Weekly Trading Update (January 3 - 6, 2012)

Discussion in 'Technical Analysis' started by Ituglobal, Jan 6, 2012.

  1. “Studies have been done between random entry systems and specific systems that use entries based off of chart patterns with amazing results. The random entry system typically outperforms the structured entry system when it uses money management (position sizing techniques) and a strong exit strategy (assuming that the structured system doesn’t employ money management tools).” - Chris Perruna


    This is an update on some of the movements in the markets and what I’m doing about them, plus my losses and profits. The analyses are based on 4-hour charts, looking at the overall price actions on the charts. My preferred leverage is 1:100 and my position size is 0.01 lots for each $2000. The risk per trade stands at 0.5%. The Stops are my insurance policy. For trading purposes, I’ve decided to do only trend-following; and only trend-following I’ll do. This kind of trading approach has stood the test of the time. I make my money somewhere in the middle of a trend. I open primary positions with a risk-to-reward of 1:2, riding the trend until the target is hit or I’m stopped out. The value of patience will forever be emphasized. As long as I stick to my rules and keep my risk low, I’m immune to fear.

    Most novice traders don’t have a trading plan. They just want to get in front of their screen and execute a trade. When this type of strategy takes place, the pro trader’s account gets bigger and the novice trader’s account gets smaller. A trading plan is nothing more than a fixed set of rules that allow the trader to reproduce their trading style. For all intents and purposes, a strategy is the opposite of ‘gut’ trading. Be accountable to following your trade plan. Sometimes it works and sometimes it doesn’t. Following the trade plan shows discipline. As the novice trader becomes more experienced, they’ll see that trading is more of a discipline than anything else. If all novice traders practise to perfection, they’d ultimately become more successful faster. In addition, risk and money management represent the most important and extensive part of the trading plan. Simply put, risk management comprises all the measures that serve to minimize and avoid losses. As a result of this, trading becomes more common sense than anything.

    Below is the summary of some of my trading activities this week.

    Primary Trend: Bullish
    From a weekly peak of 1.0386, this pair pulled back by over 150 pips. It seems to provide traders with the opportunity to buy cheaper in the context of an uptrend. This scenario would be rendered invalid only if the pullback turns into a new bearish run.

    Primary trend: Bullish
    Just like its AUDUSD counterpart, this pair shot up and later retraced by roughly 100 pips after reaching a peak of 0.7908 this week. Long buyers may be whetting their appetite while getting ready to buy cheaper, but a subsequent development would show where the market is headed. Let the market tell you what is going up or down.

    Primary trend: Bearish
    Though bearish, this market is now clearly ranging. The SMA 50 is below the SMA 200 and very close to it. The RSI 14 has long been situated around the level 50 – neither vividly above nor below it. The Stochastic 14,3,5 hasn’t reached overbought or oversold region since December 20 last year. When a panic breakout does occur later, it would be a munificent move for the benefits of traders. But one would do well to stay out of this market right now.

    Primary trend: Bearish
    The supercilious Loonie is no match for the feeble Euro at the present. The dominant trend last year was bearish and this has continued to the present time. Trend followers would just be enjoying an easy ride. Though I suspect this may not go forever, and should there be a serious bullish breakout, buyers would trade it truculently.

    Primary trend: Bearish
    This is a trend followers’ paradise! The bearish trend that was dominant last year is still very much valid. The SMA 50 is far below the SMA 200. The ADX 20 is above level 60; something that betokens the helplessness of the Euro. -DI has been constantly above +DI, making the domination of the bears not arguable. It would be nice to continue to follow the market sentiment until fact proves otherwise. Objective traders shouldn’t be inveigled by the markets.

    Primary trend: Bullish
    The price on this highly volatile market is wending its way up. Since the CHF was pegged, the market has been struggling to violate the dominant trend in the last year (something that was bearish). This scenario is still valid and anyone who was bearish should’ve offloaded their positions. The thing about adverse movements is to get out at the right time, so that excessive leverage plus running of losses wouldn’t extirpate traders’ portfolios.

    Conclusion: Experienced traders know how fast things change in trading, but still, there are some phenomena that’ll probably never change. You need to consistently implement a proven trading idea, generating trades that can be replicated and are based on logical (rather than emotional) reasons. This can give you an edge in the markets, enabling you to make money for long periods of time. You either have a plan or you don’t. But if you can’t manage yourself, then no one else can do so for you. That’s the way it’s in trading.

    Let me conclude this article with the quotes below:

    “Basically, our trading motto is: ‘Luck follows the prepared mind” – fortune favors those who prepare and position themselves professionally. There’s nothing in trading that can be said to be certain – but for us, this saying has proven to be true again and again.” - Philipp Schroeder

    “Many traders who’re unsuccessful pay attention to the wrong things or simply trade the wrong instruments. Others in turn run excessively high risks causing them to fail sooner or later.” - Valentin Rossiwall

    Your questions and opinions are highly welcome.

    Thank you.

    With best regards,

    Azeez Mustapha

    Forex Signals Strategist, Funds Manager &Coach
  2. a thing about random entries. I tend to have very bad entries. For me a shotgun approach improved things dramatically, and that means adding to winners and losers until I get a full load on. In most cases the losers get closed out before they ever achieve max size.

    as for exits I use the profit taker system which reduces everything back to minimum size or gets flat once the whole portfolio achieves the profit potential your testing shows the system can realistically achieve.

    working with small incremental size allows me to trade without stops. In forex I noticed that just about every pair will bounce around until it has hit everybody's stops and then it will trend.

    so that's 90% of my system which is nothing more than money management. I could teach an average monkey or maybe even a very smart trader how to do it. But 10% requires reading the market, which probably any technical chart bozo learned how to do after he read his first book.

    some people call it an edge, I just call it common sense

    otherwise I agree completely with those quotes.