Forex Market Notes For The Week

It was a very volatile week where we saw the Euro climb continue its upward press to the tune of 1290 pips only to top out and then fall 895 pips; all inside of 1 week! It's not very many times where you will see the Euro outpace the GBP in range. GBP made an early run in the week climbing a little over 800 pips, only to later lose all the ground gained by falling 910 pips. Those of you who have been trading for a few years may remember the Euro being good for 70-100 pips on a good volatile day; now we're getting that much in a 1 hour candle. This just goes to show you the changes in the market conditions you’ll have to face and be able to adjust to in your trading career.

Those new to trading this year will consider this type movement from the Euro as normal, when in fact it is a result of the economic turmoil throughout the world. At some point the Euro will return to much smaller range days. You’ll now have new trading system developers that have made their automated trading system based on the conditions we have seen this year because this is all they know of the market . Once conditions change they will be at a loss to why the system they developed a few months ago, which was maybe even profitable, no longer works and is actually losing more than it makes now. More on the pitfalls of automated trading systems at a later time, but this is why the most simple of methods will continue to work and stand the test of time. By teaching simple and logical methods through our Forex Education, we are training traders that will be profitable in the market for as long as they choose.

If we look closer at the events that unfolded this week with the Euro, it had many guessing as to where it would finally top out. I myself was very surprised that it met little resistance in the incredible push up this week. When we have these major movements it helps to track price from both a Support and Resistance viewpoint as well as from our longer term Fibonacci levels. In these first 2 examples we look at the overall downtrend that the Euro has been following after its yearly high of 1.6038 to the low of 1.2329; a loss in value of a shade over 23%. These first two examples are from the perspective of longer term Fibonacci. The first chart is the view of a weekly chart (figure 1), the second is the same view but from the 4 hour chart (figure 2) and we can see where price finally met enough resistance to top out at.

Figure 1



Figure 2



We find this move was a 61.8% retracement of the overall current down trend. The 4 hour perspective just gives a more zoomed in view of what we see happening on the longer term time-frames.

Looking at where price is now from a natural support and resistance view, we simply look back to the previous ranging periods in history. Where we are now is in the 1.3850 to 1.4950 trading range from around late 2007 and a few points established early in 2008 and then again later in 2008. If the Euro remains above 1.3850 we can expect it to trade in this range. Figure 3 is a representation of this from a Daily chart

Figure 3



Now If the Euro cannot be maintained in this range we will see it drop back into the range established just below the one in Figure 3. The next example is the trading range we can expect the Euro to trade in if it looses some of the value its gained from the push up in this most recent week. Figure 4 is the trading range just below where price is currently.

Figure 4



So as you can see the Euro has reached a pivotal point where it will decide its next direction. In the following week we should see it establish which range we will see it trade in during the next week or weeks.

Once price decides on the range it will establish itself in, we can go into the next week with an idea of what kind of trading range we’ll be looking for and be better prepared as we enter trades. Now that we’ve looked at the resistance levels price is respecting, we also want to look for the support levels to be aware of. With a combination of Fibonacci and the trading range we found from the Daily chart (from natural support and resistance points that are below the current price) the support picture looks like the chart in Figure 5.

Figure 5


The lesson in this is not to forget the bigger picture, since this is where you establish the expected trading ranges ahead of price. It’s the most simple of things that will work the best in the long run, they always have and they always will. Our human nature causes us to over-complicate things and we are often our own worst enemy in this respect. So don’t forget simplicity.

---

Bobokus.com - Building a community of educated Foreign Exchange traders with the power to consistently profit from logical Forex trading strategies.

Forex Education - Trade Kings Club Introduction Video

I'm proud of the recent launch of bobokus.com and all the work that has gone into it. Not just the site, but the years of hard work put into developing my strategies for profitably trading the Forex market.



A quote from me in the press release:

Founder and head Forex Trader Jeff Sorrells said "Bobokus.com has been a vision of mine for a long time. During my trading career I've seen other struggling traders literally spend 3 to 5 years attempting to become profitable. They become consumed the massive tsunami of counterproductive and often over-complex strategies that flood the internet and most books. Eventually they become discouraged and give up by choice, or due to loss of capital; which is unfortunately more often the case. It does not have to be this way, the market is fairly simple, but you have to learn its language and understand the underlying logic of methods you are using to trade.

