price action

7 Warren Buffet Quotes that Could Revolutionize Your Trading

Posted by Nick 12 Comments

He is one of the most accomplished investors on Earth….

Warren Buffet is a personal hero of mine. His story has always inspired me and he is one of the reasons I do what I do. So here are some of his most famous quotes, with a few thoughts on how they relate to Forex.

1. “Beware of geeks bearing formulas.”

This is a great quote. For the past few years, more and more coders and programmers have flooded into the Forex market. With little to no actual trading experience, they code trading robots and indicators. All these formulas and code usually (or always) amount to nothing, when used live.

Geeks and their formulas don’t meld well with Forex, or other financial markets, especially when the person bearing the formula is not an experienced, professional trader.

2. “If past history was all there was to the game, the richest people would be librarians.”

This one is obvious to experienced traders. What happened last week, month or year or a decade ago will not necessarily repeat itself in Forex.

If you look to the past, for ideas on trading in the future, you won’t be successful. This is why I am a proponent of price action trading. Price action is all about the here and now.

3. “Chains of habit are too light to be felt until they are too heavy to be broken.”

This obviously does not apply only to Forex. However, one of the biggest issues that hurt new traders are bad habits. These come from many different sources. You can have bad personal habits that do not meld well with Forex. If you’re easily stressed, or quick to anger, in day to day life and carry that through to your trading it will hurt you. This is why you should have a strategy in place to nip bad habits in the bud.

Demo accounts are also a major cause of bad habits. Traders who spend a long time trading demo accounts tend to become too open to risk.

4. “Let blockheads read what blockheads wrote.”

I love this quote. There are so many failed Forex traders out there who turn to selling products, because they cannot trade. These guys are marketers not traders. They may be smart people, in general, but when it comes to trading they are idiots. So let the idiots read what the idiots wrote.

5. “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”

This one is self-explanatory. Even though it makes perfect sense it is hard to put into practice. That should not stop you from trying though.

6. “Risk comes from not knowing what you’re doing.”

This says it all and it is a huge problem in the Forex market. So many people come into Forex with absolutely no clue what they are doing. Yet they jump into the market and they get batted around, like a cat playing with a little bitty mouse.

Check out this post in the forum. This guy entered a trade minutes before the release of the NFP, last Friday. That is a massive risk and it is no wonder he lost the trade. The guy simply did not know what he was doing and it cost him.

7. “When you combine ignorance and leverage, you get some pretty interesting results.”

Even though the CFTC has limited leverage for US traders, outside of the US people can still get leverage as high as 500:1. Leverage can be a great aid if you know what you’re doing. However, when you combine a newbie with leverage it almost certainly spells disaster.

What’s your favourite Warren Buffet quote or Forex related quote?

There are many quotes by Warren Buffet and from other inspirational people. Do you have a personal favourite?

The Mentoring Winners

Posted by Nick 6 Comments

it took me a while to read through all the entries and select three of them as winners. I did not expect there to be so many!

Thank you everybody for entering as always there was many I wanted to choose. The short list came down to 34 comments! So it was a tough job removing 31 of them.

I finally selected the winners though, here they are in no particular order:

Thomas December 13, 2010 at 4:16 am

My name is Robin Good and I desperately seek a way to cross Sherwood Forex and afterwards help other traders to master the fight against bulls and bears.

Dave December 13, 2010 at 8:31 pm

With Nick as my mentor
A ninja I’ll be

Cutting my losses
Price action’s the key

Reversals and breakouts
Will win it for me

Forever grateful…..soon I’ll be free

Secret Trader December 14, 2010 at 9:45 am

According to the cable NICKGIVESMENTORSHP2010 on Wikileaks you are training an elite group of unstoppable trading machines and I want to be a part of this privileged group.

The mentoring will start in mid February!

Forex Tips – Advanced Master Candle Trading

Posted by Nick 11 Comments

Over the past few months my trading has been evolving. I have started looking away from simple S+R line trading and looking more at candles. Don’t get me wrong S+R lines still make up a big part of my trading but they have taken a back seat to candle patterns.

