No Brainer Trades

Long EUR/CHF 1.5182 area

2009-07-01T04:16:00.004-04:00

Spike base pattern caused by the SNB intervention:

Update: Hit July 2, 2009 for +67 max pips so far.

Even Soros Won't Touch It

2009-06-30T20:15:00.007-04:00

If you think you're alone in hating the current mess and financial uncertainty we're seeing out of the markets lately, don't worry; you have friends. A lack of conviction is about the only tone caught out of this short clip. Forget trading, preserving capital also means stepping aside. Its a short video; the entire interview can be found on the WSJ.com website.

CHF Intervention and Short Term USD

2009-06-25T01:58:00.008-04:00

When we look at the range of opportunities as traders, one world typically comes to mind: volatility. Today provided us with perhaps some of the biggest string of events we have seen a several weeks, despite the ongoing, consolidated patterns across the breadth of majors.

If you follow my updates, I’ve been mentioning the 1.5000 SNB ‘tolerance’ level on EUR/CHF for the past week. Close to getting hit yet again yesterday, the SNB reacted, this time in a very aggressive manner. Though they declined comments regarding any action, reports were coming through of ‘direct buys’ from the Bank and one particular UK clearer that spiked EUR/CHF from a low of 1.5013 to a high of 1.5381, for a daily range of approximately +368 pips. USD/CHF created a daily range of +390 pips. The pair currently trades towards the high of the initial spike, and consolidation is to be expected at this point. The luster seems to be over for the time being, and I currently don’t see a clear conviction to either buy or sell either of these pairs for the time being.

Particularly in the low 3800’s (1.3825 or so), there have been reports of sovereign interest buying into EUR/USD. This ‘interest’ was able to prop up the pair last week and bring it to new highs at 1.4138, doubling on top of rumors of European central banks dipping in, buying it over the past couple of days.

Typically, ‘sovereign’ interest is in it for the longer haul, and the pair is likely to meet a string of buyers again should it drop below its current trading range. From a technical perspective, it has broken the down-sloping trendline originally created by a head and shoulders pattern, and did not close below it today. So whilst a string of FOMC reactions, among other intraday events, might have caused the pair to drop lower, bias is still generally geared to the upside. Bank research notes seem to agree. As I scan my arsenal of IB research, ‘Long’ still appears to be the consensus for the time being.

Our major levels of interest below on the pair are 1.3904, 1.3928, 1.3793, 1.3722, and 1.3668, should we see any further declines from here.

The ongoing strength of GBP/USD seems to confirm these thoughts regarding recent dollar weakness. Yesterday, reported Asian sellers in the 1.6600 area helped cap buy orders on the pair ahead of BOE Governor King’s address before the Treasury Select Committee. The intraday decline hit a low of 1.6368, in line with seemingly perfect technical support. Looking at daily charts, the downward sloping diagonal trendline from June 3rd has now been penetrated, and these initial highs are yet again at risk of being taken out. 1.6200 buying pressure never let go of the pair in the last week, with a hard line of institutional interest protecting the pair from lower lows.

Lower levels for cable include 1.6368, 1.6300, 1.6280, 1.6241, 1.6200, 1.6150 (channel low), 1.6090

USD/JPY has been steadily propped up over the course of the past several days, due to the aid of FOMC speculation and a lower than expected trade surplus from Japan. The downward-sloping diagonal trendline has now been penetrated, and we’re seeing a backwards-bounce off of this line recorded yesterday. Regardless, the ‘main events’ are now over for the short term and a correction could be due. Technical analysts still seem to be ultimately targeting lower lows in the weeks ahead. Short term, I prefer looking for sells out of ‘exhaustion’ from the recent speculative rally. In the week ahead, we could continue to see buying pressure matriculate, though it is likely to me met by sellers along the path, looking for broader-term trend continuation.

Levels ahead of USD/JPY include 96.88 (50% ret.), 97.27, and 97.94 (76.4 ret.).

Despite the recent decline of world equity markets, the dollar remains weak, creating a very short-term out-of-synch correlation with risk.

When world markets decline, analysts begin shouting outrageous price targets lower, when no more than two weeks ago we were listening to similar outrageous claims of 1200 getting hit on the S&P in the very near term, etc. But markets don’t simply traverse up or down, and in fact most of the time they remain consolidated. Regardless, this downside risk to the world equity markets is still very much a concern, with more and more reports of long equity baskets getting stopped out and recommendations to go long US treasuries trickling in just about every day now. With this deflection-to-risk scenario developing with the dollar against “English speaking” currency pairs in recent weeks, we have reason to believe that any further increase in world equity markets would accelerate the pairs higher (against the dollar), while any moves lower in world equity markets would simply be muted.

Fading Double Zeros

2009-06-22T20:37:00.008-04:00

Last week, we were discussing the best times to use double zeros.

I argued: Not when price is making recent new highs and new lows, but rather, when price has been 'sloshing around' the zeros for a while and is already in an underlying trend. Today, I caught a good example of this, and thought it was worth mentioning here.

EUR/USD found some uncharacteristic buying pressure early in the US session today and made a quick attempt for the zeros at 1.3900. They worked this time, and priced faded, as we've seen many times before in this kind of situation.

I'm not a fan of using double zeros when price is making new highs and new lows. Others might argue, but typically you'll see a stack of retail orders lined up around these areas (eg to sell in an uptrend) ready to get taken out and feasted upon by an eager crowd of overeager buyers.

Unless there is a strong reason around these areas (when price is making new highs and lows that haven't been seen in a long time) in the form of some fierce support and resistance or other major retracements, will I usually look to fade them.

An example when EUR/USD was on its way to new highs:

And from today:

A Correction Arrives (Finally)

2009-06-18T00:27:00.004-04:00

The S&P 500 has fallen approximately 46 pts from its highs, keeping risk traders at bay and pairs such as GBP/USD, EUR/USD and AUD/USD remain consolidated, with downside support levels under constant pressure.

Throughout this recession we have seen the staunch correlation of these pairs to the world equity markets, where risk trading reigns supreme, and few things have caused them to separate this relationship along the path. The occasional interest rate news and other local events are common among driving what seem to be nonsensical spikes and heavy movements in price, though from a macro perspective, we seem to religiously revert back to this relationship.

The dollar is slightly weaker tonight, after a correction the stock market helped push the pairs higher late in the US trading session. We now sit in the middle of a range that began approximately 2 weeks ago, with lower highs being made across the board.

