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<strong>1. INTRODUCTION:</strong>

The “Chop Fest” continues, with a difference. Now we have chop for a few minutes and then I have to keep checking my iCal because it feels like summer trading conditions. Once I have verified that we are actually in May, I then have to check my internet connections because there is no movement on my screens. My overview on these slow one-sided markets later.

Looking back at last week, there wasn’t really much to shout home about. My focus was on Draghi and the ECB council, but that whole “will he / won’t he” spill the beans on what he’s actually going to do this week on Thursday never materialized. Apart from Wolfgang Schauble (German Finance Minister), all of the Eurozone politicians and the rest of the ECB governing council pretty much kept their respective “gobs” shut for once. I love knocking the ECB and the Eurozone, having lived previously in three European countries; I have an “in” on the mentalities and the cultures. I just love the way that Germany through the Bundesbank and Angela Merkel just could not give a “rat’s ass” about the other members of the Eurozone, in their minds they are merely treated as if they were an additional 18 states of Germany.

The ECB Press Conference is four days away, plenty of time for the tight lipped approach, which is against the usual ECB / Eurozone, to be broken. History is on my side that the action to be taken by the ECB this Thursday will be leaked. There will be increased volatility in the EUR related currencies, as we get closer to the ECB Press Conference.

Be “a savvy trader”, keep positions small if you feel you have to trade EUR related currency pairs and in particular, with the EUR/USD and EUR/GBP keep stops wider than usual. The more conservative approach would be to ignore the EUR completely, or trade a cross-rate that will not be too directly affected. The EUR/NZD is a good example. The NZD is struggling and as a result the EUR/NZD is at a breakout point of 1.6100. Trading this pair will give you some protection as long as the NZD continues to weaken.

Last week, I thought that the CHF would break out and to some extend dominate proceedings for the week. I still think that being short CHF is a good trade as I believe that there is a very strong possibility that the SNB (Swiss National Bank) will have to protect itself ahead of the ECB Press Conference and front-run the meeting with it’s own strategy, that may or may not include raising the EUR/CHF floor limit from 1.2000 to maybe 1.2500, or higher. In any event, I still think the CHF is worth watching very closely as we get closer to Draghi’s moment in the limelight once again.

On Friday (30<sup>th</sup> May), we had the usual end of month sell the USD as market makers / hedge funds / investment managers positioned themselves for the end of the month. All of my trades took the hit, and, I am hoping that on Sunday/Monday they will re-align lower once more as typically the USD strengthens a little just after a month end. My trades are small and in line with my TRADE PLAN criteria, I just hate seeing RED on my accounts!!

The PREMIUM SERVICE is still making money, and so am I, therefore I am happy. The Forex market is challenging, so to make $$$ in these difficult conditions makes me a very happy puppy.

The only negative I am having with the PREMIUM SERVICE is that the 4-week low-cost option has introduced me to gamblers. Gamblers are signing up and are complaining that I am not doing enough trades.

Right now, I have 11 live trades and 4 limit orders placed with my brokers. How many trades should I be live with? Only those where the charts and my FUNDAMENTALS meet and that the set-ups / target entries / exits (stops) and profit targets meet with my TRADING PLAN.

It can be 1 trade or 15 trades. There is no fixed number. It is solely based on what the market is giving and what my TRADE PLAN guidelines say in line with my RISK TOLERANCE and RISK MANAGEMENT…that’s it.

Having asked some of “the gamblers” what they expected, the response was they wanted 10 to 15 trades per day in and out huge position sizes.

Forex trading is NOT gambling, I see myself as a RISK ASSESSOR and RISK MANAGEMENT in Forex trading is paramount.

So, if there are new readers, who think that by signing up (subscribing) to the PREMIUM SERVICE is a “get rich quick” programme, it is not. For that you need to go to your email spam folder and look for the make it quick at Forex programmes that drop into your inbox. Try one of those once in a lifetime special offers, and see how far it gets you.

I am only human, and I try to keep the PREMIUM SERVICE as real life as possible. I try to trade with the disciplines that I write about and place articles on in the TRADING ESSENTIALS section of the website. I make losses, a lot less than I used to, but I still make losses and sometimes I make poor decisions even though I have green lights everywhere. But I also make profits…. good profits and I am better reading the charts and analyzing than I used to be to obtain my entry and exit strategy.

