How to avoid bad advice

So I've given a few good examples of how good industry-expert advice coupled with the charts can lead to some very nice profits. Now I thought it would be a good time to show you trades to avoid and when the experts might just be a bit off.

Take a look at the trade suggestion from this morning on USD/CAD

It suggests you take a long position at 1.0040 with a target of 102.35. Sounds like there good be some good potential there right? Well before you jump into the trade it's a good idea to look at the chart and see if you agree.


From the chart we can clearly see that the RSI is very high at just about 70. Looking back historically we can see that when the RSI hits 70 it quickly falls. Also looking at the MACD it just took a big jump up and is now in a place where behavior could be a bit unpredictable.

When I see a trade suggestion like this and a chart as shown above I know this is not a trade I want to be involved in. Forex trading is all about taking risks, but doing so with as much data as possible so it is a very calculated risk. You can lose a lot of money if you just follow the experts. So instead, be your own expert and make sure the trades you make not only correspond to the news and expert analysis, but also with your own common sense.

Friday Jobs Report

Thank heaven for the Friday jobs report. Sometimes the jump after an important piece of data like this leaves the opportunity to buy on a "false dip" as I like to call them. This will happen when a pair drops quickly only to work its way back up very quickly.

This is exactly what happened last Friday when the jobs report broke at 8:30AM EST. I was able to buy at the bottom and sell pretty darn close to the top in a 5-minute span. Can't say this works every time but when it does it sure is satisfying. I've included the chart below to show the sudden drop. I only plan this strategy with EUR/USD since it is by far the most volatile pair so has the quickest jumps from one extreme to the other. You can see on the chart where I bought the pair as well as my stop and limit. You will notice in this case I am actually running two trades so I could double-up on the profits.

Current Trade - USD/JPY

I am currently in a long trade of USD/JPY that I entered about 20 minutes ago. I thought it would be good to share with my readers how I decided to take this trade. It all starts with the current Headlines which I monitor very closely. About 30 minutes ago I saw the following appear in the Headlines:


Once I see a headline like this I click "More" to find-out what trade they think should be made as well as any associated Target/Stop with the trade.
From this I can see that they are suggesting to go long at 104.40 with a target of 105.95. The stop is what really makes this trade attractive - 104.20. This means that I can enter this trade only risking 20 pips with an upside of over 100 pips! Now it's time to head to the chart.

From the chart I can clearly see that the RSI has dropped and is starting to come back up. The Candlestick patters looks like the beginning of a nice Bullish Engulfing patter at all. This is a classic example of a typical trade I will make. Low risk, high reward, and a chart that shows not just through indicators but Candlestick patterns as well that there is some strong potential for this pair to trade up.

Always remember you have to take expert advice and then verify it with your own analysis. Only then can you truly make an educated trade.

A strong end to the week

I've adopted a Forex strategy for Friday morning. I trade on the news, and usually with a position lasting only 5-10 minutes. This has turned-out to be an excellent money-maker for me and an exciting way to end the week. This Friday was particularly volatile with the jobs report coming in at 8:30AM EST.

I readied my trade, EUR/CHF was the first pair I ever traded and has always been a strong pair for me. Looking at the RSI I could see it hovering at 70 where it had been hobbling along for some time now. A headline came-out suggesting a short position on the pair. Looking at the 60 min, 30 min, 15 min, and 5 min chart I knew the time was right.

The pair started to fluctuate a lot, bouncing around in place. This was my moment, the news was getting ready to break and the pair was ready to blow off some steam. I entered the position at 1.5870, waited a few minutes and then...BOOM. The pair dropped like a rock. In a matter of minutes I closed the trade as my profits were far and above what I had expected to make on this trade.

This style of trading is not neccesarily day trading as the trades really happen in a matter of minutes. I think this would more aptly be named "Speed Trading" as you are playing on quick snaps in the market to lock in huge profits. As always I have a stop set so if the pair does decide to snap in the other direction, my losses are minimal.

While I do set a tight stop for this kind of trade, I don't set a limit. When I first tried-out this strategy I set a limit that was 4x my stop. I found that almost every time the jump would blow past my limit in a minute or less. While I would make a nice profit, I knew there was much more potential. I decided to watch the trade and sell once it hits the bottom and starts to bounce back up. This usually leads to profits well over 10x my stop. Which means that if I use this strategy 10 times and am only right twice I still make money.

I have included some of the charts from this trade below so you can witness the victorious end to my week.

