How Top Traders Think

You cannot be a successful trader if you are not willing to have both profits and losses… “It’s like only wanting to breathe in and not wanting to breathe out.” Both are a significant part of the trading process… The other half of the equation is also important (and equally puzzling). You can’t put too much importance in gains. People who value profits too highly, tend to take them quickly. Why? Because if they don’t take them, they are afraid they will get away.
this quate you have to always remember to b a good trader

It’s true that if you continue to work hard on the market, you’d eventually achieve constant survival that you dream of.
Last week, my GBPJPYUSDCAD Hedging strategy experienced some tolerable drawdown – something that would be recovered soon. In addition, I saw about 7 gap trading setups on Monday and I traded accordingly. On Friday, I closed all open positions with roughly 500-pip profit. Yes my clients’ appetite is being whetted in advanced, since they’re ready to become beneficiaries of this effective trading methodology.
Last week, I was again invited by another former trainee of mine. As a financial expert, he served in the federal civil service for 35 years. After retirement, he dabbled into agriculture without expert knowledge – only to lose a lot of money. Can you now see that trading isn’t the only business that entails serious challenges? However, he was lucky enough to have started Forex training on the right path. He practiced rigorously for almost 3 years before deciding to play the market with real money.
When I saw the account he was managing, I was amazed. He’d made over 2600 pips in 4 months! I saw 500+ pips as open profits and they increased to almost 700 pips before I left. I was extremely glad that he’d stuck to the risk management parameters I recommended to him. He was able to survive December and January as well, plus he suffered occasional drawdowns which were recovered eventually. If you feel that 26% returns in 4 months are a small profit, then it’s high time you did something else.
He and the engineer I visited earlier had something in common. This thing would soon be revealed to my clients. Yes my trainees and clients are the direct beneficiaries of my trading methodologies.
How Top Traders Think

Top traders believe in their trading systems (systems that have positive expectancy) and their own ability to remain calm whatever happens on the market. They know that trading is a game of probabilities.
They know that all trading strategies in the world would have periods of losses each, and therefore survival is all about limiting your risk and giving away as little portion of a trading portfolio as possible. Whenever a strategy experiences a drawdown, they know it’s just part of the game – for the strategy would recover in due course. It’s only a matter of time. They know that they don’t need to expect every trade they take to win: what they need to do is trading according to their entry criteria and managing each trade according to their predefined rules. They don’t ignore a trading signal merely out of fear, nor do they increase their risk because of overconfidence. Their main goal is to be more effective in trading, not struggling to force out higher hit rates.
Dr. Van, quoted above, says further: “Most people… want to be right all the time. They want to make money on every trade. Yet that will not happen because losses are a part of the trading process. When you understand the relationship, however, you can come to terms with losses and make them okay. A natural part of the trading process is to have a point at which you must unload a position or trade at a loss in order to preserve your capital. Those losses will happen to most people about half of the time or more. And you must make them okay or neutral. If a loss is not okay, you will not take it. When you’re not willing to take a loss, it usually gets a little bigger. When it rains, it pours. As a result, it becomes even harder to take—much more painful. If you didn’t take it the first time, as it becomes bigger you will be even less likely to take it. What’s likely to happen? It probably will become even bigger. The cycle typically continues until the loss becomes so big that you have to take it. This typically occurs when you get a margin call from your broker.”

For certain people, it may take many years to develop a normal trading mindset; for others, they speed up their personal evolution as traders and survive their learning curve more quickly than imagined. If you can cultivate the kind of the mindset discussed here, you’ll soon see the seed of trading genius germinating within you. The team here at Fxinstructor.com is doing everything in their capacity to help you become the best trader you can be. You’ll do yourself a great favor by capitalizing on the services they offer.

FOREX-Dlr/yen spikes on intervention talk, euro jumps

* Dollar/yen jumps above 85 yen then retreats

* Traders cite intervention talk but no confirmation

* Euro rises on IFO, resilient to sovereign debt problems

(updates prices)

By Anirban Nag

LONDON, Sept 24 (Reuters) - The dollar spiked above 85.00 yen on Friday on talk of intervention by Japanese authorities keen to stem the yen's recent gains, but quickly retreated as doubts emerged about whether they had taken action.

That left investors nervous about more intervention and, with risk aversion hitting markets, traders said the Bank of Japan's task of weakening the yen was becoming even tougher.

The dollar rose as high as 85.40 yen JPY= from about 84.55 before talk of intervention emerged, climbing more than one yen from 84.34 yen. It later retreated to 84.26 yen, a one-week low and down 0.1 percent for the day.

"The price action certainly suggested that the Japanese intervened, but one can't be sure," said Kenneth Broux, markets strategist at Lloyds TSB Financial Markets.

