FXstreet.com Live Sessions Archives

The Relationship between Commodities and the Foreign Exchange Market

Expert:  Dan Blystone, CEO of Traderslog.com 
   
Topics that will be covered for above session are: 

•    Gold and it's relationship to the Forex Market
•    Oil and it's relationship to the Forex Market
•    Relationship between Oil and the Bond Market

Commodities, like the foreign exchange market, are strongly influenced by market fundamentals. Gold and oil in particular have an important relationship with the forex market, and can be used as leading indicators in forex trading.

Who is Dan Blystone?

Dan Blystone is founder of TradersLog.com - a website that focuses on technical and fundamental analysis of the financial markets. Dan was previously a professional futures trader and is based in Chicago.

Speech Material:

Hello and welcome to our FXStreet Webinar!
Today I am going to discuss correlations in the Forex market.

As a futures trader, trading the bund overnight here in Chicago, I always kept a close eye on other markets. For example, I kept the market depth screen for the US ten year note up, as a big move in that market would almost always spark a move in the bund.

Lets consider some of the inter-market correlations that apply to the forex market now. I'll begin with a look at correlations between certain commodities and currencies. Commodities, like the foreign exchange market, are strongly influenced by market fundamentals.

Gold and oil in particular have an important relationship with the forex market, and can be used as leading indicators in forex trading. Four major currencies are considered to be the closest tied to commodity prices - the Australian Dollar, the Canadian Dollar, the New Zealand Dollar and the Swiss Franc.

Let begin with Gold and it's relationship to the Forex Market. While the US is the world's second largest producer of gold, after South Africa, gold normally does not move in line with the US Dollar, rather they tend to have an inverse relationship. This is because during periods of geopolitical uncertainty traders tend to migrate away from the US Dollar and towards gold as a safe haven. In the world of Forex, no major currency is considered to be as safe and stable as the Swiss Franc. The political neutrality of the Swiss and the fact that 40% of its currency reserves were previously backed by gold underpins the Swiss Franc's image as being a safe haven during periods of uncertainty.

For these reasons the CHF/USD has a strong positive correlation with gold prices. Both Canada and Australia possess large reserves of precious metal and both countries have very strong, well-developed mining sectors. Australia is the world's third largest exporter of gold with mining accounting directly for approximately 8.5% of its GDP.

Canada is the world's third largest producer of gold.

The AUD/USD, NZD/USD, USD/CHF currency pairs tend to trade in line with gold the closest, due to the other currency having close political and natural ties to gold.

AUD/USD has a strong positive correlation with gold due to the fact that Australia is the world's third largest exporter of the commodity.

Now let’s looks at Oil and its relationship to the Forex Market. The price correlation between oil and currencies is more complex than that of gold as described above.

The Canadian Dollar is the currency most influenced by rising oil prices. Canada's total proven crude oil reserves stood at 178.9 billion barrels in 2004 just behind Saudi Arabia. Until recently, the costs of extraction have been prohibitive in Canada.

However, recent advances in extraction technology have made the price of oil in the sands of the Alberta province competitive in the global marketplace.

If oil prices rise the CAD is likely to closely follow. Correlation between the US Stock Market and the US Dollar. A strong US stock market would normally suggest that the dollar would strengthen also. As foreign investors bid up the base currency to participate in the gains. This occurred in the bull market of the 1990's.

However, more recently the dollar and the US Stock market have not moved in line with each other. Possibly due to the fact that US companies have increasingly derived their revenues from outside the US.

Using Currency Correlations in Forex Trading

Very often currency pairs are closely related to one another and this is something that can be used to the Forex Traders advantage. Correlation analysis helps you understand these relationships. Positive and negative correlations between currency pairs are measured in decimal form and they serve to reflect the extent to which the pairs 'trade in line' or diverge with each other.

The closer the number is to 1, the stronger the positive correlation. Conversely - the closer the number is to -1 the stronger the negative correlation. A correlation of zero would reflect a completely random relationship. Currency correlations are measured over a specific time periods, and it is important to bear in mind that these relationships reflected in the numbers will be constantly changing over time.

Correlations can help a forex trader manage their risk exposure by using a pair with a negative correlation as a hedge. A positive correlation between two currency pairs can be used as a leading indicator. The table on the following page shows the correlations between major currencies over the past 100 days:

http://traderslog.com/correlations-hundred.htm

Here you can see for example that EUR-USD has a very strong negative correlation with USD-CHF ( 96-) and that GBP-JPY has a very stong positive correlation with EUR-JPY (90+).