After 2 weeks of consolidation and indecision among buyers and sellers, the S&P 500 has officially broken through its supportive trendline, and bears are now targeting lower retracement levels. Likewise, the Nikkei, FTSE and FESX are in the same boat, finally falling over from an overheated rally that began in early March.

Because of this, we look to badly needed US dollar strength in the weeks to come on the back of risk leaving world equity markets for the time being, bringing EUR, GBP AUD, etc to lower levels.

A “V” shaped recovery is great for political talk, but reality is another issue. Despite a string of better-than forecast numbers over the course of the past several months, world economic data is still very generally poor and sectors are still in rough shape. What wealth has entered these sectors over the course of the past few months has provided little in terms of sustenance, as more debts need to get paid off from beatings taken over the course of the past year. We had little reason to believe this rally would continue for long; the only question was: “how high before another collapse?”.

But as we all know, markets move up, down and sideways, and this equity market support break could temporarily be the beginning of a head and shoulders pattern or some other mutant of this. When we translate this over to currencies it means we could indeed go higher on GBP, EUR and AUD; it’s still not out of the question, though bias is certainly down.

Particularly for GBP, the currency seems to be resilient to sellers this past week, but downside levels continue to get tested. EUR is weaker; thus, it’s been my weapon of choice to sell when markets are moving lower. Two weeks ago we had strong sentiment leaning to the upside on all of these pairs, and is now vanishing little bit by little bit.

Using GBP/USD as an example, here are our alternatives as I see them now:

For buys:

The downward-sloping diagonal trendline is the first major area of resistance, followed by highs at 1.6618 and 1.6661. A potential move into this area could see a short term retracement, or bounce from the diagonal trendline or highs, followed by a breakout. Ideally, a long position would be taken on confirmation of this momentum , anywhere between the diagonal trendline high and 1.6618. A target on this trade would potentially be as high as the 1.7100 area, if it can clear the 1.6780 area. We would lock ourselves in at breakeven ahead of the local resistance (1.6661) to protect from any failures.

For sells:

Downward pressure on the 1.6239 and 1.6212 area continues. If a failure is truly to occur and in any time soon, we would like to see a day of heavy selling pressure going into this level, ideally selling ahead of this zone to protect ourselves from any false breakouts. The major area of support below this zone comes in at 1.6130 and 1.6114 (retracement confluence) and 1.6089, as well as a slew of rather ambiguous support levels from bumps made on the hourly charts in the most recent uptrend. Because we have a ‘triangular’ pattern taking shape, the likelihood of a big pullback from an area like this (1.6130-1.6089) is possible, though we would prefer to lock our trades in at breakeven and see if we can ‘ride it out’ for lower lows.

In terms of methods for entering trades ahead of these levels, I’ll be posting more in the coming weeks. I’m finding that latching onto trends seems to be an issue for many traders, and I have an armful of techniques I use to do so. I’ll keep you posted. -Steve

Long AUD/USD 0.7675 area

2009-06-16T01:52:00.002-04:00

Looking for a secondary reaction from this area on any failures from the current highs. Also a good bump in the uptrend at this zone.

Over and Under Pattern

2009-06-11T00:26:00.020-04:00

Another pattern which I monitor heavily, serving as an intraday price turning point. These are very reliable if used properly and can be seen on everything from daily down to 15 min charts. Most frequently, you’ll be using them on hourlies.

The easiest way to describe this pattern is a 0-1-0 pattern, where in the case of a buy, price makes a new low; that low is taken out, price comes back up past the initial pullback from the first low, comes back down and uses the base of the first low as support. Its essentially a mutated version of the very common head and shoulders pattern, without the diagonal trendline ambiguity.

Think of it as the top of a 2 dimensional pyramid made of squares, where the blocks on the second level from the top have equal highs.

In the case of a buy:
1. Price makes a new low
2. Price retraces from this low
3. Low is taken out to the downside (price extends beyond it)
4. Price comes back above the initial retracement from the first low
5. Price comes back down and fades the original swing point

The reason we require, in the case of a buy, a higher high on the second retracement, is to disqualify the current downtrend, and initiate a price reversal. Without the higher high, market participants could easily view the current price action as nothing more than a bump in a downtrend, as opposed to a reversal. Reverse this logic for sells.

Like anything else I list here, these are nothing more than patterns that repeat themselves all the time, and some of you might be aware of this one already. They key is to identify, and most importantly, react to them, when the opportunity arises.

Long EUR/USD 1.3669 area

2009-06-08T07:32:00.003-04:00

Going for a bounce on the multiple touches, just below the recent highs....good history here

"AAA" - The Missing Link

2009-06-07T01:53:00.017-04:00

Remember that demo account you had, where you doubled the balance in a matter of weeks? After all, it’s the reason you took your paycheck money and put it in FX to begin with. What seems to be the problem now that you have your own money in there?

I post articles filled with theory and potential solutions but I feel like this is a highly overlooked element that gets ignored far too much in this business. If there’s a ‘theory’ based article I don’t want you to skip, this is the one.

Here are three huge clichés about trading FX that we’ve all heard before, and separate the winners from the losers:

1. The trend is your friend
2. Let your profits run
3. Cut your losses short

They’re clichés for a reason. They work, and they’re true. But doing them is another story.

Today I want to add something to this list:

4. Take Action

Here’s a quote that needs emphasis:

“I watch trade after trade go by that would have been a winner, but the one I ended up taking was a complete loser.”

Some quick shots at this issue off of the top of my head:

1. Never hesitate.
2. Be on your toes. Focus in sharply on your chart and pull the trigger.
3. Control your risk. Most of the time you don’t take the trade because you are subconsciously aware of how much you could lose.
4. Curb the doubt. You know what you’re doing. You didn’t doubt your actions on the demo account.
5. Take the easy ones.

Overanalysis

You rightfully want and should plan out all of your trades, but don’t think that just because you didn’t spend 2 hours planning it out means it won’t be a winner. In fact, I find that the more I think about things the more things get screwed up, to say it plainly. Traders that have tendencies to overanalyze markets get caught up in a freakish pattern of actually undertrading, which is just about as bad as overtrading. In both scenarios the result is, many times, negative, depending on how you do things.

My daily plan is put together in a matter of minutes. I see what I need to see, and realize that there is only so much news out there that is truly going to shape the charts in front of me.
Ultimately, when someone comes into the market with a fist full of cash and moves it sharply, no fundamental data is going to tell you exactly when and where this is going to happen. But the technical levels and methods we use here will. Many of these levels are formed on an intraday basis, however, so constant monitoring plays a major role in your success.

