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Investment lessons from trekking

Investing is similar to moving in forested terrain; you can't expect your investments to move in a straight line with no fluctuations
By CHRISTOPHER TAN @ http://business-times.asiaone.com/sub/money/story/0,4574,205986,00.html?

I LOVE moving in the mountains. It gives me a deep sense of serenity and peace. It also gives me a feeling of great satisfaction as I navigate through the tough terrain to reach my destination.

Not a straight path: If you want to journey into the "financial jungle', you should know that like walking in the mountains, there is no way you can reach your goal in a straight-line approach. You must be prepared for risks.

My most unforgettable journey through the mountains happened more than 10 years ago when I was a career army officer and training in Brunei's Temburong Jungle. I had to lead 150 men through the jungle on a mission. We first used a sortie of helicopters to land on a helipad 10km away from our destination at dawn. When you land in darkness and when the strong wind caused by the rotor is blowing down on you, you lose all your sense of direction. At that time, I depended on my compass and map and moved my men in the direction of our objective. As we moved through the jungle, we walked along the ridge lines and went up and down many hills. You need to know one thing about walking in the jungle: it is never a simple case of walking straight all the way to your destination. The terrain will ensure that you will 'meander' your way through.
Often, I became worried that I may be moving in the wrong direction, and with 150 men, tired and hungry, stretched over a distance behind me, it sometimes affected my decision-making ability. But one thing I have learnt through my experience in the mountains is that you must never depend on your emotions, whether it is fear or confidence. You can only depend on the compass and map to tell you where exactly you are. So finally, after many hours of walking, I managed to take the troops to our objective on time. It was truly an amazing experience for me. But why am I talking about the jungles and mountains when this is a financial page? This is because investing is very similar to moving in forested terrain. So what similarities and investment lessons can we draw from the mountain experience?


It is not a straight road to your objective
Just like my jungle mission, we all have objectives when we invest our monies. And like my mountain experience, it is not a straight road to the destination. You cannot expect your investments to move upwards in a straight line with no fluctuations (that is, no risks). There are simply no such investments in existence. If we want to achieve say 7 per cent per annum and can only accept 8 per cent volatility over a 10-year period, we must allow our investments to fluctuate between -1 per cent to 15 per cent so that we can have an average of 7 per cent over the 10 years. This is the financial market's way, as it is the mountain's way.


One of the biggest mistakes to make when walking through jungle in the mountains is to take a direct bearing towards the objective, go down the ravine, bash through thick vegetation, cross rivers to try and reach the destination. You avoid the meandering ridge lines and you think it is faster going straight. In the end, your 150 men and you will end up being too tired, risk being bitten by harmful creatures and getting injured. You will likely get lost. This is likened to trying to time the market, taking short cuts, thinking that you can get out of the market when it is at its highest and buying in when it is at its lowest. You want your investment to only go up in a straight line and are not prepared to ride the volatility. Unfortunately, like walking in the ravine, you may end up losing your way. You must remember you cannot go against the mountains. Likewise, you must allow the financial markets to take their course to give you the returns.

Do not be reined in by your fears or confidence
Just like walking in the mountains, you will at times be overly confident and at other times be fearful. I remember a separate occasion when I went into the jungle alone. Because I have been in that location many times before, I became overly confident and relied on my 'local knowledge' and 'gut feel'. I did not use my compass and map and as a result, got lost. As it was getting dark, I got fearful and went around nervously, trying to find my way out. The situation got worse and I ended up staying alone in the jungle for a night without water and food, and was harassed by wild boars.
During good times (like from 2003 to April 2006), you may feel confident about all your investment decisions. In times of market volatility (like the first 10 months in 2004 and during this period in 2006), you may also be confronted by your fears. Just like walking in the jungle, you can never really know what to expect. Your false confidence and unwarranted fears may cause you to make poor investment decisions. You should, instead, use and rely on your equipment: your compass and map.

Trust your compass and map
The only thing you can trust in the mountains is your compass and map. It is the only equipment that will tell you where you are. If you always keep track of your last location, you will know how to make adjustments when you are lost. If you make decisions in the jungle based solely on your gut feel and intuition when you are lost, you may never be able to find your bearings again. Similarly, in making investment decisions, make sure you use all data available, know the assumptions and do all the necessary forecast. Document all the decisions so that when a mistake is made, you know how to get back on track. It is not making investment mistakes but not knowing what mistakes you have made that will cause you to lose your monies in the long term.

Make adjustments where necessary
Like walking in the mountains, from time to time, you will be disoriented. What is most important is to retrace your steps and move to your last known position and start moving in the right direction again. In investments, we must monitor the performance closely. When our portfolio is not moving generally towards our set returns objective of say 7 per cent per annum, and when it is taking on more risk, say 8 per cent than we expect it to be, it is time to check what went wrong and make necessary adjustments. If you have been faithfully documenting all your decisions and assumptions, you would be able to move in the right direction once more.

Follow the right commander
When I was leading my 150 men, I was responsible for their safety, welfare, morale and the achieving of the objective as a team. If I am only concerned about reaching my objective at the expense of my men, they will never follow me again. I must also prove to them that I am a competent commander, able to be calm during adversity and having the technical ability to use the right equipment to navigate in the rough terrain. I must constantly communicate to them about our situation and motivate them. I must be prepared to admit my mistakes and tell them what remedial actions I am going to take so that they trust me. In that mission, I believe I displayed those qualities and won the respect of my men.

