How’s your batting average?
I am not a baseball fan. I am a New Yorker. These two statements are mutually exclusive and cannot be uttered aloud on the streets of New York during these final moments of the post season play as the NY Yankees play the LA Angels tonight to secure their 40th World Series, far more times than any other baseball team, ever. They are pretty awesome. Even I have Yankee fever. I have likened forex traders to poker players before, but a forex trader can certainly also be compared to a baseball player, especially when it comes to the hitting, and maybe even more so. It is astounding the amount of statistics held on each of these hitters: percentage of hits for each time at bat, percentage of hits when against a lefty pitcher, percentage of hits against a righty pitcher, home runs per at bat, runs batted in, on base percentage… and on and on and on. So when Alex Rodriguez approaches home plate and he is sporting a .285 batting average it is fairly easy to guess that he may hit during this time at bat. Let’s compare how batting stats can be attributed to trading. Its all about probabilities and helping your confidence. I keep my weekly and monthly percentage of winning trades and my weekly and monthly profit ratio. But if you trade more than one strategy then it is important to track each strategy separately. You may be profiting 80% of the time using your intraday trend following strategy, and profiting 65% of the time using an intraday contra trading strategy. Similarly you may be profiting 71% of the time using a swing trading strategy. Or, if you trade more than just one session per day, you should track those separately also. For example, you may be 79% winning trades during the NY session and only 54% winning during Asia trading. Hey, this is fun, let’s not stop there! Do you trade more than one currency pair? Then you gotta track those separately too. You may find that you are 52% winning on the EURJPY trades but 86% on the EURUSD trades. How about percentage of trades reaching ultimate profit target vs. trades hitting break even or an early taking of profit. Do you trade NFP each month and how’s that working out for you? Certainly each week and month varies as we move through different cycles of the year. I thought I was already being thorough with my statistics on my trading but this baseball thing has got me thinking… I have some more work to do. In the meantime, GO YANKEES!
Forget China, time to move to Australia
Something really unprecidented would have to happen to get me to pack up my lovely Manhattan apartment and move out of the United States. But it is no secret that the once super power of the 1950s to the 1990s is certainly on the decline while emerging market countries such as China, Brazil, India, and Russia are coming into their own. I enjoy listening to investor gurus such as Jim Rogers discuss his reasoning behind why he moved himself and his family from New York to Singapore in 2007 and how it was the best decision he ever made. I mean, as I am quite comfy sitting here and trading and enjoying an American life, aren’t my hard-earned pips in my USD account slowly losing value against most other major currencies? Yes. But the thought of moving to China or Brazil or Russia gives me a little shiver of uncertainty. This week we learned just how strong Australia is, being the first of the major Central Banks to emerge from interest rate holding and actually RAISE their rates .25% to 3.25%. Their Aussie dollar jumped in correspondence to this surprise move, ending the week above 0.9000. I suspect the AUD may again reach for parity with the USD soon and even overtake the not-so-mighty dollar. This would alas not be new territory, the AUD was stronger than the dollar in the 1980s. Australia also posted an improving jobless rate to 5.7%, compared to the US’s continuing worsening in unemployment, now at 9.8%. Times are turning quicker down under. What, not too interested in shrimps on the barby? How about Canada. Canada, too, posted its second consecutive month of improving employment data this week adding 31,000 jobs in September, bringing its unemployment down to 8.7%. They have yet to raise their interest rates but I suspect that they will quicker than the US does. What do these two nations have in common? Both the AUD and the CAN dollars are commodity currencies: Australia is closely tied to gold while Canada is tied to oil. While commodities like these will only continue to rise in value, it is the main reason why countries that export these products will continue to grow. Unfortunately, the US is the consumer, not the producer, and thus will likely remain in a weakening state. Oh how fun fundamental analysis is! Some US traders are moving their savings to Canada in order to take advantage of a stronger currency. Australia is a good bet too. It is not too late. Even better: you do not have to move to take advantage of the weakening US dollar. Check out Everbank, you can open a savings account in several emerging market currencies without hassle or airline tickets.
