FOREX >>> Practice Accounts and “Going Live”

Question:

Hi ZL,

I am looking to nurse my small practice accounts into larger accounts gradually. I am using the Forex practice accounts. Many times I have made mistakes and decimated my small practice accounts, which tells me that I am not ready to do real trading with these accounts. How would you suggest that I nurse these smaller accounts into larger accounts? Thx

.......... from Belinda

Answer:

Hi Belinda,

I have two points for you to consider. The first is that when you trade practice accounts, your mindset is different than when you trade with your hard-earned money. You tend to take more and greater risks with play money, which is good. Aside from teaching you the mechanics of trading, practice trading teaches you about taking risk. So, take your time and don’t worry about losing.

Having said that, in order to stop losing, you have to teach yourself a new mindset when trading practice accounts. You have to move to the other extreme and become more conservative, take less risk. Make smaller trades with tighter targets. Slowly build up your practice accounts with small profits. Teach yourself to think as if it were your money on the line. It will take time, but you can do it. When you consistently start taking small profits, you might well be ready.

The second point is that at some point you will have to drop the training wheels, if you want to trade. Eventually, you will have to test your abilities with real money. The time may be sooner, or it may be later. Either way, you will know the time because you will “feel” the confidence to make the move. You will know, and until you know, keep practicing will your small accounts. Keep in mind, when you do “go live,” stay conservative, even if it means taking small losses.

The one thing to remember is that the only difference between trading practice accounts and real money is you, the mindset you bring to the game. This, my friend, will prove to be the difference between success and failure, assuming you do all your work and learn how to trade, assuming your personality and emotional makeup “work” in the trading world.

Trade in the day; invest in your life …

Regards,

ZL

TECHNICAL ANALYSIS >>> Composite Index 24/11/2009 / 综合指数 2009年 11月 24日

Composite Index 24/11/2009
On Tuesday, the FBM KLCI was supported by the 1270 Fibonacci Retracement, and rebounded to close at 1272.09 points, upped 1.21 points. However, it is still resisted by the Bollinger Middle Band. Therefore, the Bollinger Middle Band is still the immediate resistance for the KLCI while other resistance is at 1300 level. 1270 Fibonacci Retracement is still the support for the KLCI.

As shown on the chart above, the Bollinger Bands is still contracting, suggesting that the KLCI is still consolidating. Nonetheless, since the Bollinger Bands is now very narrow, it implies that the consolidation is near its end, and when the Bollinger Bands should re-expands, it would be a signal of a beginning of a new movement, and the direction of the new movement shall be determined by the relative position of the KLCI above or below the Bollinger Middle Band.

As indicated by B, total market volume declined 6%, with volume below the 40-day VMA level. This suggests that the market is now relatively quiet as the KLCI is consolidating. Technically, it is normal to have lower volume during a consolidation. But if the KLCI should its uptrend, volume above the 40-day VMA level is a must, in order to sustain the rally.

As circled at C, the Stochastic is testing the 30% level. Therefore, it has not shown a short term bearish signal for the KLCI yet. If the Stochastic should break below the 30% level, it would be a short term bearish signal for the KLCI, and the short term movement for the KLCI is expected to be on the negative side.

In short, the KLCI is still consolidating while preparing for a new movement. If the Bollinger Bands should re-expand with the KLCI above the Bollinger Middle Band, it would be a positive signal for the new movement. Otherwise, if the KLCI should stay below the Bollinger Middle Band as the Bollinger Bands re-expands, it would be a bearish signal for the KLCI.

