FXstreet.com Live Sessions Archives

The Reality of Forex unveiled

Date: November 9, 2005 15:00GMT 10EST

Expert: Carley Garner, Currency Analyst of Alaron & www.fxtradingschool.com

Topics:
- Does the FX market offers an ideal environment?
- What is the most alluring aspect of forex ?
- What is the biggest mistake that inexperienced traders make?

Who is Carley Garner?
Carley Garner is a Magna Cum Laude graduate of the University of Las Vegas Nevada, from which she earned a B.S. in Finance & Accounting. At UNLV she was a Dean’s List scholar and was elected to the Golden Key International Honor Society. In 2003 she was one of only 1200 collegians nationwide named to the National Society of Collegiate Scholars. Long fascinated by money and the markets, she previously worked for a stock brokerage, honing her skills at technical analysis. Although relatively new to the industry, Carley has been featured in several national publications including Futures Magazine, Active Trader and Stocks and Commodities.

Speech Material:

The FX market offers an ideal environment for speculation due to its enormous size, liquidity and so called “strong trends”. Accordingly, many traders are lured in believing that the characteristics of forex will lead to tremendous success. However, success has been limited for several reasons.

Many traders come with false expectations of the profit potential and lack the discipline required for trading. Day trading or even short term position trading can prove to be very difficult for amateurs due to the extensive leverage offered by the FX market. Just like any other market instrument, the rules of finance and logic apply. In other words, one cannot hope to make extraordinary gains without taking extraordinary risks. A strategy that incorporates high degrees of risk should be expected to result in inconsistent performances and even large losses. I often remind people, that trading isn’t easy. If it were, I wouldn’t work 12 hours per day. Even traders with several years of experience, and are considered to be successful, have extensive “losing streaks”. Like any other valued skill, trading takes time to master and there are absolutely no short cuts.

The most alluring aspect of forex is the high degree of leverage offered. The idea of having the ability to turn small amounts of money into much larger amounts in minutes is extremely tempting. However, leverage is a double-edged sword in that it can provide exciting profit potential, but traders must understand that the potential losses are also great. The biggest mistake that inexperienced traders make is over margining their account. For example, if the margin on a currency pair is $1,000 and you have $10,000 in your trading account, this doesn’t mean that you should execute 10 positions. In fact, trading one lot, rather than multiple lots, will likely increase your odds of success. Traders that over leverage their accounts are often “forced out” of losing positions prematurely that would have ultimately become profitable. Successful traders know that it is much easier to “outlast” the market than it is to “out trade” it. Most experienced traders will agree that as a rule of thumb you should never use more than 50% of your available margin, and believe it or not many professional money managers are not authorized to leverage a trading account over 10%.

Although there are a lot of forex traders that are quick to brag about their abilities, there are far fewer that are willing to show it. Regardless of what any given trader tries to portray, they are only as good as their actual performance. Those that do disclose actual performance statistics often don’t live up to the lofty expectations that many hold for fx trading. From what I have seen, most retail money managers are grossing between 5% and 35%, a far cry from the triple digit returns that lure beginning traders into the currency markets. There are good reasons for this lack of disclosure. By stepping back and taking a look at the “big picture”, you will find that it all makes sense.

First of all, traders that are experiencing abnormal performance numbers probably aren’t interested in sharing their skills, knowledge or performance with others. A trader that is consistently earning triple digit returns, yes there are a few out there, would be more productive trading for income than managing others money or selling trading secrets. In other words, they have no incentive to advertise, teach, or disclose to the public. Additionally, trading is a full time job. Those that trade as a means of income must be constantly enthralled with the markets and have little time to devote to “side jobs”, including money management.

Unfortunately, because forex is currently an unregulated industry it is not uncommon for trading system and educational vendors to exaggerate profit potential. As a trader, it is necessary that you keep a realistic and objective outlook on potential returns. If you are unable to devote the time, and money, necessary to become a successful trader you would likely be best off using a money manager. However, beware of those that claim abnormal performance results. Remember, if they are capable of these types of returns they will likely be more interested in trading your own account rather than yours.

When searching for a competent fx money manager. Your best bet is to choose one that publishes detailed and, most importantly, realistic numbers. As mentioned before, most legitimate retail traders net anywhere from 5-35%. Any trader that is showing returns at the upper end of this range is a viable candidate. After all, in an industry that often praises triple digits anyone that is willing to publish what, are seen by many as, modest figures is probably relatively honest. We recommend Mason Capital Management to our clients for their managed forex needs. Not only are they experienced and honest, but they also agree to a profit sharing program. In other words, you would only pay them if you make money!!! If you are interested in learning more about their services, email me at cgarner@alaron.com.

In conclusion, Forex trading should be treated as a job or business and is not a way to “get rich quick”. There are traders that experience triple digit returns, but they are few and far between. Similarly, those capable of these types of returns will most likely not be in the business of managing funds or educating beginning traders.

