Useful resources on Foreign Exchange (FX) & Technical Analysis.

I've been wanting to fund a real account to trade FOREX for quite some time already and friends were also asking for some opinions on FX brokers. Therefore, decided to dig a bit into the available FX brokers.

FX Brokers comparison by FXStreet.com (check the brokers desired and click on "broker comparative table")

http://www.fxstreet.com/brokers/forex-brokers/

I managed to shortlist a couple that I would consider, they're listed below for your reference. These seems to be the ones with the lowest spread, and more popular or well-known:

http://www.fxstreet.com/brokers/forex-brokers/?btSelectedBrokers=Compare&ckb=30b5a5da-66b4-469b-8037-925ef8967006&ckb=15acc89b-781a-47d6-96ae-2433b3c2d5eb&ckb=0cc96043-f639-49ff-9c26-414a1899d883&ckb=dd13ff25-7a71-4882-b93b-06bfbc135091&ckb=352aace2-b985-4886-808e-5a518dce8e9e

 

Another review on brokers with MT4 platform by EarnForex.com:

http://www.earnforex.com/mt4_forex_brokers.php

This site also provides some useful e-books and educational resources on FX in particular:

http://www.earnforex.com/forex_e-books/

FX market is the least regulated, (unlike the US equities/futures market), therefore choosing a reliable and trustworthy broker with good reputation is a crucial consideration. Another factor to consider is the user-friendliness of trading platform (especially on order types supported and ease of execution) and the Charting package (or other fancy tools) that comes with the platform. From what I know, MT4 (meta trader Version 4) seems to be the best trading/charting platform available for FX at present. Personally, I've been virtual trading FX through the MT4 platform with Interbank FX, and I'm so accustomed to the user-friendly interface and comprehensive charting package, that I can't live without it now :P.

Regardless of what others say, you have to do your own research, cause ultimately you're trading your own account, and are FULLY accountable for it. So, please do your due diligence before funding any account with any brokers out there.

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Since my streak of losing trades, apart from reading books on trading psychology, I've also started to delve more into Technical Analysis (which has always been my favorite anyway :P ). Specifically, I've been studying on candlesticks and major chart patterns that help me to better understand the current prevailing market sentiment and the corresponding market condition we're in.

To side-track a bit, in case you're wondering what books I'm studying on candlesticks, the answer is NONE. I'm just simply using an excellent tool (see link below) that simplifies and takes candlesticks learning to a whole new level. I bought the physical quick reference cards, but if you buy it online for the electronic downloadable version, you'll also be entitled to download a pre-recorded candlestick workshop video by the author himself:

http://www.patterntradertools.com/HMID.php 

Anyway, while researching more on candlesticks, I discovered the following site that provides a comprehensive collection of educational tools with real charts as examples, it even covers options strategies :).

Here is an excerpt from the site, which I can't agree more. :)

"As with anything in life, education is a foundational building block of successful trading. But there is no holy grail out there. A "can't miss" strategy does not exist, but a general understanding of basic trading strategies is absolutely necessary.
Effectiveness of a particular strategy will depend on many factors. You will need to study them and pick the ones that fit your personality best. Then practice and experiment to see what works best for you.
In this section we discuss the 3-headed "technical" monster…chart patterns, candlestick patterns, and technical analysis. We also cover popular option strategies, and of course we offer our recommended reading on our bookshelf."

http://www.leavittbrothers.com/education/

Apart from this site, another comprehensive site on Candlesticks studies, is the Candlestickforum.com with tons of free resources, by the renowned author "Stephen W. Bigalow":

http://www.candlestickforum.com/PPF/Parameters/1_25_/candlestick.asp

Alright, that's all for now. If you're trading, trade well and trade safely. Don't give up, keep doing what you've been doing right, and study what's not working for you and discard that. Cheers...

Staying away from the market, reading and studying on traders' psychology and market dynamics.

After a period of draw down, I've decided to stay away from trading and the volatile market to focus on understanding my own psychology and the deeper workings of the market.

