USD higher, existing home sales fall and equities slide
* JPY: Lower, January exports fall sharply, downside limited by gains in cross to Europe
* EUR: Lower , pressured by Ukraine downgrade, record drop in German GDP, weaker Dow
* GBP: Lower, UK GDP contracts most in 28 years, EU officials express concern about weak GBP
* CAD and AUD: AUD and CAD lower, pressured by risk aversion, S&P sees more debt downgrades
Overview
USD traded higher supported by report that Japan's January exports dropped sharply, UK GDP posted the biggest contraction in 28 years, German GDP posted its biggest GDP contraction on record and S&P downgraded the Ukraine debt rating. S&P warning that more debt downgrades are likely rattled equity markets and supported USD on safe haven demand. The USD extended its rise after the release of US existing home sales supported by safe haven flows as US equity markets slide. US January existing home sales fall 5.3%, a 1.1% rise was expected. USD extended today’s rise post release of US existing home sales decline, tracking a drop in US equities. Risk appetite improved Tuesday and global equity markets rallied in reaction to comments by Fed GDP Bernanke that US banks may not need to be nationalized. Global equity market gains were limited by report that S&P sees more sovereign debt downgrades in 2009 and by concern about deepening US recession as January existing home sales drop sharply. EIA Petroleum inventories for the week ending in February 20th rise 700K, a 2.2 Billon rise was expected. The EIA report supported crude prices. Firmer crude prices failed to boost demand for commodity currencies as USD is supported by safe haven flows. AUD and CAD traded lower pressured by the return of risk aversion.
On February 26th, US initial jobless claims for the week ending in 2/21 will be released expected at 630 K. January durable goods and February new home sales will also be released on February 26th. January durable goods are expected at -2.5% compared to -3% last month. New home sales are expected at 330 K compared to 331K last month. On February 27th, Q4 GDP will be released expected at -4.5% compared -3.8% last quarter. February University of Michigan consumer sentiment and Chicago PMI will also be released on February 27th. University of Michigan sentiment is expected at 60 compared to 61.2 last month. Chicago PMI is expected at 33.8 compared to 33.3 last month. Based on today's USD rally, negative US economic data continues to support the USD with USD price direction tracking US equities and risk sentiment.
source: http://www.fxstreet.com
Mistakes in a Trading Environment
In the trading environment, when you lose a trade, what is the first idea that pops up in your mind? It would probably be, “There must be something wrong with my system”, or “I knew it, I shouldn’t have taken this trade” (even when your system signaled it). But sometimes we need to dig a little deeper in order to see the nature of our mistake, and then work on it accordingly.
When it comes to trading the Forex market as well as other markets, only 5% of traders achieve the ultimate goal: to be consistent in profits. What is interesting though is that there is just a tiny difference between this 5% of traders and the rest of them. The top 5% grow from mistakes; mistakes are a learning experience, they learn an invaluable lesson on every single mistake made. Deep in their minds, a mistake is one more chance to try it harder and do it better the next time, because they know they might not get a chance the next time. And at the end, this tiny difference becomes THE big difference.
Mistakes in the trading environment
Most of us relate a trading mistake to the outcome (in terms of money) of any given trade. The truth is, a mistake has nothing to do with it, mistakes are made when certain guidelines are not followed. When the rules you trade by are violated. Take for instance the following scenarios:
First scenario: The system signals a trade.
Signal taken and trade turns out to be a profitable trade.
Outcome of the trade: Positive, made money.
Experience gained: Its good to follow the system, if I do this consistently the odds will turn in my favor. Confidence is gained in both the trader and the system.
Mistake made: None.
Signal taken and trade turns out to be a loosing trade.
Outcome of the trade: Negative, lost money.
Experience gained: It is impossible to win every single trade, a loosing trade is just part of the business; our raw material, we know we can’t get them all right. Even with this lost trade, the trader is proud about himself for following the system. Confidence in the trader is gained.
Mistake made: None.
