Trader’s Mindset

Hello everyone! Hope you had a great trading week and that you’ll have an even better weekend.  I love the weekend, especially when I can attend one of my children’s soccer games. 

Currently, I’m sitting watching my daughter play a soccer game and just a moment ago she scored a goal.  She is actually a pretty good soccer player.  In addition, it’s also very beautiful here – take a look at the pictures I just took below.

Anyways, enough about soccer for now.  Although, there is a lot of similarities between sports and trading.  I have been coaching my children in basketball, soccer and softball for the last 10 years, which is about the amount of time I’ve been coaching traders.  During this time I have come to realize that coaching children in sports is a lot like coaching traders. 

One similarity is that the more experienced they are, the harder they are to coach.  Another similarity is that you can show them what to do, but you can’t make them do it the way you showed them.  This is true for both sports and trading.  One tip:  If your not having the success you desire, find someone that can help coach you, then do what they say.  OK, enough of sports talk.  Let’s take a look at what happened in the market this week.

WEEKLY CHART REVIEW

EUR/USD – Daily and 4hr Charts

Let’s start by looking at the EUR/USD.  Notice the Daily chart above, it has been trending down for some time,  then last week it was able to break strongly up above the moving average.  This moving average happens to be the 62 period ema.  One thing that may happen on a breakout like this is that the price will try and retest the breakout area.  In this case the moving average.  A bounce up and off the moving average this week may be what is needed to see this pair begin to move back up in the direction of the initial breakout. 

Now, take a look at the 4hr. chart.  This chart has move back to the moving average and is trying to decide if it will continue to move up or to move back down again.  You may say “no kidding”, but the fact is we don’t exactly know what is going to happen with these pairs, so we need to trade them the direction they are moving.  I like taking trades using a moving average like this because it often times shows me areas where the pair will begin to have a more substantial move.  One thing we need to be concerned about this upcoming week is what will happen as the ECB makes its decision on interest rates.  Keep an eye on how this will impact this pair.

USD/JPY -1hr and 4hr Charts

The USD/JPY has been a bit range bound on the longer term charts.  Also, there has been some pretty good resistance on the 4hr chart.  Currently, the price is above the moving average on the 4hr chart which seems to be acting as some support. 

On the 1hr. chart we are also seeing the MA acting as support.  This next week we should be looking for a movement away from the MA in either a bullish or bearish direction.  One report to pay attention to will be the Tankan which is a leading indicator of economic health for large Japanese manufactuers.  Keep an eye out for a move and we may see it be fairly significant on this pair.

USD/CAD – Daily and 4hr Charts

Finally, take a look at the daily chart of the USD/CAD.  Notice the price moved below the MA on the daily chart.  This indicates some bearish momentum.  This along with the 4hr chart which is hitting a resistance level at the moving average would suggest that the pair would want to continue it’s downward movement.  Look for a bounce down to enter a short position this upcoming week. 

Alright, that was a brief overview of what I see happening to several of the currency pairs.  Take it or leave it.  Regardless of what happens, make sure you use appropriate risk and money managment in all your trades so you can continue to trade for the long run. 

One of my favorite trading strategies is based off of a type of price pattern called a ”flag”.  These are fairly common patterns to find and one of the reasons why I like them is that they are simple to trade.  They are pretty straight forward when it comes to entry, exits and stops.  Plus, they are based off the ideas of trend and support/resistance.

Basically, with a flag pattern, you would look for something that has had a sharp upward price movement and then has pulled back a bit.  After this pull back you would look to trade it as it begins to move up again or in other words it is resuming it’s trend.

Take a look at the chart below of the CHF/JPY.

Notice the flag drawn on the chart above.  This would be an example of a flag pattern.  The entry would occur as the price moves above the resistance (red line) and the stop loss is placed just below the red resistance line.

Currently, we are seeing a lot of pairs on the hourly and 4 hour time frames that could be considered a flag type of pattern.  Of course you know that there is no sure thing in trading, but when you are using price patterns, you are making trade decisions based on 2 powerful tools – Trends and Support/Resistance.  Take some time to see what pairs you can find that are currently showing this type of price pattern.  There are several right now and don’t forget to register for the free webinar this Sunday!  See you there!

Alright everyone,  let me begin my posting with a topic we discuss heavily in the “Traders Mindset” course.  That being the concept of “a good trade is a bad trade”.  Initially, this seems like a nonsensical comment, but when you really get down to it, it becomes one of the core reasons why so many traders end up not trading anymore.

Now, an example of this concept would be when a trader makes a profitable trade by not following their rules.  So even though profits were made and they felt good about it, in actuality this was a bad trade due to the fact that they did not follow their rules.

Another reason this is a bad trade is that it starts to develop within the trader a false sense of confidence.  They actually begin to think they are a good trader when in fact they were just a lucky trader.  In order to develop consistent and long term successful trading, one must realize when good trades are actually bad ones. 

I’ve seen this occur many time with traders who for one week are very vocal about how good they are at trading, but then the next week won’t say a word about their trading.  This is typically because their luck usually runs out. 

Now, we all have ups and downs when it comes to trading, but we should all be trading consistently.  This means that we understand what we can expect from our trading system day after day, week after week and month after month.  Understanding your expectancies from your trading system will help you have more confidence in your system and this confidence will help you follow your rules day in and day out.

Remember, make sure you know when a trade is a good trade and when it is a bad trade.  This will help you develop the long term consistency every trader desires.

Finally,  don’t forget to register for the free webinar this Sunday evening.  I’ll be spending some time discussing how to stay in control when your trading is out of control. 

Hope to see you there.