This is because I have been delving into price action analysis. This is the analysis of the movement of price as it is happening. The major benefits of price action analysis are:

It isn’t lagging. You trade based on what is happening right this second.
You can adapt to changing market conditions quickly.
You can trade at pretty much any time.

The main forms of price action analysis I am using are reversal trading and master candles (MCs).

I am already doing a few videos on reversal trading. I released the first last Friday and will release another tomorrow. So I thought I would do a few posts on master candle trading. I will also start doing MC analysis for some of the main pairs daily.

First let’s take a look at how I trade MCs. I will not go over the basics in this post as they are already covered in the master candle e-Book. Instead here I will discuss a more advanced technique. I have tested it extensively and it works amazingly well at filtering out some of the bad master candle trades.

Filtering Out Bad Master Candle Trades

This was contributed by forum users Samarkand, djcash, and Wombles.

Master candles tend to give a lot of false breaks especially on volatile JPY pairs such as g/j and e/j.

One thing you should look out for is Scouting Parties these are candles that break through the MC line, reverse, and close. Check out the example below.

Master Candle Scouting Party

Scouting Parties can cost you some serious pips. For this reason some traders do not enter on the first MC break. They wait for a Scouting Party to form and then place a limit order with a 5-10 pip buffer just beyond the bounds of the Scouting Party candle. This way they only enter the trade after the Scouting Party candle is broken.

Master Candle Trade

As you see in the picture above. When the price broke the scouting party high it pushed through and it ended up being a +50 pip trade.

I will be doing a few more posts soon discussing some more awesome master candle techniques. As I said I will also be posting some master candle set-ups daily. So keep an eye out on the blog for master candle analysis.

How to Catch Big Forex Moves with Confidence

Posted by Nick 3 Comments

Guest post by Kris Matthews (http://tradeforexfundamentally.com)

Don’t you just hate it when you look at the left hand side of your chart and see that a gigantic move of 100s of pips occurred, although you weren’t able to take advantage of it because you either didn’t see it coming or didn’t feel certain about getting in? I want to show you my formula for identifying and catching the big moves in forex.

What causes the big moves in forex?

Arguably the most masterful military strategist in history, General Napoleon Bonaparte, used the element of surprise whenever possible in battle. The forex market is not unlike a battle field in that you are competing against very talented traders who collectively have more information than you could ever have at any time. One of your only real edges is that upon first taking in new information, the market is surprised and confused, and the big players who move the market take time to respond by loading and unloading their massive positions, while you can jump on and off within fractions of a second. The sluggishness of the big players that contribute to the giant moves in forex.

A step by step strategy for riding the momentum of surprise price moves

1. Look for clues on the chart- On a 4 hour chart (so you can avoid much of the choppiness and broker manipulation that occurs on small time frames during volatile periods), scan for any recent giant (relative to recent price action), bold-faced candles. Bold faced candles are characterized by candles whose high is near the close and whose low is near the open if it’s an upward candle and vice versa for downward candles. These two characteristics typically mark serious market activity- usually a high volume push by large players accompanied by strong market sentiment.

2. Look for confirmation- So many moves in the FX market can be fakeouts, so it’s good to look for some sort of confirmation to avoid disappointment. One way of obtaining confirmation is to look at a news calendar and see whether some high impact news event such as interest rates, employment, or retail sales deviated considerably from expectations. These types of events can rock the market and result in a new trend lasting for days to weeks. A second way of obtaining confirmation is to pay attention to news headlines from economic news sources such as Bloomberg, the Financial Times, or Scotiabank’s FX report and see what kind of headlines are being reported. If you notice that the market is starting to panic about a different set of keywords than normal (e.g. last week the headlines on all news sources shifted from being about “risk aversion” to “intervention” and “quantitative easing,” both bad for USD and JPY), then you can conclude with some confidence that the market is undergoing a focus shift due to a surprise.

3. Get in when price breaks key levels- If a major resistance level exists nearby to current price action, the buyers in the market need to push pretty aggressively and if price moves through the level, it will continue to go up until the market finds new sellers. Thus it may prove profitable for you to enter after price demonstrates that the market had enough momentum due to the surprise to sustain a large move and will probably continue to do so.

Remember, the market is a dangerous, uncertain environment with cutthroat competition. If you want to win you need to know what times and situations in which you have the upper hand. Seize the opportunities when the market probabilities shift in your favor.