With the launch of bobokus.com I can now share specific details on my strategies through logical Forex education. On the site I provide personalized coaching and structured educational resources for struggling traders wanting to get profitable, or profitable traders wanting to get to the next level.

The greatest validation of your trading method is validation by the market itself. This year, more than any in recent memory, has validated for me, the fact that my methods will provide significant and consistent gains no matter what the market throws at you. As traders with a sound trading framework we are insulated from the meyham experienced by most buy & hold style investors this year.

Many new traders will make the assumption that there are secret indicators and methods that only the big banks and traders in the know have access to. This is simply not true. One can chose to either learn to trade or to chase their tail around; continuously searching for some magical trading secret."

Rather than selling traders a Holy Grail of trading, bobokus.com seeks to educate them from the ground up. The foundation for the educational program is that fact that your trading account equity is built, coin-by-coin, based on your skills as a trader and investor.

Evolution Of A Forex Trader

Welcome New Trader, Please Leave Your Money At The Door

There is a common misconception that traders have and it is fueled and then fed on by the trading industry, or more specifically those in the industry that make their living not from trading, but from selling false hope to traders. A large portion of new forex and equities traders are under the impression that it is easy to be a trader. A quick google search on various trading related searches will quickly make you realize how so many are led astray and believe it is as easy as the marketers proclaim. I recently came across a post on a prominent traders forum, the question from the poster was this (word for word):

"Hey Guys, There Is A New Forex Trading Robot - ______.com, anyone hear of them?"

I've omitted the address, but I did go to the site and shockingly (*sarcasm) it was no longer there. There seems to be a bit of debate online, in paranoid circles, on whether or not we should be afraid that robots will one day take over our jobs, then eventually the world. Well I don't really have much to say about that, but I can tell you that if you ever see anything about a Forex Trading Robot, you should be afraid. Grab your money and run for your life! The sad fact that people actually pay for stuff like this makes it all the more easy for those with negative intentions in the industry to continue feeding naive new traders counter productive crap and downright scams.

The Web of The World Wide Web

The age of easy access to information now seems to have a negative flip side. The same easy access that can sometimes seem like a godsend, also allows a pile-on of bad information or content of little value which can lead you astray. Many older traders did not have to go through this as they were mentored by another successful trader or forced to learn through long tiresome study of charts and the live market. The common path for an aspiring trader these days is to pop open their web browser and begin searching for information to apply immediately in their live account. The problem is that their search often leads them to destinations which are infected by viruses of bad ideas, negativity, indicator obsession, and other road blocks to lead the knowledge seeker off their path. Even many of the books sold these days are filled with recycled concepts or hacked together strategies which the authors do not even use. The problem with this new found easy access to information, at least when it comes to the trading profession, is that trading remains a discretionary field, their is no clear path to success. There is no series of text books and exams that will graduate you as a trader. The same easy access to information that may be a godsend for other fields of study, can be a curse in our profession and might even make it harder to achieve success than it was 20 years ago. Add to this the continual barrage of sites with guru's who fuel the idea that trading is easy, then financially feed off those same people they have sold this idea to. At the end of the day what many of them offer is a gross misrepresentation of what it takes to trade for a living. Trading is far from easy. You know you have become a good trader when your are trading with profitably with ease, but that does not mean it is easy. At a certain point you will be at a stage where you are calm and at ease when entering and exiting trades, but the reality is it is still hard work and must be treated as a career.

The effect of much of the bad information you come across is that it leads many traders start off overly optimistic. Now don't get me wrong, having a positive attitude and being optimistic is a great thing, but not when the foundation for your optimism was built to crumble. Would-be new traders start by jumping right in to the live market after getting a hold of some set of indicators or "secret" set of moving averages and they are quickly punished for their naivety. Being led astray is not the fault of a new trader, In fact many now successful traders went through this learning process. It only becomes your fault if you continue to allow yourself to be led astray. A break from this cycle, and your first step back on the road to success, comes when you realize that the majority of those piling on this information will not help you nearly as much as you can help yourself. You help yourself by beginning to think for yourself and accepting the reality that you cannot just decide to "Be" a trader, rather you have to decide to "BECOME" a trader.

