psychology of trading

Kong Celebrates 100 Blog Posts!

Forex Kong 12 Comments

With the book deal inked, and most of the movie details pretty much squared away ( although I refuse to be played by Leonardo Dicaprio unless he agrees to lose at least 10 pounds first) I’m taking the rest of the weekend to celebate my small short-term goal of 100 posts here at Forex Kong.

It may not seem like much..to most of you (although I seriously doubt a single one of you will likely even try) but for me….the commitment and labor required to sit down day after day, and bang out a page or so – has been no simple /easy task. A lot of this stuff is pretty damn “dry” at times and believe me – there’s been more than a day or two I’ve sat here scratching my head thinking “what the hell am I gonna say about that?”

I’ve learned to curb my toungue…I’ve learned to respect my audience (to a certain extent) and I’ve proven to myself yet again that if only to try – generally sets you apart from the 99 out of 100 people – who’ll likely never try anything new another day of their lives…….let alone set sites on succeeding at it.

So I trade….I build spaceships….I cook……I play music…I fish/hike and swim………………………………..and now I blog.

Get used to it people – I’m not going anywhere.

Short Term Technicals – Yellow Light

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The past two days of solid USD strength have created a couple of concerns on a purely short-term technical level, as well with extremely light trading volume all week and the G20 meeting wrapping up here tomorrow – let’s just say..I’ve had better.

With a number of mixed signals across asset classes, the SP 500 pushed to its highs, gold / silver taken directly to the doghouse and the Yen rolling over ( or not) – it’s just as well to clear the deck, clear one’s head, regroup and read up over the weekend. Interestingly my heart hasn’t really been “in it” here this week – and as a result my trading has suffered. I took my first small weekly loss in months, and will chalk it up as yet another lesson learned. You can’t turn your back on this thing for a second – short of having your pocket picked and or face blown off. I know this….you know this.

Looking ahead – we will get whatever “news” out of the completion of the G20 meetings, and prepare for another week out on the battlefield. At risk of sounding like a broken record – I still have little belief that any “USD rally” will be anything more than a blip – but of course stranger things have happened.

Thankfully my short-term technical system has again done it’s job in keeping me nimble and not tied to any particular trade / concept. We’ve considered this a near term “top” – so regardless of what further upside may be seen – I will be stepping lightly in following days.

Currency Crossroads – G20 Jitters

Forex Kong 2 Comments

The Group of Twenty Finance Ministers and Central Bank Governors (also known as the G-20, G20, and Group of Twenty) is a group of finance ministers and central bank governors from 20 major economies.

The G7 (also known as the G-7) is an international finance group consisting of the finance ministers from seven industrialized nations: the US, UK, France, Germany, Italy, Canada, and Japan.

The G7 has already met this week – and hopes to present a unified message to the smaller contributing countries of the G20 set to meet here on Friday and Saturday – ie………..”let’s not pull another Chavez (Venezuelan Pres. who just devalued their currency by 32% last week… and practically overnight) and leave us to do the devaluing on our own”.

Japan is clearly in the doghouse (as seen kicking ass in the current currency war) and it will be more than interesting to see what comes out of it all. At this point the currency war is really heating up  – and the markets are more or less at a stand still…frozen like a deer in the headlights.

Frankly – standing clear of it  is about the best advice I can give – as volatility is up and direction is unclear.

The USD weakness is right on track as suggested –  but thus far, the waters are choppy to say the least. Unfortunately for tonight and likely tomorrow – no trade may very well be the best trade.

Currency War Reality Check

Forex Kong 2 Comments

Don’t kid yourself – there is a war going on. I’m not talking about some little skirmish over an Island, or a dispute between two neighboring nations over Immigration – I’m talking about a major, high level tactical war being fought right in front of your very eyes  – only by way of dollars and cents…..with no guns required.

The Pentagon has run its simulations with top advisors from the financial and economic community (not high-ranking Generals and Majors) with the task of “flushing out potential attacks” and “plotting counter moves” with all the other good stuff one would imagine being included in a full scale Hollywood blockbuster. The guns have been replaced with financial instruments, the good guys and the bad guys are now your own government officials and central bankers – and the entire thing plays out in a digital war zone littered with crashed financial institutions, broken down bank accounts, highly manipulated markets and human casualties (financially speaking) in numbers I care not consider.

This is a currency war people – and it does not end well for those unwilling to accept it, and in turn prepare for it.

This headline just out of Venezuela: Venezuela devalued its currency for the fifth time in nine years as ailing President Hugo Chavez seeks to narrow a widening fiscal gap and reduce a shortage of dollars in the economy. The government will weaken the exchange rate by 33 percent to 6.3 bolivars per dollar, Finance Minister Jorge Giordani told reporters today in Caracas.

