The Euro (EURUSD) is 8 ticks off posted resistance, so the currency may bend over for a pull back . No short yet, but for traders that are long, consider moving stops to 1.3170.

Dollar-Yen (USDJPY) is flying off 60-240 minute pullbacks, but nothing new on the daily charts yet (see graph below).

The EURJPY cross also had a nice pop up, which now appears may take a breather. Agressive, short-term traders may consider selling rallies once 15-30 minute trends turn lower, for a potential pullback trade to the 104-103.50 area, where it may get another longer-term buy (see Euro-Yen chart below).

Gold and Stock Market Forecast

Exit 1/3 gold (XAUUSD) long positions and move stops on remaining positions to 1738 to lock in a bit of profit.

Stocks may roll over to the south side, so be looking to sell intra-day rallies between now and March 7 in the US Stock Market, should the 30,60,240 minute trends turn down.

If you have trouble understanding the analysis above, read the February 20th Forecast and make sure to continue visiting the FX Forecast section of our blog to receive continuous updates on currencies, as well as on other commodities and markets.

If you enjoyed this forecast or would like to tell us what you think, please leave your comments below or click our like buttons.

This Forex Forecast launches our series of Professional Market Analysis. We start the week with an analysis of the EURUSD (above), USDJPY, and USDCHF.

EURUSD is currently long (see chart above), but at short-term resistance, with more resistance directly above @ 1.330-1.333 area. A move above the resistance means buying the dips; otherwise, our trades are asked to exercise caution at these areas of market resistance.

USDCHF Forecast

The US Dollar against the Swiss Franc, USDCHF, is currently at .9147, and looks bound lower to .8618 area, the .382% retracement of the July to December rally. A print greater than .9312 would negate this view. Until then, consider selling rallies.

USDJPY Forecast

Dollar-Yen (USDJPY) appears to be putting in a longer-term low (even the Yen against the Euro looks weak; that is, the EURJPY cross is strong). However, now I expect a 1.5 to 3 day pullback. Consider buying dips in the USDJPY (and EURJPY) beginning sometime after Tuesday or Wednesday, and/or near the price area of 78.33 to 77.50, with a stop loss @ 77.30.

XAUUSD Gold Forecast

Buy gold on daily/weekly breakout above 1737.30, stop at 1716.90, target 1 = 1772, target 2 = 1800. A print below the 1720-level for XAUUSD would negate this view on gold and set up for a lower move to 1704 again.

S&P500 Stock Market Forecast

SP500 is very overbought for now, so I'm looking for a pullback to begin between Monday (today) and Wednesday, and provide a 3-10% dip into March 3-7th. If that does not happen, perhaps the market would top on March 7th, but now its very stretched.

The measured move from a pennant or wedge is still higher but investor psychology is far too bullish for much higher prices right now. Look for a short term pullback, then one more rally attempt. Whether a new high is made in this series or not, I expect a sizable top soon and some negative market fireworks around mid May, so keep and eye out for that time band for potential harsh realities to come to the forefront. Perhaps mid March this year or next is when global hostilities may increase. It's the leaders, not the people, who seem to be the problem.

If you enjoyed our Forex Market Analysis and market forecast above or would like to tell us what you think, please leave your comments below or click our Facebook or Google+ like buttons.

This YouTube video demonstrates why Forex Traders who don't use stops and instead allow open positions to float indefinitely to the downside, don't stand a chance to succeed, let alone make it to the professional level.

The Forex video proves mathematically that as a trader's average loss grows disproportionately large relative to the average win, the percentage of winning trades required to succeed becomes impossibly high. As a result, it is only a matter of time before an un-professional trader with this profile be disciplined into submission by an unexpected market-moving event ("Black Swan").

Any trader who applies to our FastTrack Professional Forex Trading program who doesn't limit losses using prudent risk management will be automatically disqualified.

To see a list of all our videos, visit Forex Day Trading's Blog Video Section.

