The other day I bought a coffee from a local Seattle coffee shop. Perhaps you have heard of them, Starbucks? The last thing I expected from my overpriced espresso and water was sage trading advice but there it was, printed on the side of the cup. Starbucks has printed quotes on their cups for a while now but this quote in particular caught my attention. It is about commitment, which I believe is a core issue among many struggling traders. Here is the quote:

The irony of commitment is that it’s deeply liberating — in work, in play, in love. The act frees you from the tyranny of your internal critic, from the fear that likes to dress itself up and parade around as rational hesitation. To commit is to remove your head as the barrier to your life.

– Anne Morriss

Since I started blogging the two largest issues I see among struggling traders is their inability to commit to either a trading methodology or simply being a trader at all. I think Anne’s quote cuts to the heart of the matter for both issues. Commitment to a trading methodology liberates a trader from constantly seeking the Holy Grail while commitment to being a trader liberates a person from the fear of either success or failure. I want to explore these two issues in today’s post and perhaps it will uncover some hidden obstacles you may not realize are affecting your success as a trader.

I personally do not believe trading is a hard profession to learn. Trading to one’s own advantage is an instinctual process for everyone so you just have to accept currency trading for what it is. Think about it for a moment, any kid could tell you how to trade baseball cards and make a profit but many traders seem to have hard time thinking about currency trading in the same context. Think about how you would buy or sell your home, a car or find a good deal on chicken legs for your weekend barbecue. Trading is simply a process of buying something when you believe it is undervalued and selling it when you have made an adequate profit. Unfortunately many people still confuse trading money with a complex science which requires years of study, powerful mathematical indicators and a gigantic brain in order to make a profit. I actually had one trader tell me he honestly thought he was too stupid to become a trader. Fortunately while learning to identify areas on a chart where currency is under or overvalued with supply and demand takes some practice it isn’t rocket science. It just takes commitment.

Commitment to being a trader means you’re willing to accept the idea that trading isn’t a perfect science and losses will occur. If you don’t buy my thoughts on supply and demand that is fine, you can use your indicator of choice but you must commit to actually trading the live markets! It is amazing to me how many people use back testing and constant analysis as an excuse to avoid actually taking a trade. You can’t optimize every loss out of a trading system and if you don’t commit to the system you’ll never make a profit with it anyway. If you want to be an analyst then fine but if you want to make money, commit to being a trader and start pulling the trigger.

My favorite part of Anne’s quote is her thoughts on fear. For all the talk about greed getting the best of traders I believe fear crushes more traders than greed could ever hope to. You always hear stories about the trader who earned a zillion dollars only to lose it all in one greedy trade but you never hear about the trader who fails to earn a single dollar because they are paralyzed by fear. People fear failure as much as they fear success whether it is an issue of pride or financial gain. The irony for many struggling traders I talk with is their trading systems are sound but they constantly hesitate to pull the trigger because they haven’t truly committed to their trading system. Without commitment traders leave themselves open to personal attacks about missing an “obvious” trade or taking a “dumb” loss. Commitment to your trading methodology will free “you from the tyranny of your internal critic” and allow you to take trades with confidence.

If any of this sounds familiar to you I submit the following advice. First commit today to being a trader, not a back tester or an analyst but a trader. Second, stop visiting internet forums. Many of those people are stuck in a loop of testing, trading and testing again; they haven’t committed themselves to being anything but someone who is searching for a better mouse trap and will waste your time. Third, learn how to read price action. Supply and demand is the only driver of price, indicators do not predict anything. I think the suggestion of indicators being a “self fulfilling prophecy” is misleading since one thousand traders can look at an indicator one thousand difference ways. Finally commit to spending time with the live markets. You’ll be amazed how quickly trading instincts develop after watching and trading live price action on one or two currency pairs for a few weeks. Remember, everything looks rosy on a back test but the real experience is gained only by working with the live market.

I am traveling this week but I’ll be back in a few days with some more videos to discuss supply and demand based trading. Don’t forget about the Fed statement tomorrow (Wednesday)! I hope you have a great trading week!

Ryan

Howdy Folks!

I’ve dusted off my microphone and decided it was time to start the weekly video update again! Today’s video discusses the one, lonely trade I took this week along with some more thoughts on identifying supply and demand level trading opportunities. Post your comments on what you think, I’m looking to make this video stuff as useful as possible for you!

