$874 profit in four trades

Market moved and I was in, all my order executed on time and happy with the results. It could have been much better in this market sentiment. I was extra cautious and cut down all my position size into half, little annoyed there.

Stocks tumble on worries about jobs, European debt

Todays link

A look inside hedge funds

Money management

1. 1% risk per trade of the allocated capital and 5% risk for all open position.
2.First target (first partial) at 1% gain, second target at 2% gain. Rest of the open position will be keept open till the system say different thing.
3.ATR allows the open position to breathe in the market volatility .Setting stop at the ATR level is most logical and effective.
4.If the ATR does not apply ,high of the consolidation is the second best place to set stop.
5.Consolidation some times become too large to set stop, in that case we will use 1% rule.

Trading with Dow Theory

There are many times in a bear market when people (especially the media) start getting excited. The market starts to rally, and before you know it we have truck loads of market experts calling a new bull market. But how do you look through all the news and noise and really tell if a new bull market has really started?
Here is one way that has been very successful in keeping out of bad trades and staying in good ones over the last 50 – 100 years. Originally coined from Charles Dow’s own writings (if his name sounds familiar, it’s because it is one half of the “Dow Jones Index”) Dow Theory, as it is now called, is simple and quick to use. But why would we use Dow Theory?
Here are the main benefits:
1: Dow Theory is an easy and measurable way to recognise when the market is heading up, and when the market is heading down (and likely to continue).
2: As Dow Theory is viewed on a weekly chart, you only need to scan the market once a week. This means you can work full time and still trade successfully.
3: Being a weekly strategy, you get to capture the longer weekly trends. These will usually range from 5% to 30%, but can stretch out to 50%, 100% or more.
4: Dow Theory is easy to recognise. You do not need to have any fancy indicators, volume, or astrological charts on your screen to recognise a Dow Theory signal.

Now, according to Dow Theory, to have a bear market we must see a peak in price, followed by a trough, then followed by a lower peak. Once price trades through or closes below the previous trough, this is our signal to sell.
By the same token, to have a bull market we must see a trough, followed by a peak, then followed by a higher trough. Once price trades through or closes above the previous peak, this is our signal to buy. If this all seems confusing, I find a picture says a thousand words:

http://www.asxmarketwatch.com/2009/06/trading-with-dow-theory/

Pending orders

After two weeks of sell off, it seems like market having some rest. Consolidation period might be over at any time or be extended for weeks. Some of my pending orders have been set to the important levels, if the market takes my order I will add some to it.

Making Millionaires Out of Average Joes

Sometimes that magic million dollar mark can seem out of reach. I mean – you earn your $50,000 paycheck, and by the time you’ve paid the mortgage, the car, the kids, the wife / hubby, the insurance, the rates, the groceries, the renovations (this list could go on for a while) there is hardly anything left for yourself – let alone to invest!

The good news is that a million dollars and beyond is actually not out of reach, and you can achieve it with less effort than you’d imagine. You don’t even have to do anything crazy like sell your grandmother or walk across hot coals – you just need to know how to use a simple mathematical tool called “compounding”.

The Eighth Wonder of the World

Compounding – a wise man once described it as “The eighth wonder of the world”. You may have heard of him – his name was Albert Einstein. Others have said that the moment you understand it your world will never be the same again. But, what is it exactly?

Compounding is when you have some money, earn a return on that money, and then re-invest the returns and do not take any out. This has the effect, over time, of earning “returns on your returns”. Now it can start out slow, like growing grass, and this is why many people give up. But with time these small returns grow exponentially, and your grass instead grows into mountains.

Let’s check out an example with a young man we’ll call Jake:

Jake used to buy two coffees and lunch at work every day – costing him around $15 a day. Over lunch one day I pointed this out to him, and also pointed out what would happen if he invested this money instead. Jake was dumbfounded - he vowed right then to change his ways. Over the course of time Jake earned a 15% return on his money – let’s see what happened:


In his first year Jake saved $5,460, but had $5,851 in his account after his returns.
In his second year Jake had saved $10,920, but had in his account $12,643 after his returns.
After five years Jake had saved $27,300 of his own money, but actually had $40,301 in his account. As you can see, the gap between his own money and investing his own money was starting to widen.
After 10 years, Jake had an amount of $125,223 in his account (the grass was really starting to grow).
After 20 years Jake had a nice $681,243.
But this is where the real magic happened (remember those mountains I told you about). In the next five years Jake earned a massive $794,562 from his investments, bringing him to a total of $1,475,805. Jake was officially a millionaire, and all because he started bringing his own lunch to work.

By the way, Jake didn’t even miss the $105 a week by the end of this – it left his account first and he didn’t even see it. And he can now afford to buy any lunch he pleases, whether he wants to continue working or not.

How Can I Get Started?

As you can see the really magic happened in the last 5 years – so I can’t stress enough that the longer you delay the longer it will take you to get there. Now of course you do need some money to invest. If you haven’t got any (or even if you do) the best way to get started is to “pay yourself first”. Set up an automatic transfer into another account so you never see the money, and set aside at the very least 10% of your net income each pay. There is a great book called “The Richest Man In Babylon”, which describes this perfectly. Go for it! A regular person really can become a millionaire, and that makes me happy.
By Dave McLachlan

No trades today

One setup i was interested in but i let it pass . Another boring day full of chopp.