You should approach the currency markets with respect. If you would like to benefit from its potential, it is imperative that you are realistic in your expectations and are willing to properly educate yourself

Money and Risk Management

Date: November 3, 2005 15:00GMT 10EST

Expert: John S. Alesia, President and founder of Brown forex

Topics:
- Finding an entry is great but is the trade worth the risk?
- Now that I have a good risk reward ratio how many lots should I trade?
- Should I trade multiple ccy pairs at the same time?
- Some real trade setups and examples.

Who is John S. Alesia?
John S. Alesia founded Brown Forex after a successful career on Wall Street. Recognizing an opportunity to capitalize on an untapped retail trading market, Mr. Alesia left an executive post with Deutsche Bank to start Brown Forex. Leveraging his years of capital markets experience with hedge funds, investment banks, and institutional money managers enables Mr. Alesia to provide sage guidance and powerful resources to the retail trader.

Session Transcript:

Finding an entry is great but is the trade worth the risk?
I get a lot of questions when talking to new traders like "Should I buy or sell EUR/USD." Well I usually have an opinion but not necessarily a trade. What I want to look for when trading is one finding the direction to go in but just as important I need to know where my risk is in the trade. Knowing your risk is knowing where your stop loss is first off.

Most new traders worry more about how much they can make and never worry about how much they can lose. So firstly find the stop loss. Second find your target. Now determine whether the trade is worth the risk. Personally I like to set up trades at a 1:1.5 risk reward ratio. So when risking 30 pips I will want to try and target at least 45.

Now that I have a good risk reward ratio how many lots should I trade?
Second aspect of managing your risk is knowing how many lots to trade. Too often I see traders who trade 1 lot no matter what. The size of your trade should be determined by the amount you are willing to risk. Lets assume your risk tolerance is per trade is 2% of your total account. That means with a $10,000 account you are willing to lose a max of $200 per trade. So your stop now determines the number of lots you will place on that trade. A 30 pip stop loss will mean you can open a position for a max of 6 mini lots on EUR/USD or $180. A trade with a 100 pip stop loss will allow you just 2 mini lots to be traded.

Should I trade multiple ccy pairs at the same time?
We like to advise new traders to stick to one currency pair at a time.
But if you are trading multiple pairs be aware of which pairs have a correlation. Understand that a long position in EUR/USD and a short position in GBP/USD may have an offsetting effect. Conversely going long both pairs may double your position. It is not impossible to trade multiple pairs, even those that correlate to each other, but understand you may want to lower the lot sizes on the trades because a move against you in one may cause twice as much in losses as you were willing to risk.

Some examples of real trades
A daytrader using pivots sees support in the way of the pivot point at 1.2005. Price is consolidating around 1.2015/25. Resistance is at 1.2076. We are willing to give about 10 pips below support of room for the price. So that means to get the 1:1.5 ratio we want to enter at a max of 1.2027 giving us a 32 pip stop loss at 1.1995 and a 49 pip target at 1.2076. If we enter at 1.2027 we can then trade a max of 6 mini lots risking $192 based on a $10,000 account and a 2% max risk per trade.

A swing trader who is looking for a longer move, over a few days may be bullish the pair as well. But that trader is looking for a longer move and thus giving themselves more room on the stop. This trader sees support at the daily low of 1.1935 and is targeting a high from a couple of days prior of 1.2268. The trader may want to give 20 pips of room on support for their trade so place a stop at 1.1915. The trader can then buy, based on the stop and target up to 1.2057 giving them a 1:1.5 ratio.

So the trader now knows if they get a signal to buy below that level of 1.2057 they can go ahead and place the trade. Let’s say the trader gets the buy signal on the break of 1.2000 and enters at 1.2010. Then a max of 2 mini lots can be placed on this trade because the trader is risking 95 pips on 2 mini's or $190.

Sterling Pound, a great currency opportunities

Date: November 1, 2005 15:00GMT 10EST

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

Topics:
-Annual, monthly and daily performances
- The best indicators to trade with Sterling Pound
- Cyclic movements
- Supports and resistances.

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.

Speech Material:

Sterling Pound.

The Sterling Pound (GBP), has, in all crosses, a great daily price amplitude, this is the rally between maximum and minimum per day.

In the following report, there is the daily average, since Nov 2004 until Oct 2005:

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Trader College LLC Comparison with major crosses:

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These are the differences between GBP and other major currencies

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October 2004/ October 2005 – MAXIMUM VS MINIMUM

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Indicators:

As we know that in short and long time periods GBP is so volatile, now, we can make a trading strategy, taking some technical indicators.

So, we think that momentum, CCI and ADX are the best ones to work with.

