“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.” — Jesse Livermore

Hello:

This is an update on some of the movements on the markets and what we’re doing about them, plus our losses and profits. The analyses are based on daily charts – looking at the Big Picture. Our position size is 0.01 lots for each $1000. The risk on each trade is 2% in a situation of an initial stop. We use the Price Behavior rules for strategic decisions and our customized indicators for tactical entries. We open positions without predetermined exit target in mind, riding the trend for as long as the trend continues. The value of patience will forever be emphasized. As long as we stick to our rules and keep our risk low, we’re immune to fear. There are constant battles between buyers and sellers, and you don’t need to stick blindly to a team. If the buyers are winning, you join them. If the sellers are winning, you join them. If you fall in love with and stick to a losing team, the markets will stop you out and send you back to your dad’s house empty-handed. You’ll know which team is winning simply by looking at your charts, especially a higher timeframes.

AUDUSD

Primary trend: Bearish

Constant false bullish signals have been filtered on this pair, whereas on a smaller timeframe, several long positions would’ve been taken, only to be stopped out again and again. We’re still on a short position since the present prevailing sentiment is bearish, and we have no exit signal yet.

Order: Sell

Entry date: June 29, 2010

Entry price: 0.8494

Initial stop: 0.8720

Trailing stop: Not yet

Status: Open

Profit/Loss: -24 pips

NZDUSD

Primary trend: Bearish

The long-term bias is still bearish, though it seems the bears are getting tired. If the bulls continue to hold sway for the rest of today, we might exit our present position tomorrow and look to go long. The best thing is to stick to predetermined rules – no matter what.

Order: Sell

Entry date: June 30, 2010

Entry price: 0.6902

Initial stop: 0.7102

Trailing stop: Not yet

Status: Open

Profit/Loss: -34 pips

EURCAD

Primary trend: Bullish

This still looks like the beginning of a strong bullish ride, but the present northward journey is limited for now. We’re in a consolidation phase, after which the upward momentum should resume.

Order: Buy

Entry date: June 24, 2010

Entry price: 1.2824

Initial stop: 1.2613

Trailing stop: 250-pip TS applied

Status: Open

Profit/Loss: 473 pips

EURAUD

Primary trend: Bullish

The high probability trade is still a ‘buy.’ In the midst of bullish movements, there’ll always be bearish corrections (and vice versa for bearish movements). And each correction can last for days, only for the primary trend to resume. Nevertheless some bearish corrections had taken us out of the market when our moving stop was hit.

Order: Buy

Entry date: June 30, 2010

Entry price: 1.4355

Initial stop: 1.4154

Trailing stop: 100-pip TS applied

Exit at: 1.4828

Exit date: July 1, 2010

Status: Closed

Profit/Loss: 463 pips

EURNZD

Primary trend: Bullish

We experienced the same thing on this cross just like EURAUD. The upward movement ought to continue. A trend isn’t over until it’s definitely over.

Order: Buy

Entry date: June 30, 2010

Entry price: 1.7856

Initial stop: 1.7642

Trailing stop: 150-pip TS applied

Exit at: 1.8039

Exit date: July 2, 2010

Status: Closed

Profit/Loss: 173 pips

AUDJPY

Primary trend: Bearish

Though our TS was hit, we closed a good profit on this pair. The high probability trade is still a ‘sell.’ We’ll continue to wait for either a secondary sell signal (when we get a brand-new bearish trade alert in the context of a downtrend) or a new bullish trade alert.

Order: Sell

Entry date: June 25, 2010

Entry price: 77.22

Initial stop: 79.22

Trailing stop: 150-pip TS applied

Exit at: 74.01

Status: Closed

Profit/Loss: 312 pips

An Observer’s Trading Results: One of my readers opened a demo account at FXOpen on June 15, 2010, and started placing trades based on my signals (he named the demo after my strategy). He places trades according to my most recent signals. The differences are that he’s using 2% initial stops with his trades and uses no trailing stops; he rides the trends until there are significant changes (I personally use trailing stops especially after some 200-pip profits). So far he has these profits:

AUDUSD Sell: -22 pips (open)

NZDUSD Sell: -32 pips (open)

EURCAD Buy: 471 pips (open)

EURNZD Buy: 347 pips (open)

EURAUD Buy: 457 pips (open)

AUDJPY Sell: 265 pips (open)

The Issue Of Trailing Stop

There is no perfect money management tool in trading. Like Stop Loss, Trailing Stop is also a necessary evil. It has both advantages and disadvantages. The TS is good for preventing a decent profit from turning into a loss while attempting to ride the trend until it’s over. The challenge we face is that our trades can sometimes be exited prematurely during some turbulent volatility or serious countertrend corrections, only for the trend to continue significantly in the forecasted direction. As you can see, we’ve had premature exits on two pairs (though with profits) while accounts without TS are still enjoying good rides. To this end, our forex research group has decided to study this issue critically. Then we’ll meet in a conference in the middle of August. The purpose of the conference is to decide on these three possibilities:

1. Whether TS should be used as it’s being used now,

2. Or it should be used only when a trade has gotten to around 500-pip profit, before putting a 250-pip TS,

3. Or whether the use of the TS should be eliminated altogether from our strategic rules.

Before then, we’ll stick to our present trading rules (which have been favorable to us in the long-run).

The quotes of Mike Baghdady below simply show the pragmatic thing to do in a situation of loss:

1. ‘I have specific entry rules and clear expectations. I stay in my trade as long as the reasons to get into the trade are intact and if the market changes direction or behaves contrary to my rules, I am out!”

2. “There are times as a trader when you realize you are in an unfortunate situation and you want to get out of it. You want out in a hurry because the longer you stay in it, the more you’re losing.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

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