Fed and Interest Rates

Expert:  Adrian Aquaro, Head of Trader College LLC and True Market LLC 

Topics that will be covered for above session are: 

•    Interest rates influence in forex market
•    Who decides interest rates rises or reductions
•    Reasons to move interest rates

Who is Adrian Aquaro?

Adrian Aquaro has been a trader for the last 3 years, specializing in the International Foreign Exchange Market and acting as an Introducing Broker for the Latin America market. He heads True Market Services LLC and is also the director of Trader College LLC. He has vaste experience in forex education, making of him a leader in this particular part of the financial services industry.

Speach Material:

Interest rates have acquired great importance in the Foreign Exchange Market in the past two years.
Thus, the different monetary policies adopted by economic authorities in the central countries have determined the growth or fall of the principal currencies in the world context.

The term "monetary policy" refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy.

It is well known that the Euro, the main European currency, has gained power in midyear 2002, and has extended a rising tendency cycle until midyear 2004, at the same moment that USA decided to start with a rise in the interest rates from 1% at that moment, to 5% at present which made money rise 25 basic points in each Federal Reserve meeting, the country’s financial ruling institution.

In fact, the Federal Reserve is represented by an institution dedicated precisely to analyze and prescribe the monetary policy of the Union, the FOMC which means Federal Open Market Committee.

The Federal Reserve controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.

Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services.

Meetings and Proceedings of the FOMC

Press Releases
FOMC holds eight regularly scheduled meetings during the year, and other meetings as needed. Links to press releases issued after the FOMC meetings since the beginning of 1996 are in the calendars below.

Minutes
The Committee unanimously decided to expedite the release of its minutes. The minutes of regularly scheduled meetings will be released three weeks after the date of the policy decision. The first sets of expedited minutes were released at 2 p.m. EST on January 4, 2005.

Transcripts
Procedures adopted by the FOMC provide for the public release of transcripts for an entire year of meetings with a five-year lag.

FOIA Report
The FOMC makes an annual report pursuant to the Freedom of Information Act.

The main goal that the FOMC seeks at the moment of increasing the different kinds of interest is to restrain the inflationary spiral which is produced in USA, derived from the economic expansion created at a certain moment.
In this way, it is inferred that the surplus money, that is not destined to basic consumption will go to banks, thus the consumption of goods and services will be restrained, and the inflation rate will decrease.

Of course, this generates in other countries that do not have in their economic programs any intentions to increase their rates of interest a mass departure of funds towards USA, due to the strength of its economic circuit and since it looks so alluring to invest in the first economy of the World.

'What can an ancient Chinese war treatise teach you about trading the FX market?’ Series: The Art of Trading - Part I

Expert:  Patrick Dyess, Senior Trader with FX Universal 
   
Topics that will be covered for above session are: 

•    How the strategies covered in the Art of War can help improve your ability to judge the inclination of the market and making trading decisions
•    Why viewing the market as war and trades as a battle can be advantageous to your trading
•    Learn to develop a trading methodology that you can believe in

Part I: The Art of Trading
The ancient Chinese war treatise entitled The Art of War has been used by strategists from all walks from business, law and finance to gain an edge over competitors. In Part I of our series: The Art of Trading we will discuss the strategies that are covered in this ancient essay as they pertain to trading Forex. We invite you to see why these strategies stood the test of time over many competing models for thousands of years, so that you can apply them to trading the Forex market.

About FX Universal LLC:
FX Universal is a world class provider of foreign exchange trading services. Our staff is comprised of a dedicated group of trading, technology, and finance professionals who apply their experience, teamwork and innovation towards a common goal - helping traders succeed in the Forex market. FX Universal specializes in offering traders the highest level of quality and performance in Forex trade signals, Forex Courses and Forex Trading Accounts. Visit us online at www.fxuniversal.com for more information.

Forex Showroom Transcript: FX Universal's 4X APPRENTICE Course

Who is Patrick Dyess?
Mr. Dyess serves as Senior Trader with FX Universal. Additionally, he manages a proprietary FX trading desk for a private equity group on Wall Street. Mr. Dyess regularly advises a global network of FX traders and maintains an active FX trading book. He is a former trader with a Miami based hedge fund and former lead Technical Strategist for a prominent FX market maker. He takes an intuitive systematic approach to trading the FX market from a dealer’s paradigm, and is held in high regard with colleagues due to his advanced knowledge of the FX market. Mr. Dyess is a featured expert and daily contributor on FXStreet.com. He recently contributed his market insight on the CNBC World financial news network and made contributions to various publications including: Technical Analyst magazine out of London, and Stocks & Commodities magazine.