First, let´s remember what each indicator is useful to:

Momentum: When its line crosses 100, we can combine it with SMA 20, and when price crosses it, we have an excellent signal. CCI: When CCI line crosses 100, and price breaks the first resistance or support, we have a signal.

ADX: DI+ line crossing DI- line, down-up give a bullish signal. And DI- crossing DI+ down – up, will show a bearish signal

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In this chart, when the market is flat, the following signals are not so good. So, it is important to work in a trend market, if it is possible, of course.

In this chart, we have GBP/USD in 4 hour chart.

In 1, 14 period CCI line broke 0 line, and it is an important signal.

In 2, we confirm with 10 period ADX what CCI said befote.

a) DI+ crosses DI-

b) ADX line is over 25, and this mean that there is a great difference between maximum and closes.

In 3 and 4, Momentum confirms the signal, because its line crosses 100.

Enter point is the orange line break, which was a resistance before.

Of course, you can use this strategy in smaller time frames, like 1 hour, or 30 minutes charts.

But we recommend not to use this combination in 15 and 5 minutes charts, because GBP is so volatile, and you won´t have good signals.

Cycles:

In forex, we have thousand of traders every day, every moment, so it is usually to see in charts what we call cycles

You can measure a cycle amplitude taking it minimum and maximum, and also, you can take the main line, to know the price range.

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Here you can see that GBP has two cycles (1), and you can compare them with the third cycle (3)

So, we can say that the cycles which are in the same trend, are so similar, and you can relate them taking a common divisor, like 2, 4, 8, etc.

This is clear in 4 and 5 cycles.

Support and Resistance

In all GBP crosses, you have several points of resistance and support. And you have to wait until these point are broken, before you enter a trade.

In this case, we have to wait a filter, this means, at least 8% of the daily rally.

Remember that in GBP/USD, we have about 148 pips per day, so we recommend to enter in market only when price breaks a support or resistance, and it is al least 10 or 12 points far from it.

If you use EMA as support and resistance, we recommend to use 60 and 200 periods EMA, in 4 hour and daily charts.

So, when price breaks them, you will have excellent signals.

Psychology of Trading: To Trade or Not to Trade

Date: October 27, 2005 14:00GMT 10EST

Expert: Jerry Chin, Currency Analyst Fxsolution's

Topics:
- Should you trade.
- Do you have what it takes to trade
- If you dont have what it takes, how to build yourself into a trader.

Who is Jerry Chin?
Jerry Chin has over fours years of experience trading futures and forex. He is currently a currency dealer at FX Solutions. As a dealer, He has a lot of interaction with FXSolutions diverse trader clientele. Many of the traders I interact with are day traders. Prior to joining FX Solutions, I was a trader with Goldenberg, Heyehmeyer & Co. one of the largest clearing firms on the CBOT. He electronically day trades firm capital in US Treasury futures.Having had experience in the largest financial market in the world, and the most liquid respectively, He has a detailed knowledge of the markets and how to trade them on a short term basis, with a successful strategy.

Speech Material:

To paraphrase the tortured young Prince of Denmark, “To trade or not to trade, that is the question.” This is the question I would like to tackle in this session on the psychology of trading. Whether you are thinking of opening a trading account or you are ambivalent as to continuing trading your account, or are thinking about re-entering the market after an absence, I hope my thoughts on the psychological decisions you have to make to answer this question will be helpful to you.

Why should a person trade? There are many psychological reasons why people follow the path to trading. Sometimes trading offers a thrill and exhilaration that a person does not experience in his normal routine. Excitement is a major marketing point many in the industry point towards as an enticement to enter the markets. Some people engage in trading because they want to be proven right on their opinions regarding the economy, political situation, or the weather. Everyone talks about these topics, and some people want to put their money where their mouth is. People want their opinions validated and there is none greater validation than cold hard cash. Others feel a certain prestige attached to being a participant in the financial markets. Others are never comfortable with certainty and actively seek out the uncertain to gratify their psychological cravings.

Prior to opening a trading account, you need to honestly answer the question, why am I trading? If you are trading for the excitement, the adrenaline rush, to be proven right, or any other reason, you might be able to attain those things through trading, but you most likely will not make money while attaining those goals. The decision to lose money trading while satisfying your other needs is yours to make. But do not be under the impression that you can satisfy your wants and needs and make money at the same time. It simply cannot be done. The reason is because when you have your psychological baggage attached to a trade, you cannot think through clearly the critical decisions necessary to cut losses and let profits ride. Your mind, whether consciously or unconsciously, will be clouded by the urges that need to be satisfied, whereas the trader who’s only urge is to make money has more than a fighting chance to do so because he is not consciously or unconsciously seeking ulterior goals.