"With stock markets retreating and a general pullback in risk appetite, the yen and the Swiss franc will be supported, making the BoJ's job harder."

Japanese officials stayed silent on whether they had intervened. Top currency diplomat Rintaro Tamaki declined to comment, Jiji news agency reported, and the Bank of Japan and the government also had no comment. [ID:nTKU106266].

Japan intervened for the first time in six years last week in repeated action that pushed the yen down from a 15-year high of 82.87 per dollar and shunted it above 85.

The dollar stayed above 85.00 yen until the Federal Reserve signalled this week that it might take more quantitative easing steps, putting widespread selling pressure on the greenback and casting doubt over how effective solo intervention can be.

"At these levels, one can expect the Japanese to intervene," said Lee Hardman, currency economist at BTM-UFJ. "Certainly the stronger fundamentals support a stronger yen, but I guess the Japanese authorities will be keen to draw a line in the sand .

Futures Rise Slightly Before Durable Goods Data

There's No Business Like FOX Business
Stock futures pointed to a slightly-positive open on Friday as Wall Street waits for durable goods and new home sales data out this morning.
As of 7:30 a.m. in New York, the Dow Jones Industrial Average futures rose 38 points, or 0.36%, to 10644, the S&P 500 futures rose 4.6 points to 1125.00 and the Nasdaq 100 futures rose 10.75 points to 1992.25.
U.S. investors will get durable goods data at 8:30 a.m. ET followed by new homes sales shortly after the market open at 10 a.m. ET.
Economists are looking for durable goods orders to drop 1.4% for the August report, according to Thomson Reuters, compared with the 0.4% rise reported for July.
New home sales are expected to bounce off the multi-year low of 276,000 annualized units that was reported in the July data and rise to 291,000 units.
Gold remains in rally mode, striking $1,300 a troy ounce earlier this morning before backing off some. Oil was up 0.3% to $75.41 a barrel.
On Thursday, the Dow sank 76.89 points, or 0.72%, to 10662.42, the Standard & Poor's 500 fell 9.45 points, or 0.83%, to 1124.83 and the Nasdaq Composite dropped 7.47 points, or 0.32%, to 2327.08. The FOX 50 dropped 6.40 points, or 0.78%, to 813.71.

Forex Exchange Morning Report

Forex Exchange Morning Report


US equities closed on Friday little changed (S&P500 +0.1%), giving up early gains in the fi rst hour of trading. Solid earnings from Oracle (second largest software producer in the world) contributed to the early boost, a weak US consumer confi dence report and Irish sovereign credit concerns responsible fro the turnaround. The Irish Finance Minister and the IMF both quashed rumours sweeping the market the country may need to seek IMF assistance, while some former Portugese fi nance ministers opined their country was likely to. Government bond yields (10yr) for Ireland rose 26bp to a post-1997 high of 6.29%, and Portugal they rose 13bp, compared to a 5bp fall for Germany. Commodities were modestly higher, oil (-1.2%) a notable exception. US 10yr treasury yields were 2bp at the close



The US dollar index moved inversely with US equities, closing modestly fi rmer. EUR fell from an early session peak of 1.3159 to 1.3020. Safe-haven Swiss franc outperformed, USD/CHF falling from 1.0180 to 1.0070. USD/JPY consolidated between 85.65 and 85.90.



AUD peaked during early Europe at 0.9466 (a fresh high), closing near the low of 0.9354.



NZD similarly peaked at 0.7333 and closed at 0.7251. AUD/NZD drifted off the 1.2955 session peak to 1.2900.



US core CPI fl at in Aug. This is the fourth month of eight so far this year that the core CPI has been fl at or falling – further evidence that very accommodative monetary policy has thus far not aggravated infl ationary pressures. The headline rate rose 0.3% in Aug, mainly due to a 2.3% rise in the energy component; food prices were up just 0.1%. Annual infl ation is 1.1% yr headline and 0.9% yr core.



US UoM consumer sentiment index falls from 68.9 to 66.6 in the preliminary Sep report. The fall to the lowest level for the year so far was driven entirely by the outlook component; the current conditions index edged up marginally.



Euroland current account defi cit €3.8bn in Jul. With the trade balance now in defi cit too, current account defi cits are likely to persist for a while yet. Other data included a fl at producer price index in Germany in Aug, for a 3.2% yr annual pace (down from 3.7% yr in Jul, its fi rst decline since last year).

Buyside uses technology to reconnect with clients

Institutional investors that have embraced the electronic revolution in the financial markets over the past decade are being forced to rely more than ever on technology to find the best returns in the face of a slump in trading volumes.