Session Material:

In part one of the Art of Trading we going to focus primarily on the appropriate framing one should adopt to accurately and effectively reify the ancient essay.   We will also define the rules of engagement as they pertain to active trading as well as some of the inspirational aspects of the author’s thesis.

It is critical in understanding the prose that a few assumptions are established and left in place throughout in order for you to apply the lessons taught to your trading effectively.

Firstly, I feel that is critical that one accepts the fact that the text commands a great deal of reverence irrespective of any predisposition primarily due to its relative fitness – meaning it has stood the test of time for a reason. 

Given the topic being something that is rather final – war, death and conquering – and the resulting proliferation of the survivors’ methods one must recognize that ideas command ones respect from nature’s model.  A common axiom sums this fact up well and that is ‘might makes right’ and the laws of nature postulate that will never change.

This statement may be hard to grip since it may take one at odds with certain situations that have unfolded in their respective situation, the fact remains this does not mean the individual speculator has no chance against the ‘mightiest’ participants; however it merely exemplifies the importance of mirroring the mighty much like a puffer fish does in order to protect itself from becoming the pray of larger predators.

The first and most important aspect of mirroring the mightiest participants is first recognizing the 5 constant factors that one must consider when trading. 

The Art of Trading postulates that you must recognize:

1. You must have faith in your methods
2. The infinite or random aspects of the market
3. The bounded or predictable aspects of the market
4. The ability for you to implement the rules – execution
5. Method and discipline

Once you distinguish the five constant factors you should accept the essentials for victory so you can implement them in your trading strategy.   The primary component in the hierarchy of essentials to victory is one should must know when to fight and when not to fight. 

From there one must be capable of managing volatile and flat markets as they are presented by the market.  It is essential for your trading success for you to be consistent in your methods from analysis to risk management to execution. 

Additionally, you must be prepared to take to the market at the moment of truth as oppose to the moment of fact - or better said after the fact.  Lastly, you must not allow other elements of your life to interfere with the methods and discipline.

Tactical disposition is one of my favorite stanzas in the treatise.  To quote the actual prose in English: ‘If you know the enemy and know yourself, you need not fear the result of a hundred battles.  If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.  If you know neither the enemy nor yourself, you will succumb in every battle.’

To me this is just one of the numerous incredibly inspirational quotes from the text, and I will include all of my favorites throughout the three parts of the Art of Trading.  I hope you are inspired in a way similar to me by this dissertation.

In order to mirror the actions of the largest most profitable participants of the FX market one must ‘put themselves beyond the possibility of defeat, and then wait for the opportunity of defeating the enemy.’ 

This is can very simply be compared to the use of sound risk management techniques to protect from the uncertainty inherent to trading the market, and in the most simplistic trading methods can be likened to the use of stop loss orders.

This is important because it would be a tremendous error on the part of a trader to deny the fact that securing oneself against a catastrophic loss lies in their own hands, as oppose to being a victim of an unquantifiable circumstance.

This fact is critical to the largest participants success because they: ‘…are able to secure themselves against defeat but cannot make certain of defeating the enemy…’.

They cant make certain of what other participants will do the simply wait for the enemy to defeat themselves, as many novice traders will do and always will, then seize upon that opportunity for their own benefit i.e. growth in equity.  Notably, not only do weaker participants provide liquidity so do hedgers and Central Banks. 

Clearly this quote embodies an incredible perspective to take on things if before you were attempting to impose your will on the market as oppose to being a student of the market.  Doing so never works in the traders advantage because thinking in other terms often encourages you to hold a losing trade longer than necessary.  It’s also a critical mindset for it instills a sense of faith to cope with the ambiguity of trading a dynamic variable such as the price of FX instruments. 

This is just one of many aspects where the essay accurately reflects nature and the process of natural selection as it pertains to survival and ruin in the market.  The market has mastered the Art of War – therefore traders who are not masters themselves are not going to succeed.

Sun Zi says: all war is based on deception, and one engaged in war should seem unable to fight when strong and appear able to fight when weak – again much like a puffer fish behaves to thwart predators.  This can be likened to when the market has achieved a range high or low.  This precisely the moment the market is weak and appears strong.  He goes on to say: ‘one should attack when the enemy is unprepared’ and placing orders at key price levels based on support and resistance is achieving just that. 

The largest market participants, also know as the ‘smart money’, nurture the ability they have to adhere to the confidence in their ability while properly executing method and discipline, thus are capable of controlling success on the broader scope.  They are not able to control any one battle, and are comfortable with this fact through risk control countermeasures, but do have the capacity to win the war based on strict adherence to the primary elements of profitability.

The more tangible aspects of the essay are explained in the hierarchy of the correct methods and they lend a great deal to the bounded or predictable aspects of trading.

