of ground ahead, allowing you to drive more safely, as long as you do it at a reasonable speed.”[/B] – Dr. Alexander Elder

6

Ituglobal, are you just sharing articles or do you proclaim to be an expert?

Of course it is great that you share knowledge, your intention isn’t fully clear to me. It may be better when you also share the source address from where the articles come from. That way it is clear to others that they are not written by you but by someone else, if that is the case.

7

What’s the source of these articles ?

8

[B]CHFJPY: SELL[/B]
In the past few weeks, the CHFJPY cross was in an overall bullish mode. Just above the price zone of 95.50, and before the price could get to the supply zone of 96.00, further bullish bias was rejected. From this phase, the price nosedived by around 150 pips (though not without some intermittent rallies). Last week, the price fell below the Exponential Moving Average 21, but the RSI period 14 did not fall below the level 50, which revealed the price action as a false signal. This week, the price fell below the EMA 21 again, and this time around the RSI period 14 plummeted below the level 50. It can be seen that the price has closed below the EMA 21: this is a ‘sell’ signal. One may target the demand zone at 90.00 – the stop might be put at the supply zone at 96.00. The price is currently at 94.34.
Chart: [I]4 hour[/I]

9

I was bored and he ignored my question…:slight_smile:

What’s So Special About Mark Carney?
Annual-Trading-Reviews-on-Major-Pairs - PaxForex
The Best Trader in the World - PaxForex

10

Dear Toekan:

Thank you for your question. We were forbidden to put links until after several posts have been made. It’s very much necessary to give attribution and acknowledgment when writing articles, and this will begin from next week. Best regards.

11

EURUSD
Primary trend: Bullish
The pair moved up by more than 300 pips last week (January 7 – 11, 2013). All technical indicators that are put on this chart shows bullish confirmation pattern. The bullish scenario is expected to continue this week. Though there could be some pullbacks in the near-term, the next price target would easily be the resistance line at 1.3400 and then the resistance line at 1.3450.

USDCHF
Primary trend: Bearish
The USDCHF pair plummeted seriously last week; by close to 160 pips. All the technical indicators that are put on the USDCFH chart testify to a bearish confirmation pattern. It is still expected that the bearish plunge will continue, given the weakness in the USD. The next price level that would be reached this week is at the support level at 0.9100, and then the support level at 0.9000.

GBPUSD
Primary trend: Bullish
Unlike the Euro, the Cable is not that strong versus the Greenback. Some bleak economic outlook might be responsible for this. Overall, the Cable was bullish last week, but not significantly. With some luck, perhaps the Cable could rise up a little bit more, especially if the Euro is also bullish this week. Otherwise, the Cable would trade sideways and oscillate between the distribution territory at 1.6200 and accumulation territory at 1.6100.

USDJPY
Primary trend: Bullish
Far beyond expectations, the USDJPY continues to break one supply level after the other – to the upside. Well, there is no end in sight for this outlook. Because, all technical indicators that are put on the 4-hour chart will ultimately support the northward outlook. Should this outlook hold out long enough, the market might reach the supply zone at 90.00 this week, and then another supply zone at 90.50.

EURJPY
Primary trend: Bullish
The EURJPY, like most other JPY pairs, was also involved in some noteworthy northward outlook. The cross seems determined to go on being bullish, so the ultimate target for this week is at the supply zone around 119.50, and then the supply zone at 120.00. Since the cross moved up by more than 450 pips last week, this target is not far-fetched.

[B]Conclusion: [/B]The world of speculation would go on being monitored, but it does not mean that the uncertainties of the future or downtrends would be removed. Sudden price moves occur in the trading world because of greed and fear – a phenomenon that is no longer new, as market players cause the markets to move as they call new trades and use modern electronic trading devices and core speculative strategies. Mostly, many traders, institutional and private, may not be able to move the markets always. Your mind ought to be made up even prior to risking your portfolio. Moreover, market players affirm that transactions would expose some part of their portfolios. If a day speculator stops their activities, even investors may not get the prices they want, and this would cause many adverse chain reaction, including unavailability of trends.

This article is concluded with the quote below:

[B]“Overall, traders should make an effort to win the largest possible amounts in
their profitable trades and only have small losing trades.”[/B] – Marc Rivalland

12

We don’t derive satisfaction from gaining pips only or through some elusive Holy Grail. Disciplined traders get satisfaction from doing what they know is really right, even when they take losses occasionally. Some hate loss to the extent that, if he were a person, he would be lynched. Only a lack of knowledge would make someone give up trading because of a losing streak – something that market wizards know is normal and they constantly anticipate and control successfully. Expert traders measure real satisfaction from their level of discipline, as futures gains and losses are measured in ticks, currency market gains and losses are measures in pips, and as those of stocks are measured in points.