Chasing and Catching Falling Knives: How to Safely Achieve Forex Profits by Combining News with Technical Analysis

Posted by Nick 5 Comments

Guest blog post by Kris Matthews (http://tradeforexfundamentally.com)

You’ve probably heard the advice to not “chase the market” but also heard the advice to not “catch falling knives.” The former refers to getting into a trade after price has already started moving very fast, while the latter refers to trying to buy at what one may think is the bottom of the market. So what does one do- buy dips or buy when price is moving up? Why do the things in life with largest potential rewards have to be so contradictory?

I feel that both work, but you have to really understand the behavior of the market to be successful at either. Let’s talk about the first option: buying when the market moves up. If you’re using this strategy you want to make sure that there’s momentum behind the latest surge in price. If you see price trickling upward, that’s not as strong of an indication as seeing a full-bodied bullish candle push through a strong level of resistance, right? Well what if we could add another indicator that would boost your winning percentage and profits substantially, while giving you the increased certainty that you’re on the right side of the market?

The indicator I’m referring to is rather the reaction of price to economic news. If price is pushing upward through a strong resistance level due to a better than expected employment figure, that’s a lot more powerful than if price is moving due to some unknown reason. If we look at it in terms of the behavior of the market, if no news release is taking place, that price move could be just due to some temporary business transaction between an FX bank and its exporting customer. After the transaction is finished, the market is likely to come back down in price as selling pressure resumes and the upward move you saw was just a fake breakout. On the other hand, if the move is supported by a positive economic news release, you know that the move is supported by real sentiment and sustainable money flows.

If you want to boost your win rate and confidence in your trading I recommend that you combine price reaction to news with your technical analysis. If you see strong price moves with nice follow through penetrating a support/resistance level, look for a surprise in the released number versus the expected number. For example, if you see a breakout of GBP/USD above a very strong resistance level (e.g. a previous high on the daily chart), if there was a UK interest rate decision of 0.75% instead of 0.50% expected, you’re likely to see sustained upward movement for at least a day. The duration of the extended sentiment will vary with the importance of the news release. News releases are scheduled and can be viewed on news calendars such as that at Forexfactory.com The releases in red and orange have the highest impact on price action. The ones I consider when looking at price moves, in order of importance, are: interest rate decisions, GDP, Employment, Manufacturing/PMI, and Retail Sales.

I hope you consider combining the power of fundamental news with technical analysis in your forex trading. The more you can understand about the true behaviour and motivations of the market moving players in forex, the bigger and more profitable your edge is.

Why the “Holy Grail” of Forex Trading Doesn’t Exist, and What to Do About It…

Posted by Nick 5 Comments

Guest blog post by Kris Matthews (http://tradeforexfundamentally.com)

Something that really humors me is the human tendency to search for the “holy grail,” the “magic bullet,” the “surefire strategy” that will bring them profits no matter what, and not require them to even think. However, when asked whether certain traders believe it exists, they say “No” on a conscious level but subconsciously are looking for that invincible, plug-and-play strategy. I don’t want to sound like I’m better than those people because I went through that too, and to this day, occasionally I still can’t resist reading about some latest hot-shot forex trading strategy some guru came out with that pulls in 1,000 pips per week—we’re all just wired to want to believe these things.

Why if there is a holy grail strategy, it’s only a temporary “drug”

Nick mentions something in his ebook, “The NickB Method: Discover Advanced Price Action Analysis” that completely resonates with me:

“…systems are limited to the market conditions that spawned them. Systems do not adapt to changing market conditions.”

When you see the outrageous claims of making $50,000 in one month, the guru selling the course may not be lying to you—it may be true that the system performed so well—in that market period. Markets change and what may have worked very well in one environment may become obsolete in another very quickly. This still doesn’t stop certain price patterns from appearing, and may lead to addictions of putting on trades to get quick profits, just like drugs. As you can see, the market is ever changing and no “quick-fix” is going to work. The only way to win is to adapt to its changes.

The only way to win consistently

After realizing that markets change and no static “holy grail” strategy will do, the next logical question is, “if I can’t win every single time how do I come close?” Let’s expand on the principle of adapting to the market in a more practical manner.