Similarly, as investment managers managing clients' monies, we must be responsible for the safety of our clients' monies. It is their hard-earned assets and their dreams for their future. We must not make decisions based on our own selfish financial interests at the expense of our clients. We had better be sure that we are competent before we lead our clients into the 'financial jungle'. When markets are seemingly doing well, we need to hold on to our clients tightly so that they won't be overly confident or greedy and, as a result, invest blindly. When markets are volatile, we need to be calm for our clients and hold them close so that they don't sell their investments out of panic. Throughout the entire investment lifespan of our clients, we need to maintain communication with our clients so that they know that we are in control. If we fail to be that 'commander' for our clients' investments, we may lose a client, but they may lose their dreams for their family and themselves. Don't take our responsibility and leadership lightly.

In May and June, the financial markets fell sharply due to fears that interest rates might be raised again. The fall wiped out all the returns that the markets have gained in 2006. Many were afraid as they did not know what to do. In this period of great difficulty, we did what every good military commander would do. We studied all the data available and knew that the markets have over-reacted and there was really nothing to be overly concerned with. We checked all our portfolios and knew that despite the fall and the volatility, the portfolios were still behaving according to our expectation and moving in the right direction, towards our clients' objective. We remained calm for our clients, stayed invested but made minor adjustments to these portfolios.

We communicated to our clients the truth behind the fall and assured them there is nothing to be too concerned about. We told them we are still very much in control of the situation and remained confident their portfolios will deliver the returns they need. As a result, none of our clients pulled out their funds and today, the portfolios have recovered.

If you want to journey into the 'financial jungle', you need to know that like walking in the mountains, there is no way you can reach your objective in a straight-line approach. You must be prepared for occasional fluctuations as this is the way of the 'jungle'. Without risks, there are no returns. As long as your investments are behaving as you expect them to and your investment manager is in complete control, there is nothing to fear. Go to the mountains sometimes, for there are many investment lessons to be learnt from Nature.

Christopher Tan is the chief executive officer of Providend, Singapore's sole fee-only independent private wealth management firm. He can be contacted at chris_tan@providend.com

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Profit of 50 pips for this simple yet effective trade setup.

The trade setup above is quite obvious. Go to http://www.babypips.com/forex-school/fibonacci.html to understand more about using Fibo retracement levels for trade entry and Fibo extension levels for profit taking.

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New trade for this week

From the diagram above, the pair made a almost 50% Fibo retracement before rallying up. In general, it is good to enter a trade when the pair is making a retracement while placing a stop limit at below 61.8% Fibo level.

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For trade week(May 01-05): A brief summary of Murrey Math Trading System

Quoted from some forex forums:

"Every activity in creation requires three fundamental elements.

Space, Matter and Time.

Where is the action? What is the action? and When is the action?

Every repeated activity creates a pattern or rhythm.

Seasons, celestial movement, tides, growth cycles, etc. (what goes up must come down).

Recording the repeated activity draws a picture of the rhythm.

The fundamental rhythms in creation are the same.

The math is the same, the picture is the same, the result is the same: predictable change.

By knowing the TIME of a cycle we can consistently anticipate the likely future direction of the rhythm by knowing where we are NOW in the cycle. Half moon to full moon etc.

The Murrey Math Trading System is based on the precise measurements of these universal cycles.

Murrey Math uses numbers and geometry (the pictures of math in action), to record, measure and visualize the buy and sell harmonic rhythms of the financial market place.

A Fundamental Understanding of Market “Investments.”

The purchases of stocks from the exchange are not really an investment in a company.

Capital infusions into the issuing company are limited to the first sale at the lowest price, less underwriting cost.

All additional profits from the sale of that stock goes into the pocket of someone other than the company.

Most likely you are not buying the companies shares, you are buying shares from someone who owns company shares.

Price earnings ratio’s are meaningless in today’s market. Reasonable ratio’s were pasted years ago on even the strongest top 100 companies.

The entire market is about speculating on the trading cycles.

Everything that pretends to be based on the true value of the stock is just market place noise and the psychology of the exchange.

The Role of Mutual Funds.

In l992 the government released its so called “Red Book,” a 560 page, “loop-hole” treasure chest, that set mutual funds free from investment restraint, and the government freefrom fiscal liability.

Ignoring the dismal history of its predecessor, the Investment Trust, Mutual funds could now soar.

The unprecedented “market highs” in the ninety’s can be directly attributable to the Mutual Fund Industry’s capacity to lure billions from the safety of insured accounts into the exposed world of stock market investments.

As proof of the absurd, there are now nine thousand mutual funds chasing four thousand stocks.

That’s too much “focused” money trying to squeeze into, too small a space.

It’s a field day for the Insiders.

These funds are capitalized by millions of uninformed, passive long term investors.

Many in the “trusting” masses don’t even realize that their “Retirement/Mutual Fund” is a stock market investment.

Nearly 43% of the population are in the market through 401(k’s)/IRA, mutual fund instruments with billions of new payroll contributions each month.

When you add the billions from bailed out S&L depositors spoiled by their guaranteed 15% returns, and the “cashed out” billions from forced early retirements there is little wonder the market is unjustifiably high with “built in” volatility for the foreseeable future.

Competitive forces require fund managers to take risks that were not even legal before 1992. Mutual fund’s are consistently outperformed by the “no-brainer” indexes. So much for “expertise.”