So……you just woke up and gold is up 33% – and your local loaf of bread just went through the roof. You don’t think this is what’s going on planet wide? How about the Yen recently? Have you checked the current value of the Pound?

Don’t be surprised to find a similar situation in the U.S  – a lot sooner than most care to believe.

No country is willing to sit idle and allow the U.S to continue on its rampage of “easing” and continued flooding of U.S dollars without at least a fight. Unfortunately for many, the Chinese are about “10 moves ahead” with a war plan so complex and intricate it will make your head spin. (A lot more on that later).

In times of war you need to be a soldier – you need to navigate the trenches, and you need to protect yourself and your family.

At best – take interest in what’s going on in the currency world as this is the battle ground….this is where the fight will be lost or won.

Angry Birds – And Where We're At

Forex Kong 14 Comments

With the recent purchase of a new Ipad 5 and subsequent purchase of the popular game “angry birds” (I bought the outer space version) it’s fair to say that my trading has suffered as a result . Now , with consideration of “going pro” it’s unlikely I will be able to commit the hours necessary, as well focus on trading so – angry birds it is.

Hardly…….but a real hoot all the same.

Market wise it appears that once again we are offered new opportunities to short USD on it’s rise over the past few days. I see absolutely no fundamental change here whatsoever, and as boring / repetitive as it may seem – I will again look to load short USD against a miriad of the majors.

Zooming out a touch, gold is still flat as a pancake and of particular interest the “TLT”  20 years treasury bond fund sits at a precarious position. A falling dollar as well falling bond prices can most certainly suggest money flowing into stocks (as we’ve been seeing) but is also reflective of higher interest rates, and in turn – pressure on borrowing and tougher times ahead for corporations.

When corporations suffer……stocks sell hard.Watch the bonds, watch the dollar and in series – stocks are the last to go.

Im back at it here full time as always everyone. Let the games begin!

2013 – You Will Never Trade It

Forex Kong 16 Comments

Lets face it – if you are some kind of “eternal optimist” you’re gonna seriously need to re adjust your thinking in coming months. If the “kool-aid” of global central bank easing, and charts filled with wonderful green candles all sloping to the sky has become your “norm” – then get ready for a good swift kick to the face.

Seriously….you’ve got to be kidding if you honestly think this is for real – and even more so a fool,  if you’ve any ideas that it’s going to continue for much longer. The stock market has long and since become a complete and total sham ( as computers make up most of the daily activity – all being that most Americans have already been robbed of their savings) and the entire thing is more or less being held up with phony money coming out of  Washington.

Please correct me if I am wrong. If you actually believe the numbers posted on CNBC – you need to have your head examined.

Looking ahead, and making plans for the future is a key element – defining a successful trader. You see you’ve got profits today – so (greedily) you hang on for tomorrow, only to see you are back at zero again. You buy when the T.V suggests all things are well – and you sell when they suggest the opposite. In other words….you continue to do exactly what they say….yet wonder why you keep getting rinsed.

Duh!

As far as a chart pattern goes – imagine 2013 looking more like a 5 year old sitting at the kitchen table with a set of crayons.  At best we are looking at one big wonderful mess.Up one day and down the next….then up two days then down for 4. A bunch of lines / squiggles – near impossible for the untrained eye to navigate.

I continue to caution you – this is a top – not a bottom.

Short Term Trade Tip – Horizontal Lines

Forex Kong 9 Comments

Obviously my short-term trade set up is a thing of beauty, and relatively soon – will be made available to the rest of you. But aside from that, I want to pass along a simple little tip – that could provide you an “edge” here in the meantime.

When you drill down to smaller time frames such as a 1H chart (1 hour candle formations) or even a 15 minute, or 5 minute – take out your crayola crayon (and not your laser pointer) and draw a line THROUGH THE MIDDLE OF THE CONGESTION/SQUIGGLES. It will be this “price level” that is currently at play – and not the “highs and lows” of the given time frame.

For the most part anything smaller than a 1 Hour chart is frankly just “noise” so the highs n lows are really not as significant as the middle ground where price is centered. Once these lines have been drawn – a trader can then focus on a “realistic price” to consider for entry or even stops etc, as the volatility short-term will spike/fall and give you all kinds of levels – not exactly relevant to your trading. On a 1 hour Chart 30 – 50 pips on either side of this “central price” is completely normal, and isn’t enough to even get my heart beating – in consideration of dumping a trade.

If you don’t understand the given volatility on the time frame you are viewing – you will get killed.

Take out a crayon and not a laser pointer – and plot the “middle of the squiggle “.

As simple as it seems – this can easily be the difference in catching many, many more pips in any given trade, based on the fact that you have not skewed your lines of S/R to reflect the highs and lows of smaller time frames….but the center – where price is currently fluctuating.

Thanks Kong!

Blow Off Top – Retail Bagholders

Forex Kong 10 Comments

I’m throwing this out there now – more so as a warning to newcomers.

My “risk barometer” being the SP 500 / Dow Jones Industrial Average is cranked about as high as one can imagine – given the current global state of affairs. We are now looking at levels not seen since the highs, prior to the massive crash in late 2007.

One can only assume that right around now, every retail investor on the planet has heard of the “massive upswing in markets” and has just as likely received word from their local shyster (ooops… broker) that now is a fantastic time to buy – as to not “miss out” on the opportunity to make a quick buck.

Looking a few days / week out – one could very well see what I refer to as a “blow off top”. A market phenomenon where large numbers of retail investors chase prices in a frantic scramble to “get in” before the opportunity has passed and the ship has sailed. Unfortunately this is right around the same time that Wall Street is unloading its last few shares (at insane premiums) to the poor unsuspecting newbies – blinded by greed, stumbling over themselves to snap up whatever shares they can.

I’m not suggesting their isn’t money to be made (seeing market leaders such as Apple down 55 bucks looks like a buy opp to me too) but I am putting out a strong reminder that – this is how the markets work. You are the last to buy (at the top) and then will generally hold (until you can’t stand it any longer) only to then sell at the bottom. The big boys will “buy your fear” and “sell your greed” all day long – as retail investors continue to do what humans will do.

Does this at all sound familiar?

Take heed….watch these markets like a hawk here at the highs….thank me later.

Looking To Trade – Need Catalyst

Forex Kong 9 Comments

As a fundamental element of my trading plan – I need to stay active. I rarely leave profits sitting on the table for more than a day, and equally – can’t stand sideways directionless action. My short-term trade technology has proven incredibly reliable once again as I have been 100% cash nearly 10 days now (Permit and Bonefishing in Punta Allen – please google it) and literally haven’t missed a pip. The majority of currency pairs (with a few exceptions) are sitting at nearly the exact levels as a week ago, while equities and PM’s have more or less treaded water.

This soon will change.

Thursday’s, with their barrage of U.S economic data have often provided swing points in markets – and I suspect that this week will be no different. With a bit of news out of Canada tomorrow as well the GBP unemployment rate, my current “tech” should have me on one side of the fence or the other, sometime late tomorrow evening / possibly early Thursday morning.

As difficult as it is to believe at times, and as little sense as it makes (considering the general state of “things”) I still favor further upside in coming weeks, but am a touch more cautious than I may have been prior. Obviously nothing moves in a straight line – so the usual zigs n zags are expected…as we likely “grind” higher.

Some signs of life also being seen in the PM’s and related mining stocks and etf’s.

I will continue to monitor commods vs USD as well JPY, and should the USD continue in another leg down – getting long GBP also looks like a promising trade. The JPY pairs have obviously had their “day in the sun” and I would be reluctant to push much further without seeing a reasonable pullback/correction before continuing (in general) short JPY against the lot. I’ve seen no real change fundamentally as the currency wars continue – with everyone taking their turn at bat. Perhaps Thursday’s U.S data will be the catalyst to push things firmly in one direction or the other.

Careful People – You Are Retail

Forex Kong 9 Comments

If you aren’t worries about the markets – you should be. If you think you’ve got it all figured out – you’re dead wrong. If you think you are a professional trader – you won’t be for long.

I took the time over the past few days to peruse the financial blogosphere and get caught up on my reading – after a much-needed (and extremely enjoyable) “holiday from my holiday”. Bonefish put up a pretty good fight, and watching my father reel in the only “Permit” caught in recent weeks was an absolute thrill. For a moment I too imagined – I’ve got this covered.

Wrong.

Passivity and complacency play no part in successful trading. It only makes sense to me, as one feels even the slightest sense of either – markets are gearing up to smash you in the face.

You have to keep in mind (as hard as it is for you to accept) that right around the time you imagine the coast is clear, that all is well, that you can surely do no wrong ( and likely that you’ve just received a call from your broker encouraging you to buy) that you are retail.

You are the life-giving blood of wall street and the “last of the last” to jump on board. The train left the station weeks if not months ago, and right around the time you’ve decided to jump onboard – you guessed it, it’s coming off the tracks.

Until you’ve mastered the psychology, until you’ve flipped this thing completely upside down – you are …and will always be…..retail.

Careful people……..careful.

They don’t call it risk for nothing right? – personally I can’t get excited re entering long here, and see more than a couple of reasons to start looking short. Take it for what it’s worth – I’m 100% cash – and would not be buying risk tomorrow….not even close.