Here is the update for USDJPY
Friday, March 13, 2015
2015 EURUSD MasterChart 1.6000 - 1.0000 (Parity)
These are the Monthly, Weekly, Daily and H8 MasterCharts for EURUSD. The charts are such a useful reference material that I will advise all traders of the pair to print and frame the charts on their trading walls.
The 2015 Masterchart for GBPJPY from 120-190
These are the Monthly, Weekly, Daily and H8 MasterCharts for GBPJPY. The charts are such a useful reference point that I will advise all traders of GBPY to print and frame the charts on their trading walls.
Tuesday, February 17, 2015
2015 AUDUSD ANALYSIS
2015 AUDUSD ANALYSIS
The AUDUSD opened the year (2014) at 0.8650 and rose 0.9500 by April 2014. The trading range for the 4 quarters in 2014 are as follows:
Jan-March - 0.8500-0.9500
April-June - 0.9000-0.9500
July-Sept - 0.9500-0.8500- Strong bear
Oct-Date - 0.9000-0.8500– bearish continuation
What do I see? The price is back where it started in January 2014. The trend continued and 0.8000 was breached. The best strategy between now and the end of 2014 is to closely monitor 2000 pips in either direction from 0.9000 as follows:
For Bearish Run
0.9000-0.8500
0.8500-0.8000
The AUDUSD opened the year (2014) at 0.8650 and rose 0.9500 by April 2014. The trading range for the 4 quarters in 2014 are as follows:
Jan-March - 0.8500-0.9500
April-June - 0.9000-0.9500
July-Sept - 0.9500-0.8500- Strong bear
Oct-Date - 0.9000-0.8500– bearish continuation
What do I see? The price is back where it started in January 2014. The trend continued and 0.8000 was breached. The best strategy between now and the end of 2014 is to closely monitor 2000 pips in either direction from 0.9000 as follows:
For Bearish Run
0.9000-0.8500
0.8500-0.8000
0.8000-0.7500
0.7500-0-7000
For Bullish Reversal
0.9000-0.9500
0.9500-1.0000
The long-term picture from the monthly chart is that extended bearish run from 0.9000 since July 2014 is still intact. 0.7500 is now place to keep an eye on.
Compare your current charts with monthly and weekly charts as at November 2014 below.
For Bullish Reversal
0.9000-0.9500
0.9500-1.0000
The long-term picture from the monthly chart is that extended bearish run from 0.9000 since July 2014 is still intact. 0.7500 is now place to keep an eye on.
Compare your current charts with monthly and weekly charts as at November 2014 below.
Attached Images (click to enlarge)
2015 GBPUSD ANALYSIS
2015 GBPUSD ANALYSIS/UPDATE
The following analysis for November 2014 is still valid
The GBPUSD opened the year at 1.6300. The trading range for the 4 quarters in 2014 as follows:
Jan-March - 1.6300-1.6800
April-June - 1.6800-1.7200
July-Sept - 1.7200-1.6300- Strong bear
Oct-Date - 1.6300 -1.5580 – bearish continuation
What do I see? 1.5300 is very close, while the strong resistance levels at 1.4800 and 1.4300 are far off. The best strategy between now and the end of 2014 is to closely monitor 1500 pips in either direction from 15800 as follows:
For Bearish Run
1.5800-1.5300
1.5300-1.4800
1.4800-1.4300
For Bullish Reversal
1.5800-1.6300
1.6300-1.6800
1.6800-1.7300
The long-term picture from the monthly chart is that the bullish run from 1.4800 in July 2013 was reversed in July 2014 and we are on extended bearish reversal since then. If 1.4800 support is broken by the monthly candle, then the reversal is complete.
The following analysis for November 2014 is still valid
The GBPUSD opened the year at 1.6300. The trading range for the 4 quarters in 2014 as follows:
Jan-March - 1.6300-1.6800
April-June - 1.6800-1.7200
July-Sept - 1.7200-1.6300- Strong bear
Oct-Date - 1.6300 -1.5580 – bearish continuation
What do I see? 1.5300 is very close, while the strong resistance levels at 1.4800 and 1.4300 are far off. The best strategy between now and the end of 2014 is to closely monitor 1500 pips in either direction from 15800 as follows:
For Bearish Run
1.5800-1.5300
1.5300-1.4800
1.4800-1.4300
For Bullish Reversal
1.5800-1.6300
1.6300-1.6800
1.6800-1.7300
The long-term picture from the monthly chart is that the bullish run from 1.4800 in July 2013 was reversed in July 2014 and we are on extended bearish reversal since then. If 1.4800 support is broken by the monthly candle, then the reversal is complete.
Attached Images (click to enlarge)
USDJPY 2015 UPDATE AND ANALYSIS
The USDJPY opened the year 2014 at 105 and dropped to 100 in February. The trading range for the 4 quarters in 2014 are as follows:
Jan-March - 100-105
April-June - 100-105
July-Sept - 100-110 – Strong bull
Oct-Date - 105-120? – Bullish continuation
What do I see? 125 is very close, while the strong resistance at 145 is not far off. The best strategy in 2015 to closely monitor 1500 pips in either direction from 120 as follows:
For Bullish Run
120-125
25-130
130-135
For Bearish Reversal
120-115
115-110
110-105
Compare your current monthly and weekly charts with the charts I posted in November 2014.
The USDJPY opened the year 2014 at 105 and dropped to 100 in February. The trading range for the 4 quarters in 2014 are as follows:
Jan-March - 100-105
April-June - 100-105
July-Sept - 100-110 – Strong bull
Oct-Date - 105-120? – Bullish continuation
What do I see? 125 is very close, while the strong resistance at 145 is not far off. The best strategy in 2015 to closely monitor 1500 pips in either direction from 120 as follows:
For Bullish Run
120-125
25-130
130-135
For Bearish Reversal
120-115
115-110
110-105
Attached Images (click to enlarge)
Tuesday, February 26, 2013
MONTHLY PRICE ACTION ANALYSIS (MPPA)
I will discuss monthly price action analysis in relation to the Masterchart for a better understanding of the forex market, I will post the monthly charts for the GBPUSD, GBPJPY, EURUSD, USDJPY and will use GBPUSD to explain what monthly price action analysis is all about.