BECOME A Trader

The faster a new trader can make the mental shift to "I am going to become a trader" the faster they will get to the goal line where you can say "I am a trader."

To be a trader is easy, all you need is an account with money in it then you enter the market and start trading. To become a trader is more work. Becoming a trader involves you going through an evolution from the starting point of little knowledge to the point of having a tradeable framework, knowledge of the behavior of the market you trade, and a cool head while taking wins and losses. To Become a trader you must:

Begin With Humility

Emphasize Equity Management

Create Your Market Lens

Operate Like a Surgeoun

Maintain Your Mind

Expect The Unexpected

BEGIN WITH HUMILITY

This is very important when you are starting your trading career. You must come to terms with the fact that you are a small fish in a big ocean. The big fish will happily enjoy you as a little snack. When you enter the Forex market most of the liquidity is coming from big banks and experienced traders. Don't for a second start off by thinking that it will be easy to take these big traders money out of the market. What you have to learn is to swim along side the big fish, catch the same currents they do, don't swim against them or they will eat you up in passing.

A funny misconception is that these big traders must have access to some holy grail strategy or use some secret indicator, but this is plain and simply not true. Online you can find access to daily bank analyst reports on currencies. Analysts at the biggest banks in the world generate these reports which are then sent off to their trade desks for the bank's traders to consider. In these reports you will find simple, but proven technical analysis techniques - most commonly horizontal support/resistance, identification of trading ranges, Fibonacci, and fundamental themes. Begin by accepting that the other participants are highly experienced in the market and then learn to trade like them. They make money because of experience, not because they hold a holy grail or secret indicators.

EMPHASIZE EQUITY MANAGEMENT

It is crucial that as a beginning trader your emphasis is not on how much you can make, but rather how you can properly manage what you have. This is most likely to be the downfall of traders. It would be common place to see a starting trader risk their entire account on one or two positions. This is not the way to a sustainable trading career and this is not how the professional traders you are up against in the market manage their risk. At some point in your trading career you will likely have a string of bad trades. A reasonable number might be 10 losing trades in a row. Are you managing your equity in a way that you can survive this?

The solution is using simple formulas to calculate your maximum risk per trade and total risk in the market at any one time. Doing this is not difficult, but you must have the discipline to follow through with it on each and every trade.

CREATE YOUR MARKET LENS

Many fail to realize that when you open your charting software and pop on the latest hot indicator or charting tool you've heard works so well, you are extremely unlikely to see much success from it. This is because an indicator on a chart does not provide you with a market lens to trade from. Your market lens comes from experience. It comes from knowing how the market behaves around your chosen framework.

There are many traders that are profitable with various indicators or tools such as fibs, pivots, price channels, MACD, etc. But the tools they have chosen are not what is making them profitable. A common theme between successful traders is that they have the experience of seeing how the market behaves around their chosen tools and framework, day in and day out. The only way to achieve this is to stop jumping between tools and select those that are based on logical reasoning, understand how they work, then spend time in the market experiencing them.

OPERATE LIKE A SURGEON

It should be your goal to take your pips out of the market with precision, the same precision a surgeon must use with his scalpel. Traders who don't treat each trade as a business decision by calculating their risk and defining entries and exits, open themselves to big losses when a trade goes bad.

Once again it is a novel concept which you will hear again and again, but for some reason it is difficult for many traders to exercise the discipline to follow a plan for each trade. Instead what often happens is what I call the "Lazyboy Trade." The trader sees a potential set-up, Decides on some arbitrary sum to buy with a quick guesstimate, then carelessly gets in the trade without analyzing risk and having an exit strategy. The Lazyboy Trade may work out a few times solely because of luck, but eventually the trader wakes up from a nap to find themselves under water in a position and that's the end of their trading career. Now there's nothing wrong with trading from your Lazyboy, but be sure you never partake in the Lazy Boy trade and you must exercise discipline each day to keep your account healthy.

MAINTAIN YOUR MIND

Entire books have been dedicated to the subject of psychology and its role in trading. That doesn't mean they are all going to help you, but you should take this as a sign that the subject is not to be ignored. Like a professional athlete must maintain their fitness at a level that allows them to compete at the top, we must maintain our mind because it is relied on each and every day to trade at the top of your game.