Signal not taken and trade turns out to be a profitable trade.
Outcome of the trade: Neutral.
Experience gained: Frustration, the trader always seems to get in trades that turned out to be loosing trades and let the profitable trades go away. Confidence is lost in the trader self.
Mistake made: Not taking a trade when the system signaled it.
Signal not taken and trade turns out to be a loosing trade.
Outcome of the trade: Neutral.
Experience gained: The trader will start to think “hey, I’m better than my system”. Even if the trader doesn't think on it consciously, the trader will rationalize on every signal given by the system because deep in his or her mind, his or her “feeling” is more intelligent than the system itself. From this point on, the trader will try to outguess the system. This mistake has catastrophic effects on our confidence to the system. The confidence on the trader turns into overconfidence.
Mistake made: Not taking a trade when system signaled it
Second Scenario: System does not signal a trade.
No trade is taken
Outcome of the trade: Neutral
Experience gained: Good discipline, we only need to take trades when the odds are in our favor, just when the system signals it. Confidence gained in both the trader self and the system.
Mistake made: None
A trade is taken, turns out to be a profitable trade.
Outcome of the trade: Positive, made money.
Experience gained: This mistake has the most catastrophic effects in the trader self, the system and most importantly in the trader’s trading career. You will start to think you need no system, you know better from them all. From this point on, you will start to trade based on what you think. Confidence in the system is totally lost. Confidence in the trader self turns into overconfidence.
Mistake made: Take a trade when there was no signal from the system.
A trade is taken, turned out to be a loosing trade.
Outcome of the trade: negative, lost money.
Experience gained: The trader will rethink his strategy. The next time, the trader will think it twice before getting in a trade when the system does not signal it. The trader will go “Ok, it is better to get in the market when my system signals it, only those trade have a higher probability of success”. Confidence is gained in the system.
Mistake made: Take a trade when there was no signal from the system
As you can see, there is absolutely no correlation between the outcome of the trade and a mistake. The most catastrophic mistake even has a positive trade outcome, made money, but this could be the beginning of the end of the trader’s career. As we have already stated, mistakes must only be related to the violation of rules a trader trades by.
All these mistakes were directly related to the signals given by a system, but the same is applied when getting out of a trade. There are also mistakes related to following a trading plan. For example, risking more money on a given trade than the amount the trader should have risked and many more.
Most mistakes can be avoided by first having a trading plan. A trading plan includes the system: the criteria we use to get in and out the market, the money management plan: how much we will risk on any given trade, and many other points. Secondly, and most important, we need to have the discipline to follow strictly our plan. We created our plan when no trade was placed on, thus no psychology barriers were up front. So, the only thing we are certain about is that if we follow our plan, the decision taken is on our best interests, and in the long run, these decisions will help us have better results. We don’t have to worry about isolated events, or trades that could had give us better results at first, but then they could have catastrophic results in our trading career.
How to deal with mistakes
There are many possible ways to properly manage mistakes. We will suggest the one that works better for us.
Step one: Belief change.
Every mistake is a learning experience. They all have something valuable to offer. Try to counteract the natural tendency of feeling frustrated and approach mistakes in a positive manner. Instead of yelling to everyone around and feeling disappointed, say to yourself “ok, I did something wrong, what happened? What is it?
Step two: Identify the mistake made.
Define the mistake, find out what caused the mistake, and try as hard as you can to effectively see the nature of that mistake. Finding the mistake nature will prevent you from making the same mistake again. More than often you will find the answer where you less expected. Take for instance a trader that doesn’t follow the system. The reason behind this could be that the trader is afraid of loosing. But then, why is he or she afraid? It could be that the trader is using a system that does not fit him or her, and finds difficult to follow every signal. In this case, as you can see, the nature of the mistake is not in the surface. You need to try as hard as you can to find the real reason of the given mistake.
Step three: Measure the consequences of the mistake.
