02- Nov2016
Posted By: adminwmk

Trading Psychology: What and Where is Yours?

It has been my experience that not everyone appreciates the importance of trading psychology.  Unfortunately, it’s not a very sexy form of information and framework of self-discipline.  This is due to the fear that it generates in so many traders and/or the belief that he or she doesn’t “need” trading psychology.

Actually, I remember when I first was apprised of the crucial nature of using psychology to the trading process. I had just begun to learn how to trade and pooh-poohed learning about self-discipline as a waste of time (of course you get the dripping irony here of a psychologist that didn’t appreciate the necessity of knowing and using tools to support trade execution).  I thought that all I needed was to learn the “right” strategies (the longs & shorts of making a deal work) and then the money would start rolling in.  Needless to say that is not the way it works.

In fact, my experience with blowing up accounts fits quite well with anecdotal and statistical data on newly minted traders across the planet.  Newbie traders fall into a couple of buckets with regard to their early trading.  The first is either they don’t recognize the need to have focus and follow-through strategies to maintain rules and keep commitments; or they know that they need to have strong self-discipline but because they don’t know how to acquire it they continue to flounder and lose money.

But here is the bottom line; it is a requirement to getting consistent successful results that you have a substantive awareness of how you think, a mind-set that appreciates focus, follow-through and keeping commitments, and a set of strategies for changing your internal states from frustration, confusion and fragmentation to being centered grounded and purposeful.   So, whether you think that trading psychology is at the top of the what-matters-most list or not, what is painfully clear is that you’ve got to have mental and emotional tools when you’re trading.  If you don’t, that’s like driving a car without a steering wheel.  You will not only “lose” your way, you will crash and burn without that steering capability brought on by mental and emotional tools.

One of the ways to acquire mental and emotional tools is to become self-aware and in the moment; with an appreciation for that moment being the most important.    That is because each moment stands alone in its connection with the present.  All past moments are history and no matter how much you may desire to return and get another chance to do the right thing, it is gone forever.  All future moments are mysteries and cannot be accessed until they make it to the “Now”.

Also, when you are in the moment you have a much better prospect of being aligned in body, mind and emotions to go in the same direction and for the same goals.  If you are not aligned then you will be highly susceptible to internal conflict…one of the main destroyers of being attuned and on alert to what-matters-most.  Additionally, when you are self-aware it becomes much easier monitor your thoughts and emotions so as to increase your awareness of what is taking place in your mind-set.  You’ll remember that in the above we indicated that one of the most important cogs to becoming a consistently successful trader was fundamental awareness of how you think and how your mind-set is firing.  You can’t change what you can’t face and you can’t face what you don’t know.  Armed with this data on where your issues stem from you have a fighting chance to begin to address and eventually change them.

Psychology is the study of the mind and its functions, especially those affecting behavior in a given context.  How you think determines your emotions and those feelings drive behavior.  In other words, what and how you think controls what you do and what you do directly causes the result.  Trading psychology is all about your mind and how you are managing what goes on in it in relation to trading.  This is what we teach in “Mastering the Mental Game” online and on-location courses.  Ask your Online Trading Academy representative for more information.  Also, get my book From Pain to Profit: Secrets of the Peak Performance Trader.

02- Nov2016
Posted By: adminwmk

Why is the dollar struggling?

Analysts at Brown Brothers Harriman explained that they had anticipated the dollar was going to be under pressure in the first part of the week.

Key Quotes:

“Today’s losses are coming despite slightly wider US 2-year premiums”

“Position adjusting seems to be the main factor, but it is not immediately clear if it is ahead of the ADP jobs estimate and FOMC meeting tomorrow or the US election.”

 “Trump’s support had bottomed before the FBI re-opened the investigation into Clinton’s emails, and his support appears to be continuing to edge higher.”

“We noted in our last technical view that the Dollar Index snapped a three-week advance last week.”

“We identified initial support in the 98.00-98.20 area and warned that a break could see 97.60.  Today’s low thus far is 97.74.  The Dollar Index has fallen through the 20-day moving average for the first time in a month.”

“A break of the 97.60 area would suggest a deeper correction is in store that could carry it toward 96.75.”

30- Oct2016
Posted By: adminwmk

8 Reasons to be Trading Forex Next Week

You should be trading currencies next week because excluding the U.S. Presidential election on November 8th, the next 5 days are jam packed with major event risks.  With 4 monetary policy announcements (from US, Japan, Australia and UK), 4 employment reports (US, Canada, Germany and New Zealand), PMIs and countless other key releases on the calendar, these will be some of the busiest days for FX traders in the month of November. Big moves are assured and we could even see new multi-month / year highs or lows set in the process. GBP/USD is not far from its 30 year low, USD/JPY could hit a new 3 month high, while USD/CAD and USD/CHF could reach fresh 7 or 8 month highs.  This coming week’s central bank rate decisions in November are not as important as the ones in December because no changes in monetary policy is expected but investors will be listening closely for their tone / bias and guidance as they will set expectations for next month’s potential moves. While it may be hard to whittle down to the most important releases (because there are so many of them), the primary events will be the Federal Reserve meeting, the Bank of England’s Quarterly Inflation Report and U.S. non-farm payrolls.