However, bear in mind, I am not a gambler…. I am a RISK ASSESSOR.

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<strong>2. TRADING SUMMARY:</strong>
<p style="text-align: center;"><strong>RADAR, FLASH and FUNDAMENTAL TRADES
</strong><strong>MAY 2014 and YEAR to date:</strong></p>
Below I show the up to date performances for my various trading styles. Full excel spreadsheets are in the subscriber area of the PREMIUM SERVICE website.

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/PREM-SERV-PROFITS1-31052014.png"><img class="aligncenter size-full wp-image-3763" src="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/PREM-SERV-PROFITS1-31052014.png" alt="PREM SERV PROFITS1 31052014" width="449" height="418" /></a>

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/PREM-SERV-PROFITS2-31052014.png"><img class="aligncenter size-full wp-image-3764" src="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/PREM-SERV-PROFITS2-31052014.png" alt="PREM SERV PROFITS2 31052014" width="461" height="423" /></a>

The above examples are for illustration purposes only:

The profitability examples detailed above are based solely upon single lot trading, regardless of lot type. If multiple lot sizes are traded the profitability margins will be different than those shown.

Just to provide more information so you understand where I am coming from with the risk / reward statements above. All of my trades are of different sizes and different size lot types. The above does not reflect the actual trading performance, but it does show you the direction of the performance of the trades placed.

I like to add to trades, profits are taken as the trade progresses and my overall cost average moves several times. All of my trades are of different lot styles. I trade a mixture of micro lots, mini lots and standard lots across my brokers.

The above results simply display your profit or loss if you placed a single lot trade on all the set-ups suggested and did nothing else.

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<strong>3. THE FUNDAMENTAL TRADERS OVERVIEW:</strong>
<p style="text-align: center;"><strong>A ONE SIDED MARKET IS JUST GREAT…ISN’T IT?</strong></p>
I am of course being sarcastic with my title this week.

I want to write only a short piece this week about MARKET VOLATILITY.

Basically, as far as I am concerned, volatility has pretty much disappeared. This does not mean that it will not come back, remember the market is cyclical and we will have volatility again, but right now, there is little or no volatility to speak of.

I am most of the time in what I call “survival mode”. I trade with smaller position sizes and wider stops and I am using multiple micro lot trades more than I have done before to give me enhanced flexibility. My standard lot trades are in the main non-existent, I am really trading just mini and micro lots.

The stock markets are basically just providing a slow grind up day after day; very low volatility and the moves are smaller but directional. Nobody wants to get short and there are no sellers at all, therefore the market is just one-sided. The best way to explain this is to say that if 50% off the traders that would normally be shorting are not active there is no two-way action, only a one-sided market and market volatility has basically dried up.

The markets are dysfunctional and for some time good news sends the stock markets higher, but also bad news sends the markets higher. Why does the market anxiously await news if the end result is the same? I wrote a few weeks ago about the “New Normal”. It sure is difficult and at the same time weird being a fundamental trader first. This week we saw U.S. GDP at -1.0% for the last quarter, the worst figure for years and German retail sales in April were -0.9% month on month. Hardly data to set the markets alight with optimism, but the stock markets were not affected and they rallied on what I would say is poor data.

However, it was it is and as trader’s we have to modify, learn, adapt and grow into being a survival trader in this environment.

In last week’s blog I wrote about the main banks in the Forex market and the way that they are seeing and adapting to the changes in volatility and their profitability based upon reduced market activity. Citigroup this week actually released an article to clients saying that Forex volatility is much lower now and that their margins from trading are challenged; very interesting times.

If the banks are challenged, we as traders need to place ourselves just as much under the microscope to ensure that we are maximizing our opportunities.

For me, no volatility means that entries and exits are even more important than ever. A one sided market in equities does not guarantee that the Forex market will only move in one direction. False breakouts and false breakdowns are not an every day occurrence, but, they are more frequent as no-one in any market wants get heavy into a trade, and, we are for most of the time just drifting from pivot to pivot or Fibonacci level to Fibonacci level…. very slowly.