To adapt means that you recognize when the market is changing its behavior and when a given system or strategy is no longer likely to work, and replacing or adding to your system something that functions well in the new environment. Here are some clues that you can observe on a price chart for when this is happening:

The average daily range (ADR) is changing dramatically. One of the biggest causes of losing trades is a trader’s misjudgment of volatility. If a trader is trying to capture a large move but price has been confined in a range for the last few weeks with an ADR of 60 pips compared to its usual 160, then most trades are not going to be profitable. If the ADR changes dramatically from its normal value at which your forex trading strategy is profitable, it’s a good sign that the market has changed.

Price strongly breaks out from a range formed over a long time period. When price is confined to a sideways range for a while, the market participants are basically either unsure of the future or are content with the current price range and are not comfortable putting on new positions until some big stimulus acts on the market such as surprising fundamental news. When a stimulus finally does occur and you see a strongly bullish or bearish set of candles indicating that either the bulls or bears are in control then perhaps the market environment is changing from one of ranging to trending. In that case a trend-trading system is more likely to be profitable.

Price faces indecision or retraces after a very strong directional move. Markets move in cycles from ranging to trending to ranging to trending. After price has made its upward run, for example, to a level where the bulls are either satisfied with the current level or are not convinced that price is likely to go up to higher levels, or the bears begin to think that price is oversold, the market may sell off or engage in ranging price action. Either of these is not good for an upward trend trading strategy because the market environment has changed.

No Long @ 139.65

Posted by Nick 14 Comments

I am trying to update trades throughout the week when I can. So here is a trade update…..

I am not taking the 139.65 long, there is no clear momentum and S+R zones are dangerous! If we had a clear break I would enter the trade. However, as I said S+R zones are dangerous and there is little momentum so that = no entry for me.

Will update again if I decide to enter later.

UPDATE: I am in now entry was 139.82 (awful entry) however it build up momentum a little late so it was the best entry I could get.

Wary of the 140.00 psych level.

Target remains the same despite late entry.

UPDATE: CLOSING OUT THIS TRADE! I am a little disappoint the lack of price action at the start gave me a bad entry at 139.82. This meant I only managed to grab 38 pips when I should have had 55 pips. No big deal, profit is profit.

Forex Tips: Entering Breakout Trades

Posted by Nick 29 Comments

Ever since I opened Forex4Noobs.com people have been asking me how I know when to enter a line break. This is because I do not enter all scalp/constant line breaks. Sometimes I do not enter simply because the trade doesn’t look right!

So naturally newbie traders are curious as to why I sometimes do not take bad trades. And when they ask me I always say I know because of “intuition based on years of experience”. Just like a seasoned cop can spot suspicious behavior in a person I or you couldn’t. The cop has intuition based on years of experience.

However, I believe I have finally figured out a way to better explain this. Hopefully you guys find these Forex tips useful. It may sound silly to start with but stick with me here.

Imagine a stampeded of bulls rushing through a large empty field.

- The bulls represent the movement of price.
- The field represents empty space on a chart in which the price can move.

Please note that the bulls do not represent the figurative bulls and bears of financial markets. They represent price in general (both bullish and bearish). I just needed to buy stock images to make the animations in this article and the bull was the only usable image of an animal I could find. That is the only reason bulls represent price as opposed to rhinos or elephants.

Now imagine a fence on that field directly ahead of the bulls.

- The fence represents a scalp/constant line on a chart.

When the price approaches a scalp/constant line on a chart many things can happen. However, most commonly one of three things will happen. Let’s take a look.

Hard Barrier

Imagine the bull stampeding through the vast, empty field. As they run they come closer and closer to the fence.

Each step brings them closer and eventually they hit the fence! But for some reason they cannot get passed it. They managed to reach the fence however they’re not strong enough to get passed it. Try as they might they simply cannot push through.

candlestick pattern reversal from scalp line

Now replace the bulls with the price, the field with the chart and the fence with a scalp line.

This time the scalp/constant line acts as a hard barrier preventing the price from moving any further. So the price approaches the line, sometimes slowly, sometimes fast but it cannot break the line. Maybe it pushes past by a pip or two but the price cannot really break the line.