After you find your true motivation to trade, you will be able to decide whether you can attempt to attain those goals through trading. If you want to trade to feel the rush, you probably will feel the rush in fast market conditions, as there is peril and shelter from the storm with every tick along the way. If you want to trade because you have an opinion on the direction of the economy, you might be proven right 50% of the time, eventually. If you want to trade because you want to have good cocktail party conversation material, you will be the life of the party talking about the United States twin deficits forcing the value of the dollar down versus its major trading partners. If your true motivation to trade is to employ risk capital in a productive fashion in order to grow your equity, then you just might have a chance of making money trading in the financial markets.

After you have made your decision whether to trade or not, whether you might be able to attain your goals by becoming a participant in the market, you must now figure out do you have what it takes to trade? Do you have the personality traits that will allow you to survive and thrive in the markets? Although there are a million ways to make a million dollars in the markets and there are a million personalities in the market, there are certain traits that help people and there are certain traits that hurt people. You need to be resilient. You will suffer many setbacks and disappointments with your successes. The nature of trading is that no matter how many setbacks you have, you must continue to strive for a good trade. If you are resilient, you will continue to be in the market no matter how many times you suffered losses, or strings of losses. You need to be resilient in trading because you need to be in it to win it, and the only way to be in it all the time is to be resilient in the face of setbacks.

In addition to being resilient, you also need to have the humility to admit your mistakes, and learn from then. No one will make the right decision 100% of the time. When you don’t make the right decision, and in fact even when you do make the right decision, you must analyze what went right and what went wrong so that next time, you do it right. Being humble and having an appropriate sense of self will allow you to be egoless and recognize when you are right and when you are wrong. Ego will prevent you from admitting your mistakes. Ego will prevent you from admitting mistakes and ego will prevent you from finding better ways of doing things.

The markets constantly change. What drives price action today, this week, or this year, will be quickly forgotten, next year, next week, or tomorrow. As a trader you must be just as flexible and adaptive. You must adapt to changing trading environments, either ranging markets or trending markets. You must adapt your opinions on the direction of prices as new economic or political events occur. A short term memory and a lack of stubbornness leads to flexibility in trading. Do not relive yesterday’s trades during today’s trading session. The decisions or opinions you had yesterday that lead to success yesterday can lead to failure today. Short term memory means that you start every trade fresh without any preconceived notions of what will lead to success or failure. Lack of stubbornness means you are open to change and changing your opinions as necessary. The flexibility to adapt not only leads to survival in nature, but in the markets as well. A single individual animal is not stronger than the forces of nature. A single trader is not stronger than all the aggregate forces in the market. Don’t ever think you can stick to your outdated opinions and views, when the market tells you are obviously wrong and are about to be extinct.

I have found that the most important personality trait to be able to participate in the markets is resiliency of purpose and personal flexibility. Although some people are just born more flexible and resilient than others, these character traits can also be developed and attained through experience. People who have gone through tribulations and failures in their life experience and come through successfully are usually more resilient than those who are never challenged and are equally successful. To become a resilient individual, test yourself, push yourself, expand your envelope of comfort everyday. You can do so with small steps, running faster at the gym, attaining a higher score in school, being a better parent to your children. As long as you are pushing yourself to improve, no matter you succeed or fail in reaching your goals, you will build up your resilience.

To increase your flexibility, learn to live with uncertainty. You need to face the uncertain in your everyday life. Be creative when confronted with uncertain situations. Do not look at them as obstacles and a source of frustration, but rather as problems to be solved and tasks to be conquered. If you take this attitude towards uncertainty, then you will develop the skills necessary to adapt and adjust to changing conditions in the market.

Deciding whether one should trade is a very personal decision that in addition to financial considerations, there are also many psychological considerations. You need to take into consideration what needs are you trying to satisfy in the market and whether you are likely to fulfill it through trading. You also need to consider whether you have the necessary character traits to be able to survive and thrive in the markets. Are you adaptable, are you flexible, are you resilient? And lastly do you want to put yourself in situations where you will have to be all those things? These are the questions you need to ask yourself before you are even ready to amass the necessary risk capital to open a trading account, let alone to open a trade.

Weakness in Retail Forex: Inherent risks of a single market maker structure OPEN FORUM

Date: October 21st, 2005 14:00GMT

Expert: Peter Rosentriech Author of 'Forex Revolution'

Topics:
- The role of counterparty risk in forex trading
- How counterparty risk might manifest itself
- Basic rules of caution

Who is Peter Rosentreich?
Peter Rosentreich is a principle and foreign exchange trader for Rose Stevons & Company, a boutique New York alternative investment firm specializing in providing retail clients with innovative, structured products. Mr. Rosenstreich has extensive experience in the retail Forex sector. He is licensed with a series 3, 7, and 63, and is registered with the NASD and National Futures Association as a Commodity Trading Advisor (CTA). Mr. Rosenstreich holds a BA in History from Clark University and an MBA from the City University of New York, Zicklin School of Business.