Successes in forex trading could only be achieved if you have the bigger picture within your purview. To achieve this it is important to realise that you can only have a ‘helicopter view’ of the market in the higher time frames. The higher time frames provide useful insights into the trading parameters within a given period of time, which could be up to 2-4 years. With this knowledge it becomes easier to proceed to the lower time frames and trade confidently within the established boundary.
For a better understanding of the picture, we will now discuss, the Monthly Price Action Analysis (MPAA). As usual we will use the GBPUSD monthly to explain the MPAA for the period December 2008 – January 2012.
A closer observation of the monthly chart for GBPUSD will reveal the following facts:
a) If the cable begins a new year around the lowest point in a yearly circle, the point usually serve as a circle for a bullish run (rise in price)
b) If the cable begins a new year around the highest point in a yearly circle, the point usually serve as a circle for a bearish run (fall in price)
c) Price moves for the first 6 months (Jan-June), consolidates for the next 3 months (July-Sept), and closes for the last 3 months (Oct-Dec)
d) Price generally consolidate around the concrete zones
The question at this point is what is the usefulness of the above analysis in a simple language? The benefit of the MPAA is that the accounting year for the ‘big players’ (banks, hedge funds, investment outfits, etc) starts from January and ends in December. At the beginning of each year, depending on the fundamental factors, the big players push the price to a direction determined by fundamental factors (it doesn’t matter whether it is bull or bear). By the middle of the year, these players used the next three months see whether the bullish/bearish run will continue or not hence the consolidation around this period. These players use the last three months to take their profit and close their books for the year. The big players will never leave roll over their profit to another year. That is the monthly circle for the Cable.
What is then my view for 2013? I.5300 which has proved to be a very strong support on all time frames and most importantly the weekly candle since 2008 was eventually broken in February 2013. If the weekly candles fails to break above 1.5300 and the weekness of the Pound continues, a retest of the support at 1.430 is a strong possibility. You need to however follow one weekly candle at a time.
I attach a weekly chart showing consolidation around the master charts levels. This area of weekly consolidation is where I called the concrete zone. The weekly charts can consolidate for up to three months. The consolidation area in the chart was between 1.5360 and 1.5780 (about 420 pips) and the Masterchart support is 1.530 until firstly, the body of a weekly candle closed outside and secondly a the body of a weekly candle opens and closes outside this level. A pin outside 1.530 is a false breakout.
What I am trying to do here is to explain this process and give you knowledge to apply it to any situation. To gain confidence in your analysis pick the chart for any currency pair e.g. EURUSD, GBPJPY, AUDUSD, and try the MPAA through this simple process:
Ø Identify where the prices on the monthly chart are in Dec/Jan over a period of 2-3 years
Ø Identify the highest and lowest point for 2-3 years
Ø Identify weekly chart price reaction around the concrete zone
Ø Identify the consolidation areas (concrete zone)
For a better understanding of the picture, we will now discuss, the Monthly Price Action Analysis (MPAA). As usual we will use the GBPUSD monthly to explain the MPAA for the period December 2008 – January 2012.
A closer observation of the monthly chart for GBPUSD will reveal the following facts:
a) If the cable begins a new year around the lowest point in a yearly circle, the point usually serve as a circle for a bullish run (rise in price)
b) If the cable begins a new year around the highest point in a yearly circle, the point usually serve as a circle for a bearish run (fall in price)
c) Price moves for the first 6 months (Jan-June), consolidates for the next 3 months (July-Sept), and closes for the last 3 months (Oct-Dec)
d) Price generally consolidate around the concrete zones
The question at this point is what is the usefulness of the above analysis in a simple language? The benefit of the MPAA is that the accounting year for the ‘big players’ (banks, hedge funds, investment outfits, etc) starts from January and ends in December. At the beginning of each year, depending on the fundamental factors, the big players push the price to a direction determined by fundamental factors (it doesn’t matter whether it is bull or bear). By the middle of the year, these players used the next three months see whether the bullish/bearish run will continue or not hence the consolidation around this period. These players use the last three months to take their profit and close their books for the year. The big players will never leave roll over their profit to another year. That is the monthly circle for the Cable.
What is then my view for 2013? I.5300 which has proved to be a very strong support on all time frames and most importantly the weekly candle since 2008 was eventually broken in February 2013. If the weekly candles fails to break above 1.5300 and the weekness of the Pound continues, a retest of the support at 1.430 is a strong possibility. You need to however follow one weekly candle at a time.
I attach a weekly chart showing consolidation around the master charts levels. This area of weekly consolidation is where I called the concrete zone. The weekly charts can consolidate for up to three months. The consolidation area in the chart was between 1.5360 and 1.5780 (about 420 pips) and the Masterchart support is 1.530 until firstly, the body of a weekly candle closed outside and secondly a the body of a weekly candle opens and closes outside this level. A pin outside 1.530 is a false breakout.
What I am trying to do here is to explain this process and give you knowledge to apply it to any situation. To gain confidence in your analysis pick the chart for any currency pair e.g. EURUSD, GBPJPY, AUDUSD, and try the MPAA through this simple process:
Ø Identify where the prices on the monthly chart are in Dec/Jan over a period of 2-3 years
Ø Identify the highest and lowest point for 2-3 years
Ø Identify weekly chart price reaction around the concrete zone
Ø Identify the consolidation areas (concrete zone)
Monday, February 25, 2013
THE MASTERCHART AS THE MASTERKEY
Trading requires careful preparation and insightful analysis. This could be overwhelming and confusing to majority of traders. The truth of the matter is that most traders are incapable of undertaking the complex technical analysis required for informed decisions. The fundamental analysis is a different challenge entirely. I read somewhere that you need 100,000 hours of study to fully understand forex trading. Let me tell you the truth, this statement though slightly exagerated might not be very far from the truth.
