Trader’s Mindset

“… It is intuitive to stay with losing trades; it is counter-intuitive to have a stop loss and to embrace small losses. It is intuitive to get out of winning trades too soon; it is counter-intuitive to let your winners run. It is intuitive to enter a trade in the direction of the price action after an extended rally or sell-off; it is counter-intuitive to wait for the imbalance of buyer and sellers to go against the herd. And, it is intuitive to pile on multiple indicators in an effort to get as much information as possible; it is counter-intuitive to reduce and simplify incoming data. Default thinking is often intuitive; it follows naturally occurring biases, which make it difficult to follow-through with pre-determined objectives.” – Dr. Woody Johnson

Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus our losses and profits. The analyses are based on daily charts, looking at the Big Picture, though my entries are on a smaller timeframe. My preferred leverage is 1:100 and our position size is 0.01 lots for each $1000. My maximum drawdown in a week is 3% (worst case scenario). I use the Price Behavior rules for strategic decisions and customized indicators for tactical entries. I open primary positions without predetermined exit target in mind, riding the trend for as long as it continues. The value of patience will forever be emphasized. As long as we stick to our rules and keep our risk low, we’re immune to fear.

We need to trade like an insurance company to ensure our ultimate survival, because over time the insurance company will make more money than the insured. We’re fortunate to have so many vehicles at our disposal, but we need to know the right time to utilize them and protect and insure ourselves against risks.

AUDUSD
Primary trend: Bearish
I plan to buy at 0.8755 and ride it till I’m stopped out. Despite the fact that the trend has been bearish, there are many factors pointing to possible bullish correction or reversal. Just note that the present bearish trend is weak.

NZDUSD
Primary trend: Bearish
The present overall trend has been bearish for a few weeks. Price level 0.6950 was tested before a temporary bullish correction and it stands the possibility of being tested again, after which the price is expected to move up.
Order: Buy Limit
Entry date: September 1, 2010
Entry price: 0.6940
Initial stop: 0.6790
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: N/A

EURCAD
Primary trend: Bullish
There is no open order on this cross right now. The high spread on it is simply not a significant since I only go for long-term trades, looking for hundreds of pips. I’m looking for a serious turning point on the market. For example, I may sell at 1.3700 if the price eventually gets there.

EURAUD
Primary trend: Bearish
Price level 1.4150 was tested and broken before the market went up. It’s assumed that the market would retrace and even test the strong support at 1.4100 before going up. The price could even push further lower in the present bearish scenario (as indicated by the SMA &ADX, and eventually the EURAUD is supposed to shoot up.
Order: Buy Limit
Entry date: September 1, 2010
Entry price: 1.4090
Initial stop: 1.3840
Current stop: N/A
Exit price: N/A
Exit date: N/A
Status: Pending
Profit/loss: N/A
Percentage growth: N/A

EURNZD
Primary trend: Bullish
It’s better to stay way from this cross for now until it hits a strong level where the turning potential is high. It’s unthinkable to hear how certain eccentrically superstitious people are about the markets. Someone went to a soothsayer to know what he could do to stop the consistent losses he was experiencing on the markets. The soothsayer told him that since the markets were controlled by demons, he needed to sacrifice a goat to conciliate the demons in other to make consistent profits from the markets. Readers, should I slaughter a goat when I finally see a signal on EURNZD? Or don’t you want me to make a profit? LOL!!! It’s extremely absurd indeed.

AUDJPY
Primary trend: Bearish
Bullish correction was rejected when the price hit 77.50. I’m looking forward to a possible long trade when the price hits 73.45, though other factors have to be taken into consideration.

Conclusion: False breakouts are no longer a curiosity and sustained trends are rather a rare find. It shouldn’t be forgotten that though all strategies will face stubborn challenges on the markets, good risk management will help them survive. So trading isn’t how much money you make – it’s how much you don’t lose.

Please, I’d like to conclude with this quote:

“To be blunt, over time, the capital of those who fall for the illusion trap typically ends up in the bank accounts of those who focus on the reality of pure supply and demand in markets. The objective supply and demand relationship in markets is revealed most clearly in price and price alone.” – Sam Seiden

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

Nice trading tips are available at: www.ituglobalforex.com
And my past articles are also available at: www.ituglobalforex.blogspot.com

There’s one thing that few people will dispute: We’re all imperfect and therefore make mistakes and do things we come to regret.

Hello:

I was away from the markets recently due to some transient technical problems. I nevertheless received phone calls from those who found the markets difficult. So I decided to write this small essay to encourage those who are facing tough times on the markets.

