Marc Walton on August 25, 2013
Hello Forex Friends!!I truly hope everyone has had an enjoyable weekend and is gearing up for another wonderful week ahead!! Yes, I’m baaaaacck! Marc decided since we have spent the entire month of August already with my analysis, it’s only “right” to let me finish the month with another week of analysis. So let’s have a strong finish!! I have really enjoyed doing this with everyone and really appreciate the response you have all been kind enough to give me. It has been so wonderful that Marc and I are discussing the possibility of alternating this blog either monthly or bi-weekly. Of course, YOUR FEEDBACK IS VITAL to this process!! What do you think?? Here at Mentor Pro, YOU are the most important voice, and we truly want to make sure this is the best experience for you. Marc and I feel since we both trade essentially the same way, having a different viewpoint on the same method would be beneficial to members on an alternating basis. Feel free to comment or send emails with your thoughts or suggestions, and DON’T WORRY, both of us have thick skin (at least I do), and honesty is valued above all.
Before I get to the weekly analysis, I wanted to discuss an often overlooked topic: ”Is it good to win a lot?”. Yeah, you’ll find plenty of articles and education out there telling you how to avoid losing, but see how much you can find about avoiding winning………..not much. Duhhhh right?? Well, just as I discussed about how winning systems can lose money, winning too much can be detrimental as well. But how?? Let’s start with a trading story from my own experience:
When I began in forex, I plowed right
ahead with a live account after very little demo trading. After all, I
had a bit of experience with equities and had done rather well. I
thought “how hard could this be?” Keep in mind, I had always invested
in equities using fundamentals and this was my first foray into purely
technical trading. Blew the account right?? NOPE………well, not right
away. In fact, I tripled the account in less than 2 weeks!! Yup, my
beginners luck made me think I was a born genius at trading and I would
be a trillionaire by years-end. But we know that didn’t happen right?
Instead, my winning gave me a very high confidence level in my own,
ignorant trading. And I continued to trade away, without learning
anything else, and using ridiculous amounts of risk (which I didn’t even
know I was using because I was such a noob). Yup, I blew 80% of that
account in one night!!! Stacked orders all the way up on the UsdCad
thinking it would have to turn around, and it DID NOT. Yes, for those
of you who know my disdain for that pair, it started with this one night
in the beginning…… OOOOOOOOOOOOHHH I WAS MAD!! But it made me finally
take a step back and think about my trading, something I had not done
AT ALL while I was tripling my account.
It seems obvious when we approach trading that we should focus much
attention and education on learning how NOT to lose, but we rarely
prepare ourselves for what might happen if we start WINNING ALL THE
TIME, or a great deal of winning in % terms. We dream of the day where
the wins start coming in, but we seldom have a plan for what to do if we
gain 50% in a week. The problem with winning a lot quickly is
multi-faceted. The first problem is that we rarely learn much from our
wins. Yeah, we scramble to figure out what went wrong when we lose so
we don’t repeat it, but we don’t often pay as much attention to the
“nuts and bolts” of the trade when we make a big win……usually because we
are too busy telling our spouses we will be rich soon, and simply
basking in a gain that is no doubt challenging to come by. Not only do
we not learn much from our wins usually, but lots of wins have a big
tendency to give us way too much confidence in our trading and leads to
hubris which leads often to risking too much on subsequent trades. And
it always seems like when we make the “big bet” after winning so much,
it inevitably loses. Why?? The market was waiting for it?? NOPE, the
market doesn’t care. The law of averages. If you go on a great run on a
system that wins 80% of the time, you have eaten up much of the wins in
the trading ratio and losses are more likely to happen. Also, we stop
looking for reasons NOT to take the trade and start fudging the rules to
get us in more positions. Since we are already up a considerable
amount, we care less about how much we are risking and since we are
potentially just risking profits anyway, we tend not to take the trades
as seriously. All these things can lead to a devastating cycle:- We start losing some of the profits we had already banked
- We start taking more trades to get “back” to where we were
- Commonly at this point we continue to lose, because maybe the market has shifted phase after a big move that favored our system and our system that was just raking in the dough starts losing.
- We now see our profits evaporate away and we start to “revenge trade” and make even worse trading decisions
- We watch our 30% weekly gain now become a loss and we either get into “gambling mode” or we simply throw our hands up, and think that the business of trading is rigged and no one can win
- Our negative attitude affects future trades, and prevents us from really learning from the losses we just took
- We avoid good trades in the future, which makes us even more angry, and we begin looking for another system, abandoning what was actually good trading for something new.
- Repeat the cycle again
- Just as with the losing end of your trading plan, come up with rules as far as wins go
- Give yourself a maximum % gain for the session/day/week and once you achieve this figure, TAKE THE REST OF THE session/day/week OFF!!!
- Maintain a consistent risk % with every trade
- DO NOT vary risk % based on how you are trading that session/day/week
- Try to learn from the wins and see why they were good
- This is important to learn about which market conditions your system works well/not so well in
- Pay attention to whether this was market related, or based on a good trading decision
- Learn to balance confidence with hubris
- Know your system will provide wins, but do not start thinking you have the whole trading game “figured out” just because you went on a good run
Forex Weekly Analysis for Week Beginning August 26, 2013
Last week was a pretty solid week, with some nice trades to be had. We had our “flow” interrupted by the bear of news known as FOMC. This announcement did little to help us find trades towards the end of the week, BUT it allowed price to find areas that would help us for THIS upcoming week. We head into the end of August ready for the Fall trading season and happy to put some of the summer meandering behind us. Just remember, we are not there yet!! Holidays are coming to an end, but true Fall trading usually doesn’t get into full swing until Mid-Late September. That being said, we can expect the upcoming weeks to hold the promise of big, new moves and us there to catch the pips that fall from them. Let’s see where we are for this week:Euro/$: Ohhhh Summer. This pair has dropped down to daily ranges of under 80 pips. But on the other hand, it has been moving nicely through our S/R areas AND we have now had a weekly breakout of the big triangle that has been in place for a LONG time. Although the Euro finished the week below 1.3400, I am still interested in longs that come from this exact area from an M2 upside breakout. Alternatively we wait until 1.3300-1.3316 to grab the long. Shorts will interest me if we see a solid break below 1.3300. Check video for much more detail.
Gbp/$: Longs above 1.5600 sputtered and failed after FOMC causing this pair to retreat under this important area again. But, like the Euro, this actually is still where I”m looking to long, from an M2 breakout. The weekly trendline got it’s pullback last week, and I would expect bullish price movement now, especially since we have relatively clear skies above. It gets sticky looking short on the way down and I would not be interesting in shorting this pair unless 1.5270 broke to the south side first. If prices continues to pullback, look to 1.5530 area first for price reaction (important weekly 55 EMA) to long, followed by the trendline at 1.5500 area. Price is well protected with both a 200 & 55 EMA on the daily, as well as a fib and horizontal s/r at 1.5425. Check Le Video for more details.
Aud: . After pretty easy trading for week, this pair is starting to confuse with a pullback inside the .9000 to .9040 area. .9040 seems to be really important, BUT it sits right above the whole number and s/r area of .9000 so I’m going to wait for a clean break below this area before I short. Alternatively, counter-trend longs are potentially available from .9040 back up .9200. Pullbacks to .9200 and finally .9300-.9325 will have me VERY interested to short again. Check the video for all the details.
Euro/Gbp: Ehhh. This pair is back at .8600 again and looking confused. Which way will it go?? We WON’T guess, so let’s see how .8600 plays to price before getting in a trade. I prefer the long trade from this area as explained in video, but we must go with what the market tells us. Downside moves should be limited by trendline and .8500, while there is more space to the upper trendline longing from .8600.
$/Yen: Has been a confusing pair to trade lately and last week was no exception. However, price has NOW moved to a much better area, by bouncing off the the trendline. I prefer a short after a break of 98.50, but I’ll be watching closely how far it gets below 97.50 and 97.00 as we may have bounces back up from there. If the trendline DOES break to the topside, I will be waiting for a breech of 100.00 before I get interested in longing this pair again.. Check video for details.
Euro/Yen: Yeah130.70… belive it. This important area became the jumping-off point for a rocket move up after providing great shorts for weeks. Price soundly rejected from 132.50 area which is a very important s/r and trendline convergence. Going forward, I would short from 132.50 area, unless it breaks, then I would LOVE a long from an M2 breakout above this area. Look to lower timeframes for more detail. If it breaks above and closes 132.50, think long. If a spike comes through and starts heading back down, think short. Long again at 130.70 if price does end up falling more. Check the video for more info.
Aud Yen: Bravo to those who caught the 90.00 short. yeah! We are pulling back to this area again, so shorts from there are on the menu, BUT keep in mind, the more times we hit that area, the more likely we are to finally push through it. I am NOT interested in longs if that happens, until we get more information. I am however, interested in longs from 86.25 area if price falls from 90.00. I will see how price reacts to 90.00 and try to short from there. Check video out for more details.
Cad: We got the move we anticipated (break above 1.0435), and it even stopped right at our projected next difficult s/r area (1.0560). Expect to take longs from 1.0435 if we get a pullback and shorts from 1.0560 if price heads up first. Alternatively, wait for a breakout above 1.0560 to take a long.
New members please note: If I am looking to take a trade long, at for example 1.5000 , I place my order 10 pips above & 10 pips below for a short. This is because price often does not quite reach a major line and you need to allow for spreads.
We are NOT a “tipping service” our aim is to teach you how to trade for yourself. For more up to the minute updates do not forget to drop by the forum
Hope you enjoy the analysis!! See you Wednesday for an update!! Best wishes and happy trading to all!!!
Weekly Outlook Video
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