Trade update and Read your Words!

The markets gave some unexpected volatility over the Christmas period where traders were happy to take on risk. The EURCAD trade ended up as break even (trading on the 1 hour chart, the trade went 2:1 reward to risk, so a great place to move stop to break even) and did not trigger on the Daily chart. Gold is still moving sideways as the fiscal cliff issue has not made any progress.

I have taken a long on NZDCAD as my seasonal's suggest a bullish January but this will depend on the risk on mentality for the New Year and clearly the fiscal cliff. However, the technical setup was there and the weekly low test may support the bullish case. Daily chart below:

As it's the New Year, most people will be re-writing their trading plan and looking back at what goals they have or haven't reached and why. A few traders have sent me their thoughts and plans and it is surprising to see they don't where they are going wrong. If they just looked at the words they used to describe their trading plans and their reasons on why they have or have not reached their goals, they would see the lack of confidence and consistency they have in themselves. 

Words such as usually, sometimes show lack of a consistent trading system and thought process. Their goals and targets are only in the 'I want' category, these need to go in the 'I will' category. What was most apparent is most don't have a measurable plan of success, i.e a 3 month, 6 month and yearly plan. When are you going to increase your risk, put more capital in, etc...

Remember, trading is a business. Look back at how you have treated your trading business in the past year or so and would you have opened up and operated another business in the same way? Sometimes, because of the benefits of trading (low start up costs, ease of access) this creates a false precedence on trading being easy. The truth is trading isn't easy but it is simple!

As ever, I'll keep you updated when I can on anything I see setting up. In the meantime, have a fantastic New Year!

Euro trade +4%, Gold Long, EURCAD Short

Hi traders!

I'm finally back in the UK after a visit to the States and am glad to see our Euro position going well. First part has been scaled off at the large option expiry number 1.3300 and stop has been moved to 1.3155, still locking in a 2-3% gain (assuming 1% risk).

My 20 year seasonal analysis is still providing me a bias on my trades, as it did with Euro (posted in: http://qitrading.blogspot.co.uk/2012/12/euro-long-probabilities-and-seasonals.html).

Gold looks interesting for a long as it comes off its 1.272 Fib extension and the Stochastics diverge, as my good friend and trading partner Rob Colville also suggest so: http://robtrading.blogspot.co.uk/2012/12/gold-long-anyone.html. However, we may see a lower low to the 1.618 Fib extension where the RSI will also diverge. This is why I have taken this trade with half my usual risk.

EURCAD has hit its average monthly gain for December (sample size of 20 years). January suggests a negative month for this pair. Technically, we have RSI divergence, 2 resistance levels and the 1.272 Fib ext. I have gone short on the 60m high test but you could wait for an end of day setup.

Charts below

Have a very Merry Christmas and a fantastic New Year!

Euro long? Probabilities and Seasonals suggest so...

EURUSD has retraced 50% of its original move from November lows to December highs. This is also the fourth touch of the 200dma which is providing a level of support. The order of moving averages suggest further upside but we need to wait for them to start separating away from each other to confirm the move higher. Continuation divergence on the RSI and the Inside Bar/Harami candle price action suggest bullish momentum, as the chart below shows. Whilst this pair is arguably trading sideways, the seasonal probability suggests for a bullish month as the table shows below.

Below is also an analysis I have done on the EURUSD since inception. It shows the best and worst performing months on AVERAGE. Remember the data can be skewed with the likes of the 2008 crash but Seasonality is an extra edge in the market we shouldn't ignore.

Listen carefully....I also get it wrong, which is why I RISK MANAGE!

Hello all from a lovely day in Surrey!

So, I had an interesting conversation with some trader friends of mine. The reason I say interesting is because the mindset of the human being never ceases to amaze me! They mentor a lot of beginner and advanced traders who also follow my blog. However, what they've noticed is that people only listen to what they want to hear! Or in this case read parts of what they want to hear!

For example, the past few trades haven't triggered and the ones that have, depending on how you entered got stopped out. Now, in my post I explain my thought process and the reasons I look at certain trades. Why? Because I want every reader to understand trading is about looking at the markets the same way every single day. Let's take the recent FTSE trade. For those of you who have been following me for a while, you know that I am medium/long term bullish on global stock indices (due to seasonals, dow theory and fiscal cliff). Therefore, the trade I posted before was a short term trade which I highlighted I would trade at lower risk! Yet some people ignore the risk part and sell, sell, sell!

Herein lies the obstacle of being a successful trader. Through our life we have been programmed to listen to everyone else and the so called experts as they know more. Honestly, the way society works today is that they grow us up to be sheep! Follow the path you 'should' take, follow the path of what everyone else is doing, the safe path, comfortable path, etc.

Simply put: 'Not many of us have the entrepreneurial spirit - a single minded focus and belief in yourself and your path'. However, as a trader this is exactly what you need!

My blogs, other blogs, your idols, your teacher are their to guide you and help along the traders journey. However, you have to have your own plan, your own goals and your own path to success.

I truly believe everyone can trade if they have the correct mindset. Just follow Anthony Robbins path to success in his Business Mastery:

1. Know your Why - this is your story and driving force
2. What's your Strategy - how are you going to get there as a business?
3. How - know the tools to implement your strategy

One more thing I'd like to highlight is RISK. Remember the key quotes from Warren Buffett and the World Poker Champion I blogged about in November: http://qitrading.blogspot.co.uk/2012/11/what-warren-buffett-and-world-poker.html

Also, remember this from George Soros:

'It's not about being right or wrong, rather how much money you make when you are right and how much you lose when you are wrong!'

I'll send out my watchlist in the next day or so. But it looks like the risk rally could start with Gold, Precious Metals and Indices turning.

Sell Indices before the rally? Previous trade update...

Whilst I am bullish on Global Stock Indices in the medium to long term, most indexes have put in decent reversal patterns which suggests a short term bearish bias. When the US finally sort out the fiscal cliff, which they have to, then the market could be in for a strong rally. Until that point the market has been rallying on low trading volumes, as the ATR levels are near historic lows during previous peaks.

How then would you position yourself? Well trading is all about having a view based on what you see on the charts. Then it's about executing that view in a risk managed way. Whilst I could be wrong on my analysis, as may be the case with AUDCAD - the news of another rate cut from the RBA was taken positively from the market, it's all about reward to risk at the end of the day. Therefore, on the majority of these short positions I will be risking less than my usual stake and then position my full stake on the rally, if it comes along.

This is how I position myself in the markets. How about you? Do you have a thought out structure and plan everytime you sit down to trade? If you don't, you need to. After all, this is a business and if you fail to prepare, you prepare to fail.

Charts: DAX, FTSE, DJIA - remember this is just the selection criteria. Execution of the trade depends on your strategy, risk rules and time frames to trade and whether we get the right signal to take action!

Market overweight on the Yen....COT report suggests

The Japanese Yen has been heavily sold off on the back of strong comments from opposition party LDP. This currency could get a little choppy in the run up to the elections on 16 December. However, technically we have some interesting setups. Last week's Commitment of Traders report showed an strong increase in the number of Yen shorts which is at a 5 year high, whereas the Yen didn't move that much relative to the positions taken - suggesting a fundamental divergence and a heavily overweight bias.

I'm currently looking at GBPJPY and CHFJPY short as below: