IndexTrader.com.au Copyright © 2010 Brent Penfold AFSL 225946 Long-term Secrets of Professional...

Long-term Secrets of Professional Forex Traders

Learn the universal principles of successful trading and you’ll know what the professional forex trader knows!

Brent Penfold

• Bank America 1983• Futures Trader – FX and Indices• Author• Educator• Licensed Futures Advisor (AFSL 225946)• Publish daily newsletters for active traders

• Contact:– Web: www.IndexTrader.com.au www.CyclePoint.com.au– Email: bpenfold@tpg.com.au

Email: bpenfold@tpg.com.au

For either;

• A 28-day free trial to my newsletter or a• Copy of this presentation

ASIC Housekeeping

ASIC AFS License No. 225946

This presentation is

• Educational only• Does not contain investment advice• Does not contain personal advice• Only contains general advice

There is RISK OF LOSS in futures trading

Any opinions, conclusions and or other information expressed by myself today does not contain personal advice. Attendees will need to determine with, or without the assistant of a person licensed to give personal advice, whether any general advice expressed by myself is appropriate for them given their particular needs, financial situation and investment objectives.

A Big Thank You

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Who’s confused about works in Forex?

1. Forex - The world’s biggest market

2. Why everyone fails - A trader’s typical journey

3. What you can do about it

Know what the professional forex trader knows,

the universal principles of successful trading• Avoid financial ruin

• Embrace expectancy

• Implement money management

• Trade a portfolio of rule based trading strategies

• Develop a proper mindset

My message today is to understand the

universal principles of successful trading.

Understand them and you’ll knowwhat the professional forex trader knows!

Forex – the World’s biggest Market

2007 daily turnover US$3.2 trillion (BIS)2010 daily turnover US$4.0 trillion (est.)

London accounts for around 34%New York accounts for around 17%Tokyo accounts for around 6%

EUR/USD 27%

GBP/USD 12%

JPY/USD 13%

CHF/USD 5%

AUD/USD 5%

• Fastest growing market• Becoming the market of choice for the private trader

Advantages of Forex

Good volatility creates plenty of trading opportunities

• Competitive quotes low transaction costs

• Low margin requirements, some as low as1%efficient use of trading capital

• Variable trade sizes from $10k to $1.0mtailor risk exposure to match account size

• Multiple forex providers good competition for your business

• Multiple internet trading platformschoice of easy execution

• 24 hour trading creates continuous bars with few gapless surprises

Advantages of Forex

• Deep liquidity ease of entry and exit

• Good volatility creates plenty of trading opportunities

Advantages of Forex

• Variable trade sizes from $10k to $1.0m (and more)tailor risk exposure to match account size

Advantages of Forex

• 24 hour trading creates continuous bars with few gapless surprises!

gaps very few gaps

Why Everyone Loses

Let’s begin and find out why

everyone loses and what you

can do about it!

Trading’s Paradox

Today it’s both the best and worst time for traders.

Nirvana – It’s The Best of Times

Today traders have never had it so good.

Today traders have never had it so good.– Multiple electronic discount brokers

– Multiple electronic trading platforms• Automatic trading programs

– Inexpensive live real time data

– Multiple charting programs with 100’s of indicators

– Multiple markets • Forex, Financials, Commodities, Energies etc

– Multiple instruments – Options, Futures, Shares, CFDs

Today traders have never had it so good.– Multiple trading theories

• Traditional technical analysis, Inter-market Analysis,• Elliott Wave, Market Profile, Fussy Logic,• WD Gann, Chaos Theory, Candle Sticks,• Geometry, Seasonals, • Fibonacci etc, etc, etc.

– Multiple trading newsletters

– Multiple trading educators

– Multiple trading workshops

Today traders have never had it so good.– Multiple trading theories

• Traditional technical analysis, Inter-market Analysis,• Elliott Wave, Market Profile, Fussy Logic,• WD Gann, Chaos Theory, Candle Sticks,• Geometry, Seasonals, • Fibonacci etc, etc, etc.

– Multiple trading newsletters

– Multiple trading educators

– Multiple trading workshops

And still over 90% of traders lose!

A Trader’s Typical Journey

Lets look a trader’s typical experience.

Despite advancements traders still lose!

10% edge back, step by step.

IndexTrader.com.au

So the question is how can we join the 10% Winners Circle?

Any ideas?

90% of traders give up here.