However, as a resulf of my researches over the last few years, I have narrowed down this complex endeavour into some simple, easy to understand strategy. As a result of these research efforts I have been to develop my unique trading strategy comprising of the following key styles:
a) Mastercharts
b) Concrete Zone Trading system
c) 14 days period Daily RSI
c) 1000 Pips Price Action Analysis (1000 pips PAA)
d) 50 Pips Price Action Analysis (50 pips PAA), etc
These keys styles could be found in my main thread - The Perfect Trading System, you can search for it on FF. On the thread I discussed my general views on forex trading.
I considered it necessary to discuss the mastercharts from all these styles due to its strenght. I also consider Mastercharts as classical charts that could guide a trade for several years. Furthermore, since I have found the usage of Mastercharts very successful by me and my team, I consider it necessary to continue the research by allowing others to use this style and gauge their successes through their postings here. I will only discuss mastercharts here and nothing else.
The major characteristic of Mastercharts are as follows:
a) The circles of most currencies pairs are between (6000 - 9000 pips)
b) The major resistance/support levels are usually 1000 pips apart
c) The minor resistance/support levels are mostly 500 pips apart and 750 pips for AUDUSD, which circle is 1500 pips.
We shall examine discuss Monthly Price Action Analysis (MPAA) in relation to the Masterchart for a better understanding of the forex market, I will post the monthly charts for the GBPUSD, GBPJPY, EURUSD, USDJPY and will use GBPUSD to explain what monthly price action analysis is all about.
Happy reading!
However, as a resulf of my researches over the last few years, I have narrowed down this complex endeavour into some simple, easy to understand strategy. As a result of these research efforts I have been to develop my unique trading strategy comprising of the following key styles:
a) Mastercharts
b) Concrete Zone Trading system
c) 14 days period Daily RSI
c) 1000 Pips Price Action Analysis (1000 pips PAA)
d) 50 Pips Price Action Analysis (50 pips PAA), etc
These keys styles could be found in my main thread - The Perfect Trading System, you can search for it on FF. On the thread I discussed my general views on forex trading.
I considered it necessary to discuss the mastercharts from all these styles due to its strenght. I also consider Mastercharts as classical charts that could guide a trade for several years. Furthermore, since I have found the usage of Mastercharts very successful by me and my team, I consider it necessary to continue the research by allowing others to use this style and gauge their successes through their postings here. I will only discuss mastercharts here and nothing else.
The major characteristic of Mastercharts are as follows:
a) The circles of most currencies pairs are between (6000 - 9000 pips)
b) The major resistance/support levels are usually 1000 pips apart
c) The minor resistance/support levels are mostly 500 pips apart and 750 pips for AUDUSD, which circle is 1500 pips.
We shall examine discuss Monthly Price Action Analysis (MPAA) in relation to the Masterchart for a better understanding of the forex market, I will post the monthly charts for the GBPUSD, GBPJPY, EURUSD, USDJPY and will use GBPUSD to explain what monthly price action analysis is all about.
Happy reading!
Saturday, February 16, 2013
THE MINDSET OF A SUCCESSFUL TRADER
THE MINDSET OF A SUCCESSFUL TRADER!
I will today discuss the following specific stepso n how to think, act and develop the mindset of a successful forex trader:
Step 1: Trade the Masterchart. It should be your No. 1 guide: The levels on the Masterchats I posted here are products of extensive research. What is happening in the forex market is that series of bad/good news (fundamental), manipulation/greed by the big players (banks, hedge funds etc) and most times fear/panic by the investing public will always push the price from one support/resistance level to another. The truth of the matter is that the world economy generally is in shambles that is why you will constantly see series of bad economic news followed by series of good news resulting in “bull+bear+bull+bear” usually repeated over and over again on your weekly chart.
Step 2: Trade in the direction of the weekly chart: The most reliable direction in the forex is the direction of the weekly. If the weekly is in a bear/bull mode it could stay that way for 4-10 weeks. Read the post on understanding trend to better understand how to see the bigger picture using the weekly chart.
Step 3: The best trading opportunities are in the weekly: To increase your chance of success, sell only the top of nN, mM and buy around the base of V, U and W on the weekly charts. To identify these level signs, open a weekly chart, look closely and you will begin to recognize them. This simple trick will make your trading live a lot easier. I will begin to post this signs on this thread.
Step 4: Use money management: Use my recommended money management lots/account size ratio as follows:
0.01 lot for $1000 Trading account (max of 5 open trades at the same time)
0.10 lots for $10000 trading account (max of 5 open trades at the same time trades), etc
If you gather more experience or make profit regularly, you can gradually increase your lot sizes or open trades to double the recommended lot sizes.
Go through the early part of this thread for a better understanding of my views of money management.
Step 5: Trade the daily trade-friendly chart: The weekly is your guide and the daily is your main field of play. Trade the daily chart following the direction of the weekly. Study some of the daily charts I have on this thread for better understanding of the daily charts.
Step 6: Trade 1000+ Pips circle. Read and understand the 1000 pips price actions analysis. For the major pairs from the pin of a weekly candle expect 1000 and more before any major reversal. If the destination of 1000 pips PAA is closer to a major support/resistance on the master chart anticipate a touch of that level. Identifies expected levels in advance and you only monitor price reaction around such areas.
Step 7: Avoid thinking in terms of pips: Avoid thinking in terms of pips but in terms of actual currencies e.g. cent, pence, etc. If you think this way you will avoid the graveyard of most forex traders (i.e. chasing low pips (below 100 pips). If you think in terms of currency you will realize that a move 1000 pips move by GBPUSD move from 1.54000 to 1.64000 is a mere 10 cents. Further a 1000 pips move on GPBJPY from 130 to 120 is a merely 10 yen.
