Archive For "December, 2009"

12-31-09

5:14a GMT – No signal today because of the holiday, but I’ve written a long post on what it takes (and what it doesn’t take) to be a successful forex trader. I hope you read the whole piece, as I think you will benefit from it, and share your thoughts and feelings at the end. Reflect on what you learned in 2009. What you hope to do better in 2010. Anything. God bless.

New Year’s resolutions. Every year millions upon millions of people make them. Then, every year, 95% of people fail to achieve them. Want to guess what the failure rate for aspiring forex traders is their first year? Roughly 95%.

Coincidence? I think not. You see the same things that make it hard to achieve one’s general resolutions (e.g. lose weight, start working out, eat healthier, etc.) make it hard to succeed at forex. To lose weight it takes discipline! You have to come up with a plan. With specific goals so you know if you are achieving that plan. And, more important than anything, you have to wake up every morning and stick to that plan. There will be times when you want to get off of it. You’ll think “just this once it will be OK not work out or eat this junk food. There is always tomorrow!” The same applies with forex! If you don’t have a specific plan with every trade, every day then you will fail in the long-term and be just another of the 95% that couldn’t make it.

Too many traders have a false dream of succees, whether they know it or not. In it they have the envy of their friends, family and all. They have done something others can not – conquered the markets. Quit their dayjob. Mastered complex financial instruments. Wall Street? Who needs it – you can earn hundreds of dollars every day as you sip coffee and click your mouse. Friends are envious and everyone talks about how lucky you are to be so smart and to have such a nice life. You can wake up when you want, follow your own schedule and answer to nobody.

Are those things possible? Yes. Unfortunately you will never achieve them until they are completely purged from your head.

In this post I’ll dive into what I think should be in you head everytime you sit down to trade. And, more important, what should not be in there.

What should you be thinking about?

Everytime you go into a trade you need to know first: how much can lose on this trade? If things go south, which they inevitably will with some trades, how much of a dent will it put in your equity? Second, what are your odds this will go in your direction? You should know from months of demo-trading, months of journalling and revisiting your trades that this particular setup you are thinking of entering will yield a reasonable chance of success. If you are just guessing, or going off of “gut feeling” you will lose in the long-term. And only then should you consider how much you could possibly profit on a trade.

I see traders come in here all the time with high hopes, eager to make 50 trades a day and tell their family how great they are doing. It doesn’t work that way.

So, to any beginners out there let me clear some myths up for you:

1) forex is not a get-rich quick system. In fact, if you have that attitude I prefer to refer to it as a “get poor system”. With no trading plan you will have the same odds of going to your local casino and wagering all your money on the roulette table.

2) there is no system that will do it for you - Any sales pitch that promises you can turn your computer “into a cash register with no trading knowledge” is a lying to you. Straight-up there is never any truth to those scams. If that was the case they would take out a loan, borrow money from friends and buy as many lots as they could and instantly become billionaires.

3) A PROFITABLE trade is not always a GOOD trade, and a LOSING trade is not always a BAD trade. Hard lesson to learn. Trading is about probabilities and long-term success. Think about this: you have a trade setup has a 70% chance of being a profitable trade, and the money management is sound. Sounds like a good setup, right? It is! But what about those 3 out of 10 trades that are not profitable? Are those bad trades? No! Losses are a part of the game in forex. You just have to know your system, know how many losses you can take and be able to be confident in that 70% success rate.

4) Consistency, discipline and knowledge are not optional. Without a consistent, systematic approach to your trading plan you will never know if a trade has a 70% success rate or a 10% chance. You will be taking stabs in the dark, reacting to the your latest trade emotionally based solely on whether it was profitable that time, not whether it is high-probability trade in the long-term.

Think of it this way:

You are competing against the best of the best. Imagine you walk into a professional football game (soccer for my fellow americans). Would you bet the professional player standing next to you that you could kick harder then him? Or faster? Or with more accuracy? No! He plays football for a living. He practices every day, kicking, passing, heading. He knows if he does a ball fake you’ll jump and he can blow by you. It is no different in forex. You are competing with professional traders who want nothing more than to separate you from your hard-earned cash.

