Forex Time Machine (Review)

http://www.theforextimemachine.com/home_200909.php

Someone in my discussion board asked whether it is worth paying a few thousand dollars for getting the proper investment education. I was happily explaining to this person that when it comes to investing in myself, I need not think hard because I know before and now, and even after that investing in myself will generate a huge return in the long run. So, what happened was that I grabbed a copy of Forex Time Machine and studied the methods in about two days.

As a professional trader, grabbing the methodology of the three methods in FTM is quite easy. Like Bill nicely put in his Q&A upon the launch of FTM, experienced traders will still benefit from the course because it is perfectly fine to add on additional tools and trading methods to their toolboxes, and this means that these experienced traders are armed with more weapons and are flexible to trade the ever-changing market.

FTM discusses three trading methods - Breakout, Momentum and Spring. Spring method is also part of the previous course "Forex Income Engine 2.0". The interesting part to me is therefore the breakout and momentum.
Momentum method


Imagine that this is the set-up of the momentum method as discussed in FTM. There are just a few technical indicators in the chart. For me, I prefer to trade currency using hourly chart although FTM methodology is fractal in nature which means that you can use it for longer and shorter time frames.

Although it is not part of the requirement to understand the fundamental, by combining what I learnt from Jimmy Young of FXTE pertaining to how to read the market from a top-down approach, picking up a bearish trading opportunity in GBP/USD is no brainer, to be frank with you.

So, based on the momentum method, we will enter a short GBP/USD position at around 16192, and within two hours, we should be able to close this position around 1.6000. That's like 192 pips more or less, and just one trade using standard lot, the course fee has been recouped.

Breakout Method

How about the breakout method? Here is just another example of the breakout method set-up.

As you can see from the chart on the left, there are just a few technical indicators to be used. However, while it is not discussed in the course, I believe it is important to understand the fundamental. So, Jimmy's insight in reading the market helps me to determine that when the market is weak, USD is up because of a strong correlation over the last two weeks, and an inverse correlation with the commodities such as gold and oil, shorting AUD/USD is again a no-brainer job.

See we don't need to follow 100% what the course discusses. The key point as a trader is to understand our own trading preference and psychology, and copy & paste what seems to work for us, and that's is. This is why it is so hard for a newbie to make money immediately because he has yet to develop the craft. It does not mean the course does not work. It works, and yet it works because we understand how to trade the methods and apply what suits us.

For this trade, we should be able to make around 30 pips within an hour or US$300 using one standard lot.

Unfortunately, I understand that the launch has come to an end. For those who procrastinated or were skeptical about paying a few thousand dollars, sorry to hear that. It's normal for human beings to be skeptical. You may need to wait for the next launch then.

I mentioned to this person that there is actually nothing to lose because the course provides MBG (Money Back Guarantee). So, if we are not happy with the course, we can return it to Bill and incur at most administrative fees on shipment. At least we give ourselves an experience to find out if the product works for us. Again, human psychology tells us that most of us will not even dare to make this move - hence explaining why for every thing the mankind do, only 5% of the people will eventually be the Elite Club.

Will I be able to make tons of $ after attending a $6k course?

Is it the follow-thru impact after my InvestFair 09 talk two weeks ago? I got frequent questions from a number of people who are asking for my opinion on options courses that are being run in Singapore.

If you are in a rush to pay $6k to attend a 2-day or 3-day options trading course, and your objective is to make quick bucks in the shortest time frame possible, I would urge you to donate the same sum to charitable organizations in Singapore because you can get 2.5 times of deduction against your income in 2009, and you will help other folks.

The market is cruel. However, what makes us think that trading is as easy as writing "ABC"? What makes us think that by putting $6k with someone, we can make quick bucks in the short period of time. Is this guy selling us a dream?

Options trading is a tough game, and yet it is possible to make money when one is committed to learn in the manner in which professional options traders are trading. For every hour of actual trading experience one can clock, he/she would have to put in at least 10 times of the effort.

In some of these advertisements in the Straits' Times, it was alleged that one can spend only 15 to 20 minutes a day to do trading. While I don't deny the correctness of this statement, it must be read in the right context. It is true if we are referring to people who have been in trading business day in day out. In other words, we are talking about seasoned traders. It cannot be applied in my opinion to newbies.

If you think by putting $6k with a trader who is teaching you how to trade options successfully and allow you to make lots of money from options trading in a short period of time, please do your due diligence by asking this person a couple of things. You are doing yourself a favour by asking these questions so that you know this "teacher" is not selling you a dream which is not real in the real world (perhaps it is true in lala-land).

I have nothing against anyone who is committed to learn and master options trading. However, I continue to stress that one should learn the stuff from someone who is ex-floor trader or at least has been trained by ex-floor trader. if whoever taught you cannot explain the things I wrote in my blog, and is however telling you that you must believe in those myths, please re-consider.

Whoever told you that you need not study delta, gamma, theta and vega, and you don't need to pay attention to the volatility, and whoever told you not to buy out-of-the money option without explaining in maths why this is the case, you know what to do.

Whoever told you that you must be options sellers because 80% of the options expire worthless, and whoever is teaching you to do high risk high probability trade without explaining profitability versus probability, you know what to do.

Finally, if whoever is telling you to do short-term trading (like intraday trading), and if he fails to explain to you the PDT rule, you know what to do.

Trading is not as easy as what the public might think, I reiterate. Trading consists of hard work, and is an art. If we are willing to spend time and treat this as a business (I have discussed this in my Optionetics February 09 monthly online forum), then it is possible to survive in long run. If we are not prepared to spend that kind of hours, I would recommend that you forget about trading, and you pass me the money instead and I will spend it for you.

Good luck for those who have read the ST and are about to pay $6k for an options course thinking that they can attack the market immediately. We love you!

Myths on Options Trading (Part II)

1. One loses money on a long straddles for one and only one reason - i.e. because the underlying does not move.

Does the trader ever bother to understand how vega will hurt or help a long straddles?
Does the trader know how gamma works to allow him/her to profit from a long straddles?

2. Options are very risky .... they are like gambling

Do we know that options can be used as a protective tool, thereby allowing us to protect our valuable assets?

3. Options are not easy to trade

Well, are we blaming others or ourselves if we are not committed to trade options properly. Are we complaining about educational providers who are selling expensive courses? Are we constantly looking for the Holy Grail, i.e. the free and most effective resources? Does information come free every time?

4. Some traders believe that the Put/Call Ratio is a measure of market sentiment. It is also believed to be a contrary indicator.

Well, do we ignore synthetics completely? Selling a put is equal to long stock and a short call. Buying a call is synthetically the same as buying the stock and a put. So, if you already own the stock, and you buy a put to protect it, the PC Ratio will go up, ceteris paribus. Does it mean that you are bearish?

More to come!!

TRUE OR FALSE

If you can answer all questions correctly, you know your stuff well

1. Being assigned on a short option causes you to lose money.

2. Being assigned increases your risk.

3. The use of market orders is discouraged because market makers will move the market when they see your order.

4. Market makers match buyers with sellers.

5. Implied volatility is based directly off of the historical volatility.

6. Open interest is important.

7. Daily option volume is important.

8. Credit spreads and debit spreads are the same thing.

9. Market makers purposely over/undervalue options from time to time.

10. Risk free trades can be created and opened in one trade.

Source: http://www.optionetics.com/forums/topic.asp?fid=136&id=51766&page=6

More Myths on Options Trading

Options trading business can be a viable business, and yet it's been tainted by many blacksheep in the Singapore market whereby public associated with options trading as risky, and options traders (especially those who teach as well as trade) are selling dreams to the poor public.

I walked past a bookshop last Sunday and happened to see a book written by a learned author who is selling his options seminar in Singapore, Malaysia and Indonesia, and I admired this fellow who claimed that he has been in trading options for more than 10 years, and he is advocating "non-directional trading". So, I read with interest on this book (and it cost me some S$20) and here is what I found:

a. options selling is better than options buying because 80% of the options expire worthless.