Step 8: Use H4 50 Pips Price Action Analysis: Utilise price movement on H4 candles within 50 pips range to determine where to enter a trade. If you do this you will realize that you can have up 16 hours and more to enter a trade. Trading this way you do not need to sit in monitor your chart endlessly to get trading opportunities. In the worst case scenario you only need to check the chart every 4 hours.
Step 9: Enter trades using only M15 trade-friendly chart: When the price get to your desired areas on the higher time, enter your trades at the best discounts by using M15 on a trade-friendly chart. If you need further explanation read my previous post about creating a trade-friendly chart.
Step 10: Understanding the importance of 50 point level on RSI: 50 point level on RSI on your trade-friendly chart is usually an area where price normally stalls, changes direction or continues on any time frame. Study how price react at this point for a better understanding of price action.
Step 11: Set concrete zone on H4 chart: Price usually trade for most major currency pairs within 250-400 pips over a period of time within a concrete zone. The concrete zone is a good guide on where to place stop losses. For your short term trade, place stop losses slightly above the concrete zone for your sell and slightly below for your buy. Read my previous posts on concrete zone for better understanding of the concrete zones.
Step 12: Stop loss: Most traders recommend that you should not risk more than 2% of your account per trade. This is a fair recommendation, but I do not support tight stop loss. With my maximum recommended lot size/account ratio 2% account risk per trade on $1000 account size trading 0.01 lots is $20 i.e. 200 pips (If you trade the maximum you increase your exposure to 10%). The important thing about stop loss is money management, if your lot size is small you can afford to increase you stop loss settings and give your trades room to breathe. Read my views of stop loss in some of my earlier posts.
Step 13: Take profit at pre-determined level: Set your take profit at pre-determined points depending on your expected returns. If you are trading the weekly chart anything less than 200 pips is a waste of efforts. You should be aiming for 200 pips and above. Alternatively lock your profits at pre-determined levels and allow your trade to rund
I will today discuss the following specific stepso n how to think, act and develop the mindset of a successful forex trader:
Step 1: Trade the Masterchart. It should be your No. 1 guide: The levels on the Masterchats I posted here are products of extensive research. What is happening in the forex market is that series of bad/good news (fundamental), manipulation/greed by the big players (banks, hedge funds etc) and most times fear/panic by the investing public will always push the price from one support/resistance level to another. The truth of the matter is that the world economy generally is in shambles that is why you will constantly see series of bad economic news followed by series of good news resulting in “bull+bear+bull+bear” usually repeated over and over again on your weekly chart.
Step 2: Trade in the direction of the weekly chart: The most reliable direction in the forex is the direction of the weekly. If the weekly is in a bear/bull mode it could stay that way for 4-10 weeks. Read the post on understanding trend to better understand how to see the bigger picture using the weekly chart.
Step 3: The best trading opportunities are in the weekly: To increase your chance of success, sell only the top of nN, mM and buy around the base of V, U and W on the weekly charts. To identify these level signs, open a weekly chart, look closely and you will begin to recognize them. This simple trick will make your trading live a lot easier. I will begin to post this signs on this thread.
Step 4: Use money management: Use my recommended money management lots/account size ratio as follows:
0.01 lot for $1000 Trading account (max of 5 open trades at the same time)
0.10 lots for $10000 trading account (max of 5 open trades at the same time trades), etc
If you gather more experience or make profit regularly, you can gradually increase your lot sizes or open trades to double the recommended lot sizes.
Go through the early part of this thread for a better understanding of my views of money management.
Step 5: Trade the daily trade-friendly chart: The weekly is your guide and the daily is your main field of play. Trade the daily chart following the direction of the weekly. Study some of the daily charts I have on this thread for better understanding of the daily charts.
Step 6: Trade 1000+ Pips circle. Read and understand the 1000 pips price actions analysis. For the major pairs from the pin of a weekly candle expect 1000 and more before any major reversal. If the destination of 1000 pips PAA is closer to a major support/resistance on the master chart anticipate a touch of that level. Identifies expected levels in advance and you only monitor price reaction around such areas.
Step 7: Avoid thinking in terms of pips: Avoid thinking in terms of pips but in terms of actual currencies e.g. cent, pence, etc. If you think this way you will avoid the graveyard of most forex traders (i.e. chasing low pips (below 100 pips). If you think in terms of currency you will realize that a move 1000 pips move by GBPUSD move from 1.54000 to 1.64000 is a mere 10 cents. Further a 1000 pips move on GPBJPY from 130 to 120 is a merely 10 yen.
Step 8: Use H4 50 Pips Price Action Analysis: Utilise price movement on H4 candles within 50 pips range to determine where to enter a trade. If you do this you will realize that you can have up 16 hours and more to enter a trade. Trading this way you do not need to sit in monitor your chart endlessly to get trading opportunities. In the worst case scenario you only need to check the chart every 4 hours.
Step 9: Enter trades using only M15 trade-friendly chart: When the price get to your desired areas on the higher time, enter your trades at the best discounts by using M15 on a trade-friendly chart. If you need further explanation read my previous post about creating a trade-friendly chart.
Step 10: Understanding the importance of 50 point level on RSI: 50 point level on RSI on your trade-friendly chart is usually an area where price normally stalls, changes direction or continues on any time frame. Study how price react at this point for a better understanding of price action.
Step 11: Set concrete zone on H4 chart: Price usually trade for most major currency pairs within 250-400 pips over a period of time within a concrete zone. The concrete zone is a good guide on where to place stop losses. For your short term trade, place stop losses slightly above the concrete zone for your sell and slightly below for your buy. Read my previous posts on concrete zone for better understanding of the concrete zones.
Step 12: Stop loss: Most traders recommend that you should not risk more than 2% of your account per trade. This is a fair recommendation, but I do not support tight stop loss. With my maximum recommended lot size/account ratio 2% account risk per trade on $1000 account size trading 0.01 lots is $20 i.e. 200 pips (If you trade the maximum you increase your exposure to 10%). The important thing about stop loss is money management, if your lot size is small you can afford to increase you stop loss settings and give your trades room to breathe. Read my views of stop loss in some of my earlier posts.