The Zen and Art of Setting Stops

My dear friend EUR/GBP, which has always been a strong pair for me hit my stop last night while I was sleeping. If there is one lesson I have learned with Forex it is this: "Set tight stops, and NEVER change them." I cannot emphasize how important this is.

When I started Forex trading I used to set a stop, then in fear it would be hit while there was still potential, I would raise the stop. This would almost always lead to me losing at least 2x what I had initially intended to lose.

You have to remind yourself that you will lose money. It's just important that you are making more money than you lose.

Now some call the Forex market volatile and risky. Nothing could be further from the truth. An amateur investor that throws money into the Forex market without proper research and without setting realistic stops and limits is headed for disaster.

I think of Forex a bit more like fishing. Toss your line in the water, but after a little time has passed, if you aren't getting any bites, try changing spots. It takes finding just one section of a lake where the fish are to catch many fish. Why spend your whole day fishing in one place just because someone told you there were fish there?

If you ever have the chance to see any Forex competitions you will see that those making 300%-400% profit are losing money just as much as they are making it...but they are losing less than they are making.

This is the discipline of setting a stop and limit intelligently, and in many ways it can be a dark art. I usually agree to set my limit at 4x my stop. Thus, when I lose on a trade, I don't undo the profit I have made from a successful trade. It's simple math but amazing how few investors ever follow this discipline.

So last night I lost money on a EUR/GBP trade. It was a beautiful trade - strong short with an RSI creeping down from 70 on the 60, 30, and 15-min chart. When I woke-up this morning and looked at the charts, I jumped for joy - the pair had dropped like a rock! Then I checked my account, I had lost money on the trade, but how? With a tight stop the pair hopped-up for just a moment and hit my stop then immediately dropped from that point on. This is the nature of Forex and an event you will have to be comfortable with.

Yes, if I would have set a stop just a bit higher I would have made a lot of money. Instead a lost a little bit of money. However who knows, in a future trade the opposite might have happened. I could have woke-up and saw the pair climb higher and higher. In that case, the higher stop would have caused me to lose more money. This is why you need to set your stop and never change it.

Just remember, you only have to be right one out of every three trades and you are making money. If you are right 50% of the time with your trades you can make a fortune. This is the allure of Forex and why with careful trades you too can make money in the world biggest market.

Starting off with a Bang

Well there couldn't be a better way to start-off this blog than the trade that happened the night of its inception. Before I explain my good fortune last night I thought it would be good to give a little background.

First-off I use FXCM as my trading platform. I've tried Forex.com and can assure you that FXCM is light-years ahead. The main benefit I find to FXCM is their software. The FXCM trading station has a clean, easy-to-use interface. I've paid as much as $50/month for charting software but with FXCM they provide an excellent charting package - free to their customers.

I am a technical trader, however rely heavily on analyst opinions to spot my entry points. I use DailyFX Plus (also a free service with FXCM) and keep a very close eye on the headlines. With Forex day trading (or night trading) you can miss a potential opportunity in the matter of 5-10 minutes. I find good potential trades and then do the technical analysis to determine if I think there is some potential.

The two main indicators I use are the RSI and MACD. If you are not a technical trader there are million of resources online to teach you the basics.

Last night I was lucky enough to catch a dip in USD/CAD and buy right before a nice breakout. Below is a chart of the trade including my entry and exit points. Key things to look at is the low RSI at the point of trade initiation and the crossed lines seen in the MACD.

Welcome to Forex Night Owl

Hello and welcome to Forex Night Owl. As you have probably guessed I am a Forex trader, and yes, I am also a night owl. In the Forex world this is a good thing because I get the advantage of trading based on events that happen when many people are sleeping...in the U.S. at least.

If you are in China then we might be doing the same thing at one in the afternoon, only it's one in the morning for me! That being said, I'm sure there are other Forex investors like me who like to play the market when the hustle and bustle of the day is long gone. For me, I find that I concentrate the best late at night. I know there are morning people out there right now just cringing thinking of being awake past eleven!

On this blog I will share with you my Forex trading strategies as well as the outcome of my current trades. It is important to note that by no means should you follow my strategies - instead I might suggest you learn from my mistakes. Sometimes my trades go very well, and other times the trade moves in the exact opposite direction I expected. This is the exciting world of Forex and some losses are inevitable. I have made a consistent 15-20% with Forex so know that so far I have made more money than I have lost.

For most stock investors this would be a big deal but as a Forex trader it is only the beginning. I constantly read Forex news and strategy sites and see people making over 200% on a single trade. That's the game I'm looking to play and I hope to share my path to it with all of you on my blog.

Thanks for reading and I look forward to sharing this adventure together!