Before you place a single trade.

Read this entire book.

Ok, it’s not really a book, more like a booklet considering it’s mostly pictures and a 12 point font, but great information none-the-less.

I can’t stress enough the idea of trading in small sizes with a lot of reserve capital so you can take advantage of a more attractive price even if you are already in a trade.  Also, take your time when planning and executing a trade, if you “miss” the opportunity, don’t rush the next one, just be ready earlier. Patience will turn into $$’s faster than rushing.

I am constantly surprised by how many traders can gain/lose 30% of their account in 5 pips or less. Such large swings have to stressful or euphoric and will make it nearly impossible to remove emotion from the decision-making.  When I gain or lose 1% on a trade, sure, I am happy or disappointed, but it won’t affect my decision to open or close the next trade.

I have a post in the works that talks about probability and the uselessness of a 3:1 risk/reward ratio, I think it’s brilliant, but then again I also have a degree in Commercial Art and not Statistics and Probability.

Enjoy your weekend everyone! Oh and follow me on Twitter.

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AUD/USD Outlook.

Below is a brief snapshot of what I am looking at with the Aussie.

A lot going on here, but it really all comes down to how strong you think the US Dollar will perform over the next few months.  My bias is bullish on the Dollar…

Conversation with a New Trader

Below is a conversation from Facebook that I had with a young trader and I felt that the questions he asked are questions that a lot of young traders have…

John Smith May 28 at 12:31pm
sry about the double message. hit enter by mistake. I have been looking for a broker for some time now and I was wondering how you picked yours? every time I look online at reveiws they are all mixed. It seems very few people like their broker and then there are 80% that give a bad reveiw.

How did you go about looking for yours?

My name is john and i would greatly appreciate any insite to what you have to say.

Michael Goldsborough May 28 at 1:00pm
Yeah, no problem. If you ask how long most people have been with their broker, it’s usually the rookies that complain. They have no idea what it used to be like. Today, most brokers are decent (at least the ones you hear about the most). I am with OANDA because I have had really great experiences with their customer service. What you need to look for is easy to withdraw/deposit money, order fills, slippage and availability. If you have over 1 million to invest you are going to want to look for an ECN (they are direct to market brokers). Under that amount a dealer desk like OANDA or FXCM are good choices.

I’d love to help you out where I can, please, ask me any questions you like. I never would have gotten started in the business if it weren’t for someone to answer my questions, so I guess I am paying it forward. Check out my blog if you haven’t yet, as well as all the links on the blog roll – great seasoned traders. See the link below.

John Smith May 28 at 1:27pm
Thank you very much. I was looking at those brokers but they seemed to have the most reviews but the worst reviews mixed in with really great reviews. but I am sure its because of what your saying about new comers. What would you say would be the best way to get started? How much is the least amount you think some one should start with? How was OANDA’s free account differ from the live account?

Thank you very much and I will check your blog out

John Smith May 30 at 2:15am
hi another Q. why does it seem that when im reading or watching live trades they seem to be talking about taking profit in a downward slope. i thought you could only make profit in an up trend.
if you could pls clear this up for me.

Michael Goldsborough June 1 at 4:09pm
The best way to get started is to trade on DEMO until you are consistently profitable for about 3 months. Then, based on what you’re comfortable with, deposit real money with the broker you choose. You’ll have to check with the broker to find out their live account cash minimums. The OANDA platform for Demo and Live are extremely similar- no problems transitioning. In fact, I still use my demo account to test out new trading ideas and strategy’s.

Michael Goldsborough June 1 at 4:13pm
If you are trading currency, there is always a downward AND an upward market. Since you aren’t just trading in one currency, in order for you to buy it, some one has to sell it – and vice versa. Let’s take the Eur/USD for example. If the chart is in a Downward Trend, then the EURO is LOSING value and the DOLLAR is GAINING value. Therefore, the EURO is in the Downtrend and the Dollar is in the Uptrend. What is beautiful about trading in currency is the markets are cyclical, i.e. there is no bottom and there is no top – a currency can NEVER (well rarely) go to ZERO.

Hope this helps.

John Smith June 1 at 4:38pm
if you dont mind me asking. do you do this full time?
“I have the demo open and learning while useing fibonacci tool.

Michael Goldsborough June 1 at 5:13pm
My income is derived mainly from Trading, but my style of trading allows me to carry a full time job that I enjoy. More like a hobby (and it pays the health insurance) then a job.

Keep learning Fibonacci. I use the Fibonacci Retracement and Fibonacci Fan as well as hand drawn Support and Resistance lines.

John Smith June 1 at 5:23pm
im really liking the fib style. I was just wondering how hard it would be to do this full time. I have plans of finishing school in PharmD/mba. I want to open independent pharmacies.

John Smith June 1 at 5:46pm
is it possible to get 10…20 pip trades a day?
if i had 100$ and 100:1 leverage. that would be 1000$ leveraged for a trade.( i wouldnt start with 100$ dont worry)
if i got 1$ per pip profit and made 200 pips a day that would be 200$ a day. times 5 days is 1000$ a week which is 4k a week and 48k a year…… right lol or im i off or unrealistic?
i know the numbers are low but im trying to see if my math is right.

Michael Goldsborough June 3 at 3:55pm
OK, sorry it took me a bit to get back to you…life is just busy sometimes.

I don’t want this to discourage you, but you need to be a bit more realistic with your expectations as to not get disappointed and leave the business of trading prematurely. I will help you as much as I can and let me know if there is anything else I can do.

