Smart Casual Trading™ approach to Technical Analysis (TA): Divergence


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There are probably as many strategies to trade forex as there are the stars you can count in the sky. Simply because there is none that works, alone, without having the right perspectives, expectations, and risk, emotional, money management finesse, which can only come from practice, failures, and self reflection. To find out more about my thoughts about Indicators and Trading Strategies, check out my Udemy course, and use this coupon to get a great discount as a celebration of the first Udemy course I’ve launched to help aspiring traders learnt the Smart Casual Trading Method™.

In this brief post, I want to share my favourite “strategy”. It isn’t exactly an indicator. There are many divergence indicators, the most popular being the MACD. Rather, “divergence” is an occurrence when price action is divergent, as the name implies, from an oscillator. And yes, there are many oscillators around as well. But the MACD is probaby the “de facto” indicator that aims to identify divergence specifically.

The picture above shows a great illustration of a divergence signal. When prices are appearing to be in a downtrend, for example, lower prices between two candles, but when compared with an oscillator showing an opposite picture coinciding with the two candles: higher highs instead of being in line with the trend. That’s divergence between price action and an oscillator.

I like to use divergence because in my opinion, and preference, it is a clear signal. That does not mean the price WILL reverse or retrace, but it is a CLEAR signal. One that you can recognize at a simple glance. And the degree of divergence is also very clear, and it makes decision making rather easy.

The oscillator illustrated above is the Stochastics. And honestly, I don’t even know how it is calculated. I don’t know what is the best setting. And I don’t search for the perfect settings. But I use MACD and Stochastics with my own personal settings that I am comfortable with, but always bearing in mind, that indicators don’t predict anything, simply because indicators are based on past prices, and at most, at present price action, but never indicate future prices, because in order to calculate the indicator, you need a price. And the future price is not known. That’s the reality and the fact that many traders don’t quite seem to understand. And hence, they keep searching for the poorly named “indicator”, which indicates nothing except what has happened in the past.

But there are problems with using divergences, as with any strategy. Very simple questions need to be asked:

  1. When do I place an entry?
  2. When do I exit a trade?
  3. Where do I place a stop loss?
  4. Is the divergence a strong one?
  5. Is the trend a strong trend?

Yes, there are many questions to be asked, but with the Smart Casual Trading Method™, the focus is to simply trading as much as possible.

To learn more, check out the link about what I describe to be Smart casual trading, and feel free to contact me.

Happy trading!


Sunday Thoughts: “I want to turn $1000 to $2000 by next week.”


Who is right?

It is possible to turn $1000 to $2000 in a single bet in forex, in one day, in one minute, in one week, or one month, or any financial instrument that allows margin. Say for under Singapore regulations, the maximum margin allowed is 1:50. Meaning if you’re trading forex, every dollar you trade is worth $50. Overseas brokers can allow margin up to 500. Imagine your $1 being worth $500. And you have $1000 to trade. You effectively have $500,000 of margin.

With $500,000 of margin, you can do lots with it, just as what you can do with a bank loan. But it’s very, very different from a bank loan.

Simply because if you use all your margin, every little movement of a forex price (pips in common language) is going to be worth alot of money.

So as an example, with using all your margin of $500,000, betting long on the USDCAD on last Friday’s NFP results (which turned out higher than expected, but the USD CAD dropped by 60 pips in 5 mins), each pip is worth about SGD$38. So a 60 pip move against you will lose you $2280.


HOW CAN I LOSE MORE THAN I HAVE? (learn to read bro)

Ok. So that’s what can happen. So let’s say it moves 60 pips in your favour. Thats $2280. Congratulations, you managed to turn $1000 into $2280 in 5 min.


Dr Van Tharp in his book Super Trader did a very good experiment on this. And found that when it came to the biggest winners, there were basically 2 types: The one who bet large bets and got lucky, or the one who places small bets and profits little by little.

So who is right? Both are reasonable, and very possible ways of turning $1000 to $2000 although the more patient trader will take a longer time.

It’s all in your risk appetite. If you can’t afford to lose $1000 or even more (don’t be fooled that you’ll be closed out at $1000. Price can move so fast, the broker will just close it at the next possible price, which can make you lose even more than $2280 if there’s no one to take your stop loss. Happened to me once. And once is enough.), but willing to risk it because you have really nothing left to lose and wanna have a chance and doubling your money in 5 minutes, nobody can stop you.

The patient trader has an edge over you though. And it’s survival. Time. And luck only knocks a few times.

Which of the 2 types of big winners do you prefer to be? Rationally thinking, which is the right way to trade?

Both are possible. The only difference is time. And of course, this very important question if you want to be the big bet big winner trader:

What’s your next plan for the next trade?

