Saturday, October 10, 2009

Mental Flexibility Is Always a Good Thing

You've read an earlier post about how underperforming the Aussie-Yen has been of late. No doubt this is tied into the increased AUDUSD strength as China and India etc. buy up natural resources to build up their infrastructure. If you weren't already aware, when trading cross pairs, the relative strength of the parents (AUDUSD, USDJPY) is extremely important. It doesn't matter which is the weaker, or which is the stronger. As long as there is a difference, you will have the opportunity to trade.

When the AUD is gaining in strength at relatively the same pace as the YEN, then the AUDJPY pair just sits there in fairly tight ranges. Take a look at the hourly chart. Don't forget that the AUDJPY can typically have a 5-6 pip spread. This makes going for tight range bound scalps pretty difficult unless you are after 2-5 pips. Jupiter looks for 40+.

So, as one should do as part of their trading business, I went back and reviewed the last couple of month's. Why has trading performance been so mediocre in this pair? Basically, two reasons. The AUDJPY was in some very tight ranges most of the time. Which in turn impacted trade call frequency so that it was very few in number. Extending onto that, some of the range breaks often appeared to be divergent at first, but continued through to stops. Successful trading was at the end of these bursts. (If you remember an earlier post, you will see that Divergence doesn't always play through the first time it forms.)

In review, I was thinking what could have been done better? How could I have adapted to these markets in a more pip friendly manor for our clients? There's that mental flexibility starting to work.

I clicked one button....

Wowzer.....Like many a trader is prone to do, even the experienced ones, you stay locked into the one thought pattern, or in my case, the one time frame! When the current time frame you are on is providing unsuitable conditions, step back and take a look at a bigger picture!

Now, I have highlighted some pretty pip targets in the picture. I am not saying every last pip is possible for the taking. I'm trying to highlight the difference between a 1 hour chart (20-40 pip ranges) and the 4 hour chart (some movements ranging from 180-300pips). Surely you can agree that the latter provide far better potential.

Whenever you don't like looking at something, change your perspective of it. You may just find a more pleasing view :)

Cheers and much pippage to you all.