Step 13: Take profit at pre-determined level: Set your take profit at pre-determined points depending on your expected returns. If you are trading the weekly chart anything less than 200 pips is a waste of efforts. You should be aiming for 200 pips and above. Alternatively lock your profits at pre-determined levels and allow your trade to rund
Tuesday, December 29, 2009
RULE NO. 5: Leverage 100:1
‘Leverage’: As I mentioned earlier Forex trading is often attractive to investors because Forex trading offers such high leverage. However, with increased buying power comes increased risk. The risk becomes higher as your leverage increases. This system is designed for a leverage of 100:1. Where your leverage is higher, you can balance it by reducing the number of your open trades or adjusting your stop loss to reduce your maximum exposure to the market to disaster level of 10%. Remember, you are not here to gamble your hard-earned money away but to grow your wealth over time. The table below provides the effect of the system on leverages of 100-500
Account Size $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Open Trades Loss in pips 1 2 3 4 5 Account Balance
1OO:1 200 $20.00 $40.00 $60.00 $80.00 $100.00 $900.00
2OO:1 200 $40.00 $80.00 $120.00 $160.00 $200.00 $800.00
3OO:1 200 $60.00 $120.00 $240.00 $240.00 $300.00 $700.00
4OO:I 200 $80.00 $160.00 $240.00 $320.00 $400.00 $600.00
50O:1 200 $100.00 $200.00 $300.00 $400.00 $500.00 $500.00
If you follow all my postings right from the introduction to the ground rules, you will never fall as a trader. What you need to avoid are those items which constitute the graveyard of most trader.
Now that we have dealt with the ground rules, in my future postings we shall discuss the practical aspects of the trading system which covers the followings:
a) When to trade.
b) What to trade.
c) How to trade.
d) How to be a mechanical trader
e) How to remove stress and worries from your trade
f) How to trade and enjoy your life at the same time.
g) How not to be a slave to the trading platform
h) How to come out successful 99% of the time.
i) How to ensure positive returns months after months.
‘Leverage’: As I mentioned earlier Forex trading is often attractive to investors because Forex trading offers such high leverage. However, with increased buying power comes increased risk. The risk becomes higher as your leverage increases. This system is designed for a leverage of 100:1. Where your leverage is higher, you can balance it by reducing the number of your open trades or adjusting your stop loss to reduce your maximum exposure to the market to disaster level of 10%. Remember, you are not here to gamble your hard-earned money away but to grow your wealth over time. The table below provides the effect of the system on leverages of 100-500
Account Size $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Open Trades Loss in pips 1 2 3 4 5 Account Balance
1OO:1 200 $20.00 $40.00 $60.00 $80.00 $100.00 $900.00
2OO:1 200 $40.00 $80.00 $120.00 $160.00 $200.00 $800.00
3OO:1 200 $60.00 $120.00 $240.00 $240.00 $300.00 $700.00
4OO:I 200 $80.00 $160.00 $240.00 $320.00 $400.00 $600.00
50O:1 200 $100.00 $200.00 $300.00 $400.00 $500.00 $500.00
If you follow all my postings right from the introduction to the ground rules, you will never fall as a trader. What you need to avoid are those items which constitute the graveyard of most trader.
Now that we have dealt with the ground rules, in my future postings we shall discuss the practical aspects of the trading system which covers the followings:
a) When to trade.
b) What to trade.
c) How to trade.
d) How to be a mechanical trader
e) How to remove stress and worries from your trade
f) How to trade and enjoy your life at the same time.
g) How not to be a slave to the trading platform
h) How to come out successful 99% of the time.
i) How to ensure positive returns months after months.
RULE NO. 4: Five (5) maximum open trades at any point in time
‘Stop Loss’: With five maximum open trades at any point in time and your stop loss set at 200 pips, where the almost impossible happens and the market run against your five stop losses got hit, you maximum loss will only be 1000. For illustrative purpose, let us look at effect of 1000 pips loss on our hypothetical 3 traders on the table below. It is obvious that Trade1 can will never survive such a loss even with one open trade, while Trade2 can will not survive where he has up to 3 trades open, but Trader3 loss is only a mere $100 or 20% of his accounts.
You may want to ask if it is possible for market to move at such a rate. It is quite possible. GBPJPY recent fall 152.69 to 139.47 i.e. a fall of over 1,200 pips within a week, the last leg of the fall 400 pips occurred within 4 hours. Also EURUSD fail from its height of 1.5171 to 1.4191 i.e. a fall of over 1000 pips.
The Holy Grail Trader will survive any loss and have the fund to ride the market back on its way up or down and into profitability. How many traders can survive a loss of 1000 pips?
‘Stop Loss’: With five maximum open trades at any point in time and your stop loss set at 200 pips, where the almost impossible happens and the market run against your five stop losses got hit, you maximum loss will only be 1000. For illustrative purpose, let us look at effect of 1000 pips loss on our hypothetical 3 traders on the table below. It is obvious that Trade1 can will never survive such a loss even with one open trade, while Trade2 can will not survive where he has up to 3 trades open, but Trader3 loss is only a mere $100 or 20% of his accounts.
You may want to ask if it is possible for market to move at such a rate. It is quite possible. GBPJPY recent fall 152.69 to 139.47 i.e. a fall of over 1,200 pips within a week, the last leg of the fall 400 pips occurred within 4 hours. Also EURUSD fail from its height of 1.5171 to 1.4191 i.e. a fall of over 1000 pips.
The Holy Grail Trader will survive any loss and have the fund to ride the market back on its way up or down and into profitability. How many traders can survive a loss of 1000 pips?