Measurement is the first in the order of methods and in terms of analysis that can be analogous to being aware of the factors that move the market. 

Secondly, the estimation of quantity of the measurement, meaning you must place the proper range on the impact of the market moving factors. 

Thirdly, the calculation of the impact of the underlying consensus shift on price with technical and rational fundamental analysis. 

Fourthly, the probability multiplied by the arithmetic expectation based on your analysis to reach a quantifiable outcome over many iterations.

This aspect of trading is where many traders fail to make accurate deductions based on many factors including decision making biases that derive from expectations tempered in what can be construed as subjective or irrational – such as fear and greed.  This is where the psychological aspects of decision making must be heavily scrutinized and every attempt to neutralize the impact of human error must be taken.

One way to do that is to be systematic in your approach to measurement and estimation.   The original essay recognizes this and naturally developed methods to combat it systematically. 

Through many successful battles the ideas proliferated in the Art of War postulate that 3 dimensions with 2 phases each suffice in measuring and estimating with accuracy great enough to achieve success, or more specifically in the case of trading, a positive arithmetic expectation in account value with each risk taking endeavor.

Support and resistance is the basis since directional forecast are more often than not fruitless.  The proximity of price and/or our orders and open positions relative to the level allow traders to accurately measure the ‘terrain’ or ground. 

The Art of War ‘distinguishes six types of ground (3 dimensions with 2 phases each) to wit: Accessible ground, entangling ground, temporizing ground, narrow passes, precipitous heights and positions at great distance to the objective’.

This segment of the treatise offers very good guidance on strategic order placement.   Given the fact that the market often takes what is known as a random walk within a clearly defined range, trading a break out of the range is not to your advantage to get involved prior to the break. 

By using the Fibonacci sequence to measure the range and projections to measure the break out one can place orders accordingly to shield stop loss orders by the fib boundaries and either place targets or use a trailing stop to create a positive arithmetic expectation.

Why You Need a Trading System

Expert:  Markus Heitkoetter, President of Rockwell Trading Inc. 

Topics that will be covered for above session are: 

•    Lack of a Trading Plan
•    Lack of Discipline to Follow the Plan
•    Failure to Control Emotions
•    Failure to Accept and Limit Losses
•    Lack of Commitment
•    Over-Trading

Day Trading can make you rich in a few weeks or months or wipe out your account with no mercy.
In this session we will take a look at the top six reasons why traders lose money and how trading a system can help you avoiding these mistakes.

Who is Markus Heitkoetter?

Markus Heitkoetter did his first trade in 1990, using hand-drawn point-and-figure charts from quotes published in the morning newspaper. In 1997 he started developing trading system using MetaStock and TradeStation.
In February 2005 he became the CEO of Rockwell Trading, a company that was founded by five active traders to teach interested investor how to make money in the markets with trading systems. Two of Rockwell Trading’s team members are active floor traders at the Chicago Board of Trade, having a combined trading experience of more than 50 years.

Speach Material:

If you want to make money trading then by all means you have to avoid the six biggest mistakes of trading. In this session we will talk about the six reasons why traders lose money and how a trading system can help you avoiding them. Join this session because the reason why you are losing money could be one of these mistakes:

• Lack of a Trading Plan
• Lack of Discipline to Follow the Plan
• Failure to Control Emotions
• Failure to Accept and Limit Losses
• Lack of Commitment
• Over-Trading

Confessions of A Forex Trader - Part 1: Looking At The Risk

Expert:  Mihai Nichisoiu, private speculator in the currency markets 

Topics that will be covered for above session are: 

•    Standing aside: the state of being normal instead of being the exception
•    Cutting losses early: a tight and rigid policy of risk
•    Betting when higher leverage does not automatically equate higher risk

Who is Mihai Nichisoiu?

Mihai Nichisoiu is a private speculator in the major currency markets. Actively involved in managing speculative funds, Mr. Nichisoiu also emails a letter to a small number of long-term clients every day in the US afternoon time, having done so un-interruptedly eversince mid 2002.

Mihai Nichisoiu's performance record involves a model account started in early January 2004 with one of the oldest, most respectable US-based spot forex brokers. Running in the same broker's monthly 'Demo Trading Contest' - October 2004 through August 2005 - Mr. Nichisoiu finished twice as runner-up, ending up with a positive return in 8 months out of the 11-month participation ; Mr. Nichisoiu won the trading contest in August 2005 with one of the best 1-month returns recorded so far in the competition.

FXstreet.com has been hosting a daily market update signed by Mihai Nichisoiu since early 2004. Mr. Nichisoiu can be currently contacted via ForexGrandCapitals.com, although the appearance of a new, more personal website is being underway.

