EURCAD

With price at the neckline of our double bottom and at the same time the resistance of the ascending channel. Our vigilance is called for as to whether price will break out or be resisted back to the support of the triangle.

SUMMARY.

This is an important price confluence area and we will follow price on a breakout or a reversion of price back to the support of the triangle.


DISCLAIMER: This analysis is for educational and general information only and not advice or a recommendation to trade or invest. Do your own research/analysis and don’t blindly enter trades based on the analysis.


USDCAD

This image has an empty alt attribute; its file name is EURNZD-WEEKLY-ANALYSIS..png

Within this prolonged descending channel we have a bearish engulfing right at the resistance of the channel. This is a potential reversal from the small rally.

SUMMARY.

A bearish indication within a downtrend is trading along the trend. Open lower time frames for further price action confirmation.


Disclaimer: This analysis is for educational and general information only and not advice or a recommendation to trade or invest. Do your own research/analysis and don’t blindly enter trades based on the analysis.

EURNZD

Four months of price moving bearish within a descending channel gives us strong indication of bear control. Price is approaching the upper trend line with indecision candles which is not a good sign of bullish momentum.

SUMMARY.

Watch for reversal candlestick formation at the channel’s resistance to confirm continuation of a down move. However, if price breaks out on the upside which is a likely scenario of channel breakouts, we follow price as usual.


Disclaimer: This analysis is for educational and general information only and not advice or a recommendation to trade or invest. Do your own research/analysis and don’t blindly enter trades based on the analysis.


GBPCHF

This image has an empty alt attribute; its file name is AUDNZD-15TH-19TH..png

An ascending triangle breaking out below is a good sign for the bears. However, preventing our certainty is the near term support level.

SUMMARY.

Price may rebound and rally back to the triangle at the support level or breakout further below the level and resume it’s downtrend. We continue to monitor the price in order to react accurately.

AUDNZD

Upon resistance from the descending channel, price formed a weekly pin bar followed by a confirmation candle.

SUMMARY.

Bears have strongly begun showing their hand.Time combined with price action will guide us to see how much further their power will be sustained.


Disclaimer: This analysis is for educational and general information only and not advice or a recommendation to trade or invest. Do your own research/analysis and don’t blindly enter trades based on the analysis.

Quick question. When was the last time you came across something so profound, a golden nugget of wisdom, so real that you couldn’t keep your calm? Fighting the surging urge to pick your phone and ring your best friend about it. You somehow manage to hold it together, but it keeps replaying in your mind like a beautiful melody. You live and breathe it for the next three days, or even a week.

Brevity is the soul of wit’, is a statement that has always resonated with what I do and how I approach life in general. On this particular day, I find myself pondering on it so much that I search through the streets of my mind. True to my self-inflicted nuance, I come across an even more profound ideal, a concept I stumbled upon many years back. Have you heard of ‘The Pareto Principle’? Even a more significant question is how does it relate to Forex trading, and life in general?

The pareto principle is named after an Italian Economist – Vilfredo Pareto, who noted the 80/20 connection while at the university back in 1896. It states that for many events, roughly 80 percent of the effects come from 20 percent of the causes. Pareto observed that in most occasions/events/projects, 80 percent of the output from a given situation or system is determined by 20 percent of the input. A quick example would be the analogy that 20% of employees in an institution produce 80% of the company’s results. Breathtaking, right? Occurred to me more like the case of being busy vs being productive.

There are fewer capacities in life that the Pareto Principle applies more than in Forex trading. Less is more in trading. If there was one principle or gospel that I would preach all day to every new trader, that statement would top my sermon pointers. Quoting the legendary trader, Nial Fuller – “Most Traders do not make money in the markets over the long-run for one simple reason: They trade way too much.” Needless to explain, professional traders only place trades that meet the rules in their trading plan. The same way you can’t go hitting on every beautiful girl in the party, hence you end up winning none. World’s most renowned trading legends such as Jesse Livermore and George Soros have been striking for their spectacular precision of picking a few best stocks that only match their criteria as outlined in their trading plan .

CFDs trading is a question of fewer quality trades over quantity trades. Professional traders know that there is a thin line between taking many trades and overtrading. The latter has been one of the biggest pitfalls for most beginning traders. The ultimate ‘holy grail’ of Forex/indices/stocks trading lies in the true apprehension and application of the Pareto Principle, in that less is more. It’s a game of percentages and risk to reward ratios. Numbers don’t lie. Let’s work out a practical scenario to prove this analogy.

SCENARIO ONE: Trader A takes a total of 10 trades. His rules allow him to risk only 1% of his capital per trade, with a target of 2R. Meaning he is risking 1% to make 2%.

Turns out that out of the 10 trades, he wins 4 trades, and loses 6 trades.

Means, His profits = 4 trades x 2% profits = 8%

         His losses = 6 trades x 1% loss = 6%

Here, we find out that despite experiencing more losing trades (6) than winning trades (4), Trader A is still profitable, 2% profit addition to his portfolio.

SCENARIO TWO: Trader B takes a total of 20 trades. He doesn’t have clear-cut guiding rules for his risk exposure and winning targets.

Turns out that out of the 20 trades, he wins 12 trades, and loses 8 trades.

However, he lost more in his few losing trades than he made in his many winning trades:

       Means, His profits = 12 trades x 1% profits = 12%

                  His losses = 8 trades x 2% loss = 16%

Here, we find that despite having a higher number of trades, and winning a higher percentage of his trades, Trader B still ends up with a negative 4% on his portfolio. Not to mention he encountered more costs from his broker through spread & overnight swap charges on his many trades. And the mental strain that comes with always watching and worrying about the outcomes of the many running trades. 

Not called for, not worth it.