History proves that artificial highs don’t last forever.

Long Term Mutual Fund success is fiction.

However, there is One Group that are consistent winners, in Bull or Bear markets.

Up or Down, these folks win. Let’s meet them.

Creating the Cycle.

In order to understand how stock market cycles are created there is one thing we must know. A few legal insiders, trade in such large volume that they almost single handedly determine the direction of the market. They in effect own the goose. These insiders make massive amounts of money by constantly changing directions as soon as enough people follow their previous move! These traders are the pied piper’s of Wall Street. Their functional control enables these legal insiders to make millions from small percentage profits (from 2% to 10%), EVERYTIME they change directions. This constant flow of huge profits from modest percentages in BOTH directions enables the truth to be camouflaged through official explanations of the market’s Up’s and Down’s. The noise of the market place serves as a verbal smoke screen that hides the real-profit-taking activity.

Interest rates, inflation fears, international incidents, etc., mean nothing unless the Insider’s are ready to take their next profits.

Murrey Math provides a CLEAR picture that allow us to ignore all the unreliable sounds of the market place. Our single objective is to Watch what the legal insiders DO so that we can respond quickly when they change direction. We ignore what they Say! We Do what they Do!

A Closer Look At The Players And Their Relationship.

Insiders. Traders who have the power to effect the entire Market, day after day, year after year. A person who is a part of the initial offering or someone who has advanced knowledge of information that is going to significantly effect a specific stock is not who we mean as an Insider.

Long Term Investors. “Buy and hold,” The mantra of “the masses” taught to believe the only profitable direction is UP. This is the official trading rhetoric of the marketplace. It is the psychologically acceptable way to explain staying in a losing position or failure to take available profits.

The Dynamics of the Relationship.

“Buy and Hold.” This is what “The Insiders” tell the masses to do, it is not what they do! must have the majority of investors thinking long-term to make their lucrative strategy work. Long Term Investors serve two vital functions from “The Insiders” point of view. First, this basic, no-action-strategy, maintains the overall stability of the trading column. Second, Long Term Investors provide the money that the insiders take as profitsUps and Downs that take place on the top 10% of the stock column. The Insiders in both directions on the constant

This subtle orchestration must be managed very carefully. “Long Term Investors” who buy close to a downward reversal may get out when the price comes back to their entry level. Immediate losses are hard for most people to accept psychologically. These Insiders know that these sellers create a natural buying resistance which they must push through each time they come back up to their last reversal line. However, if stock prices go above the entry level before going below, the exact same losses are amazingly accepted as a “Long Term” investment strategy. “Long Term Investors” provide both the Profits and the Stability of the trading column. “The Insiders” thrive on the mental gymnastics that keep “Long Term Investors” locked in their one direction stupor.

Murrey Math discovers “A Family” who makes Money in Both Directions On Every Reversal!

We begin by personifying the Insiders as a Family who discovered a great secret. The family name is PROFIT. Each trading day will represent the life span of a family member. Everyday we WATCH what Mr. Profit does. True to their name “The Profits” make Money, ( Profits) when the market goes UP and they make Money, ( Profits) when the market goes DOWN. That’s the Family Secret . . . Profits in Both Directions! Profits on Every Reversal!

If you know the Right direction there are always profits in BOTH Directions. Which direction, is not the issue, the RIGHT direction is the only one that wins. “The Profits” can’t lose for a very simple reason, their actions determined the Direction! They move in one direction until enough buyers follow them UP or DOWN and then REVERSE, collect their PROFITS, and start another profit cycle in the opposite direction. Day after day, year after year, The Family secret has been undetected, carefully concealed by complex rhetoric and the noise of the market place. . . UNTIL . . .

T. H. Murrey discovered that words can’t hide what Math Reveals!

Mr. Murrey has used his knowledge of Universal Harmonic Rhythms Cycles to build a Computerized “Camera” that Watches, Tracks and even Anticipates “The Profits” every move! He’s got them on screen, boxed in by their own actions. Murrey Math does not affect “The Profits,” it enables you to be the first that follows them, to do what they do!

Murrey Math can be validated by “the Entire History” of the Market. It’s control group includes every investor. The consistency of the buy/sell psychology creates market rhythms that conform precisely with the mathematical laws of the Universe. EveryMurrey Math Line is a “wall of resistance” and therefore anticipates a change of direction. The Human Factors, and unpredictable decisions may move the market through “a specific” Murrey Math Line. If so, it will be observed, measured and resisted even more strongly by the next line.

The Ways of the Insiders.

Since “The Profits” do not have total control over the market, they must monitor the losses of the masses. All losses must be explainable and within acceptable limits. The masses must be kept in the game. This is accomplished several ways.

1.When too many sellers follow “the Insiders” down too quickly they may overrun an acceptable target. When this happens “The Profits” immediately “give back” some of their latest gains from selling Short by becoming significant Long buyers. They “rally” the market in order to shore up the psyche of the Long Term Investors.

2.Substantial Short Profits that wipe out months, even years, of “paper profits” must be rare, once a decade or so.

3.“The Family” is very adept at faking in one direction for part of the day and then swiftly changing directions. This action is designed to avoid detection and to reinforce the concept of random markets. It works, over and over. This is the “Michael Jordon” move.

4. New breaks, good and bad make the Insiders job much easier. News provides an official rational for movements. However, only the Insiders can decided if the news is important enough to move the market. If they don’t respond the news doesn’t matter. They can ignore big deals for days or make big deals out small ones. The news is used as vital part of the Insiders strategy, it does not control it. Remember, the only thing that matters is what they do.