Get comfortable, but not too comfortable

You’re not going to trade successfully if you’re under too much stress. By nature, I ‘m high-strung. I have always been this way and doubt it’s going to change any time soon. I take trades I’m comfortable with only, and doing this allows me to ‘keep peace’ with myself and let the rest follow.

Best way to do this? Profit. Build up a bank of initial profits, and your mind goes at ease on subsequent trades faster than you can imagine. Do what you need to do to post some initial balance higher than what you started with and the rest becomes much, much easier. A way to do this? Next point:

Take the Easy Ones

I use this as the slogan for this website for a reason. There’s no sense in taking trades that are ambiguous or pose a very low probability. Key word of this slogan is “TAKE”.

You actually DO know what's going on. The good versus bad subconscious

When we talk about our subconscious minds in terms of trading we generally refer to it in a negative sense, because usually it comes up when we’re talking about fear of losing. But there’s a good side to our subconscious, one which we don’t realize is there most of the time because we’re too busy remembering all of the bad things that have happened.

Anyone that has a basic knowledge of psychology might be familiar with the "Little Albert" experiemen t, where "Little Albert", just a child, was conditioned to be afraid of small, furry animals. We don't touch the stove because it's hot. We don't put our arms in spinning lawnmower blades for other obvious reasons. In trading, this subliminal conditioning which might have led us to a fear of losing is one which never gets us ahead, as we all know.

But here's the good news: when we learn how to trade, we are subconsciously storing a library of information in the back of our heads. Whether we realize it or not, its there. So when we see something on an intraday basis that is so obvious and so plain, are we taking it? Yes or no?

Most of you are pros already….I can see it in the charts that get posted and the comments that follow. But my experience knows full well that you’re not taking all of the trades you post. Don’t think your knowledge or education is any less than anyone else that takes up trading for a living. Do what is obvious, and use your initial judgment. It’s usually right.

Many times, you know EXACTLY what you’re doing, and how the market is behaving / reacting, but your doubts cloud your actions. Until finally, you get so fed up and bored at staring at charts, you pull the trigger on a losing trade.

“AAA” stands for “Action, Action, Action”.

Keep saying it. Easier said than done, I know. But get it done.

Naturally, I can't stress the importance of all of the other tenets I teach here (eg risk management, daily planning, etc), and this piece of the puzzle is in no way intended to undermine or contradict any of it. Put everything together, and most importantly, when you see it, take it.

1-2-3 Breakout!

2009-06-03T04:45:00.007-04:00

A trend-continuation pattern that I honestly adore. These are best viewed on smaller timeframes, usually 5 minute, where price will tap an area several times before finally thrusting through it. Its important to note that these work best during more volatile times, when there is a lot of volume in the market. Very little drawdown and big reward on these, in a little amount of time, usually.

1. Price makes at least 3 or 4 touches at a high or low area.

2. In examples below, price makes higher lows (lower highs for shorts)

3. Price lunges toward the area a 4th or 5th time, enter long or short before the level gets hit on the intial thrust. Getting in before the level gets hit allows you to move to breakeven in the event of a false breakout, or another fade.

Spike Base Pattern

2009-06-03T04:16:00.010-04:00

Following a spike, price will consolidate towards the highs. These work best when visible on 1hr timeframes. When price retreats back down (or up), the bottom of the consolidation zone acts as support (or resistance) go long (or short) at the base of the initial spike's consolidation zone. These are best played on a 1 hour or greater timeframe, and "V" shaped charges, back into the level should be avoided. The consolidation zone is a prerequisite. Perhaps easier said,

1. Price spikes out of a consolidated range

2. Price pulls back, making a 'flag' pattern

3. When price revisits the bottom of the flag, its used as support

Once you start noticing them you'll see them alot....they happen more often than you might think.

Long USD/JPY 90.95 area

2009-06-03T02:40:00.003-04:00

I dont like posting stuff this far in advance but I dont want to forget about it either, so here it is.....bottom of the bucket and overall a very strong zone historically....that is, if it ever drops down there again.

Long USD/CHF 1.0412 area

2009-06-03T01:53:00.005-04:00

I'm going for the higher of these marked lows because I have a feeling that if price makes it way down to the lowest low, its likely to break and continue into the 76.4 retracement area. Anyway, its an area that's going to be noticed, but its countertrend.

Live Trading Chat

2009-05-28T01:07:00.094-04:00

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Forex trading, fx trading, support and resistance traders trading fx trading, futures options

No Brainer Automated Trading

2009-05-20T22:24:00.010-04:00

When I started this blog, I never thought anyone would ever ask me about automated trading, but I surprisingly get more than enough emails for me to even think of writing this article.

We’ve all been tempted….you go on the one-page advertisement site with the big red letters boasting millions in profits, see the fluke, one time sample statements and the pictures of yachts and big houses and say “gee whiz…I should have that…and all I need to do is pay this guy 100 bucks for his system and its mine, right?” Yeah of course it is. Because life is really that simple. (<-------sarcasm here). One of my goals for this blog is to break my readers away from the millions of claims in false advertising that floods this business, and get them down to reality in terms of what matters most in trading. I have a renewed interest in automated systems lately, mainly because I’ve been looking to diversify into other strategies. There’s nothing wrong with it if it’s done properly, like anything else. The problem is that the retail crowd is exposed to VERY IMPROPER uses of automated trading, and it bothers me to no end. If you have ever been fed up with day trading in general and have ever had the slightest inclination to engage in some form of automated trading, please listen to what I have to say. The main reason we go into this business is to make money, and if there’s an easy way to do it, then we’re going to try to exploit it as best as possible. I get hammered with emails from too many people about making millions in this business, and according to these emails, it’s as easy as ‘clicking a mouse’. Well they’re right about that, but they’re not mentioning the other 99% of labor involved that comes before taking this action. As I’ve said plenty of times before, the retail crowd is immediately at a huge disadvantage mainly because new traders are exposed to this kind of false claims and advertising, and they get (very easily) roped into thinking that they’ll make millions right off the bat. Anyone that has been trading for an extended period of time knows this isn’t true, but try to tell this to someone in their third or fifth month into trading. It’s not easy to convince them otherwise. So what about automated trading? If it’s so easy, then why aren’t these systems making people the millions they claim? Because they don’t work as advertised. Plain and simple. But you didn’t need me to tell you that.

What We Learn from Automated Systems – Relating it to Our Day Trading

I love it when somebody tries to sell me their system, because it means I get to play devil’s advocate. All over the internet people accept trading systems as ‘valid’ or okay because they seem to be coming from a credible source that seems to know more about the market than they do. But then they lose money. Surprise surprise. Everyone hop aboard the idiot train.