According to Paul Liburd, trading isn’t a win-win situation. Be prepared to lose on some trades as well… It isn’t really a question of whether you’re right or not, the fact is that markets move in an unexpected way and they have a knack for surprising people when they least expect it.

I’ll continue to emphasize that the markets aren’t predictable (yet we can make money from them). I’m a market speculator, but I don’t try to predict the markets. Speculation isn’t prediction. There are ways we can become better traders without predicting the markets. The overwhelming need to be right about open trades undermines most of us when we try to challenge the markets. 3 years ago, a trader was arguing with me that if the markets can’t be predicted, then trading is senseless because we need to predict the next markets directions and place trades accordingly. I told him to cut his losses and run his profits and then I walked away. Less than 6 months later, he called me and declared that the markets aren’t predictable indeed. He’s now making fine progress as a trader.

All skilled traders face occasional losses. Whether you buy resistance and sell support, whether you sell resistance and buy support, whether you know all the reasons behind price developments or not, whether you use a plain chart or you combine a million indicators on a chart – you’ll make both losses alongside profits. You need to accept this and stop looking for what doesn’t exit. You should also not be deluded by those who don’t mention their losses as their ‘holier-than-thou’ attitude can be misleading.  If I were a private trader, I wouldn’t talk about losses. But since I’m an analyst, I mustn’t give my readers any impression that I’m perfect as a professional. If I couldn’t mention my losses, then I shouldn’t talk about my profits as well. To me, you know, concealing your losses and telling people only about your profits is a criminal behavior. The trading world would be much better if traders were honest.

Even if you suffered losses, tell yourself that it isn’t the end of your life. If you get whacked and humbled by the markets, your life goes on. All you can do is try your best, given the strategies that you’ve learned. Count your blessings – no matter how bad things are, they could be a lot worse. No matter how bad things are, they’ll get a lot better. If you don’t think you trading results can improve, they won’t

You losses oughtn’t to sound the death knell of your trading ambition. If a trader loses sight of the focal point and his goals ands stops pushing forward, it brings to nothing all the hard work she or he has already done. The results of success are so heartwarming that you shouldn’t contemplate going back. The past is unalterable; you can’t erase painful past experiences. But such experiences don’t doom you to failure. You can make trading choices in the present that can lead to a happy trading future.

I’m concluding this article with this quote:

“… Workplace studies have shown that extrinsic motivators, like money, do work some of the time, but not as well as intrinsic motivators like recognition, self-fulfillment, quality of experience and esteem. Now, let’s take this notion to the trading platform. One of the first things that traders put as a goal is to make a “lot of money.” It’s not that this extrinsic motivator is entirely ineffective, it is just not as powerful as trading for your family’s future, and your overall quality of life. See, when you identify a “compelling reason,” in other words, that what-matters-most part of your life to the trading process, you automatically invoke your passion. Passion, about any endeavor in life, is your most powerful energizer. It will get you up in the morning and attach you to a turbo-jet with a laser focus on keeping commitments and consistently doing what it takes to be successful.” – Dr. Woody Johnson

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

“(Financial markets)… are not a problem to be solved, but psychology to be understood.” — D.R. Barton, Jr.

Hello:

Last week came and went. Whatever the positions we take on the markets, the markets will do what they’ll do. So we simply need to stick to our plans.

Here are my recent trading results:

AUDUSD
Order: Sell
Entry date: August 6, 2010
Entry price: 0.9213
Initial stop: 0.9413
Current stop: 0.9026
Exit price: 0.8910
Exit date: August 20, 2010
Status: Closed
Profit/Loss: 303 pips

EURAUD
Order: Buy
Entry date: August 11, 2010
Entry price: 1.4345
Initial stop: 1.4134
Current stop: N/A
Exit price: 1.4250
Exit date: August 20, 2010
Status: Closed
Profit/Loss: -95 pips

GBPJPY Strategy:
1. Order: Sell
Entry date: August 16, 2010
Entry price: 133.52
Take profit: 132.23
Exit price: 132.23
Exit date: August 20, 2010
Status: Closed
Profit/Loss: 130 pips

2. Order: Buy
Entry date: August 16, 2010
Entry price: 133.55
Take profit: 134.85
Exit price: 132.99
Exit date: August 20, 2010
Status: Closed
Profit/Loss: -56 pips

In general currency markets tend to trend long-term very nicely. The best trading method is still trend following. One task is to try and identify the market turning point for a new trend. Once we’re able to pinpoint the next market move, the next challenge is to ride it for as long as we’re not stopped out. There are so many distractions interfering with our trading but by riding our winners for as long as possible, we’ll be able to stay in winning positions until they reach full maturity, and we’ll also have the courage to exit from losing trades early. We just have to do the normal things while trading. If we wish to trade the markets with constant success, we must abandon contrary or counter trend methods and begin to follow the natural law of following the trends.