5. Since Insiders constantly make money in both directions on every reversal they will always make sure there is constant movement on the top of the column.

Becoming a “Top-Gun,” Murrey Math Trader

Murrey Math’s “Two-Staged-Strategy.”

Stage One: You must be willing to accept Immediate, modest LOSSES when the Insiders reverse against any NEW position.

This is the most important point to learn because it is the most difficult. It’s all about psychological maturity. It’s about being able to view small LOSSES as an necessary part of a Winning Strategy. It is impossible to utilize Murrey Math if you won’t accept modest LOSSES as a fact of life. The Insiders determine the direction, not us. Sometimes they pull a “Michael Jordon,” they fake us out. Sometimes the Two Arena’s that aren’t predictable move against us.

These unexpected directions are not exceptions to the math cycles! They come from the microcosm, right down on the point of the movement. It’s an up close, jagged edge that can’t be seen in the Big-Picture cycle. However, if your money is on the line, where the jagged edge is being formed You PULL OUT immediately. We call Stage One, “Top-Gun” Trading.

“Top-Gun” Trading: To be a “Top-Gun” Pilot you must be able to PULL OUT of a flight pattern the instant you are in danger. REACTION TIME is the characteristic that determines success or failure. You must be able to respond automatically and instantaneously. “Top-Gun” pilots are not macho! Wisdom not recklessness WINS the War. If the enemy fools a “Top-Gun” Pilot, their Sole Objective is to ESCAPE; live to fight another day. “Top-Gun” Training schools program pilots for a proper UNEMOTIONAL, automatic response to trouble.. The decision to “Pull Out” MUST BE put on “Automatic Pilot.”

All you have to do is place a sell/stop or a buy/stop immediately behind your exposed position. These stops must be “engaged” EVERYTIME you take a new position! (If the market jumps over your stop you will be taken out at the next opportunity.)

Stage One Summarized: PULL OUT When you have a NEW position and the market moves against you! Small losses powerfully protect the profits of Stage Two.

Now that you know how to minimize inevitable losses we are ready to . . .

Stage Two: Follow the Insiders as they Make Money in Both Directions, Every timeReverses. the Market

The Law of Entry: Never enter a stock position without knowing how far Mr. Profit has walked since he last changed direction!

The Profit’s USUALLY reverse after going up THREE blocks! SOMETIMES they will get a burst of energy and go up as much as SEVEN blocks before changing directions. On RARE“New” Eight Block section of Wall St. (more about this later). occasions they will go beyond eight blocks into a

Remember, we view the microcosm of Wall St. as EIGHT blocks long. The First two blocks, (1/8 and 2/8, picture three) are on the BOTTOM of the trading range. The Last two blocks, ( 7/8 and 8/8) are at the TOP of the trading range.

Enter/Exit Rule 1#: NEVER enter a position if Mr. Profit has moved Three or More Blocks in either direction! Entering in the middle of the range (3# through 6#) is avoided if possible. (When the market is locked in this range you must be willing to accept smaller profits).

The stock you choose SHOULD BE On the BOTTOM or On the TOP of the Trading frame! If the stock is on the BOTTOM you go LONG with a Short, Sell/Stop order. If the stock is on the TOP you go Short with a Long, Buy/Stop order.

Enter/Exit Rule 2#: When your stock moves Three Blocks (3/8ths), you SELL half your position! (We anticipate based on known history!) This is SURE profit! Your objective is to MAKE MONEY Every time you take a position! Remember, we are observing, measuring and anticipating Mr. Profit!

Enter/Exit Rule 3#: If Mr. Profit goes more than the normal Three Blocks you follow him with the remaining Half of your money. When Mr. Profit PULLS OUT, we PULL OUT!

To Summarize: We Follow for Three Blocks then ANTICIPATE by Selling Half our position for Sure Profits! We reset or continue to FOLLOW with our balance to MAXIMIZENO RISK of missing the move! We reset or sale/buy stop on Mr. Profit’s current move with right behind our new position.

Reminder: Murrey Math Traders have accept the philosophy of the legal Insiders. We constantly make money on the Up’s and Down’s of the market place over a Long Period of Time. We are “the true” Long-Term Traders.

“Irrefutable Laws”: The basis of Murrey Math

The Law of Mathematics: We live in a mathematical universal absolutely controlled by mathematical law. All of the grand cycles, eclipses, stellar movements, seasons, growth/birth cycles, music etc., submit themselves to the mathematical law of cycles. Murrey Math precisely applies these immutable laws to reveal the harmonic rhythm cycles inherent in all market buying/selling activities. The result is a Visual Representation of market action.

The Law of Harmonic Rhythms: All Repeated Actions produce MOVEMENTS that create a Harmonic Rhythm Cycle or Reoccurring Pattern. The four seasons and their specific weather patterns create the basic rhythms of life. From the macrocosm to the microcosm, rhythms and patterns are everywhere. Everything that exist is a part of a pattern, components that dance to a fundamental harmonic rhythm.

The Law of Observation: By Consistent Observation these harmonic rhythms cycles or reoccurring patterns can be MEASURED and PLOTTED, (visually illustrated), with Dependable Mathematical Exactness. Aside from modest variations (Indian summers and late winters), these rhythms or patterns are very precise, with no exceptions.