Any ideas?

90% of traders give up here.

Despite advancements traders still lose!

Any ideas?

Winners Circle!

Any ideas?

Winners Circle!

Universalprinciples

of successful

trading!

Any ideas?

Winners Circle!

Without the universal principles it’s almost impossible to succeed in trading.

Universalprinciples

of successful

trading!

Any ideas?

Winners Circle!

Without the universal principles it’s almost impossible to succeed in trading.

Universalprinciples

of successful

trading!

Why Everyone Loses

Despite advancements in technology, trader services and

trading education over 90% of traders still continue to lose.

Traders are being overloaded and overly confused by too

much choice in the trading world. They lose sight of the

Why Everyone Loses

So it’s time to get back to the

universal principles of successful trading!

Why Everyone Loses

So it’s time to get back to the

universal principles of successful trading!

Your SolutionUniversal Principles = Complete Trading Solution

A complete trading solution requires three basic objectives.

A complete trading solution requires three basic objectives. Your;

1st Objective: Avoid financial ruin

- Risk-of-Ruin- Expectancy

2nd Objective: A portfolio of rule based strategies

- Entry?

- Stops?

- Exit?

3rd Objective: A proper mindset to implement your strategy.

- Hope, Fear & Greed

- Entry?

- Stops?

- Exit?

- Entry?

- Stops?

- Exit?

1st Objective: Avoid financial ruin ……………………. Money Mgt

2nd Objective: A portfolio of rule based strategies …. Methodology

- Entry?

- Stops?

- Exit?

- Hope, Fear & Greed ……..... Psychology

- Entry?

- Stops?

- Exit?

U. Principles

- Entry?

- Stops?

- Exit?

- Entry?

- Stops?

- Exit?

- Entry?

- Stops?

- Exit?

- Entry?

- Stops?

- Exit?

2nd Objective: Portfolio of Rule Based Strategies

The Intermediate TrapMany intermediate traders fail to develop additional rulebased trading strategies believing their current methodologyis sufficient to continue trading profitably.

Usually it’s not.

Advance traders will usually trade a portfolio of strategies.

Benefits of Developing a Portfolio of Rule Based Strategies - Capture more market structure gives more opportunities

- markets can trend- retracement trend trading

- breakout trend trading- counter-trend trading (or swing trading)

- markets can be range bound/choppy/non-trending- scalping- swing trading

- Capture more timeframes gives more opportunities- short-term, medium-term & long-term trading

- Diversification against a strategy failing

- Smoother equity curve/results

- Smoother equity curve/resultsA

- Smoother equity curve/resultsRisk Management!

Usually it’s not.

Book includes interviews with

15 elite traders – the Market Masters.

One is Andrea Unger

Winner of the World Cup Championship of Futures Trading® 2008 & 2009

One is Andrea Unger

Andrea trades;

- trend-following

- counter-trend and

- inter-market strategies.

One is Andrea Unger

Andrea trades;

- trend-following

- counter-trend and

- inter-market strategies.

Andrea trades multiple rule based strategies!

- trending markets- retracement trend trading

- breakout trend trading- counter-trend markets

- swing trading- choppy range bound markets

- scalping

- Smoother equity curve/resultsRisk Management!

Usually it’s not.

Three Long-Term Trading Secrets

- Breakout Trend Trading (x2)

- Reversal Swing Trading (x1)

Long-term trading is where the big money is made.

Money is made from day trading, short-term and medium-term trading, but NOT the big money.

BIG MONEY is made by catching the BIG long-term moves.

BIG MONEY is made from long-term trend trading.

Trend Trading

Important Facts:

Trend Trading

Important Facts:

Fact #1 It’s the safest way to trade.Trends move markets and are the basis of all profits.Trade with the trend.

Trend Trading

Important Facts:

Fact #2 It’s a miserable existence being a trend trader.

- You spend 67% of your time losing!

Trend Trading

Important Facts:

Fact #2 It’s a miserable existence being a trend trader.

- You spend 67% of your time losing!