On Parts I and II of the Unprofessional Forex Trader series, we covered the warning signs associated with traders who don't use stops and hold on to losing trades indefinitely, as well as provided the evidence that shows why this trading group doesn't succeed over time.

But if you suffer from a can't-take-a-loss affliction, there is hope! Based on our decades of experience incubating traders and money managers via our Traders Wanted program, here are three suggestions on how to effectively deal with the inability to take it on the chin:

1. Face the Facts. Most Forex Traders with risk management issues fail to improve their condition because they typically deny that they have a problem to begin with. Consequently, the first step in solving the floating loss dilemma is for traders to admit it exists. That means they have to stop doing foolish things such as calling themselves "scalpers" at parties, while holding on to dead weight in the market every day or making senseless, delusional claims like "stop losses are for sissies." Just face the facts and admit it big guy! That is half the battle right there.
    
2. Focus on a Strategy with Good Risk Management. There are an infinite number of trading strategies out there that teach you how to manage risk properly, cutting your losses when necessary. Oh, and you don't have break the bank to learn them.
     
   You can find numerous Forex forums, chat rooms, and blogs that discuss these things. Start reading and learning. It takes time, but what is the alternative? Going back to a pet-the-grenade Forex style of trading? You have no choice! You can also practice what you eventually learn on a trading demo. If you can't control yourself in a demo environment, you probably won't make it as a Forex Trader in the real world either; so why bother?

   Another possibility is for you to start applying one of the proprietary strategies we will send you when you request one of our 60-day MT4 demos. This is part of our unique FastTrack Forex program, which we created to incubate successful prop traders and money managers in an accelerated fashion, giving them the opportunity to manage capital for Forex Day Trading and our clients.

3. Tune Your Trading Mind for Success. It is true that Forex trading is mostly mental; so even if you follow our earlier advice on numbers 1 and 2, you still might fail because of psychological reasons. Consequently, getting your mind in the proper state and conditioning it for trading success is essential.
    
   One potential solution is to practice meditation to reprogram your trading mind while in the mental state of Theta (read our blog post, Forex Training Should be Mental, for more information on the Theta brainwave state and mental re-conditioning). Unfortunately, this is a difficult process that often takes years to master.

   A shortcut around this might be to use the FX Mind Tuner, which was designed to minimize trader involvement. This unique tool is part of our FastTrack trader recruitment program, and was created by professional traders and PhD's in subliminal programming. It works on the Trader's Subconscious Mind while he sleeps. One of the problems it attempts to correct is the psychological inability to take losses, a requirement to reach a Pro Trader status. That is why we highly recommend it to every currency trader, especially to those suffering from a loss anxiety.

This is the last piece of the important 3-part series on pro trading. If you have made it this far, we congratulate you! We can also assure you of one thing… If you follow the advice we have provided here and learn how to deal with your losers and stop losses correctly, you will dramatically boost your chances of becoming a successful Pro Forex Trader.

We would love to hear what you have to say about our suggestions to help traders deal with the floating loss problem. Please use our like buttons below to like our post or tell us what you think by submitting your comments.

If you haven't read the Un-Professional Forex Trader – Part 1, So You Can't Take a Loss? and Part 2, Why Not Using Stop Losses in Forex is a BIG Mistake, please do so at this time.

Both beginners and advanced traders can watch this YouTube video to learn what the warning signs are that show a trader has a problem cutting his losses; a very big problem that prevents most novice traders from reaching the Pro Level.

The video also includes an additional, but important, example showing an actual account traded on the MetaTrader 4 platform (request a 60-Day MT4 Forex Demo here).  The final numbers look exceptional to the untrained eye and are apparently the work of a very skilled FX Trader – when in reality, they conceal a very high level of risk taken by a trader with a problem realizing losses.

Moving forward, Forex Day Trading is making a big push to include a wide variety of free videos in this new Forex Video Blog category. This will include educational and training videos that are part of our FastTrack FX Pro Trader program, as well as currency analysis and forecasts.