综合指数 2009年 11月 24日
富时综合指数在1270点的费氏线支持水平稍微回弹1.21点，以1272.09点闭市，惟综指在布林中频带（Bollinger Middle Band）遇阻，所以这布林中频带是综指当前的动态阻力线，综指另一道的阻力水平是1300点的心理阻力关口，支持水平则是1270点的费氏线。

如图所示，布林频带（Bollinger Bands）进一步收窄，这显示综指依然维持调整巩固的格局，无论如何，这非常窄小的布林频带亦表示综指已经接近摆脱当前僵局，因为接下来只要布林频带开始打开，那综指将会出现一个新的趋势，而新的趋势将取决于综指当时处于布林中频带的相应位置。

如图中箭头B所示，马股总成交量减少6%，这使到成交量继续处于40天的成交量平均线（VMA）以下。这表示马股的交投在巩固格局中的淡静，以技术而言，当市场处于巩固时，成交量萎缩是很正常的，但是若综指要恢复上扬格局时，成交量就必须增加并且重返40天的平均值以上，那么涨势才有望维持下去。

如图中C圈所示，随机指标（Stochastic）在30%的水平回弹，所以综指的短期并未出现下跌的确认讯号，若随机指标能继续上扬的话，那综指的短期走势将有望开始转强。反之若随机指标跌破30%，那综指的短期走势将会技术上形成下跌的趋势。

总的来说，综指目前正处于一个调整巩固的格局，由于布林频带收窄，这也意味着综指正在酝酿一个新的趋势，接下来当布林频带开始打开时，那综指将摆脱目前的横摆巩固格局，而开始一个新的趋势，惟行趋势将取决于综指届时处于布林频带的相应位置。

Rains bring prospects of new highs for crude palm oil futures

OBSERVATIONS: Rising floodwaters in most parts of the country lifted the Kuala Lumpur CPO futures market to a 14-week high last week. And if the weatherman’s forecast is any guide this market can expect to hit new highs in the near-term future.

The actively-traded February 2010 contract settled at the intra-week high of RM2,486 a tonne, over the week. Closing at the absolute high point of the week’s trading range is a bullish candlestick pattern pointing to more upside movement ahead.

The north-east monsoon which lashed most parts of the country was the principal catalyst behind this market’s well over RM250 leap in price over the past fornight. TV newscasts of the many landslips caused by rainstorms and floods in rural areas contributed to bullish sentiment.

For sure the floods not only haved hampered the harvesting of palm oil fruit, they also must have disrupted the logistics of transporting the fresh fruit bunches to the refineries and palm olein to the ports for export. What’s more, the weather forecast is for more rainstorms – and therefore more floods – in the near-term future.

And fortuitously, at least for market bulls, export market monitors Societe Generale de Surveillance (SGS) and Intertek Agri Services (IAS) chimed in with scintillating export estimates. SGS and IAS’ combined export estimate of an average of some 696,000 tonnes for first half November 2009 was not only the highest for any month-to-date estimate this year, it also was about 126,000 tonnes or 17.0 per cent higher than that for the corresponding period in October 2009. That bodes well for a reduction in end-November 2009 stocks of palm oil.

Conclusion: This market can be expected to make more headway on the upside in early trade this week, before coming up against the immediate RM2,500 a tonne overhead resistance level.

RAIN RAIN DON'T GO AWAY ........ :P

A Game Plan Is What Traders Need

Question:

Hi there ZL ......

Everybody talks about developing a trading strategy. This is difficult when one has not traded before. All is a bit overwhelming at the moment, with little success in the trades already performed. What strategy do you follow that you are successful? Thank you.

......... Elaine from Foolstown.

Answer:

Hi Elaine,

This is about you, not me. What are you willing to do to learn how to trade? Are you willing to stop being overwhelmed and get to work devising your own strategy? If so, consider working with the following strategic outline. Understand, though, in any competitive framework, a strategy is the overall plan and tactics are the “plays” one makes to achieve the strategic goals.

1. Monitor, analyze, and evaluate the overall markets on a daily basis. Learn the ebb and flow. Learn the intermarket relationships that affect the ebb and flow.

2. When the overall market conditions are favorable, search for potential trades in specific markets (ex: forex, commodities, futures, equities), or specific market sectors (ex: technology, retail, biotech, aerospace).

3. When potential trades are found, confirm them with reliable fundamental and/or technical tools, such as financial/economic data or common technical indicators. Select those with the highest probability of success.

4. Evaluate your potential “position” in the trade. Define quantity, cost, profit target, and potential loss. Define entry and exit positions that meet the defined goals.

