Beating The Currency Markets by Azeez Mustapha
Make It A Graceful Exit
It may seem impossible, but it can be done. Find out how.
Trading with the flow of the markets means entering highreward
and low-risk settings, and taking a small loss
if something goes wrong. We often think that a small
loss will be sustained when trying to pinpoint a turning
point in the market, but that may be unrealistic, especially if
the supposed turning point becomes spurious. How can you
overcome this challenge by using a few popular indicators?
How can you recognize true dips or rallies in the context of an
ongoing trend? How can you recognize a trap that may plunge
you against a serious reversal? How can you exit properly and
safely? This article will try to answer these questions.
It is well known that buying the dips in an uptrend and selling the rallies in a downtrend offers the best trading probability.
Hence, the strategy discussed here trades pullbacks
only (not breakouts).
Some people like to do nothing but trade. They are soldiers,
pure and simple, on the battlefield of the financial markets. For
them, trading has become a calling. However, each trader’s
mindset differs, and studies have shown that most traders spend
more time in positions that are showing positive returns.
Indicators and open trades
The market can be in one of these three phases:
* A bull market, where buyers gain the upper hand
* A bear market, where sellers gain the upper hand
* A ranging market, where supply & demand reach
Historical data may be adequate to measure past price behavior,
but price will do what it wants. It may move up, down,
or sideways. When we place an order, our portfolio is subject
to pecuniary uncertainty, and our temperament is also on the
line. Staying glued to the screen as you monitor open positions
(for example, when there is negativity) may undermine your
fortitude. Staring at your screen and wanting a negative position
to turn positive has nothing to do with what the market
is really doing. In fact, monitoring your trades 24/5 will only
entice you to carry out irrational reactions that may untimely
have an adverse effect on your trading.
The indicators used for this strategy are the linear-weighted
moving average (LWMA) and the commodity channel index
(CCI). More specifically, these indicators are the following:
* 30-period LWMA
* 50-period LWMA
* 14-period CCI
For details on how to calculate the LWMA, see sidebar
“Linear-Weighted Moving Average.” The CCI is an oscillator
developed by Donald Lambert in 1980 to indicate whether a
trend is beginning or ending.