The Law of Predictability: Once the Movements that create the Harmonic Rhythms or Patterns are mathematically Measured and Plotted, Continual Observation, allows SUCCESSFUL PREDICTION of their Future Direction.

Two arena’s that cbe predicted.

1. Back-room decisions.

A. Security and Exchange Commission C. Boardrooms of Trading Companies.

B. Pre-opening strategies. D. Federal Reserve Action

2. Impacting news before it happens.

These Two arena’s require every Murrey Math trader to Learn to accept Immediate, modest LOSSES when reverses go against you. (See: Top-Gun-Trading). Once these non-predictable events are activated, they immediately become predictable.

Learning to See the Market!

The Murrey Math System captures, measures and visualizes the movements of stocks. The picture of the movements enables those trained to SEE to consistently predict the probable future direction. Once your eyes have been trained to accurately SEE the past, you can SEE the future. Murray Math is DEAF to what the market says! We WATCH what the market does!GO where the market is going! We

You learn to SEE Murrey Math ONE Picture at a time!

(Use the memory keys to lock in the pictures quickly)

Murray Math is based on the mathematics of Music, (eight notes to an octave). The “Square in time,” is divided into EIGHT sections. 1/8, 2/8, 3/8, 4/8, 5/8, 6/8, 7/8 and 8/8."
If you are interested to know more, I believe you can do some search online to find out more.

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New trade using the new system

I have personally played around with this marvellous system which is my 'night vision goggles' to look for 'bobby traps' at night in forex market. The picture shows that the current trade is worth 23 pips if closed. However, I have chosed to secure 10 pips of profits and let the rest run. This system has the ability to profit from both trending and ranging markets.

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For trade week(Apr 24-28): New system testing in progress

This post should have been posted yesterday and is delayed due to technical error in blogger. I am testing a new system(created by someone else :D) to guide me to enter and exit trade better. The person has been profiting from this system for a few years. I shall give more details more this system if i also profit from this system. The 3 trades that I placed for EUR/USD has earned me abt 45 pips. One of the 3 trades , a short trade, earned me 25 pips which is shown in the picture above.

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USD/CHF shows early signs of recovery

After beling in a downtrend for the past few days, USD/CHF shows early signs of recovery. Using fibo analysis, the pair would be expected to hit the 1.2930 level by next week. Currently, the pair is resting on the 1.2778 support level. There were long spikes which pierced through the support level but failed to close below the level. It is suggested that the pair has done a fibo retracement of less than 50% before it would continue its journey up. In addition, a lot of open orders are placed on buying this pair based on information from Oanda.

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USD/CHF downtend ends, EUR/USD uptrend ends

The picture shows that the trends for both pairs has just ended. I have just earned 13 pips from EUR/USD since the profit per pip is higher than USD/CHF. Right now the 'dagger' is out from the bottom for both pairs. But there is no strong sign of new trend forming. What we can do is to follow the trend until it bends; try to pick as many durians as possible right now.

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How To Handle A String Of Losses

Quoted from http://www.currency-page.com/3684.php by Ryan Sheehy

Everybody hates to lose and unfortunately no one is blessed with the ability of foresight, therefore losses are an unavoidable part of trading. When we enter a trade we will either be right, or wrong, and even if we broke-even we'd still be classed as being wrong - as nobody enters into a trade just to break-even! When unsuccessful traders encounter a string of losses they begin to engage in self-destructive patterns that help them escape the pain they are experiencing. In this article we bring to light these self-destructive actions that can help you realize what you are doing before it takes hold of your physical health. If you find yourself already engaged in these patterns hopefully this article can help you to get you back on track as quickly as possible.

The Destructive Patterns
If you find yourself caught in a string of losses or a bad performing week/month be sure to monitor your behavior. It is during this time that you will be at your most vulnerable. You will begin to indulge in activities that at first seem harmless, but upon excessive use (or in time), begin to cause physical damage to your health. Ask yourself the following question: during during
drawdown periods do I find myself over-indulging in these activities:
> Food (especially junk food - eg. chocolate, ice-cream, chips)?
> Sex (includes viewing pornography)?
> Alcohol?
> Drugs (includes excessive smoking)?
> Laziness (find it difficult to wake up in the morning)?
> Entertainment?
All of the above taken in excessive doses can be detrimental to your own physical health (some even in small doses!). These activities above during your losing period are only covering up the pain of confronting the true issue, and your body tries to rid the emotional pain by trying to "fix" it with physical pleasures. Unfortunately it is going about it in the wrong way, so what should you do?

Firstly... REALIZE WHAT YOU ARE DOING AND STOP IT!
You need to realize what you're doing and you need to STOP doing it immediately! You can either decide to stop, or you'll be forced to stop when your body eventually breaks down and prevents you from any form of movement. It will be much more beneficial to you in the long-term if you can decide to stop *NOW*. Once you have stopped you now need to figure out a way to solve the pain - not by cutting out or neglecting it, but by staring it in the face. Bring your problems out into the light, be honest with yourself. There can be no growth without pain, you are experiencing the emotional pain, now it is time to find the error and therefore your growth.