What does this tell us? We’ll simply buy low and sell high; but we must endeavor to do it right. This reality about trending markets tells us that it’s more profitable to look for cycle highs in a bear market to sell short, or cycle lows in a bull trend to buy. “The trend is truly your friend.’’

It takes a great deal of time for a trend to change. A trend continues until it’s definitely over. How then can we know if a trend has totally changed? Which signal, which price pattern is definite enough to allow the end of a trend to be announced? The most direct answer which can be given to this question is: When the market prices penetrate the large-scale extreme point – in other words, the last low in an uptrend or the last high in a downtrend.

You might want to ponder these favorite quotes of Dr Van K. Tharp:
1. “Trading and investing are very simple processes and we human beings try to make it into something much more complex. Unfortunately, we have a lot of biases that enter into trading decisions.

2. “I believe people get exactly what they want out of the markets and most people are afraid of success or failure. As a result, they tend to resist change and continue to follow their natural biases and lose in the markets. When you get rid of the fear, you tend to get rid of the biases.

3. “As for risk, most people don’t understand it, including a lot of professionals, and what’s really interesting is that once you understand risk and portfolio management, you can design a trading system with almost any level of performance.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

A GRASP OF REALITY

“You can never achieve anything worthwhile in life by taking shortcuts and in the world of trading, it is absolutely no different.” – Sam Evans

Hello:

Today we’re going to comment on the real past performances of a group of top traders. There are lessons we can learn from this. These would help us maintain a realistic outlook; remain calm, disciplined and objective while trading. The performances table is displayed below. Please go through it and I bet some thoughts will come to your mind. These are great results. For those who think deep, there are many lessons to be leaned from this table, though I’ll point to 5 lessons.

RESULTS
YEAR              RETURN*
1996 ……………. 35%
1997……………… 74%
1998…………….. 80%
1999…………….. 211%
2000……………. 312%
2001……………. 125%
2002…………… 27%
2003…………… 8%
2004…………… 2%
2005……………. 29%
2006…………… 43%
2007…………… 92%
2008………….. 189%

2009………….. 48%

2010……………ytd = 27%

Lesson #1
Rate Of Returns Are Never Guaranteed: Past performances aren’t a guarantee of future returns. Confidence is simply the feeling you have just before you understand the situation. I often shake my head when people ask me to specify the percentage amount I can gain in a month or year. If the markets were that easy! You may target only 2% profit in a month and the market could give you 20%. You may be running after 100% per year and it’s only a deficit you’ll come up with. Anyone who’s asking for a guarantee of an amount of returns on daily, monthly or yearly basis isn’t psychologically prepared to trade; such a person would be disappointed. Those who’re giving you guarantees are doing so in order to delude you. The really sad fact is that very often the person who’s deceived or deluded tends to hold on to his belief in spite of strong evidence proving otherwise. Perhaps he gets so emotionally attached to his belief that he simply shuts his eyes and closes his ears to any evidence that might challenge it.

Lesson #2
Even Pros Can Have Losing Months: The table above shows that the group of traders hasn’t had a losing year since 1996, but there were years in which they gained only 2% and 8%. It means that there were several losing months in those years. This shows that even great traders can suffer losing months – then how much more novices! If wet wood can undergo something like this, how much more dry wood. But the most significant point is that they still came out with 2% in the year 2004. I don’t think they’d have survived those years if their losses were not limited by them. Safety first! Your survival is contingent on doing risk management. Not going broke is far more important than getting rich quickly. If I had $5 million worth of portfolio in that year, then my 2% income would be $100,000. Isn’t that a good annual income? Most of us don’t have enough money to trade, and that’s why we’re under pressure to double our accounts in order to have presentable profits. That’s suicide trading

Lesson #3
Let’s Be Thankful For Small Mercies: Let’s think again about their performances in the years 2003 and 2004. It’s easy to think that these funds managers toiled and sweated for nothing by having so small percentages in those years (upon all the knowledge of technical analysis, fundamental analysis, intraday and swing trades, and everyday battle and challenges on the markets). What about the majority of traders who received margin calls or had significant drawdowns in those years? We don’t need to be in fantasy. Even if you don’t have good yearly ROI, you should be grateful that your trading capitals are intact. Real investment is all about going after small and consistent profits over a long period of time. Trying to maximize profits in trading is gambling. If a gambler buys a ticket; it’s simply a matter of winning the gamble or losing his stake. Is this what you prefer?