All markets are connected
Today’s market action could be signaling a changing in the guard after the Federal Open Market Committee’s rate decision and accompanying statement. It is such a perfect example of how all markets are connected in some fashion: whether it is oil, gold, EURUSD, the Dow, or the Hang Seng. It is also a perfect example of why intraday traders need more than one screen to trade from, there’s so much going on to pay attention to. First I’d like to say, I never trade an FOMC statement. But it was spectacular to watch the reversal today after this bit of news, or non news, came out. Today’s price action in most markets were quietly awaiting the FOMC decision, minus crude oil prices. Oil had already dropped nearly $3 this morning when I turned on my computer. Consequently, the US dollar was showing signs of resilience against the euro, yen, and aussie, after reaching new highs in the euro and aussie during Asia last night. That spike last night certainly caught my eye, creating some serious negative divergences in those pairs today. Putting all this together I was starting to guess that the dollar was starting to reach some sort of bottom, if only temporary. So after the 2:15pm FOMC decision and price spike, (look how beautiful the double tops in EURUSD and AUDUSD!) it was not too surprising to watch the Dow also spike up, but all of these stalled after just 20-30 minutes and the US dollar came back strong to lead the EURUSD, AUDUSD, and the Dow down in a big way. The Dow made a 160 point swing to close -81 points down. Nice volatility, just like the old days. There has been quite alot of talk about the US dollar being the new carry trade, and that is probably why we have not seen “normal” market correlation with the dollar and the yen, and oil, in respect to the Dow. My good old trading strategy of Dow/yen correlation has not worked for many months now, but just selling the greenback against anything has been the trade of the year. Wouldn’t it be interesting now if we see more dollar strength, ushering in some risk aversion? Did the Dow get close enough to the magical 10,000 level (she hit 9906 today during the FOMC spike) for sellers to get in the game? Are the institutional traders back and in the swing of moving this market?? So many questions, so many pips. Good trading.
End of the month and quarter: confidence reigns
It is hard to believe that 2009 is half over today! For those of us who have been “the glass is half empty” because of the recession/depression/economy gone bad, maybe the second half will be better. But for intraday forex traders, this market has actually been quite nice for making consistent pips, especially this second quarter. Typically I pull in about +200 pips per week, but my average has actually increased to almost +250 per week in the past few weeks. The thing with forex trading, as soon as you start to celebrate your wins, you may get knocked down a few notches with some losses, but so far so good. In June my average weekly winning percentage actually decreased from 82% to 79% winning trades, but my losses have been lower, therefore my overall pip intakes has increased. Pretty cool. I guess I am quite a geek for being so interested in the statistics of forex trading, but truly it is just as important to track all of that each and every week, as it is to actually do the trading. The reason: it will improve your confidence immensely in order to properly act at each trade opportunity rather than second guess yourself. I “feel” better about entering a trade when I have my trade entry confirmation when I know that they past 4 weeks I have seen 80% of these exact trades do win. It makes me sweat less. Along with the confidence of consistent trading, tracking the stats week in and week out will help you determine best days of the week to trade, best times of the month and year to trade. These markets are so cyclical. I have mentioned before in another post that during different times of the year the New York session is good and easy trading, while other times the Asia and/or London are much better and smoother. One way to track your weekly/monthly/yearly trading performance is to track your profit factor. Profit factor is your Gross Profit divided by your Gross Losses. For example: if you make 10 trades in June and 7 are profitable for $15,500, and 3 are losers for $4,100, your profit factor is $15,500/$4,100 or 3.78. The goal is to keep your profit factor consistently about the same, and definitely above a 1.0 profit factor, which is break even. It will make you feel pretty good when you master your trading strategy each month with a consistent profit factor, and the cash you made will make you feel pretty good too. July here we come!
EWI ponders the question: are successful forex traders just lucky?