The learnt author said "This is a proven statistical fact. Statistics shows that 80% of options expire worthless. If you buy an option, your chances of winning are only 20%. If you are a seller of an option, your odds of winning are 80%."

First of all, I am not sure where the source of this so-called statistics. Even though this is only my sixth year in options trading business, I already knew this myth some three years ago whereby the so-called "80%" thingy is really a myth.

In an article written by Albert Brinkman published in Summer 2007, he quoted the OCC's 2006 statistics which showed that 31% of the options were unexercised at expiration, 17% were exercised and 52% were closed out prior to expiration. So, where does this 80% thingy come about?

Ok, if you are still in doubt, think about this, just pull out any option chain of your favourite stocks. Regardless of what the stock does, for every put that goes in-the-money, a call will go out-of-the money. So, if someone like this learnt author tells you that 80% of the option expire worthles, you must do one thing - question his math and/ or logic. Ask for official proof rather than hearing him say according to someone ...

b. Always be options seller and never be options buyers

The learnt author also advocates that options sellers will always win and thus we should never become options buyer. True enough, if we sell every option and the stock does not move, the only way we will fail to make money is if all options traded solely for real value. However, stocks do move, and options have to account for that movement through addition of extrinsic value. This value is necessary since if it did not exist, it will be true that options buyers can devise strategies to always make, or at least never lose money.

Options sellers may make money more often than options buyer. However, everything happens for a reason. When sellers lose, they lose far more than what they tend to make on each options sale. On the contrary, buyers may lose more often but each win may return more than several losses. This therefore leads to the point where people tend to confuse something that works most of the time without something that is safe. Obviously the two are not equal. Russian roulette works 5 out of 6 times. With such a high probability, do you want to play now? It is quite safe to cross the road when you see green man. Does it mean it is guaranteed safe? What if you encounter a reckless driver who fails to see the red light or ignores the red light, just shoot it?

So, these two points to me are myths - and if they are not clarified in the books, it is as good as another monkey selling dreams to the public.

Then, what happened today is that I was clearing my old stuff since I am going to move house next month. And I found something that excited me a few years back about options trading, and now to the point where I am, I could not help but laugh harder.

The following represent extracts of a guru's teaching materials, and let's see what is wrong with these statements:

'So, what volatility should options have that allow us to capture the desired movement of the option. We would like to see volatility no greater than 65%'

Guru is teaching us that we should look for THE SWEET SPOT on volatility. So, now many gurus are telling us that there are THE SWEET SPOT on delta, and this guru added THE SWEET SPOT on volatility. If we compare the IV on the options on Pharma stocks and that on the large cap stocks, are we suggesting that we should forget Pharma stocks since the IV can be > 65%. Should IV be a relative number rather than an absolute number? Folks who have our Optionetics Platinum should be able to debunk this myth easily.

'Refrain from buying options that are OTM'"

I did not take this statement out of context but this is exactly what the guru said in the manual. Keep in mind that there is always a trade-off between time and profitability. OTM options exist for its own reason. Just like there is something for options seller to grab and options buyer to grab. Again, the guru is advocating the purchase of only ITM/ ATM options? Folks who have done our two day intermediate class know that OTM options happen for a reason.

'look to purchase ITM or ATM options that have a minimum of 6 to 8 months to expiration. Once we have been filled, we will then look to sell the front month ATM or OTM options.'

The guru advocates this strategy on DIA and QQQQ as strategy for longer-term trades. However, traders should be mindful with how sensitive these longer-term options can be to volatility. So, what if there is a drop of IV on the longer-term option, the traders can be hurt. Folks who have done time spread strategy in a professional way will only that it is far more effective, and mathematically proven that time spread should be constructed using back-to-back basic by selling the front month option and at the same time, buying the immediate next month option, since time spread if done on ATM basis is after theta decay.

So, knowing the open interest of an option being considered for trade, is critical!

It's been again and again debunked by our instructor team that open interest has nothing to do with liquidity. Obviously, we want to get into an option easily in and out but this is governed by liquidity of the option, and it has nothing to do with OI, which is a totally different matter. Liquidity of the option is governed by the bid-ask spread. Are we suggesting that we should not be the first buyer of JNPR Oct option when it is launched next week because OI will be zero? So, go figure.

So, guys, the moral of the story is that when you are listening to a person who claim to trade options successfully, he/she may be doing it in a consistent way and fortunately within a certain period of time when the market condition remains unchanged. Having said that, if we wanna learn options properly, ask the person where he learns options and whether the person teaching him/her knows the options mechanics in a professional way.

So, when choosing an options trading course, if the person does not cover the greeks, and when asked why 2+2 must be 4, he fails to explain, you know how "GOOD" that person is.

I will be speaking on 23 Aug 2009 at InvestFair 2009 for Optionetics. The chosen topic is about building our edges in finding limited risk options trades. In order to allow us to do this, we have to have the proper knowledge in options trading. What I propose to do is to take the advantage of this session to demystify certain myths that exist in the public domain.

Myth 1 - Are puts and calls the same? Why would someone suggest to track Put/Call Ratio?

Myth 2 - We should be credit spread specialists because we can get paid to initiate such trades

Myth 3 - There is always THE BEST sweet spot (i.e. the BEST delta) for every option trade. Delta 25 is the best. No, Delta 75 is the sweet spot. Who is right and who is wrong?

Myth 4 - When you sell an option whose premium is above $0.25, you won't be assigned. Are you sure?

Myth 5 - Debit spread is easier to understand than credit spread because credit spread has margin to deal with. So, are debit spread and credit spread not the same?

There are many more myths I can find. Let's do my part to demystify at least the above, as there are so many monkeys teaching options in Singapore who know nuts about options. They only know how to sell dreams to the public.

So, interested to listen to me? See you on 23 Aug 2009 at Suntec City Convention Center.

Optionetics Expert Seminar - Live in Singapore (12-14 August 2009)

Once again, the annual Expert Seminar featuring Tom Gentile will be live in Singapore from 12-14 August 2009 at Furama City Center, Singapore. Nick Gazzolo, one of our senior instructors will be the co-instructor with Tom.

For the first time in history, Expert Seminar 2009 offers to both Optionetics and non-Optionetics students. In this seminar, participants will be exposed to Tom Gentile's world of system trading. Also, detailed discussion on certain advanced strategies such as Collars, Broken Wing Butterflys and Tarzan Loves Jane will be included.

Seats are filling fast, and there are limited seats offered to non-Optionetics students at a discounted price. For details, please visit the following link:

http://fxtrading.na3.acrobat.com/p51612760/

and do contact Optionetics Singapore office at http://www.optionetics.com.sg for details.

Recent Update

Hi folks, I have been absent for a while as there are a number of projects I have recently embarked on and thus have yet to update anything in my blog.

Quick Update:

Monthly Forum

I am helping Optionetics Singapore to run the monthly online forum which should be every third Thursday of the month. Watch out for an e-mail blast from Optionetics Singapore two weeks before the forum. If you are not on the list, please send an e-mail to classes@optionetics.com.sg or classes@optionetics.com.hk. Of course, I will post the information regularly on my Facebook. Keep a look out of that.

What has been discussed since Feb are:

1. Creating a business plan and trading psychology
2. Identifying Trading Opportunities using seasonal patterns
3. Identifying Trading Opportunities using sector rotation concepts
4. Identifying Trading Opportunities using Profitsource as a tool

The last forum was in particular interesting because it unlocks many folks' limiting belief that they are not able to trade Wave 3 because many instructors have told them this is not possible. Well, I have already demonstrated in my forum how to look for Wave 3's price target and created a few a-ha to the folks. Well, I promise to the folks that in the future runs, I am going to do more on Fibo time analysis and right now, I am running practical test intensively to train myself to identify Gartley Pattern. Why is this important? We are in the trending market and therefore, these stuffs become important in my trading toolbox.

