Marc Walton on April 27, 2014
Our goal as traders is obvious right?? We
have to place trades to make money. That makes sense doesn’t it? We
learn all these skills so we know what trades to take, how to manage
them, etc….. And yet, for the last couple of weeks, the forex markets
on MOST pairs have been completely ridiculous, small daily ranges, flat,
just incredibly hard. So, we modify our approach, take smaller
targets, and make sure we are still trying to take trades. That’s the
right way, isn’t it???? I argue no. And the following article explains
why:The reality is that more trades does not always translate into more profit. In fact, I would venture a guess that many of our members that have traded for a few years can attest to the fact that the times they remember the most “active trading” have been times that probably started off well, and ended in some spiraling horror story. I personally have shared more than a few of these with people along the way, as I have experienced that phenomenon myself.
One day, when I was doing some research about market auction theory, I stumbled on a doctor who was a professor of a university of which name now eludes me so I won’t make a guess at it. In his talk, he said something that stuck in my ear. He said that simply put, the best traders get paid the most money to wait. What?? How does that make sense? Don’t we have to be active to get the best gains? But then again, I was approaching a point in my own trading career where I was simply sick of losing the gains that I had previously made since I knew how to identify good trades, and I seemed to have a handle on that part, but it always seemed it would be no sooner I had made good gains, that I gave part or all (or more!) of them back. And this happened within intra-day trading on multiple trades, or on an intra-week or intra-month basis. I would start a week strong, and finish with losses. The same was true of my months. The weeks I started with losses, seemed to either improve by week’s end, or devolve into even more losses. But almost invariably, if I started strong, I finished weaker.
At some point, it finally clicked as to what was going on. Instead of “closing down operations” after a big gain, it empowered me (since I was sitting on profits), to look for more trades, and when I was honest with myself, I found it was these particular trades that came after wins that I was fudging the rules on and taking simply because I was sitting on gains and felt I had “free reign” to trade more since the “worst” I could do was give back profits. What I always failed to realize at that point was how painful that always felt when I did that and how counter-productive it was to my account growth.
When I was sitting on the sidelines, looking for a good position to get into WITHOUT the luxury of already being up for the day/week/month, I took A LOT more time and care to make sure that if I was going to risk my capital sitting at b/e or worse for the day/week/month it better be a really high probability trade. You see, it wasn’t the position during the day or week that the bad trades were found in, but the position MY MIND was in when I took them. I was encouraging myself to take trades after I was sitting on nice gains and not approaching them with the same care. Once I recognized this in my own trading, it not only completely changed the way I approached the market from that point forward, but it made me a subscriber of the “getting paid to wait” philosophy.
Fast forward a few years to now and you will see someone who is more than happy to sit and watch and wait in the market for the RIGHT opportunity. If it comes, I take it, without hesitation. If it doesn’t, I don’t force myself to look for one. Rather than be “bummed” or “irritated” that I had spent all that time in front of my charts for little or no trades, I looked at it as a different form of income. The income I was making from NOT losing on less than optimal trades!! When I started adding up all the money I would have from simply avoiding those bad trades I fudged my own rules on in the past, it became CRYSTAL clear to me, that NOT trading can be VERY profitable!! Simply being happy with not taking positions became all of a sudden easy for a guy who loved to trade as much as I could.
So, next time you are sitting for days or even weeks without a “you’d be stupid not to take this trade” setup, consider yourself earning just as much as if you were taking a great trade in a desirable market. Yeah, you really do get paid the big bucks to WAIT!!
The Forex Week Ahead:
Well folks, I pride myself on always trying to see the glass as “half full” and finding opportunity where others cannot. But to be honest with you, the current forex markets are SCREAMING at me “Stay away, you don’t want your fingers burned right???” Best advice, carte blanche, is LEAVE FOREX ALONE RIGHT NOW. I hate to say it. After all, I’m supposed to be the “voice of reason” and leadership in forging ahead with trades. But I would be doing you a grave disservice if I recommended trading these markets. Simply put, I am NOT. Does that mean there are NO TRADES to be taken this week?? Not at all. It just means that I am currently paying myself to wait. I would rather jump on a good opportunity…..WHEN IT ARRIVES with 100% of my trading account, over trading simply to “kill time” or make myself feel like I’m getting something done while the markets are playing narcolepsy. The fact is that daily ranges on most pairs we like to trade are NADA, and trends are scarce. Sure, the areas we analyze matter, but to what end?? What’s the point of being right about an area of interest only to sit and watch your trade go nowhere for days or even weeks. The time is better spent on the sideline, no not avoiding the markets, but patiently waiting for that “you’d be stupid not to take this trade” to appear. Forcing trades from bad markets inevitably, and almost invariably leads to heartache and bruised accounts. It looks like Spring when I look out the window, but when I look at the markets, I see Christmas break. In the video, you will see a few, small opportunities, but the majority of the pairs, we are waiting for the market to give us a reason to trade, and the smart thing to do is wait until the point we’d be stupid not to take the opportunities.Euro/$: Leave Alone, wait for breakout.
Gbp/$: Leave Alone, wait for breakout.
Aud/$: .9200 is THE area to look for a long. If it breaks south, then we can start shorting this pair again. Without a pullback to .9200, I won’t think to long unless .9400 breaks wide open.
Euro/Gbp: Price is sliding down the trendline as shown in the video at the rate of less than 30 pips a DAY. .8300 is still on for a short, but geez, when is this picture going to change??
$/Yen: Range bound between 101.50 and 103.75. 102.50 is an area to trade from on VERY small timeframes. More conservative traders will leave alone until a bigger move occurs.
Euro/Yen: This pair is looking even worse than before. STAY AWAY!!!
Aud Yen: Range seems to be 94.50-96.50. Break of either area could spell a move, but until then trade the range with aggressive order management.
Usd/Cad: Sideways, Leave Alone for now.
Eur/Cad: Break above 1.5300 for a long and break below 1.5200 for a short. Anything else just doesn’t appeal to me.
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!!!