Elliott Wave International (EWI) yesterday in their newsletter revisited a question that many have asked since the dawn of time: Are successful forex traders just really lucky? In their article they recount the Alan Greenspan comment made at an economic forum back in 2004 in which he stated
Recession proof: Trading the foreign exchange market
As unemployment soars in the US and elsewhere some are looking in unconventional places for income. Since the recession began over one year ago more than 6 million jobs have been lost in the US alone. With more and more people looking for work, its becoming increasingly difficult to land one of the fewer jobs that are available. Competition is fierce. But some individuals are looking beyond the want ads and have found the foreign exchange market, a seemingly recession-proof means of income, if you know how to trade it. After all, you would be your own boss. But trading the markets is not for everyone, and the foreign exchange market (forex) is the biggest and fastest moving market on the planet. Over $2 trillion is exchanged on this market every day. It can be just as easy to lose your investment as it is to win gains.
How do you know forex trading is for you? Online trading in any market is really not for the faint of heart. But it is also not for gamblers. Trading should be treated just like any business that you would consider entering. Here’s some things to consider before jumping into the forex market:
1. You need an investment of at least $2000 for your trading account if you expect monthly returns that you can apply to your living expenses. You can certainly open a forex trading account with much less, even $25 in some cases. But it will take many months to build your account up to something substantial. Realistic monthly profit is typically 5% - 30%.
2. Learning to trade the forex market yourself takes time and money. You need a minimum of 3 months to really get a grasp of what the forex market is all about. There are many training and education firms out there that specialize in intensive forex training.
3. If you do not want to trade your own account, you can have a professional do it for you, but you need bigger bucks in order to do this. Typically professional traders require at least $10,000 initial investment to open an account with them. There is a fairly new option in the managed account arena, check out zulutrade.com. You can open an account with only $1000, then you choose from over 1500 different available expert forex traders to “follow” their trades, the ZuluTrade software automatically will trade your account with the experts’ buy and sell trades.
4. Watch out for scammers. Unfortunately the foreign exchange market is really not that regulated worldwide. Be very skeptical of buying “100% winning forex trading systems” over the internet. Also be skeptical of “money managers” that will trade your account for you. Get references.
5. Choose a forex broker carefully. There are literally hundreds of them. For US citizens I recommend picking one that is a registered member of the National Futures Association (NFA). Also check the Commodity Futures Trading Commission (CFTC) website for broker account liquidity. Brokers with at least $20 million in capital are a good choice.
Not everyone who is looking for a job these days can afford to become a forex trader much less expect to start making millions right away. The initial investment can be difficult. But if you have the money and the time and the will power, the sky is the limit when it comes to profits in this market.
This is posted from my newest writing endeavor: NY Markets Examiner 
Forex madness..
The definition of madness: Repeating the same thing over and over and expecting different results. Could it be that many new traders in the forex market are too quick to brand a perfectly good trading strategy as “madness” if it produces 2 or 3 losing trades in a row? Personally I think there are many, many winning strategies out there, but way too much time is spent on looking for the very best one, in my opinion. A winning strategy that works for me may not work so great for you. Do not give up on a strategy so quickly, test it for at least a full month to 3 months to really get a feel for it and track its true winning percentages. Its like surfing: if you are a good surfer and the wave break outside your beach house is pretty decent, and you surf it and surf it, but then maybe you think, hmmmmm, I should go try out New Zealand, they got good waves there. So you spend a whole bunch of money and time to fly to New Zealand only to be disappointed because the wave break is waaaaaaaaay far out there and your arms get so sore from paddling. Then on the last day of your trip you catch some gorgeous waves, and you meet another surfer dude who invites you to his beach party that night, only when you get there a gang of thugs smack you over the head and steal your wallet and the bottle of rum that you brought. Bummer! You finally get home, after the long flight, drop your bags, and glance outside to your very own quiet beach with the perfect little wave breaking and you think, Man, I missed this! Forex, its just like that..
No fanny packs in Forex!
