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<strong>1. INTRODUCTION:</strong>

The roller coaster ride in trading the Forex market continues. Until Draghi uttered the words “The Governing council of the ECB is comfortable with acting in June” coupled with “The Euro exchange rate is a serious concern” the USD was being taken to the cleaners and on the way there was being given a severe whipping. The USD index looked as it if was about to cave in. Just 24 hours later the EUR/USD was trading 200 pips lower and the GBP/USD 150 pips lower; an amazing turnaround.

During the past 5 days we also saw a huge number of major news releases from Australia. My overall observation at the end of the week is that both RBA Stevens and RBNZ Wheeler, could be using pretty much the same scriptwriters with regards to their comments on their currencies. The only difference being that Wheeler has threatened direct intervention to bring the value of the NZD lower. Stevens once again re-iterated last Tuesday that the AUD was too high. He is partially to blame for this jump higher in the AUD/USD. Two months ago he really talked it down by stating 0.8000 – 0.8500 was a more appropriate level. He did not keep banging the drum he took his eye off the ball and the AUD/USD rose towards 0.9470 in the recent caning given to the USD. Had he been consistent the AUD/USD exchange rate would be sub 0.9000.

Now we have the situation where, the ECB, RBA and RBNZ are talking dirty on currency exchange rates. As I have said many times talk is cheap. Draghi at the ECB looks like he is going to act next month, Wheeler at the RBNZ may directly intervene, where does that leave the RBA and Governor Stevens?

Friday saw a disastrous set of job figures for Canada, the market was expecting +12,800 for April, instead, Canada lost 28,900. For a smaller populated country like Canada this was an awful result. There will be calls for stimulus in Canada if the next few sets of key economic data releases are poor. Personally, I think the BOC should react and cut rates. Let’s NOT pontificate like other central banks, let’s be decisive and pro-active and do something. Time will tell.

Finally, I wanted to share something with you regarding the PREMIUM SERVICE.

About a couple of months ago, I launched a 4-week low cost $20.00 trial. Previously at the launch of the PREMIUM SERVICE I had resisted doing this, as what is happening now is what I thought could happen when why my gut feeling was not to offer this option. At renewal, I advise subscribers that the on-going option is from 10 to 40 weeks, ranging from $150 - $400 dependent upon the subscription period. About 50% renew 50% do not, I ask the “do not’s” why?

I am concerned: as I ask, not interrogate, I am told it’s NOT the costs involved, although one or two have said this, but the main reason is it's the fact I am not doing enough trades per day. Surely, trades per day is relative to the market conditions…the opportunities…the risks.

Forex trading is not gambling. Forex trading is RISK ASSESSEMENT, you require total 100% DISCIPLINE to survive. I know from various social network media that many people see Forex trading as an easy fast killing to make thousands of $$$$. Oh my God, I am stunned by some of the responses I am getting.

Please, please….you should only trade if you see trades that meet your plan and guidelines. I have been a Forex trader for 7 years and I want to remain a Forex trader for at least another 7 years, longer if possible. Additionally, if you see Forex as quick way to deliver $$$, please do not subscribe to the PREMIUM SERVICE.

I have zero intention of blowing my accounts out in a dysfunctional marketplace. I am a Conservative/cautious “Steady Eddie” trader. My existing subscribers will admit to seeing me write on twitter that I screwed up an entry every now and then, I am human. I have losses, some because I get over stubborn on trades. The most recent example being the USD/CAD long, I took a hit of over 200 pips last Thursday. I should have exited a long time ago. I was in that trade for 38 days. I am NOT perfect; my wife will confirm this fact. I have learned the hard way how to apply DISCIPLINE to trading. If you want a fast cash gain you might as well gamble and go to Las Vegas and play a few tables.

As my father once said, “Gambling is a mugs game”. I had gamblers in my subscriber base; God only knows what size positions they were trading.
<p style="text-align: center;"><strong>The keys to Forex trading longevity in my opinion are: -</strong>

<strong>DISCIPLINE (understand the power of Leverage)</strong>
<strong> RISK AND EFFECTIVE MONEY MANAGEMENT PLAN YOUR TRADES </strong>
<strong> TRADE YOUR TRADING PLAN RULES and GUIDELINES.</strong></p>
Every trader surely has a goal to make money from trading, but one has to be RESILIENT and DISCIPLINED

I apologize, if you think my thoughts are overkill. But, unless you try to RISK MANAGE you may as well burn your cash on the fire in my opinion.