Speech Material:

Given recent developments in the investment world, it is critical to revisit and review the role of counterparty risk to the retail forex trader. In recent years counterparty risk, while still an important factor to institutional traders, has become less important to retail traders. Retail traders tend to choose a trading firm based on other factors such as spreads, cost and execution.

In a single market maker system, which is the mechanism utilized by most retail platforms, there is a heavy reliance on the creditworthiness of the counterparty. This is due to the fact the firm is handling the trade for some period of time. Either holding the currency in inventory or quickly offsetting the trade, but both ways exposing them to additional risk.

Discussion – Please post your questions it is vital that we hear what you have to say!

- The role of counterparty risk in forex trading
- How counterparty risk might manifest itself
- Basic rules of cautionmy the euro could fall apart !

Naked Trading: Exposing the Secrets of Successful Traders

Date: October 11, 2005 14:00GMT 10EST

Expert: Rob Booker, Currency Analyst

Topics:
- Get Naked
- Get Some Naked Backup
- Make a Naked Plan

Who is Rob Booker?
Rob Booker trades profitably for his own account and manages money for others. Rob has trained hundreds of fx traders around the world. He has helped them develop their own trading systems, but more importantly, Rob focuses on helping traders deal with the mental, psychological, and discipline issues related to training. For Rob, successful trading is more mental than anything else.

Speech Material:

It was not long after my big loss that I realized that in order to trade successfully, I needed to have an edge. Without some kind of informational advantage, I was not going to be successful. And you know what?

Without an edge, you’re not going to be successful either.

Perhaps you are a profitable trader. It’s possible that you already have some ferocious trading skills. One time there was this dog in my neighborhood, and he was really, really ferocious, like he could bite your leg off in one bite, and then as he was chewing on your leg while you were screaming, he would be grinning and stuff. Maybe that’s how ferocious you are as a trader.

Maybe that’s you. Maybe you’re not so confident in your trading right now, or you have a bunch of winners and then you lose big. I know how that feels. I want to help you become a better trader. The best trader you can be.

Getting naked is the first step.

Step 1: Get Naked
Ok, I don’t mean that you should actually take off all your clothes. But if you are not yet successful in trading, you must strip down all of your pretenses, your pride, and your previous knowledge. Dump it all. Start over. Take a deep breath.

Let me give you an example. I once worked with a trader who had studied technical analysis for 5 months previous to hiring me as a mentor. He was fascinated by many different indicators, including the MACD, moving averages, Bollinger bands, Relative Strength Index, and a few others. He was using all of these indicators on his charts when he first started with me. He asked if we could work together to put those indicators into a system for him. A profitable system that he could use every day.

I encouraged him to delete all but 2 indicators from his charts. This would help him to focus. No longer would he be confused by the conflicting messages that all of the indicators were giving him.

Instead of being excited about the prospect of reducing the information overload, he protested. What about all those months of study that he had done? All of that would be lost if he deleted the other indicators!

Two months later, he relented. After crippling losses to his account, he was ready to get naked. He humbled himself. He agreed that he was taking in too much information. He was willing to admit that he needed to reduce the amount of information he was studying every day – even if this meant that he had wasted 7 months of his trading life.

He deleted the other indicators, focused exclusively on MACD and moving averages, and has been trading profitably ever since.

Step 2: Get Some Naked Backup
I trade with a team. Granted, my team consists of me and just one other person – Maxwell Fox – but that helps me trade better than I could on my own.

Team trading is a concept that I introduced in my training, because traders seemed to do better when they could bounce ideas off one another. They don’t necessarily all take the same trades, but they at least can voice their trade ideas, get feedback, plan trades together, and keep each other honest.

I found that when I first started, it helped me to have another person to whom I would be accountable for all of my trading. That’s what I mean when I say you need to get some backup. Someone to get inside the barrel with you, to help you when you make a bad trade, to keep you humble when you make a good trade. That kind of stuff.

Step two, in essence, is to trade naked with other people.

Step 3: Make a Naked Plan
Over the years, I have read at least 1,000 trading plans from traders around the world. There is one common characteristic of the best plans:

They were short. They were simple. The very best were just 1 page long.

Don’t run out and delete the last 5 pages of your trading plan just because I said the best plans were only 1 page long.

Wait. Wait a minute. I take that back. I think you SHOULD run out and delete the last 5 pages of your plan. Make it one page.

Make it one page, and cram everything you can into there. Tell me, in your plan,

- When you plan your trades

- What money management system you use (fixed fractional, etc.

- What your primary entry and exit triggers are.

Step 4: 1-2-3
I have talked about this in front of groups. I have talked about this in front of individuals. By email, by phone, by fax, by instant message, by carrier pigeon, and by message in a bottle.

And very few people ever listen to me.