Have been reading quite a bit on successful traders' psychology. One excellent resource I found is Linda Bradford Raschke's (one of the New Market Wizards interviewed by Jack Schwager) articles published in various trading magazines.

http://www.lbrgroup.com/index.asp?page=MagazineArchive

Also reading the original "Market Wizards" by Jack Schwager and just finished the legendary Financier George Soros' latest book, "The New Paradigm for Financial Markets". These are great books that have provided so many insights into the mind of successful traders and the markets they trade. I never really believed in books like Market Wizards and used to think that they were just a waste of time. But now, after the first book, I plan to read up the other 2 market wizards books by Jack Schwager as well. These books definitely deserved to be on my collection of trading classics.

http://www.amazon.com/Market-Wizards-Interviews-Top-Traders/dp/1592802974/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1218638708&sr=1-1

 

http://www.amazon.com/New-Paradigm-Financial-Markets-Credit/dp/1586486837/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1218638476&sr=8-1

Learnings from a streak of losing trades...

Key Learnings:

1. Never enter a trade because of "fear of losing out". Only enter when there's clear direction and entry signals, exit profit target and stoploss all figured out.

2. Treat trading as a "game", in which real money is just a scorecard, nothing more than that.

3. Take profit and salvage losses when opportunity arises. I can always re-enter the trade if there's more profit potential in either direction after exiting.

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Another blog worth checking out:

http://www.slopeofhope.com/

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Again, trade to trade well. Trade safely. :)

A week's effort in a volatile market...

What a week! Had my fair share of roller coaster rides, but all in all, I learned much and was profitable with my scalps.

The trades captured above pretty much sum up all my effort for this past week. I've recouped all my past losses, and made back all the gains made at the beginning of the month, only $11 dollars shy of my previous cumulative gain.

P/L for the week: (excluding commissions)

(-100) + 120 + 75 + 55 + 80 + (-70) + 160 + 35 = $355

What I did RIGHT and should continue doing:

1. Learned to regain my composure and retain my focus while scalping so that I can be as objective as possible and only see what the market is telling me (NOT my own imagination), especially when the trade turned sour.

2. Fine-tuned my entries using limit orders at predetermined levels based on technical analysis (S/R, Pivot levels, etc).

3. Traded only when market condition was right and only in the prevailing market sentiment of that day.

4. Constant monitoring of key market moving news to make sense of the prevailing market sentiment.

5. Traded only within certain "windows" of opportunities based on intraday market behavior.

6. Stay focused and have faith in my own analysis. Never PANIC and HOPE the market will go my way.

7. Limit my entries to only "high probability" trades and avoid overtrading and revenge-trading.

What I did WRONG:

1. Having preconceived notions about what the market should/will do, thereby setting unrealistic expectations and profit target or stop-loss (strictly speaking, I only use "mental" stops, which basically is the maximum amount that I'm comfortable of losing without causing too much emotional pain. It allows me to weather through the trade without getting stopped out by market noise, but the downside is that I may let losses run too far).

2. Traded when I was emotionally or physically exhausted.

3. Traded when I was not in the "right frame of mind".

 

To sum it up, here's an excellent posting that helped me regain my composure and confidence when I was in my losing streak the previous week. The author, an accomplished full time trader and trading coach, is also the Teacher from whom I learn to trade in the right way, and a model that I aspire to become.

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Trade to Trade Well

Posted By Conrad on June 29, 2008

In an episode of the TV Reality Series, “Fear Factor”, a seemingly dumb-blonde-Barbie-Doll-like babe made it to the last round for a shot at the $50′000 prize. She got there not because she qualified for it. In the first round, a hunk of a guy made a mistake and got the boot and in the second round, another girl sucked more than the babe.

So here she is in the final round and everyone is making fun of her and saying mean things about her. She seems to be miles away in her airhead when Joe, the host, asks her if she was ready for the final challenge.

The clock starts and she stays perfectly put with her eyes closed while everyone is shouting at her to get going. She takes her time, takes a breath and executes the task. Although she completes the task, her time sucked so she takes the walk of shame.

As she walks away in slow motion, you hear her thoughts;

“I will go away from this knowing that I didn’t lose because I lost. Every stage of the competition I completed was a victory to me because I didn’t lose to myself. I had a plan, I executed the plan and I didn’t give up till I completed the plan. I go away, knowing that I will be stronger and better, simply because I will never allow myself to give up, even when it’s obvious that I can’t win.”