Fact #3 There are two ways to trade with the trend

- Retracement trend trading- Breakout trend trading

Retracement Trend Trading

“ trade with the trend, the trend is your friend”

Breakout Trend Trading

“ trade with the trend, the trend is your friend”

Attributes of Successful Rule Based Trading Strategies

A universal secret to most winning strategies is to keep strategies;

• Simple

• 100% objective

• Verifiable

Tom DeMark is a well-respected trader who has worked with market wizard Paul Tudor Jones and currently advises Steven Cohen’s SAC Capital, a $16 billion hedge fund. He remarked in the Art Collins book Market Beaters:

“…The bottom line was, after 17 programmersand 4 or 5 years of testing,

the basic 4 or 5 systems worked best…”

Tom DeMark is a well-respected trader who has worked with market wizard Paul Tudor Jones and currently advises Steven Cohen’s SAC Capital, a $16 billion hedge fund. He remarked in the Art Collins book Market Beaters:

“…The bottom line was, after 17 programmersand 4 or 5 years of testing,

the basic 4 or 5 systems worked best…”

One is Tom DeMark

Special advisor to Steven Cohen at SAC Capital,

a $16 billion hedge fund that for the last 18 years

has a achieved an average annual return of 40%.

Tom has been a special adviser since1997.

• Simple

• 100% objective

• Verifiable

• Simple less can go wrong

• 100% objective consistent application

• Verifiable know your expectancy

• Simple less can go wrong

• 100% objective consistent application

• Verifiable know your expectancy

We trade for the opportunity to earn expectancy.

Long-term secrets used to make the BIG MONEY!

Who wants to learn three long-term tradingsecrets used by professional forex traders?

Three Long-Term Trading Strategies

… but first, let’s look at their profit and loss performance …

… let’s look at the first strategy …

Strategy #1 – Triple Moving Average

Set-up1. Short-term trend 20dma2. Medium-term trend 40dma3. Long-term trend 200dma

Trade PlanLong Entry 20dma > 40dma & Close >

200dmaBuy next day MOO

Long Exit 20dma < 40dmaExit next day MOO

Short Entry 20dma < 40dma & Close < 200dma

Sell next day MOOShort Exit 20dma > 40dma

Exit next day MOO

Exit next day MOO100% objective rule based strategy

… let’s look at the first strategy …

… let’s look at the second strategy …

Strategy #2 – Donchian Channel Breakout Strategy

Developed by Richard Donchian in the1960’s.

Made popular by Richard Dennis andBill Eckhardt’s Turtle experiment in the1980’s.

This strategy is almost 50 years old!

Strategy #2 – Donchian Channel Breakout

LongsEntry Breakout of the 4 Week HighStop Breakout of the 2 Week Low

ShortsEntry Breakout of the 4 Week LowStop Breakout of the 2 Week High

4 weeks in and 2 weeks out

100% objective rule based strategy

… let’s look at the second strategy …

… let’s look at the third strategy …

Strategy #3 – Stop and Reverse Strategy

Strategy #3 – Stop and Reverse

Always in the market.

Stop and reverse when market switches over the trailing stop.

Trailing Stop;If Long, the trailing stop is the highest of either;

- 7.5% below previous highest high or- If a new high hasn’t been made within 20 bars lift existing trailing stop by 0.5%.

- The trailing stop is never lowered.

If Short, the trailing stop is the lowest of either;- 7.5% above previous lowest low or- If a new low hasn’t been made within 20 bars lower existing trailing stop by 0.5%.

- The trailing stop is never raised.

100% objective rule based strategy

They are all;

- simple

- 100% objective

- verifiable

Question:

Can we improve the combined results?

Question:

Can we improve the combined results?

YES … with money management!

- Entry?

- Stops?

- Exit?

- Entry?

- Stops?

- Exit?

- Entry?

- Stops?

- Exit?

- Entry?

- Stops?

- Exit?

Understand them and you’ll knowwhat the professional forex trader knows!

Universal Principles of Successful Trading

1. Money management

2. Methodology• Mechanical/systematic• Discretionary

3. Psychology• Hope• Greed• Fear

The Universal Principles of Successful Trading

“This is one of the best books on trading to come along in a long time and I predict it will become a classic”.John HillTraderPresident, Futures Truth Co.

“I recommend reading this book cover to cover several times. It will change your mind about what's important in trading.”Van K. Tharp, Ph.D.TraderAuthor Trade Your Way To Financial Freedom

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The Universal Principles of Successful Trading

• Money Management• Methodology• Psychology

For either;

• A 28-day free trial to my newsletter or a• Copy of this presentation

Thank you

good trading!

IndexTrader.com.au Copyright © 2010 Brent Penfold AFSL 225946 Long-term Secrets of Professional...

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