Begin Your Review
The review process begins in two separate areas: You & Your System. Here are some checklists for you to go through to find out where the problem could lie:

"YOUR SYSTEM" CHECKLIST
> Was your system thoroughly tested prior to trading it (or paper traded if you do not have the capacity to programme your system into backtesting software)?
> Did you test with out-of-sample data?
> Do you even have a system???? If you do not, how do you even know if the method that you are trading is even profitable??
> Is your system's code correct?
> Did you over-optimize your system? (what have we discussed about over-indulging?)
> Did you paper trade your system prior to placing capital on it?
> Did you trade with a small amount of capital prior to placing the rest of your funds on it?
> Do you know the system's limitations?
> Did you properly drill your system? (see our
blog article on why I am the system designer from hell)

"YOU" CHECKLIST
> Is the current drawdown you are exhibiting with your system normal?
> Are you comfortable with your system's historical drawdown performance?
> Are you fully aware of the risks involved with your system and the instrument(s) you are trading?
> Are you trading with funds that you are comfortable risking?
> Are you relying too heavily on your performance?
> Have you set realistic goals? As you can see there are generally two areas that you need to explore: the mechanical aspect - your system - and the emotional aspect - you. Both can be responsible for making the way you feel the way you do. It will either be an error on the system's side with how the system was tested and/or programmed, or it can be your own psychological profile not being comfortable with the system's performance.

Your Answers = Change = Your Growth
What steps should we now take? Now that we have begun a corrective process where we have stopped the evil nature of our over-indulging ways to take control we should continue our "corrective nature" by invoking our findings and taking ACTION in correcting our errors. If the problem was mechanical - fix it, if the problem was emotional either go about setting up new thought patterns, or change your current system. The answers lie in whether you need to expand your knowledge in system development, or whether you need to grow emotionally as a person. Unfortunately there is no easy road, and even if there was everybody would be doing it. Hopefully this article has made you ponder over some of your behaviors during drawdown periods, be sure to keep an eye on yourself and as always take care of your body, because there's no use in making all the money in the world when you don't have the physical capacity to enjoy it.

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Trade #5: Loss of 35 pips

There is a loss of 35 pips since the dagger has not reach the bottom yet! I have to admit that I have deviated from my trading system on this trade as I was eager looking for quick profits. This trade is a good lesson of not following the system. Discipline is a must for traders who wish to see consistent profits. The picture shows that the price is in a consolidation phase before going down further or prepare for a rebound. The crossover of the EMA curves and by how much the price pierce through the EMA curve would tell us which direction the price would go.

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New Trade for USD/CHF

USD/CHF took an unexpected plunge for the start of this week. What we can do now is to predict where the downtrend would bottom out.A word of caution is that we must never try to catch a falling dagger. I used the price of 1.2815 with reference to Apr 05/06 to buy 30K units. My target is at least 25 pips for today. Let's see how many pips we can get for this trade.

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USD/JPY facing a downtrend ahead

Right now, the USD/CHF is at crossroads which require further monitoring. On the other hand, the USD/JPY is showing the sign of a downtrend. If you look at the two circles, both the doji which appeared near the resistance level(yellow line) and a following red hammer indicate that a downtrend is imminent.

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For trade week (Apr 17 - 21): USD/CHF take an unexpected plunge

The pair has been dropping at the start of the week and lower than last week's low price. However, it is still early to say that the pair would continue to drop for this week. DailyFX has the detailed reports.

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USD/CHF pending breakout

A breakout is pending since the price has been making lower highs and higher lows as seen in the picture above. This event would form a "triangle" which is one of the trend continuation patterns. This pattern implied that the next move would be in the same direction as the trend that preceded this pattern. In this case, there was a uptrend before the formation of this pattern and the triange acts as a pause in the trend before the trend goes up again. It is considered one of the good entry strategies adopted by traders in their trading systems.

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My new bets at BetOnMarkets

After my two wins at BetOnMarkets which I have posted previously, I have again placed another two bets as shown above. I have to say that we need to do some homework reading the chart patterns on a daily chart before we place any bets to avoid losing money. I would not say my bets are 100% risk-free, but the odds are in my favour. I would rather lose money on these bets than to give it to scammers who claimed that they can make money for us.

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Results of using Hedging in FX

I have done a simulation using hedging. The table above shows the difference that hedging makes in FX trading. If I have not purchased EUR/USD to hedge against USD/CHF, my loss would be -$21.6 instead of -$3.51.

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My current chart analysis of the USD/CHF

The picture briefly describes my reading of the previous price since Jan 29. My prediction is that the pair would go up in the days ahead. Let's see whether I can be a good fortune-teller. Anyway, I am prepared to hedge against any losing position using the strategy described in my previous posting.

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Hedging:How to hedge a losing position rather than closing it

After two straight losses, the topic of hedging would be an appropriate topic at this point. The strategy for hedging goes like this:

If we buy USD/CHF and the trade moves against us, we can buy EUR/USD trade that allows us to profit from the short term EUR move (offsetting losses on the USD). When the direction reverses, we close the EUR/USD trade for a profit and the USD/CHF trade will move back to break even or into profit.

This strategy is common to hedge funds companies and banks.

In addition, some traders would use cover sell or cover buy as another hedging move. For example, traders would trade the same currency pair instead of another currency pair. In other words, if they bought USD/CHF previously and the trade moved against them, they would sell USD/CHF as another trade instead of buy EUR/USD trade to cover losses.

Previously I have only opened one trade at a time and results had shown that one trade is not enough and hedging is needed in choppy situations. Since our risk capital is small, the maximum open trades allowed would be only 2 instead of 3 or 4. Some traders with sufficient capital open 3 or 4 trades at a time.