List the consequences of making that particular mistake, both good and bad. Good consequences are those that make us better traders after dealing with the mistake. Think on all possible reasons you can learn from what happened. For the same example above, what are the consequences of making that mistake? Well, if you don’t follow the system, you will gradually loose confidence in it, and this at the end will put you into trades you don’t really want to be, and out of trades you should be in.
Step four: Take action.
Taking proper action is the last and most important step. In order to learn, you need to change your behavior. Make sure that whatever you do, you become “this-mistake-proof”. By taking action we turn every single mistake into a small part of success in our trading career. Continuing with the same example, redefining the system would be the trader’s final step. The trader would put a system that perfectly fits him or her, so the trader doesn’t find any trouble following it in future signals.
Understanding the fact that the outcome of any trade has nothing to do with a mistake will open your mind to other possibilities, where you will be able to understand the nature of every mistake made. This at the same time will open the doors for your trading career as you work and take proper action on every mistake made.
The process of success is slow, and plenty of times it is attributed to repeated mistakes made and the constant struggle to get past these mistakes, working on them accordingly. How we deal with them will shape our future as a trader, and most importantly as a person.
Taken from : http://www.straightforex.com
WORLD FOREX: Euro Extends Gains Vs Dlr On US Stocks
The Dow Jones Industrial Average was recently up more than 80 points on the day, discounting a disappointing U.S. jobs report and focusing instead on a potential economic stimulus package ahead of a press conference scheduled for next week by new Treasury Secretary Timothy Geithner.
"There is little doubt that the U.S. non-farm payrolls report was extremely weak," said Vassili Serebriakov, a currency strategist at Wells Fargo Bank in New York. "Over the past few days the foreign exchange market has tried to lean on positive developments - better-than-expected Purchasing Managers Index numbers in Europe and the U.S., a modest rebound in equities, and hope of fiscal stimulus and a move towards government guarantees for toxic assets in the U.S."
That optimism is encouraging risk appetite among currency traders Friday. They sold off both the dollar and yen, considered safe-haven assets.
Alan Ruskin, head of international currency at RBS Greenwich Capital, noted that investors are also unwilling to let go of their riskier positions ahead of Geithner's address.
The euro gained as high as $1.2894 and Y118.35 Friday morning. The dollar also rose against the relatively safer yen, to Y91.85.
Friday morning, the euro was at $1.2877 from $1.2798 late Thursday, while the dollar was at Y91.70 from Y91.18, according to EBS. The euro was at Y118.12 from Y116.76. The U.K. pound was at $1.4662 from $1.4635 and the dollar was at CHF1.1684 from CHF1.1706 late Thursday.
Nonfarm payrolls in January tumbled 598,000, the U.S. Labor Department said Friday, the most since December 1974 and above the 525,000 drop Wall Street economists in a Dow Jones Newswires survey expected. December was revised to show an even steeper decline of 577,000.
The data were worse than expected, but "nothing catastrophic," said David Powell, a currency strategist at Bank of America in London. "There is already a very bad amount of news being priced into global equity markets, and this report doesn't give us a new leg down in risk."
Elsewhere, Canada also reported disappointing employment data Friday, sending the Canadian dollar down sharply.
Canada Morning
The Canadian dollar dropped rapidly in response to news that Canada lost 129,000 jobs in January, sharply weaker than the expected loss of 40,000 and the largest single monthly job loss on record.
The U.S. dollar surged to the C$1.2478 area immediately after the 7 a.m. EST (1200 GMT) release from about C$1.2427 just before. It subsequently registered a session high at C$1.2541, its highest level since Jan. 23, before receding.
The dollar was recently at C$1.2478 again as risk appetite returned.
-By Riva Froymovich, Dow Jones Newswires; 201 938-5063; riva.froymovich@dowjones.com
(Don Curren in Toronto contributed to this report.)
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WORLD FOREX: Euro Extends Gains Vs Dlr On US Stocks
By Riva Froymovich
Of DOW JONES NEWSWIRES
(END) Dow Jones Newswires
February 06, 2009 09:56 ET (14:56 GMT)
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