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<strong>2. TRADING SUMMARY:</strong>

<strong>RADAR, FLASH and FUNDAMENTAL TRADES
</strong><strong>MAY 2014 and YEAR to date:</strong>

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.

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/PREM-SERVICE-PROFITS-1-10052014.png"><img class="aligncenter size-full wp-image-3644" src="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/PREM-SERVICE-PROFITS-1-10052014.png" alt="PREM SERVICE PROFITS 1 10052014" width="449" height="413" /></a>

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<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/PREM-SERVICE-PROFITS-2-10052014.png"><img class="aligncenter size-full wp-image-3645" src="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/PREM-SERVICE-PROFITS-2-10052014.png" alt="PREM SERVICE PROFITS 2 10052014" width="451" height="413" /></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.

<strong> </strong>

<strong>3. THE FUNDAMENTAL TRADERS OVERVIEW:</strong>
<p style="text-align: center;"><strong>THE ECB - ARE WE ON A PROMISE…MARKET REACTION SAYS YES?</strong></p>
Another ECB press Conference goes by and despite many calls for action from within the Eurozone for the ECB to act on DEFLATION and the high EUR exchange rate that is in effect across almost all currencies, nothing was done

However, Draghi admitted that the ECB Governing Body has discussed the matters and the ECB now has a green to go if it wants to, by the next meeting in June 2014.

The market reaction was immediate. The EUR/USD sell off started. In 24 hours we had a 200-pip fall. If you remember, the last time Draghi acted was to cut rates by 0.25% and we saw a huge 200-pip fall followed by, at the end of the day a much larger bounce. This time it’s different, well at least the market believes this time, that Draghi means business.

Draghi has backed himself into a corner. A few weeks ago I wrote about the DEFLATION issues in the Eurozone. It looks like inflation forecasts will be wound back lower next month, given the fact that The European Commission has recently revised expectations downward. So if Draghi does NOT act in June, then

Mr. “Whatever it takes” Draghi will lose all credibility.

What will he / can he do?

Well, he has really upped the ante this time:
<p style="text-align: center;"><strong>Governing body comfortable to act in June</strong>
<strong> The Euro exchange rate is a serious concern</strong></p>
The issue / problem as I see it, is that no matter what the ECB decides to do, and there a few options, none of them are in the same league as the BOJ QE programmes of Quantitative easing and Qualitative easing, that was able at the launch to move the YEN by about 35% in a few weeks.

The structure of the ECB, albeit, allegedly independent of political influence…(and if you believe that you would also believe that I am running for President!), simply does not allow them game changing, large-scale measures like the FED or the BOJ.

The list of options hasn’t really changed from what I have written previously: -
<p style="text-align: center;"><strong>LTRO - (Longer Term Refinancing Options). </strong>
<strong> Lowering its Refinancing rate to zero.</strong>
<strong> Negative overnight ECB Deposit Rates.</strong>
<strong> QE (Quantitative Easing).</strong></p>
I think that whatever is decided it has to show strength of commitment from the ECB otherwise if it is a “wishy-washy” attempt to ease, it will be responded to that way and the EUR/USD, in particular, could once again strengthen.

There are 4 weeks between now and the next meeting for all the debates on the options open to Draghi and his peers to take hold. Let the merriment begin.

From a trading perspective, we have seen pretty much a universal EUR fall across all cross-rates as well as the EUR/USD.

Where do I see the EUR pairs falling to? This is dependent on the reaction with the EUR/USD, but do not rule out the EUR/JPY. The Eurozone trades heavily with Japan and to some extent the EUR/JPY cross-rate could pull the EUR/USD. Do not rule this out.

I include a monthly chart of the EUR/USD below. I think that 1.3436 (76.4% Fibonacci level) (1.3450), is probably where my thoughts are at the moment as a possible short target.