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Off the topic: The AdSense Formula

Some may find this topic interesting...I also don't know how much I can get with Adsense :D

Quoted from Adsense Formula:

The AdSense Formula
There's no secret to making money with AdSense

I often get asked what the secret is to making money with Google's AdSense program. This often comes from people who are dreaming of setting up websites chock full of high-paying keywords for particular niche subjects and then sitting back and watching the money roll in. "What's the magic formula?" they ask me. If they're non-technical, I point them straight to my book, Make Easy Money with Google, and assure them that they'll learn everything they need from it. They may think it's hard, but it's not.

But what about the technical people? By this I mean the people who've already set up a blog or website, who have registered domain names, who are comfortable with basic Internet terminology and concepts. What is the "AdSense formula"?

The only AdSense formula that you need to know is this:

earnings = number of clicks * average price per click

This is what I call the Fundamental AdSense Formula because you can derive almost every AdSense "secret" directly or indirectly from this formula. Do you want to earn more with AdSense? You have two ways of doing it:

1. Increase the number of clicks, and/or

2. Increase the average price per click

Your earnings will only go up if you do one or the other, and ideally both. It's an obvious formula, yes, but it's amazing how many people lose sight of it in their quest for increased AdSense earnings.

Increasing the Number of AdSense Clicks

Increasing the number of times the ads on your site or blog are clicked is the most obvious strategy. There are two general strategies you can follow:

1. Increase the traffic to the site, and/or

2. Adjust the ads to make them more "clickable"

Getting traffic is hard and takes time, so don't look at it as a quick fix. The best way to get traffic is to provide useful, unique content and to rank highly in search engine rankings for keywords related to that content. In other words, use standard search engine optimization techniques. DO NOT "buy" traffic or use "link farms" or other dubious techniques. Other tips for getting traffic:

1. Publish articles, even free ones, with links back to your site.

2. Include a link to your site in the signature at the bottom of your emails or in any forum postings you make (if the forum allows it).

3. Participate in forums/groups related to the content of your site or blog. The key is to participate, not lurk, and don't just post messages promoting your site.

4. Add comments (relevant ones only, please) to other blogs, you can usually link back to yours. (This won't help your search engine rankings, but it may allow others who are reading those comments to find your own site.)

5. Syndicate your content (trivial if you have a blog) and make sure that the content is registered with syndication aggregators.

6. List your site in relevant directories.

Adjusting the ads is something you can do almost immediately:

1. Position the ads on the page in order to make them more noticeable. Google even publishes a helpful heat map (see https://www.google.com/support/adsense/bin/static.py?page=tips.html ) for AdSense publishers.

2. Choose the best AdSense ad format that works for your site.

3. Change the ad colors either to make the ads blend in with your site or to make them stand out. Again, it varies depending on the site.

Whatever you do, DO NOT ENTICE VISITORS TO CLICK THE ADS. Google is very strict about this, see the AdSense program policies (found at https://www.google.com/adsense/policies ) for the details.

Increasing the Average AdSense Price Per Click

Increasing the average price per click you receive from AdSense is the other strategy for increasing your overall AdSense earnings. You can do this by:

1. Carefully targeting your content, and/or

2. Filtering out and avoiding low-paying ads

Content targeting isn't just about creating relevant, unique content. It's also making sure that that content is written to target the higher-paying keywords associated with a given topic. This means:

1. Figuring out which keyword variations for that topic pay more. Often the more specialized variations and phrases pay more than the "generic" terms.

2. Ensuring that the keyword density of the content favors the higher-paying keyword variations. See http://www.MakeEasyMoneyWithGoogle.com/vioxx-lawsuit.html for an example of well-targeted ads due to appropriate keyword density.

And to reduce the occurrence of lower-paying ads, consider these two strategies:

1. Use AdSense's competitive filter mechanism to screen out the ads that you don't want.

2. Show fewer ads on a page. The fewer ads you show, the more the higher-paying ads get displayed and clicked.

Many publishers also report that their earnings increase if they remove ads completely from pages with few or no clicks. Again, the "less is more" strategy favors the higher-paying ads.

There's No Magic

As you can see, there's no magic involved to increasing your AdSense earnings. The Fundamental AdSense Formula is easy to understand, but that doesn't mean it's easy to apply the formula. It takes time and effort to do it, just like most things.

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Trade #4: Loss of 18 pips

Sad to say, despite my previous technical analysis of the chart patterns that prompted me to place a sell order, the price went 180 degrees. As you can see in the picture, I have been whipsawed. It is better for me to take a break to monitor the choppy situation and resume trading when the situation permits. Technical analysis can only help us ascertain the direction of the future price based on the current chart patterns and formations that we make out from previous prices. We can never know how the future price would turn out since we are not God.


The only consolation in this trade is that I have the discipline to stick to the same stop-limit level. Had I pulled back the level further, I would have incurred higher losses.

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Trade #3: Loss of 18 pips

Unfortunately, there is a trend change for USD/CHF which resulted in the loss of 18 pips. For USD/CHF, they have made lower highs and lower lows while EUR/USD have made higher highs and higher lows. A sell order of 20,000 units instead of buy order is placed for USD/CHF. A brief technical analysis for both pairs is explained on the picture above.

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New Trade

The picture shows that the new trade is entered at the Fibo 50% indicated by the green dotted line. Since the price has pulled back to Fibo 50% level previously, it would probably pull back to the same level on the next correction. Let's see how many pips we can get from this trade. At the this point, there is no pip in profit. Double bottom indicates that there could be an uptrend reversal signal and it acts as a support line for the price.

