I hope every father reading this had a great Father’s Day this past weekend.
I’m a very proud father of an 18-year-old son and I must have done something right (perhaps most of it’s due to his mother!) but indeed every day is a happy Father’s Day for me. So I hope you enjoyed it with your family and your sons or daughters.
Now let’s start today’s report a bit differently. Over the weekend, I read an article called “Can Individual Traders Succeed in the Financial Markets?” by a guy named Brett Steenburger, who seems to be a trading psychologist. I guess he advises traders and trading firms.
He notes the survival rate of traders is very, very poor.
He said 75% quit after two years and 90% are gone after four years. I think that’s probably overly optimistic. The statistics and effects are probably even worse than 90% of traders blowing out their account within the first three months.
Anyway, this coach goes on to tackle this problem and he came up with a few insights I want to share them because while some of them are useful there are others where, quite frankly, I couldn’t disagree with him more.
In the article, a founder of a trading firm is quoted as saying it takes at least six to eight months of dedicated effort to get to the point where a trader is consistently profitable. While I agree with that, and also about the importance of training and mentoring to accelerate the learning curve for developing traders, we part ways on successful methodologies.
The article tries to emphasize the application of technical indicators. This is something I strongly disagree with because I feel indicators create a lot of distractions.
Price action and patterns are what you need to study instead. Fortunately, the article does reference Peter Brandt who has used chart patterns on different time frames to develop ideas. I totally agree with that.
However, I strongly disagree with the article’s assertation that the “old model” of trader education featuring class seminars is somehow useless and outdated and that the new model is all about learning at proprietary trading firms via online communities.
I have four decades in the trading world and I’ve done it all. I’ve tried different things and to my mind the one thing that traders really need is objectivity.
But trying to learn via an online community makes it impossible to be objective. Just picture yourself in a room with 10 people, 25 people or even 100. You’ve now got all kinds of divergent opinions all trying to say something different for different reasons.
There’s no way you can be objective in such an environment.
Just think back to a few months ago when we were at the height of the epidemic panic. Unemployment was (and still is) the highest it’s ever been, GDP was cratering and so on. Now you’re in a chatroom full of traders, and how many people would have felt the NASDAQ was going to go to a new high soon?
Probably none. The consensus would have been the opposite. You would have gone with the people who were betting on new lows and look at how that would have worked out.
I know from personal experience that whenever I’m considering a trade idea and examining charts, seeing a random article that takes the completely opposite view can sometimes throw my confidence in that trade. I start doubting myself and hesitating whereas before I was ready to put on the trade.
That’s why I believe that while mentoring is important, you do need to isolate yourself from the herd and identify a methodology that gives you a genuine edge. Then you need to have complete independence and confidence to execute that methodology day in and day out.
Seeking opinions all over the place is just going to confuse and distract you. It will lead to all kinds of emotional trading and that’s exactly how NOT to become a consistent winning trader.
Let me give you an example. Here’s an example of an email I sent out last week on June 14 at 1:54 pm called “Yen Biased”:
In that email, I talked about GBPJPY (the British pound versus the Japanese yen) on the weekly chart and I was looking at the governing double top and head and shoulders pattern. (When I say something is a governing price pattern, I mean it governs or dictates the price after the pattern has been confirmed.)
In GBPJPY, the governing price pattern reversed an earlier uptrend into a prolonged downtrend for five years including most recently a bearish rounding top. Now I did put the wrong entry price on the chart, but whether you went short at 135.77 (on the chart) or 136.27 (in the text below) with a pending limit order you were still set to make a 350-400 pip profit based on this analysis.
I didn’t need to go into an online community and seek out a thousand opinions to understand what this chart was telling me. I didn’t need a bunch of indicators to “help” me either.
My pending limit order was triggered two days after I sent out that email. That means I didn’t have to worry about this trade by constantly watching the screen. I simply entered my limit order in and waited.
As of this writing, GBPJPY is trading at 132.13, some 420 pips lower than my entry, and giving me a handsome profit of over $200,000 on this position.