For an up to date list of our videos, you can also subscribe to Forex Day Trading's YouTube Video Page.

Having a Forex Stop Loss Strategy to limit trading losses is a must. Every successful Forex Professional, has one. Here are three reasons why the failure to control losses is a gargantuan mistake (Read Part 1 of The Unprofessional Forex Trader).

1. Risk is Much Greater Without the Use of Stops. This may seem obvious, but it cannot be stressed enough. Having a strategy to control losses is so essential, that it is one of the requirements in our Professional Traders Wanted program. This is why…Every time a Forex trader opens a position, he is exposed to market risk, since the price of the position will fluctuate and so will his account equity. Consequently, the longer a trader keeps a trade open, the longer he  will be exposed to market risk and the greater his total risk will be.
    
   Un-Professional Forex traders who hold on to losing trades waiting for a recovery have the greatest risk exposure of all. A losing position can gradually become more negative over time, getting bigger and bigger until a trader blows up in the process.
    
2. Black Swan's Hate FX. In the world of professional Forex trading, the term "black swan" is used to refer to an unexpected event that can drastically change the prices of currencies.
     
   Any trader caught on the wrong side of trade during a black swan event can be destroyed; especially traders who use leverage (and most traders do).

   Traders who don't use stop losses and fail to control their open negative positions properly are more susceptible to total devastation during a black swan. All it takes is for the market to hiccup in the wrong direction and the party is over. On the other hand, a Forex Pro who uses proper risk management and works with stops runs a much lower risk of being affected by an unforeseen, market-moving event.

3. Unrealistically High Winning Percentages are Unsustainable. "Winning Percentage" measures what percent of profitable trades a trader has achieved. Any trader whose losing trades are much larger in size than his winning trades will need many winners to make up for one loser; in other words, he will need to maintain an extremely high percentage of profitable trades to stay afloat. Even though a trader might survive with a low average-win-to-average-loss ratio for a while, all it takes is a streak of consecutive large losses to force him to look for a different career.
    
   Un-Professional Forex traders who do not use stop losses on their open positions at all and allow open losses to frequently sink into oblivion, are in the worst shape of all.

   This can be proven mathematically (a special treat for the technically inclined!) with the equation below, which shows what a trader's winning percentage (Wpct) must be in order for the trader to be profitable, based on the his average win (AVGwin) and loss (AVGloss). The equation demonstrates that if the average loss per trade is much larger than the average gain, the percentage of winning trades must be greater than 100%, which is mathematically impossible (to see a derivation of the winning percent formula below, click here).
   

   Consequently, the FX trader who doesn't use stop losses will more than likely fail over the long run. All it takes is one bloodbath and his future professional trading career becomes no more than a distant memory.

This is Part 2 of the three-part "Un-Professional Forex Trader" series. In the next blog post, we will provide crucial advice to help traders effectively deal with the inability to take losses.

If you have any comments on the importance of using a stop loss to trade Forex successfully, please add them below or click to join Forex Day Trading's Google+ or Facebook Pages.

There is nothing more detrimental to a Professional Forex Trading career than the inability to take a loss!

As risk managers always in search of talent through our FastTrack program, we come across this un-professional Forex trader specimen all the time.

Traders who cannot let go of negative positions typically have their days numbered.

Since this is such a big problem in the trading world, we will make some suggestions to effectively deal with the issue; but before proposing a solution, let's look at some common signs that indicate you have a problem with handling losses correctly.

3 Common Signs that Show an FX Trader has a Problem with Losing

An addiction with floating losses rears its ugly head in different ways. These are some common ones:

1. A High Maximum Adverse Excursion on Many Trades. Maximum Adverse Excursion or MAE is the maximum amount of pips an open position goes against a trader before the trade is closed. For example, if a trader makes 10 pips on a EURUSD trade, but the position was down a maximum of 20 pips at one point in time while the trade was open, it is said that the MAE on that trade was 20 pips. The diagram below perfectly illustrates the essential concept of MAE:

   

   Traders with this loss-anxiety disorder would let a position drop off a cliff if they had to – anything to avoid having to take a loss.