The trader’s single most common bad habit is that they never plan. How many times have we heard of traders jumping into a stock and getting stuck in it because they didn’t know when to sell it? Some of those stories even end up in losses.

It’s a very common trait because most traders don’t plan their trades. They either don’t know how or are too proud to admit their shortcomings. And when push comes to shove, they often react too slowly while continuing to accumulate losses. If it’s tough for them to get out on a profit take, it’s more difficult for them to get out of a losing trade because they definitely didn’t plan on losing either.

Then we get the phenomenon that is the Growing Portfolio. This is not the same as Portfolio Growth where your investments experience growth. The Growing Portfolio is a growing list of trades that have gone out of control simply because the trader never planned on closing out the older trades and bought into new ones every time the older trades weren’t profitable.

Planning a trade is about doing a thorough research on the underlying then planning to trade it. You plan an entry and more importantly, an exit. The exit is based on a time target and/or profit target. The timing of your entry into a trade is not as crucial as the exit because the art of exiting a trade is based on looking for an excuse not to stay in the trade.

Money is the key reason traders falter when it comes time to execute an exit. Greed takes over when the trade is profitable and the trader will always be tempted to go a bridge too far. Then when the stock goes south, Fear runs wild and makes exiting even more challenging. What if we could eliminate the money factor? What if we treated those numbers as units instead of money? That means you shouldn’t be trading with money you can’t afford to lose. When you put yourself under pressure to perform, the stress can be quite overwhelming and mistakes will be made and compounded.

The only way to overcome these problems is to plan your trades and stick to the trading plan no matter what happens. When you trade to trade well instead of trade to make money, you will find your trades becoming more and more consistent and the losses will lessen considerably. By treating the numbers as units and not dollars, the element of fear and greed fades enough for us to make sound decisions without battling fear and greed.

Focus on trading well. Give it 100% and stick to the plan. Taking comfort from a well executed trading plan is more satisfying than getting an accidental win. Plus by trading well, you inevitably adopt the habit of trading consistently.

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Now you all know where I got my slogan from.. :P

Remember, TRADE to TRADE WELL... and Hang on tight for more roller coaster rides... :)

CFD - Contracts For Difference

A friend asked me about CFD today. So partly to satisfy my curiosity and in order to NOT convey wrong information and mislead my friend, I decided to do my due diligence and carry some research.  For the uninitiated, CFD stands for "Contracts For Difference" and refers to "An arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities." (source:www.investopedia.com)

More information below that may be helpful to anyone keen on trading CFDs.

General definition:

Contracts for difference offer all the benefits of trading shares without having to physically own them. Contracts for difference (or CFDs as they are sometimes referred to) mirror the performance of a share or an index. Contracts for difference are traded on margin, and the profit/loss is determined by the difference between the buy and the sell price. Because contracts for difference trade on margin, investors only need a small proportion of the total value of a position to trade. CFDs also mirror any corporate actions that take place. The owner of a share CFD will receive cash dividends and participate in stock splits.

As traders, we're trained to only trade those things that we understand, so you'll need to put some effort into this before putting your money in.

Having some experience in trading leveraged instruments (options, futures, etc), what is critical is understanding what's the TRUE risk (real money that you can lose) versus the amount of expected reward.

Also, you'll need to know what's the purpose of your investment (long term/short term?, capital growth, income generation, etc).

Based on the purpose, then choose the right instruments.

From my 1st impression, CFD doesn't seem like a long term investment, as it costs money to continue to hold onto your positions, although there's no expiry for these contracts.

More resources for you to digest:

1. Pricing Model

- How money is made or lost? What cost to initiate a contract, etc?

http://www.contracts-for-difference.com/cfds-pricing.html

2. Pros and Cons

http://www.contracts-for-difference.com/advantages-disadvantages-cfds.html

3. Do's and Don'ts

http://www.contracts-for-difference.com/cfds.html

4. Risk

http://www.contracts-for-difference.com/cfd-trading.html

There's a web site with CFD calculator also:

http://www.cfdcalculator.com/

Accept losses and move on...

