psychology of trading

Mixed Signals – Opportunity Or Not?

Forex Kong Got something to say?

I don’t like getting caught in sideways market action. Nothing bothers me more than seeing my hard-earned dollars tied up in the zigs n zags of a given trade – ranging sideways and going nowhere fast. As much as I understand this to be a common (far too common actually) and normal aspect of trading – sideways is a killer psychologically as “dead money” starts to weigh heavy on the brain. Trading capital is tied up as other opportunities present themselves, and a trader is left with his/her hands tied – unable to act.

When I get mixed signals across my intermarket analysis as well my shorter term technical system – I question if perhaps an opportunity has presented itself – or if  I am looking at the initial stages of “sideways” and possible reversal. If a trend is still evident on the longer time frames such as a daily chart as well a 4H chart – I will then come down to the smaller time frames to see where we are at.

Kong’s Awesome Tip

On any time frame chart you are viewing – if price starts in the upper left corner of your screen, and ends in the bottom right -YOU ARE IN A DOWNTREND. If price starts in the bottom left corner of your screen and ends in the upper right YOU ARE IN AN UPTREND. Anything else – and you are sideways.

As simple as this may seem, it serves as an excellent exercise when looking to eliminate sideways action. Even if (to start) you only drill down to a 1 hour chart – and run this simple exercise, it should go a long way in helping you to avoid sideways market action, and possibly identifying potencial trade opportunities.

Todays Markets – Trading What I See

Forex Kong 8 Comments

Stepping away from the markets for a day or two can be a mixed blessing. Sure the sunshine is great, the beer cold and the fishing fantastic – but what about work? These days 2 (or god forbid 3) days away from the markets – and you could just as well be looking at a completely new game! War may have broken out, stocks may have crashed, some nutjob may have launched his own missile, man…..my buddies from the planet Nibiru may have returned to pick up more of their gold! You just don’t know what the hell’s gone on until you start digging back in.

Top of my list – several of my beloved commodity pairs are showing relative weakness against both the USD and JPY. At this point it’s just too early to tell, but as it stands I would still be sitting on my mits here this morning regardless of the holiday, as things have more or less traded as expected – sideways. Price action has more or less remained steady/flat in risk in general, but I give a touch larger weighting to these “dips” as opposed to seeing much of anything “blowing through the roof”. I dare say “getting short risk” has poked its head around the corner – but still have considerable reading to do here today.

The moves in both silver and gold appear “healthy” but as per the usual these days – nothing to write home about.

I will spend the majority of my morning reading/reviewing Central Bank statements/news as well getting back up to speed with the planet at large before making any drastic decisions but in “trading what I see” – current trading conditions look a touch cloudy with a small chance of showers in the afternoon.

Glad to be back everyone – lets get out there and make some money.

 

Over Trading – Not A Good Plan

Forex Kong 5 Comments

Considering the recent run with respect to the short JPY trades , as well recent gains made short USD – Im taking this opportunity (being 100% in cash) to wish you all the best – and get out of dodge.

Markets are nearly some relative near term highs ( with DOW around 13,600 looking like solid resistance ) so I find it highly unlikely that I will miss any “upward action” in coming days. As an active trader, these opportunities rarely present themselves so…..I am “obliged” to take it when I can get it.

Often traders will get caught in the moment when “everything is going up” – push their luck – and do run the risk of overtrading. Too commonly resulting in losses and significant psychological wear and tear.

When stars align and you find yourself sitting with significant profit and absolutely “zero” market exposure….one really can’t look a gift horse in the mouth.

This gorilla is going fishing!

Ill do my best to get a post in tomorrow evening and be back on track for the rest of the week. Good luck everyone!

Learn To Trade – Or Die

Forex Kong 25 Comments

I still hear some of these “old school” guys on the net – talking about “investing”. Good luck with that.

You see – for those of us who got started in this game around the time of the crash in 2008, the word “investing” has more or lost its appeal. Considering the current environment, and the forecast for the future – anyone considering investing in anything (for any extended period) should most certainly have their head examined.

I wish it was still that easy.

I pull up charts on any number of things, going back some 10 odd years or so  – and laugh. These guys still think they know what they are doing because of their experience back in 2005 when it didn’t matter if you bought ” day old cake”. Every morning you woke up – called your broker – and your stock went up.

This is fantasy land now. This will likely never happen again.

If you are not willing to spend an extra hour or two studying the company you just invested in, or following a couple of charts, or tuning in to the current news (and I’m not talking about CNBC) to get an idea of what’s going on day-to-day – I can assure you….you and your hard-earned money will “all too soon” be parted.