Speach Material:

I could assume that, for many traders, the risk is just an im-material parameter ; the stop-loss order exists merely on the basis that, traditionally, past generations of traders have used stop-loss orders as well.
For me, though, the risk is the single most important issue, upon which my estimations never cease to end.

While many others 'see' the profits again in an im-material framework - that is, often as wasted opportunities -, I instead look at the risks. At all times I assume I cannot and will not be right in my own market predictions, and that there is always something which can and will go wrong.

Often the way I speculate in the markets is read as being one of extremely tight and rigid stop-loss orders ; although the charts I monitor on an ongoing basis are daily, even weekly ones, most of my trading positions are started off with protective orders many times tighter than one could observe at the way an intraday trader is seen dealing.

But I think the premise is confused with the effect. Very tight and rigid stop-loss orders are not the premise, but the effect. The real premise is the attempt to keeping the drawdowns extremely low.

My long-run observations have also shown me that, for most traders, the natural status is being in the market, dealing.
For me, it is exactly the opposite - my natural status is being out of the market, not dealing, but performing the simple act of observation ; only at a handful of moments I allow myself actively participating in the markets.

Over the years I have come to view the market rather as a matrix of risk defined opportunities, than in terms of traditional technical / fundamental analysis. A matrix when and where tight windows of trading opportunity open up and close out themselves, in-frequently, on rather a rare basis, within which the markets violently continue a previous trend or just as violently reverse it at the expense of low-volatility time and price intervals ; the use of the word expense is not a coincidence, as more often than not my stop-loss orders (the initial ones, at least) have a key 'technical' connection with those above mentioned low-volatility time and price intervals.

I too view the market as a chess table, one at which there is usually an agglomeration of opinions and (chart) movements, however also a table at which I am not bound to make a move unless precisely when and how I want. Along my trading years I have also built the capacity to view that 'agglomeration of opinions and (chart) movements' in rather abstract terms ; for example, I very rarely think of a sudden, exquisite increase in market volatility which I have not speculated as a default in forecasting or a frustrating waste of trading opportunity, but sheerly as a change in the (chart) picture which might offer me 'technical' and risk-related terms for a personal reaction.

That is not to say that I do not have an innate passion for action, because at times the way I let myself dealing means I must be more active (and also more contrarian) then most everybody else. Nevertheless, at most times I am also more passive then most everybody else - and that is too an integral part of my strategy, and perhaps the foremost part of it.

One other premise which I have found very popular is that, in trading, an increase in the leverage utilized must automatically equate an increase in the risk assumed. An online dictionary very popular on the web explains the word 'aggressive' - in one of its many forms - as 'of or relating to an investment or approach to investing that seeks above-average returns by taking above-average risks'.

Nonetheless, I believe one can be 'aggressive' in his or her speculations not necessarily by increasing the amount of risk assumed ; it is the core essence of my trading style which should put me in the position when and where that popular 'matching equation' would not take place.

I think the popular conception is higher leverage automatically drives to higher risk, and that the stop-loss orders must necessarily be larger as the timeframe of market observation gets larger itself.

That does not necessarily apply to the way of my dealing. Indeed I do follow up with larger (chart) moves as they would occur in the daily, sometimes weekly chart timeframes ; however, I only choose to speculate upon rare, in-frequent spots on the charts when and where I perceive there might occur an increase in market momentum at the expense of low-volatility time and price intervals.

Such a selective choice would allow me having an extremely tight (initial) stop-loss order as with most of my market entries ; that means, although the (initial) risk could stay at a very low level, the leverage utilized may not be low.


This way I am approaching an (almost) ideal situation where capital gains could be notable, while potential as well as effective drawdowns could stay at quite a low level. That is a very selective way, a very selective strategy - I well know - but in the end I am prominently interested in the risk adjusted ability to making money, rather than validating any personal connection with popular and traditional conceptions about trading.

Technical Indicators for Range Bound FOREX Trading

Expert:  Wayne McDonell, Chief Currency Coach, FxBootcamp.com 

Topics that will be covered for above session are: 

•    Support & Resistance
•    Pivot Points
•    Bollinger Bands
•    Candlestick Patterns

Who is Wayne McDonell?

Wayne McDonell is a professional FOREX trader with an Entrepreneurial spirit and a business leader's mind. He trades his own funds and trains others how to do so consistently and profitably by coaching them everyday... in the live FOREX markets. No signals or alerts are provided. Only trade planning and execution that suits the individual trader's style, comfort and risk tolerance.