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Calendar

The picture shows that the price has taken a correction of slightly below Fib 50% level after reaching the week high of 1.3060. Fortunately, I have placed my stop-limit level(the red spot) between 38.2% and 50% just in case there is a sudden reversal of trend. My inital prediction was that the price would pull back to 38.2% before rallying up.

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Update #2 of current trade

The picture above is a brief commentary of the bullish process. Good news is that EUR/USD fails to maintain the support level of 1.21. Profit of 30 pips is secured and we can do now is to let profits run. I am hoping that the pair can reach my target of 1.3093 which is a profit of 100 pips.

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Euro holds above $1.21 after US jobs data

Quoted from the Financial Times

"The euro held just above $1.21, having been hit on Friday when the latest employment data in the US suggested further monetary tightening which would support the dollar.

News of 211,000 new jobs in the US in March strengthened expectations the Federal Reserve could raise interest rates above 5 per cent from their current 4.75 per cent level. The dollar gained around 1 per cent on the euro on Friday.

The euro prior to the jobs data had climbed to a seven month high above $1.23 as repeated strong eurozone economic data bolstered expectations of tightening by the European Central Bank. It slipped 1 cent against the dollar on Thursday however when Jean-Claude Trichet, ECB president, said the market’s expectation of a quarter-point rate rise in May did not match the central bank’s thinking.

“We maintain that sentiment looks to recover above $1.2200 to retest towards key resistance at $1.2325/33 (January 2006 and recent April high) this week,” Commerzbank Corporates and Markets analyst Andy Hart said.

The euro held against the dollar at $1.2114 and climbed 0.6 per cent against the yen to Y143.79.
The dollar gained 0.3 per cent against the Japanese currency to Y118.41 but dropped 0.3 per cent on sterling to $1.7461. The pound rose 0.3 per cent to £0.6936 on the single currency."

The Euro needs to drop below the psychologically important level of $1.21 in order for the USD/CHF to have more space to grow. If not, we would not be able to hit the target of at least 40 pips in profits in return for a risk of 20 pips according to the risk/reward ratio of 1:2.

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Update of the current trade

From the picture above, the price has rallied up to the price of 1.3010. The bulk of the increase in price would come from the overlap of the US market hours and London market hours which is between GMT 1pm and 5pm. Equivalent Singapore time would be between 9pm to 1am. Hope that there would not be a trend reversal during this 'heavenly' period :). There is a profit of 18 pips at the point of typing.

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For Trade Week (10 Apr - 14 Apr)

How come the pair is dropping when the trend is bullish? Right now, they are having a correction or retracement. To technical analysts, they are having a Fibonacci retracement. This event is perfectly normal and it applies to all financial markets. I have placed a buy order of 20,000 units at 1.2993 which is a few pips above the 200-EMA curve average price of 1.2989. 200-EMA curve determines, to a large extent, the trend is bullish or bearish. If the price is above the 200-EMA average, the trend is considered bullish. If the price falls below 200-EMA average, the trend is bearish. Should the price close at least 10 pips below the 200-EMA curve, there could be a trend reversal. Let's see how many pips we can make from this trade.

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USD/CHF remains bullish

From the picture, the red candlestick failed to closed below the 21-EMA curve(may not be clearly visible in the picture) and that signified that the trend could remain bullish. The blue candlestick which closed above the 144-EMA curve confirmed the trend. We shall look for a trade entry next week.

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Updates on my bets at BetOnMarkets.com

Currently I have placed two bets at BetOnMarkets as shown in the picture above. Time will tell whether I can claim the payouts. The returns are high and hence the risk for buying the bets are worthwhile. For those who are actively engaged with HYIP developments, BOM is considered a reliable hyip i.e. they are not a scam. People who do not know a thing about FX may find BOM attractive. :)

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Trade #1: Profit of 30 pips

There is a profit of 30 pips for the USD/CHF pair bought yesterday. The unexpected reversal(as shown by the long red candlestick in the picture) in trend caused the stop-loss limit of 1.2900 to be exceeded. It's a pity that I do not close the trade at 1.2950 which translated into another 50 more pips in profits. However, we shall wait for another setup to go for big profits. Overall, the trend remains bullish and the breakout could be fake. We shall know the trend once the subsequent candlesticks managed to close above the 144-EMA curve which is the current resistance level for the pair.

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The purpose of FXpress

I am still a novice FX trader. The purpose of FXpress is to track my FX trading activity and show readers how leveraged funds coupled with effective risk management and good technical analysis can secure above average returns. I will mainly focus on USD/CHF pair because it is probably the best trading pair in the market today due to its high volatility and liquidity.
I would also focus on EUR/USD since it shares a high negative correlation with USD/CHF which means that when EUR/USD goes down, USD/CHF would go up. BTW, currency pairs do not move in isolation.

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For Trade Week (3 Apr - 7 Apr)

This is the first trade update for this week. Have done some finetuning to my trading system so that it can be more responsive to sudden reversals in trend. Started a long trade for 9780 units of USD/CHF pair. There is an initial profit of 27 pips for this pair. USD/CHF has been in downtrend for a couple of days before a breakout (shown as the long blue stick with a upper long tail) marked the end of the downtrend. Let's see how many pips can be earned from this trade.

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