Despite a surge of activity in May, when equities worth €1.2 trillion were traded in Europe, volumes have fallen for three consecutive months – to €979bn in June, €846bn in July and €763bn last month, according to data provider Thomson Reuters. These figures are well short of the pre-crisis heights of January 2008, when volumes reached €1.5 trillion.



The outlook is grim too. The annual value of trading in UK equities relative to the size of the market is set to hit its lowest level for eight years, according to a report last month by share registrar Equiniti.



This depressed level of trading has brought with it more volatility, making it increasingly important for investors to seek out liquidity from the automated trading venues that have proliferated in Europe.



Rob Goldstein, managing director at asset manager BlackRock, and head of its technology division, BlackRock Solutions, said: “The amount of demand from the buyside for risk and investment platforms is at the greatest I’ve ever known it.



This is largely driven by a much greater awareness among firms that these platforms are incredibly complex to build, expensive to maintain and need to rapidly evolve with market changes.”



By 2006, 96% of buyside firms had adopted front-office trading technology, which includes systems to help execute a deal as opposed to portfolio management or compliance tools, according to a report published by consultancy Tabb Group in May. This figure is expected to reach 100% by the end of this year.



With such a high uptake of automated trading systems, it is not surprising that buyside firms are looking to use this technology more effectively in the face of thinner markets.



Chris Sims, head of investment operations at asset manager Gartmore, said: “We are not currently looking to radically invest in or change our trading technology, but are instead focusing on using the systems that we do have in a more efficient way.”



According to Sébastien Jaouen, head of trading community services in the trading solutions group of technology firm Orange Business Services, this focus on technology is putting pressure on vendors to be more innovative.



He said: “The combination of lower trading volumes and the impact of the financial crisis has resulted in less assets under management at hedge funds and other asset managers. As a result, our customers are looking for solutions that are not off-the-shelf, and that they can easily and quickly integrate with their existing systems.”



These solutions range from systems that allow multi-asset class capability, to algorithmic trading capability, as well as improved information management tools, all in bid to home in on venues offering the most liquidity, the narrowest spreads and the best prices.



Rob McGrath, global head of trading at asset manager Schroders, said: “Whether it is identifying ‘problem’ trades or sectors within a programme, or working out the best venue and way to trade a block, the more information traders have at their disposal the better.”



It is not just market forces that are causing buyside institutions to take stock of their technological capabilities. Firms will also have new legislation to contend with, as the European Commission seeks to overhaul its equity trading rulebook later this year.



The changes are set to include the introduction of a consolidated data feed showing prices across all of Europe’s venues, as well as limits on the amount of activity that can be conducted on dark pools, venues that allow orders to be matched anonymously.



Financial News looks at three areas of trading technology that are capturing the attention of buyside institutions: algorithmic trading, transaction cost analysis, and multi-asset class platforms.



Algorithmic trading



The way in which buyside institutions look to execute their trades is becoming an increasingly pertinent issue, particularly as what little liquidity there is left is fragmented across several venues.



For many, the solution lies in the use of tech-savvy systems that allow orders to be conducted with the click of a mouse.



Miranda Mizen, a principal at Tabb Group, said: “The buyside have turned heavily towards algorithmic trading strategies, and have invested in the time and technology to give them this capability.”



Algorithmic trading is a process whereby computer programmes automatically enter orders on to a venue, within parameters defined by the investor, and these often determine certain aspects of the trade including timing, price and quantity, in a bid to secure the best deal.



It is a method that is particularly favoured by the buyside, as it allows larger orders to be broken down into smaller units to help manage the impact of a trade on the market.



Sims said: “We’ve seen a gradual increase in the use of algorithmic trading strategies and I would imagine that a substantial and growing proportion of our trades are now conducted in this way.”



Goldstein said: “Algorithmic trading is on the up, largely as a result of an increase in the number of automised trading venues and less dealerisation.”



However, not all buyside institutions share the view that algorithmic trading is the only answer, particularly with equity volumes being so thin.



McGrath said that while the use of algorithmic trading techniques was increasing, the rate of adoption was slowing, as firms weighed the costs of different execution methods and lower volumes made certain types of algorithms less effective.



He said: “The rate of change is slowing as the blend between algorithmic trading and traditional broking finds its balance. In this environment the value of blocks increases, both in terms of speed of execution and reduced market impact.”



Block trades allow an institution to quickly and efficiently move into, or out of, a large position, and offer an alternative to breaking up an order into smaller sizes, but anonymity is important when trading in this way.



If a large block is placed on an exchange, negative signals may be sent to the wider market, for example that an asset manager is looking to sell, causing a downward spiral in prices, as traders observe a significant increase in the supply of a stock.