Mr. McDonell has coached hundreds of entrepreneurs and executives. He has spoken at dozens of conferences around the world. He's held several senior management roles at companies from 2 - 2000 employees, including Cicso Systems and Apple Computers. As a venture capitalist,
he as invested in over 100 consumer and industrial patents. Mr.McDonell has appeared in many publications including Inc Magazine,
TechWeek, Information Week, The National Post, as well as others in Europe and Asia.

Mr. McDonell's passion is FOREX. He currently mentors currency traders who are preparing to trade currency as a career. Future plans include a book and seminar tour.

Rob Booker recommends you what Trading Books you should read

Expert:  Rob Booker, Independent Currency Trader of www.Robbooker.com 

Topics that will be covered for above session are: 

•    How to pick books that will help you?
•    How many strategies do you need?
•    The 10 best books on trading and how they can help you now

Who is Rob Booker?

Rob Booker is an active proprietary trader, money manager and forex educator. Mr. Booker has trained hundreds of forex traders around the world, assisting them with developing their own trading systems, but more importantly, Mr. Booker focuses on helping traders deal with the mental, psychological, and discipline issues related to trading. Mr. Booker has authored Strategy:10, one of the most popular electronic books on currency trading, which has been downloaded over 100,000 times. He has also written The Currency Trader's Handbook, to be released in early 2006. Mr. Booker avidly employs technical analysis in his search for trading opportunities. 

Session Material:

You’ll notice there are only three “system” books listed here.  Only two books that will teach you strategies for trading.  The rest focus on the mental side of trading.  Trading is way more than 70% mental.  It is nearly 100% mental.  The system you use is irrelevant.  The mental discipline with which you test your system, and build it, and implement it – that is everything.



Books #1-3:  The Market Wizards Series by Jack Schwager.  If you don’t read anything else, read the interview with Paul Tudor Jones in the first book.  If you read something after that, read the interview with Stan Druckenmiller in the second book.   And if you read something after that, read the interview with Mark Cook in the third book.

And you should read all the other interviews too.  You will learn that even the greatest traders in the world have had serious, emotionally damaging losses. They lost huge amounts of money at the beginning.  But they did not give up, and they learned that disciplined money management made all the difference.

Are you going to learn any trading systems from these books?  Absolutely not!  You are going to learn how important it is to protect your account.  How critical it is to test your strategies before you trade them.  And how you have to be emotionally strong to survive.  These are arguably the best trading books you can read. 

Book #4: Reminiscences of a Stock Operator by Edwin Lefèvre.  This is the story of Jesse Livermore – one of the greatest speculators the world has ever seen.  He earned and lost huge sums of money time and time again.  Some of the most important advice you’ve ever heard about money management originated with this book.  You’ll read about the importance of standing by your decisions, and also the wisdom in getting out of positions quickly when you know you are wrong.  You will see how terrible it can be for you to mismanage your money, without losing any of your own.  And though written in the 1920’s, the book reads like a thriller.  Well, if you are a trader it reads like a thriller.  I read it in one sitting and could not put it down, and I periodically pick it back up and read a few pages. 

Traders who blow up their accounts are the types of individuals who never spend any time remembering how dangerous trading can be.  They start to feel invincible and then they overleverage their account and then they explode.  You can see this happen more than once in this book, and the lesson is worth reading over and over.

Book #5: Ugly Americans by Ben Mezrich.  I love this book!  Not a single trading strategy in it, but worth 5 times the price.  This is the story of a Princeton graduate, a former football player, who after college has no job offers.  So he goes to interview on Wall Street and can’t get hired.  And when he is ready to give up, he gets a job offer from a Princeton football fan (and alumnus) in Japan.  Without even knowing what he is getting into, he jumps on a plane to Japan and starts an amazing adventure as a hedge fund trader.

This book will teach you that you don’t have to be a rocket scientist to trade.  You don’t have to be a math genius, or have super connections.  You just need to have discipline.  You’ll notice in this book that there isn’t a lot of room for error in a hedge fund – these guys play to win.  The story of Malcom the football player turned hedge fund superstar will make your head spin.  And teach you how important it is to prepare for your trades: he makes $500 million on one trade that he researches for months.

   

Book #6: Day Trading the Currency Market by Kathy Lien.  This is the most important book ever written about the currency market.  There are other books that propose to be an overview of the market, but they suck in comparison.  This is the only “overview” book you need.  And yes, it does even have trading systems – good ones – described in detail.  Kathy is the queen of retail currency trading, and it’s obvious why in this book. 

This book has an excellent description of the driving economic forces behind the currency market – and I don’t think you can find the same, reliable information in any other place, let alone in a book. 