This happens occasionally and it usually results in the price reversing from the line. Obviously in this event you would not want to get in the trade. Look at this kind of line approach with candles on a 5 min chart.

candlestick pattern reverses from a scalp line

Barrier Break

Again, Imagine the bull stampeding through the vast, empty field. As they run they come closer and closer to the fence.

As they get closer to the fence and they speed up, they move faster and faster. Finally they get to the fence and BAM they leap right over it! Almost as if the fence doesn’t exist they fly over it and keep on running.

candlestick pattern breaking scalp line

Again, replace the bulls with the price, the field with the chart and the fence with a scalp line.

So this time the scalp/constant line doesn’t even hold the price back. The price breaks right through the line and keeps on going almost as if the line doesn’t exist.

This is obviously an optimal time to get into a trade. This means that there is a lot of momentum. So entering a trade here would be perfect. Take a look at an example on a chart, the candles represent 5 min.

candlestick pattern breaking a scalp line

Barrier Trickle

Imagine the bull stampeding through the vast, empty field. As they run they come closer and closer to the fence.

They could be running fast or slow, it doesn’t matter. Eventually they hit the fence! They can’t jump the fence but they back up a little and try again. They do this several times trying to jump. Eventually a few bulls manage to jump over. Encouraged by the sight of some bulls making it a few others make it over. The more bulls that make it over the fence the more encouraged the rest get. Soon all the bulls are jumping the fence.

candlestick pattern breaking through scalp line

This time the scalp/constant line held the initial surge back. However, slowly but surely the price manages to break the line by a few pips. Maybe it backs up a little, but then it pushes straight back against the line and it manages to break by a few more pips. Eventually the price builds up enough momentum to push past the line and become a proper break.

The barrier trickle is the most common event. You will find that when the price reaches a scalp/constant line most of the time it will have some trouble crossing. However, with a little time the price picks up the momentum it needs to push through the line. Here it is on a 5 min chart, you can clearly see the trickle here:

candlestick pattern breaking through scalp line slowly

So when the price reacts like explained above I will likely enter a trade. There is another thing to consider though.

Price Reliability

The price cannot be perfect. Let’s say you have a long scalp line set on your GBP/JPY chart at 150.00 and the price nears the level. After the price hits the 150.00 it tries to push past it but it cannot. If it pushes past by 1 pip to 150.01 many would consider the line broken. However, that doesn’t necessarily mean the line is broken. You need to account for a margin of error from your broker. While your brokers price may display 150.01 mine could very well be showing 149.96 (5 pips lower than yours).

The price cannot be the same with every broker. So when looking at a line you should not enter the second it breaks. The key is to watch closely and allow the price to guide you. The price will tell you by how it reacts at the line if it will reverse or break the line.

If you need a better view of the price action consider dropping from the 4hr chart to the 15 min or 5 min chart. The smaller time-frame will give you a much clearer picture of price movement. Imagine watching the bulls stampede through the field from 1000 feet in the air. They would all appear like one large mass. However, if you watch from 100 feet you can clearly see what each bull is doing.

So the idea is not to enter instantly when a line breaks, instead analyze and decide what the price is doing. Realistically, you need to do this analyzing in seconds, so it does take experience. However, I hope now you have a better idea of what to look for.

Worse comes to worse, remember the bulls running through the field. Are they being held back by the barrier or are they breaking it? If they’re breaking it enter, if not STAY OUT!

Special Offer – Price Action Video Course

Posted by Nick 43 Comments

Hey Guys,

First off I want to say to all of you who entered. Thanks, that was almost 400 entries! It took ages to get through them all.

There has been a little bit of complaint over the price of the next course. So as a thank you to everybody who entered I am going to give a special pre-release offer on the course. The course is scheduled to be released February 28th 2010 (less than 2 months from now).

(OFFER CLOSED)

How This Will Work

When you get the course at the pre-release price. You will get instant access. Over the next two months I will be adding videos to the new course. There will be at least 1hr added each week to the course. So if you get it on pre-release you don’t have to wait 2 months for the course! It will slowly be built up over the next 2 months. The first hour is being added this week so you will already have access to the first hour of videos.