Advanced Coaching Online Classes

For advanced Optionetics students who recently did ICT, ITT and Master ICT Classes in Singapore and Hong Kong, you will have the opportunities to meet with me online three times starting from next Thurs to refresh what we have learnt in these classes. They are only open to a privileged group of students who have committed to advance their education. It's also a gesture from my viewpoint to express my gratitude to these students who allow me to share my experience with them. The class will be 1.5 hours and will be in the usual "trading out loud" format. So, there won't be any slides or presentations. We go straight to analyse and discuss real trades for education purposes. Honestly I am looking forward to it.

Forex Education

While I told myself my R&D budget for 2009 will be frozen, I decided to invest in two forex courses to continue to enhance my knowledge.

1) OU Forex

I have signed up for OU Forex with a view to getting another perspective of forex trading. I must say that there are lots of materials to read everyday. In fact, it's a standard for me to spend at least an hour every morning to go through the new stuff and market analysis. Over the weekend, or on my off days, I will have to catch up with the daily webinar by Forex Joe and Sunil. Oh well, I have learnt a lot because Sunil has discussed how to use FIbonacci as a trading rule and of course, he shared with us his specialty - Harmonic Pattern. This impresses me a lot. The exclusive forum also contains very rich information from traders from different part of the world.

2) Forex Nitty Gritty

Again, I signed up for this because the fee is pretty cheap, and it happens to provide me with a very simple trading method which compliments with FXTE's momentum trading system. I am not able to share with the simple method is from FNG. However, I will say this it is a fairly simple method, and if one is correct in the fundamental outlook - e.g. Bearish on USD or JPY, he can start using the simple method to profit from the market. Incidentally, I started with FNG's simple method this Monday (well, because I am not a FX newbie), and the trades I put just on Monday has already covered me 10 months' of FNG"s subscription. It's awesome.

What else am I doing?

Nothing much really. There won't be any workshops or coaching to do at AKLTG until July. Also, I am not going to OASIS at Santa Clara this year for personal reasons. So, it is a good time for me to rest my body because July will be a crazy month in view that Wealth Academy 18 and Patterns of Excellence Whoosh 28 (Mod 1) are coming.

Till then, take care.

Official Launch of FXTE Program in Singapore

Today marks the beginning of Quarter 2 of 2009. The fact is we are all excited about the official launch of FXTE Program in Singapore. FXTE is a US educational institution providing forex trading education worldwide via physical seminars and online courses.

On 25 and 26 April 2009, FXTE's Forex Trading Essential Course will be offered for the first time in Singapore at Furama City Center. Two of our FXTE instructors, Jimmy Young and Steve Nurre, will be flying 10,000 miles to the Lion City to teach this course.

What you will learn in these 2-days are

1. How the SIMPLICITY of the FX market removes the clutter often found in the stock and options markets and allows you to focus on the most important thing - MAKING MONEY!

2. That the FOREX can be traded 24 hours a day, 5.5 days per week so you can always find a time to trade - even with your busy schedule. (see - we are very honest - we know what we are talking about. Who said FX is 24 by "7"?)

3. The simple approach to trading Forex - created by a 20 year bank trader for people just like you, that can INCREASE your PROFIT potential by changing how you view the news.

4. How Forex can provide all the upside of trading the equity markets but with LESS RISK.

For further details, click this link - FXTE 2-day class

The course is being offered for only SGD188.00. There is no typo. It's really SGD188.00. You will get 2 full days of forex education. For those who want to gain exposure to the forex market for the first time, or want to learn more how to trade forex, this is a golden opportunity that you should not miss.

How to Read a Chart & Act Effectively
by Jimmy Young, CTA

Introduction

This is a guide that tells you, in simple understandable language, how to choose the right charts, read them correctly, and act effectively in the market from what you see on them. Probably most of you have taken a course or studied the use of charts in the past. This should add to that knowledge.

Recommendation

There are several good charting packages available free. Netdania is what I use.

Using charts effectively

The default number of periods on these charts is 300. This is a good starting point;

Hourly chart that's about 12 days of data.
15 minute chart its 3 days of data.
5-minute chart it's slightly more than 24 hours of data.

You can create multiple "tabs" or "layouts" so that it’s easy to quickly switch between charts or sets of charts.

What to look at first

1. Glance at hourly chart to see the big picture. Note significant support and resistance levels within 2% of today’s opening rate.

2. Study the 15 minute chart in great detail noting the following:

* Prevailing trend
* Current price in relation to the 60 period simple moving average.
* High and low since GMT 00:00
* Tops and bottoms during full 3 day time period.

How to use the information gathered so far

1. Determine the big picture (for intraday trading).

Glancing at the hourly chart will give you the big picture – up or down. If it’s not clear immediately then you’re in a trading range. Lets assume the trend is down.

2. Determine if the 15 minute chart confirms the downtrend indicated by big picture:

Current price on 15-minute chart should be below 60 period moving average and the moving average line should be sloping down. If this is so then you have established the direction of the prevailing trend to be
down.

There are always two trends – a prevailing (major) trend and a minor trend. The minor trend is a reversal of the main trend, which lasts for a short period of time. Minor trends are clearly spotted on 5-minute charts.

3. Determine the current trend (major or minor) from the 5 minute chart:

Current price on 5-minute chart is below 60 period moving average and the moving average line is sloping downward – major trend.

Current price on 5-minute chart is above 60 period moving average and the moving average line is sloping upward – minor trend.

How to trade the information gathered so far

At this point you know the following:

* Direction of the prevailing trend.
* Whether we are currently trading in the direction of the prevailing (major) trend or experiencing a minor trend (reaction to major trend).

Possible trade scenarios:

1) Lets assume prevailing (major) trend is down and we are in a minor up-trend. Strategy would be to sell when the current price on 5-minute chart falls below the 60 period moving average and the 60 period moving average line is sloping downward. Why? Because the prevailing trend is reasserting itself and the next move is likely to be down. Is there more we can do? Yes. Look for further confirmation. For example, if the minor trend had stalled for a while and the lows of the past half hour or hour are very close to the 5 minute moving average then selling just below the lows of the past half hour is a better place to enter the market then just below the moving average line.

2) Lets assume prevailing (major) trend is down and 5-minute chart confirms downtrend. Strategy would be to wait for a minor (up trend) trend to appear and reverse before entering the market. The reason for this is that the move is too “mature” at this point and a correction is likely. Since you trade with tight stops you will be stopped out on a reaction. Exception: If market trades through today’s low and/ or low of past three days (these levels will be apparent on the 15 minute chart) further quick downward price action is likely and a short position would be correct.

3) A better strategy assuming prevailing trend down, 5-minute chart down, and just above days lows is to BUY with a tight stop below the day’s low. Your risk is limited and defined and the technical condition (overdone?) is in your favor. Confirmation would be if today’s low was a bit higher than yesterday’s low and the price action indicated a very short-term trading range (1 minute chart) just above today’s low. The thinking here is that buyers are not waiting for a break of today’s or yesterday’s low to buy cheaper; they are concerned they may not see the level.

4) Generally speaking, the safest place to buy is after a sustained significant decline when the bottoms are getting higher. Preferably these bottoms will be hours apart. By the third or forth higher bottom it is clear a bottom is in place and an up-move is coming. As in the example above your risk is limited and defined – a low lower than the last low.

5) The reverse is true in major up-trends.

Other chart ideas

There are always two trends to consider – a major trend and a minor trend. The minor trend is a reversal of the major trend, which generally lasts for a short period of time. Buying above old tops and selling below old bottoms can be excellent entry levels; assuming the move is not overly mature and a nearby reaction unlikely. When a strong up move is occurring the market should make both higher tops and higher bottoms. The reverse is true for down moves- lower bottoms and lower tops. Reactions (minor reversals) are smaller when a strong move is occurring. As the reactions begin to increase that is a clear warning signal that the move is losing momentum. When the last reaction exceedsthe prior reaction you can assume the trend has changed, at least temporarily. Higher bottoms always indicate strength, and an up move usually starts from the third or fourth higher bottom. Reverse this rule in a rising market; lower tops… You will always make the most money by following the major trend although to say you will never trade against the trend means that you will miss a lot of opportunities to make big profits. The rule is: When you are trading against the trend wait until you have a definite indication of a selling or buying point near the top or bottom, where you can place a close stop loss order (risk small amount of capital). The profit target can be a short-term gain to nearby resistance or more.