I hope you have a great weekend!

Ryan

Howdy Folks!

It was another fantastic day on the lake, sunny and 70 degrees! I hope your all doing well in your corner of world today! Trading is rather quite for me this evening. There are no trade setups I like and I’m already in a USD/CAD long so I guess we wait for the fundamentals to play out Thursday and Friday and see where we end up. Yesterday’s thoughts on USD/JPY turned out to be too conservative and my entry orders were never picked up. Instead of trade setups today I thought I’d respond to a comment I saw on another post I wrote.

My entire trading methodology centers around three things; price action, supply and demand and fundamentals. The currency market is a floating point exchange which means it’s price is determined by the underlying forces of supply and demand. The market will move only when supply and demand are so unbalanced market makers must move the price in order to fill their orders, it has nothing to do with indicators. Reading price action is subjective and a skill that takes time to develop but I believe anybody with a little guidance and a lot of commitment can learn to trade on price alone. Today’s question comes from “Another Brian” who wrote the following comment:

“I have a question. This post has a chart with a “50 pips support zone” I’m wondering why 50 and not 10, or the height of the lowest low candle. Are you looking for the congested area?”

He is talking about this chart:

The short answer is yes, I’m looking for the congestion area ahead of the breakout. The reason I selected a 50 pip demand level in this case is due to the choppy candles around the pivot of $98.25 / .45. As the currency pair was rejected from $98.13 it was choppy up to $98.62 before breaking free of selling pressure and moving higher. When I look for supply and demand level trades I’m looking for the area immediately before a large breakout occurred, that becomes my supply or demand level. That is the “zone” which the battle between supply and demand ultimately became imbalanced enough to drive the price away from that area.  Using the old axiom of demand (support) becoming supply (resistance) I assume that as price enters that zone again the imbalance will emerge again offering a low risk entry point. This methodology can be used on any currency with any time frame. You’ll see me use two indicators to visually depict trend but all of my entries are planned on price action alone, it is all that matters.

Why didn’t I market it up with a smaller supply zone and smaller stop required? You want to give yourself the best chance of entering the market with the lowest risk but if you go too low you’ll miss alot of trades. Supply and demand levels are rarely clean so you need to give the market room to manuver. If you want a smaller stop, by all means drop the order at $98.25 on this chart with a stop below $98.13, there is nothing wrong with that. I just prefer a little more room.

It is not a perfect science, it’s somewhat messy but it is the only reason price moves. With a little practice you’ll get the hang of it.  While your learning I recommend trading only one currency pair, learn it’s habits and observe how it performs around supply and demand levels until you can trade it in your sleep. Only then should yo consider adding more pairs to your watch list. Besides, if you can’t make a profit trading one pair what makes you think you ready to trade ten? Trading is a profession, learn what makes the market work and be patient during your apprenticeship, I promise you will enjoy the journey.

I hope that answered your question “Another Brian”, best of luck through the end of the trading week!

Ryan

Howdy Folks,

First, thank you for being so patient with me and my stale blog while I wrote my book. I’m finishing it up now and getting back into the swing of things.  I appreciate everyone’s comments and suggestions as well. I’m really looking forward to having this work published. I will keep you updated on it’s progress.

Also, before I get started I want to mention I posted my thoughts on USD/CAD over on my FX Street blog. I invite you to read them by clicking here:

Tonight the USD/JPY is on my watch list for the next 48 hours. This pair staged a fantastic rally last week and given what happened in today’s equity market I think the risk averse crowd is itching for a reason to rally this again. Tonight we see USD/JPY floating just above what should become support from last week’s rally if the old axiom of resistance forming support proves true again with some trend indicators pointing to a move higher.

Fundamentally, the sentiment may shift to Dollar over the next 48 hours. Japan’s core machinery orders posted a horrible number tonight down 5.4% versus an expected 0.1% gain, ouch. Japan will also see GDP data tomorrow night (Wednesday in the U.S.) but that is the last of Japan’s fundamental punch for the week. Dollar on the other hand will see trade balance, retail sales and unemployment data over the next 48 hours with consumer sentiment on Friday.