Test 1 currency pair. With just 2 time frames. With a maximum of 3 indicators. That’s it. 1-2-3.

Too many traders feel that they will do better if they have more information. You know that’s not true. So, here is the plan:

Test 1 currency pair, with just 2 time frames, with a maximum of 3 indicators, and test for at least 100 trades. See what your results are. Test with a small live account if you are wealthy. Test on a demo if you are not. Testing takes a long time, and no one likes to do it. Be patient. Test. Try different things. Test on historical charts by playing the candles back one at a time. Testing pays off.

A Bunch of Naked Rules

- You are looking at too many currency pairs, too many time frames, and way too many indicators. Get naked.

- You are trading live too soon. Get a naked demo.

- You did not test your system extensively. Test naked.

- Your forex dealer is not running your stops. You are just taking bad trades.

- Support and Resistance is the greatest invention ever. Support and Resistance can make you wealthy.

- Put one indicator on your charts. Make a system from just one indicator. I bet you’ll make more money.

- Think about pips, not dollars or euros or pounds

Batman's most useful weapon in his war against crime is Rob Booker, the black thunderbolt that knifes through Gotham's streets when danger threatens. The vehicle has undergone many design changes over the years: in the earliest days of Batmans career, Rob Booker was a giant armor plated sedan; advanced automotive technology has turned Rob Booker into a sleek street machine.

Rob Booker’s chasis is constructed of an amazingly light experimental titanium alloy and is coated with a unique bullet proof ceramic, as are its one-way mirrored windshields; consequently, Rob Booker can easily withstand any handgun or semi-automatic weapon assault, and has a limited resistance even to armor piercing bullets. It's puncture proof tires are impervious to routine damage, as well.

Oops. That’s the batmobile.

I trade for a living. I want to help you trade for a living, too.

No matter who you are, you can probably trade for a living if you just get a handle on the mental aspect of trading.

I try to give a lot of stuff away for free. Sometimes I do charge for some services. Visit me at robbooker.com, or send me an email (rob@robbooker.com). Keep in touch.

How to Differentiate a Breakout from a Fakeout?

Date: September 29, 2005 14:00GMT

Expert: Sam Shenker, Technical Currency Analyst of FXCM

Topics:
- Breakout Confirmation
- Follow through
- High Probability Breakout Setups

Who is Sam Shenker?
Sam Shenker is a Technical Currency Analyst for Forex Capital Markets (FXCM). Sam is the author of the Daily and Weekly Technical Research reports at FXCM. His reports include: Daily Technicals, Daily Crosses and the Weekly Chart Analysis. Prior to joining FXCM, Sam spent a number of years on Wall St and has traded many different products, including: equities, equity derivatives and futures. He also specialized in research and analysis of high yield bonds, corporate bankruptcies, restructurings, reorganizations and venture capital. He holds a Bachelors degree in Finance and Business Management from Pace University and is an active currency trader. Sam is frequently quoted on FXStreet, and his research can be found daily on Bloomberg.

Speech Material:

Breakout trading is one of the most alluring trading strategies that draw’s beginners and professionals alike.

Breakouts epitomize the price action as it moves fast and entry point does not have to be exact and profits just pile in, that is where most traders find the other side of breakouts, a condition that I like to call a “fakeout” or more commonly known as a whipsaw.

Breakouts:
There are two types of valid breakouts that I would consider trading.

Pattern Breakout
HH (Higher High) / LL (Lower Low) Momentum Breakout

Pattern Breakouts:
Pattern breakout is the most common form of breakouts as it’s based on the pure price action and a breakout from the reversal/consolidation patterns.
The most common patterns consist of triangles, channels, wedges, pennants, flags and less common pattern is Head and Shoulders.
Also breakout trader must keep in mind the timeframe he or she is trading on, as lower timeframes will have a higher number of potential breakouts and higher number of failure. Also a trader must keep in mind that the profit potential will be different for different pairs and different timeframe, the higher the timeframe the higher profit potential, but on the flipside the higher the potential loss if the breakout turns into a fakeout.

HH/LL Momentum Breakout:
Momentum breakouts occur when the price breaks above the high or breaks below the low of the most recent short-term price range.

Example:
Following is a great example of recent price action as it encompasses breakout, fakeout and a momentum breakout.

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British pound daily chart has the GBP/USD swinging within a large channel, with the swing to the downside finding the lower boundary. Here is the dilemma facing most traders, do I swing the price the other way, or will the price breakout and head lower. The trading tactic is to wait and observe the price behavior, if the price flashes a turnaround than I will swing for the channel’s upper boundary, if the price flashes a potential breakout than I will trade in the direction of a breakout.

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Next day showed the indecision from both sides with the price closing at the channel’s lower boundary. So the best thing to do during the days of indecision is to remain on sidelines.

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Following day the price opens below the channels and slowly moves to the downside. The breakout is far from decisive and lacks momentum.