RULE NO. 3: Set you stop loss at 200 pips or no stop loss at all (manually close your trade if your stop loss is approaching 200 pips
‘Stop Loss’: Every new trader is told to use Stop Loss (SL) and Take Profit to manage his risk and increase profitability. The typical advise is ratio of 2:1 (TP 20:SL10; TP40:SL20; TP80;SL 40; etc). Since forex trading starts the position of a loss (i.e. traders’ spreads), the spreads range from 3-9 or even more, most traders setting their stop loss at 10, 20 or even 30 get hit easily. The rules works together, once there is a clear trend, you use the recommended lot size for your account size, Rule No. 3 pips is to insulate your trade against any unusual, unexpected, temporary development. I can assure you that your stop loss will get hit less than 10 out of a 200 trades.
For illustrative purpose, let us look at the chart below using the same example of our hypothetical 3 traders, where they bought at Buy1, Buy2 or Buy3. With their 20-30 SL they got stopped out of the trade, while Trader3 SL was still intact and thus able to ride out the trade to profit.
‘Stop Loss’: Every new trader is told to use Stop Loss (SL) and Take Profit to manage his risk and increase profitability. The typical advise is ratio of 2:1 (TP 20:SL10; TP40:SL20; TP80;SL 40; etc). Since forex trading starts the position of a loss (i.e. traders’ spreads), the spreads range from 3-9 or even more, most traders setting their stop loss at 10, 20 or even 30 get hit easily. The rules works together, once there is a clear trend, you use the recommended lot size for your account size, Rule No. 3 pips is to insulate your trade against any unusual, unexpected, temporary development. I can assure you that your stop loss will get hit less than 10 out of a 200 trades.
For illustrative purpose, let us look at the chart below using the same example of our hypothetical 3 traders, where they bought at Buy1, Buy2 or Buy3. With their 20-30 SL they got stopped out of the trade, while Trader3 SL was still intact and thus able to ride out the trade to profit.
RULE NO. 3: Set you stop loss at 200 pips or no stop loss at all (manually close your trade if your stop loss is approaching 200 pips
‘Stop Loss’: Every new trader is told to use Stop Loss (SL) and Take Profit to manage his risk and increase profitability. The typical advise is ratio of 2:1 (TP 20:SL10; TP40:SL20; TP80;SL 40; etc). Since forex trading starts the position of a loss (i.e. traders’ spreads), the spreads range from 3-9 or even more, most traders setting their stop loss at 10, 20 or even 30 get hit easily. The rules works together, once there is a clear trend, you use the recommended lot size for your account size, Rule No. 3 pips is to insulate your trade against any unusual, unexpected, temporary development. I can assure you that your stop loss will get hit less than 10 out of a 200 trades.
For illustrative purpose, let us look at the chart below using the same example of our hypothetical 3 traders, where they bought at Buy1, Buy2 or Buy3. With their 20-30 SL they got stopped out of the trade, while Trader3 SL was still intact and thus able to ride out the trade to profit.
‘Stop Loss’: Every new trader is told to use Stop Loss (SL) and Take Profit to manage his risk and increase profitability. The typical advise is ratio of 2:1 (TP 20:SL10; TP40:SL20; TP80;SL 40; etc). Since forex trading starts the position of a loss (i.e. traders’ spreads), the spreads range from 3-9 or even more, most traders setting their stop loss at 10, 20 or even 30 get hit easily. The rules works together, once there is a clear trend, you use the recommended lot size for your account size, Rule No. 3 pips is to insulate your trade against any unusual, unexpected, temporary development. I can assure you that your stop loss will get hit less than 10 out of a 200 trades.
For illustrative purpose, let us look at the chart below using the same example of our hypothetical 3 traders, where they bought at Buy1, Buy2 or Buy3. With their 20-30 SL they got stopped out of the trade, while Trader3 SL was still intact and thus able to ride out the trade to profit.
Monday, December 28, 2009
RULE NO. 2: Trade only 0.01% of your account at any point in time (e.g. 0.01 lots for $1,000 account, 0.02 lots on $2,000 etc)
‘Lot size’ is another is another determinant of whether you will be a successful trader or not. Forex trading is often attractive to investors because Forex trading offers such high leverage. Without high leverage most retail investors would not be able to afford trading in the Forex market. However, with increased buying power comes increased risk. A quick market move can then result in substantial losses. Rule No. 2 allows managing your risk effectively and reducing it almost to an insignificant level. In forex you start you trading from the position of a loss (i.e. traders’ spreads) and there is no guaranty that you will turn your loss into gain.
Now, let us look at the effect of unpredictable market movements on 3 traders. Trader1 (experienced, knowledgeable but a high risk Trader), Trader 2 (experienced, knowledgeable but conservative trader), Trader 3 (Experience, inexperience but understands market trend). Multiply the situation below by 2, 3, or even 10 and you will realize by the time Trader1 and Trader2 are blown out of the market, Trader3 (you can call him the Immortal Trader or Holy Grail Trade) is just scratching the surface of his account.
‘Lot size’ is another is another determinant of whether you will be a successful trader or not. Forex trading is often attractive to investors because Forex trading offers such high leverage. Without high leverage most retail investors would not be able to afford trading in the Forex market. However, with increased buying power comes increased risk. A quick market move can then result in substantial losses. Rule No. 2 allows managing your risk effectively and reducing it almost to an insignificant level. In forex you start you trading from the position of a loss (i.e. traders’ spreads) and there is no guaranty that you will turn your loss into gain.
Now, let us look at the effect of unpredictable market movements on 3 traders. Trader1 (experienced, knowledgeable but a high risk Trader), Trader 2 (experienced, knowledgeable but conservative trader), Trader 3 (Experience, inexperience but understands market trend). Multiply the situation below by 2, 3, or even 10 and you will realize by the time Trader1 and Trader2 are blown out of the market, Trader3 (you can call him the Immortal Trader or Holy Grail Trade) is just scratching the surface of his account.
As promised in the last post, I will explain the five ground rules for this trading system beginning with Rule No. 1.