Should the data continue a positive streak I expect to see another rally in the equity markets. Today’s market staged a vicious fourth quarter rally on mere commentary from Paul Krugman. Kathy Lien wrote in today’s FX360 column:

It seems that markets only needed one small catalyst to overturn bearish control. Today it came in the form of economist Paul Krugman’s comments that the economy is on pace to recovery, and should breach recessionary bounds by September. His comments reaffirm what everyone desperately wants to believe. However, today’s ending rise does mask some of the dour events that took place today. Today’s trading may present the new norm, as the masses of conflicting indicators manage to spike anxiety and volatility.

-Kathy Lien

http://www.fx360.com/commentary/kathy/1362/us-dollar-market-swings.aspx#headline04

I agree with Kathy. Assuming the news is consistently positive we may end the week higher on the equity side and Dollar may win out over the next 72 hours. From a technical perspective, the pair is testing a serious demand level built in from last week’s rally. Supply and demand traders will be watching the demand level between $97 and $97.50 for signs it will hold. Trending indicators including the Remora (modified HMA) that I watch and the bollinger bands suggest this pair may be starting a new up trend as well.

Here are today’s charts…

USD/JPY Daily

USD/JPY Daily (Remora)

USD/JPY 240

Best of luck, and more tomorrow! It’s good to be back!

Ryan

MPORTANT NOTICE: These comments are for information purposes only. My opinions or other information contained in this post do not constitute investment advice. It should not be understood as a direct recommendation to buy or sell any currency contract or other investment vehicle. Forex trading involves substantial risk of loss and is not suitable for all investors. It is quite possible you will lose all your risk capital on one or many really dumb trades if you don’t protect it with the appropriate risk measures. You could end up living in a van down by the river, and if you do it is not my fault you dig?

Howdy folks,

I’m closer to finishing the book and trying to get back into the swing of blogging again. Tonight I have only one interesting trade idea which I posted over on my FX Street blog. Since I only have one long term trade idea today I’m going to take the lazy way out and suggest you visit my FX street blog if your interested:

http://blogs.fxstreet.com/dayjobtrader/

Hope your having a great trading week thus far!

Ryan

Today was Memorial Day in the United States. I realize today commemorates those who have given their lives in the service of our nation but I also want to thank the men and women of the United States military who currently serve for doing whatever job our civilian leadership has asked them to do. Regardless of where you fall politically the individual members of our military deserve respect, admiration and our thanks. I don’t care if your a file clerk at Lackland or strapped into a U-2 flying at the edge of space. Thank you for your service to our country and your dedication to a constitution which allows a simple currency trader to pontificate to anyone who will listen. I haven’t done nearly the amount of traveling I’d like to but the countries I have visited solidify just how lucky I am to have been born on a piece of dirt called as the United States of America. Thank you for all that you do, know that you are loved and in our prayers.

If you have thought about doing something to support our troops why not take this Memorial Day as an opportunity to reach out and volunteer? Our military could use the support of every American citizen and there are a number of groups you could help out with. Here are a few links to get you started:

http://www.anysoldier.com/

http://www.opgratitude.com/

http://www.aircompassionforveterans.org/

http://www.operationhomefront.com/

http://www.uso.com/

Or maybe you could just shake the hand of the next solider you see traveling through our nations airports. Tell them personally how much you appreciate their service and the time they have sacrificed away from their families.

Photo Credit: Army.mil

Something lighter to banter about today. For all the talk about efficient markets and the “randomness of price” take a giant gander at where the EUR/USD closed today, $1.40 on the nose!

GBP/USD closed at $1.5905

USD/CAD closed at $1.1200

You’re not going to convince me this is random price action. I can see the interbank traders closing their books on the “double zeros” with cold beer, golf and the Memorial Day weekend on their mind.

Randomness of price…sure.

Have a great Memorial Day weekend!

-R

Following the giant sell off last Friday I went searching for some gap trade opportunities on Sunday night. I’m still hacked off I didn’t sell USD/JPY when it opened with an up gap in favor of the down trend. I can hear myself saying $98.74 is the supply level to sell, good grief. If I could trade a day late I’d be flying a Gulfstream G-550 by now.

I did manage to harvest a few pips off the USD/CHF as it gaped lower. Anytime I get gap lower after a long period of selling it sets up a long trade. I liked the hammer it formed and I wanted to trade it long for a few hours to see what I could get. I ended up holding it overnight and after a brief scare managed to get some pips out of it. This was not the cleanest trade I’ve ever made but profit is profit.