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The next few days the breakout turns into a fakeout and the price rallies back toward the channels boundary, thus causing most traders to close their initial positions.

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The next day the action turns around as the price fails to climb back into the channel and with subsequent turnaround seeing the price breaking below the three day range

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Resulting momentum gave the pair additional 300 pips after the momentum breakout occurred, that is what I call momentum follow through

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As demonstrated earlier this is one of the variants of a fakeout, a price breaks the pattern, than fakes out the traders who traded the initial fakout. The best way to avoid the fakeout is to be patient, have sound money management rules and emotional control.

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Triangles are some of the most common patterns, as they confine the price within a shrinking range. As the range shrinks and tighter it becomes, the further the subsequent breakout will travel, which will reduce the chance of a fakeout.

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Wedges are primarily consolidation and continuation pattern, and the wedge seen on the 4HR GBP/USD chart was a pause during the summer dollar rally that divided the move in two large parts.

Building a winning trading plan

Date: September 22, 2005 14:00GMT

Expert: Jay Lakhani, Professional trader author of The way to trade Forex

Topics:
- What is a Trading Plan?
- Benefits of a Trading Plan
- Building the Perfect Master Plan

Who is Jay Lakhani?
Who is Jay Lakhani? Jay Lakhani 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.

Speech Material:

What is a Trading Plan?
90% of traders fail, and the common factor amongst these failed traders is that they do not have a trading plan. In my book The Way To Trade Forex, apart from strategies, I also focus on trader psychology, and especially creating a winning trading plan. I offer a free evaluation report. A trading plan is a complete set of rules that covers very aspect of your trading life. A trader with a plan starts with an edge, as he will perform a lot better than someone without one.

A Trading Plan will not guarantee you success, but when things go wrong you will be able to react to possible outcomes. It will enable you to respond positively and will measure your success. This is why a plan is essential. You control the only thing you can control yourself.

Benefits of a Trading Plan
- It will make trading simpler as you have rules to follow before you pull the trigger.
- It will act as a road map for your trading journey, so that monitoring of your trades becomes easier.
- If you are having a string of losses, it could be either that one of the component of trading plan is not working or you are not following the plan, it is time to review
- Relaxed and emotional free trading.
- The plan will instil a measure of discipline in your trading.
- The plan will enable you to control yourself!

Building the Perfect Master Plan
The trading plan should be tailored to suit your personality, ability and resources. It should be your plan and unique to your style of trading.

Take into account your emotional and psychology side of you. Do not pretend to be some one you are not; be honest with yourself when creating your trading plan.

What are the components of a good trading plan? During the Q & A Forex Showroom, I will give you a step-by-step guide, on how you can organise a winning plan.

Keys to Trading Intraday Breakouts

Date: September 21, 2005 14:00GMT

Expert: Edward Ponsi, FXstreet.com FX Educator

Topics:
- Putting the Odds in your Favor
- Optimal Breakout Patterns
- Optimal Breakout Times

Who is Edward Ponsi?
Edward Ponsi has been recently appointed new FXstreet.com FX Educator and is the president of FXEducator LLC.

Speech Material:

Hello everyone, my name is Ed Ponsi of FXEducator and I’m happy to present this lesson to you today.

When trading intraday breakouts, or when engaging in any type of trading for that matter, it is important for the trader to use every type of advantage possible. In all forms of trading, no matter if the vehicle is the equity, futures, or forex market, there are many instances of false breakouts. In order to reduce the negative effects of these events, let’s take a closer look at intraday breakouts and how to trade them.

Ascending and descending triangles are excellent breakout patterns, because the pattern itself establishes a directional bias for the trade. An ascending triangle is formed by a combination of diagonal support and horizontal resistance; a descending triangle is formed by a combination of diagonal resistance and horizontal support. In the case of an ascending triangle, the bulls are gaining strength and buying at higher and higher levels, while the bears are merely trying to defend an established level of resistance. In the case of a descending triangle, the bears are gaining strength and selling at lower and lower levels, while the bulls are merely trying to defend an established level of support.

In the case of ascending or descending triangles, the trader can gain an edge by looking to the direction of the currency pair prior to the formation of the triangle pattern. This is because it is not unusual for currency pair to trend, then consolidate, and then resume trending. The directional bias of a triangle is to break the horizontal support or resistance, and if the pair was trending in the same direction prior to the formation of the pattern, the trade becomes all the more compelling.

For example, on the hourly chart of the EURUSD pair, we see the formation of a descending triangle.

(see figure 1) Click to enlarge:

The first thing the trader needs to ask is, what was the trend prior to the formation of the triangle? If we take a longer view of the pair.

