Sunday, July 26, 2015

Sunday, July 26, 2015 - Quick Notes

Notes for the upcoming week


Direction - 3m - Up / 1wk - Down / 2d - Down / Bias - Down
PP - 123.84
Support - None? Recent New Low
Resist - 123.84

- Drop on Sunday evening
- Big US earnings week?


Direction - 3m - Flat / 1wk - Up / 2d - Flat / Bias - Up
PP - 1.097
Support - 1.097
Resist - 1.010

- Near resistance on the weekly


Direction - 3m - Down / 1wk - Down / 2d - Down / Bias - Down
PP - 90.44
Support - 89.92
Resistance - 90.21

Wednesday, July 8, 2015

Predicting is Pointless

I have no way of knowing for certain which direction the market will move.  I should not try to figure out where the market is heading.

This may simply be a matter of semantics, but using charts and indicators to predict market direction can be detrimental to a trader. When I look at a chart I should NOT be thinking:

“This chart is telling me the market will move lower”

“I know the market is going to move up because the fancy-schmancy sounding indicator is flashing green”

“Prices are way too high, that’s nuts.  It’s gotta come down now”

Instead, I should look at charts as a tool to help establish clear, quantitative criteria that shapes my trade.  My thought process should be along the lines of:

"My preparation tells me that USDJPY has been trending down recently. I’m waiting for opportunities to go short.  USDJPY is at a key level where it appears, based on previous price movements, there is a good probability that USDJPY can move lower from 123.15 to 122.80 (a potential profit of 35 pips).  However, if it goes above 123.24 it probably won’t happen and I should cut my losses (risk of 9pips).”

Predictions and opinions lead to a vested interest in being proven right.  They introduce ego, emotion and feeling into the trade.  I should not care if I am right.  I don’t need to be right.  If the trade doesn’t work out, it was one of the reasonable outcomes I already accepted at the onset of the trade.

Tuesday, July 7, 2015

Random Thoughts on Hazy Tuesday Evening

Greece is in the news again.

Stick to the process.

Ignore the noise.

Trade the plan.

Friday, July 3, 2015

Plan of Action

I need a plan.  I need to focus.

If the first few years of my trading journey has taught me anything, it is the need to be prepared and to have a written plan.

No more random trades under a variety of conditions.  I need a tangible set of guidelines to make this a repeatable process.  I need to write it down.

I need to review it regularly and adjust it when things are not working. Even the simplest of plans is probably infinitely better than no plan at all.

  • For now, the elements of my plan will cover:
  • Which markets will I follow and watch?
  • What are the criteria to enter a trade
  • What are the criteria to exit a trade
  • How much risk will I take on each transaction?

I think this is a key starting point on the path to better results.  When I review my results I can look back and see if I followed my plan.  Was I disciplined?  Which types of trades are successful forme?  Are my undisciplined trades causing me to lose?

Thursday, July 2, 2015

Forex Preparation Summary


Quick summary, review preparation from the evening of July 2, 2015:

3 Month 1 Week 2 Day 8 Hour
Trend Slightly Up Flat Flat Up
Support 122.00 122.00 122.81 123.03
Resistance 124.37 123.23 123.14 123.14

  • USDJPY flat recently
  • 8 hour chart is slightly trending up
  • Look for bullish opportunities on the short term 8 hour chart if USDJPY is at or above 123.03
  • *** Greece referendum on Sunday, US holiday tomorrow

Being Prepared

I often find that when I load up the screens it is very easy to get distracted by the constantly changing prices.  Seeing the bars run-up or down leads to random thoughts:

“The market is going up, is this breaking-out, should I go long?  Should I take
profits?  Cut losses?  Oh my, it’s dropping, should I go short?  Oh
my, it’s going back up now...”

Tunnel vision starts developing and I find myself staring at the screen eagerly anticipating every new bar.  Feelings of nervousness and excitement are not uncommon.  The temptation of entering a
transaction and jumping into the fray is strong.

I’ve come to realize that feeling nervous, excited or impatient is probably counter-productive to successful trading.  This reminds me of an interview where a NFL quarterback was asked if he gets nervous.  His response was something to the effect of:

"there’s no need to be nervous because we are well prepared"

Trading should be boring.  If I am properly prepared I won’t be nervous or impatient.

How can I consistently be prepared and eliminate the distraction of ever-moving prices?  I need to develop a routine that involves assessing the overall market landscape in a rational way:
  1. What kind of market are we in?  Range-bound? Trending Up?  Trending  Down?
  2. What are the key levels I need to be aware of?
  3. Are there any big news events this week?
If I routinely prepare in a structured, logical way, when I load up the screens the flashing numbers and moving prices won’t be a distraction.  I’ll be ready and patiently waiting.

Also see:  Example of USDJPY forex preparation