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<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/EURUSD-MONTHLY-10052014.png"><img class="aligncenter size-large wp-image-3641" src="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/EURUSD-MONTHLY-10052014-1024x424.png" alt="EURUSD MONTHLY 10052014" width="1024" height="424" /></a>

Possible lows on the crosses if the EUR/USD targets the 1.3450 area are: -

EUR/JPY: 132.00 (The 50% Fibonacci retracement of last big move)

EUR/CAD: 1.4400 (If the CAD rallies back towards 1.1200, this may not happen)

EUR/AUD: 1.4000 (If the AUD breaks lower, this may not be achieved)

EUR/NZD: 1.5000 (If the NZD breaks lower, this may not be reached)

Referring to the prices above, a great deal depends on how the cross-rates react. The Commodity crosses may hold up the EUR/USD fall if the commodity currencies also weaken in line with USD strength. But the levels above are very much in the target zone in my opinion.

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<strong>4. TRADER TOPICS:</strong><strong> </strong>
<p style="text-align: center;"><strong>PROBABILITIES IN TRADING:</strong></p>
I was speaking over the telephone a few days ago with one or two subscribers to the PREMIUM SERVICE. I noticed a consistency, as they were relatively new traders to Forex. The consistency was that they spoke as if they knew what the markets were going to do next. In reality, experienced traders would usually speak in probabilities and typically have some form of analysis to back up their opinion.

No one can say that a particular currency pair will move to an exact point with absolute certainty. In fact, I feel it is naïve to think that anyone can predict the direction of a currency pair with absolute certainty over a given period of time. Sure, sometimes you could be correct if you boldly predict that a pair will move to X level with absolute certainty. However, there will be other times when the market doesn’t go your way. That is why we must deal with probabilities, because no one knows for sure what will happen next in a given currency pair.

The reason we can never know where a currency pair is going with absolute certainty is that the markets move based on the will of every market participant. Let’s suppose that someone stated “the EUR/USD will definitely rise to point X, before falling down to point Y”. They are saying that they know exactly what every trader is thinking, how each of these traders plan to act, and how each trader will respond to the actions of every other trader. Needless to say, no one could ever have that information.

However, it isn’t uncommon to see bold predictions that definitely state which direction a currency pair will go and exactly where the move will begin and end. No one can know these types of moves for certain. Even worse, it isn’t hard to find predictions that say something like “buy the USD/JPY at X or you will regret it”. This baseless claim gives virtually no useful information because we don’t have any idea how long of a trade this would be or where the exits (stop and limit(s)) are. Without being too harsh, just beware of anyone who claims they know for certain where a currency pair is headed. Of course everyone can be entitled to his or her opinion, but that doesn’t mean they “know” what will happen next.

Even if an insider were to know about an interest rate change ahead of its release, that doesn’t mean they can predict exactly how the market can act. What if the interest rate briefly rises the pair into massive stop-sell orders that actually move the market down for the day? What if enough market participants felt the rate would move higher, so the pair moves lower? There are endless scenarios, but it is virtually impossible to predict how every market participant will act within a constantly changing market.

Therefore, we must think in probabilities.

No matter how good / sensational your analysis is, sometimes you will simply be on the wrong side of the market. Whether you are looking at fundamental news announcements, a combination of technical tools, or a simple moving average, as traders what we are looking for are patterns that put the probabilities in our favour so that we will profit in the long run. In other words, we are looking for how the market has reacted in the past to certain conditions, and speculating how likely the market will react in the future to similar conditions.

Regardless of the tools you use to analyise the market, you are still working with probabilities. If you find a system that is profitable over a long period of time, that system is likely putting the probabilities on your side. These systems come in a variety of shapes and sizes.

Every trader has their own system; one of my trading buddies is hooked on an easy mathematical calculation system….makes no sense to me but he says it works for him.

I think I have his system correct below.