(see figure 2) Click to enlarge:

We can see that the pair has been trending steadily lower. It’s important that we use the power of this trend to our advantage, to reduce the occurrence of false breakouts. As a general rule, traders should always trade with the trend, and never fight the trend. It is essentially the difference between swimming with the tide or against the tide, and traders that fight against trends often regret their actions.

Another edge that we can put to use when trading intraday breakouts is the time of day. Perhaps you are familiar with the trading axiom that a breakout is considered significant if it occurs on high volume, and is considered less significant if it occurs on low volume. While forex traders are not able to easily access accurate volume figures, we do know that trading is not equally liquid at all time of the day, and there are certainly times of day that generate more volume than others. Let’s take a closer look at the forex trading day to see how we can use this to our advantage.

When we’re dealing with a vast, liquid market like the Forex, which trades the equivalent of US$1.9 trillion on a daily basis, it’s important to understand which times of day are the most active and most liquid. Because this market follows the sun around the world, trades take place literally all day and night. Let’s take a closer look at the Forex trading day, to gain a better understanding of the market and of its optimal trading times.

The Forex trading day is considered to begin at 5:00 PM Eastern U.S. time. Because Forex trades 24 hours per day, the trading day also ends at 5:00 PM Eastern. Why is this particular time used? Consider that when it is 5:00 PM on Sunday in New York, it is Monday morning in places like Australia and New Zealand. Overall, volume is low at this time of day because the three biggest Forex volume centers – Great Britain, the United States and Japan – are mostly inactive at this time. However, the Australian dollar and the New Zealand dollar (also known as the “Kiwi”) may see some price activity during these hours.

A few hours later, around 7:00 PM Eastern U.S. time, Japan awakens and the Forex markets begin to stir. Japan is the third largest Forex trading center, and comprises about 10% of all Forex trading volume, as many major banks have offices in Tokyo. The Japanese Yen is particularly active at this time, especially vs. the Euro, the U.S. dollar, and the Great Britain pound. Most of the volume occurs during the early part of the Japanese session, and the liquidity lessens considerably as the trading day continues.

As the Japanese trading day winds down around 3:00 AM Eastern U.S. time, European markets open for business, and the London trading day begins soon afterward. Great Britain is by far the most important and influential Forex trading market in the world. The dealing desks for many of the world’s major banks are run from London, and the market is responsible for roughly 30% of all spot foreign exchange volume. London tends to be the most orderly foreign exchange market due to its tremendous liquidity.

About midway through the London trading session, U.S. Forex traders come to life. New York is the second most important market in Forex trading. New York trading is very liquid and accounts for about 20% of the world’s total foreign exchange volume. Trading is especially active early in the New York session, as the London session is still ongoing. U.S. Economic news releases often occur early in the New York session, and can cause a tremendous amount of volatility.

Trading often becomes choppy after midday in New York as the London market winds down, and liquidity and volatility begin to dissipate. By mid to late afternoon New York time, London traders have gone home for the day, and it is late at night in Japan. New York traders, while still active at this time of day, have already finished with the bulk of their trading. Friday afternoons in the U.S. are generally the least active, because for much of the trading world, it is already Saturday.

Finally, as the U.S. markets close, a new trading day is just about to begin in the western Pacific, as the Australian and New Zealand markets begin to stir, starting the process once again. The cycle continues all week, with most dealing desks closed from Friday afternoon until Sunday afternoon, when trading resumes.

Now that we have a greater understanding of the forex market’s liquidity as it relates to various times of day, let’s see how this can affect our trading. Just like an equity trader, I’ll assume that a breakout that occurs at a time of high volume is legitimate, and a breakout that occurs at a time of low volume is suspect.

For example, let’s take a look at the daily chart of EURUSD. The pair had formed strong support in the summer of 2004 at 1.2000, which is also a number that takes on psychological significance because it is a large round number. In fact, the pair could not close below 1.2000 and then trended higher, before returning to the same area of support in the summer of 2005, when it cautiously hovered near 1.2000

(see figure 3) Click to enlarge:

Finally, during the August 24 session, the pair suddenly tries to break support. However, we can see in the five-minute chart

(see figure 4 ) Click to enlarge:

that the break was short-lived, a classic example of a false breakout. A trader who pays attention to the time of day would have noted that the break occurred late in the Japanese session, a time of day that is notorious for low volume and for false breakouts. Such a trader would have considered the timing of this event to be suspicious and would have refrained from entering a trade.

One week later, on July 1, the pair tries to break the support level once again, only this time the breakout occurs at approximately 1430 GMT

(see figure 5) Click to enlarge:

At this time of day, the London session is ongoing, and the New York session is well underway. As a result, this is a time of high volume and the trade is more likely to succeed. The pair finally breaks 1.2000 and drifts as low as 1.1865 over the next few days.

As we can see, there are steps we can take to alleviate the problem of false breakouts. These are just a few of the subtle nuances that traders use to gain an edge.