There are different aims for different market speculators. Certain speculators focus on risk control or having as low roll-downs as possible (and some may want to double their account every week). Yet, certain traders are making attempts to combine huge profits with less roll-downs, like fifty per cent per annum with no more than twenty per cent roll-down. No matter what you want, lot sizes are what should be used to attain your realistic trading goals. Given the importance of safe uses for lot sizes, all traders ought to take it serious. Yet, in reality, many rookies and even experts don’t bother much about this powerful tool. They prefer to focus on a magical methodology, trading instruments and market types. Though nothing is wrong with the aforementioned, they are ineffectual without the judicious use of lot sizes. Granted, a nice strategy helps you formulate sensible lot sizes in your trade, however, lot sizes are great in their own right. Why? By using too big lot sizes on small accounts, many traders have seen great roll-downs on those accounts even when they have superb strategies.

Why aren’t we disciplined? Do you hate to hear this? Well, without being disciplined, you’ll eventually find it impossible to outsmart the markets. Trading success is simple only when we’re disciplined do to what’s right. We find trading success elusive because we can’t be disciplined. Some know the grim consequences of certain hard drugs, but they still use them. We know certain types of junk foods that are detrimental to individual’s health, but we can’t desist from eating them. We know some dangerous lifestyles, but we still live them. We know what are morally wrong, but we find them appealing. We know the best ways to handle money, but do we do that? There are many more examples… As long as the markets exist, there would be disciplined and undisciplined speculators. Undisciplined speculators trade rashly, but blame others. Being undisciplined means knowing the correct trading styles, but doing something suicidal.

Our ultimate goal is to make decent profits from the markets (logically quarterly, on annual basis) irrespective of what the markets do. In order to achieve this goal, there are trading principles that must be incorporated into our speculative activities. The reality, however, is that, it seems that the human mind isn’t wired to be disciplined enough to do the right things. How can we be disciplined? And what are the advantages that might be derived from this? The part 2 of this series would talk more about it. These trading principles would be unfolded gradually.

[B]Conclusion:[/B] Though you can’t change what’ve happened to you in the past, you can take steps to ensure your success in the future. All over the world, there are people that, regardless of their nationality, skin, color, ethnicity, or language enjoy success in the markets. Yes, a bright future awaits serious traders!

The quote below ends this article:

[B]“A trading system idea might look like it won’t work, but the more knowledge you have about yourself, and the more you understand yourself, the better you’ll be at determining whether you’re looking at the truth or a belief. The systems that work in the markets are so much simpler than any I would have thought possible, and the potential returns are so much bigger.”[/B] – Frank Eaves

13

We don’t derive satisfaction from gaining pips only or through some elusive Holy Grail. Disciplined traders get satisfaction from doing what they know is really right, even when they take losses occasionally. Some hate loss to the extent that, if he were a person, he would be lynched. Only a lack of knowledge would make someone give up trading because of a losing streak – something that market wizards know is normal and they constantly anticipate and control successfully. Expert traders measure real satisfaction from their level of discipline, as futures gains and losses are measured in ticks, currency market gains and losses are measures in pips, and as those of stocks are measured in points.

There are different aims for different market speculators. Certain speculators focus on risk control or having as low roll-downs as possible (and some may want to double their account every week). Yet, certain traders are making attempts to combine huge profits with less roll-downs, like fifty per cent per annum with no more than twenty per cent roll-down. No matter what you want, lot sizes are what should be used to attain your realistic trading goals. Given the importance of safe uses for lot sizes, all traders ought to take it serious. Yet, in reality, many rookies and even experts don’t bother much about this powerful tool. They prefer to focus on a magical methodology, trading instruments and market types. Though nothing is wrong with the aforementioned, they are ineffectual without the judicious use of lot sizes. Granted, a nice strategy helps you formulate sensible lot sizes in your trade, however, lot sizes are great in their own right. Why? By using too big lot sizes on small accounts, many traders have seen great roll-downs on those accounts even when they have superb strategies.

Why aren’t we disciplined? Do you hate to hear this? Well, without being disciplined, you’ll eventually find it impossible to outsmart the markets. Trading success is simple only when we’re disciplined do to what’s right. We find trading success elusive because we can’t be disciplined. Some know the grim consequences of certain hard drugs, but they still use them. We know certain types of junk foods that are detrimental to individual’s health, but we can’t desist from eating them. We know some dangerous lifestyles, but we still live them. We know what are morally wrong, but we find them appealing. We know the best ways to handle money, but do we do that? There are many more examples… As long as the markets exist, there would be disciplined and undisciplined speculators. Undisciplined speculators trade rashly, but blame others. Being undisciplined means knowing the correct trading styles, but doing something suicidal.