Historically I haven’t seen gaps as frequently as I have now with the recent volatility however when they appear a gap can offer a great trade on Sunday for those of you who work day jobs.

Overall a decent start to the week and I hope you’re off to a good start as well!

We have some good fundamental data on tap this week including Trade and Retail Sales data. I’m particularly interested in the Retail numbers since everything else in the U.S. seems to be on the stabilization path. The expectation is a big fat 0% but if it shocks significantly in either direction we could see some fun price action in the risk pairs such as AUD/USD or USD/JPY.

Best of luck,

Ryan

I haven’t posted in a while simply because I’ve been far too busy trading, writing my book and maintaining a few posts over at FX Street. Fortunately the book is close to being done and I’ll be able to finally bring this blog up to date!

This week something happened that I had to share because I think it is an important lesson you can learn from. I go out of my way to blog my trading blunders with the goal of making you a better trader so I hope it is working!

I’m a discretionary trader which means I do not trade a set of rules governing my entry or exit from the market but it doesn’t mean I trade without a plan. I trade a trend based methodology many of you know as “The Remora” which is a core topic in my upcoming book. The problem with discretionary trading is without black and white entry rules sometimes you can seriously over think a trade and in my experience cleverness is often not rewarded to your liking.

The Trade Setup

AUD/USD has been on a strong trend since the 28th of April and had just closed down forming a “pull back” day within an uptrend. These “pull back” days are what I look for when considering whether or not to join an existing trend so it put me on alert for a potential long trade.

The Trade Entry

With the bias to go long based on trend I started looking for fundamental reasons to back the trade. The evening of the 5th I got my wish when the Australian retail sales report posted a 2.2% gain over an expected .5% gain. The initial reaction was a sell off smack into a support area which offered an excellent opportunity to buy the pair and join the trend on the back of positive fundamental news.

The Clever Mistake

Even with everything going my way I convinced myself when London opened they would test the support level again and I dropped an order at $0.7337 instead of buying at market. I wanted to keep risk low and figured that support level would be probed again but I was dead wrong. The market never dropped and my long order was never picked up. For the sake of risking another twenty pips I missed out on 300 pips as the AUD/USD rallied for three straight days closing today at $0.7679.

I could have easily reduced my position size, increased my stop loss and bought at market but I tried to be clever and I missed out. I knew the trend was strong, I knew the fundamentals were strong, I knew the support layer had been tested but I was convinced of something that hadn’t even happened yet. Talk about a rookie mistake!

The moral of this story is that you can only trade on what you know and not make assumptions about what you think you know. It doesn’t get any better than this trade setup and when it happens again make sure you just pull the trigger!

I hope you’re making a killing in these crazy markets! Have a great weekend!

Best of luck,

Ryan

Quite a mixed bag on the Dow Jones Industrial Average today. We saw a late day rally fueled by some positive data out of the Fed and American Express among others ultimately ending up 109 points. It appears the positive outlook continues into the Asian markets as the Nikkei is up 253 points at the time of writing this post.  A positive outlook may help fuel the carry trade through the rest of the week. Combined with a juicy daily chart hammer along support I’m considering a small long in USD/JPY over the next few days. The U.S. economic risk event calendar is rather sparse tomorrow (Thursday) however we are still awaiting the results of the U.S. bank stress tests which could be a game changer, who knows how the market will react to that news.

Technically speaking, the hammer corresponds with a resistance layer that USD/JPY broke through a couple of weeks ago but had not tested as support until today. Looking at the hourly chart, the demand level appears to be between $98.60 and $98.10. I’ll be watching for an opportunity to go long as price moves in and out, around that level while tomorrow plays out. If I do get long, I’m going to shoot for a profit target around $100.71.

How Much Does a Sam Adams Cost in Washington?

I was reading comments tonight and saw Radek had asked:

So how much is a Sam Adams there in your place?

Very good question, unfortunately I don’t know the answer. I buy Sam Adams when the seasonal cases come out at Costco. I don’t recall the price of a case but their Winter brews are my favorite. Perhaps I should change my donation link to say “Buy Ryan a Case of Sam Adams”!

There are only two beers my Wife and I are fond of. One is Sam Adams and the other is a local brew named Mac & Jack’s which unfortunately can’t be bought retail unless you want a keg so we are stuck with ordering it at local restaurants.

Best of luck,

Ryan