This comes down to a few things. First you must understand the role psychology plays in trading. Second you must make it your aim to never stop learning. You cannot get yourself to a certain level and then become complacent. Your entire career in this industry will be a learning experience. Until the day you stop trading you must be prepared to learn lessons from the market and be willing to do R&D and testing of newly gained knowledge, just as a business would Invest in R&D.

EXPECT THE UNEXPECTED

I'm writing this at the end of 2008 which has been quite a wild year in the markets. We've seen bank runs followed by bail-outs, brokerage bankruptcy's, government intervention in free markets, housing bubbles exploding, and a global deleveraging of the financial system of historical proportions. At the beginning of the crash it seemed like every other week the market was being saved by rumors of Warren Buffet buying out struggling companies. Now we see pundits questioning the savvy of the oracle himself as he loses large sums on the same derivatives he once criticized as a bad idea and sees his prized AAA credit rating for Berkshire being threatened. Did anyone expect to see that?

These are indeed interesting times, but there is one thing every investor needs to learn. Expect the unexpected and do not get wrapped up in the euphoria of those around you. There will always be bubbles, crashes and threats to your profitability, but as long as you maintain and objective outlook and think for yourself you will have a feast when there is famine for those who are caught up in the hype.

Allow Yourself To Succeed

By putting in the effort to BECOME a trader you allow yourself the opportunity to one day evolve from saying "I am going to become" a trader to "I am a trader." And that is the ultimate reward.

To say "I am a trader" is a great privilege and achievement, it means you have done something that around 95% of those who tried could not. Congratulations to those who can make this statement and for those just beginning this journey start your evolution by allowing yourself to BECOME a trader.

The Real Bo'Bokus & My Forex Trading Background

BoBo... What?
Now a little insight into who I am. Online i've been known as Bo’Bokus. That screen name comes from something my Grandmother said to get us as kids to sleep at night, I can still remember her saying that "if we didn’t get to sleep Ole Bo’Bokus would get us." The name has just kind of stuck with me and somewhere along the way it evolved into my own nickname.

My real name is Jeff Sorrells I am 43 years old and retired. I am from Alabama, and yes I am a redneck, but proud of it. I didn't attend college as I didn’t feel I needed it. Instead I joined the US Navy after high school, I thought joining the biggest party in the world would be more fun than continuing with school. I finished my term with the US Navy and although it was fun and I did see things I never thought I would, I knew it wasn’t for me.

My destiny was yet to materialize. My entire life I’ve always had a sort of knack with math and I’ve always been interested in the stock markets and how they worked. During my short career in the US Navy there was one experience that stuck with me the most. While overseas, especially in the European countries, I learned something from the old timers. During our deployments we were sometimes given several thousand dollars for per diem. They would take the money and go back and forth to the local banks in whatever country we were in at the time. I asked and found out they were exchanging their cash back and forth with the banks to try and make a profit from the exchange rate as it changed from day to day. They wouldn’t make very much, maybe $20 sometimes, but it got the wheels going. Soon it was all I could think about, I got a notebook, a calculator and a pen, which soon turned into several notebooks of me playing with the numbers and exchange rates. I theorized that if you could do this on a daily basis and trade these currency pairs back and forth several times per day a fortune was there to be made. I knew this was the career for me everything just seemed to fit.

To The Boiler Room And Back
The heart breaking part came when I found out that only International banks were trading currencies at the time, we didn’t have what we have today with the retail side of forex trading, it was simply non existent. Years later back in the civilian world I thought I would do the next best thing, I would go to school and become a stock broker and at least I would be trading. After getting my series 6 and 63 licenses I went to work for a broker in Atlanta and things turned into a fiasco. It didn’t take me long to figure out that you don’t just go to the trading floor. I was stuck at a long desk with other new hires and all we did was call on what seemed to mostly be older retirees. Our job was to try to sell them on whatever new mutual fund the company had put together. I didn’t last long there as every call I made felt like I was talking to my grandmother and trying to convince her to invest into a fund that I had absolutely no faith in myself. After not very long I left and went back to what I knew how to do utilizing my experience as an aircraft electronic tech in the Navy.