He uses only SMA’s and Bollinger bands plus pressure charts to show both momentum and trends. Exactly how he determines an entry or exit I am not 100% certain: -
<ul>
	<li>The system requires 40% of trades to reach the profit target in order to break even.</li>
	<li>The reason for 40% is that he works on a risk/reward ratio of 1:1.5.</li>
	<li>Therefore, if he has only a 50% success rate on profitable trades, he would be very profitable over time.</li>
	<li>Even having 45% of all trades being profitable is a success and provides a great return.</li>
	<li>In fact, anything above a 50% profitable trade rate is fantastic.</li>
	<li>Therefore, it is plain to see that it is not necessary to know where the market will go on each individual trade. Instead, it is important to have a system that that places increased probabilities in your favour over a large sample size of trades</li>
</ul>
At the end of the day, it’s is all about RISK and MONEY MANAGEMENT, as traders we are RISK ASSESSORS…we PLAN OUR TRADES and TRADE OUR TRADING PLANS. No matter what system you adapt to for trading, as long as you have good discipline, you stand a better than average chance of survival as a trader. Without discipline you are doomed over time.

Many of the PREMIUM SERVICE subscribers have asked me, what do I use to plan a trade.
<ul>
	<li>Discipline.</li>
	<li>Fibonacci levels</li>
	<li>Pivot points</li>
	<li>100 and 200 day SMA’s</li>
	<li>Sometimes….Bollinger bands (I hate my charts to look too busy).</li>
</ul>
As long as you can use and relate to the probabilities in trading in your favour and that they work over an extended longer period of time, the individual results on each individual trade are almost meaningless. Like all traders I take losses. The key is to manage those losses correctly so that the long-term track record remains profitable.

The bottom line is that thinking of trading in terms of probabilities is a key step to becoming a successful trader.<strong> </strong>

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

<strong>FLASH TRADES:</strong>

I am in several positions and I am not 100% happy with them all but many positions are very small position sizes that I do not mind holding. I am maybe too optimistic that I will engineer my way out of these poorer trades but my RISK MANAGEMENT is still 100%.

FT73
USD/CHF
Long
Cost Average / Entry Level: 0.8937
Stop Loss: 0.8800
Limit / Target: 0.9250
Weekly Closing Price: 0.8862
Position: -76 pips

FT77
EUR/USD
Short
Cost Average / Entry Level: 1.3744
Stop Loss: 1.3950
Limit / Target: 1.3450
Weekly Closing Price: 1.3757
Position: -13 pips

FT106
NZD/USD
Short
Cost Average / Entry Level: 0.8533
Stop Loss: 0.8750
Limit / Target: 0.8400
Weekly Closing Price: 0.8609
Position: -76 pips

<strong>RADAR TRADES:</strong>

I have no open RADAR TRADES at the moment.<strong> </strong>

<strong>FUNDAMENTAL TRADES:</strong>

FUN14
GBP/NZD
(This trade is hedged from -150 pips)
Long
Cost Average: 1.9950
Stop Loss: 1.9000
Limit / Target: 2.2350
Weekly Closing Price: 1.9555
Position: - 395 pips

<strong> </strong>

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

Due to the continuing Ukraine / Russian tensions I am not looking to add any trades over this weekend.

I would wait until we set how the weekend plays out with the tensions around the globe and the politician sound-bytes that will no doubt be aired in Sunday’s press and on TV.

Having written that, these are the trades on my mind for early next week.

AUD/NZD
Long
Entry (above the breakout point) at 1.0950.
Stop Loss 1.0750
Limit 1.1350

USD/CAD
Long
Entry 1.0880.
Stop Loss 1.0800
Limit 1.1120

USD/NOK
Long
Entry 5.9050
Stop Loss 5.7500
Limit 7.2500

USD/SEK
Long
Entry at 6.5600
Stop Loss 6.5100
Limit 6.9700

As you can see from the chart below, we are attempting another breakout. I would keep your eyes peeled if I enter this trade. When there is a bit of light above the entry level my objective would be to move my stop to breakeven. Given the Eurozone news and the USD strength, this may be the time we see the explosive upside move. But, just in case, we should also be prepared for a failure.

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/USDSEK-WEEKLY-10052014.png"><img class="aligncenter size-large wp-image-3642" src="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/USDSEK-WEEKLY-10052014-1024x424.png" alt="USDSEK WEEKLY 10052014" width="1024" height="424" /></a>

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In addition all of the JPY pairs are on my RADAR. I will be looking at these in detail next Monday. As you know, I am NOT a fan of Sunday night’s in Asia and I do not want risk exposure until we have had at least one Asian and one European session out of the way. I will make a feature of the JPY pairs in Monday’s (12<sup>th</sup> May) DAILY FX POST if the current conditions persist.