Here’s a GREAT QUESTION: If a trading system works so well and was so easy to use: (for example, 3 indicators tell you to do something, so you put a stop loss at xx and a take profit at xx and it works out), then why can’t these just get programmed and do it automatically for you?

Answer: they CAN get programmed and they DO get programmed, but they LOSE money over time, because the trading system is fundamentally flawed.

Why? Because PEOPLE move markets, NOT MACHINES. If a computer could conclude that a massive selling campaign is going on because a Fed Official made a comment about interest rates, then GIVE ME THAT SYSTEM. But it doesn’t exist.

Institutional Versus Retail Automated Trading

One of the wealthiest hedge funds on the planet is run by a man named Jim Simons, called Renaissance Technology, and they’re based here in New York City and in Long Island. Renaissance separates itself from the pack because they engage primarily in automated trading, and returns have never been known to suffer. People joke because they say that walking around Renaissance is like walking around a quant-physics laboratory filled with PhD’s, because these guys are fierce number crunchers. I never worked for Renaissance, but I worked for a fund comparable in size that did engage in automated trading, and I can say this much about the systems that were used:

They are quantitative strategies because they exploit opportunities in the market without any qualitative judgment (unless they start to really lose, of course). For equity driven systems, pretty much all of them used one form or another of off-pricing exploitation, such as various arbitrage / black schools strategies, etc. For the FX systems, some of them used one form or another of fundamental analysis, taking into account interest rates, or whatever other form of economic data was seen relevant or at hand to success, but not all.

But in terms of many of the systems, a lot was purely based on price action and technical analysis, using things like relative strength, etc, in order to make judgments or forecast future price movements. If you read the book Market Wizards, you’ll find some of the industry’s top traders trading in much of the same manner as you or I. Few differences can be found here.

So the ultimate question is this: are many of these systems that get offered to the retail crowd all that much different in terms of general strategy than some of the ones used by major institutions? Surprisingly no, they’re not (yes I’m serious).

What separates them is QUALITY and the experience levels of the programmers / traders / developers that create them as well as the amount of work that goes into maintaining them. Many systems offered to the retail crowd are cranked out on a steady basis, making millions for the creators, taking millions (and then some, if including losses in trading accounts) from the users / customers.

The other big thing that separates them is RISK. Institutional investors or hedge funds are thrilled by the idea of getting a 30% return every year. An uneducated retail investor looks at that number and gawks, because they’re too jaded by the false advertising that has bitten them in the face over and over again in the short time they have been exposed to this market. They’re expecting that goal to get hit in a matter of weeks (I begin to laugh), which is a common but completely distorted understanding of the market.

In a nutshell, the ‘concept’ is all wrong from the beginning, when it comes to systems readily available to the retail crowd. My former hedge fund coworker was promoted to a position at one of our quant funds. His job? To continuously optimize and maintain the system with a team of other analysts. Contrast this to any automated trading system available to the retail crowd, and you’ll immediately see a difference in both care and logistics.

Granted, comparing a system trading over $500 million in capital versus a system trading your $10,000 brokerage account seems like a far cry, but conceptually, the goal is the same: to make money trading. How this gets accomplished is where these systems vary so much.

So getting down to reality, if you think automated trading is going to take your 1,000 account and blow it into 1,000,000 within a year, think again. None of them will.

If you have a system that you are convinced does otherwise or proves me wrong, send me live, auditable proof, and I’ll write a public apology and note your system for the books to all of my readers. But I doubt this is going to happen.

I bought FAP Turbo – Read Before You Judge:

That’s right, I said it, I bought this thing and made the author even wealthier than he already is (until my refund was processed). I was curious and needed some fuel for this article; what can I say? Right on the blog, quoting from a public chat, the author of the system recommends for ‘aggressive’ settings xx, xx and xx to be input as certain parameters.

So dum deed dum - As usual, I start with risk, and asked myself: how much am I risking at these settings? The answer: 75% or more of my ENTIRE account in a single day. WHAT THE...????!!!!!! Anger boiled over me for the creator of FAP Turbo, for making this world dumber than it needs to be.

Let me make this clear: using a setting like this is like jumping off a cliff, and it reinforces the lack of knowledge out there. They have a subscription list that consists of about 25k people or more, and this kind of knowledge is being passed along to every one of them. It’s no wonder so many people lose money in this business.

I’m not saying the system isn’t profitable, but I'm not endorsing it either. In backtests at ‘reasonable’ risk settings, it did fine (though spreads are a major issue for this system so backtests were very unrealistic, something else they don’t tell you off the bat).

What bothered me is the clear show of total carelessness coming from its creator, telling his clients that its okay to use settings like this because it will ‘double your account every month’, without ANY acknowledgement of the possible LOSSES that could have occurred along the way. Take two of these in a row, and you just blew your entire account. This is a guy that claims credibility just because he used to work for the likes of Morgan Stanley (given his advice I assume probably in payroll) among others.

I look at it this way: an inexperienced client reads something like this, and carries it onto his or her manual day trading, and blows all of their very hard earned savings in no time. The 2nd tier consequences are horrifying, and it’s a completely unrealistic view of the market.

From My Experience

As I said earlier, I started automated trading as a means to take some of the burden off of my daytrading and I found it to be just as much, if not MORE work than daytrading alone. Making money is never easy unless you’re the son of JP Morgan. Here are the most important factors to consider with any form of automated trading:

Does the system perform well over the past 5 years with no more than 3 consecutive down months?

If the system does well in 2008, but would have blown your account in 2005, 2006 and 2007, bye bye. It’s not an adaptable system and belongs in the garbage bin.

Does the system perform well in the most recent 6 months?

Many developers can optimize systems to perform well over the past few years, but they perform horribly in recent times because market conditions change. I can’t count the number of systems I’ve looked at that boast massive returns over the past few years but have been losing consistently in recent months. This is because the parameters need to be changed to reflect recent conditions, and many times the developers don’t offer the support to do this. They want to show you a rising equity curve to get the sale, but going forward is another story.

Is the drawdown to winning % ratio worthwhile?

If a 30% annual performance cannot be achieved without drawing down the account by 7.5 – 10% or more, you’ve got a system that has the potential to blow up at any point in time.

Is the system continuously optimized?

Meaning, market conditions change all the time. If the system is not able to handle all of these different types of market environments, then does it offer the flexibility to be optimized and ‘stay on top of things’? One thing I like about neural networks is that they do just this. A neural network takes trades, price and indicators and stores a ton of data so that when a new situation arises it says: ‘okay, I’ve seen this before. Price was doing this, while the indicator was at this position and the time of day was this and the stop loss was this and the take profit was this, and it worked out, so I’ll do it again”, very generally speaking. Neuroshell is a platform I use if you’re interested. Its labor intensive, though, warning.