229 dollar profit

Happy new year to all my readers. I have just finished my second part of the advanced forex setups, it was due long time ago. Not much writing was left but I didn’t feel like finishing it. It’s cool to see how a simple step can get into something that you always wanted to do, with or without any influence. I always wanted to be a writer, when I went to school. I wrote some poems for my school magazine, I still have the copy of that .I guess your inner urge, the hunger for creativity is important for anything you want to create.

No trades

Market was extremely choppy and i decided not to trade in this market condition.

How to identify a trend

I was away from my computer in the European session and missed opportunities in EUR/USD and EUR/GBP pair. Clean breakdown from the consolidation gave us good short opportunities in both pairs. If you are new to trading, I will suggest a few important things to clearly identify impulse and consolidation mode of a trend.
1. Size of candlestick: Usually when the market is trending it will make wide range candles with small shadows
2. In a consolidation period we will see mixed candles which mean bull and bear candles and small in sizes.
3. Usually one directional or impulse candle will cover most of the consolidation range..
4. Usually first candle will close with no or small shadow, which shows strength of the trend.

News trading

It’s Unbelievable that I couldn’t get any thing out of the EUR/USD short. This is the problem with news trading, you have gamble, and I never gamble with my money (may be with other stuff).I made some money in news trading before but never felt comfortable trading news. Since I missed the opportunity in EUR/JPY I was already frustrated and tried to get some money out of news trading. I usually follow the sentiment even its news related trading and enter long before news release, well it worked for me .After the news release price dropped 20 pips and I thought it was enough room for the trade to breath ,but when price failed to contain in the range and I had to close it manually.

$813 profit

Martingale principle is popular in FX trading; its works very well if you have a high provability system. High probability means more the 70% winning ratios in trading. my trading strategies are able to produce 70% winning rates in any given time frame ,I was following Martingale principle. Any fundamental news related trading will consider only 50% winning ratios. Yesterday I lost three consecutive trades, though USD/JPY was up 200 dollars, I was not active enough to put it in a break even trade. After three losing trades I was sure that my system will produce a winning trade and I just follow the principle. Here is one problem if you don’t know what’s your system probability is, you shouldn’t be using this principle.

229 dollar profit

Monday is always quiet and choppy and I am always aggressive in my stop and target. Mistakenly I set target at only 3 pips instead 30, which could have made me another 150 .Other than the mistake not a bad trading day.

The unemployment news

US dollar jumped after the surprise in the unemployment news. Federal Reserve might increase the Interest rates long before the traders are expecting it. I wasn’t interested in news trading; just watched the market from the side line. In the European session market was almost dead there wasn’t any opportunity for me.

Change in the emotion of the market

Pattern couldn’t co-op with market sentiment. Strong price action was the reason to enter long in the EUR/USD but sudden shift in the emotion hit my stop. On the other hand the weakening of the market helped my short and I gained almost 50 pips.

Dollar hits 14-year yen low amid Dubai debt fears

Dubai debt fears, dollar slide hit world markets hard

Support and resistance

Support and resistance are probably the most talked elements of technical trading. Some trader’s only trades using S/R, they buy the support and sell the resistance. Of course nothing is fool proof, some days even the best of the best set up wont work, that’s trading. Cost of trading is some losing trades, you have to accept it.

Facts that you need to know:

The more times the old support/resistance levels are tested the more forceful it is if it is violated.

After a support level has been broken, it often acts as a resistance level; this is because traders want to limit their losses and will sell later,when prices approach the former level.

Easy way to trace historical support or resistance is to look for V shape pattern in the chart.
In the chart above we can see that price made several V shape patterns.

Valid trend line

New traders, who want to make money with high probability set ups, should get used to drawing trend lines. Tend line could be the simple tool to profit from the market, but please draw it on the bigger time frame and move to smaller time frame to execute the trade. Some Of my fellow traders send me e-mails about a valid trend line. From my way, when we are able to connect to points (HH,HH and LL,LL) we get a trend line and when the price touch the line third time and bounce back to the original trend we can say it’s a valid trend line .

Slow start

I had to go to Canberra over the weekend for some reason. This is almost a year ago since I had an escape from Sydney. I had a nice time there with my wife, but worst part is good thing always finish quickly. We arrived at Sydney domestic airport Monday evening. I had a chance to look at the market not before 8 pm Sydney time, which was already too late for any entry. I tried AUD/JPY didn’t work well, closed out break even.

MMDC result: $573 profit

This week market didn’t have any direction, best time to lose money in the market. Good news is the whole week I traded half of the regular position size, which resulted in less profit, only 573 dollar gain this week. In this kind of market, I shouldn’t complain about any profit.

Trend line trading:

Trend line trading is one of the most popular trading system that I use, as far as I remember most of the time it’s bring very good outcome from this system. So what you need to know to trade trend line system, answer is, you just connect two valid points and bingo, you are in the right track. Monitor the price when it comes close to the line, how it behaves, if it started to move away from the line, than its time to jump in the trade after the completion of the candle (what ever time frame you are trading). If the price break throws the trend line, wait for the pullback to enter the reversal entry.Detail of this system is available in my course.

Change in market sentiment:

Gross Domestic product (GDP) is the primary gauge of the economy’s health. Healthy economy should create job in a moderate phase, job hiring dropped from last quarter, which does not support that. US GDP advance increased from -0.7 to 3.5% which moved the market sentiment in the New York session. Economic commentators say that stimulus plan and “cash for clunker” helped the economy to recover from the recession. The national association for business economics thinks this growth will slow to a 2.4 percent pace in the October –December quarter. So we might observe a mixed economic data in near future.