One night after work I was surfing the Internet doing random searches, when I found an advertisement for a retail forex broker and as I read on It felt like I had just been reborn. Finally forex was available to the general public through these new retail brokers. My lifelong dream was a reality!

Adventures In Forex
My stab at self employment had basically emptied everything I had built up over the years in savings, but I didn’t care, I immediately opened a live account with what I felt I could afford to loose. At the time this was a whopping $1,000. Heck I figured with my "knowledge" I would turn this into $10,000 in no time. I couldn’t have been more wrong as I proceeded to lose almost every penny in the account and was in denial about losing it. Surely I didn’t really loose all that over the course of 1 month? but I did. Being in denial I Immediately re-funded the account with another $1,000 and went right back into the same habits. My story really isn’t any different than what I’m sure a lot of you have experienced, I lost both of those accounts and that it couldn't happen because I knew what I was doing.

I started looking around for different brokers and found the MT4 platform with basically unlimited amounts of adjustability in the indicators and charts. This time I thought maybe I should learn more about Forex and try these demo accounts to actually test some things before I throw real money at it. I went the very same route everyone takes, I tried every single method I could get my hands on, tried all the different indicators, I even taught myself some coding so I could take the indicators out there and rewrite them to my purposes, nothing worked over an extended period of time. So I started to ponder, what techniques have been used over the longest period of time and what are the majority of the big traders using. I came to the conclusion it’s the simplest of things that really worked. Basic support and resistance. It’s the simplest but makes the most sense. I sat down in front on my cpu for at least 12 hours a day until I found how it could be traded successfully.

I found that using Fibonacci also helped so I began working with fibs and even looked into getting professional training for using them to trade support and resistance, that idea was scrapped when I found out how much the cost was to get professional training, wow it was expensive. 10 years ago I could afford it, but now no way. I had to find my own way of using them so I did. I spent another year of sitting in front of the computer with demo accounts until I found they weren’t so complicated and I simplified the use of them by splitting the market between a long and short condition with the fib tool and everything started to come together. It took a long time to trade my way back to being profitable because I found that after loosing my first 2 accounts I became somewhat gun-shy about entering live trades. It was difficult to trade with real money again even though my back testing and the results in the demo accounts were unmistakable. I was trading with money I could not afford to loose and this to me is almost a death sentence to a trader. In the back of my mind though I knew I could not give up yet, this was the dream I’ve always had and here it is and I’m doing it. I traded feverishly for the next year or so.

I traded my way out of the hole I dug and actually made back my $2,000 original investment and for the first time withdrew around $3,500 leaving about $2,000 in my live account. Certainly not the results I had originally dreamed of. At this point I even thought of giving it up because now that I was profitable I felt a lot of pressure to continue to be successful. Once again it was difficult to pull the trigger on a live trade, my fear of loosing was powerful since I really could not afford to loose. If I lost what had left in my account I would not refund it again or I would be back to square one again.

A Final Turning Point
In one final twist an opportunity came up to trade someone else’s money for them, having limited capital myself at the time, I figured what the hell. After all I turned out a 550% profit in my account so if I traded theirs with caution I could earn close to that and a hefty commission to boot, which I could in turn use in my own account. This added an entire new dimension of pressure and needless to say the psychology prevented me from trading as I normally would.
It was also one of the worst ranging periods you could imagine. I had only made a few trades in the span of about 2 weeks and was down about 40 pips. It could have been worse, but I knew I needed to focus first on myself and my own account.

This is the point I knew it was time to put up or shut up, what in the world was I thinking, I myself had forgotten who I was and what I was capable of. I was letting others determine my future and my decisions were being swayed. Never again have I looked back, I began to trust myself and this was the most important turning point in my trading career. The thing I wanted the most was to retire and become a full time trader since I was still working full time throughout this. I couldn’t retire until I could relieve myself and my family of our debts. It was a hard road and you will never hear me ever say that trading is easy, it’s never easy. I fully understand why so many fail at trading now. I am retired now and all I do is trade. It almost killed me, but I am living that dream now and nothing that anyone says, thinks, or does can change that.

This is my background and where I am coming from. I started with basically nothing and still by no means do I consider myself wealthy yet. I still do not own my own International bank, that’s my next goal.