Work Smarter Not Harder

I have said it before and I will say it again you cannot work harder or force progress to get more performance out of your strategy. If you try to work harder and force things you just fail more and dig yourself a deeper hole.

I know it sounds counter intuitive or even crazy to hear that too much market analysis can lead to over trading or analysis paralysis. But you would be surprised at how many traders struggle with this area in their trading. It is an inherent psychological trap that keeps many traders from ever reaching or achieving any real consistent success.

See humans have an innate need to feel in control of their life and of their surroundings, it is an evolutionary trait that has allowed our species to perpetuate its existence and ultimately arrive at our current modern-day level of civilization. Unfortunately for the aspiring market professional, this genetic trait of all human beings works against those trying to succeed at trading. In fact, most of our normal intuition of wanting to work harder or spend more time studying and researching for a project for work or school are instincts that are not beneficial to success in trading the markets.

Now there is absolutely nothing wrong with a little hard work, in fact in the real world I encourage it. But the issue with trying to apply the concept of hard work to trading is that beyond discipline, observation, patience and an ability to analysis and read charts, there really is no benefit to spending more time analyzing the same charts your already on top of or analyzing more economic news reports. At the end of the day we have no control over price movement and trying to further analyze economic data or trying to come up with an overly complicated method is essentially just a meaningless attempt to control something that simply cannot be controlled.

Thus, the main cause of trading failure begins with the traders psychological need to control their surroundings and when this emotional state meets the uncontrollable world of trading it almost always results in a loss of capital. To elaborate further this problem works to compound itself creating a ripple effect because once a trader loses a few trades he or she begins to get angry and starts revenge trading in an attempt to “get back” at the market. Once this process has begun it is very difficult to stop because it makes logical sense if things are not working out to put more time in and do more work to get better results. The difficult truth of the matter is that, after you have found a system that fits your trading style and you have reached a certain degree of technical and fundamental understanding, any further research or system “tweaking” beyond that point will only cripple you.

So how do we overcome this trading demon that has benefited us in the real world but has no place in our trading strategies. It is quite simple, if your trading edge is present then you execute your edge and do not involve yourself further in the process unless you have previously defined the action in your trading plan. In other words “Just set it and forget it”. When you decide to mess with or tweak your trade once you have already entered the market it almost always starts an emotional roller coaster that leads to moving your stop-loss further from your entry or getting rid of it entirely, moving your profit target further out, increasing your position size or over-trading. These actions almost always result in a loss of capital, because they were not objectively thought out, but were influenced by an emotional reaction that was caused by trying to control the uncontrollable.

Trading is more about timing than anything else. Timing is everything, you have to move to the markets rhythm.  What that means is don’t fight the market take what it gives you when it decides to give it to you. Now how you react when the opportunity presents itself is paramount.  Which brings us back to timing, are you entering the market at the right time, are you exiting your positions at the right time etc. Everything else in between are just extra thoughts and emotions that get in the way of your initial plan. Remember you cannot control the market but you can control yourself. In order to get more performance out of your strategy you must follow your trading plan. You must be rigid in your rules but flexible in your expectations.

Now onto the fun stuff. As you heard in my last newsletter Euro Swissy is about to get busy. If we look at the chart below it is apparent that we have a clearing bar from the Bulls after about 6 months of consolidation no that is not a typo yes 6 months of consolidation. This is such a big deal I have decided to shed light on this pair again. As traders it is our job to find out where the big money institutions are investing their money and follow suit. Since I have already established a long-term Bullish bias for you on this pair, this is a great opportunity to go to your time-frame find a good entry and stop-loss and  “just set it and forget it”. If you follow the strategy in my last newsletter and execute properly you should be able to pull at least 700 pips from this position. Stay Tuned!

Look Out EUR/CHF is about to get busy!

Yes you heard it heard first EUR/CHF is about to get busy!

Gold & S&P 500 exploded for over 1,000 points+ like I predicted. Now EUR/CHF is my next CAMPAIGN, it is set for a monster move as well. After being sleep for over 23 weeks the GIANT has awoken.

Looking at the monthly chart below we can see a huge igniting candle that is the biggest move on the chart this candle shows us that the power has shifted from the bears to the bulls.