You don’t have to become a “day trader” – as I don’t day trade either, but you should at least come to understand that there is nothing wrong with selling when you see a profit – and buying back again when your favorite stock dips. Trust me – you won’t miss a  thing.

Markets today (more than ever) are designed to rid you of your cash – designed with “alien type precision” in fact…..for that very purpose. If you don’t learn to “trade” – I have some very bad news for you.

For all your efforts….and all your hard work……you will most certainly end up with zero.

Learn to trade – or……….

Predictions For 2013 – Apes Will Win

Forex Kong 31 Comments

Making a prediction for the future is easy. (In response to a valued readers questions)

The precious metals have decoupled from the dollar to a certain extent, so putting a time frame on the future prices of these two “asset classes” based on the usual correlations is difficult. I do predict that gold will go up and the dollar will fall. (go figure eh?)

I expect the USD to make its way lower through the first couple weeks of January – then take a usual oversold bounce, and then at least one more leg even lower into the middle/late February. During this time equities will likely push to near term highs then top out and trade sideways. As I am constantly moving in and out of the market I plan to be 100% cash sometime late February early March at the absolute latest, but in a different sense than my usual trading. I will continue to play the safe havens against the risk related currencies with possible addition / focus on EUR.

I plan to  completely re-evaluate my trade plans come March.

A previous article worth reading : click here.

Considering that I trade the fundamentals coupled with an extremely accurate shorter term technical system – I will really just allow price to guide me. As per my usual shorter term entries and exits – I am (more often than not) sitting in cash during times of  “trendless market direction” so regardless of exact dates / predictions I will trade what I see  – as I see it.

I will continue to post real-time trade activity here via twitter, as well through the daily posts. I suggest extreme caution after this next (and possibly final) move up in equities and risk in general  – come mid Feb or early March.

Forex Charts – Gaps Get Filled

Forex Kong Got something to say?

There is much debate on the subject of “gaps” in charts, and  it’s been my experience that the vast majority of these gaps do indeed get filled. A large percentage (somewhere around 80%) filled during the following day of trading.

A gap in a chart is essentially an empty space between one trading period and the previous trading period. They usually form because of an important and material event that affects the given security, such as an earnings surprise or a merger or in the case of foreign exchange – announcements pertaining to a given countries monetary policy.

Incoming Japanese Prime Minister Shinzo Abe kept up his calls on Tuesday for the Bank of Japan to drastically ease monetary policy by setting an inflation target of 2 percent, and repeated that he wants to tame the strong yen to help revive the economy. Abe, a security hardliner who will be sworn in as premier on Wednesday, when he is also expected to appoint his cabinet, is prescribing a mix of aggressive monetary policy easing and big fiscal spending to beat deflation and rein in the strong yen.

This has produced some very large gaps in nearly every single YEN (JPY) chart I follow – as well as over 7% account profits practically overnight. Generally these kinds of “gifts” don’t fall in your lap very often, and I have a hard standing rule to take this off the table immediately – and then likely wait for the gaps (in some cases 80 pips) to be filled as price dips back down to fill the “empty space” before resuming its trend.

I am expecting the dollar to make its last stand here sometime this week – and then roll over hard into its next leg down – while risk in general looks  full steam ahead . The Yen crosses have been absolutely fantastic and are now either on the cusp of full-scale break out, or a possible breather. I am planning to stay on aggressively until proven otherwise – booking profits along the way, and jumping back in the trade.

End Of The World – Kong Attends

Forex Kong 2 Comments

The world isn’t going to end….. so for those of you hoping to take the “easy way out” of your current gold positions – please……if only it where that easy.

The Solstice on December 21, 2012 ~ precisely at 11:11 AM Universal Time ~ marks the completion of the 5,125 year Great Cycle of the Ancient Maya Long Count Calendar. Rather than being a linear end-point, the cycle that is closing is naturally followed by the start of a new cycle. What this new cycle has in store for humanity is a mystery that has yet to unfold…

2012 is also considered the completion of the 26,000 year Precession of the Equinoxes cycle, and some say it also signifies the end of a 104,000 year cycle. That is some serious SERIOUS math on the part of the Maya – and as an avid student of “all things Maya” I will be in attendance at the ruins of Tulum  – here on the Mayan Riviera, Yucatan Mexico.

As my spaceship is still in “ill repair” perhaps my fellow space brothers will make an appearance, saving me some time and effort. We’ll see……but if all things go right – well…………  “It’s been a slice!”

I wish you all the best of luck with your trading, and encourage  you to continue looking to the future – as the past will provide little guidance for the “financial reckoning” coming soon to a theatre near you.

Kong…………(literally) Gone.

Kong Out – Spaceship On Hold

Forex Kong Got something to say?