 

Book #7: Technical Analysis of the Currency Market by Boris Schlossberg.  Boris is a fundamental trader but he wrote a book about technical analysis. Go figure.  He’s not only a friend but he is a good trader and a world-class currency analyst.  The discussions of systems in this book makes it worth the cover price.  He has a unique way of setting stop losses that is the best discussion of the subject that I have ever read.  Because it focuses on the currency market, I find it more valuable than other books on technical analysis.



Book #8:  Trading in the Zone by Mark Douglas.  This is the best book on the mental side of trading ever written.  Period.   If you’ve not read this book, you’re missing out.  It has served as a wake up call to many traders and has been an instrumental difference in their success.  I have bought at least 200 copies for friends over the last few years.  Probably more.  If you are struggling with discipline, or you are jumping between trading systems, I hope you’ll read this book.



Book #9:  When Genius Failed, by Roger Lowenstein.  Have you ever thought that you needed to work on Wall Street, or have an Ivy League education, in order to trade?  That the Wall Street traders have an advantage over you?  This book will put those myths to rest, as you read about Nobel Prize winners and Wall Street veterans and their success in blowing up a $5 Billion hedge fund and nearly sending the entire world financial system into chaos.  Think about it: some of the most respected minds on the planet didn’t just act so stupidly that they blew up their own fund – they almost blew up major Wall Street brokerage houses in the process.  Genius doesn’t make you profits.  Good money management and discipline do.



Book #10:  Liar’s Poker by Michael Lewis.   One of the most entertaining books about Wall Street ever written.  The descriptions of the outsized personalities, his experiences  on the trading floor at Salomon Brothers, his storytelling of the explosion in bond trading in the 1980s – all combine to make a quick read, and good lessons about risk that you can incorporate into your own trading career.

Using Moving Average in Trading

Expert:  Valeria Bednarik, Trader College LLC and True Market LLC 
 
Topics that will be covered for above session are: 

•   What is a Moving Average
•   Different ways to work with simple moving average(MA)
•   How to use a exponential moving average (EMA)

Who is Valeria Bednarik?

Valeria has been an active Forex trader for the last 2 years, specializing in the International Foreign Exchange Market. She also graduates in the Universidad Catolica del Salvador, in Argentina, as a Public Account, specializing in financials and cost managements. She actually manages an important clients portfolio for IFX Markets, Boston and is trader at Trader College LLC.

Sessión Material

How to use MOVING AVERAGES simple and exponential
What is a Moving Average?

Moving averages are trend direction indicators that calculate a simple arithmetic average of prices for a specified period, showing the average value of the price of a currency over a set of value.

There are different types of MA:  we use SMA for simple moving averages and EMA for exponential ones. There are also two more kinds of MA: smoothed and line weighted.

The SMA is the simplest one, yet the most used. It calculates the average of the price by adding the prices of the specified period together then divides it by the number of the prices.
SMA = Sum of “x” periods /X

Where x represent a certain number (could be almost any one from 2 to 500 depending of how many historical information your charts include); besides, many chats allows to select a chosen set to apply the calculation: Open, close, high, low, median or typical price, etc.

The EMA, smoothes the MA by adding to the current closing price, the previous value and giving the last prices more weighted value. This type of MA reacts faster to recent price changes than SMA

The Smoothed MA smoothes the SMA by giving the recent prices an equal weighted to the historic ones. It’s recommended to use it with long term periods to get better result.

The Linear Weighted MA smoothes the SMA, by giving the latest data more weighted value than to more early data. That helps to limit the effect of the price fluctuations of the recent price.

Let’s remind that MAs works better in a trend market and they act worst in periods of  market fluctuations.

Different ways to trade with MA

There are many different methods and settings of Moving Averages a trader can use; in this session, we will include just two methods, with some of the common settings, useful for intraday trading. 

On first place, we can use a MOVING AVERAGE BREAKOUT. In this method, you have to draw a Ma in any selected chart. Let’s see an example in a 1 hour chart of EUR/USD. I used a SMA of 20 periods (blue). When the price crosses the Moving Average down-up and there’s a new candle opening above the Moving Average indicator we buy, an when the price crosses the Moving Average up-down and there’s a new candle opening below the Moving Average indicator we Sell.