RULE NO. 1: Confirm the overall trend of the market before you place a trade (1H or 4H Candles)
‘Trend’ is the most critical factor that can make or mar your life as a trader. What drives the market is the herd mentality, momentum or the fact that majority of the traders are going in one direction. The question is how far will they go before the momentum changes? To be successful you must learn to follow the general direction and make sure you disembark before a change of direction. To clearly understand the direction of the market, H1, H4 and daily charts are your guides. To illustrate this statement look at the EURUSD H1, H4 charts below. You can clear see direction of market from the charts. The simple message is if the trend is up go long of buy and if the trend is down, go short or sell. Forget about the indicators on the charts for now, they are not of any great importance for this trading system. I inserted them in my early days in forex trading, but rarely use them now as the direction of the market is obvious enough to the eye without any aid. They could however serve as a guide or confirmation of the trend.
Attached Thumbnails
RULE NO. 1: Confirm the overall trend of the market before you place a trade (1H or 4H Candles)
‘Trend’ is the most critical factor that can make or mar your life as a trader. What drives the market is the herd mentality, momentum or the fact that majority of the traders are going in one direction. The question is how far will they go before the momentum changes? To be successful you must learn to follow the general direction and make sure you disembark before a change of direction. To clearly understand the direction of the market, H1, H4 and daily charts are your guides. To illustrate this statement look at the EURUSD H1, H4 charts below. You can clear see direction of market from the charts. The simple message is if the trend is up go long of buy and if the trend is down, go short or sell. Forget about the indicators on the charts for now, they are not of any great importance for this trading system. I inserted them in my early days in forex trading, but rarely use them now as the direction of the market is obvious enough to the eye without any aid. They could however serve as a guide or confirmation of the trend.
Attached Thumbnails
I will now discuss the ground rule for this perfect trading system
1) Confirm the overall trend of the market before you place a trade (1H or 4H Candles)
2) Trade only 0.01% of your account at any point in time (e.g. 0.01 lots for $1,000 account, 0.02 lots on $2,000 etc)
3) Set you stop loss at 200 pips or no stop loss at all (manually close your trade if your stop loss is approaching 200 pips
4) Max open trades - 5 at any point in time
5) Leverage 100:1
I will explain the ground rules in my next posting.
1) Confirm the overall trend of the market before you place a trade (1H or 4H Candles)
2) Trade only 0.01% of your account at any point in time (e.g. 0.01 lots for $1,000 account, 0.02 lots on $2,000 etc)
3) Set you stop loss at 200 pips or no stop loss at all (manually close your trade if your stop loss is approaching 200 pips
4) Max open trades - 5 at any point in time
5) Leverage 100:1
I will explain the ground rules in my next posting.
Friday, December 18, 2009
HOW TO BECOME A SUCCESSFUL TRADER
Having discussed why most traders failed, I will now discuss how you can avoid being part of the infamous 95% failed traders. statistics of
From personal experience and studying the experience of others, I have come to realize that what is required to be successful traders are quite simple rules captured in the statement “Acquire as much knowledge as you can about forex trading, have a detailed plan in place on how to achieve your desired objective and imbibe the self-discipline to abide by your strategy. I will now attempt to address the pre-requisite for successful trading:
1) Acquire adequate knowledge about the forex market: It is essential to acquire enough knowledge on how the forex market operates. You should have understanding of the basic components of the market such as:
a. What is forex?
b. The global nature of forex market
c. The role of the brokers in having access to the market
d. Forex Market Hours and their impact on your trading
e. "Bid" vs. "Ask"
f. Things that influences Price
g. Profit Potential in Both Rising and Falling Markets
h. Currency pairs – the majors and the minors
i. The impact of margin on your trading in terms of profit and losses
j. Contract size and margin call
k. Percentage in Points (Pips)
l. Fundamental and Technical analysis
m. Demo trading
2) Do not see forex trading as an avenue to get-rich quickly: Forex trading is not a get rich scheme. You should aim at realistic returns on your investments, and you will increase your returns over time as you acquire knowledge, experience and expertise.
3) Adequate capitalisation: Forex is a business and should be treated as such. To have a chance of survival you need a minimum of $1,000 and your target should be to increase it over time to between $10,000 - $20,000 before you can begin to expect appreciable returns on your investment
4) Trading Strategy and Plan: You should have a trading plan/strategy in place to guide your trading. Put differently, plan your trade to the last detail before you enter any trade. Such plan should include, entry point, expected profit and exit point and retreat strategy (stop loss) if things go against you. Stick to this plan because it is your only chance of survival in this high risk endeavour.
5) No trade is compulsory Do not enter a trade simply because you want to trade or the opportunity is too tempting to loose. No trade opportunity is compulsory as there are many more trade opportunities by the corner.
6) Be very sure of the direction of the market before you enter a trade: Never trade in anticipation of the direction of the market. Let the market shows you its direction and follow the trend. Trading against the trend should be avoided at all cost because it has led to the downfall of many. For example in case of moving averages, look for sharp angles and an obvious degree of separation between the two lines to determine upward and downward trend. Once this separation is obvious and a few candles have opened higher than the previous (lower than the previous in the case of a downwards trend) the market has shown its true colors. A candle is not a candle until it is fully formed. You need two or three candles to confirm the direction of the market.
7) Your main objective should be fund preservation: Your first priority should be fund preservation. You are not in trading to throw away your hard-earned money foolishly. It is better not to make any profit in your account in a whole month than lose all trying to chase unrealizable profit. The key to preserving your fund is money management. Do not expose more that 1% of your account per each trade and your total exposure at any point time should not be more than 10% of your account. In case of major disaster, you will still have between 99% and 90% of your capital to fall back on.
8) Set realistic target of profit for yourself and take whatever the market gives you: Set realistic target of profit for yourself and stop trading if you achieve your target. If you are able to achieve a return of between 2-5% on a monthly basis, you would have outperformed most blue chips investment outfits in the world. As a new trader, fund preservation should be your number first priority and profit distance second. Once you acquire experience, making profit will come naturally.
9) Cut your losses and live to fight another day: Trading without stop losses is a perfect recipe for disaster. Set your stop loss target before your enter any trade. This will put in control of your loss. Allowing the market to control your loss is a sure way to quick annihilation, because the market could be ruthless.
10) Trade higher time frames: As a new trader, avoid short time frames and only trade higher time frames to guarantee your success. Trade only 1 hour, 4 hour and daily time frames only as a beginner, anything lower would end up in disappointment and heartache.
11) Be a mechanical trader As a new trader, you are psychologically equipped to handle live trading on your. Make your trading as mechanical as possible. What this means is that you do your analysis, know the direct of the market, set up your trade with stop loss, take profit target ensuring this are within your money management zone and leave the market to do the rest. Leave the trade, close your laptop or computer if you can and go out and do other things. Check back later and if your analysis is right, your profit will be waiting in your account. Where you are wrong your loss will be very insignificant. ‘Baby-sitting’ your trade will definitely shorten your life-span. Live trading is high pressure game and is not meant for the inexperience and faint-hearted.
12) The first 3-6 months is crucial to your trading life: The first three to six months is crucial to your trading. If you are able to make profit consistently no matter how small over the first 3-6 months of your trading life, you will be on auto-pilot if you stick to the same strategy, improve on its flaw and maintain the same discipline.
I believe we have enough discuss enough theory for now. Beginning from my next post, we shall begin to discuss practical trading that will guarantee you success.
From personal experience and studying the experience of others, I have come to realize that what is required to be successful traders are quite simple rules captured in the statement “Acquire as much knowledge as you can about forex trading, have a detailed plan in place on how to achieve your desired objective and imbibe the self-discipline to abide by your strategy. I will now attempt to address the pre-requisite for successful trading:
1) Acquire adequate knowledge about the forex market: It is essential to acquire enough knowledge on how the forex market operates. You should have understanding of the basic components of the market such as:
a. What is forex?
b. The global nature of forex market
c. The role of the brokers in having access to the market
d. Forex Market Hours and their impact on your trading
e. "Bid" vs. "Ask"
f. Things that influences Price
g. Profit Potential in Both Rising and Falling Markets
h. Currency pairs – the majors and the minors
i. The impact of margin on your trading in terms of profit and losses
j. Contract size and margin call
k. Percentage in Points (Pips)
l. Fundamental and Technical analysis
m. Demo trading
2) Do not see forex trading as an avenue to get-rich quickly: Forex trading is not a get rich scheme. You should aim at realistic returns on your investments, and you will increase your returns over time as you acquire knowledge, experience and expertise.
3) Adequate capitalisation: Forex is a business and should be treated as such. To have a chance of survival you need a minimum of $1,000 and your target should be to increase it over time to between $10,000 - $20,000 before you can begin to expect appreciable returns on your investment
4) Trading Strategy and Plan: You should have a trading plan/strategy in place to guide your trading. Put differently, plan your trade to the last detail before you enter any trade. Such plan should include, entry point, expected profit and exit point and retreat strategy (stop loss) if things go against you. Stick to this plan because it is your only chance of survival in this high risk endeavour.
5) No trade is compulsory Do not enter a trade simply because you want to trade or the opportunity is too tempting to loose. No trade opportunity is compulsory as there are many more trade opportunities by the corner.
6) Be very sure of the direction of the market before you enter a trade: Never trade in anticipation of the direction of the market. Let the market shows you its direction and follow the trend. Trading against the trend should be avoided at all cost because it has led to the downfall of many. For example in case of moving averages, look for sharp angles and an obvious degree of separation between the two lines to determine upward and downward trend. Once this separation is obvious and a few candles have opened higher than the previous (lower than the previous in the case of a downwards trend) the market has shown its true colors. A candle is not a candle until it is fully formed. You need two or three candles to confirm the direction of the market.
7) Your main objective should be fund preservation: Your first priority should be fund preservation. You are not in trading to throw away your hard-earned money foolishly. It is better not to make any profit in your account in a whole month than lose all trying to chase unrealizable profit. The key to preserving your fund is money management. Do not expose more that 1% of your account per each trade and your total exposure at any point time should not be more than 10% of your account. In case of major disaster, you will still have between 99% and 90% of your capital to fall back on.
8) Set realistic target of profit for yourself and take whatever the market gives you: Set realistic target of profit for yourself and stop trading if you achieve your target. If you are able to achieve a return of between 2-5% on a monthly basis, you would have outperformed most blue chips investment outfits in the world. As a new trader, fund preservation should be your number first priority and profit distance second. Once you acquire experience, making profit will come naturally.
9) Cut your losses and live to fight another day: Trading without stop losses is a perfect recipe for disaster. Set your stop loss target before your enter any trade. This will put in control of your loss. Allowing the market to control your loss is a sure way to quick annihilation, because the market could be ruthless.
10) Trade higher time frames: As a new trader, avoid short time frames and only trade higher time frames to guarantee your success. Trade only 1 hour, 4 hour and daily time frames only as a beginner, anything lower would end up in disappointment and heartache.
11) Be a mechanical trader As a new trader, you are psychologically equipped to handle live trading on your. Make your trading as mechanical as possible. What this means is that you do your analysis, know the direct of the market, set up your trade with stop loss, take profit target ensuring this are within your money management zone and leave the market to do the rest. Leave the trade, close your laptop or computer if you can and go out and do other things. Check back later and if your analysis is right, your profit will be waiting in your account. Where you are wrong your loss will be very insignificant. ‘Baby-sitting’ your trade will definitely shorten your life-span. Live trading is high pressure game and is not meant for the inexperience and faint-hearted.
12) The first 3-6 months is crucial to your trading life: The first three to six months is crucial to your trading. If you are able to make profit consistently no matter how small over the first 3-6 months of your trading life, you will be on auto-pilot if you stick to the same strategy, improve on its flaw and maintain the same discipline.
I believe we have enough discuss enough theory for now. Beginning from my next post, we shall begin to discuss practical trading that will guarantee you success.
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