The only source of knowledge is experience

This week has been a good week to take off, shame I didn't! The markets have been very subdued with some volatile moves, especially today with the EU payment to UK farmers where the British Pound rallied. This week was probably the toughest week I've had in a while, purely because I've been working from my desktop and obviously wanting to trade. I had to go back to my old tactics of sticking a post stick note on my screen saying: 'We get paid to be disciplined; not by the hour'. I was also heavily influenced by my involvement in a trader talk group where there are many intra-day traders. I put in more effort this week in staying disciplined than I did in the gym! I digress, we all know the obstacles we face as traders but not many have solutions to them.

When most traders lose money or don't follow a strategy through, they return to the path of learning more and increasing their knowledge. Some of my traders who I mentor have done exactly this. After not trading for a while due to quiet markets, pressures start forming.....how am I going to hit my target? How am I going to pay the bills, etc.... So what do they do? They forget about their mentor's (me!) years of experience and try and go it alone. They start spending hours a day learning about Elliott Wave Theory, Gann Theory, Cycle theory, Candlesticks, joining forums to find new strategies, etc and are essentially trying to find the holy grail!

Fortunately, I have studied all of the above, do I use all of the above? No. Last night, I met with my network of market technicians from the Society of Technical Analysts at the LSE who are a mix between institutional market technicians and private traders. They all specialised in one field.....some only traded Elliott Wave theory, some spent most of their time analysing and understanding Gann theory, however, most just kept it simple. We all came into agreement that you have to find something that resonates with you, no matter what it is, and go with that. For that will be the simplest method for you to implement on a daily basis, allowing you to focus on the more important aspect of trader psychology.

My own view is that the only source of knowledge in trading is experience. Most successful people in life have a mentor that inspires and motivates you, holds you accountable, challenge your thinking to make you understand it in your own psyche, provide new ideas and help you achieve your goals. This is vastly different from a coach, a mentor has been there and done it and you are their to learn from their experience. I have been fortunate enough to mentor some dedicated and hard working individuals for some time now. It is remarkable what one can achieve on a personalised basis. Being around the right peer group is essential, or to not have one at all if there is no one like minded!

Experience counts for everything.

As Bruce Lee said: "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times"

Best,

Jitan

This week's watchlist

Hi Traders,

Here are some potential currency pairs I'll be watching this week. This is just the SELECTION criteria, our execution will depend on our trading strategy and so on.

These include AUDNZD, CADCHF, GBPUSD and EURUSD.

Good luck

Today's trade setup - AUDCHF and still EURAUD, EURCAD,

Morning folks!

After a great Arsenal result here's some potentials I'm looking at:

EURAUD/EURCAD - already in off the daily bar setups, however, once and if starts trending in our favour will look to capitalise intra-day as could be a long phase 1

AUDCHF - annotations are on the chart below but we have a low test bar/hammer false breakout, 3rd touch trend line from August 2011 lows, 61.8% Fibonacci retracement, RSI/Stochs diverging. There are various ways to enter this trade - off the daily low test bar, off the intra-day higher high and higher lows, etc....follow your rules!

Happy trading!

Potential Trade Setup tonight...

Hi Traders! After some much appreciated feedback from you here is a potential trade I am looking at this evening: EURAUD. Why? Look at the chart :)

SELECTION: Price has retraced to a five touch trend line from 2011 highs, the 61.8% retracement from May's high to August's low and the 200dma

TIMING: RSI divergence is showing us that the buyers are potentially exhausted allowing room for sellers to enter the market and we have a clear ring high/high test bar setup

MANAGEMENT: Given previous phase 1 cycle lengths lasted 3 months and that the beginning of phase 2 in Feb/Aug 2012 came off the 1.618 retracement this trade clearly has some room to continue its overall downtrend

Today's trade setups

Hi Traders,

Here are two trades I am in and have orders to get me in: (more details to follow)

EURCAD: Short
NYMEX Crude Oil: Short

Friday wrap...