Is live proof available, or are you at least offering me buyer protection?

I won’t even look at a system that doesn’t have some form of live trading track record or shot at getting a full refund. Theory is great if your trying to describe space / time continuum, but not if you’re trying to sell me a trading system. I see systems that run close to $10,000 in price without any refunds or live proof available. Adios.

At the End of the Day….

If you go through the list above you just knocked out about 99% of the systems available on the market. Winning systems do exist, but it boils down to RISK, QUALITY and MAINTENANCE. As I said, my interest was renewed alone in thinking that I was taking a burden off of myself, when in fact I think it just added work. If you’re in the market, just remember, you get what you pay for most of the time. Heed my warnings and you should be fine.

And some links, if you’re in the market for one of these retail systems that cost only a few hundred a pop and usually run on Metatrader, here are some links to websites that independently test and review a bunch of them. I’m not going to recommend anything in particular to you, I myself would only put these on an account I could totally care less about, but here they are:

4XProject – They buy them, they test them on demo and real money accounts; nice guy that runs this blog; I actually chatted with him online before writing this article. He’s also got a weekly newsletter where he publishes results and adds new systems http://www.4xproject.com/

Forex-Systems-Reviews.com – popular website; I’ve spoken with this guy too; good site in general http://www.forex-systems-reviews.com/

Expert Advisors Forex – another one with live statements: http://www.expertadvisorsforex.com/

Best Forex EA – This guy is funny and has a bunch of systems posted for the taking and 4 real money accounts running http://bestforexea.com/

As usual, if you have any comments feel free to post them below.

Long GBP/USD 1.5350 area

2009-05-19T08:49:00.004-04:00

Free Resources for FX Traders

2009-05-15T00:18:00.055-04:00

Note the word ‘free’. One thing I notice alot is the attention paid to the wrong information all over the internet, especially in the beginning, allowing traders to develop poor trading habits. An important aspect to any trader’s career is getting access to information that is going to steer them in the right direction. Some of the services below are 100% free, others are trial, or intermediary version of services that you can access for either a limited period of time or indefinitely with restrictions. Also, I haven't included any forums, as this this list is intended to provide direct resources as opposed to community chats (anyone that knows the origin of this blog knows I'm partial to one, anyway). I have no affiliation with anyone or anything on this list.

This a ‘sticky’ post and I would like to keep this list growing. It could easily multiply by 10 in size. If you have anything you feel should be added, please email it to me at updates@nobrainertrades.com , and thank you to all who have contributed thus far. Enjoy.

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1. Audio and Video Market Data

Ransquawk - http://ransquawk.com/ - Audio alerts for Forex, Energy, Fixed Income and Gold. There is an announcer that ‘squawks’ live news information through all trading sessions. It’s a great service, but there’s a hitch. The free service has a short delay, so you’re not getting second by second alerts. Regardless, its still well worth it. These guys are good and offer a quality product.

NewsStrike - free audio alerts in real time, but only for the US trading session (7am to 5pm EST). Service is 100% free. I haven't tried it out yet, it was just sent to me so I sent them an email to sign up. Seeems pretty straightforward and I'll let you know how it goes. http://www.newsstrike.com/

Bloomberg Live on the Web - http://www.bloomberg.com/tvradio/index.html?Intro=intro_tvradio

2. Free Magazines

Currency Trader Magazine – a free magazine distributed monthly outlining latest events, strategies and input from market pros. http://www.currencytradermag.com/

Futures and Options Trader – As the title says, but still filled with lots of very useful information in regards to trading strategies. http://www.futuresandoptionstrader.com/

Futures Magazine – free magazine with all of the above, but emphasis on futures trading strategies. Currencies are also discussed from time to time. Can’t beat the price. http://www.futuresmag.com/cms/futures/website

SFO (Stocks, Futures and Options) Magazine – a free monthly magazine with a wide range of trading articles dedicated to the daytrader http://www.sfomag.com/

Global Finance Magazine - delivers the full story; corporate finance, joint ventures and M&A, country profiles, capital markets, investor relations, currencies, banking, risk management, custody, direct investment, money management and all the rest-specifically tailored for corporate readers around the world. http://www.gfmag.com/

Investment Advisor Magazine - authoritative features, product surveys, planner profiles, and monthly articles on improving client relationships; covers the spectrum of portfolio management. http://www.investmentadvisor.com/

The Deal Magazine - current deals in every sector from all around the world. They cover the players - the people behind the deals - plus they bring you comprehensive perspectives, timely commentary and analysis with pages of charts and stats as well as in-depth features. http://www.thedeal.com/newsweekly/magazine.php

3. Market Data and News

IFR Market Data – Love this service. Some highlights include order flows touted on currency pairs, briefings, outlining daily notes, key levels, etc, FX OTC option data, volatility data including risk reversals, etc, and technical studies, where they essentially ‘keep their own book’ and trade much in the manner we do here. A full listing of available information can be found here: http://www.ifrmarkets.com/protected/ForEx.pdf You can get it completely free with an Oanda Demo or Live account here http://www.oanda.com/. Go to the Oanda platform and click go to Resources>FXNews. Everything is there. FXCM also offers this service, but only, to my understanding, if you have a live account and the data is limited. I recommend going through this link if interested in them vs. Oanda: http://www.forexfactory.com/brokers.php?broker=443

Bloomberg Currency and World Market News – http://www.bloomberg.com/news/markets/currencies.html

UBS Currency Strategy and Research - http://fxtrade.oanda.com/resources/ubsnews/

Reuters Currency News - http://www.rttnews.com/Content/Forex.aspx?Node=B3

Wall Street Journal Currencies - http://online.wsj.com/public/page/news-currency-currencies-trading.html

FX Econostats from Oanda – compare past and current economic data sorted by country - http://fxtradeinfocenter.oanda.com/fxeconostats/

Oanda’s Order Book – See outstanding orders and current live positions. http://fxtradeinfocenter.oanda.com/fxeconostats/ The only other retail broker that I also know does this is MB Trading. You’ll need their MB Navigator platform to see it, and I don’t know what the reliability is on the demo platform.