The ability of large institutions to trade large orders, or blocks, has improved with the advent of anonymous electronic trading venues such as Liquidnet and Posit, which aim to directly match corresponding orders away from lit exchanges, preventing adverse price movements.



Jim Conway, head of trading at asset manager Standard Life Investments, agreed that these venues were proving more valuable in the current climate.



Conway said: “Over the past three months we have been using our execution management system less, using capital commitment more and using crossing networks, such as Liquidnet and Posit, whenever possible.”



Transaction cost analysis



The use of technology is also gaining favour among the buyside for its analytical virtues, particularly as investors try to better judge the performance of their brokers.



McGrath said: “With electronic trading the ability to access the market quickly has increased dramatically, but one area where there has been a gap is with the integration of the tools that allow the trader to analyse the trade and therefore make their trading decisions.”



A process known as transaction cost analysis, or TCA, aims to close that void and Conway said it was becoming more important and high-profile across the industry.



TCA is essentially a reconciliation of the difference between two amounts – the first being the value at which a transaction could be executed at the moment a portfolio manager makes a decision to trade, without any additional costs, and the second being the amount realised.



The transaction costs that buyside institutions incur come from several sources. They include commissions from brokers and the fees and taxes paid to exchanges and regulators, as well as expenses that are less easy to define, such as market impact, which is determined by the forces of supply and demand.



The result is that TCA has become integral to the buyside’s trading process, allowing firms to achieve best execution, control trading costs and bring greater efficiencies to their operations.



Sims said: “We’re spending a lot more time on TCA, looking very closely at execution data and having conversations with our brokers in an effort to ensure we’re achieving the best deals.”



This view was shared by Goldstein, who said it was becoming a more effective tool as the quality of data improved. He said: “We are aggressively leveraging our TCA systems across different asset classes.



The quality of these systems is dependent on the quality of data, and with trading becoming more standardised and electronic, we have been able to improve our analysis.”



The popularity of TCA has risen in parallel with an increasing demand for execution data from regulators, according to Sims. He said: “I think it is also going to become increasingly important that we keep hold of transaction data, as this is something that will soon be required of us by regulators.”



Multi-asset class capability



As volumes in equities markets have remained thin, investors are seeking to diversify their portfolios into other asset classes, and technology is developing to meet this demand.



Goldstein said: “If we look at the trends across the last few months, we’re spending much more time developing technology solutions by sharing ideas across asset classes – we believe that the market structure evolution seen in equities over the past decade provides a significant amount of intelligence for how fixed income will evolve over the next few years.”



He said algorithmic trading was moving into new products such as foreign exchange and fixed income.

Other asset classes already account for a substantial portion of electronic volume. According to Tabb Group, 53% of buyside firms now trade financial products other than equities through their trading platforms.



Of this group, 29% said they traded futures and options electronically, and 16% of firms said they traded foreign exchange low-touch. Some 12% of firms said they exchanged their fixed-income trades on electronic platforms.



Jaouen said traders “want to be able to trade a whole range of products and trade globally and the onus is on vendors like us to develop these sort of systems”.



James Davies, head of sales and client services at Trayport, a company providing connections to commodities exchanges and which has buyside firms among its clients, said the demand in other asset classes was in its infancy.



“We’re experiencing increased demand and pressure from hedge funds that want to be able to automate their commodities trading.



“Commodities are not quite as developed as the equities market yet in terms of electronic trading, but it’s going down the same road and we very much see it as a market with a big potential for growth,” he said

Govt To Stay Vigilant On Forex: Noda

TOKYO (Nikkei)--Tokyo will maintain a firm stance against foreign exchange market volatility, Finance Minister Yoshihiko Noda said Wednesday after the government and Bank of Japan intervened in the market to weaken the yen.

"(Japanese authorities) will continue to closely watch forex market trends," Noda said during a press conference at the ministry building. "We will take decisive steps, including market intervention, when necessary."

As for communication with U.S. and other overseas financial authorities, "The Japanese government is in close contact with relevant and necessary parties," Noda said.

But Noda declined to comment on how authorities overseas reacted to Japan's unilateral intervention.

Noda said he himself decided to intervene in the market, as such a measure is exclusively under the Finance Ministry's oversight. He told Prime Minister Naoto Kan about the unilateral move beforehand.

At 10:30 a.m., the ministry urged the Bank of Japan to conduct yen-selling, dollar-buying operations.

"I think the central bank had intervened in the market by 10:35 a.m.," Noda said.

Noda said the size of the intervention would be announced later, "once the intervention is complete."

A strong yen weakens the competitiveness of Japanese exporters' products overseas and erodes the exporters' earnings when they are repatriated.