#Majors - Change In The Direction of The Main Move and Criticism

Cable has changed the direction of the main move of the year (MMOTY) today. Euro should follow soon as well as the other majors. When this happens, usually there is some extension expected. In this case favoring the bullish USD. AUDUSD also broke a very impotant supportive trend line and is heading to change the MMOTY.

Elsewhere, USDx is about to reach a bullish MACD must-reach target @ 78.86. As mentioned quite a few times during this year, the USD will remain bullish possibly well into 2013. Other targets to the upside are 92.63 and 99.51.

I am not going to jump on my horses and criticize fellow analysts, however, during the last few months, I read so many hesitant and illogical analysis from everywhere while all one needed to do was be able ro read the charts accordingly. It bugs me to see so many fellow analysts hesitating not only to see te obvious but also failing to observe matters from a speculator point of view. Some of them, just as economists, calling a few assets as being a safe haven. Most-likely, they will come up and call this a reversal 'as expected'.

On the other hand, I received much criticism from everywhere for having a firm forecast about the future (now becoming present). But at least, I was firm and will not change this while time goes by. I just hope I don't see those who were hesitant and critical about many things  come forward and say they knew all about this beforehand.

I guess the market is providing the appropriate answers.

As mentioned here earlier this year as well, next bubble due to burst is GOLD. The aforementioned 'safe-haven'.

Being right or wrong brings me no direct profits (although I am long-term  LONG in the USD). However, trying to predict the 'future', is a great means to exercise my TA capabilities. It's good exercise for the brain.

I am not Nostradamus but...

The predictions are slowly turning into reality as published earlier:

http://mcapitalmarkets.blogspot.com/2011/06/is-us-dollar-really-doomed.html

Spread Widening

Some of the brokers tricks are well know to all of us. Today I encountered an old friend of ours: spread widening.

A perfect example of stops been taken out, without actually surpassing the high/low, of the day happened today.

AUDCAD provided a perfect sell opportunity today. While one of my feeds/broker took out my stops above the daily high, the other didn't quite perform the same way.

The spreads were widened aggressively due to the jobless claims news in the US.

Oh well...

Perfect Price Action #USDJPY

Every now and then, the market throws a straight opportunity at us. It is up to us to read these and take action.

The PA provided by USDJPY for the last few days, gave us an excellent opportunity for a LONG entry in the direction of the weekly move.

After price made a consolidation on Friday and again yesterday, late on the day (Monday), PA provided a higher high. Then, today, price went to have a look at the earlier lows, this time around, it made a higher low, which provided an entry with very tight stop loss.

Have a look at the chart.

A perfect entry towards the direction of the weekly move was provided today.

Lack Of Discipline

A plan is only of value if you actually have the patience and the discipline to follow it. While this can be difficult, it is necessary if you expect to be successful, and it is this very reason why developing a plan prior to the trade is so fundamental. As rates fluctuate, you can easily get caught up in the market and it is only human nature that you will begin to second-guess your actions. If, for instance, the rate moves up surpassing your original take profit point, you may be tempted to hold out for an even higher return; alternatively, if the price drops below your limit level but you believe there is a big rebound just around the corner, you may be tempted to keep the order open on the hopes of a reversal.

But does either scenario really make sense? If before you entered the trade you had a sound reason for establishing both your take profit and your loss limit levels, how likely is it that conditions have changed so much that now you are prepared to throw your previous assessments out the window in the heat of the battle? Can you be sure that you are not acting on emotion rather than sound analysis?

This is why a plan is so important – it allows you to avoid the emotion that is bound to arise during times of volatility.

Now this is not to say that a trading plan can never be revised – in fact, your overall objectives should be re-examined every few months or even more frequently if required. As well, it may be necessary sometimes to abandon a plan mid-trade if market conditions warrant but this should be the exception and not the norm.

And yes, sometimes the market can be so volatile that no amount of planning will produce positive results. In this case, maybe the best option is simply not to trade until you can get a better handle on things. Never allow yourself to fall into the “I have to do something” trap – sometimes the best plan is to do nothing.

Automated Trading Experience

Experience sometimes brings us to some intriguing conclusions. Throughout my trading career I have come across many different types of trader and trader profiles. By trader profiles, I mean the different characteristics that 'build' a trader. I have seen boastful traders, proud traders, cool traders, anxious traders and even those that are very calm. However, I have been able to separate a wider sense that encompasses many of the trader characteristics: psychology.

I have personally observed a few traders with great potential fail simply because they could not handle the decision making process of a trade. They would fail to take a trade. They would rush into trades. They would close trades too early either by not letting their profits run or they would move their stops to brea keven with no logic behind it.  They could not simply follow the plan.

I myself have made many mistakes as such and still make them from time to time. 

The idea of lack of discipline is widespread in the trading industry and is one of the main reasons why most traders fail. 

I have never been a big fan of automated trading. The thing about the widespread majority of automated systems, EAs, Robots or however you like to call it is that they are composed of complicated math formulas rather than a well thought mechanical system in which, from time to time, there can be human intervention. Most mathematical formula based EAs, have a breakpoint and cannot be regarded as a healthy investment means in the long run.

On the other hand, if one has a sound trading plan, has logical places as to place the SL, where/how/when to enter the market as well as a TP level and all this can be translated into an automated system, than I tend to believe that one might get the upper hand: the discipline and psychological aspects of trading will be left out.

The market has artificial intelligence and no place for emotions or sentiment. Period. Be on the wrong side, lose money and the market will not be merciful on you: It will take your money and won't give it back to you.

Therefore, the counter weapon for that is to also use artificial intelligence through a sound trading plan thus leaving all kind of emotions outside.

Also, I came to a personal conclusion that trading is game of averages. You will win some, loose some. However, if you can land an average high  enough so that profit is sufficient as to counter the risk involved, than you are in business. I believe that automated or semi-automated systems can help us achieve these goals and with less stress.

By this, I don't mean that you don't have to do your work every day. On the contrary, this means that you have extra inputs as to provide extra room for improvement in your own trading system. Also, some decisions are there to be made such as: reversing a position or not? Should I be in the market during heavy news days? If I am in the market during te news, is it prudent to reverse?  and so on...

Cutting it short, I decided to 'migrate' 4 of the trading systems I use into automated systems. The first one is up and running but filled with small bugs. Therefore it is still not fully operational but operational enough as to provide a general idea.

The system has been up and running (forward testing) from the 24th and it was down for a day (the 28th). It has been able to rightfully increase a $100k account by more than 1% just in these last few days (actually just 4 actual trading days) . Needless to say that backtest on the system provided impressive results as well.

If you are interested in following the beta version of the system just click on the link below:

http://www.myfxbook.com/members/maurosandrade/ftt-18-4-stand-set/154655

Too early to congratulate my programmer or the system itself. However, I can call it a good start.

Cheers and Happy trading to all.

#EURAUD Intra Year Trade

I missed this oppotunity on this double-bottom most-likely to take out the whole years range north. As price is channeling sideways covering the whole years price action, it could even become a triple bottom giving us a possibility to enter a third touch of the lower trend line.

Another possibility is to enter at the break of the upper line of the channel.

Perfect double bottom so far. Can become a triple bottom. A position north can be established @ the bottoms third attempt or at the neckline break.