ForexDatasource - has a free piece of software (FXHound) that covers technicals, trading signals and news events, you name it http://forexdatasource.com/

Average Volatility Grid by MoneyHackers: see which days and which hours provide the most volatility for currency pairs: http://www.moneyhackers.com/

GFT’s News Feed – adds value from time to time, but I honestly don’t pay too much attention. Their best attempt at providing market maker information, up to the date broadcasts, etc: http://www.gftforex.com/resources/news.asp

COT (Commitment of Traders) Charts - http://www.timingcharts.com/

Financial Times Currency News - http://www.ft.com/markets/currencies

Financial Times Currency Performance Strength - http://markets.ft.com/ft/markets/currencies.asp

Barchart.com - http://barchart.com/

TradingCharts.com - http://tradingcharts.com/

NASDAQ World Currency Option Chains - http://www.nasdaq.com/asp/currency-options.asp

4. Charting Software

TradeStation Analytics – In depth charting platform offering a wide range of technical analysis with the option to automate your strategies. There are a massive range of plugins available for this platform, and its been one of the most widely recognized among individual traders. The big hitch with this one is that you have to open an account with them in order to use it and, to my knowledge, trade a certain volume. Regardless, I put them on the list knowing the quality they provide. http://www.tradestation.com/

Charts by Esignal - Rhobust charting platform with a wide range of indicators, built in techniques, etc. http://www.esignal.com/ . You can get it free if you have an account with Gain Capital (http://www.forex.com/). The good news is that they give you access to the Advance GET version, which is the advanced version of the platform. There is also a market depth data add on for forex, which allows you to see streaming bids and offers from about 80 different brokers/market makers.

ProRealTime Charting Software - Another pretty rhobust platform, offering a wide range of technical analysis tools for an active trader (http://www.prorealtime.com/). Again, a condition with these - if you have an account with IG Markets, they're offered for free (http://www.igmarkets.com/fx/charts-highlight.html). I was also just told today that apparently you will get charged appx. 30GBP/month if you dont maintain atleast 2 transactions per month with these. If you're interested in opening an account, I recommend you do so through here: http://www.forexfactory.com/brokers.php?broker=478.

Metatrader – I don’t think I even need to put this on the list, but just do a google search for ‘metatrader brokers’, pick one, download the platform, and right from the platform, you can open a demo account. Probably the most widely used among the retail crowd. Allows for automated trading of expert advisors (EA’s). If you're an indicator junkie, you can download over 1,000 compatable ones for the platform here: http://www.fx1618.com/indicators.html

NetDania - offers free charting and quotes on live and forward rates in what is a pretty rhobust platform for a web-based Java app. If you go to the following url: http://netdania.com/UI/Products.aspx you can check out their wide range of Web Applications found in the left-navigation. There is quite a bit to choose from.

5. Online Tools

Mataf.net – everything from a position size calculator, volatility and correlation data http://www.mataf.net/en/tools/home

6. Newsletters

Van Tharp Institute – A great free newsletter commenting on trader psychology and current market environments by the author of ‘Trade Your Way to Financial Freedom’. Emphasis is alot on equities, but still worth reading. http://www.iitm.com/

Joe Ross’s Chart Scan Newsletter – I’ve been getting this since I started trading. Joe Ross is one of the pioneers of individual day trading techniques and offers a wide range of books, services and trading systems for futures and forex markets, but you can get his newsletter for free. http://www.tradingeducators.com/

John Carter - Author of 'Mastering the Trade', and Hubert Senters, his partner, publish free daily videos if you subscribe to their newsletter. They cover forex, futures and equity day trading strategies. http://www.tradethemarkets.com/

7. EBooks and Articles

Trading-Naked - Tons of great reading material can be found on trading-naked.com (please excuse the audio in the back; I admit in saying I find it a little weird, but the site material is good) - http://www.trading-naked.com/Articles_and_Reprints.htm

Pdf-search-engine.com – not a trading site, but type in the name of any trading book and there’s a likelihood you’ll find a reprint of it here http://www.pdf-search-engine.com/

8. Trading Tutorials/Instruction/Strategies

Informed Trades - Massive, online free video course available – whatever your trade level, this is a good place to visit. The time spent putting together these free online courses pretty much blows my mind. They’re well devised, concise trading videos on a wide range of topics. http://www.informedtrades.com/f111/

Gann Global Financial - Offers a free ecourse and videos dedicated to Gann trading http://www.gannglobal.com/

ElliotWave International - offers 10 free lessons, with access to another 10 free before you have to pay anything http://www.elliotwave.com/

DecisionPoint - Online overview of various technical analysis / trade management / psychology techniques http://www.decisionpoint.com/tacourse/tacoursemenu.html

Learning Markets - dedicated site offering frequent updates on pretty much anything you could imagine about daytrading and have a massive video vault covering any topic imaginable http://www.learningmarkets.com/

BabyPips –101 stuff with an active forum http://www.babypips.com/

MoneyShow - most people know these guys for putting on the 'Trader's Expo', which takes place in several locations around the world each year, but their website is flooded with videos and articles to help make you a better trader. http://www.moneyshow.com/

FXWords - dictionary of FX terms http://www.fxwords.com/

Forex Strategies Revealed - a decent-sized list of strategies aimed at the FX market. I have nothing to say about any of them, other than the fact that they're posted on this site; use at your own risk http://forex-strategies-revealed.com/

Investopedia’s FX Arena – Good general overview of the FX Market from A to Z - http://www.investopedia.com/features/forex.aspx

NASDAQ's Online FX Trading Tutorials - New site feature with alot of valuable data http://www.nasdaq.com/investing/forex-trading.stm

9. Other Sites

ForexOnTop - Is a listing of the most popular websites dedicated to the FX Market http://www.forexontop.com/

Dealbreaker.com - If Wall Street could even be remotely funny. Given what's happened during this recession, its hilarious. http://www.dealbreaker.com/

The CFTC's Financial Data for FCM's (Futures Commission Merchants - aka Futures and Forex Brokers) - http://www.cftc.gov/marketreports/financialdataforfcms/index.htm

Weaker GBP Means I Can Visit the UK More Often So I Was Glad to Short It

2009-05-14T05:28:00.022-04:00

Our strategy as all about waiting until you see that perfect, most obvious sign staring you in the face to take action. Today I want to do a little post trade analysis to talk about a setup that happened on cable (GBP/USD) last night.

For anyone looking for more info in regards to safe entries on breakouts, this is a good example.

1.5241 was hit earlier in the day. It was a support area turned resistance. We saw a fade upward into the 1.5330 area, and a major selloff began at approximately 5:00am, EST following the release of the Bank of England inflation report.