Consider the normal or average daily range, average price change from open to high and average price change from open to low, in determining your intra-day price targets. Do not overlook the fact that it requires time for a market to get ready at the bottom before it advances and for selling pressure to work it’s way through at top before a decline. Smaller loses and sidewaystrading are a sign the trend may be waning in a downtrend. Smaller gains and sideways trading in an up trend. Fourth time at bottom or top is crucial; next phase of move will soon become clear… be ready.Oftentimes, when an important support or resistance level is broken a quick move occurs followed by a reaction back to or slightly above support or below resistance. This is a great opportunity to play thebreak on the “rebound”. Your stop can be super tight. For example, EURUSD important resistance 1.0840 is broken and a quick move to 1.0860, followed by a decline to 1.0835. Buy with a 1.0820 stop. Themove back down is natural and takes nothing away from the importance of the breakout. However, EURUSD should not decline significantly below the breakout (breakout 1.0840; EURUSD should not go below 1.0825.

After a prolonged up move when a top has been made there is usually a trading range, followed by a sharp decline. After that, a secondary reaction back near the old highs often occurs. This is because the market gets ahead of itself and a short squeeze occurs. Selling near the old top with a stop above the old top is the safest place to sell. The third lower top is also a great place to sell. The same is true in reverse for down moves. Be careful not to buy near top or sell near bottom within trading ranges. Wait for breakaway (huge profit potential) or play the range. Whether the market is very active or in a trading range, all indications are more accurate and trustworthier when the market is actively trading.

Limitations of charts

Scheduled economic announcements that are complete surprises render nearby short-term support and resistance levels meaningless because the basis (all available information) has changed significantly, requiring a price adjustment to reflect the new information. Other support and resistance levels within the normal daily trading range remain valid. For example, on Friday the unemployment number missed the mark by roughly 120,000 jobs. That’s a huge disparity and rendered all nearby resistance levels in the EURUSD meaningless. However, resistance level 200 points or more from the day’s opening were still meaningful because they represented resistance to a big up move on a given day.

Unscheduled or unexpected statements by government officials may render all charts points on a short-term chart meaningless, depending upon the severity of what was said or implied. For example, when Treasury Secretary John Snow hinted that the U.S. had abandoned its strong U.S. dollar policy.

100 Points
by Boris Schlossberg and Kathy Lien of GFT Forex

"You guys suck," is refrain I hear often."100 points a month?! I could do that in my sleep. You should be doing 100 points a week at minimum!" Well, I try to point out we the game is a lot more difficult than you think, but the critics do not want to hear it. They proceed to tell me all about their marvelous trading exploits showing me how they just picked a turn to within a pip of the bottom and then went on to bank a thousand points in the trade as they "let the profits run."

My favorite of these demo billionaires was guy who used to write to me with the sole purpose of telling me how stupid our latest trade idea was and how trading was so easy that he was making thousands of pips week. I finally relented and asked him top show me his "portfolio of trades." The guy proudly wrote back that he was was long a wide variety of pairs such as EUR/JPY, AUD/JPY, GBP/JPY and NZD/JPY. I did not have the heart to tell him that this was the same trade levered four times the maximum risk he should have been taking. A few months after that conversation the carry trade collapsed and I never heard from him again. Another trading master of the universe relegated to the dustbin of market history.

They say that you should never watch how sausage or politics are made. To that old adage I would also add investment returns. Since most people only look at year end numbers they are convinced that trading returns accrue with the consistency of a weekly paycheck rising in a straight 45 degree angle towards ultimate wealth. Nothing of course is further from the truth. Take a close look at the audited records of any hedge fund and in fact you will see many months of losses punctuated by a few months of gains, that hopefully eke out to a net positive number at the end of the year.

Investment returns are notoriously lumpy not only on a month over month basis but even on year over year basis. Witness the two of the very best hedge funds in business -Citadel and SAC - posting double digit losses this year. Someone the other day reminded me that despite George Soros vaunted $1 Billion win in the GBP/USD in the early 1990's, a few years later he managed to lose $600M in the yen trade not once but twice in the same year. Everyone remembers the wins but forgets the losses.

One of the nice side benefits for those of you who trade with us at BK is that you get to see how investment returns are actually made on trade by trade basis in real time. As many of you can attest it is hardly a glamorous affair. The reason why trading can be so trying is that you are always operating in an environment of complete uncertainty. You can fail by making a bad trade selection (something that we all fall victim to far more than any of us care to admit) but you can also fail even when all of your analytics are absolutely correct.

K has a marvelously understated term for it. She call it market activity. Market activity can encompass anything from some large player dumping a yard worth currency during the illiquid early Asian session irrespective of price as he hurries to leave the office for tryst with his mistress, to some political official making an offhand remark (see Timmy Geithner) that gets spattered on the Bloomberg terminal a second later. All of this "market activity" can wreck havoc with your best laid plans stopping you out before your trading thesis has a chance to play out.

That's why 100 points a month is not bad at all. 100 points a month is 12% per year. Drop $20,000 into your retirement account each year and compound it at 12% and after 20 years you have 1.8M. After 30 years you have 6M. That's hardly a plan to becoming a baller overnight, but that's how real money gets made.

Official Launch of FXTE Program in Singapore

Today marks the beginning of Quarter 2 of 2009. The fact is we are all excited about the official launch of FXTE Program in Singapore. FXTE is a US educational institution providing forex trading education worldwide via physical seminars and online courses.

On 25 and 26 April 2009, FXTE's Forex Trading Essential Course will be offered for the first time in Singapore at Furama City Center. Two of our FXTE instructors, Jimmy Young and Steve Nurre, will be flying 10,000 miles to the Lion City to teach this course.

What you will learn in these 2-days are

1. How the SIMPLICITY of the FX market removes the clutter often found in the stock and options markets and allows you to focus on the most important thing - MAKING MONEY!

2. That the FOREX can be traded 24 hours a day, 5.5 days per week so you can always find a time to trade - even with your busy schedule. (see - we are very honest - we know what we are talking about. Who said FX is 24 by "7"?)

3. The simple approach to trading Forex - created by a 20 year bank trader for people just like you, that can INCREASE your PROFIT potential by changing how you view the news.

4. How Forex can provide all the upside of trading the equity markets but with LESS RISK.

For further details, click this link - FXTE 2-day class

The course is being offered for only SGD188.00. There is no typo. It's really SGD188.00. You will get 2 full days of forex education. For those who want to gain exposure to the forex market for the first time, or want to learn more how to trade forex, this is a golden opportunity that you should not miss.

Fast and Furious Trading

In this week BKT Weeks Video, Boris Schlossberg continued his discussion on the 10 pips strategy. This link (Fast and Furious Trading) will direct you to his YouTube video.

His rules are as follows:

1. Look at 5 min charts - on EUR/USD and USD/JPY
2. Sell 2nd candle close above 2nd SD Band (for Sell Trades) or close below 2nd SD Band (for Buy Trades). Exception is 00 and 05 level.
3. Trade on all sessions using EUR and JPY
4. 10 pips stop; 7 pip limit

There are some interesting observations:

1. Boris stressed that this is not a strategy that can be automated. So, he believes that if someone designs an EA on this strategy, it will fail as there is discretion as to whether the rules should be implemented.

2. This is not a Holy Grail. There will be losing trades. I have personally observed the strategy and interestingly, it is more likely than not making money.