Our ultimate goal is to make decent profits from the markets (logically quarterly, on annual basis) irrespective of what the markets do. In order to achieve this goal, there are trading principles that must be incorporated into our speculative activities. The reality, however, is that, it seems that the human mind isn’t wired to be disciplined enough to do the right things. How can we be disciplined? And what are the advantages that might be derived from this? The part 2 of this series would talk more about it. These trading principles would be unfolded gradually.

[B]Conclusion:[/B] Though you can’t change what’ve happened to you in the past, you can take steps to ensure your success in the future. All over the world, there are people that, regardless of their nationality, skin, color, ethnicity, or language enjoy success in the markets. Yes, a bright future awaits serious traders!

The quote below ends this article:

[B]“A trading system idea might look like it won’t work, but the more knowledge you have about yourself, and the more you understand yourself, the better you’ll be at determining whether you’re looking at the truth or a belief. The systems that work in the markets are so much simpler than any I would have thought possible, and the potential returns are so much bigger.” [/B] – Frank Eaves

14

EURUSD
Primary trend: Bullish
This instrument traded in an equilibrium zone for most of the week. Then there was an upside breakout on Thursday (January 24, 2013). Technical indicators are in support of a bullish outlook – something that could go further up. As more buying pressures come into play, the price would not find it difficult to touch the resistance line at 1.3400, and should this be broken upwards, the next target would be 1.3450.

USDCHF
Primary trend: Bullish
In a rare circumstance (and it happens so), the USDCHF is in positive correlation with the EURUSD. This kind of rare scenario is, however, expected not to last too long. Based on the current rational outlook, it is probable that the USDCHF would trade downwards. It would be advised that speculators might want to stay out of this market until a clear bias is confirmed.

GBPUSD
Primary trend: Bearish
Strange enough, this Cable is currently trading in a negative correlation mode to the EURUSD pair. While the outlook for the latter is bleak, the outlook for the former is bright. This kind of rare condition is significant for a reason: if it does not end dragging down the EURUSD, the Cable itself will end up in a serious bullish breakout. This will happen sooner or later within the timeframe forecasted.

USDJPY
Primary trend: Bullish
Most analysts thought that the USDJPY had gone northwards too far, and that a breakdown was imminent. Owing to the consolidation that was characteristic of most of the last week, it was supposed that the trend would turn doggedly bearish. When logical traders were waiting for a confirmation of this, the price broke out to the upside. The price would continue going upwards and would not find it difficult to touch the psychological level at 100.00.

EURJPY
Primary trend: Bullish
Like the USDJPY (and most other JPY pairs), when bearish confirmation pattern was being awaited on the EURJPY cross, there was a significant breakout towards the north. Those who waited for a bearish confirmation before they could open a short trade were spared. That is why it is logical to wait for some confirmation before joining the trend. The price zone at 120.00 has been broken to the upside; the next target is easily 130.00.

Conclusion: Whatever happens in higher timeframes first started in lowers timeframes. A speculator who has gotten some time on her/his side ought to see the beginning of a new market bias and capitalize on it as soon as practicable. When the bias has run its course, the best of the time should have been made.

This article is concluded with the quote below:

“Initially, trading looked like a way to help me maintain my standard of living in retirement. That view began to shift as I progressed through my corporate career. I worked 60 to 80 hours a week, but when review time came around, I was getting less than 1%-2% in annual raises. I realized that if I learned how to trade well, I could put in less time and have a much better return on that time.” – Frank Eaves (Vantharp.com)

15

Finicky traders are usually attracted to high-flown trading systems. In the end, they see that even a complicated system can’t enjoy long-term survival in the markets if safe position sizing and risk control measures are not included in it. The strategy discussed in this article is very simple, but powerful. Top traders have found a way of making quarterly or annualized profits using simple speculative methods. Below is one way of doing this.

