Tom Hougaard All Rights Reserved FX Trading & Trading Psychology Proprietary FX Strategies by...

Tom Hougaard

FX Trading & Trading PsychologyProprietary FX Strategies by Tom Hougaard

Dear friend,It was a pleasure teaching you at the Saxo Bank workshop. I hope you can make good use of the notes in the following pages. All I ask from you is that you don’t distribute this in any shape or form. The notes are part of the 2-day course that my trading partner Dr David Paul and I run at Saxo Bank.

If you have any question regarding the material, you are welcome to email me on info@tradertom.com. You may be interested in attending a 2-day workshop where we train you intensively in the set-ups we use in our own live trading room www.whichwaytoday.com.

As you should be well aware of from my workshop, I place a huge emphasis on the mind part of trading. Learning to master a good technique does not take nearly as long as it can take to master yourself. Without sounding like I am paraphrasing the great sages of past and present, there is a lot to be said for knowing thyself, and trade as if only the present moment was all there ever was. If you should wish to explore this topic in more detail, I welcome you to take a look at my website www.tradertom.com where you can read more about the trading psychology workshop being run on the 20 th June 2009.

Last but not least I wish you all the best in your trading career and life in general.

Kind regards

Tom Hougaard

Final Message from Tom Hougaard

The information given to you here will go a long way in your journey to become a trader. I know anyone can call themselves a trader the moment they open and fund an account. The fact of the matter is that it is quite a difficult business to have sustained success in. but it is not impossible.

I hope you will find these notes a good start, and should you be interested in more education, then please contact me on info@tradertom.com. We can then discuss what you think you need to take you to where you want to be.

Good luck and happy trading.

Kind regards

Tom Hougaard

Tom Hougaard/www.tradertom.com

Methods to time the Forex market have been discussed to death in many courses and internet forums.

I have no doubt that many of you will have studied lots of this material. A lots of my old IX material can be used to determine turning points in both price and time. This is the soul of the market and its invaluable.

What I would like to address here is not WHEN but WHAT?

Many trade the Euro/$ or the GBP/$ each day without asking if it’s the best pair to trade that particular day or week.

Each month there are several 500 pip moves which take place with very little fuss and move cleanly without stopping lots out along the way. I want to find them and position trade them.

Who is the Leader?

Here is my objective

I want to find the strongest currency.

I want to find the weakest currency.

I want to use a simple trend following timing technique which will buy the strongest and sell the weakest.

This may seem very basic but I've found that it’s the key to building cash in the Forex market

Strategy no 2: Strength & Weakness

All Rights ReservedStrategy 2: The Settings

Timeframe:

I use a 4-hour chart, also known as a 240-min chart. This means each bar/candle is 240 min worth of trading.

Indicators:

10e,20e and 62e moving averages.The ‘e’ stands for Exponential.

Currencies:

The majors are Euro/$, GBP/$, $/CHF, $/JPY The crosses are Euro/GBP, Euro/CHF, Euro/JPY, GBP/JPY, GBP/CHF andCHF/JPY

In all we have 4 major currency pairs and 6 crosses. I normally add the CAD to the pot but it makes the matrix much bigger. I will

explain the process with the above.

Here is the process. Its completed on a 4 hour chart and uses the 10e,20e and 62e moving averages (and 120E for big view)

The majors are Euro/$, GBP/$, $/CHF, $/JPY

The crosses are Euro/GBP, Euro/CHF, Euro/JPY GBP/JPY, GBP/CHF CHF/JPY

In all we have 4 major currency pairs and 6 crosses.

I normally add the CAD to the pot but it makes the matrix much bigger. I will explain the process with the above.

Every morning display a chart of all of the previously mentioned 10 currency pairs.

Apply the 10,20 and 62 exponentially smoothed average.

Note which currency is outperforming.

If the chart is going up the base currency is outperforming, if down the secondary currency is the winner.