3. In this version, Boris did not cover the use of GBP/USD although in his video last week, he said GBP/USD may be incorporated into this system to improve the equty curve of the entire system.

Winning by Losing
by Kathy Lien and Boris Schlossberg of GFT Forex

"The key to succeeding in trading is to lose well. It doesn't matter if you are a die hard fundamentalist who thinks that chart reading is akin to astrology or an unrepentant technician who thinks that all news flow has less value than celebrity gossip. Every great trader I ever met knew how to control risk which is simply a polite way of saying that they knew how to take losses.

Of course losing is not what every newbie trader focuses on. Everybody wants to win big. Everybody approaches trading as though it was a lottery not a business. I am always amused by new traders who email me for the next 10 point trade and the next one and the next one after that thinking that the FX market is like a massive ATM machine. Those traders usually have a shorter shelf life than a half eaten apple.

On the other hand, traders that approach the market with a much more cautious attitude tend to do better. They soon learn that in trading losing is the only variable that you can control. Winning is frequently a function of luck, but losing is always a matter of skill.

Everybody hates stops. What's even worse is to be stopped two, three, four times in a row. In a debate between tight stops and wide stops I used to always hear "You don't want to die a death of a thousand cuts!" Well actually I do. After years of trading I came to the conclusion that tight stops will keep me in the game. I may be bloodied, I may be hobbled but I will remain alive to trade another day. In a choice between taking many small measured stops versus a few very large ones I will always choose the former because large stops can frequently turn into catastrophic losses, and much as it is unpleasant to lose money, it is always easier to recoup a series of small losses rather several huge ones.

Recouping is what trading is actually all about. Everybody who begins trading envisions an ever climbing equity curve that builds with the consistency of a weekly paycheck. Nothing can be further from the truth. In reality trading is always the act of giving money back to the market and then trying to claw it back.

Trading is tough precisely because it is so brutal. Unlike a job that pays us even if we are sick or distracted or simply not in the mood to do our best, trading promises you nothing. You lose, you don't eat. That's why I have such enormous respect for those traders who make their living solely from the market. They are the gladiators of modern finance and the ones that survive always know how to take a stop. The rest of us must learn those skills.

The need to build wealth through trading is greater now than at any time in the past 50 years. Does anyone who is 40 or younger believe that Social Security will pay them anything? How about your decimated 401K plans that are likely to range trade for the next 10 years as stocks cycle much like they did in the 1970's? Bonds? Good luck trying to fund your retirement with 2% yields.

Bottom line is that in the next decade trading may be the only avenue left to build wealth with your savings. That's why it is more important than ever to master key principle of the game - in order to win in trading you must learn how to lose properly."

What a timely reminder to many aspiring traders who think that traders have easy life and trading is as simple as ABC. Also, this article serves to reiterate that professional traders approach trading in a completely different way compared with amateurs. Professional traders always deal with the risks and profit target is the second. In this case of Kathy and Boris, they always talk about hitting T1 and move the stop to breakeven, and let the remaining lots do what they are supposed to do. They make they make. They don't make, it's fine. At least risk has been removed after hitting T1.

That's why I subscribed to their mode of trading completely, and it makes perfect sense to me. So, if one feels that forex is an ATM machine, and he can learn the tricks by attending courses but no practices after that, he may wish to spend to money to buy me kopi instead.

Trading 'expert' ordered to refund fees

I am sure many folks in Singapore are bombarded with the recent case of Dr. C who was successfully sued by a group of students. See this Link.

The basis of the claim lodged by the complainants is that Dr. C misrepresented to them on his qualification. Is it a joke? Yes, at least to me. When a self-proclaimed options guru markets his course, the participants relied only on his academic qualifications. Well, there is a big difference between academic qualifications and practical / experience qualifications.

Lecturers (or nka Assistant Professors) are all assumed to have at least Doctorate Degree, and it is a requirement. Do they necessarily possess practical experience? Not really. They need to be exposed to the development outside the campus in order to understand what the heck it is going on in the world. Having a paper qualification is good but it does not mean that this person is an expert.

If we all respect trading as a business, and is a skill we need to practise in order to get better and better, we just have to do and learn from someone who does it professionally and day in day out. Learning trading from a PhD will give us very good textbook knowledge. In this case, of course, I have the privilege to speak to Dr's classmates many years ago and understand his background and his trading journey. From what I was told, I did notice immediately that this guy is going to be in trouble one fine day. It's just a matter of time. Why? It's because when he is teaching someone options, he does not even bother (or should I say he knows?) talking about volatility and Greeks. He simply asked his students to have "faith" on him (btw, what faith is he talking about?). He also taught my good friends a 911 strategy which clearly does not make any sense as he did not reveal the entire risk of making that particular adjustment.

On the brighter side, without him in this market for the last few years, options won't be a popular subject at all. Most of my friends would probably not wake up and still live in the dream of knowing the so-called most powerful strategy in the Planet, which after I had a chance to look at it, is merely a pure gambling on direction without regard to volatility at all.

So, Dr. , you have done a few good deeds. Kudo to you! Salute!!

Common Flaws found in Free Breakout Forex System

I have been a big fans of forex breakout system because it is a no-brainer and is fairly easy to implement. It is also uncommon that one can find breakout trading systems free in the internet.

This is an example:

*******************************************

-Determine the 08.00 – 12.00 GMT (0:00am to 4am EST) High Low on EUR/USD and GBP/USD
-Determine the 12.00 – 16.00 GMT High Low on EUR/USD and GBP/USD

-Set Buy Stop at High + 5 pips and SellStop at Low - 5 pips for both time frames and both currencies.

-Set Target Price at entry + 80 pips for EUR/USD and entry + 120 pips for GBP/USD

-Set Stop Loss at entry - 50 pips for EUR/USD and entry - 70 pips for GBP/USD.If the other side of the breakout is within 50 pips for EUR/USD or within 70 pips for BP/USD then the Stop Loss will be that level.(Longtrade:

SL = Low range - 5 pips = Sell Stop; Short trade: SL = High range + 5 pips = Buy Stop)

-Move the SL to breakeven after a gain of 30 pips for EUR/USD and a gain of 40 pips for GBP/USD.

-If a certain position is taken and price turns against you and it breaks the other side of the breakout channel then turn. If the breakout channel is broader then the stop loss first the stoploss will be hit. If the breakout channel is narrower then the stoploss then hitting the other side means that you have to turn your position.There is only one turn per time frame possible .

-At 24.00 CET all orders expiring and close all trades at market On Friday we do the same at 23.00 CET.

Note :

6 – 10 CET or 8 – 12 GMT

10 - 14 CET or 12 - 16 GMT

********************************

Sound easy to implement, huh? However, contrary to free information, no one seems to discuss a big flaw in this type of trading system.

Let me give you an example:

Suppose you have a set-up to buy EUR/USD

EP - 1.2959
PT - 1.3059
SL - 1.2859

Risking 100 pips for 100 pips profit (or RRR 1:1)

Some people will place the system diligently without asking any further questions. Some "smarter" ones will tell you that you should check the range - if it is 80pips or more, the set-up fails. So, you will ask "why 80 pips or more?" You get a response that it has been backtested.

While I found all these craps in the internet, we at the same time realize that market conditions do changes. So, we must be nimble and adaptive to the changing market conditions.

Have you ever wondered that EUR/USD can make 200 pips daily move consistently since last month? This was definitely not the case in 2008. So, relying on 80 pips as a gauge is a complete disregard of the current market conditions. Anyone talking about 80 pips does not know what he is doing.

To be in a better position, ask yourself what's the opening price for EUR/USD say at 5:00pm EST. Suppose the opening price is 1.2800. You roughly know that given a 200 pips average daily move on this pair, hitting a PT of 1.3059 is challenging as the estimated high will only be 1.3000.

You will also realize that different pairs/ crosses have different average daily move, which is something you need to know. As we are getting more experience as a forex trader, this is definitely a relevant question to ask. You will realize that not all set-ups can give us the best bang for the buck. This means that we have to think whether we should still take that trade.

