Wednesday, 15 May 2019

The Mindset Required for Trading Currencies

When we say we trade FX, The Currency Markets, what are we doing? 


We are Trading the following currencies


  • Aussie Dollar
  • Kiwi Dollar
  • Canadian Dollar
  • Euros
  • British Pound
  • The Yens and
  • The Mighty US Dollar.


... So one more thing I'd like to talk about when trading the currency markets/pairs on the Daily charts Whether you're using AIMS The Setup, The Fruit or specially the AIMS The  WALTZ (New Strategy) or anything else.

I try to see the pairs as groups. Let me give an analogy from the Stock Trading World.
so e.g. when you trend trade stocks, you try to see where is the price for this particular stock and you also want to see, where is the "industry" heading for that stock and then you also want to know where is the overall market heading.
e.g Apple Stock Going down, is that industry going down? yes, is the overall market pulling down? yes. That would make it a great candidate for selling that stock and letting it run as long as it drops.

Oh, before you go into "fundamental vs technical" debate, I'd like to clear that too. All I meant by that was to check the relevant charts for "industry" and the "index". See if the trends are all down. E.g. a company could have bad news or reports and that made its charts pointing downwards but its possible that the industry is still going up or sideways and it could be an overall bullish market.

Now let's go back to FX Markets. For Currencies, you look at the various combination of the currency in question. e.g. To Trade Aussie dollar I would look at these 4 pairs ,

  •  AUDJPY,  (Australian Dollar vs Japanese Yen)
  • AUDNZD, (Australian Dollar vs New Zealand Dollar)
  • AUDCAD, (Australian Dollar vs Canadian Dollar)
  • AUDUSD. (Australian Dollar vs US Dollar)
I look at AU from these 4 dimensions. Now suppose I get a signal on AU, I want to know that the entire lot is generally pointing down. Suppose AJ , AN and AC are looking bullish and AU is giving me a Sell signal, perhaps its NOT Aussie move, rather aussie is weak against US dollar but strong against yen, cad and kiwi. This won't be very interesting.


I hope I have clarified that now, when you trade a signal on say Aussie vs xyz currency, if you caught "a" signal on either of the 4 available. you've done the trick. You've traded the Aussie Dollar. You don't need to have signals on all 4 pairs.

As you guys know, since I have traded AUD/NZD and took profits, but missed other move on AUDUSD, due to lack of signal or otherwise, its fine. I've traded  Aussie dollar one way or the other.

AUD vs New Zealand Dollar Currency Pair: Picture of Trade Taken
Trade Taken on the Aussie against Kiwi Dollar. A Good Trade overall. 


So what upsets me today is that looking at GBP it's clearly heading down. and I have not managed to catch anything. That was bad decision making or too strict on my rules.

Had I taken EUR/GBP long, or GBP/JPY short or GBP/CAD short, Had I taken either one or all, that would have done the trick. That would have counted as , "I traded the British Pound". But I did not take any trades despite good signals. Now this is not forgivable. I must take action to ensure I am able to take good signals.

So look at GBP/AUD, sell signal, it did not really move. but I  won't be shorting it anyway, since I knew Aussie Dollar is heading down while British Pound is selling off as well. Don't confuse this with correlation.


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