Until you can confidently answer questions about the historical probability of your success on a trade setup, your money management and how much you can lose/win on each trade you take then, in my opinion, you might as well be betting in a casino. And in casino the house always wins.

Sound bleak yet? I’m hoping it does, because that was my goal. But don’t hang it up quite yet, because it will soon be the New Year, and there is still hope!

Your goal is to do what 95% of the other forex traders are not doing so you can become the 1 in 20 that succeeds.

That means studying. Getting books and learning the markets. That means keeping a journal, every trade you do, revisiting those trades at month-end and being honest with yourself about the pros/cons of that trade. Participating here at PipHut. Talking to other traders. And above all – being honest with yourself.

I’ve tried at PipHut to roll out tools that can help you achieve that success:

1) first and foremost – the free daily signals at PipHut.com. You know, what you would be reading right now if it weren’t a holiday!

2) Candlestick Alerts – this is such a powerful service and has taken off in popularity. But a tool is only as good as you the user who yields it.

3) Forums - here you can post your own charts, start a journal, talk about anything forex related.

and more.

And there are more exciting things to come in 2010, things that I know will help you – things like specific entry/exit signals, signals for more pairs like the AUDUSD, GBPUSD and more – but don’t let that distract you from what should be your main New Year’s resolution in 2010 – to improving consistency, discipline and knowledge of forex. And if you can do those things you WILL be a successful forex trader.

If you’ve been trading forex for over 1 year then you have already beat the odds! Now it is time to take your trading to the next level, and I look forward to helping you get there in 2010.

Have a happy and safe New Year from PipHut!

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12-30-09

3:41a GMT – Is it 2010 yet? In these thin markets and with most traders taking the week off (it’s been quiet in here!) the price staggered back and forth, establishing both a new high and new low on the day. I entered no trade yesterday as both support and resistance were broken with no good signals to enter in either direction.

Daily Outlook: The most interesting thing to happen yesterday was the bearish shooting star that appeared on the daily chart, just piercing the 23.6% retracement resistance of the december high-low fibonacci (daily chart shown below with candlestick circled). That daily signal is enough for me to be bearish on the day and to look for rallies to sell into.

Daily Chart with Shooting Star Circled

Trading Idea: I’ll give the pair some room to breath in these thin and volatile markets and look for a rally to the 61.8% retracement to 1.4400. Short targets preferred at 1.4370, 1.4340, 1.4305 and 1.4275.

1-hour Chart

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12-29-09

5:29a GMT – The markets struggled to move at all yesterday, with virtually nothing happening throughout the entire trading day! I could sum up the entire day with: “the markets rose a little bit, then fell a little”. No new highs, no new lows. The only technical detail worth mentioning was that on the daily chart yesterday formed a (very small) bearish doji. Because it is so small however, on thin markets and not a new high it is a very unreliable bearish signal at best.

Daily Outlook: After failing to make a new high by breaking 1.4420 and the somewhat bearish daily doji discussed above I am back to leaning bearish, however the technical signals are weak at best and the market is without a clear direction at the moment. It would seem bulls and bears are content with the price at the moment as we go into 2010.

Trading Idea: Look for the pair to continue to consolidate in the 1.4420-1.4350 range, with a break of 1.4420 opening the way to 1.4500 and a break of 1.4350 opening up 1.4320 and 1.4275. Remember, markets are razor thin this time of year and tend to either do nothing or make big jumps, so trade carefully, always use stops and good money management!

(click to enlarge)

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12-28-09

6:14a GMT – I hope everyone had a relaxing few days off last week! This is generally the slowest week of the year before the New Year, and I know many of you are still out for the week on vacation, but the markets are open so the signals will continue! We finally saw a breath of life out of the bulls last week as the EURUSD managed to close on a high note, climbing above 1.4400 and almost piercing the 23.6% fibonacci retracement resistance from 12/3-12/22 at 1.4330. Price also managed to break the downtrend resistance we’ve had since December 3rd.