First, your math is fine, it’s the logic behind it that is flawed. Remember, if it was that easy, everyone would do it and everyone would be successful and we would no longer have a market.

I would be remiss if I didn’t tell you that this very thought (how easy it looks to make money in FOREX) got me into trading. It would be foolish of me to not warn you that it is an extremely hard was to make an easy living. You can make 10 – 20 pips/day on average, but you can’t trade with $1/pip with $100. It is a numbers game, and you need the zero’s to make the necessary amount of money to sustain a living.

Think about what you’re saying, you want to triple your money everyday. People would kill for 15%/year and you want to make 300%/day. I average about 3%-5% each month, I compound my earnings and adjust my position exposure every 6 months.

Not to mention you need to have 6-12 months of expenses in a savings account in case you hit a real bad run…you still need to pay the rent and eat.

Weekly Plan

My Trading plan this week is simple.  Wait for a bounce off of 1.4600 (EUR/USD) and wait for it to hit my sell order at 1.4750.  I know, a lot of waiting.  For you new guys out there – learn to do this and do it well…nothing will make you more money in the markets than being patient.  If we make a decisive move down further, I will enter a short below 1.4550 — but will also look to close quickly and maybe swing trade a bounce… we shall see.

Happy Trading, please comment – I love to make new friends!

In-Sync and Confident, the Bi-Products of Consistency

Two words or phrases that are 1. rarely talked about and 2. hard to feel in this business.  I, fortunately, feel very in-sync and as a result I am gaining confidence with my trading.  What is the cause of this you may ask??

Consistency.

Since my declaration in “A Quick Note…” on July 12th, I have implemented just about every one of those points and stuck to them with a military like discipline.  As I feel myself straying, I will go back and re-read it.  I suggest you make your own plan, or copy mine if you like…stick to it, find out what works and what doesn’t and slowly watch your system change into a profitable tool.

Consistency isn’t just from profit, you have to develop consistency in your losses too.  When your system starts to be consistently in the red, then redevelop your system, don’t jump from idea to idea, but break it down and FIX the problem.  Keep that consistency IN your plan and in FOLLOWING your plan.

For the past two weeks I have been able to meet my weekly goals by Thursday (which is great, I HATE trading on Fridays)  and this week I have meet my goal this morning.  I am going to keep trading this week, but I am cutting my normal trade sizes in half to decrease the probability of giving it all back. Everything from here on forward is extra, so I am not worried about killing it and risking what I have gained.

One thing or phrase that I have developed and helped my trading is this, “Know what the crowd is doing, don’t blindly do what the crowd is doing…” To aid me, I watch CNBC, I said I WATCH – I really don’t listen to much because most of them on there are bumbling idiots (I’d like to see a portfolio that they have managed).  Most of the time I look to take the opposite position of what they recommend, it’s that bad. This has helped me stay In-Sync with the world’s markets and understanding the correlations between them.

In-sync, Confident, and Consistent. Three pieces to this seemingly 10000 piece puzzle.

Trading update…

For those of you not following me on Twitter (get your head checked…) where I call all of my trades when I take them, I will try to update on my blog when I can.

Currently I have a EUR/USD short in @ 4087 with an order for twice the OE (original entry) @ 4150 and then an order for 4x’s the OE @ 4200.

Eur/USD and S & P 500 are correlated very tightly at the moment, seems one can’t do anything with out the others permission.

S & P – Up for the day and week – well past the 900 level.  With a gap right above 900 (I think it needs to close it AND retest 900 before moving up any further).  Aiding in the retest will be the Profit takers for this week… first time bulls have made a profit in a while, they won’t leave it out there very long.

Eur/USD – Approaching some semi strong short term S&R. On the 4h charts we can see (whole numbers) that we are in a range between 4200 and 3800 since the beginning of June and we are approaching the 4200 mark.  Look out for something to happen at this line (or there abouts).  I have some shorts in before it and on it so I can try to catch a down move.  If it moves against me, I have my mental stop set around 4350 (above the last highest peak after we entered this range).

I have introduced a friend of mine (the genius type – perfect 800 on math in SATs…you know, NOTHING like me) to the FOREX market.  I’ve showed him a few of the things I look out for and have some interesting incite on how he is handling things.  I will write an OP ED this weekend about it…

I may take tomorrow off from trading since I’ve hit my targets for the week already, but I doubt it…

See you around the block!  OH yeah—-> follow me on Twitter!

A quick note

As this week is about to kick off, I am going back to the basics.  Reason being that I had a successful week last week until I took some cocky, ill prepared and WAY off my sytem, trades that took away most of my profit.

I will look at and take trades off of the following guidlines this week.  I will be a machine and will not stray from this basic plan.

1.  Look for important fundementals and money flows.  Pick a side (long/short) and trade in that direction.

2.  Identify the areas of Support and Resistance.

3.  Look for Price Action at these levels and react to what Price is saying, not what I hope will happen.

4.  Keep an eye on Consecutive highs/lows in order to realize a potential retracement and buy/sell at an advantage.

5.  Plan my exit strategies with thought not emotions.

6.  Finally, work to better understand the Correlation of other markets such as the S&P 500, Crude and Gold.

The most important for me is the patience to wait for these things to happen, not to beat a dead horse, but I am working on patience all the time.

Good luck and Happy Trading.  See you around the block.