So, the one-sided market is a pain in the ass, it will change but my fear is that it may be September before we see normality again. We are so close now to the holiday / vacation season we could be dealing with thin markets, little liquidity and false moves becoming the new normal.

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<strong>4. TRADER TOPICS:</strong>
<p style="text-align: center;"><strong>TRADING PSYCHOLOGY
</strong><strong>“RECENCY BIAS”</strong><strong> </strong></p>
The term “RECENCY BIAS” may not appear to be very familiar with you as a trader, but as traders I can pretty much guarantee that we have all experienced it.

Recency Bias is the tendency for traders to place more importance on recent trades and to place less importance on less recent trades. Recency Bias can have a very negative effect on a trader’s results. Lets say that two traders have the exact same profitability over the course of 2014 to date. However, Trader A for his last three trades was 100% profitable and that Trader B has lost money with his last three trades. Even though for 2014 they are equally to the penny as profitable as each other, who do you think feels more positive? Trader A, of course. In fact, Trader A probably feels like he can run a mile in 3 minutes and never lose money again at Forex trading after having three consecutive profitable trades. Of course, Trader A has lost plenty of trades, but chances are the past three profitable trades will make him euphoric.

Euphoria will likely lead to bad decisions by Trader A. Trader A will ignore possible warning signs and enter a trade that typically does not fit his TRADING PLAN criteria. This increases the odds of a loss. Shaking his head, Trader A cannot believe he ignored those signs and gave back some of his profits from his profitable streak. Even if he is able top right the ship and go back to a neutral mindset, he has still lost a trade due to mental error. Of course, every trader will lose trades, but emotional errors (such as ones caused by euphoria) are the reason that most traders that would otherwise be successful don't live up to their potential. If Trader A does not become emotionally neutral after his euphoria driven loss, the loss to his broker account can be even greater.

Trader B probably feels as if he will never have a profitable trade again after three loss making trades. Sure, he has had plenty of profitable trades in the year so far, however, the last three losing trades will have him thinking very negatively. Trader B will be more likely to make one of two mistakes at this time. First, he could abandon his TRADING PLAN rules and jump into a trade that does not meet his trading criteria because for the last three trades the criteria just hasn’t worked. This sounds a little irrational because the same criteria has led to long term profitability, but I would guess that most experienced traders have done exactly what I have just described at some point. Second, Trader B could pass up on a perfect trade set up that fits his TRADING PLAN guidelines because he is fearful of losing again. Both scenarios can be disastrous to a trader’s mindset.

Clearly, it is important to avoid these mental mistakes and minimize the effects of recency bias. So how do we avoid succumbing to the negative mental influences that can be caused by recency bias? The first step is to keep a track record that includes every trade, how much $$$ was made or lost and a total equity running total. That way you can accurately track progress over a long period of time. This makes it much easier to think about on a longer-term basis. If trades are not tracked, the past few trades will have a far greater impact on your mindset.

The second step is to write out a trade checklist with your criteria lifted from your TRADING PLAN. That way, you are more likely not to enter every trade unless it fulfills all of the criteria. You will also be more likely to enter every trade that does fulfill your TRADING PLAN criteria. This may seem meaningless, but it is much more difficult to ignore your trading rules if you have to physically put a check mark next to each of your criteria before taking or passing on a trade.

The third step to minimizing recency bias is to know yourself. Some people are more emotional than others If you are prone to making emotional decisions, take a day off from trading if you have had either three profitable or three loss making trades consecutively. Trading under emotional distress is not profitable. If you can handle emotions well, perhaps waiting that day is not necessary. Usually a full nights sleep will help negate recency bias, especially if you have a detailed track record to go over the next morning that reminds you long term results are more important than the past couple of trades.

Remember, it is very challenging for the human brain to completely overcome recency bias. However, its effects can be devastating to a trader’s mindset as well as their equity. Therefore, it is important to take the above steps to minimize the negative effects created by recency bias.