The course will only be available at this price for about a week. The only reason I am doing this is because of the high demand for a lower price. Hopefully this will make all you guys who wanted a bit of a discount happy.

Price Action Analysis Course Winners

Posted by Nick 23 Comments

Hey Guys,

Time to pick the winners. Sorry this is a little late a lot of stragglers sent applications in late and I wanted to read them all. Ok so lets do this.

PulsarFx
Nick I am an Astrologist give me the course and the next planet I discover will be named after you.

I love astrology and physics. I have a stack 15 books high on string theory, black holes, higher dimensions and astronomy. I know PulsarFx is not going to actually name a planet after me but it is a cool thought and I have massive respect for his field of work.

EDIT: I got some email’s saying astrology and astronomy are different…… of course they are that was the joke!

Danno1290
I have a 20 year old car, I am balding and I am unmarried. Pathetic is an understatement I need something to give my live value.

I just feel sorry for this guy. He definitely does need some help.

Dream-Caster
If I do not make cash soon I cannot buy my wife shoes. My wife gets very mad when she doesn’t get new shoes. Please don’t let her beat me up Nick.

This one made me laugh…….

Greg McKINLAY
Pensioned out of Police after 21yrs because of MS, pension lump sum gone on necessities. Need to make some money!

MS is a horrible disease. I have actually done some tests myself as I was afraid I might have it. So far it all looks good and I do not fall in any of the risk factors. But if was very freighting going in for the tests.

Bkaze
I need to break free. I sit at work day dreaming about blowing up my workplace (when my colleagues aren’t there) well maybe my boss is working late KABOOM!

Bkaze when i first met my girlfriend she said the exact same thing. Apart from it being hilarious I am sure heaps of people here can sympathize.

NeilA
A PA fur me (Chorus)
(Repeat Chorus)
If I don’t have PA
Its nae use to me
So gees a break and
Copy me
THEN I will have PA
(Repeat Chorus)

I guess you have to either be Scottish or live in Scotland for this gibberish to make any sense. It made me laugh. It is scary that having lived here in Scotland since April I can actually translate that stuff! Plus I heard NeilA is a Micheline Star rated chef…… now he owes me some I get great food FREE for life (I hope)!

Doc
Counting on Nick to help me get over the idea that 4x (XXXX) isn’t porn, judging from the screwin’ I’ve been getting from other systems…PLEEZE be FREE -1 TIME!!! *_*

Hahahahaha….. ok!

Adiranna
I……alone…….surrounded by the evil twins AUD – NZD and the samourai YEN…….tracked by the Cable, the Fiber and their Cross pairs…….how to fight these beasts…..?…….NICK VIDEO !!!!!!

Great imagery in just 30 words. I loved this entry.

Jerrad
Want to become rich and famous so I can be a ‘Star in a Reasonably Priced Car’ on Top gear.

Love Top Gear but you probably already knew that hence the reference. I doubt Forex will get you on the show but hey why shouldn’t I support your dream.

Jurne
09 was really funny,
coz i lost all my monies,
New Year New Resolution,
NickB’s video is my solution.

Love it.

Ok guys that pretty much takes care of the 10 winners! It was tough going through the almost 400 entries and picking just 10 so I hop you guys are happy with my picks. Now on to another issue.

There has been a lot of talk about this new course being too expensive at $479.99!

I find it hard to agree since the previous one was 4 hours long and cost $250 when released. This one will be longer than 8 hours in the end so I think it is worth it.

However, many of you guys still think it is too pricey. So I am prepared to make a special offer to all you blog readers (if you want it)…..

How does a $120 discount sound? So the price will be $359.99 instead!

If that sounds good and you want the discount I will put the course on pre-sale for a week or two and that discounted price.

Let me know if you guys want to buy the course on pre-sale at that discount so I can set it up. I am asking since I am not sure if anybody will want to buy it 2 months before it is actually released.

This course will have a 60 day money back guarantee. Even if you buy it on pre-sale your money back guarantee wont start until the course is released. So you will be protected if the course doesn’t work for you or you just don’t like it.

With this pre-sale course you get a huge $120 saving and you will get first access to the coruse when it is released towards the end of February.

Page 1 of 4:12 3 4 Next »