See, this is something you may not find in free websites. However, you realize that you now know this relevant issue by reading my blog. It is easy, isn't it?

Why Does the Average Forex Trading Strategy Lose Money?

The following article (Part I) is a good wake-up call for folks who are looking for the Holy Grail.

http://www.dailyfx.com/story/topheadline/Why_Does_the_Average_Forex_1232461301568.html?print=1

Enjoy!

Which Forex course is worth to attend?

Quite recently, a few readers in my Discussion Board asked me the same question - which forex course is worth to attend?

"I ... would like to get your advice which forex course provide best system and which one worth to attend?"

This is an alarming question to me because you will realize that the subject matter in this question is to ask for the "best" system. As far as I am concerned, I do not believe there is the BEST system in the market. In fact, I will honestly tell my readers that there isn't any such system in the market. Imagine the system is telling you that it is the best. However, the system itself can never be the Holy Grail. The fact that there exists no Holy Grail in the market means that there is no one "best" system out there.

It may be a piece of disappointing news to many because they have been constantly looking for the best system. Well, you know as much as I do that success in trading business is not only to master one trading system, or learn from one instructor. I have been relaying the following example to many folks and I am happy to repeat:

Suppose A and B both pay $3,000 to learn from X to trade forex. X provides the entry guidelines and the so-called things to watch out. It is not surprising for either or in fact both to ask "can this work in other currency pair?" and "can this work if I do this or that?" People are all like that. They think they are looking for the best system. At the same time, they are also looking for ways to "outsmart" the system. Is this a self-fulfilling prophecy here - i.e. human beings are better than systems? Is there any conflicting issue you realize?

If you happen to shop for a course or a particular instructor, and if he tells you trading psychology is not important, you should run and not walk away. If he tells you that if you simply follow the rules, you will definitely make money. I think you should run and not walk away.

In my example, both A and B may have different trading personalities. Therefore, they may apply different money management rules to suit their own circumstances I believe. It's not about being right or wrong in trading business. It is all about how to manage risks. So, if both are able to adopt certain rules to manage their risks, they are doing a great job as risk managers.

So, here is my reply to my readers: there is no one best trading system or trading course that guarantees making money. We are the ones who control our destiny.

By the way, there is so much free information in the public domain. If we focus on looking for free information, we will notice that it is everywhere. Perhaps one of the most common places to go is babypips.com, followed by forexfactory.com. So, have you checked these websites already?

Never too late to Get Education

I was able to make some time to meet up with my fellow Optionetics colleagues over the weekend at Suntec City as we had our first 3-day Interactive Computer Training (ICT) Class in Singapore in 2009. I met up with some old friends who started with me around the same time in this trading business, and at the same time new friends who recently joined our Optionetics program.

This friend of mine started with Optionetics in 2005. We had a drink somewhere around Suntec City and shared with each other what we had been doing over the past few years. He shared with me that over the last couple of years, he did not do much with his portfolio and he used "complacency" as his reason. The market was bullish until the financial turmoil back in late 2007. His portfolio went up and he did not see the need to do anything. Put simply, he thought that he would just let the portfolio continue doing what it has been doing.

Of course you know as much as I do what happened over the last year. This friend of mine felt the pain too. Fortunately, he told me that he was not hurt as badly as his peers. During our talk, he shared with me that he went for education with Optionetics, and he should have had realized that there are ways to protect his portfolio. This serves as a wake-up call for him to change his strategies by being more alert to what's happening in the market, and get further education in order to improve his literacy in dealing with trading business.

A lot of things happened for a reason. When we feel the pain, it's probably the time for us to change our behavior. Does it happen on you too? What I am saying is that regardless of the entry into this trading business, there is always something to learn every single day. This is because the market condition keeps changing and what we saw is not what we see now.

Several people in this ICT Class were new to Optionetics. However, they all went for the class for a common reason - to take charge of their lives and make a difference regardless of the extent to which it will be. Some of them shared with us that they wanna have more time to pursue their passions - including hobbies, families and children etc. All I can say is that these folks have made their first step (i.e. by taking action).

You will realize recently that the poor folks who bought Hi-Note and Lehman Mini-bonds somehow were promised to be compensated in whole or in part. There are ethical and legal issues involved in this saga, and is beyond my role to comment. Suffice to say this serves as an alarm bell, in particular to the young ones, that they must do something to improve their financial literacy. If I were to describe that Mini-bonds is like (and I have simplified the picture for discussion sake here) buying 1 call and selling 2 puts. Optionetics students will be able to quickly tell me that:

1. Long 1 call and short 1 Put is synthetically long stock - an unacceptable position from Optionetics' perspective

2. 1 Short Put (or naked put) - which is also unacceptable position from Optionetics' perspective.

At the end, I have yet to hear any of my students from Optionetics who went to buy these kinds of instruments. Perhaps what they paid for getting the Optionetics education save them a lot. We knew some celebrities in HK who lost some HK$20m on mini-bonds. For our Optionetics students, they paid only a tiny fraction and they are able to stay away from this saga.

So, while I understand that S$5,000 for a 2-day life-time Optionetics program may be expensive. At the same time, if one thinks of these poor chaps, spending S$5,000 instead of losing the entire portfolio is worthy.

There were also stories about brokers and remisers in Singapore who lost a lot of money on stocks. One poor chap lost $1m because he failed to acknowledge his reading in the market and apply dollar cost averaging techniques.

What I can share with these people is that

"Will they buy insurance when they buy their houses?"
"Will they buy insurance when they buy their cars?"

So,

"Will they buy insurance for their stocks?"

It's amazing that many people did not know stock insurance, which is essentially put options. Had these guys been educated to apply this very simple techniques, they might be able to save millions of dollars.

It's amazing that there are many people who are prepared to enter into the financial markets without getting education, thinking that they are able to deal with all sorts of issues. When they lose money, they start to blame themselves, blame the markets, blame the Government. Is it what you do in your life - knowing how to blame and nothing else?

Here is your opportunities -

For newbies - we have Optionetics 2-hour Introductory Seminars in Singapore from 21 to 23 March (for details: check out http://www.optionetics.com.sg).

For repeating students - sign up for the upcoming 2-day Intermediate Seminar in Singapore on 5 and 6 April 2009.

For students who decide to step up and get further education - we have the following advanced courses in Singapore

- ITT Class - 14 to 16 April 2009
- Master ICT Class - 8 to 10 April 2009.

There is always something for someone. The question for you is "are you committed?"

Merry Christmas and Happy New Year!!

Time really flies in that we are approaching the final week of 2008. As most hedge fund managers have already gone for holidays, I do expect there isn't much to do with the forex market until next year. As a result, I have officially closed shop in my forex business for 2008.

Looking back what I have done during the first year of running this new (forex) business, I have learnt a couple of things:

1. Believe in yourself and you will find ways to achieve certain goals - my limiting belief of not being able to stomach the volatility in the forex market over the last decade, has been thrown away. Now that I am able to trade forex simply means that limiting belief is just limiting belief. If I give myself a complete stretch, I have progressed to the next step.

2. Successful trading is all but psychology - I could have the so-called "best and powerful" trading strategies and also the "best" forex guru in town to teach me, and yet the progress could not be achieved until I have got the trader's attutide right in this business. That's how the psychology comes about. Have an attitude that is deemed correct in my own circumstances. Follow the rules, and keep myself discplined. Further, remember the importance of continious improvement - Kaizan. I followed faithfully what I called "7 Essential Credentials of a Successful Trader" to work on this new business. I am glad to see significant progress in the first year and trust that I will be able to deal with the challenges in 2009.