MARKET NEWS

After the disastrous US employment numbers released last week (96k actual vs 126k expected) the market priced in a further round of quantitative easing with the US Dollar dumped across the board. As expected the market began the first part of the week in a range as all eyes were focused on the German Constitutional ruling court on the legality of the ESM. A negative decision on this would have been disastrous for the already embattled single currency. Therefore, with the market expecting a positive decision and the pricing in of QE3 due to Ben Bernanke's previous FOMC comments, the risk on sentiment for the week was relatively clear and the intra-day traders have faired very well in recent weeks. The US Federal Reserve's FOMC actions were classed as very aggressive as they introduced QE3, $40B per month on MBS with no limit, a cut in 2013 GDP forecast and potential rate hikes in 2013. Gold rallied strongly on the news as the S&P 500 reached 4 year highs of 1460 and USDCAD reached 13 month lows. EURCHF also saw some welcome movement as SNB Chairman Jordan talked up the EURCHF peg.

TOP TRADES OF THE PAST WEEK (mainly intra-day due to high news announcements)

1. AUDUSD - Pivot Bounce Long 10.09.2012 After bouncing off its daily 38.2% retracement level from June's low to August's high, this pair rallied strongly as the search for yield continued on a backdrop of a weak US Dollar. Simply trading off the daily pivot point with a stop below S1 and target just below R1 resulted in + 1.5%

2. NZDUSD - Pivot Bounce Long 11.09.2012 The commodity rally continued as inflation fears set in due to QE3. However, price action has been relatively clear and showing a very strong trend. Trading as above resulted in +1%

3. USDSGD - Consolidation Break Short 11.09.2012 Continuing with the sell off in the US Dollar, this pair trended aggressively as investors shunned a weaker dollar. This pair consolidated in a 50 pip range before breaking out in the direction of the trend. This breakout resulted in +2%

4. GBPUSD - Pivot Bounce Long 10.09.2012 As investors shun the Euro for the British Pound this pair has been trending upwards for the past four weeks. Trading pullbacks to levels of support faired well for traders, as this trade resulted in 1.5%

5. S&P500 - Fib/Divergence Long 11.09.2012 Price retraced to the 38.2% Fib level and diverged on several oscillators. Trading the inside bar as a price action confirmation resulted in +4%

EFFECT OF THE NEWS LOOKING FORWARD

With most of the key news announcements out the way, attention now turns to Greece, Spain and Italy and whether or not they will ask for a bailout and seek the aid the ECB has already put in place (the ESFS bond buying scheme). Price action will be key as markets and macro players position themselves for the last quarter of the year. Commodities will be strongly looked at as they have had the most aggressive moves in recent weeks. Seasonal patterns may also come into the forefront as demand for Gold and Oil increase as the Western hemisphere prepares for the Christmas and New Year period. Australian Dollar will be one to watch in coming weeks, as well as EURNZD and EURAUD as deleveraging takes place. Watch the volume on the rising equity markets as it could be a precursor to a potentially volatile  period as US elections get more aggressive towards their primary in November. As always follow price action as a leading indicator. 

Best,

Jitan

Friday wrap....(slightly early!)

Hi traders. As I'm off to the US tomorrow here is my round up of the week:

MARKET NEWS

 

The first day of the week experienced light trading volumes due to a mixture of factors. Whilst the US and Canadian public holiday aided in the range based day, most of low volume was due to a fairly choppy session at the end of the prior week. The Jackson Hole summit produced a string of volatility which started early in London trading as the USD was dumped across the board. Most traders analysing the speech concluded a firmly dovish stance. Predictably markets stayed range based as traders waited for details from ECB President Mario Draghi's speech at the ECB press conference on Thursday. The US ISM Manufacturing data and Non-Farm Payroll were also closely being watched. However, on Wednesday the Euro rallied 100 pips after media reports suggested that the European Central Bank may buy unlimited amounts of short-term government debt to ease the Eurozone's financial crisis. Traders and investors alike have been expecting ECB President Mario Draghi to unveil the bond buying scheme at Thursday's meeting but details were clearly leaked early on. This expectation was clearly priced in as the Euro has been grinding higher the past month supporting the economic theory of 'efficient markets'. Precious metals also experienced volatile price action as it has been the pure QE3 play. As the market fears another round of Fed quantitative easing due to poor US data, gold rallies and vice versa. In Asia, the Australian Dollar found some relief from its one month straight sell off due to positive employment data as well as investment bank reports circulating that Australia is not in a mining bubble. This short covering was also buoyed by the rise in Gold due to Australia's status as the biggest exporter of the yellow metal.