Lesson #4
Every Dog Has His Day: The years 1999 and 2000 provided very encouraging results. Yes it happens like that. There are times when everything you touch will turn to gold. There are times when the markets conditions would be favorable to your system and the best thing to do during those times is to gain so many pips by letting your profits run.

Lesson#5
There’s No Easy Money: Nothing good is easy to come by. Trading is hard work, hard personal work. All successful athletes practice always to keep in shape and remain at the top. You need to practice new ideas on demo or add more new ideas to present strategy while simulation trading in order to come out with better results. The strategy that worked well many years back may need some fine-tuning in order to survive today’s markets, albeit there are timeless trading principles. There’s a system that was backtested for over 14 years back with great results, plus it’s been used on the markets consistently successfully for the past 4 years. Yet there could’ve been some adaptation as well.

The funds managers have made a profit of 27% this year, so far so good. It could be less or more than this at the end of this year – you never can tell. Let me conclude with this quote.

‘Failure is part of the process of success. People who avoid failure also avoid success.” — Robert T. Kiyosaki

*Ronin Asset Management

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

YOUR QUESTIONS ANSWERED

Hello:

Today I simply want to answer some questions sent to my email. All senders have gotten personal replies from me; only that I wanted to make some questions public, and so adding more details to the answers, for our mutual benefits. Only 7 questions are treated here. Here we go:

1. What are your trading beliefs? — M. F.

Answer: My trading beliefs are based on my long-term observations of the Forex markets. I also made serious endeavors to study the trading strategies of successful traders, and I found what majority of them have in common. Most of their timeless principles have been mentioned in my past articles. On of them is “cut your losses short and let your profits run” (a golden rule). Traders keep on looking for magical trading systems that can make them right most of the time. Your success has nothing to do with what’s happening in China or Ghana; neither does it have anything to do with any forms of technical analyses whatsoever. The only purpose for possessing a trading system is simply to have reasons for entering a trade; it has nothing to do with your survival. No system on earth can survive without effective risk management, plus our long-term success has nothing to do with the accuracy of our entries, it lies in our exits. Let me remind you that Dr. Van K. Tharp forecasts that a sequence of 6 trades with a hit rate of 17% remain profitable, provided the 5 losses are limited to 5 x (-1R) = -5R, and the winning trade amounts to 10R. Conversely, I’d say that a sequence of 6 trades with a hit rate of 83% remains a losing strategy if the 5 profits are limited to 5 x (+1R) = +5R, and the losing trade amounts to -10R. This golden rule makes perfect rational and logical sense but our wrong mental biases always make us go against it, doing its exact opposite. This basic truth isn’t attractive to most traders who feel that right entries are what needed for survival on the markets. Yes experience is the best teacher.

2. I swear I’ll never believe any adverts again. I’ve lost up to $10,000 on the markets, and it was by following the advice and the trading systems of smart guys who have a lot of influence in the trading world. What makes you special? — C. I.

Answer: I’ll repeat that trading success has nothing to do with any trading system under heaven. You don’t become successful by predicting the markets correctly. The markets aren’t predictable. As for me, there’s nothing special about me. I was a novice trader in the past (though I thought I knew what I was doing). I’m just a humble trader who’s trying to do the right things on the markets. I’m working hard to become a better trader. I’m also trying to make some traders benefit from my trading activities and beliefs. Popularity has nothing to do with skills on the markets, and so is education. Someone talking on a popular financial program may be having serious problem trading successfully on his own while an unknown trader may be making consistent profits in his own bedroom. The fact that nearly $10,000 was lost means that those guys or you didn’t take money management serious.

3. Why aren’t you afraid of the consequences of showing your losses alongside your profits? — E. R.

Answer: Honesty will forever be the best policy. Being honest has nothing to do with the color of your skin or your nationality – it has to do with an individual. I don’t want anyone to tell me lies, and I don’t want to tell you lies either. We make mistakes in life, owing to our imperfect nature. In fact, most of us who do well are probably right less than half of the time. Yet many traders like to dwell on illusion (Illusions are something very pleasant, but the only disadvantage is that they tend to burst like a bubble). If we think we can dodge realities, realities will eventually face us. I’ve seen many market analysts who are too egocentric to admit their errors. We need to be humble and accept our limitations. Humility is the recipe for success. Those analysts want to prove to the world that they’re perfect. If a typical analyst says that he expects the EURUSD to get to a price, he’ll never mention that again in a subsequent article if the forecast fails. He’ll only make references to his past forecasts that have come to pass. Many an analyst will post charts that showcase their winning trades and mention their profits only. Some even announce bogus profits! To me, this is professional hypocrisy. Those analysts are indirectly adding to the problems of novice traders (who they’re supposed to help), by giving them impression that there’s a Holy Grail somewhere. In my future articles, I’ll be transparent – I’ll mention my profits and losses, plus how I survive in spite of this.