Simply count the number of winners per currency

All Rights ReservedEuro vs. Dollar: Dollar wins

All Rights ReservedSterling vs. Dollar: Dollar wins

All Rights ReservedDollar vs. Swiss Franc: Dollar wins

All Rights ReservedJapanese Yen vs. US Dollar: Yen wins

All Rights ReservedEuro vs. Sterling: Euro wins

All Rights ReservedEuro vs. Swiss Franc: Euro wins

All Rights ReservedEuro vs. Japanese Yen: Yen wins

All Rights ReservedSterling vs. Japanese Yen: Yen wins

All Rights ReservedSterling vs. Swiss Franc: CHF wins

All Rights ReservedSwiss Franc vs. Japanese Yen: Yen wins

All Rights ReservedScore Board

Euro: 2

JPY: 4

USD: 3

CHF: 1

GBP: 0

So the natural conclusion is that I want to look for entry signals in the following currency pairs:

Sell Short Sterling/Buy Japanese Yen

Sell Short CHF/Buy Japanese Yen

Sell Short Sterling/Buy US Dollar

All Rights Reserved1. CANDLESTICK

THEORY

The oldest form of Technical Analysis

Trading: It’s Simple – but it isn't Easy

A Trading Strategy With An Edge (positive expectancy)

The Ability To Be Able To Consistently Apply The Strategy

Now Future

Learning and Development‘Transformation’

SkillsKnowledge/Understanding

AttitudesBehaviors

Performance

1. Sense of purpose – Passion and tenacity – realistic expectations

2. Education – training, coaching, mentoring

3. Take it serious (Behavioral Finance)

4. Personal finance and trading capital

5. Learn to think like a successful trader

6. Time – mastery takes time

7. Find your own style

All Rights ReservedColour Chart Challenge

Your Fears are:

THERE ARE FOUR TRADING FEARS :

• 1. fear of being wrong

• 2. fear of losing money

• 3. fear of missing out

• 4. fear of leaving money on the table.

Key to Success: Don’t shock the Brain

• SMALL STEPS

– Large goal-fear-access to cortex restricted

FAILURE

– Small goal-fear bypassed-cortex engaged

SUCCESS

The End Goal

THE JOURNEY TOWARDS BECOMING A WINNING TRADER:

• 1.Executing without fear or hesitation

• 2.Stopping out when wrong

• 3.Let winners run

• 4.Pushing winners

The 4 bar fractal

• You received a basic candle course as part of the pre-course material. You should know what a candle is by now.

• The 4 bar fractal is a simple measure of a turning point which is mechanical and very reliable.

• As its name implies it is composed of 4 candles although bars would be just fine.

• It works on all time frames.

• It’s a very positive indication of a change on trend but it can be very slow.

• If the CLOSE on this bar (1) is higher than the HIGH of the previous bar (2) and the Close on this bar (1)is higher than the HIGH of the bar three bars back (4), then we have a buy signal.

The 4 bar fractal

• In the previous slide the close of the bar labeled 1 is higher than the high of 2 and the high of 4 .

• This is saying that the trend has turned and that the market can be bought.

• It’s a useful way to confirm a trade in addition to momentum divergences such as the Eva M entry.

• Its just as valid as a signal to indicate that a market has broken down.

• This is shown next.

The 4 bar fractal

• In the previous slide the bar labeled 1 has closed below the low of the bar 2 and the low of the bar 4.

• This indicates that the market has broken down.

The 4 bar fractal

4bar fractal

Final Message from Tom Hougaard

The information given to you here will go a long way in your journey to become a trader. I know anyone can call themselves a trader the moment they open and fund an account. The fact of the matter is that it is quite a difficult business to have sustained success in. but it is not impossible.

I hope you will find these notes a good start, and should you be interested in more education, then please contact me on info@tradertom.com. We can then discuss what you think you need to take you to where you want to be.

Good luck and happy trading.

Kind regards

Tom Hougaard

Tom Hougaard All Rights Reserved FX Trading & Trading Psychology Proprietary FX Strategies by...

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