Here’s what I was looking at: an hourly bar crashing into a support level hard and fast, essentially wiping out an entire range of consolidation. What took hours to build up took 1 hour to wipe out and it headed right back down to the bottom of the range. When this happens, don’t expect the level to hold, especially with that kind of range (100 pips appx) and on a pair notorious for excited market runs. I’ve said in one of my videos , when you see selling like that going on, just go for it. You’ve got a huge shot of being right. This one was a perfect example.

We scroll down to the 1 min chart. There was an initial fade off of this area after all of this selling (I begin to get excited) for about 25 pips, and then a thrust downwards, hard and fast. There’s your cue to get in short and ride this thing out for a little while. A sell stop right below the level would have even done it.

Most importantly, be on your toes and execute when the time comes. Money doesn’t pop into your account by you staring at charts.

You shouldn't be worried about something like this going against you too much, mainly because the next support level wasn’t for another 40 pips lower at 1.5200, which it managed to take out in a matter of minutes.

In terms of taking profits, you could have easily done so at the bottom of the channel which was made on the 1 or 4 hour chart, or rode it further expecting a more dynamic breakout. Usually, on that kind of selling, trendlines are likely to be broken.

Bottom line: Excited market, strength out of control and an hourly bar that takes out an entire consolidation range, get in short and ride that puppy for the next few bars or more.

On a side note, today’s the 1 year mark of the inception of this “idea” called nobrainertrades. Thanks to all of the thousands of readers, support and comments made in the past year. Have fun out there and report back with major pips. Glad to be of service.

Steve

Short USD/CHF 1.1780 area

2009-04-16T22:25:00.008-04:00

This one is a little different; a pattern we see happen a lot.

Its kind of like the bottom of the bucket, for now we'll just call it a "spike base". It happens when price makes a huge spike, when the spike gets taken out in the opposite direction, the bottom of the original consolidation area is used as a fade, in this case, its 1.1780.

I talked about briefly in a couple examples for the last video, on EUR.

We've also got the .764 retracement of this last move coming in here around the same figure, along with double zeros 20 pips higher, and a good history in general with this area. Worth a shot.

Long AUD/USD 0.6850 area

2009-04-16T22:14:00.004-04:00

Its a ways away, but nonetheless a solid reaction point over time. Worth the attempt in the event of an approach. 10 pip range as always.

Long GBP/USD 1.4612-1.4602

2009-04-16T02:36:00.007-04:00

Cancelled due to too much USD short exposure.

The former 50% retracement of 1.5722-1.3501 is 1.4611, and 1.4600 has a good history behind it in general.

Just watch out for spastic sell-offs as cable is, in general, considered 'overbought' at the current range and a couple hundred pips can be a walk in the park for this pair.
1.4580 is the local low so I would be alert for that, as well, in the event of spikes lower.
And if it wants to take it out alltogether, my next area long would be in the 1.4380 area.
Same rules as always.

Twitter Added

2009-04-07T02:46:00.013-04:00

Hi everyone, just so you're aware - I added twitter functionality to the site tonight, which allows me to randomly post my comments in real time during the trading sessions.

For those of you new to Twitter, it basically allows you to see notes and links I post at any given point in time. It even allows you to receive updates to your mobile phone via text message or through email.

If you have a Twitter account you can follow me by clicking here:
http://www.twitter.com/nobrainertrades
or just visit the blog and look to the right.

For those curious about when I trade, its mainly 12:00am to 10:00am EST. I have been shy of the forums lately due to the time I notice it takes to get around to everything, and due to the traffic incoming from many other places, this seems to be a good alternative solution for the meantime. Its easy, and works very well.

As usual, any major posts, emails subscribers will be notified. Thanks as always and here's to good trading,
Steve

Update: If you have skype, you can actually get Twitter right through there; click here for more info:
http://skypejournal.com/2008/11/twitter4skype-following-your-twitter.html

Dissecting EUR/USD

2009-04-03T06:08:00.006-04:00

Major points:

Different market environments call for different 'types' of trades. Keep a folder on you computer with screenshots, marked up with key areas and notes of what you did right/wrong or missed alltogether. Be prepared for the next time around.

On 'heavy' price action, after an area has already faded, dont look to fade, but rather breakout. This is true on most timeframes.

Look for slow and steady price action leading up to a key area that has yet to be faded to sell or buy against the shorter term trend.

When you are expecting a breakout of an area, try to get in before the breakout occurs. This allows you to put a stop in at breakeven and never go 'in the red' on the initial pullback. This is particularly helpful if the breakout occurs shortly before a news announcement, etc.

To determine reversal points in an uptrend, look at price action on the last move down.

Look for confluence of diagonal trendlines and horizontal support/resistance or fib levels.

On breakouts of major areas, expect the move to be big, and go for the long haul.

An Update (Yes, Seriously!)

2009-03-18T01:25:00.004-04:00

Dear readers,

I haven’t posted in quite some time as I’ve been tremendously busy working on a number of different projects and life’s interjections in general.

You’ll be glad to know that I am in perfect health and was not abducted by aliens or stranded on a desert island – just been busy, and the blog has to get pushed to the side unfortunately, for some other priorities of mine.

Nobrainertrades.com has been translated into approximately 70 different languages and read across 125 different countries (no kidding!) so I have done my best to accommodate all. In my absence, I have received a lot of emails filled with support for the work of this blog and everything that goes along with it. I hope this recession has been easy on most of you and you’re finding continued success in trading.

My plan for the blog:

Through experience, I’ve learned a lot about what works and what does not in terms of this blog, so with arms full of information to use I’m a lot more prepared than I have been in the past.

I’m going to do my best to get ‘back on the horse’, so to speak, and start updating from time to time with videos and daily updates and commentary, attempting to put focus on one currency pair at a time, with underlying macro trends – always, doing my best to keep trading as simple as possible.

It might be a rocky start for me, as I haven’t updated in quite some time, but I’ll do my best to keep content relevant and in high quality.

Timing of updates:

When I have time, or see something good setting up, I promise to do my best to get it posted. The best and easiest way to know if the blog has been updated is to either subscribe to the email distribution list, or through and rss reader.

If you have questions:

Oh boy, do I get a lot of questions. While I do my best to be responsive, please keep in mind that I run a business on the side here, and that blogging has been a hobby of mine more than anything else. Should you have any questions, please first skim through the Trading Strategy section of the blog, as well as seek some general support from the forum, possibly. Unfortunately, I cannot promise that I will be able to answer all emails, due to the sheer volume and time it takes to get around to them. We have a fantastic community of traders here and while I might not have the time to answer a question of yours, there are possibly thousands of others that could.

And as always, it’s just a blog - free for the taking, so please enjoy!

