Great Article - Passion VS Interest

Really like this article, probably because it is relevant to my current situation.

http://2ndskiesforex.com/strategies-for-forex-trading/forex-articles/difference-trading-passion-interested/

The below excerpt really spoke to me:

I think many people get depressed when they lose focus or motivation because they think that successful people have some unstoppable passion and willpower that they seem to be missing. But that’s exactly the opposite of what this coach was saying.

Instead, he was saying that really successful people feel the same boredom and the same lack of motivation that everyone else feels. They don’t have some magic pill that makes them feel ready and inspired every day. But the difference is that the people who stick with their goals don’t let their emotions determine their actions.

Triple Witching

DJ 30

Notice the four super high volume days in the chart? I always knew it was due to options expiration, but I only just realized these four days occur on days of triple witching. According to Investopedia this is an event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December.

As such, traders using volume analysis might want to interpret the volume on these days with a pinch of salt. Just scroll through some stocks and you'll notice this disgustingly high volume on them too. Interesting huh?

New Chart Pattern - Last Breath Pattern

I think I've discovered a new chart pattern. I hate thinking of names so I shall call it the Last Breath Pattern for now. I seriously don't even know what the logic behind it is and why it works, but I've seen it so many times to know it is not a fluke. The pattern basically starts off with a compression like up move which then curves down a little and shoots up as if taking its last breath. It finally drops back down rapidly and breaks the origin of the final spike up.

This is going to sound stupid but I don't know how to trade this pattern. You can't short at the top because you don't know whether it'll spike back down or not, and you can't short the support break because you don't know whether it'll be a genuine break or not (yes it does false break and go higher too). This pattern only gives a high probability that the support will break, it doesn't guarantee that the break will follow through. :P

There is one use for the pattern though - Avoid going long when price is returning to the origin of the spike up. You see, I managed to discover this pattern because I fell for it many times by going long at the origin of the spike up and getting stopped out. After some time I can't help but find it familiar. I'm happy to say that in the past two days, I've avoided two losing trades simply because I remembered this pattern. Every other trading rule of mine stated that those trades were valid but I just couldn't pull the trigger as something "didn't look right". Well that discomfort saved me 2R and I am even more convinced that there is something going on behind the scene of this pattern. Maybe I should add this to my trading rules - Do not trade if there is a Last Breath Pattern. :P

It Is Not The Critic Who Counts

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. ― Theodore Roosevelt

That quote has to rank among one of my favorites. I've read it many times and I still feel so inspired and encouraged whenever I read it. To me, it has to do with critics vs vision. Every successful person has a vision, be it Mother Theresa, Nelson Mandela, Steve Jobs, or President Obama. There will always be people who don't agree with your vision, ALWAYS. Critics will rise up, and in this generation where social media is prevalent, their voices will sound out far louder than ever before. However, successful people know this - They have to choose their battles. Not all battles are meant to be fought. Every second spent answering or pacifying a critic is a second that could have been spent furthering the vision. In other words, critics = distraction, and a visionary has to be very careful not to be caught up with such distractions.

In the trading context, not everyone will agree with your trading methodology. However, every second spent debating and fighting in the forums with your critics is a second that could be spent improving your strategy, back testing, reading, practicing. It is the same for every aspect of our lives, every vision, every journey. Critics will never understand the ironic relationship of the inevitable yet necessary occurrences of failure. They devote their time and energy to nitpicking on you, hiding in the shadows and ready to pounce whenever you make a mistake. Fast forward a few years and the focused visionary who failed repeatedly would have gained a treasure trove of lessons from his failures. He would be at a much higher level than where he was a few years ago. And the critic? I shall leave that question open. :)

Update On EURNZD Trade

Just to update the EURNZD order which I mentioned in the previous post. So price continued down and did not retrace enough for my entry. The original target has been hit so I've pulled my order. This actually happens very often. I find myself cancelling more than 70% of my orders because some criteria gets broken, but it is how it is. There are more than sufficient opportunities every week. Price is now in a strong D1 demand zone, so surprising as this sounds I'm going to start looking for a setup to go long. The criteria for this would be for a H1 supply zone to be absorbed/engulfed as a sign of bullishness. I'll then buy when price retraces back to the source of engulf. A lot of people will find it hard to buy after such a steep drop, but we should instead love such steep moves because the entire sharp move down is a liquidity gap (at least on the D1) which can be easily filled without trouble. Just look at the prior few steep moves up and down, notice how price subsequently moves from one end to the other quickly and easily? This is because there is no zone in between to stop the move, and we know that price moves from zone to zone. Besides, I'm not taking a blind entry, I'm waiting for a lower time frame supply zone to get engulfed as a sign that the bulls are interested in higher prices. Can it go wrong? Sure it can, but if it works out, I'm potentially entering based on a H1 demand zone with a D1 supply zone as my target. In the best case scenario that my trailing stop is never hit, the RR could be as high as 20:1 or more, depending on the width of the H1 entry demand zone.