3. Always have a back-up plan - this forex business was the result of my contingency plan in 2008. By anticipating the challenges in the equity and index markets, I started equipping myself with additional knowledge in another area of practice and I was glad that this anticipation resulted in a successful launch of my forex business. The fact that I could start the real operation within a couple of months means that I could make a difference from my old days as an options trader. So, what's my back-up plan for 2009? I am going to look at the next level of challenges - i.e. futures market. This means that I will be essentially one day able to trade anything under the sun. Having said that, I do anticipate a come-back to the index options market in 2009 as I expect that the trend will likely be a side-way for 2009 and perhaps 2010. I did quite well in 2005 in the sideways market by deploying sideways strategies - something which I am very good at. So, I am ready to play sideways strategies again in 2009 at least.

Finally, this will be my last post for 2008. I wish all of my readers a Merry Christmas and look forward to the upcoming challenges in 2009.

Believe in yourself and you will make a difference! This is our Patterns of Excellence!!

Am I a marketer?

First and foremost, I am grateful that there are many readers in my Discussion Board , and I realize that not everyone has been actively participating in my board, which is fine with me. I am not in the board selling you any information or courses. However, as and when I think there are some interesting products, I do post a link or two to keep my readers aware. Of course, if my readers are interested, they have the choice of buying the products directly by clicking the link in my board.

Having said that, I am recently quite perturbed with a few participants who registered in my board and made a lot of unresourceful remarks. You know as much as I do that every aspiring trader wants to succeed in trading and yet, no one is going to spoon feed us. Thus, we all have to devote our time to learn and better equip ourselves in this business. Put simply, there is no short cut or miracle. If I don't give me 100%, I won't see the result I have today. Is it a fair statement?

Now, here is the deal. I am happy to share with my readers knowledge I have provided that it does not infringe any proprietary rights. A particular reader recently has demanded me to release certain details of a proprietary system and insisted that it is no harm to share just as little information as possible. When I replied politely that this trading system is proprietary, I got remark that I am the best marketer in promoting my course and stuff like that.

What a joke, isn't it? Sharing information is fine to the extent that the source originates from public domain. If the information is proprietary, it cannot be given out free. That's the real life in business. Obviously, we all wanted to get this kind of information free of charge. Doing so is however not respecting intellectual property law, and is also unfair to people out there who are willing to pay for such information.

So, blaming me as a marketer for courses because I don't give out such proprietary information does not help that person at all. Well, there are also many sites that provide free forex trading system information. Why doesn't this person go to read for himself? Well, I don't have a clue!

Practice Defensive Forex Trading

“In trading, Risk is Pre-Determined but Reward is Un-Predictable. Your Stop determined your risk. The Market decides your reward. Success in trading is supported by your discipline, diligence and decided by your Money Management and Psychology.,” - Henry Aw Young, Singapore

Henry is a good friend of mine with whom I met in Adam Khoo's Wealth Academy Program in 2008. He is also a professional trader and a trading coach.

As you can see, people who have been proper trading education will say something like the above. Always determine the risk before looking for the reward. Establish the pain threshold with informed decision right before placing the trade and know how much we will lose in a particular if we are wrong first before asking how much money we can make if we are right.

Amateur traders could find it hard to accept. They tend to ask "if trading is for money, why should they not take about how much they can make in a trade?" Well, the answer is fairly simple. If we are in a trade without knowing the maximum pain threshold, and if we are wrong in that trade, emotion will drive us crazy, and we will start giving excuses so that we can delay our pain until such time as we cannot. By that time it will be too late to get out of the losing position, and the traders might as well not exit the trade. The probable outcome s that the traders have their accounts wipe out and curse and swear that they shall not trade anymore because the market is unfair to them.

Does this sound familiar to you? You should have heard in the recent bear market where many people lost tons of money because they approached this business in a completely incorrect manner.

So, who in the market right now are still making money? I guess people who have been educated properly and practice defensive trading. And what do I mean by defensive trading? Let's draw some indications below:

1. Always find a reason not to trade, and if you find one, then, you are out of the market. This helps us to focus on quality set-up / pattern and at the same time, kick away emotional trading.

2. Always address stop loss first before looking at the profit. Yes, it is completely reversed. The advantage of this is by ascertaining the stop loss, you will be able to determine the proper position sizing, and risk allocation. If you find that the stop loss is something you are not comfortable, you have found another reason to stay out of the market.

3. Trade based on your trading personality. I know this is a challenge. Some of us tend to trade in a shorter time frame. I am one of them. When I talk about shorter time frame, I mean it is short in my own definition. For example, I trade forex by using at least a 5-min chart and at the same time. 1 min-chart is too short in my definition.

4. Do take into account of bid/ask spread. Very often, we tend to look at the upside of an individual trade and when taking into account the spread, the result can look very different. So, remember to incorporate bid/ask spread in your trading result so that it becomes more realistic.

5. Do your research and development. I would like to answer Chris' (JMOT's) questions here. I am a system trader because it is something I learnt from Tom Gentile, the co-found of Optionetics. I took Tom's traits in my trading business and very often, I blend a few systems which may give me better results. For example, if I take FAST2 to trade on USD/JPY, the accruacy may be somewhere between 65% and 75%. Knowing that the win/loss ratio and the risk/reward ratio, most FX1 students may find it hard to make money on FAST2. Some of the students may start blaming FX1 and whoever on the planet saying that this course sucks.

In my case, I focus on how to better the system with a view to increasing the win/loss ratio. In my own R&D, I asked myself the following questions:

- Can I use some signals to filter out the less probable side of the trade? Put simply, if USD/JPY is on a short-term downtrend, and there is a long signal, should I take this trade blindly? This is why I incorporate Kathy Line's BB Band in my modified FAST2. So, if the pair is in the sell zone, I will concentrate on the short trades.

- Can I take into account support and resistance? Put simply, if USD/JPY gives me a sell signal, and at the same time, the profit target will face a strong support somehow in between, should I take this signal? Peter Bain and John Person are the gurus in pivot point analysis. There are also free MT4 code for daily pivot points. How about putting pivot points in the pair and filter out less probable trades? For example, this afternoon there was potentially a short USD/JPY trade and I decided not to trade. My PT was 92.20 and S1 is 92.24. So, I did not place the trade which eventually was proven to be a right decision becuase it really bounced back nicely at S1and moved all way to my SL and I would have registered a max loss on this signal.

So, these are some of my ideas to fine-tune the trading systems based on what I know. You may ask how the hell I know all of these. I can share with you that it is based on my hunger and desire to become the best forex trader in Singapore. That means I constantly look into my existing trading systems (and till now, I have at least 20 systems) and decide which of these are suitable in the given market condition. Unlike many amateur traders, instead of focusing the word "why?", I look at "how". With this little weeak of the question marker, I see a hell lot of oppotunities in forex market.

Another reader asked why I posted my daily forex record in my discussion board. I am not showing off of course. The sole purpose of doing this is to keep track which systems I use on a particular day, and how they performed. Of course, some of these systems are proprietary and thus I am not allowed to post the detail entry and exit rules. I need to respect the intellectual property of the inventor of the systems. At the same time, I have recently spent hell lot of time to forexfactory.com and singaporeforexforum.com as there are tons of free traidng systems and some of them provide MT4 codes. So, if you are committed to be the best of the best, you must decide for yourself what you should do.

Have fun in your forex venture!

Getting addicted to Forex Trading

My wife and I went to a parent workshop this morning about internet security at home for concerned parents. The presenter mentioned that online gaming is very popular among the kids and it is very easy for them to be addicted. I was thinking whether it is just the problem for the kids because I have a similar challenge too.

Over the last four weeks, I only placed 3 options trades, all of which were simple quickie on directional bets. For the rest of the time, I focused 100% on forex trades. Yeah, I had two business trips in the month of November and honestly did not really trade. However, the fact that I am now back to the normal schedule allows me to focus again on forex trading.

As I explained to some of my readers, forex trading is tough if one hasn't got the proper education. In addition, under the influence of Boris and Kathy from GFT Forex, I honestly do not trade forex by looking at the technicals alone. I read into a lot of fundamentals and use fundamentals to confirm my directional bias, and use technicals (if I have to) to confirm my bias. So, in this sense, I have fulfilled with Boris mentioned on the first M and the second M.