5.Execute the trade with the defined entry point. Set it and forget it. If you get in, so be it. If not, another trade waits. Immediately set the predefined stop as the downside exit point. Set it and forget it. If you get stopped out, so be it. Another trade waits.

6. Monitor the trade. If it heads toward the stop, let it go. If it heads toward profit, consider adjusting the stop to minimize losses. If it hits or surpasses the profit target, consider tightening the stop to protect profit, otherwise take the profit, and call it a day. If you tighten the stop, and the trade continues moving favorably, consider resetting to a trailing market stop to let the profits run.

7. When the trade is over, evaluate it. What went right and what went wrong? Did you get lucky, or did you execute according to trading plan you devised?

8. Enter the results of the trade in an accounting program.

9. Track your trades, meaning know the win/loss ratios, know the average gain/loss per trade, and know total dollar gain or loss.

10. Start preparing for the next trade.

Keep in mind, the above is a general strategy........

The tactics one uses will vary according to personality, knowledge, experience, and intuition, but one element common to all strategies and tactics is discipline. If you set up a plan, and you meddle with it because you lack faith in it, you will lose. If you meddle because intuition whispers in your ear, that is acceptable, if that intuition derives from years of achieving the goals of a strategy by executing tried and true tactics.

Trade in the day; invest in your life …

Regards,

ZL

TECHNICAL ANALYSIS >>> 综合指数 2009年 11月 23日 / Composite Index 23/11/2009

综合指数 2009年 11月 23日

富时综合指数稍微下滑，惟综指精确的在1270点的费氏线上获得扶持，综指以1270.88点闭市，这意味着1270点继续的成为综指当前的支持水平，阻力水平仍然维持在1300点的心理阻力关口。

如图所示，布林频带（Bollinger Bands）进一步收窄（-31%），所以综指维持在调整巩固的格局，无论如何，由于布林频带收得非常窄小，这显示综指将有望在近期内摆脱调整巩固的格局，所以接下来若布林频带开始打开的话，而综指又能再度回弹至布林中频带（Bollinger Middle Band）以上，那综指将有望恢复上扬的趋势。

如图中箭头B所示，马股成交量减少5.9%，这使到成交量继续低于40天成交量移动平均线（VMA）的水平，这是综指在调整巩固是典型的情形。若综指再度走强时，成交量是得增加至40天成交量平均值以上，那综指上扬的趋势讯号将更有效。

如图中C圈所示，随机指标（Stochastic）跌破50%的水平，这表示综指短期的走势继续转弱，若随机指标跌破30%的话，那综指的短期走势将形成一个下跌的趋势。

总的来说，综指目前正酝酿着一个新的趋势，惟此新的趋势只在布林频带再度打开时才能确定。通常在布林频带开始打开时，综指处于布林中频带的相应位置将是综指新趋势的方向

Composite Index 23/11/2009
On Monday, the FBM KLCI ended slightly lower, while precisely supported by the 1270 Fibonacci Retracement, closing at 1270.88 points. This shows that the 1270 Fibonacci Retracement is still the support for the KLCI while the resistance remains at 1300 psychological level.

As shown on the chart above, the Bollinger Bands contracted 31%, suggesting that the KLCI is still consolidating. Nevertheless, since the band width is now very narrow, it implies that the consolidation of the KLCI is nearing its end. If the Bollinger Bands should re-expands with the KLCI returning to above the Bollinger Middle Band, the KLCI is likely to resumes its uptrend.

As indicated by B, total market volume declined 5.9%, with volume below the 40-day VMA level. This is a typical behavior during market consolidation, as investors are staying on the sidelines while waiting for some fresh leads. Nonetheless, if the KLCI should resume its uptrend, volume above the 40-day VMA level is a very important element to sustain the uptrend.

As circled at C, the Stochastic breaks below 50% level, suggesting that the short term movement of the KLCI is still weakening. If the Stochastic should break below 30% level, it would be a short term bearish signal for the KLCI.

In short, the KLCI is still consolidating while preparing for a new movement; and the direction of the new movement is yet to be revealed, with the expansion of the Bollinger Bands width and the relative position of the KLCI againts the Bollinger Middle Band.

HAPPY TRADING & GOODLUCK2ALL