Just drove back from Miami to New York, 1200 miles, 2.5 days. Escaping New York winter in Miami Beach is spectacular, all the while doing my usual day trading and spending the rest of the time on the beach. The beach can sure be relaxing, but there were certainly plenty of tourists down there blocking my sun, with their sunburned noses and white socks under sandals, oversized hats, tshirts, and fanny packs bulging, screaming to the world, “yeah, I’m a tourist!” Kinda reminds me of the retail foreign exchange market. More and more people keep hearing about the fantastic profits that Mr. so-and-so made last month and more and more new traders keep diving into the market with little or no training, no knowledge, and praying for profits. Tons of tourists with their fanny packs bulging with little or no strategies, too many technical indicators, too little knowledge of money management, diving into this market, the most volatile market there is. Before they know it they have lost their life savings and must bid farewell to the party way too early, another forex tourist bites the dust. DO NOT BE A FOREX TOURIST! Take the time to really learn how to trade this roller coaster ride, pick your trading strategy wisely and stick with it, use a daily trading journal to track all your trades, follow your rules for every trade entry and exit, and be consistent. Learn from your wins and your losses. Being a profitable forex trader requires diligence and patience; never cut corners, because it will make you a forex tourist faster than you can say “I don’t need sunscreen!”.
I am so glad to be back in New York..
The Year of the Ox, A Sign of the Forex and Economic Times
How perfect that the Chinese New Year celebrated this week is the year of the ox, a sign of prosperity through fortitude and hard work. Whether you believe in such things or not, it is fitting that this sign for this particular year of economic turmoil and continued recession to come is one of diligent work, slow and logical and methodical, enduring hardship without complaint. But it is a power sign and one of prosperity, and the ability to achieve great things. It is a sign of hope. All of these ox traits would make an excellent forex trader, by the way: calm, unswervingly patient, tireless in their work, logical thinkers, extremely systematic in their work, they speak little but are very intelligent. Tireless and systematic, definitely. Another sign of hope: Mr. Barack Obama was born during the sign of the ox in 1961. With an ox in the hot seat, maybe we do have a hope that the worldly woes can and will be worked out in the next few years.. or at least in the US.
Today I again looked to USDCAD for my daily pips. As I stated last week I was looking for support at the daily 50ema, which has been holding support for a couple days now. Yesterday formed an inside candle on this pair, peaking my interest, as usual. But I had to rethink my strong USD mindset, when USDCAD broke the support at 1.2200 breaking a beautiful tight range to the downside. When the 5minute or 15minute chart is in such a tight range, I enter the trade as soon as it breaks, rarely will it pull back unless it is a fake out break. But this pair fell hard and fast, 150 pips. I exited with 100 pips profit. Also the 1.2070 region was past resistance which may become support. Price action below there could target the next level at 1.1800. GBPUSD did in fact retrace up to revisit that declining support line at 1.4300 area during the past three days. I exited my long position and will wait for the next direction on that pair. Good trading.
Live to trade, trade to live
Ah, the age old question for people who want to trade for a living: do I live to trade, or trade to live? Like me, many traders in the forex market love what they do. We love to trade forex. We love to think about forex. We love to think about trading forex, and we dream about forex when we sleep. It is a sickness. It is a passion. And, truly I think one needs to have that passion in order to make any dream come true, no matter what it is. But sometimes traders can become so enthralled or even obsessed with trading that they lose the point of it: the point really is to trade in order to LIVE, not to live to trade all day. Of course, some traders are fine with sitting in front of their computer all day with red eyes and coffee stains on their shirts. But for me, I trade to live. I have learned to be incredibly disciplined with my trading so that I must stop trading by 12pm noon New York time. This discipline has become one of my most important tools in my trader toolbox. Discipline keeps me out of bad trading times of the day, like New York afternoon, and helps me remember to ENJOY LIFE. A little less time in front of my computer actually makes my next trading session even better because I am rested, I eat properly (enjoying fantastic New York restaurants), and I am a happier trader and a happier human. Plus my friends and family are happier when I can spend more time with them too. If you absolutely feel the need to be trading all the time, here is a suggestion: try out zulutrade.com. You can have others autotrade your account for you free of charge while you sleep or do whatever you want without having to sit there and stare at your charts! Remember the goal: trade to live.
Jennifer Shotts
Casey Stubbs has been trading for 14 years. He started trading in the stock market and moved to Forex. 
Richard draws from his extensive experience trading to write insightful trading articles for both fundamental and technical analysis.
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