Daily Outlook: So what does this all mean? Well, if we were in a long-term downtrend for all of 2009 I would let this go and continue selling, but given the thin markets and the fact that we have actually been in a strong uptrend all of 2009 these are enough bullish signals to make me a believer – I looking to buy on dips today.

Trading Idea: I’m looking first for bullish signals near support at 1.4320 and, if that gets broken, I’ll look above 1.4275. From 1.4275 targets are 1.4315, 1.4345, 1.4390 and 1.4420. Make sure to keep an eye out for candlestick signals here to confirm the trade.

(click to enlarge)

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No signals for today (Dec 24) or tomorrow (Dec 25) as Christmas has closed US Banks. Signals will be back on Monday, December 28th. See you then and happy holidays!

12-23-09

4:14a GMT – I don’t know about you all, but I for one am really looking forward to a few extra days of no trading this week! Holidays can be a good thing. We did in fact see a nice drop yesterday to go with my bearish signal – keeping with my conservative holiday gameplan though I did not enter as resistance held at 1.4330 and the pair dropped over 100 pips to the low 1.4200 range. Housing data came in better than expected for the US with home sales continuing to improve, but remember that this is also because many first time home buyers in the US rushed to purchase a house last quarter to take advantage of the expiring home tax credit. That doesn’t really tell us the interest rate will be raised soon – it tells us the government might stop printing money at some point.

Daily Outlook: Bearish downtrend remains strong. Markets will be at their thinnest during the US trading session. Unless you are very confident in your trading ability I recommend taking the day off and catching some early holiday spirit! For those of you feeling aggressive… I’m bearish under 1.4330 in the short-term. We have a sinking trendline that has held for the week now and until we see a good rise in their pair the bearish outlook will continue.

Trading Idea: Looking for bearish signals around 1.4330 with targets at 1.4300, 1.4275, 1.4245 and 1.4220.

(click to enlarge)

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12-22-09

4:24a GMT – Candlestick alerts gave us a solid entry yesterday on a triple-bearish candlestick signal on the 30m – bearish doji at 12:30, shooting star at 13:00 and hanging man at 13:30.  It was below our resistance level but the triple signal was too tempting for many of you. I would have entered short as well – despite the thin markets – on the second signal except for the fact that the price didn’t get high enough to alert me :).

In general markets continue to thin and traders keep dropping off to take time off for the holidays. I know many of you have already wished me a happy holidays and a “see you next year!” FYI to all other traders still present I will continue publishing signals through the holidays except for Christmas Eve (24th), Christmas Day (25th), New Year’s Eve and New Year’s Day.

Daily Outlook: Bearish action continued yesterday though we did see a second bounce off support at 1.4260. In the short-term I am bearish below 1.4420, but we have a confluence of resistance around the 1.4350 area that I will be watching closely for shorting opportunities. We have the sinking trend line from 12/11-12/16 highs (top blue trend). Second we have the shorter-term resistance connecting the 12/18-12/21 highs. Third we have the 38.2% retracement from the 12/16-12/18 at 1.4390. That leaves a zone of between 1.4355-1.4385 that I will be looking for good shorting signals.

Trading Idea: Looking for shorting opportunities in 1.4355-1.4385 resistance zone. From 1.4385 short targets are 1.4350, 1.4320, 1.4290. If 1.4390 is broken to the upside look for a re-challenge of 1.4420 and 1.4460. Also if price continues to drop without rising first a break of 1.4250 would open the way for a quick challenge of 1.4210.

Reminder that markets are thin near the holidays: use smart money management and I recommend a more conservative trading style! There is also a news event at 13:30 that could make markets move more than it usually would. Caution advised!

(click to enlarge)

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12-21-09

6:28a GMT – Quick email update: server has been completely upgraded and everyone should receive their forex signal via email (if you signed up for it). Just a reminder: if you signed up you get an email notification whenever the daily signal comes out, one per day!

On Friday’s signal I was bearish below 1.4420 and we had a double-confirmation signal (timeframe confluence) with a hanging  man on the 30m chart at 8:30a and a hanging man on the 1h chart at 9:00a – both right below support at 1.4400. Quite a few of you got in on that and it yielded good pips (110 pips if you used my targets to 1.4290).