Happy Sunday.

How to trade the news: understand what is news.

Sumiko Tan is an executive editor of Singapore’s mainstream newspaper the Straits Times. Picture credit: Straits Times July 8th

What is news? These days since Trump has been elected POTUS, there’s been lots of scrutiny on news. “Alternative facts” is endorsed by the White House. “Fake news” is a growing concern even Facebook and Google are thinking of ways of how to sieve out fake news because of the potential damage it causes in light of the explosion of social media.

Thene there’s nonsense news. Like the above. Which is basically a subtle advert to buy a book.

Trading websites like DailyFX, Bloomberg, are becoming more tabloidish than reliable news. And this is no surprise. Because news is a great business. Great business moguls like Rupert Murdoch make billions on selling sensational news.

Selling news is lucrative. Particularly for trading news. If you read through Bloomberg and DailyFX carefully, each article is skilfully engineered to hang a carrot to encourage speculation, feed greed and fear, and the most important point is thid:  news don’t make you money. The market does. A more controversial statement would be that “the market makes the news”. But perhaps we can talk about that over wine for a light hearted debate.

News is important. It gives traders informatiom. But we need to be aware of the many hands news has passed through, editors like Sumiko Tan, who considers it top news that she has a book of her life journey. Add on ingredients to excite and entice, And you’ve got the news you get.
Nobody bothers to read through the boring articles on economic news, or the facts. They want the analysts’ take on it. Shortcuts.  They want trade calls, recommendations. But they forget the fine print. And the fact these writers are paid to write articles. And exciting, ambiguous articles attract attention and stir emotions. And then come the subscriptions for “privileged access”.

By the way. DailyFx was and still is  associated with FXCM. Which was recently involved in a major scandal. It was sold to IG after the major disaster.
So why trade news?

Your choice. But be aware. The news doesn’t really have your interests at heart. Well? At least not anymore. News have more interest in what’s in your pockets.

Disclaimer. I’m not associated with any news maker or brokerages. I don’t want to be anyway. 

Destructive Emotions will Destroy your trading account. Here’s why.


I absolutely loved the wisdom in this book. Highly recommended, and applicable to trading

I read this book several years ago. It is quite a deep conversation, but also a highly enlightening insight into destructive emotions that cause a cycle of suffering. Seen below


Hard to read but very good examples of how it can be applied to trading as well

I have a Masters in Guidance and Counselling, and you probably have no idea what does that have to do with trading. I would say, 90%.

Because when trading, with real money, we are so attached to the value of money, it evokes strong, extreme emotions in us. And, sure enough, “over confidence” has been identified as a destructive emotion.

What is the result of destructive emotions? What is the cause? Well, it starts with having irrational beliefs. In the case of trading, most people think trading is all about getting the market right, predicting the right move, and finding the right guru to tell you where the market will go. It is irrational thinking, because the future cannot be known, hence your belief in the Holy Grail will only result in destructive emotions, such as anger, envy, hatred, which will lead to destructive actions and behaviours, such as revenge trading, doubling down too big, moving your stop loss, and changing your mind when you decided to break even, and when when you see profit, and greed takes over, and decide to add to your profit instead, you lose everything, very quickly.

Irrational beliefs, such as thinking trading can grow a $1000 to a $10000 account in one month consistently, gives you over confidence when it happens once, and then to despair when you get your margin call, and you double down to earn it all back, losing even more, and giving up what could potentially, if you had gone through proper coaching and embraced the rational thinking of trading, lose your dreams of being self employed, enjoying great quality of life, being detached from money, and overall attain happiness you never thought possible.

Which comes back again to my take on being a reflective trader. Do you trade with irrational beliefs? Are these beliefs leading to irrational, destructive actions, which feedback to your irrational beliefs, ending up in a never ending cycle of trading suffering?

Something to think about, and definitely not to be scoffed at. Most real traders will agree with me, that they have learnt more from books on trading psychology than from technical trading books. And that has actually sharpened their edge. At least, that has, for me. Perhaps you can try the same. And start, if you haven’t, read about trading psychology more, than about trading strategy.

Happy trading!


How to beat the NFP: My thoughts


Ok. Let’s kind of sumnarize the major USD events so far. FOMC minutes did not reveal anything spectacular. There are plans for 3 more hikes over the rest of the year, so thats one hike in 2 months. Let’s look at some key factors that the FOMC take into consideration.


Are we seeing a start of a down trend away from the desired 2%?


Rather mixed, but the NFP has always been the centre of speculative trading


Unemployment is clearly going down. And that is quite a good indicator of an improving economy

The next forecast for the NFP, depending on which news source you use, is projected to be above 170.