Barring the unexpected news that the FBI has re-opened its investigation into Hillary Clinton’s emails, this past week has been a great one for the U.S. dollar with Friday’s stronger than expected third quarter GDP report adding fuel to the market’s optimism.  We doubt that this investigation will have any impact on the election a week and half from now but political headlines can add to the volatility expected this coming week. The dollar ended the week higher against most of the major currencies.  USD/JPY broke above 105, USD/CAD breached 1.34 and GBP/USD came close to breaking the 1.2100 handle.  It is almost hard to believe that USD/JPY was trading near 100 a month ago but thanks to the Federal Reserve’s persistent commitment to raising interest rates this year even in the face of softening labor and spending data, U.S. yields and the U.S. dollar rose strongly over the past month.  Data in the past week was mostly better with growth accelerating, manufacturing activity improving, new home sales rising, and the trade deficit narrowing but a slow recovery in the labor market and upcoming election is making consumers nervous.  The Federal Reserve isn’t going to change its message next week so the ISM non-manufacturing and non-farm payrolls report will be more important as they will either ease or harden the market’s doubt about December tightening.  Fed fund futures are pricing in a nearly 75% chance of a rate hike at the end of the year but if less than 175K jobs were created in October, putting the average near 165K, those expectations will fade as it will cast doubt on the central bank’s rosy outlook.  With that in mind, since we are anticipating hawkishness from the Fed and the FOMC meeting is 2 days before NFP, we expect the dollar to trade strongly in the front of the week. The Bank of Japan also has a monetary policy meeting and while no changes are expected, weak growth necessitates more easing and investors are eager to find out if they will act in December or surprise with a November move.

Sterling took a beating this past week and the prospect of further losses hinges on the Bank of England. In many ways next week is more important for the British pound than the U.S. dollar because the latest UK PMIs and Quarterly Inflation Report will be released.  Immediately after Brexit, the PMIs plunged, then it recovered in the months that followed and now there is some fear that we will begin to see weakness again. Most of this past week’s economic reports like consumer prices, employment and GDP surprised to the upside but retail sales was weak. Yet sterling came under heavy selling pressure on growing Brexit fears. The headline on Friday that Northern Ireland would not challenge Brexit caused a flurry of activity but is not particularly surprising. The big question next week is whether the BoE will lower its economic forecasts and signal plans to ease.  When Governor Mark Carney spoke this past week, he drove sterling higher when he said there were limits to monetary policy. GBP is at risk of a short squeeze so if the Quarterly Report echoes this sentiment by emphasizing the improvements in the economy and downplaying Brexit, we could see a sharp rise in the currency.  We don’t think that is likely because Carney has been very vocal about the risks of Brexit.  Both the manufacturing and services PMI will be released before the Quarterly report and they will help set expectations for the more important release.

Compared to other major currencies, the data impacting the euro next week is less significant which means the path of the currency will most likely be determined by the market’s appetite for U.S. dollars.  Having fallen to a 7 month low this past week, EUR/USD appears to have bottomed.  We could see 1.10 but further gains should be limited as we expect dollar bulls to remain in control at the start of the week.  On Friday, we learned that consumer prices in Germany grew at its fastest pace in 2 years, which is a function of the weaker euro and higher energy prices. This adds to the string of positive surprises that we seen all week from the Eurozone. Monday’s third quarter Eurozone GDP report and Wednesday’s German labor data are the key numbers to watch.  Job creation was the strongest in 5 years according to the PMIs and another healthy release could keep the currency supported into FOMC.  Like sterling, short positions are near extreme levels, which makes the currency vulnerable to a squeeze in the coming days / weeks.

Of the 3 commodity currencies the weakest one this past week was the Canadian dollar.  Oil prices peaked and data surprised to the downside with retail sales falling and consumer price growth missing expectations.  The Bank of Canada left interest rates unchanged but cut their growth and inflation forecasts, adding pressure on the currency. While August GDP, Canadian employment and the IVEY PMI reports are scheduled for release this week they will take a back seat to all other major global releases.   The Australian dollar on the other hand is likely to march to its own beat with a Reserve Bank of Australia meeting, Australian PMIs and retail sales on the calendar.  After last week’s stronger CPI report, we believe that the RBA’s neutral monetary policy bias will lend support to the currency. While AUD/USD may be pressured by positive USD flows, the Australian dollar could see stronger gains versus the euro, Swiss Franc, Yen and sterling.  AUD has shrugged off rising iron ore and gold prices but we believe these rallies will return as drivers for the currency in the coming week.  Meanwhile Chinese PMIs will affect both AUD and NZD.  The New Zealand dollar has been surprisingly resilient in the face of deteriorating trade data. New Zealand’s employment report is scheduled for release next week and according to the PMIs labor market conditions weakened in the third quarter.