Getting Ready for 2012

Well its been a while since I've posted anything on here.  I've spent much of the past two months following the stock market more closely and trying to learn how to trade it, so I haven't focused much on currencies.  Starting fresh for 2012, I've tweaked my currency strategy a little bit.  I'll be looking for some more longer term swing trades (not much longer than a week maximum though).  I'm going to be focusing on only about four majors (EUR/USD, GBP/USD, AUD/USD, USD/CHF) because I think it will help me better learn these pairs and gain an edge.  My position sizing will be small, with much more focus on trading correctly than making money.  I'm planning on doing a weekend analysis each week of what I will be looking at for the next five trading days (Under the Weekend Outlook tab!)

I think that stepping back the timeframes I trade on will help me gain a broader sense of how everything is moving, rather than scraping up pips intraday.  I'll be much busier with school this semester, but I'm hoping to get at least 2-3 posts a month done on top of the weekly analysis.  Good luck to everyone this week and this year.

Beating Markets Update and Changes

Hey all.  Its been a while since I've posted anything on here (been spread really thin with school, growing our university trading club, my own trading), but I'm making it a top priority to keep up with the blog from now on.  I recently spoke with another good young trader from Pitt named Jon Hewson (@Hew_Dat) who is going to be hopping on board and helping me run Beating Markets.  He is a forex swing trader and is also involved with equity options, so he'll be bringing a slightly different perspective to the blog.  

Also, my interest in the stock market has been increasing a lot lately, so I just opened up a demo account and will be trading equities.  Right now I plan to focus on swing trading while occasionally trading intraday with in-play stocks to see which method suits me best.  I've always followed the stock markets with my forex trading but I've never focused on individual names, and I'm excited to jump right in.  I plan on being as transparent as possible on Twitter and will hopefully be posting at least 1 or 2 trade reviews/videos a week on here.  

I'm pretty excited about these changes to the blog.  I'm expecting this blog to be much more active than it has been the past few months, and I think it will be great to discuss the stock market as well as forex in our posts.  Keep an eye out for new posts in the next week or two and good luck with your trading!

A Little Psychology...

Well, it’s been a while since my last post (been busy with repairing the shack I called home this past year, moving out, working on stuff for the Trading Pitt, etc.) but I decided now is a pretty good time to think about where our head needs to be at as traders, especially in markets that have been as wild as the ones the world’s been experiencing lately.

I’ve spent a good chunk of today reading Andrew Menaker’s blog (which can be found at http://www.andrewmenaker.com/ideas/blog/), and he always offers great self-evaluation ideas and food for thought.  One of his latest post talks about the need to be right.  This need is kryptonite to a trader.  The feeling of being correct is almost like a high for some people, and they constantly need to feel it.  Problem is, most of the best traders aren’t even correct half the time.  So to be successful, it’s absolutely essential we can deal with being wrong and don’t let our predictions dictate whether or not we are profitable.

Think about everything that’s been going on in the markets lately.  The nauseating roller coaster we’ve been on has opened the door for everybody to provide their opinion on what will happen next.  Many have been wrong, some have been right, some haven’t had a clue what’s been going on.  This is exactly the type of situation where we all need to be flexible as traders.  Use of if/then statements is absolutely key.  Sure, you always want to do a thorough analysis that provides you with a good idea of where the market might go but you need to have a Plan B if it doesn't go as planned.  As Menaker says, there is "a subtle but critical difference between anticipation and prediction." Traders who anticipated moves but ultimately took what the market gave them profited during the past two weeks; traders who made unwavering predictions got sauced.

Another great little post from Menaker's blog talked about trading the market or your P/L.  Its been said a million times but tons of traders, especially beginners, still struggle with it.  We CANNOT trade worrying about how much money you make or lose.  I'm still working on this concept myself.  I can't tell you why, but most of us (especially beginners) trade differently when we know we've lost money or are losing money.  The best way I've learned to deal with this is to completely remove your P/L from the screen.  Obviously, we still need to respect daily stop out and tolerance limits, but hiding your P/L allows you to concentrate more on price action and objectively make and manage our trades.   Try it if you don't believe me, I can guarantee that you will feel a lot more relaxed and confident when your not worried about your account.  

School will be starting up for me in about two weeks, so I'll be back to trading live during the days.  I hope to start doing a chart of the day and posting video reviews of my trades as often as possible.  I hope everyone has a great, relaxing weekend!

FX Outlook for 7/8/11: Pre NFP

I'm expecting tomorrow to be the biggest trading day of this week, notably because of US employment and payroll data. CAD also has some important employment data, so there should be some fireworks early on tomorrow morning in all markets.



Last time the NFP came out in May we saw very disappointing results (added 54k with expectations of 170k, unemployment rose to 9.1%). Afterwards, just about everyone sold dollars for the rest of the day. This time around, were expecting an increase of at least 100k with some expecting the number to be as high as +175k. Since there has been a string of good US data lately on top of recent strength in the US markets, I believe the markets have already accounted for these payroll and unemployment figures, so in order for the data to be bullish for the dollar they must come in significantly higher than expectations. Sure, we will probably see a nice pop even if they are in line with expectations, but it may not carry through the day. On the other hand if we see data well below expectations, I'm expecting a hard dollar selloff. The SPY and IWM are both near significant resistance and have just seen strong runs in the past two weeks. There could definitely be some panic selling in US markets if bad numbers come in. I have a hard time seeing either the SPY or IWM moving through resistance unless we see some extremely good numbers, but I'm not expecting it. The dollar index, which is still in a very long term downtrend, looks to be flattening out a bit and showing a little bit of strength.