The spaceship I’m building on the rooftop is coming along – but  in light of the recent news out of the United States ( the mass shooting at elementary school in Connecticut) I can’t get it done fast enough. What the hell is going on?

What kind of world are we living in where this kind of thing not only happens – but isn’t that like the third or fourth one of these  “events” in the past month or so? What the f$%K is going on?

My Kong size heart goes out to each and every individual effected by this, as I cannot begin to imagine the grief and pain brought on by such tragic events. Being an uncle myself, not a day goes by that my little nephews aren’t racing around my brain somewhere – bringing a smile to my face….. on even the worst of days. Again I can’t say how sorry I am for the loss, in this tragic event.

Parts are a little hard to come by here in Mexico – and now I’m considering some modifications / additions that may put me back and additional week or two…maybe more.

Hopefully I can find enough seats for every single person I  love and care for – so that we can all get on board……. and get the hell out of here.

I hope the wireless connection will be O.K

How To Trade A Risk Event – Or Not

Forex Kong 20 Comments

My own definition of a risk event (go figure) –  An event that puts you at risk.

We’ve all got our own tolerance for risk,  as a particular event (such as the FOMC announcements tomorrow) that may be considered a “risk event” by one individual, may have absolutely no significance to another. There are many factors to consider – and it really comes down to the individuals circumstances  and/or evaluation at the time.

I for one  – have an extremely high tolerance for risk.

Almost to a point of fault, I have been known to walk down the odd dark street at night just to “see what’s down there”, or perhaps  hail a cab with no real “company name” visible on the door  – however…..

I do not take undo risk with my investment or trading decisions.

The best suggestion I can make centers on the simple question of “whether or not its worth it” as a risk event approaches – and more often than not the answer comes back the same….absolutely not.

  • Could something occur tomorrow that could potentially jeopardize the profits I am currently seeing on the table?
  • Could I find myself deep underwater tomorrow in the case that something completely unexpected occurs?
  • Am I going to miss “something massive”  if I am not fully invested and exposed to the market?

Questions like these are healthy, and can go a long way in preserving  capital in these volatile times – let alone reduce risk considerably.

Consider your risk tolerance. Ask yourself – Is it really worth it….. for a couple of points or two?

An aside – I have little doubt that tomorrow’s FOMC announcements/outcomes will result in markets moving higher, and the dollar getting sacked. However – it may not play out as “matter of fact”. I have 100% confidence that any trade opportunity that is currently available to me – will equally be available to me tomorrow (and likely the next day for that matter). Do I care?….nope…not really.

Kong banks an additional 2% on the day – and back to the ol favorite – 100% hard cold cash.

2013 – Only The Apes Will Survive

Forex Kong 27 Comments

Let’s face it – the markets have become increasingly more difficult to navigate. For the most part, anyone sitting idle for anything more than a week or two max, has likely come out on the receiving end of a “good swift kick in the account” – if you know what I mean. Hedge funds drying up, blogs offering “financial advice” dropping like flies, and the majority of investors left wondering “what the hell to do” next. Well……………….

It’s only going to get worse.

I’m not looking to scare anyone ( as you should already be completely petrified no?) but I see 2013 -14 as likely the most difficult / volatile / dynamic / screwed up / challenging / trading environment I will have faced in my entire career. The number of variables are staggering, and the new “forces that be” (now being the majority of central banks on this planet) are not only locked and loaded – but have more chips than well…..they’ve got a lot of chips.

So…….

You can’t be a bull. You can’t be a bear. Anyone sitting on one side of the fence or the other (for any considerable length of time) will be liquidated like butta. You are going to have to learn to trade like a gorilla – or you will surely be left with “less” – if you currently have anything at all.

I should explain…….

I have no bias. I trade in one direction or the other (avoiding “sideways” at all costs) with 100% conviction. I have absolutely no concern where the market is going – only in that, I am going with it. I don’t cling to any idea what so ever that the “world is a beautiful place” or opposite “the apocalypse is upon us” – zip , nada , zero as it pertains to my account balance.

This is trading like a gorilla.

You will have to evaluate/ re-evaluate  your current “animal character” very soon in that – whatever you’ve been doing has likely not been working….and whatever anyone else is “telling you to do” is suggestive that what “they are doing”  – isn’t working either.

I expect to enjoy these last few weeks of 2012 – and possibly the first few of 2013 before things really start to get complicated. With the printing presses of both Europe and the U.S cranking away and the conflicts in the Middle East broiling, it’s going to take a lot hard work to squeeze out those dollars in 2013 – 14.

I imagine some bulls will make money…. and some bears……..but we gorillas will make more.

Where do you think things are headed in the coming year?