EURNZD D1

Pending Sell On EURNZD H1

EURNZD H1

A nice short setup just occurred on EURNZD H1. Downtrend, demand engulfed, very distinct supply zone with strong departure (signifying a huge order imbalance there) for entry and clear S/R flip level for target. Just want to share what goes on in my mind with this concept of trading. We know that trading is a probability game and expectancy is what matters. This trade if successful would yield approx 3R. If I lose, I lose 1R. I only need to be right 25% of the time to break even. Do you think shorting such a nice supply zone in a downtrend with clear space below has at least a 25% chance of working out? If so, take the trade.

This is the way I'm approaching every single trade now, measuring the reward-risk vs the probability of the trade working out. With regards to the above setup, I would say it should have at least a 65-75% chance of being successful. There is no reason not to take the trade! I used to be very uncomfortable with limit orders and preferred to wait for candlestick confirmation. However I realized that while waiting for candlestick confirmation might result in a slightly better hit rate, it greatly reduces the reward-risk ratio of the trade and hence my overall expectancy, especially if the candle is a big ass one. However this is definitely an issue of preference as I do know some really good candlestick traders too.

The fact that price moves from zone to zone is one of the best kept secrets in trading. It gives confidence in entering at the point with the lowest risk and holding to the next opposing zone.

With regards to the above trade, I'll only cancel it if 1) Price doesn't trigger me and goes on to hit my target
2) Price starts making higher lows on the way to my entry, signifying a possible trend change 3) I'm not in the trade by NFP tomorrow. I don't trade before NFPs, and with the Syria issue looming I'll certainly prefer not to hold trades over the week end.

Update on Silver Trade

Just to update the Silver trade I took previously. I trailed my stop below a H1 DZ and it got hit just now for a +0.5R. The fact that price failed to make a new high and the possibility of it forming a H4 head and shoulders now is giving cause to potential bearishness. Side note: I'll be very cautious of trading in the next two days due to ECB conference on Thurs and NFP on Fri.

Silver

AUDUSD confluence with the AUD crosses

Just want to write a short post to describe a form of confluence that could aid an analysis. In this example, we can observe nice H1 zones across the various AUD pairs. This means that if price should retrace, there is a high chance they'll hit their respective zones around the same time, hence acting as a form of confluence for any AUD related trade.

At first glance one might wonder duh doesn't this always happen? Well it doesn't. Sometimes we could see AUDUSD rising strong and forming a nice Demand zone, but the rise could be due to Dollar weakness. In this case, It is likely that pairs such as EURUSD , GBPUSD, NZDUSD would also be rising and USDJPY could be dropping. What we have then is a muted reaction on the various cross pairs.

In this case we have clear zones formed across all the AUD crosses and even on AUDNZD (NZDUSD is highly correlated to AUDUSD, so for a strong zone to form here is pretty rare). This is a sign of clear AUDUSD strength which was a result of the positive morning AUD GDP news. The idea then is to pick the best looking AUD pair to trade. I've personally chozen AUDNZD as I think it has the nicest price structure and most space to move. We will not want to enter multiple trades on the various AUD pairs as that would result in excessive losses should all the trades fail.

China Minzhong - Another Reminder On The Danger Of Equities

China Minzhong Daily

Once in a while something like that happens to remind me why I quit trading equities. This stock got screwed by a short seller (similar to what happened to Olam) and dropped 50+% in a single day to its all time low. No matter how much one sucks at trading, reading charts or fundamental reports, nobody deserves to lose that much just like that. My heart really goes out to the retail investors who are affected, especially those who placed their hard earned money in the stock. It is exactly moves like this that potentially leads to suicide cases. Note that the shitty cash market brokers in Singapore do not provide stop loss orders, so unless you're trading CFDs or happen to be around when that spike happened, chances are you'll incur losses so big it'll take many winning trades to recover. So yep you can be a damn good trader, killing the markets and having a decent win rate. All you need is to get hit by one of these every few months and a big dent will be created in your account. The damage will not only be financially but psychologically. There will be a huge sense of unfairness and indignance coupled with discouragement. And mind you this happens far more often than one would like to believe. In the case of CMZ, at least it was a spike down so some people might still have got out in time either via stop or market orders, albeit with huge slippage. Most of the time though news is released when the markets are closed and huge gaps can occur overnight. Your stop loss order will not protect you then.

One might argue that huge spikes/gaps can occur in your favor too. I agree, but as a trader I'm more concerned about managing my downside than hoping for the big break.

Oh and did I mention that if you were short before the trading halt, the gap up today would have wiped out your account overnight? Welcome to the world of equities.