<strong> </strong>

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

<strong>EUR/USD: Closing Price 1.3757.</strong> Following the ECB Press Conference the EUR/USD has slid about 250 pips from almost touching 1.4000. Now the question is how far will it fall ahead of the next ECB Press Conference in June. My medium term target from my short EUR/USD trades of late has been 1.3450. Right now, I see no reason to change that goal. However, in the short-term, I am expecting some consolidation next week and I think we may have a little range bound activity to work off the oversold conditions that you can see on the charts. I am thinking that for this coming week the range will be around 1.3700 to 1.3840. I could be wrong, but this is what I think as of now.

<strong>GBP/USD: Closing Price 1.6847</strong>. This pair almost got to 1.7000, and then it fell from grace like the EUR/USD. It too has pulled back about 250 pips off its highs.
Over the coming week I see 1.6750 to 1.6920 as the range to break out of. Ultimately, if the EUR/USD falls so will the GBP and I expect us back around 1.6500.

<strong>AUD/USD: Closing Price 0.9360</strong>. This pair is not reacting the way that I thought it would. I am staying away for a little while until it makes its mind up if it is moving lower or going to attack 0.9500. The RBA needs to get stuck in with the AUD and be firmer on what it sees as the target. The AUD/NZD is affecting this pair, the cross-rate has come alive with the demise of the NZD/USD and this has a great deal to do with the current elevated price of the AUD/USD, probably to the annoyance of Governor Stevens. The range is 0.9300 to 0.9450.

<strong>NZD/USD: Closing Price 0.8609</strong>. The big number that I was working with last Friday (9<sup>th</sup> May 2014) was 0.8615 as support…look where it closed the week. I am short this pair and intend to remain short for sometime to come; I struggled with much higher levels and was patient. Now I am hungry for my pips. I will add again to my position on a break below 0.8600. The range is 0.8600 support to 0.8780 resistance.

<strong>USD/CAD: Closing Price 1.0897.</strong> The crazy loonie, I got stopped out on Thursday for a 221-pip loss and then the next day we got a rally on really poor employment data. I did not see that coming. We have a “tweezer” candlestick pattern pretty much in play. The move with this pattern is to 1.1000. Support is at 1.0840.

<strong>USD/CHF: Closing Price 0.8862</strong>. As the EUR/USD falls the inverse relationship with the USD/CHF is in play. One of my long term trades, still with it over a month now and patience is paying dividends. If we can get above 0.8950, I think we are going to head much, much higher. Support is really good at 0.8800<strong> </strong>

<strong>USD/JPY: Closing Price 101.86. </strong>Very interesting, JPY crosses had a bad day on Friday last week, the EUR/JPY in particular. The USD/JPY held up very well and this is a pair as you now from TRADES ON MY RADAR SECTION that interests me along with the other JPY pairs. The range is 101.40 to 102.10.

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

SUNDAY: CNY – HSBC Manufacturing PMi.

MONDAY: N/A.

TUESDAY: EUR – German ZEW Economic Sentiment.
TUESDAY: AUD – Annual Budget Release.
TUESDAY: NZD - RBNZ Wheeler speaks.

WEDNESDAY: GBP – BOE Carney speaks &amp; BOE Inflation Report.
WEDNESDAY: NZD – Annual Budget Release.

THURSDAY: USD – Core CPi.

FRIDAY: N/A.

<strong> </strong>

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

I am expecting more of the same over the coming week, the only difference, and, it could be a big difference is we may have direction following the ECB Press Conference last week. Additionally, there are moves now out of tight ranges and this should help with momentum.

However, you still have to be ready for false breakouts and false breakdowns. There are so many inflection points close by in equities and bonds that the potential spikey moves could impact the Forex markets, despite it’s recent moves out of ranges coupled with the momentum directional moves of the EUR.

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

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Scott Pickering
The Pip Accumulator
Saturday May 10th 2014

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

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