Now the position is still open so it could make me more money. Or it could move against me and I lose some money.
However, I’m still expecting much lower prices in GBPJPY and I’m prepared to wait as I hold the trade.
What I’m trying to show you here is that I didn’t need to seek everyone’s opinion for effective analysis and trade execution. I have a methodology that works and I stick with it.
Here’s an updated GBPJPY chart on a weekly basis:
I refer you again to the governing patterns way back in 2014 – 2015. This is why understanding history is so important. If you don’t know history you’re bound to repeat it, as the old saying goes. My observation of the double top/head and shoulders indicated this pair was going to move lower as these are bearish price patterns.
The pattern was confirmed when the price dropped through the neckline of the head and shoulders and since then we’ve seen only a downtrend in GBPJPY.
The lesson here is that once we understand which governing patterns are in place, then we can see how to strategically place our orders.
Price history will force prices lower here because there’s no bullish pattern on the other side of this that suggests GBPJPY is going higher.
Now of course the market will always retrace within a trend. That’s basically what we saw in the last couple weeks where GBPJPY soared and then reversed hard. And it’s why I suggested that members try to short GBPJPY with a limit order at 136.27.
Limit orders are very tricky because the market can rise to a certain price (but not your price) and then drop, leaving you out of the market even though you were correct on the direction of the overall move. However, this time the GBPJPY market hit the limit price perfectly and now it’s 400 pips lower.
That move has given me a monster $200,000+ profit so far.
I’m going to be holding most of that position for the long-term although I may cover a portion of it at it hits various support levels.
I hope you see that I made this call without indicators or similar “help”. All you need is some basic understanding of trends, price patterns and price action to make significant profits in the market.
You definitely don’t require any friends to confirm your thinking. You only need to analyze the patterns that govern the market action.
This is why it was very easy for me to see that the recent GBPJPY rallies were just fake outs within a bear market. These were dead cat bounces which can be profitable if you take them in the short term but which are better used as opportunities to go short at a conveniently – and temporary – high in the market.
Now let’s review the USDI (US Dollar Index) as it’s trading right at or near a major support line:
USDI hit a major support area after its recent drop and I can well imagine that it will continue to bounce around at this level in a similar way to what’s occurred over the last couple of years.
I don’t think the dollar is going to rise by much, but it doesn’t look like it’s ready to drop for the next couple weeks at least. I remain long-term bearish on the dollar despite the now-higher probability that it will slide sideways for most of the summer season.
Just keep that in mind when you’re trading the dollar-correlated currency pairs.
It’s been one of my biggest trading weeks of the year … and the markets are showing no signs of slowing down.
From MONSTER traders to some of the most obvious opportunities to profit that I’ve seen in a long time.
We’re currently experiencing some of the best market conditions that I’ve seen for a long time and there has never been a better time for traders on the sidelines to get involved.
In this week’s video report, I had a lot to share.
- Why survival rates of traders are incredibly POOR according to this reputable article on Forbes, and why I believe I strongly disagree (I share my thoughts on how traders succeed in today’s world)
- How I’ve made over $200,000 in the last seven days on the GBPJPY (and how my members are making bank because of THIS strong governing pattern – I walk you through exactly what’s happening)
- I share a breakdown of how I identified this major trade via a “Head & Shoulders” pattern, giving you a walkthrough of what flagged my attention and what I believe will happen next (there is still a lot of money to be made within this MONSTER trade).
- The “Exhaustion Top” on the US Dollar that indicates what is going to happen next on this key currency (and why it’s not good news for ambitious traders)
- The two strongest currencies on the board right now and why the weakest currency will probably surprise you (watch from 19.20)
- Why Silver is in a “prove it” mode, why this market is leaving traps for novice traders and what you should do to profit during these strange times
- The HUGE key reversal on the NASDAQ and what you need to know about how a “Bearish Diversion” works
- The exact advice that gave to my $10,000/year Elite members about a huge opportunity (I share it at 27.44)
- Plus much more
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