This my friends, is a classic example of a case of quality over quantity when it comes to trading. The above two scenarios therefore approves of the practicability of the Pareto Principle in Forex trading. If Vilfredo Pareto is ever proven wrong on his principle in all other spheres of life, then he will have won it with Forex trading. This is what it takes to be a profitable trader

It’s at this point that we call it a day with today’s hangout. ‘Brevity is the soul of wit’, remember? 🙂 

NZDCAD

The double bottom occurrence is a price pattern indicative of bullish momentum upon a breakout on the upside.

SUMMARY.

We patiently wait for price action to guide on whether to follow price after the breakout or rebound downwards upon being resisted at the neckline.


Disclaimer: This analysis is for educational and general information only and not advice or a recommendation to trade or invest. Do your own research/analysis and don’t blindly enter trades based on the analysis.

USDCAD

After a period of consolidation into what we refer to as a symmetrical triangle, price broke out on the downside.

SUMMARY.

This is a clear and good indication of bear power coming into the market. We closely monitor this pair to see how long this price waterfall will last and key areas to join in the move


Disclaimer: This analysis is for educational and general information only and not advice or a recommendation to trade or invest. Do your own research/analysis and don’t blindly enter trades based on the analysis.

CHFJPY

Price has been on an uptrend looking at the weekly time frame with a retracement in the pattern of a descending channel on the daily time frame.

SUMMARY.

Following the breakout of the descending channel to the upside, very high chances that the bulls may continue pushing price higher.


Disclaimer: This analysis is for educational and general information only and not advice or a recommendation to trade or invest. Do your own research/analysis and don’t blindly enter trades based on the analysis.

In the legal profession, lawyers and advocates are always guided by one major ethical code throughout their practice, whether in the courts or their outdoor legal engagements; they must never disclose or discuss details shared to them by their clients in confidence with outside parties. This practice is commonly referred to as ‘The Rule of Confidentiality.’ With this code of practice, any details shared by a lawyer in a court of law that was disclosed to them in confidence by their clients is dismissible and can be rendered futile by the presiding judge/advocate. This rule holds grounds throughout their practice unless the courts or the Law otherwise demands or provides grounds strong enough to necessitate the lawyer/advocate to disclose such confidential information.

That’s too much legal talk for a Forex & CFD’s trading article, right? All this will make total sense in a moment. Let’s call it ‘the preempting before the sentence.’

The rule of information confidentiality applies equally for the esteemed medical profession. No doctor or medical practitioner is allowed to discuss their patients’ diagnosis and treatment status with their colleagues or spouses. The ‘Confidentiality Rule’ holds grounds and guides their professional practice, the same way as the legal profession.It is with this resonance that as professional Forex and CFD’s traders, we must as well uphold this healthy code of ethical practice when going about our trading activities, and to stay truthful to the Rule of Confidentiality. Never at any point and time should a trader share or make public their open/running trades to their friends or to the public. The fact that isn’t an oversight body to keep us in-check in our adherence to this rule must be our very reason to develop self-engraved discipline if we are to achieve meaningful and long term trading success. There are very few professions, not even the legal nor the medical profession, where the rule of confidentiality has ever been so imperative to the welfare and value-based performance than in the trading business. The ability to develop strong self-restraint and discipline among traders cannot be overstated. This principle falls on the significance of upholding the right trading psychology as a strategic ingredient in achieving long term successful trading.

The main reasoning behind this rule is that once a trader makes their trades known to their peers or to the public, or any other party for that matter, (even worse to their spouses) is that it invites the emotional burden of ego and pride, driven by the desire ‘to be right’. Human beings possess an inborn urge to be right. Over the years, society has condemned failure and losses as if they define your ultimate destiny. On the contrary, it is the challenges, failures, and losses we encounter in life that grow our resilience and grit to break free and make a mark in achieving success. As a rule of the thumb, anyone who doesn’t experience failure or losses, whether in trading or in life, is either not trying at all or not doing enough, and is therefore self-limiting.

At Fourthstreet Consultants, we don’t discuss or publicize our live trades. This only causes one to grow the ‘need’ to convince the other party of how ‘right’ they were. Consequently, this mounts their ego and clouds their judgment, thereby distorting their actions, which ultimately leads to costly mistakes. Mistakes that could easily be avoided by keeping calm, and strictly following your trading plan to guide all your actions in the markets.

It’s okay to share trading ideas and thoughts as that shows one’s command and understanding of their trading business, but no trader should ever make their personal open trades public, unless one is doing it purely for educational purposes only. 

For instance, Module (III) of our comprehensive Forex course covers a full three months of live trading. We took our time to record every trade we took live on the market charts for our trainees/traders, recording both the losing and the winning trades. We adopted this approach because there’s no better way of teaching than illustrating live. Every trainer must demonstrate their craft or skills live to their students. Otherwise how can you teach that which you can’t practice? The recorded live trading sessions, together with the test of the Forex trading course educational content is only accessible to our members who sign up for our Online course.

The goal was to illustrate and teach our traders that losses are part of the trading business, the same way you cannot avoid losses in life or in any other ‘real’ business. You can only control and keep the losses small, while locking in big profitable trades. At the end of the three months of our live trading as is covered in our Online Forex course, (which is essentially a quarter of a year) we made a great deal of net profit, even with the few losses we encountered factored in.

Lesson of the day; whether you’re a novice or an experienced trader, strive to develop the discipline of ‘not disclosing your open trades,’ keep them private. In case you get the urge to talk about them, it’s advised you write them down in your trading journal to keep track of your progress and performance. Otherwise they will dent your ego and confidence in your trading system, especially if your trades end up as losers.

Joshua Matumo,

Founder, Fourthstreet Consultants.