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<strong>5. MY CURRENT LIVE TRADES:</strong>

<strong>FLASH TRADES:</strong>

FT125
EUR/CHF
Long
Cost Average / Entry Level: 1.2226
Stop Loss: 1.2150
Limit / Target: 1.2525
Weekly Closing Price: 1.2201
Position: -25 pips

FT126
GBP/CHF
Long
Cost Average / Entry Level: 1.5098
Stop Loss: 1.4950
Limit / Target: 1.5700
Weekly Closing Price: 1.4995
Position: -103 pips

FT127
EUR/USD
Short
Cost Average / Entry Level: 1.3594
Stop Loss: 1.3250
Limit / Target: 1.3690
Weekly Closing Price: 1.3633
Position: -39 pips

FT128
AUD/NZD
Long
Cost Average / Entry Level: 1.0938
Stop Loss: 1.0870
Limit / Target: 1.1350
Weekly Closing Price: 1.0948
Position: +10 pips

<strong>RADAR TRADES:</strong>

RT84
EUR/GBP
Short
Cost Average / Entry Level: 0.8109
Stop Loss: 0.8174
Limit / Target: 0.7900
Weekly Closing Price: 0.8134
Position: -25 pips

RT86
AUD/USD
Short
Cost Average / Entry Level: 0.9240
Stop Loss: 0.9315
Limit / Target: 0.8800
Weekly Closing Price: 0.9306
Position: - 66 pips

RT91
NZD/USD
Short
Cost Average / Entry Level: 0.8505
Stop Loss: 0.8590
Limit / Target: 0.8000
Weekly Closing Price: 0.8498
Position: +7 pips

<strong>FUNDAMENTAL TRADES:</strong>

FUN14
GBP/NZD
Long
Cost Average: 1.9800
Stop Loss: 1.9000
Limit / Target: 2.2350
Weekly Closing Price: 1.9704
Position: - 96 pips

FUN14
EUR/AUD
Long
Cost Average: 1.4750
Stop Loss: 1.4500
Limit / Target: 1.5250
Weekly Closing Price: 1.4642
Position: -108 pips

FUN26
EUR/NZD
Long
Cost Average: 1.5990
Stop Loss: 1.5875
Limit / Target: 1.6300
Weekly Closing Price: 1.6034
Position: + 44 pips

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<strong>6. TRADES THAT ARE ON MY RADAR:</strong>

All of the trades listed below are limit orders placed with my brokers.

RT89
USD/JPY
Short
Entry at 102.20
Stop at 102.60
Limit 98.00

RT92
GBP/USD
Short
Entry at 1.6850
Stop at 1.6940
Limit 1.6500

RT95
USD/SEK
Long
Entry at 6.6610
Stop at 6.5400
Limit 6.9215

RT96
EUR/SEK
Long
Entry at 9.0830
Stop at 9.0300
Limit 9.1700

RT97
USD/NOK
Long
Entry at 5,9650
Stop at 5.9200
Limit 6.0860

RT98
USD/CAD
Long
Entry at 1.0815
Stop at 1.0750
Limit 1.1030

FUN25
GBP/AUD
Long
Entry at 1.7895
Stop at 1.7700
Limit 1.8375

I will also be looking to re-enter the USD/CHF as I was stopped out on Friday. But this will be via a FLASH TRADE that I will advise on twitter.

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<strong>7. LOOKING FORWARD…THE KEY SUPPORT &amp; RESISTANCE LEVELS WITH THE USD MAJORS:</strong>

<strong>EUR/USD: Closing Price 1.3633.</strong> I think on Friday (30<sup>th</sup> May) we suffered from the usual month end sell the USD scenario. We bounced about 30 pips and consolidated the position. I am expecting the ECB governing council or Eurozone politicians to break ranks prior to the press conference on Thursday and leak some if not all the ideas that have been formulated to ease on deflation and to reduce the strength of the single currency. I will be amazed if ranks are NOT broken given the fact that the Eurozone diverse cultures make it extremely hard to maintain solidarity in approach.
Looking at the levels to watch, I am of the opinion that 1.3585 is now crucial support and 1.3780 a good resistance level.

<strong>GBP/USD: Closing Price 1.6753</strong>. I am hoping for my limit order target of 1.6800 to be achieved although, I fear that Friday’s highs of around 1.6770 may be as high as the cable rises before resuming it’s downward trend once again. Support is big at 1.6670 and resistance at 1.6820

<strong>AUD/USD: Closing Price 0.9306</strong>. The Aussie received a boost from Capital Expenditure data that was released last week and has remained elevated ever since. I think a lot of this has had to do with the AUD/NZD cross-rate which was looking very oversold and it has bounced strongly off its lows to keep the AUD supported and the NZD heavy. Key resistance is at 0.9330 and support is very strong at 0.9210.