 

Now lets look at this weekly chart do you notice the bottoming signs. This pair has been quiet and off of our radar for quite some time. For 23 weeks the bears tried but could not break through the level of support at 1.20000. Then all of a sudden out of no where we get a huge candle from the bulls. I believe the bulls are trying to tell us something traders. As you can see we have an opportunity for an entry at 1.21162 with our stop-loss at 1.20740. A second option for your stop-loss would be to place it below the 1.20000 support level but you must account for your risk to reward if you opt for the second stop-loss option. Are first initial target (TP1) will be at the prior high we will then look to watch price action from there to see how it reacts to the prior high.

 

The Daily chart below has a nice Buy Setup forming now, after price action bounced off of a major level of support. We have an opportunity for an entry at 1.21120 with our stop-loss at 1.20740 and our initial target (TP1) at the prior high.  If you look at the bottom of the chart you will notice the clearing bars that wiped out 23 weeks of consolidation to the left and ignited the larger move. Do you know how BIG it is to wipe out 23 weeks of price action with 2 candles (i.e. 2 weeks of price action) its BIGGER THAN BIG traders it’s colossal.

This pair should give us a nice opportunity to pull in some major pips as it has great upside potential. My only concern is the monthly 20MA, but it is not a big enough concern to shift my bias or deter me from the trade. Stay Tuned!!!

$&P 500 Trade Update were in the money!

Man what can I say S&P 500 has been a beast. I mean did we pick the right time to go all in or what. Our Long position and add has paid us handsomely. As stated earlier we were looking to take profit at the top of the channel as price makes its way into the prior high. We are up 600 points and counting and we still got some nice size on this position. I am looking to get light on my position at the prior high on the monthly. It is rare in trading to have a home run but I think it is safe to say we knocked this one out of the park. Stay Tuned!

On another note have you ever heard the saying strike while the irons hot, get to gettin while the gettin is good, ride the trend till the end, Milk it dry etc… Although it is best to ride the trend as long as you possibly can during any season in the markets. During the summer since good trades  and solid trends are far and few between  (except this week in the market oh boy) one has to try to take advantage of any trend you find and follow the money. That means ride the wave and add till you cannot add no more. Now of course you want to keep your risk in check, treat every trade separately even if they are on the same chart, and follow your trading plan. But if there is money staring you in the face on a particular pair or commodity then stick with that pair or commodity because if it is paying and the other pairs or charts are choppy then the instrument that is paying is the one that commands our attention. As you can see in the chart above I have played S&P in a major way as well as AUD this past month because these are the charts that commanded my attention. In directing my focus to these charts I was able to avoid the whip saw and choppiness in other pairs that would have more than likely resulted in me giving some profit back.

Greek Elections create uncertainty in the markets

With the Greek Election being held on 6/17/12 there is expected to be lots of volatility in the trading week ahead. Analysts have viewed the Greek election as a potential turning point for Greece. This election could result in Greece’s eventual departure from the euro zone. Central banks from major economies are ready to take steps to calm financial markets should the outcome of the Greek elections create a market storm.

With the uncertainty that looms ahead, several firms have already started reducing their exposure to European Assets. During times of major volatility and uncertainty in the market, it is best to implement a different approach. Although I feel it is best to just sit on hands and wait it out till the smoke clears. For the trader who must trade the markets this week I recommend you take on lighter positions and be more selective with your entries.

With that being said it must be noted that Silver prices did not fall as much as some expected following Spain’s $126 billion Eurozone bailout on last Sunday 6/10/12. Many investors planned for a spike in the U.S. dollar following the bailout, hurting silver prices. With everyone’s attention focused on the Greek elections this Sunday, silver prices might be the beneficiary of any more turmoil and bailouts overseas.

Looking at the Daily Silver Chart below we can see the repeated Higher Lows and Bottoming Tails. Price has made several attempts to close below the 20 MA but keeps rejecting off of our trend line and rallying to close back above the 20 creating our 5th Bottoming Tail. These are signs of a bullish reversal in the works. Since this is more of a swing trade I have a more long-term approach for this trade if we can clear the area of resistance on the weekly chart at the 20 MA. Our entry will be just above $29.05 with our stop loss at $28.07 just below the trend line and Support level 1. Our first target is at $31.00, once price reaches our initial target we will see how price reacts at the weekly 20MA. Stay Tuned!