Trading on 5-minute Charts
The Simple Moving Average period 10 is used as the sole indicator with the strategy, since the price action is enough to show the direction of the market. If the market is rising or falling or moving sideways, you’ll see it yourself. It should also be noted that only pairs and crosses with small spreads are used for this strategy (a pair or cross whose spread is more than 5 pips oughtn’t be chosen, for they’re good only for swing or position trading systems, not intraday systems, like the one described here). Tuesdays, Wednesdays and Thursdays remain the optimal days of the week for this strategy, though as the example below shows, it can be used successfully on Mondays and Fridays as well. Please see the section titled; “Details of the Strategy,” Normally, there’s been a significant northward push prior to sighting an equilibrium zone in the market. This significant northward push could happen sooner than we think or earlier than that.
It’d be sufficient for this bullish push to be conspicuous and as a result, for the SMA 10 to be trending upwards. Having this condition is mandatory. Additionally, we need to know when the bullish push is happening. This is merely a situation in which the price makes higher highs and lower highs on 5-minute charts in which more and more buying pressures push the market upwards, at least in a near-term. Short-term trend is thus vividly visible on a small timeframe like the 5-minute chart, because this can also be capitalized on. Normally, the SMA goes up only when there are buying pressures. The bullish push would then be so strong that bears would be pummeled continually, as distribution territories are broken upwards (one after the other). With these conditions, there is great possibility that a long trade, if opened, would probably go in the forecasted direction of the speculator. This is a clean bullish market. It should also be noted that the idea explained above could be reversed logically for a bearish market.

Strategy Summary
Strategy name: 5-minute Trend Catcher
Suitability: Good for full-time traders
Charts: 5-minute charts
Indicator: Simple Moving Average period 10
Instruments: Typically popular pairs and majors with no more than 5 pip-spread each (e.g. EURUSD, EURGBP etc.)
Entry condition: There must be a strong bullish market or a bearish market (stay away from a sideways market)
Entry rule: When the price is trending northwards and the SMA 10 is sloping along, enter a long trade as soon as the price pulls back and touches the SMA 10. Reverse the logic for a bearish market.
Best trading days: Tuesdays, Wednesdays and Thursdays (but could be used on Mondays and Fridays)
Position size: 0.02 lots for each $1000 (or 0.01 lots for each $500)
Stop loss: 15 pips
Take profit: 45 pips
Trailing stop: You can lock about 15 pips of your trade if you’ve made around 30 pips in profit
Exit rule: You exit when your stop is hit or your trailing stop is hit or your take profit is hit or when the maximum trading duration expires.
Risk-to-reward ratio: 1:3
Maximum trading duration: 12 hours
Worst-case scenario: Stop trading for the week if you go down more than 5% of your current balance. This may mean the week isn’t favorable to the system
Survival possibility: Long-term survival is possible with 35% hit rate

Trade Example
We’d be able to show only one example here, for limited space and time. This is a typical instance in which a trade was managed with discipline. Please see the chart that comes with this strategy. Here on the GBPUSD 5-minute time horizon, the red vertical line on the left shows where the trade was entered while the red vertical line on the right shows where it was exited. In this example, the spread was not considered. On January 21, 2013, there was already a short-term downtrend on the Cable, as the SMA 10 was sloping downwards. In the afternoon, the price (which had previously closed and trended below the SMA 10) retraced upwards and touched the SMA 10. A short trade was opened, after which the market moved sideways. Later it moved downwards – not in a straight manner – and eventually hit the target. Please note that the trailing stop was used in this example. Besides, it’s imperative that we stick to our trading plan, no matter what the market does.
Instrument: GBPUSD
Order: Sell
Entry date: January 21, 2013
Entry price: 1.58600
Stop loss: 1.58750
Take profit: 1.58150
Trailing stop: 1.58450
Exit price: 1.58150
Status: closed
Profit/loss: 45 pips

This is one best-case example for this trading methodology. However, there is a fact: the money and risk management recommendation that comes with the system would ensure your survival with less than 50% accuracy. Any advanced trader would easily comprehend what is meant by this. Can we predetermine how many trades we can win or lose? Certainly not. It’s nice to think we can win all our trades, but that isn’t realistic. The Holy Grail would cause one person to have an undue advantage over all other traders. If you’d a system that can never lose, then you’d quickly have all the money in the world. Once again, this isn’t realistic.

Conclusion: It’s our hope that this simple strategy would bring improvement to your trading experience as you make more than you lose. We’re determined to continue providing good trading methodology of enlightening and appealing positive expectancy – in Forex and other types of financial markets – to benefit our many readers who acknowledge the potential in trading and who want to benefit from activities in the markets.

This piece is concluded with a quote below:

“Actually, when you are in the markets, every blemish, weakness and character flaw in your personality will be challenged, called out and tested. Now, that doesn’t mean that the markets are doing that to you. On the contrary, the markets have no intention for you; there are no rewards, punishments, pain or risk in the markets, only consequences.” - Dr. Woody Johnson

Disclosure: This article is only for education purposes only, and is not a trading recommendation. It was written as what the author was doing, not what he wants others to do. There is risk of loss in trading.