 

TOP 5 TRADES OF THE PAST WEEK

 

1. NZDUSD - Pivot Bounce Short 04.09.2012 Trading the bearish trend, simply waiting for a pullback to intra-day levels of resistance has worked very well in recent weeks. This trade was further supported by the 60m 50ema. +2%

 

2. EURNZD - Low Test Long 05.09.2012 This pair has been rallying aggressively the past month. After four 60m low test bars during the Asian session, this pair was poised for a strong move to the upside. Simply trading off the low test in the London session resulted in +2%

 

3. GBPAUD - Pivot Bounce Long 04.09.2012 Tracking the sell off in commodity currencies, this pair as been rallying strongly as investors shy away from Europe and look to invest into the stronger UK. This pair low tested on the 60m 50ema on the European open and resulted in +2%

 

4. GBPNZD - Pivot Bounce Long 04.09.2012 Staying with the theme of the commodity sell off, this market has been highly correlated to GBPAUD. Trading the pivot bounce resulted in +1.5%

 

5. AUDCAD - Pivot Bounce Short 04.09.2012 As the Australian Dollar has been dumped the rise in Oil prices has made AUDCAD a strong pair to trade. The daily pivot resistance level was further supported by the 60m 50ema and resulted in +1.5%

 

EFFECT OF THE NEWS LOOKING FORWARD

 

All eyes are now on the Fed's FOMC statement and economic projections on Thursday as well as the German ruling court announcement. The Fed's actions will typically be priced in from the Non Farm Payroll figures, so analyse and follow price action. Intraday traders be careful of volatility around these news announcements. Thursday also has an Italian 10-year bond auction which depending on results could shed some light on which country may ask for a bailout first. However, with the Fed speaking later in the day, it will have to be a big disappointment or surprise to have any effect. The SNB Monetray Policy Announcement could also be fairly interesting as their view on further diversification to help keep the 1.2500 peg to Euro could affect the markets as traders sit on their positions. In any case follow what the chart is telling you to do, rather than what you think should happen.  

ECB details leaked....

The euro rallied 100 pips after media reports suggested that the European Central Bank may buy unlimited amounts of short-term government debt to ease the Eurozone's financial crisis. Traders and investors alike have been expecting ECB President Mario Draghi to unveil the bond buying scheme at tomorrow's policy meeting, this was clearly the case as Euro has been grinding higher the past month. Given the economic theory of 'efficient markets' - everything is priced in. 

However, it is important to realise we still have NFP this Friday, the QE3 and German ruling court decision next week. Expect volatile markets but follow price action as a leading indicator. 

My favoured pairs to be watching over this period are the currencies where I expect a short covering squeeze on any surprise news announcement. These include EURCAD, EURAUD, EURNZD and to an extent EURUSD. Gold is also one to watch closely but be careful of volatility. 

Good luck!

FX Watchlist & Update

The end of week trading session proved to be quite choppy due to the Jackson Hole summit. The volatility started early in London trading as the USD was dumped across the board. Most traders analysing the speech concluded a firmly dovish stance. Gold has been the best pure QE3 play and is now an interesting chart coming into mid-September. All eyes on 13 September where a final decision is due depending on this week's data. I'm personally wary of entering end of day trades in week one and two of September due to a raft of central bank announcements, the QE3 decision on 13 September, the German ruling court decision on the ESM on 12 September and the recent downgrade of Catalonia to junk status. Looks set to be a volatile September. I will try to keep you posted on any trades I am close to entering but am currently flat until the market sentiment is more clear. 

Trades I'm in: 

EURNZD long and NZDUSD short.....managing these trades from a while back

Trades I'm looking at: 

AUDUSD/Gold Long (seasonal bias is bullish mid-September). We obviously have to bear in mind the horrible data that keeps coming out of China that has been weighing on AUD the past month. This also coincides with EURAUD/GBPAUD short positions due to strong rallies. 

DJIA/Stock Indices short.....seasonal bias is short due to US election year and we have a potential Dow Theory sell signal (will post during the week).

FX charts with explanations: