Keeping perspective in the markets.

Like many of you out there, I get several emails from different forex "gurus" and commentaries. Most, if not all, are complete rubbish. However, I am going to call one out right now.

BK Trader. As in Boris Schlossberg and Kathy Lien. I would like to point out the four middle letters in the main player's last name....."L-O-S-S". I do not say this with any malice, nor do I have anything against the man. He could be a world-class guy. I do however, have issues with the style of trading I see from him. (Which is why I don't trade that way.)

I know that there are always going to be different styles, and I am for anything that works for you. However, someone that is connected with a broker that lives off the spread, should be taken with a grain of salt.

If you ever look at the videos, (you can look them up on their page, or YouTube) you will notice something odd. 10 minute candles. Who in the hell trades on a 10 minute chart? He also is always talking about trading the "IFO report" or some other such nonsense. By the way, these two people work for FXCM, who of course have an interest in you making short term trades......gotta get that spread baby!

None-the-less, let's pretend that he's honestly trying to help you out. (Like I said - he may be....I have no information that makes me think there is any malice in his advice.) I can tell you one major thing I have learned in my time as a trader: Short time frame trades get KILLED by short term fluctuations.

I want you to think about this for a second: if you have a stop of 40 pips in a pair like GBP/USD, how much of a stop is that actually? As I write this, the exchange rate is something along the lines of 1.9975 GBP for every USD. A 40 pip move is roughly a move of 0.2 percent! This is why currency pairs tend to be choppy. It's because they are decimal pointed out 4 places. (In the case of cable.) It takes 199.75 pips to make 1% in that scenario. And seriously....if you heard that the British Pound lost 1% of it's value against the U.S. Dollar, would you be thinking a collapse? I didn't think so. Odd how just changing the phrasing makes a huge difference in the psychology, huh?

I only picked on BKT because I just got an email from them....trust me, there are plenty of people willing to take you down the road of high leverage, short term trading. By the way, high leveraged trading is a major factor in today's financial mess. If major banks are getting whacked by it, I can guarantee that your little account will too.

Slow and steady. Someone, I believe Einstein actually, said that "Compound interest is the 8th Wonder Of The World." Maybe it wasn't him....it was someone you should listen to though, I promise.

So the next time the Euro drops 50 pips, think about what you are really looking at. The other day, I had a short in the pair that got me 250 pips. (See the previous post.) Sounds like a lot huh? It wasn't a huge drop, and you can bet the big money was waiting for things to calm down a bit, so they could buy more Euros at a cheaper price. Truth be told, I did as well. However, like an ass, I went to bed with my stops too tight. I got stopped out at +50. I am still a little pissed about that one, as I should still be in this trade. But, we live and learn.

Unless of course, we are trading 10 minute charts. We won't be around long enough to learn.

Sometimes it takes a while.

Hi gang,

The above charts show a trade I am in at the moment. As you can see, (hopefully) the EUR/USD pair made a wicked pinbar on Monday the 17th of March. This is a major reversal signal for those of use that use price action for our signals.

Well, I went short needless to say. And waited. And waited.

There were moments where I could have taken as much as 50-80 pips before it went right back up. I have to admit, it was very tempting to do so. However, as I have been reading Reminiscences Of A Stock Operator, I am working on letting trades run a little more.

Because of my patience, I now have 250 pips locked in. That's a good week in itself as far as I am concerned. Add in some trades in Gold, and this has been a great week.

I believe the biggest thing to remember is that no matter what happens, you are never risking more than your original amount. As I was once 50 pips up, then down as much as 11 later, I had to remind myself that I was still only risking what I thought was alright in the first place. I could never lose more than that amount. Granted, you have to figure out a way to lock in profits, because it's counter-trend if no other reason.

So this was my thinking:

1) This is counter-trend. A target isn't a bad idea, but as long as I can keep an eye on it, I will let it run.

2) Not only is this counter-trend, but the actual break was fast and hard. Fast and hard tends to stop suddenly as well, so once it gives you a huge bar, time to tighten up stops. (I know this sounds contradictory, but there's a "feel" moment has, if you just watch long enough.)

Hmmmm......funny I am writing this, they just took me out at 1.5425, a gain of 250. Ok, so I gave back 20 pips or so. 1.54 was strong support anyways.

Which, brings up another point about patience, there were several times I could have gotten out of this trade in the last hour or two....but I HAD TO LET IT TRY TO BREAK THE 1.5400 MARK. If not, I would have been upset. However, once I was up 250 pips, there was no reason to give a ton back either.....I mean, Come On! :-)

Also, there is the chance that it does go lower eventually. That's alright, we can't get every pip. I am grateful that the Forex Goddess has bestowed this lesson upon me.

The single biggest piece of advice I can give this week is to buy the above named book, "Reminiscences Of A Stock Operator", by Edwin LeFevre. Read it, re-read it, and think about what's being said. There will be no "trading plan" to make you rich. No "When the 20 Ema crosses the 50 EMA, buy here type of thing." However, there are some MAJOR keys in it.

I cannot speak highly enough of this book. Another is Rob Booker's "Adventures Of A Currency Trader." They are basically the same idea, education with entertainment as well. The truth is, the key to riches is within you. You ARE the system. It took me a lot of frustration to realize that.

Good trades,
Clockwork

Dollars down under.

The above chart is the Australian Dollar/ U.S. Dollar pair, which as you can see, is taking off again.

There is a serious case for parity at this point. I am not convinced that we are going all the way up there yet.....BUT..... I also am not in the business of predicting currency movements - I just react to them.

I did not get into this pair on the break of that pinbar, (the last arrow) as I believe I was working at the time. However, as you see, .9100 is a major area, and should be for a while.

All of the arrows show how it's been support and resistance. Several days of it in fact.

So, I am going to watch out in that blue box. Somewhere in there, I am looking to find a nice bar to enter into this trade. With Friday's big drop, I think we will probably see it test that area again, and soon.

Most of my trading lately has been done based on daily charts, and I have to say, I like it. Nice and slow, no need to worry about much. It can takes days, but it is a lot like stocks at that point. Anyone that tells you there is no money to be made in the upper levels, or more commonly, "The stops are too big for guys like us.", has no idea what money management means. I can assure you, even with a small account, it's possible.

Anyway, if I get into this trade, I will let you know how it's going. I am currently looking around various weekly charts today.....Our day off in the markets is really just a "cooling off" period to reset our charts.

I also have been checking out futures trading. I did pretty good in Gold last week. I am demoing it first, of course.

Good luck all, and I will talk to you soon.