Accepting the losses and learning from the mistakes made, that is what I'll need to keep doing if I were to become a successful trader.

A winning trade and net positive for last day of the week (11-Jul-08: US). Entry was based solely on technicals and the bearish market condition. Constipated for a while, when the trade actually reversed and went against me for ~$100. I didn't know whether it was because I had faith in the technicals or was it the FEAR of another losing trade that kept me in this trade. At hindsight, I know now that it was a combination of both. Net result is $70 profit for the day. :)

Lessons learned:

1. Have faith in the technicals and stay calm while in a trade.

2. Only trade the instrument of which the volatility and the corresponding fluctuation in $$ is comfortable for you. Reason being, most futures contract are volatile, and in order to make a potential profit we'll need to allow a certain "room" of price movement (which translates directly to the $$ amount that we're comfortable of losing or cutting loss) within the timeframe (time target) that we've planned to exit for the trade to work out.

So much so for what happened last Friday. :) Let's side-tracked for a while. :P

Today, while zebra-crossing at Orchard Road with my wife, I bumped face-to-face into Utt, the famous, and gorgeous looking MediaCorp male artiste. (Don't get me wrong, I'm STRAIGHT and like girls and fast cars.. :D) Just that, I would like to consider the encounter with a celebrity a good omen for something wonderful to show up in my life. Since I have a choice, I might as well choose a SUPPORTING and POSITIVE belief, and keep my dreams alive. :)

For the female traders out there, here are some eye-candies of Utt for your viewing pleasure.. :P:

Don't take life too seriously... Have fun and dream on for bigger things in life... :)

Trade safely, and Trade to trade well...

More losses in a choppy market...

It was a choppy market on 9-Jul-08 (US), yet I continued to scalp at such unfavourable market conditions, resulting in more losses. Looking at my trade records, it is clear that I feared losing at the very beginning and cut losses at ~$50/trade. Later I began to take some small profits (because of fear of losing my profits and the choppy market condition). Eventually, greed and revenge got the better of me, as I let my losses run, while hoping the last trade to go my way, giving me enough profit to make back what I'd lost for the past few days. Net result, instead of losing $10 (excluding comm.) for the day, I lost $110.

Lesson learned, never trade when market is choppy, only take high probability trades, plan my trade. Still much more to learn. But I'll never give up... :)

DATE	TIME	TYPE	REF #	DESCRIPTION	AMOUNT
7/9/2008	23:39:15	TRD	51775826	SOLD -1 /NQU8 @1868.00 CME
7/9/2008	23:54:44	TRD	51779198	BOT +1 /NQU8 @1868.00 CME
7/10/2008	0:03:20	TRD	51781478	SOLD -1 /NQU8 @1864.50 CME
7/10/2008	0:19:23	TRD	51786826	BOT +1 /NQU8 @1866.50 CME	-40
7/10/2008	0:20:39	TRD	51786880	BOT +1 /NQU8 @1867.00 CME
7/10/2008	0:24:41	TRD	51788221	SOLD -1 /NQU8 @1864.25 CME	-55
7/10/2008	0:36:16	TRD	51791912	SOLD -1 /NQU8 @1861.25 CME
7/10/2008	0:37:16	TRD	51791971	BOT +1 /NQU8 @1860.00 CME	25
7/10/2008	0:39:00	TRD	51792651	SOLD -1 /NQU8 @1857.50 CME
7/10/2008	1:03:24	TRD	51797947	BOT +1 /NQU8 @1856.00 CME	30
7/10/2008	2:09:17	TRD	51808980	BOT +1 /NQU8 @1861.75 CME
7/10/2008	2:15:49	TRD	51810507	SOLD -1 /NQU8 @1863.25 CME	30
7/10/2008	2:20:10	TRD	51810880	SOLD -1 /NQU8 @1857.50 CME
7/10/2008	2:31:27	TRD	51813157	BOT +1 /NQU8 @1862.50 CME	-100
				TOTAL	($110.00)

Trading Psychology and Mindset

Completely screwed up my account last night, wiping out all the profits generated from last week. :(