My Top Five

2008-11-21T01:07:00.010-05:00

A good friend of mine called me over the weekend and explained that he wanted to start trading, and was looking for some basic advice. In our relatively brief conversation, I covered several major topics, so I thought I would share them here. I could have talked to him for days about the thousands of ideas and issues we cover here on a regular basis, but I instinctively selected the below items, I assume, because I view them as the most relevant. I’ve either appropriately or inappropriately entitled this article “My Top 5” because these are the items which flowed most naturally when asked for advice. In the order in which I spoke, here they are:

Learn to be a Position Trader

The first thing I told him was to learn to be a position trader (leaving positions open for several days to weeks/months). I told him that by doing this, he learns two absolutely essential things: to control his risk, and focus on the information that really matters in the currency market. If you learn those things, I said, trading on an intraday basis becomes much, much easier. If you have a good handle of the macroeconomic environment, and what’s truly driving investor sentiment, intraday scalps will cause you very little worry. Nothing gives you more confidence than your ability to score 500 pips on a single trade.

Counter to this, I told him that one of the biggest makes people make when they first start out trading is that they focus on miniscule moves of several ticks at a time which usually develop into massive losses. They become ‘hard-wired’ to this particular way of trading, and it usually ends up devastating them in the end. I said “They don’t understand what’s really moving the market or the value in basic fundamental analysis. It trains them to use ridiculous leverage when what they should really be doing is first learning to trade profitably then raising more capital to trade with profitably, instead of trying to turn 10k into 10mm. People, you will find, are very willing to give you their money if you’re making 20% a year after fees. Trust me. It comes. Billionaires don’t become billionaires because they ‘organically’ took 10k and turned it into a billion. Other people’s money always comes along the way.”

The Plan

The second thing I told him was to make a list of rules and stick to them. This is basic, and you hear it all the time, but I have a slightly different interpretation of the relevance of this, I believe. If things don’t line up, simply don’t trade. Your planned trades are the ones that always bring in the bigger money. Patience, and waiting for the right ones, are key, as we’ve discussed many times. And when that magical moment arrives where all conditions line up and the perfect entry is staring you in the face, by all means take it. Eventually, they come. Eventually being the key word, here. Staring at a chart and saying “I should have taken that one” or “I can’t believe I missed that” will get you nowhere. You didn’t get in for a reason. There are just as many times I could have stared at a chart and seen winners I should have taken versus trades that would have turned into losers. Not to mention any of the money management disasters which could have occurred along the path.

Most traders, especially in the retail environment, don’t have a written plan. I’ve found the most valuable thing that has come out of my writing a trading plan is not just the plan itself but the realization of all of the things that go into making a trade. Trading is a complex process. There are just as many short term implications which need to be taken into account as there are longer term. Risk management, selection of the right pivot levels, investor sentiment, capital flows, profit management, etc., are just the beginning of a long list of topics that go into hitting “buy” or “sell”. Writing a plan usually opens up the eyes of any trader and makes him or her realize all of the implications of what it is they’re really doing. Sitting down at the computer and executing an order doesn’t make you a trader. My one year old nephew could do that. It’s everything else that really matters.

Keep an Open Mind

“Anything can happen, at any point in time”, I told my friend. Particularly in volatile environments, things can turn dramatically in the blink of an eye, so it’s important to visualize all possible outcomes of what could happen next. Becoming too rigid, or stuck to an idea which is clearly fading away tends to paralyze a trader and force a lack of reality on their actual trading.

Charts are merely a visual output of all of the thousands of factors combined in a given instrument. Visualizing different variations of price action is important for any trade, as it removes any of the “shock value” when things don’t play out in the exact manner you visualized. It keeps you flexible, nimble, and able to react to a variety of different conditions.

Most traders “see” price doing once certain thing when they take a trade, and block out all of the other possibilities. I’m a very visual person in general, which could be a reason I find it easy to identify key areas sometimes. But most importantly, I force myself to visualize all possible scenarios of what future price could look like. And I’m not just referring to price moving higher or lower. It can move sideways, a little higher, then lower, than higher again, consolidate for a little bit, then spike up, and then spike down, etc. The list is endless, but at the end of the day I’m simply keeping an open mind of major possibilities which could result due to any number of different factors.

The Most Obvious Thing to Do

This week I signed up to CNBC’s Million Dollar Portfolio Challenge; I figured it wouldn’t hurt to try it out. The worst that could happen is that I don’t actually make a half a million dollars and get 10 free hours on a private jet. So I immediately bought 4 ETFs and allocated 100% of my available cash to them: SH (Short S&P 500), DOG (Short Dow 30), PSQ (Short QQQ) and DRR (double short EUR). This isn’t a lesson is horrendous disregard for portfolio diversification (needless to say I was was swinging for the fence here on fake money) or to pat me on the back for calling the right shots here (though I’ll admit my portfolio is on steroids right now) as much as it is a blatant realization of what’s going on out there, and how important it is to always remain on the right side of the most obvious conditions.

In my daily overview of the market and planning process, I keep in mind one thing that seems to keep me alive: “What’s the easiest thing to do here, what makes the most sense, and don’t forget, Steve, if you go against it you’re at a much greater risk of taking a loss”. Simple. Keeping with this trend has been the easiest shot throughout, and as the bad news pours on day over day, its no wonder the stock market is tanking and bringing everything along with it. Always keep the big picture in mind, and never forget it.

Also, on an intraday basis, some trades are so obvious, so clear, it seems you would be foolish not to take them. But you don’t, whether it be a fear of drawdown due to overleveraged or any other number of different factors. Be smart, control yourself and take the obvious ones when they’re there. The agony of not taking a trade you plainly should have can be a lot more painful than taking an actual loss.

Losing and Winning Streaks

The final thing I told him was that, if you, by any chance, get on a losing streak, stop trading altogether, take some time off so you can go back in and think clearly. Losers tend to lead to more losers, and I like to think of it as a virus. It just keeps on growing unless you give yourself some rest and medicine to knock it out. A winning streak can do the same to you. There have been many times in my career where I have simply stopped trading for a few days or weeks just to get my head cleared out of any emotional nonsense which is blocking my way to success. It happens to all traders at one point or another, and many, I know, usually end up calling it quits for at least a few days.

A big mistake many traders make is that they keep on plugging away, causing them to force trades, or take those that they wouldn’t normally take if they were in the right frame of mind. The best trades I have ever taken have come when I am calm, cool, and have a clear head. The worst trades I have taken have always followed previous losers that just didn’t work out as planned. This pattern is more predictable than anything I know of. I’m very cautious to get caught up in it.