Daily Outlook: Markets are now razor-thin now as vacation week officially sets in before the major holidays coming up before the end of the year. These thin-markets can cause major whip-saws and I recommend you tighten your wallets and trade very conservatively – if you trade at all. For my part the EUR/USD is still very bearish and 1.4420 is still the key resistance level. Below 1.4420 I remain short-term bearish on the pair. I will therefor be looking for candlestick signals to short on near this level.

Trading Idea: Looking for short signals to sell on around 1.4420, a key resistance. Short targets preferred at .1.4390, 1.4355 1.4320 and 1.4290. If 1.4430 is broken to the upside look for a re-challenge of 1.4500.

(click to enlarge)

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12-18-09

5:14a GMT – Before today’s signal I want to say something quick about patience. As you all probably know I talk about NOT trading about as much as I talk about trading. About waiting for a good pullback to buy/sell on, about waiting for confirmation, and about not minding if I miss a trade because there will always be another one. It’s one of the hardest things to learn in becoming a trader but I think the most important. I’m going to write a full article on it this weekend but until then please 30 seconds and read this post by James in the forum on Patience and Trading here. Feel free to share your own thoughts and stories (reply to the forum please) so we can all grow as a community.

On to the signal! Markets will probably be thin today due to it being Friday and so close to the holidays. We’ve definitely seen the end-of-year increase in volatility that many of us were expecting, and Friday’s can make it even worse. As always use stops and good money management. No entry on yesterday’s sell signal as the price dropped like a rock and never looked back. Mind the news event at 9a GMT – details on the forex calendar.

Daily Outlook: Short-term trend is obviously still bearish, and we have a short-term resistance in place at 1.4420 that should provide a good guide as to the direction of the pair on the day. 1.4420 is the 38.2% retracement of Wednesday’s high and Thursday’s low and has been twice tested (7:00 and 14:00 yesterday).

Trading Idea: Below 1.4425 I am bearish. For the day I will look for a bearish confirmation signal (candlestick, failure, etc.) to enter on with short targets at 1.4390, 1.4355 1.4320 and 1.4290. If 1.4425 is broken to the upside look for a re-challenge of 1.4500.

(click to enlarge)

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12-17-09

Email update: Server upgrade for signals is complete, but it has to be phased in for reasons out of my control so about half of you should have received an email letting you know there was a new signal, and about half of you didn’t receive anything. Almost everyone should get tomorrow’s signal and everything will be working smoothly by this weekend I promise :).

4:40a GMT – If you braved the news the yesterday’s signal yielded you good pips – no matter which trading idea you used (sell at 1.4580-1.4600 or sell on break of rising support) all targets would have been hit for over 100 pips. I did open 1 short on the initial jump to 1.4580 and took profit on first lot but second was stopped out at break even for no profit/loss.

Dollar gained heavily against the Euro yesterday, establishing a new low of the quarter amidst Bernanke’s words that the job situation was stabilizing. Traders see job data as the key factor in determining when the Fed will begin raising interest rates, and coupled with the positive non-farm payroll data from a week ago this makes rate hikes much more likely in the early part of 2010. Does this mean the dollar will continue gaining until next year? Of course not. The market will attempt to find a ‘fair value’ price for the pair. And in that fair value the Euro has the advantage because its interest rate is already higher than the dollar’s.

Daily Outlook: I am bearish below 1.4600 and will look for good areas to short around Fibonacci levels.  I expect to see a pattern similar to what we have seen over the past week where we have a long bearish flagpole followed by hours of bullish consolidation. As I mentioned before I am conservative in these thin-markets before the end of the year, so if I miss a trade there will always be another one.

Trading Idea: Shorts preferred below 1.4600, looking first at 61.8% fibonacci retracement around 1.4500. From this level short targets are 1.4455, 1.4420 and 1.4385. If 1.4500 is broken to the upside look for a re-challenge of 1.4600.

(click to enlarge)

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