DATE	DESCRIPTION	AMOUNT
07/08/08 10:40 AM	SOLD -1 /NQU8 @1842.75 CME	($105.00)
07/08/08 10:49 AM	BOT +1 /NQU8 @1844.75 CME	($50.00)
07/08/08 11:38 AM	SOLD -1 /NQU8 @1855.75 CME	$85.00
07/08/08 12:20 PM	SOLD -1 /NQU8 @1847.75 CME	($140.00)
07/08/08 12:24 PM	BOT +1 /NQU8 @1843.00 CME	$75.00
07/08/08 01:11 PM	BOT +1 /NQU8 @1847.25 CME	($115.00)
07/08/08 01:21 PM	SOLD -1 /YMU8 @11244.00 CME	$15.00
07/08/08 01:31 PM	SOLD -1 /NQU8 @1849.25 CME	$40.00
07/08/08 01:41 PM	SOLD -1 /NQU8 @1856.00 CME	$110.00
07/08/08 02:04 PM	SOLD -1 /NQU8 @1867.00 CME	$110.00
07/08/08 02:11 PM	SOLD -1 /NQU8 @1865.25 CME	($55.00)
07/08/08 02:33 PM	BOT +1 /NQU8 @1869.25 CME	($100.00)
	P/L Day	($130.00)

Did a post-mortem on myself and all my trades.

The following is my assessment results:

1. I realize that there is a recurring pattern in my trading P/L, i.e. my average losers (-$95) are significantly higher than my average winners (+$70). It implies that I'm not cutting losses quick enough.

2. I had early losses and wanted to "make back" my money. But losses compounded as I "over-traded" in this kind of "revenge-trading". Net result, I lost more money than required and wasted my capital unnecessarily, not to mention that the commissions made up a significant portion of the losses, since I traded 12 times within 1 day. However, I did learn that when I stayed calm and followed my plan, I COULD make my money back. That's a consolation.. :P

Conclusions:

- I need to focus on trading well on a daily basis, instead of focusing on making money and keeping a positive P/L daily. Traders do LOSE money, and I'm NOT any special to NOT lose money.

- The market will always be there and so are the opportunities to make money. There's always TOMORROW. :D

-  Don't OVER-Trade or trade unnecessarily as the commissions do add up and eat into our bottom line. Treat trading as a business, keep the "overhead" down.

What could be more timely than an excellent article on Trading Performance and Psychology by Dr. Brett below in this period of self-reflection and introspection for me. :) Don't miss this, CHECK it out here:

"Blowing the Whistle on Yourself (July  2008)"

By Dr. Brett N. Steenbarger, Ph.D.

http://www.sfomag.com/article.aspx?ID=1194

As usual, focus on trading well and the money will come.

Cheers... :)

Follow through...

For the past week, I'd been constantly focusing on being consistent on a daily basis,  by setting a daily profit target. To me, $50/day seems like a reasonable start.

I truly believe that success means "follow through" by repeating what one does right every day and getting rid of those things that don't work.

"Success is the sum of small efforts repeating day in and day out."

So far, I've been doing pretty well with this approach. Results speak for itself.

Total profits for 2-Jul to 3-Jul:

(+1857 - 1855.75 + 1847.25 - 1852.25 + 1848.5 - 1841.75 - 1830 + 1833.5)*20 = +$130 (ex. comm.)

I certainly wish to continue this winning streak, then again I understand that losses are unavoidable. In fact, small losses will keep our ego in check, and save us from big losses as a result of overconfidence after strings of winning trades. The crucial thing is that I must learn to control my losses by cutting losses quick and to know that I can always make it back another day. Everyday is a new day to me, regardless of what happened yesterday. The focus on any day is that the net results should be profitable at the end of the day. :)

Macroeconomic fundamentals

Found this very useful article in Investopedia.com regarding Macroeconomic Analysis, that provides a quick summary of the relationships between GDP, Unemployment, Inflation, Supply/Demand, Money Supply, Monetary policy, etc...

http://investopedia.com/articles/02/120402.asp

More articles by the same author who wrote the above article, here: http://investopedia.com/contributors/default.aspx?id=80

Do check them out if you have time. :)

Cheers, trade well, trade safely.