Clic image to enlarge - Chart 1 EUR/USD 1 hour

Another way to trade MAs, is using MOVING AVERAGES CROSSES. In this method, you can use at least two MA, but here at Trader College we generally use three. The first one will be set with a small period (Fast Moving Average) the second one will be set with more number of periods ant the third even with a bigger number of them (Slow Moving Average). Let’ see another example using SMA of 4, 9 and 18 periods in a 4 hours USD/JPY chart

Clic image to enlarge - Chart 2 USD/JPY 4 hours chart

The sky blue is a 4 periods MA, the medium blue represents 9 periods, and the dark one, is for 18 periods. See how, when 4 cuts 9 and then, cuts 18 you have a good trigger. The 4 periods line crossing the 9 ones, is the first signal you have; this signal gets its confirmation when both, 4 and 9 cross 18.

There are lots of combinations we can use to trade using Ma or EMA. Another good combination is 9 13 34. The most important thing to remember is that this particular indicator works better when the market is at a defined trend.

EMA as dynamic supports and resistances

Another way to use EMA, not only as a signal or trigger, is use large ones (50, 60,200), as dynamic supports and resistance for the intraday trading. Of course, as day go by, numbers change, because as I say this is a dynamic indicator. The way to use them, is to check them in a 4 hours chart; with observation you will find out, that generally, prices rebound or stop near that point. You can use them as target prices too.

But take notice, when this EMA are broke, let’s say, for more than the 8% of the pips a certain currency moves a day, that probably means a change of status: if it was a support, then turns in to resistance, and vice versa.

Check the following GBP 4 hours chart.

Clic image to enlarge - Chart 3: USD/GBP 4 hours

The blue line, is a 200 EMA. The yellow, a 60 periods EMA. See how currency spends a good number of hours “fighting” them, until giving a  trend confirmation. 

No matter what system you use to trade, no matter what indicator, always remember two things: do your own back testing, and try to keep it as simple as possible. If you do your own back testing, you will feel confident, as you understand better the currencies behavior; if you keep it simple, you won’t get dizzy with thousands of different signals.

'How to Become a Thriving Trader?’ Series: Part IV Trading on Breakouts

Expert:  Robert Nowak, CEO of www.dailyforexanalysis.com 
 
Topics that will be covered for above session are: 

• Technique: how to spot a breakout?
• How to recognise breakouts in various trading systems?

Part IV: Trading on Breakouts

Breakouts are the single most important element of a fast moving market. Within the context of Forex, breakouts can occur 2-3 times per day. Being able to spot a breakout and trade on it is key to trading success. Mr. Nowak will discuss techniques for spotting breakouts before they begin and how to recognize breakouts in various trading systems.

Who is Robert Nowak?

The key of Rob Nowak’s trading plan is the ability to determine market direction based on institutional accumulation and distribution and recognizing signals based on the correlation of technical indicators and the use of intra-day pivot points and levels.Mr. Nowak is a commodity trading advisor, professional Forex manager and foreign currency analyst.

Speech Material:

What is a Breakout?

A breakout is the point at which the market price breaks away or moves out of an established  trading range. 

A breakout is simply a resolution of market confusion with respect to price direction. 

A breakout signals a resolution to indecision and can lead to significant changes in the perception of value. 

A breakout of a trading range can be the identification of a change in the balance of supply and demand.  It may point to resolution or maturing of events or perception.  It often points to a continuation of the trend in the direction of the breakout but does carry the risk of whipsaw when the breakout is small or lacks continued momentum. A continuation of the trend in the direction of the breakout carries more confidence when the movement coincides with a critical day.

A study of technical analysis can strengthen a perception of changes in supply and demand and allow for stronger trading opportunities.  Critical day analysis has significant value when combined with trade strategies.  Knowing when the market may change direction with such a high degree of success is a valuable edge for investors. If the market reacts to technically identified levels, it provides as much information about supply and demand as when they do not react.

PDF Presentation:
Download seminar_part_iv.pdf

Mastering Emotions In Trading - Part I

Expert:  Jay Lakhani, Professional trader author of The way to trade Forex   
   
Topics that will be covered for above session are: 

•    Technique or Psychology
•    Emotion and Mental Fitness
•    Beliefs
•    Trading Plan
•    Trading System & your Rules
•    Information Overload

Though different traders will have a different perspective as far as psychology in trading is concerned. However, in my opinion success in trading is 90% psychology. I could give a perfect trading system to ten people, and all are likely to have a different trading performance. I believe that a trader with a sound mental fitness but a poor methodology will perform better than a person with the best trading system, but poor mental fitness...

Is it the fault of the system? Or is it the psychology which hinders your success?

Who is Jay Lakhani?

Jay Lakani is a professional trader and has been involved with markets since his early twenties. He has extensive experience of both the US and UK stockmarkets - trading in derivatives, forex, index and stock futures, and commodities.

Jay uses Technical Analysis in his trading, and believes that successful trading is based on your strategies and techniques, psychology and having a disciplined money management.