ForexPros Daily Analysis July 12, 2011
Free webinar on ForexPros - Q3 2011 Outlook for the Major Currencies
Expert: Ilian Yotov
Start: Sun, Jul 17, 2011, 10:00 EDT
End: Sun, Jul 17, 2011, 11:00 EDT
- Review of the trends for the currency majors in Q3 2011
- Should we expect a reversal of the USD fortunes in Q3 2011?
- Will the carry trade remain strong in Q3?
- Is the worst behind for the EUR?
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Monthly Trading Report June 2011
It’s necessary that I give a monthly report of the results from the strategies I use for signals generation and trading. The trading results from my weekly trading updates aren’t discussed here, since those who follow my articles can see for themselves when I place or close trades based on the weekly analyses. The results on live and demo accounts are similar. Only position sizes are different – in proportion to each account balance.
The USDCAD Hedging strategy has been optimized to give more frequent and profitable signals. No stop loss has been hit since the inception of this trading idea on the pair. Because the USDCAD is caught in equilibrium zones most of the time, some simulation was carried out to determine whether the profitability of this strategy could be improved by reducing the fixed target per trade by 35 pips. This ensures constant survival in the market in which both buyers and sellers are often stopped out. Nonetheless this kind of reduction would make less sense in a strongly trending market. A future article from me will explain the details of this optimization. In the month of June, our equity grew by an additional 9.5% (closed profits). The total trading time is a maximum of 15 minutes per week. One of the big mistakes in trading is to think you’ve always got to be doing something.
The Gap Trading strategy suffered some losses in the first half of June, leading to a roll-down of close to 4% on the accumulated profit. However before the end of the month, the losses were recovered and we’ve moved ahead by another 2.2% (additional 440 pips at minimum). Part of your profit would sometimes be given away: the key is to give away as little as possible so that recovery would be very much easier. Now, based on past experiences, it’s possible to forecast whether a gap would be filled or not after it occurs – with stunning accuracy. Gaps in the currency markets are usually followed by powerful price movements in the week they occur. Gap trading is a highly lucrative trading strategy – provided you know how to interpret the price actions correctly. A future article would be devoted to this advanced gap trading method.
Ralph Vince, author of 3 books on money management, allowed 50 PhDs who knew nothing about money management or statistics to play a game with 60% accuracy (which is certainly much better than any game you’ll ever play in Las Vegas) for 100 trials. They weren’t given any incentive for winning – which can cause stupid behavior. They were merely instructed to make as much money as possible playing the game. Guess how many of them made money? Only 2 of them! And these results aren’t unique. The markets can remain irrational longer than most traders can remain solvent. That’s why majority of traders would continue to suffer in the financial markets unless they embrace safe money management.
Why is it important that we understand money management? Because the main reason people think that trading is a dead-end activity is that they are unaware of – or choose to ignore – the purpose and power of this principle. Make money and risk management the focus of your trading activity. That’s what will make you a successful trader.
Forex Trading Analysis written by Azeez Mustapha for ForexPros. For more information about forex news visit ForexPros.
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