What I have learned in 2014: The 3 P's

Process, Preparation, and Patience. My lesson (suggestion) for 2015 is to (continue to) follow these 3 Ps. 

Trading decisions must be governed by a process that generates signals. You must decide whether or not to take that signal. Prepare to make decisions based on the process. Without going into detail, my process is technical and the preparation involves marking charts with exact entry levels and stops. If/when the market trades to these prices, I'm prepared to make a decision. Since I trust the process, the decision is made quickly and confidently. Also, exercise patience when the process is not working. Nothing works all of the time….you will experience several months or longer where your process doesn’t work….which brings me to 2014.

 

My largest drawdown took place from February 24th to May 1st. As I look back now, this isn’t a surprise because markets need to move for my process to work and FX volatility was at record lows. At the time however, I battled self-doubt. Sticking with the process was a daily struggle and it took years of experience (and pep talks from my wife) for me to do so. If I’d abandoned the process at my lowest point in May, the rest of the year would have been a disaster. Instead, I stayed with the process and was prepared when volatility returned.

The 4 pairs I am watching in the holiday period until next year

Hi guys.

Yesterday I wrote about EUR/USD which is getting near a very long-term trend line and also 200 moving average. However, there are 3 more pairs which I am looking at not everyday but checking at the close to see how is going.
On the other hand, I do not recommend no one to trade scalping or day trade with this thin market condition, the market right now is not having follow through on breakouts and there are many false signals. So I only recommend medium to long term trades which gives us the option to use bigger stop-loss so we do not get end up off the trade because of a silly and false jump or slide.

Anyway, here are the other 3 pairs which I am looking at:

AUD/USD (weekly):

 
Very near 2010 low (0.8064) and also 100% fib extension. Also looking RSI is near the 20 line, last time he touched this line, we got a nice reaction! So keep 0.8064 in mind and lets see if we get any type of reaction in this zone. No trade in this pair, just watching!

USD/CAD (weekly):

USD/CAD had touched the H&S target (1.1639) which he formed between 2010 to 2012. Also in that area we have a channel line and 0.618% fib extension AND we can see very clear 5 waves move. Time for correction or reversal? I dont know. BUT we formed last week a evening star very beatiful but we need that confirmation which is a red candle this week at close. Another confirmation could be RSI breaking bellow the 70 line. To be honest, I think this one is my favorite at the moment because of so many things signaling bearish, so I am already short at 15 pips above the high!

And finally; GOLD (XAU/USD) (monthly):

 Gold is showing 5 waves down very clear and had reached 0.382% fib from the high to 2008 low. Also we got a divergence on RSI (gold making new low but not on RSI). And most importantly, we closed last month with a Doji, but we need a good green candle this month to confirm that. For this reason, I am just looking and waiting for this confirmation before I go long.

EUR/USD very close to long-term support line.

Above is the monthly graph of EUR/USD. As we can see, is very close to long-term support line from 2005. The both times that EUR/USD reach these levels we got a very nice impact. However, looking Dollar Index is not so bearish at all. Bellow is the monthly Dollar Index graph which shows where we closed on Friday night.

89.92 is the 0.382% fib of 2001 high and 2008 low. This level I expect to be reacted at least before anything can happen. BUT the question is; are we going to get rejected at this level or even 90.96(100% fib extension)? I believe that we were inside of a long-term trade but we broke and jumped very hard but do we have a chance to get rejected and traders get panic believe that US Dollar made a high?

A great example that we need to be ready if this rejection really happens is at GBP/USD:

We can see above the GBP/USD monthly chart which shows us that we were inside of a triangle, we broke to the upside but we got rejected at a very important level which was at 1.7100 level.

So, can we see the same thing on dollar index? a rejection at 89.92 or even 90.96(100% fib extension)??
Well I don't have magic ball but I will look for reaction and CONFIRMATION before I do everything, until then.... I will keep looking and get relaxed at this end of year.

Have a nice weekend everyone!!!

Take care.

Thiago
thiago@duarteinvestmentgroup.com