Usually, at the moment of NFP release, both the numbers and the unemployment numbers are taken in context. And it is usually within those few minutes of frantic speculation that the price of the US will go crazy, or not. (Who knows what the market does?)

So it looks pretty good for tomorrows NFP. And currently the USD seems to be moving upwards in anticipation. So, anyone want to put a buy order on the USD today?

Remember last week’s NFP for the EUR?


looks like a middle finger doesn’t it..dont know at who tho. Retails? Institutions? Everyone?

To sort of illustrate my point, go through the past daily charts of the main USD pairs. And without looking at the dates. See if you how many you can identify as those are the NFP dates. Some are obvious. But most of the time, I find that I cant. In other words, over the long term, this single event may have little impact on the overal market, but compiled NFP numbers, and further affirmation by the Fed, may be the true market movers.

To me, the NFP release is a very bad time to place your bets. The spreads go wild, your stops get wiped out, your emotions are hanging by the thread as you try to double your account in 5 mins, looking at the min charts.

What is your edge against the pros who are all well prepared for the NFP, who may even have pre-access to the numbers? (Watch Trading Places) How about the hackers who have already hacked into the NFP numbers and sold them to financial institutions?

Then there is you. Trying to make a quick bet in a crazy, deadly environment that will make you make huge mistakes.

Now, there are ways to trade the NFP. I know that. There are ways to trade through the EIC. There are ways to trade through the elections. Through interest rate announcements. Through media conferences.

To me, these are not sound trading strategies. They tend to build up alot of anticipation, greed, and fear, and you have to bet really big to profit well from the sudden movements: which can also move against you very quickly.

I don’t trade through the NFP, but I do take note of it. I see if there is anticipatory action prior to the NFP, and I like to see divergence before I enter a small position to fade the crowd, without a stop loss. And I my timeframe can go from 1 hour to 4 hours, and may hold the position until the next week.

I don’t aim to double my money in 2 minutes. That’s gambling. And my job is certainly not gambling.

I’m trading smart, trading casual.

Be careful of the wolves out there. Watch your back, and always, seek your edge against the market, even if it means going for supper instead of looking at a boring screen of numbers.

Where is the line between gambling, speculation, calculated risk taking, trading, and investing?


There is only one side of the market and it is not the bull side or the bear side, but the right side. ~ Jesse Livermore

How we wish we were always on the right side, don’t we. Some may say, be with the smart money, don’t be with the dumb money, but who ever wants to be with dumb money?

I had an interesting conversation today with an old friend. We talked about a varied approach towards trading, and it was quite interesting to try to pin down what exactly was trading, and what defined it. “Calculated risk” may seem to be the best answer, but it is also too general and misleading, especially if your calculations are based on gut feel, and your risk is too high.

I have met with some whose background in investing is basically bets on soccer, using some method of calculating the odds, and using some formula to decide on how to size the bet. It sounded alot like a calculated risk, but no doubt, it was gambling.

Then there’s speculation. It sounds more benign than gambling, but essentially it is still betting on an unknown future, be it in stocks, forex, or the weather.

Now we come to the debate between trading and investing. And it came to my mind because of the conversation I had, because investing seemed like the “zero risk” approach, investing in products sold by the banks, with “full capital guaranteed” clauses, with decent returns of 3-5% a year.

But what the institutions do, are basically speculating and trading in a portfolio of equities, bonds, commodities, forex etc. How is it being sold as “risk free”?

I guess in essence, investing is widely accepted to mean putting capital into a product for capital appreciation, or for some interest return in some form, be it in rental or dividends, even swaps if you invest in forex.

Did I just say “invest in forex”? Some may call me out on saying that. But isn’t that what the institutions are doing, distributing your capital into currencies, and selling you an “investment product”?

What do I do? I trade forex, for a living. What does that mean? I have a set amount of capital, I allocate a percentage of capital into products known as exchange rates based on price movements, and make profits and losses whether I am on the right side, or the on the wrong side. And since I am doing it for a living, it means overall, my profits exceed my losses, and my capital is growing. For now.

I do not know the price of the USD/JPY tomorow, or later at night. But I can make an entry based on price patterns and other information that allow me to make a “calculated risk” on how much to “bet” and where to take profit, or to cut a loss.

Am I gambling?

To me, the line is very clear. And it lies not in definitions or words, or descriptions.

The line is drawn in the Mind.

I am a forex trader, running a business, making calculated risks on future, unknown prices, and allocating small amounts of capital for every position, with the aim, in Mind, to grow and compound the capital over time. I don’t aim to grow 100% in a week, but I do aim to beat the market by a fair margin, over the course of years.

So which category do I fit into?