Newsletter: 2 April 2023
What's Going On In Markets?
It’s been a great week for so-called “risk-on” assets, with the likes of the NASDAQ 100 rising by more than 4% since a week last Friday to set a fresh 7-month high.
NASDAQ 100 Daily Chart
Oil continued its turnaround from the 1-year+ low seen earlier in the month. Since 20 March, oil has risen by more than $11 a barrel – that's a 17% rally in under two weeks.
West Texas Crude Oil Hourly Chart
What’s next week going to bring – can we really expect the strength into the end of the month to continue? There are a few major announcements that are worth keeping your eye on.
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I tend to only pay attention to the really important market announcements – there is so much news in this day and age and so much general noise around financial markets that it can be a distraction from your trading. The free economic calendar I use is this one here from FX Street. One of the reasons I like this is because it colour codes the announcements by perceived importance, making it easy to see what is relevant in the weeks ahead.
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The major announcement next week is a bit of an odd one at this time of year.
It’s the US Non-Farm Payrolls data – the monthly employment figures. This is coming out as it usually (but not always) does on the first Friday of the month. It is just this time around that it is Good Friday so many markets will be closed – and those that may be open (foreign exchange and out of hours indices perhaps?) will have much lower volume than usual.
Regardless of what the Non-Farm Payrolls data shows, there is always the potential for some extreme moves in “thin trading”.
Trading Tip: How To Stop Being A Losing Trader
During the week, I always think about what to write in the ‘Trading Tip’ section of the newsletter. And I keep coming back to the same thing, the reality of trading.
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Most people lose money.
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Having worked in and around the trading industry for more than 20 years it really is an odd one – most of your customers are going to have a negative experience. So how can losing traders change that?
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Since 2018, European regulated brokers have had to show in their risk warnings the percentage of clients who lose money when trading with them.
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At least three quarters of people are losing traders. And of course, this doesn't mean that the remaining 25% are making a fortune. A large proportion of those may be just breaking even or slightly profitable on their trading. So, what can losing traders do to try and reverse the process?
Stop trading
This isn’t a clever marketing paragraph that is going to twist around at the end and say you should carry on trading. It's actually the easiest way to stop losing...
Why not stop trading altogether and try and do something potentially more profitable, for example longer-term investing, rather than just being another statistic when it comes to shorter-term trading? More than 75% of people lose trying to trade – what makes you think your experience will be any different?
There is a great quote that has stuck with me over the years:
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Trading is the hardest way to make easy money
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Too many people come into it thinking it’s a few clicks per day and then you are done by lunchtime, with your trading account a bit richer. The numbers from the actual brokers show us this is not the case. So, stop doing it. Go and do something else.
Find out why people lose - and try and avoid doing it
If you are stubborn then you probably don’t want to stop straight away, convinced that for you the experience will be different.
There are lots of reasons why people lose - here is a screen shot from the Artificial Intelligence Bot, Chat GPT when I asked the question.
Click the image to see the full list of reasons.
I'd agree with most of those points. More specifically, one of the biggest reasons is that people cannot cut losses and cannot run profits. If they make, for example $50 on a trade, then they are probably losing nearly $100 on a losing trade. You can’t beat those numbers. Running winners makes a big difference.
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I showed it here in this video from December how it had worked out for my own trading (starts around 8minutes in)
Stop watching the markets all the time
I’m guilty of this from time to time and have drifted back into it in recent weeks. I trade off daily charts and hourly charts. There is NO point in me watching the market minute by minute.
From October through to December I used to look for my set ups twice a day – in the morning UK time and again at the US open. If there was a trade I would place it, put the stop on and set up an alert if the market moved in my favour. Then I would go and do something else.
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I think watching markets too often can definitely kick-off FOMO trading – the fear of missing out. We see a market start to move, think we are going to miss a great opportunity, break the rules “just this once” and do a trade that isn’t really part of our strategy. I think a lot of retail traders have this “gunslinging” approach to trading, and it’s reflected in those winners versus losers stats.
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Take a step back, make considered decisions and then let the market do its thing. Watching it won’t make it move in your favour any quicker.
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And finally, (and this is the marketing message), consider taking my trading course. You can read more about it here. Any questions let me know.
What Am I Trading?
After a frustrating first couple of weeks trading for me in March, the month ended much better. I’ve got a few open trades that I am still in and so far, the FTSE100 trade has been my biggest winner of the past month.
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It was a logical trade to do and definitely helped by the ongoing surge we saw in stock markets for the second half of last week. But it didn’t start well, and I had my doubts at the beginning of the trade.
FTSE 100 Hourly Chart
I did the trade last Tuesday afternoon and it was based on shorter-term charts, not daily charts. There had been a bounce back in the FSTE for the past 2.5 days and as it was selling off Tuesday morning, I thought this was just a pullback. I ended up buying in the afternoon and the market went up for an hour – but then dumped to new lows for the day, which made me think I was too early.
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It’s a great example of how important psychology is in trading.
Just because you or I have decided to buy or sell does not mean the market is going to go your way right from the off. Patience is a virtue. The next day the FTSE recovered and at the end of the week the trade stands around 160 points in profit, with a tight trailing stop behind. let’s see what Monday brings.
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I also went short USD/JPY last week and although that trade ended the week pretty much where I got in, I am not sure it is a great position. I was speculating that the old highs round 134 would stop any rally but Friday saw another higher high for the price so that recovery that has been running for a week is still going in my book.
I have my stop in place if I am wrong and it continues higher.
Who Do I Trade With?
We are spoilt for choice when it comes to brokers and trading platforms and, on the face of it, there is not much to choose between one company and another. Which is an interesting point – if we are all looking at broadly speaking the same information then why do so many struggle to make money?
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An important consideration for me is the analysis of my OWN trades. Where can I improve, where do I have some possible bad habits - and how can I fix it. I made a short video explaining why I trade with who I do – and you can try them out too.
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You can watch the video here.
You can visit the broker to find out more here.
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That's it for this week.
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Good luck with your trading.
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David