Some predictions for dollar-denominated pairs:



The EURUSD has been consolidating on the daily's for some time now, and off line data could set us off in one direction or the other. The euro has been struggling to stay afloat as the ECB raised key interest rates and Portugal received a downgrade earlier this week. If the numbers come in at expected or higher, I think we’ll definitely start selling off. The next support looks to be around 1.4140, so that could be a good initial target.



The AUDUSD has moved higher in the past two weeks due to US market strength and investors seeking higher yields. If dollar strength continues, this move higher could very well continue. We’ll definitely be running into some traffic on the upside though, so keep that in mind. If data comes in weak, there are at least 100 pips of possible downside that we could see today, depending on how much we come up short. Short-term downside support looks to be around 1.0725, then 1.0680, then 1.0650.



Another pair I’d be interested in in the long term if we see good US data is the USDCHF. This pair has been trending down forever and while it hasn’t quite broken out of the downtrend yet, it may have found some support near 0.8325. This is a very well-defined and obvious trend that people will be looking at, so I think there is nice upside potential if we can break out. Strong NFP numbers may be a perfect catalyst for this to occur.



All of the dollar denominated pairs will be in play this morning; these are just a few I will be following a little bit more closely. I always try to avoid any exposure before huge data like this, and I like to wait 15-20 minutes at least to let any type of kneejerk play out. Don’t chase moves you’ve missed, just be patient and wait for pullbacks. And finally, remember to listen to the market and take what it gives you! Be flexible, because it’s easy to get burned if you’re stuck on a particular idea. Any questions, please feel free to ask. Happy Trading!

Embracing Failure

"I've missed more than 9,000 shots in my career.  I've lost almost 300 games.  Twenty-six times I've been trusted to take the game winning shot, and missed.  I've failed over, and over, and over again in my life; that is why I succeed."

-Michael Jordan

Michael Jordan is the best basketball player ever (go ahead and try to argue that if you disagree).  When you look past his 6 championship trophies with the Bulls along with countless MVP awards, scoring championships, and other accolades, you see that he was cut from his varsity team in high school and how he came up short of a title in each of his first 7 professional seasons.  Michael Jordan became the best because he faced a lot of failure throughout his career.  If you look through the history books, you'll see that just about any highly successful person has failed on their way to the top.

As traders, we face failure more often than most people.  If you trade intraday, I'm willing to bet within the past week or two you've had at least one day where your timing was just a little bit off or your setups just didn’t work out like they normally do.  While it’s easy to get frustrated and down on ourselves, we should really be thankful for the days of failure the market gives to us.  

If we are going to be consistently profitable traders, we need to learn to cope with failure as well as make the most of our failures.  Humans are naturally inclined to be more sensitive to failure than success.  In order to cope with failure, we first need to accept that EVERYONE faces tough times; we’re not alone in out struggles.  The faster we realize that some degree of failure is unavoidable, the better we will be able to accept it when that time comes. Another way to cope with failure is to keep a level head when you’re losing as well as when you’re winning.  Don’t get to high on yourself when your winning, and don’t get too down when you lose.  Just move onto the next trade and focus on performing the best you can.  Many of us will make hundreds or thousands of trades in the long run, so a handful of losses may seem unbearable in the short term but means virtually nothing in the long run.  When you’re struggling, reach out to other traders and just talk to them.  Chances are they’ve been in the same position before (or worse).  They made it through, and so can you.  Every trader loses sometimes, but our main goal must be to live to trade another day.  If we lose all the money in our accounts, then we physically can’t trade.  Cutting position size, following strict stop out rules, and not trading frustrated or forcefully are great ways to minimize your losses and ride out the tough periods.  If you can’t be in the right state of mind when you’re trading, it’s best to just step away and not trade until you get your head straight.

There are plenty of ways to capitalize on your failures and make yourself better in the process.  Filming your screen and reviewing certain situations that you struggle with is one great way to do this.  Things seem to move slower the second or third time around, so you can really focus on where you made your mistakes and why they happened (This has become my favorite method of reviewing my trades; its great!).  The next time a similar situation arises, you’ll be able to remember back to your past experience to avoid the same mistake this time around.  Document all your trades on paper, too.  Be detailed, and be brutally honestly with yourself.  If you did something stupid, writing it down helps you take full accountability for it.  Another great way to improve on your failures is visualization.  Put yourself back into the situation that caused the failure.  Remember the thought process you were using when you made your decisions and correct yourself where you were wrong.

Bottom line, failure is unavoidable.  I’ve been reading the Market Wizards books this summer, and nearly every single one of the world’s best traders have had periods of failure.  They didn’t allow these times to ruin them; instead they turned them around and used them as learning experiences.  If we do the same, we will only be setting ourselves up for future success.  Have a great rest of the weekend, Happy Father’s Day, and best of luck in the upcoming week!