   As a result, many of the positive trades these un-professional Forex traders make have a relatively large MAE. Even though systematic traders who develop trading systems sometimes use historical MAE stats to determine where to set their stop losses, a repetitively high maximum adverse excursion usually spells trouble for the average trader that has not learned how to take a hit and is just one or a few trades away from destruction.
    
2. Most or All Trades are Positive. Some of you might be thinking, "How could it be a bad thing if a trader makes money on all his trades?" It's really quite simple…99 out of of 100 times that we see a statement with mostly winners, it indicates that a troubled trader is at work; one that has been lucky to pull the stunt off so far and hasn't had a big loser blow up in his face…but there is always a first time! Look, nobody is perfect. It is just not possible, due to the chaotic nature of the FX market and probability, to win all the time. Even a win ratio of close to 90% is usually suspect in our book.
    
   When someone wants to manage money at the pro level and applies to our Professional Forex Trader program as a proprietary trader or money manager with a perfect record of mostly winning trades, only one cliché comes to mind: "the calm before the storm!" That's when we typically run for cover.

   So how does a Forex trader pull it off then? How do they generate real statements border lining on Utopia, concealing the real risk behind their trades?

   It's easy. Most of the times, they use the MT4 Forex platform to create their work of art (request an MT4 Forex demo here).

   MT4 or MetaTrader 4 is the most popular platform in Foreign Exchange trading. Unfortunately, it does not take MAE (see previous section) into account when calculating the maximum drawdown (max DD), a very important measure of risk. It only uses closed transactions to make this calculation. Consequently, a trader's statement may display a drawdown of 10%, when in fact the equity could have been down much more than that – before the account recovered and the floating positions at risk were liquidated.

3. Habitual Praying while Trading. What?!?!? Praying?!?!? Is this about Forex or religion? Don't worry…although this may sound funny, it is true. Please note that we are not against the use of praying by any means; but we don't recommend that it becomes the recovery strategy for your out-of-control losers. It's sad when you see so many traders in FX who are afraid to let go, praying and whining about their floating losses. Get real! Trading is about CONTROL, period! To become a professional Forex trader, strict risk control is required. Trading and praying don't usually mix.

This is the first blog post in a three-part series on Professional Forex Trading. The next post will discuss why stop losses in currency trading are so important and why avoiding the use of stops is the wrong way to go.

Leave us your comments and thoughts on traders who can't take a loss below or join the Forex Day Trading Google+ or Facebook fan pages.

The Forex Market is slow today, with most financial centers closed on the day after Christmas.

Liquidity and trading volume will likely remain low until after New Year's.

Today's reduced liquidity levels are causing wider currency spreads across the entire Forex industry. Periods like these also increase the risk of price spikes due to liquidity crunches and carelessly managed orders.

Consequently, we advise our Forex traders to proceed with caution when trading currencies during the Holiday period, and sticking to the most liquid major pairs (since the crosses will more than likely witness the largest surges in spreads).

Traders who operate during Asian hours using non-trending Forex strategies with relatively low average profit levels per trade (as well as those who employ a Forex scalping strategy) are at the greatest risk of all, since even one quick price spike could rapidly erase days or weeks of accumulated gains or cause a substantial loss in the portfolio.

In this environment, the Euro-USD has so far failed to take out the low near 1.2870 set on January 10, 2011 and it appears that the support level caused by that low will not be broken for the remainder of the year. See the daily currency chart below.

No one knows what Armageddon-status 2012 will hold in store for the Forex Market, but we guarantee that the ensuing volatility will be off the charts!

Until then, avoid the wide spreads the Holiday has brought upon us.

Happy Holidays from Forex Day Trading!