4. I have over two years of experience on the markets, yet I can’t do anything. I’m cowardly when it comes to trading executions on a live account. I could even pass water on my body if a trade goes against me. How can I trade like you? This I want to know. — A. G.

Answer: You nearly made me laugh by what you just said. Your risk must be vey low in order not to pass water spontaneously when you’re trading. Besides, you need to demo-trade a strategy for at least two months in order to be sure it can survive the markets. If you’re still profitable after the demo practice, you should be confident that as long as you stick to your rules, you’ll be profitable. If you believe my trading ideas and you’re disciplined enough to follow them, perhaps you could trade like me. You could also read some of my past articles.

5. You are a long-term trader, but I don’t like to hold positions on a long-term basis. Don’t you have any short-term strategy at all? — S. S.

Answer: Yes you’re right. I’m a long-term trader. I try to find potentially turning points on the markets – levels of demand and supply. I ride a trend until it reaches maturity. I don’t believe in taking 40 pips when the market can offer me 200 pips on a trade. I like to place trades and go and come back to check later. Nevertheless I’m constantly aware of the need to accommodate short-term traders who sit in front of their screens for several hours of the day. My long-term strategy shows results only on quarterly to yearly basis whereas there should be another one that shows results on monthly basis. To this end, our forex research group has developed a positive expectancy scalping strategy with good accuracy and nice risk-to-reward ratio. Trades are opened and closed within minutes. Unlike my swing cum position trading system, it works in all markets conditions unless there is too little movement. It’s being paper-traded by my trainees. Soon I’ll give you the details of this strategy in one of my future articles. It’s partly based on a theory of Mr. Stefan. Stefan Risse talks about the Chance-Risk-Profile (CPR) as the magic formula. Here, too, the risk (still the gap between the expected entry price and the first stop loss after position entry) is defined before the entry and the realistically expected profit put in relation to it. The requirement: The ratio between chance and risk (C/R) should be at least 2.5:1, otherwise the trade shouldn’t be entered. This means the end profit indeed amounts to 2.5 times the initial calculated risk. So anytime I’m online, I may be looking for a short-term entry as well

6. I wonder why I don’t see you in one of those trading rooms one Fridays. Why? — N. Y.

Answer: Trading rooms are an excellent option when it comes to trading mentorship, but it seems I’m not prepared for one now. There are other ways by which my readers, trainees and clients can benefit from my trading activities. But I need to tell you that I can’t help admire the great value of a trading room, and you’ll soon see me in one.

7. When would you start giving your real-time trading signals? — G. B.

Answer: Thanks for this question. My trading signals would soon be offered. The great purpose of offering trading signals is to make you survive the markets just like I do: doing the same risk management like me and managing open orders. We’re working towards this goal. Further enquiries could be forwarded to info@fxinstructor.com. Thanks.

PS: I’m so sorry I was able to take only 7 questions. Next Friday would feature an interesting explanation of an important topic – a real eye-opener. Meanwhile let me conclude the article today with this quote:

“As I have said many times before, trading is not really about making money, but instead it is all about capital preservation. Without money in the account, you can’t trade. Always risk small percentages of your account and use decent risk to reward ratios which, in time, will provide you with a buffer to cover the losses that you will endure. Risk rewarding ratios are far more important in the longevity of a trading career than hit rates… trading is not about how you win, but how you lose. Lose small and win big is the idea and if you are disciplined enough, you can still make good money with as little as a 30% success rate. This is one of the only businesses in the world where we can get paid for being overall losers, but only if strict risk management principles are adhered to at all times.” — Sam Evans

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha
Forex Signals Strategist, Funds Manager &Coach
Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

“It is the mark of an instructed mind to rest satisfied with the degree of precision to which the nature of the subject admits and not to seek exactness when only an approximation of the truth is possible.”
– Aristotle

Hello:

This is an update on some of the movements on the markets and what I’m doing about them, plus my losses and profits. The analyses are based on daily charts – looking at the Big Picture. My preferred leverage is 1:100 and my position size is 0.01 lots for each $1000. The maximum risk on each trade is 1% in a situation of an initial stop. I use the Price Behavior rules for strategic decisions and my customized indicators for tactical entries. I open primary positions without predetermined exit target in mind, riding the trend for as long as it continues. 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.

The markets are still in indecisive situations, and therefore I’m yet to place a trade. I’d be looking for possible trades after the close of the New York Session today. The instruments I trade are more easily predictable in the middle of the week (based on my past observations).  I need to mention that this is a type of the market condition in which those who don’t use Stop Loss often go scot-free, while those who use Stop Loss look like idiots. Doing the right things don’t always make you appear smart: it simply ensures your long-term survival. What we’re looking for is trader’s participation; the more traders who are willing to buy, the stronger the buy signal. The more traders that realize they’ve made a mistake and need to exit quickly, the bigger the move in the opposite direction.

AUDUSD

Primary trend: Bullish

This pair is clearly in an uptrend. There was a false bearish breakout yesterday, so the most baffling problem is to try to find the right entry point. The previous day candlestick – a hammer, points to a potentially strong bullish continuation.

NZDUSD

Primary trend: Bullish

This pair, like AUDUSD is also trying to wind its way upwards. Like its correlating partner, it also experienced a false breakout yesterday. The price was almost breaking the trendline to the downside, and once again, one could’ve been spared if one waited for the candlestick to close below the channel, which it didn’t. There have been a series of higher lows.

EURCAD

Primary trend: Bullish

There is a strong resistance at 1.3678 and a strong support at 1.3258 (on the daily chart). For almost 3 weeks, this cross has been finding it difficult to break the aforementioned resistance and support. It would move near the resistance or go near the support; only to turn. I’ve drawn a channel to mark these two strong levels. The present situation is good for short-term traders – something I don’t do on the instrument. I’m convinced that a clear break and close above/below the channel would confirm the next market direction.

EURAUD

Primary trend: Bearish

The movement on the cross is competently flat. It’s also moving within a straight channel; the resistance on the daily chart being 1.5495, and the support 1.4298. A clear break and close below or above this would determine the next journey, either to the south or to the north. At least we aren’t prepared to catch a falling knife: we need the direction to show itself.

EURNZD

Primary trend: Bullish

The price is constantly quoted above the SMA, and the +DMI is above the –DMI. However the trend isn’t presently strong (as shown by the ADX which stands at 14) This object is moving in the opposite direction of its correlation partner, EURAUD. It’s clear that the NZD is weaker than the AUD. Yesterday, the market tried hard – with very little success – to break 1.8155 which is a very strong resistance. If this cross eventually closes above this level, then a nice journey to the upside would’ve just begun.

AUDJPY

Primary trend: Bearish

Despite the present consolidation phase of this market, the bears still appear to have the bulls in subjection. This is fundamentally a trendless market; there’s a resistance at 79.40 and a support at 77.50. I can’t say what would happen next, but with a pending order, perhaps I might catch the next great move, or else I limit my losses. No-one must develop stroke, asthma or cardiac arrest while trading. We must stake low and have a good rest of mind. Why should you stake too much and risk losing too much? If the risk is too high and you’re in a losing streak, the result would be senseless sentences and childish tantrums. ‘O market, I’m on my knees. I pray you, stop moving against me!” “I can’t afford to lose more than this!” My trading career is over!” “My mother won’t accept this!” “My wife is going to kill me!”

Conclusion: If you’re right on the markets, good, and if not, you need to limit your losses. Your trading portfolios must be successfully defended on the battlefield of the financial markets. Recovery is easier only if you have smaller drawdowns. Remember the word of Ed Seykota, ‘Cutting losses, cutting losses, cutting losses.” If you can do this, you may have a chance to survive on the markets.

Please, we need more encouragement from Sam Seiden:

“Most people are afraid of failure in any part of life, especially things like trading and personal relationships. You have to understand that failure does not happen TO YOU, it happens FOR YOU. It is a gift that offers the opportunity to grow. When you shift your mind and think this way, you will smile with each failure, knowing that you have just identified a flaw that needs to be corrected, removed, or improved. Adversity is scary in the moment, but it is always when we grow the most. Failure is only permanent when you allow it to be. How wonderful adversity and failure really are.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

“Even so, humans generally have little choice but to base their plans on assumptions about the future. For example, you plan tomorrow’s activities assuming that the sun will rise and that you will still be alive. The first assumption is well-founded; the second is less certain.”

Hello:

The last two weeks had been so difficult for most traders. The movements of the markets were indecisive. Even short-term traders faced serious challenges. The markets generally moved in ranges, with common false breakouts. This experience was a blessing in disguise. Why? The reason is that versatile and adroit market speculators have come out with better trading plans. Once you understand why your bad trades happen, you’ll make yourself a better trader. The only regrettable thing is an instance in which people fail to learn simple lessons and make the same mistakes. Many people will continue dwelling on illusion even if realities often prove them wrong. Some traders will continue to lose again and again, while some will continue to place better trades. I’m a private teacher of academic subjects with over 10 years of experience. I’ve taught some students who improved academically in the long or short run. I’ve also taught some students who didn’t improved at all, even after years of teaching. Although there are many factors responsible for this, the most significant are obedience to simple instructions and burning passion for knowledge in the individual student – things that most students who didn’t improve over the time lacked

On bad markets, you need to fight hard to preserve your trading capital for those periods when you can gain so much. Like I said in my past articles, it’s very important to know when the markets are favorable to a particular strategy. We should never close big losses during losing streaks. Instead, we should close big profits during winning streaks.  The best way to survive bad markets is to stay out of the markets when it’s evident that the conditions aren’t good. Why should you suffer many losses in a row? As for us, three losses in a row are enough confirmation of an ongoing bad market; and we’ll stop trading for the week. We’ll make sure that our maximum drawdown on weekly basis is 2% – 3% (only in a worse-case scenario). As long as there aren’t three losses in a row, we’ll continue trading. It’s as simple as that.

Peter Milman emphasizes that there’s no science in trading. Nothing is ever guaranteed but if you can find just one setup that works consistently for you, stick to it. Patience, patience, patience. It’s a game of patience.

Confirming A Breakout

Going back to the topic above, how can we confirm a genuine breakout? Confirmation is necessary since it’s terrible to get trapped in bad positions. Now here’s a straightforward answer: You must have a close that moves beyond the high of a breakout bar if prices are moving up and a close beyond the low of the breakout bar if prices are moving down. If these requirements are met, then you probably have confirmed a breakout (violation). Otherwise, what you’re seeing is nothing more than stop running. This is especially important in keeping you from trading a false breakout, when using the lines of support or resistance, or a trendline.

When it comes to trading, you just need to set reasonable goals, have modest expectations… and go on and execute your plans.

I couldn’t help posting here some words of encouragement from Sam Seiden:

“Trading is a difficult challenge that will test your emotions more than you can imagine. From birth, we gravitate towards things that make us feel good and run from things we fear. If you take this instinctual and conditioned action in trading, you will lose. For example, if you wait for news and charts to look “good” before you buy into a market, price is already high and at retail prices at that point. You can’t buy when price is at retail levels and profit consistently. If you sell into markets when everything including news, indicators, and opinions are “bad,” you are selling when price is low and at wholesale levels, which is the last thing you want to do. The goal is to buy low and sell high. You must understand that proper trading is not easy on the emotional side and you don’t want it to be. If it were easy, everybody would be doing it and making money, but that is just not the case. The people who do well over time are the ones who understand that the path of learning and practicing takes time and is typically a bumpy road. The key difference between those who fail and those who stick it out and succeed is that the successful ones embrace the bumps in the road with a positive attitude. They realize that the bumps are needed failures that allow them to grow. You see, when you experience failure, it is really success letting you know that you have identified a flaw that needs to be corrected or removed, and that’s a great thing.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

AN AUDIENCE WITH A PROFESSIONAL

This article features an interview with someone who breathes FOREX. He has chosen Forex as a way of life; his niche. His name is Olanrewaju Lamidi. He’s a Forex trader, researcher and systems developer. He’s tested a myriad of trading strategies and concepts for years. He’s seen the good, the bad and the ugly in trading. He’s dealt with all kinds of trading professionals. Based on his years of experience, an encounter with him would make you all the more determined to be the best trader you can. You’ll always have something to gain from him. I met him earlier this week and was able to ask him some questions.

Azeez: Could you please introduce yourself?

Olanrewaju: There’s nothing extraordinary about me. I’m just like anybody else – only that I make a living trading Forex. I’m also married with a kid.

Azeez: What made you develop interest in trading?