<strong>NZD/USD: Closing Price 0.8498</strong>. Key support lies at 0.8420, with resistance at 0.8515. If the support gives way I am targeting 0.8000 as my short level objective.

<strong>USD/CAD: Closing Price 1.0844.</strong> Not much of a change in the “Loonie” for the second week running. I am not really too sure what to do with this pair, but I do have a limit order to buy just above 1.0800.

<strong>USD/CHF: Closing Price 0.8949</strong>. We are trying to break out and talk of the SNB raising the floor limit in the EUR/CHF to 1.2500 ahead of the next ECB Press Conference is keeping interest high in this pair. I am long and sticking with it. If you have yet to enter long 0.8900 support if you can get it would be an excellent entry level, I would add to my position if we get down there. The resistance level that gives the breakout confidence is 0.8980.

<strong>USD/JPY: Closing Price 101.74. </strong>I am looking to get short this pair once again. I took a hit earlier this week on a nasty little bounce. The range for me is support at 100.80 and resistance at 102.4

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<strong>8. MAJOR FOREX NEWS THIS WEEK THAT INTERESTS ME:</strong>

SUNDAY: AUD – Building Approvals.
SUNDAY: CNY – HSBC Final Manufacturing PMi.

MONDAY: GBP – Manufacturing PMi.
MONDAY: USD – ISM Manufacturing PMi.
MONDAY: AUD – Retail Sales.

TUESDAY: AUD – RBA Interest Rate Statement.
TUESDAY: GBP – Construction PMi.
TUESDAY: EUR – Flash CPi estimate.
TUESDAY: AUD – GDP.

WEDNESDAY: GBP – Services PMI.
WEDNESDAY: USD – ADP Non Farm Employment Change and Trade Balance.
WEDNESDAY: CAD – Trade balance and BOC Interest Rate Statement.
WEDNESDAY: USD – ISM Non Manufacturing PMI.

THURSDAY: GBP – BOE Interest Rates and Asset Purchase Facility.
THURSDAY: EUR – Interest Rate and ECB Press Conference.
THURSDAY: CAD – Building Permits and IVEY PMi.

FRIDAY: USD – Non-Farm Employment Change and Unemployment Rate.
FRIDAY: CAD – Employment Change and Unemployment Rate.

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<strong>9. FINAL THOUGHTS:</strong>

This week we have four Central Banks reviewing their interest rate policies and updating us with their medium and longer-term views. The pick of the crop being the ECB on Thursday, if you have been trading Forex from another planet over the past four weeks, this ECB Press Conference is the most eagerly awaiting in months, if not, years. ECB president Mario Draghi, announced last month that the ECB governing body was united to act this month if the current economic data on growth and deflation persisted and in addition the single currency strength across the Forex market continued.

Guess what?

Nothing much has changed so we await with baited breath to see what tricks Draghi has up his sleeve, or rather what tricks are up the sleeve of Angela Merkel’s blouse as she holds the strings that make Draghi move. (ECB independence my ass!)

In addition to the Central banks there is a plethora of PMi data and unemployment data ending the week on Friday with both the Canadian Jobs data and the biggest event of the month on the Forex calendar the U.S. Non-Farm Payroll numbers.

In addition, please watch out for the SNB front running the ECB Press Conference, my gut says that they will do something to protect the CHF.

So, keep your eyes and ears on the Eurozone, because there will be leaks, it would not be the Eurozone without some politician or ECB official, leaking the news. Plus, whatever is done in Frankfurt will have a direct line access to Zurich and the SNB.

There is enough therefore to keep the brain very active this week and allow for huge market moves and high degrees of volatility.

Take care and good luck. Be careful with position sizes.

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Scott Pickering
The Pip Accumulator
Saturday May 31st 2014

EMAIL / FOLLOW ME AT:
premiumservice@weeklyfxdrivethru.com
Twitter: @pipaccumulator
Twitter: @ThePremService
Google+/scottpickering

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