Imagine in a down day where you see a bullish signal on the carry trade pairs, are you seriously going to long? Well, a pure technical trader may go for this trade and probably it will be either a small winner or luckily best, no loss. However, by understanding the fundamentals, one will more likely than not filter out this long signal and hence, places no trade.

My forex trading hours are primarily in the afternoon, Singapore time. To me, this is the best time to trade because there is no US news that could swing the market easily. In addition, Europe markets have the tendency to follow the US market of the previous days. It's therefore easier to gauge the direction.

Having said that, I know and am aware that there are students who still prefer to trade during US cash market hours. It's fine because it boils down to one's trading preference - in this case, the operating hours. Now that I have traded forex for a while, I must say that I have an upper hand on the news around Asia and Europe, and even Canada, Kiwi and Aussie. There are many opportunities a day so a forex trader should not worry about having nothing to trade. Of course, we filter the better ones in order to ensure a higher win/loss ratio.

I have many trading systems in forex - which I acquired from many mentors and gurus. However, I screened out the best of five which have been working consistently:

Asia High Low System - AHLS
This is a system that requires one to place a trade at 3pm Singapore time on EUR/USD. The idea is to look for breakout of the range, and aim at a quick bite of the breakout and pocket the profits. This system has a track record of about 60% correct over the last few years. A few of us are working on a semi-automatic system and probably will launch in the near future.

London Momentum
This is a system that requires one to place a trade at 3pm Singapore time on GBP/JPY, at which time the London market is open. There is a set of formula to use to calculate the EP, SL and PT and is largely based on Jimmy Young's original version with mutiple lots to go in and scale out. The system however suffers an inconsistency at the beginning of this year and thus, I have researched and introduced a filter that provides a better result. Yesterday, I have further refined the system in such a way that I chalked up 185 pips per 3 lots in a mere two hours. So, London Momentum (Beta 2) will be what I am concentrating on for the next month to see if it can give me a better result. There isn't a trade everyday but for the time I traded so far in November, I recalled there was only a losing trade.

5 min 60 SMA
For Jimmy Young's trading tactics coaching class students, and also the TradeCast Publication subscriber, you know this is the main daily trading system Jimmy and his students use. The challenging part of this system is the execution, and I am still working on how to get a better execution. In addition, I have introduced a new set of stop loss rule which largely follows Kathy's multiple lot scaling out method. So, as Boris said, forex traders are risk managers. I would therefore be more than happy to lock in the profits and make the trade risk free first before looking for the final lot to make a home run.

1 min 60 SMA
This is the newly inented trading system introduced by Jimmy not long ago. It's purely based on the news each day, and can be referred to in the NewsTrader Publication. I have tested this system since last week, and it's 50/50 so far. Let me test it further before I give you my insights.

FAST2
When USD/JPY is trading in a tight range, FX104 did not really work. So, as an alternative, let's go back to the first forex trading system introduced by FX1 Academy. Using Kathy's BB filters and my own parameters, I have managed to screen out many bad qualty set-up. I am glad to say that I have not made a single loss this week on FAST2 based on my parameters. So, who said FX1 Academy's $4,500 course not working? I bet to differ.

For further information about Jimmy Young's trading course, please go to http://www.fxte.com for further details. I know the full-package costs US$7,999 (consisting of the basic course, intermediate online course, trading tactics coaching class, and the advanced online seminar) and it is quite expensive in view of the current economic climate. And at the same time, it is expensive because it gives you the entire trading package which enables you to start, rather than putting one in a half-past-six position. Jimmy shares with his students the game plan each day and this is the cream of the crop. He also does post-mortem everyday to explain what works and what does not work. I have certainly benefited so much from Jimmy's insight.

3 Simple Rules of Winning Forex Traders (from Kathy Lien and Boris Schlossberg of GFT Forex)

About two weeks I went on CNBC and predicted that range will rule the currency markets for the foreseeable future. The price of EUR/USD at the time of broadcast? 1.2630. The price of EUR/USD at close of trade today? 1.2590. So range reigns in the currency market as every rally fails and every decline proves false breaking the hearts of both bulls and bears and that dynamic will probably last for the rest of this year. Thus with little new to say and holiday shortened week ahead of us I thought we'd change the format this week and skips the price action review concentrating instead understanding the basic building blocks of successful trading.

This past week in Kuwait I gave a presentation titled "3 M's that Drive the Currency Market". It showcased a simple analytical framework created by Kathy and I to explain most of the price movement in currencies. The 3 M's stand for Macro - broad economic and political themes, Micro - day to day economic releases and Monetary - for monetary policy of the G-10 nations. The 3M's model, though relatively straightforward, does a very good job of encapsulating virtually all of the catalysts in the FX market.

As I was flying back to US, my thoughts drifted to the 3M idea and I realized that trading itself can also be summarized in a 3 variable model - a model I call the Three Simple Rules Of Winning Traders.

Rule 1 - Develop an opinion

Whenever I hear traders tell me, "I don't have any opinion, I just trade price action." I always smile ruefully and think to myself that the trader is both an idiot and a liar. The fact of the matter is that every time you enter the market you are implicitly rendering an opinion on the future movement of price. The difference between those traders who do so implicitly versus those who put forth an explicit reason for their trade is that the former have no clue of what they are doing while the later at least try to figure out the story behind the trade.

It goes without saying that I have little respect for traders who mechanically follow price action like mindless robots. In trading you get paid not for what is happening now, but for what will happen in the future and if you cannot figure out what is likely to drive price towards your target you are just a lemming in the market. Right or wrong, developing an opinion is the cornerstone of a winning strategy.

Rule 2 - Let Price Confirm Your Thesis

To politely paraphrase a very crude Wall Street saying, opinions are like faces - everyone has one. Developing an opinion even one that is ultimately correct is utterly worthless if the market happens to disagree with your assessment. The history if trading is littered with brilliant analysts who were absolutely correct on their calls and yet were bankrupted by the vagaries of price action before they were ever proven right. Your opinion may be dead on, but as traders it is price movement, not opinion that we are trading. Until and unless price corroborates your opinion you have no entry signal for your trade.

Rule 3 - Manage Your Trade

More than anything else great traders are good money managers. I've always believed that you can put two great traders on the opposite side of a position and often both of them will wind up making money. On the other hand put two novices in the same spot and they will more than likely both lose. Trading above all the art of managing the unknown. Let's say you own a sandwich shop in some strip mall in Nebraska. Most likely you would know to within 10 or 20 sandwiches how many customers you will have every single day of the year. Now imagine that sandwich shop was the FX market. The day to day variance would drive most sandwich shop owners insane. Some days you may sell 500 sandwiches, other days you may have to dump all your food supplies into the garbage as no business came through your door. That's why trading at its core is always about managing risk. Every time you trade the operating principle is - Hope for the Best Prepare for the Worst.

The only way we've been able to control risk and at the same time participate in the market is by always cutting our position in half once a short profit target is met. No matter what anyone tell you, there is simply no way to know a priori if any given trade will be successful. At BKT we really believe that half a loaf is better than none. Success in trading is contingent not only on your analysis but on your ability to properly manage your position. That is why the game is hard. To be a winning trader you must be both - a good analyst and an an excellent risk manager.

AN ARTICLE TO SHARE

Dear Readers,

I would like to dedicate this article to all of you.

Lesson Learnt From My Grandmother

It brought me a lot of fond memories when I first wrote it, and the more I read, the happier I will be. The fact that life is full of challenges means that we can become stronger and stronger. You know as much as I do that we should love our family, relatives and close friends, and treasure them before it is too late to do so.

So, if you haven't talked to your parents for a while, go ahead and make that phone call and say "I love you". Treasure yourself too because who is the most important person in this world. After going through Module 2 of Patterns of Excellence, I know the answer pretty well. So, take charge of your life and become 120% responsibility for what you are doing.