Olanrewaju: The possibility of making money, even in the comfort of your bedroom. Whether you buy or sell you can make money. It’s very hard for me to think of any job that’s better than trading, provided you can find a strategy that works for you. I heard about Forex and quickly got my feet wet. There’s no-one who hears about trading and its potential and won’t be interested. I like a kind of business that makes me think a lot and do thorough analyses. I practiced and practiced and practiced. I read a lot of books and experimented with many trading ideas. There’s no end to what you can learn in trading.

Azeez: Out of many types of financial markets available, why did you single out Forex?

Olanrewaju: The forex market being the biggest and the fastest-growing market in the world is highly liquid and dynamic. It tends to trend more than other types of markets. There are always trading opportunities.

Azeez: Didn’t you have any bad experience on your journey to success on the markets?

Olanrewaju: I believed I could double my accounts within a very short period of time. There are baits for traders out there. You name them: over-leveraging, higher lots, etc, with the hope of getting rich quickly. If you do this, you’ll lose yourself. I was doing that in the past, but I learnt bitter lessons.

Azeez: Do you have very good or memorable days in trading?

Olanrewaju: When the markets are moving very well in my favor and I’m making good profits, I always feel on top of the world. There are times out there when your strategy would work well for you.

Azeez: You’re a highly skilled and experienced trading systems developer – both manual and automated. Which one is better, based on your experience?

Olanrewaju: No question about it. Manual trading is the best. With a manual trading system, you analyze the markets yourself and make your own trading decisions. But when using a robot, you mayn’t know why the robot places trades. 99% of trading robots manufacturers won’t give you a manual to explain why their robots are placing trades, which means you’re trading blindly. I’m not saying that robots can’t make you money, but contrary to what marketers are saying, most robots don’t survive long on the markets. A robot that’s working well today may crash and burn tomorrow. This is because the markets change and/or because of brokers’ manipulation. For example, there’s a pretty popular EA that made lots of money for its buyers before it stopped surviving the markets. This was because so many people were making money with the robot that those brokers started to manipulate their servers against the EA, especially by increasing their spreads and other kinds of fraudulent programming. We placed that robot on two different platforms belonging to two different popular MT4 brokers; with the same settings. But we were amazed that each copy of the robot was going on different directions on each platform.  The robot would buy on this platform, but its other copy would sell on another platform; in spite of the same settings and pair. That’s broker’s manipulation.

Azeez: What are your favorite pairs and how long would you like to hold onto open positions?

Olanrewaju: I can hold onto a position for as long as one week. I’m a swing trader, and my favorite instruments are EURJPY, NZDJPY, EURAUD and EURNZD.

Azeez: How do you personally analyze the markets for trading decisions? What’s your favorite timeframe?

Olanrewaju: I analyse the markets on 4-hour charts and daily charts. Like I said earlier, I’m a swing trader. I simply buy low and sell high. I try to identify best possible turning points for the markets.

Azeez: Why is it so difficult to make consistent profits on the markets?

Olanrewaju: It’s because the markets are unpredictable, and so are all aspects of life. Once you accept this fact, you’ll stop looking for the Holy Grail.

Azeez: Then how could consistency be achieved?

Olanrewaju: By staying true to your rules and having trust in your trading system, plus money management. What you need to achieve consistency are simple but not easy to follow.

Azeez: Do you think women could also be good at trading?

Olanrewaju: Absolutely yes, even a woman may even perform better than a man for they have certain qualities that may be utilized for their benefits while trading. My wife has been so supportive, and I’d be glad if she makes up her mind to start trading. The markets aren’t gender specific. Anyone is welcome in trading – even kids can trade successfully.

Azeez: How much profit in percentage can you realistically expect on monthly basis and yearly basis?

Olanrewaju: My monthly target is around 5% – 10% ROI and my yearly target is around 50%.

Azeez: Is trading your only profession?

Olanrewaju: No, I’m also an accountant.

Azeez: For someone trying to go into trading on a full-time basis, how much do you think is the minimum amount sensible to start trading with?

Olanrewaju: It depends. It absolutely depends. It has to do with how much you need as income on yearly basis, providing that you earn enough money to support yourself and your family. To me, a minimum of $25,000 is recommended.

Azeez: As far as trading is concerned, what are your plans for the future?

Olanrewaju: I’m more determined to place better trades and make better profits. I aspire to be one of the best traders in the world.

Azeez: Which one is more preferrable, managing your own money or managing others’ money?

Olanrewaju: Managing your own money is more preferable, but you could ride other people’s horses if you really know what you’re doing.

Azeez: Mr. Olanrewaju, thank you so much for this encouraging interview!

NB: Mr. Olanrewaju Lamidi may be reached on Yahoo! Messenger. His ID is: fxmoney55

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.