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GM. This is Currencies & Coffee – where we dissect the forex frenzy and deliver the distilled details

Here’s what we have covered today:

☕Rough Week for Wall Street, FOMC, BOJ & BOE on tap

☕10 Lessons From Unsung Market Wizards

☕+$15,000 USD in 24-HRS, CADCHF & USDCHF Setups

🗞️Movers & Shakers🗞️

Let's look at the major events that shook the financial world last week and then peek into what's lined up for the upcoming week. Ready? Let's dive in!

The Week That Was:

➡️ Wall Street's Rough Week: Investors struggled as Wall Street hit a 5-month low. Why? A combo of not-so-great company earnings, rising bond yields (which means borrowing gets more expensive), and worries about the conflict in the Middle East.

➡️ China's Market Woes: Even after China's leader, Xi Jinping, made some budget changes, China's stock market didn't cheer up much. It had a small rally but is still near a 2-year low.

➡️ Bond Market Buzz: Some big names in the bond world, like Bill Ackman and Bill Gross, shared their views on bonds. The takeaway? They're feeling more positive about bonds and are worried about a US recession by year-end.

➡️ US Economy's Strength: The US economy grew faster than expected in the third quarter, which is good news. But, some early European indicators weren't so rosy, especially for Germany's stock market, the DAX.

➡️ Central Banks in Action: The European Central Bank (ECB) paused raising interest rates after doing so many times before. Down under, Australia's central bank hinted at possibly raising rates, but there's still some uncertainty. In Japan, there's chatter about the Bank of Japan possibly stepping in to intervene as the USD/JPY currency pair broke above the infamous 150.00 level.

➡️ Gold's Shine: Gold, often seen as a safe place to park money, had a good run but is now hovering around the $1950 - $2000 range after pumping 10% in 10 days.

The Week Ahead:

➡️ Federal Reserve's Meeting: On the radar is the Federal Reserve's meeting. Most are expecting them to keep interest rates unchanged. But, with recent events, like the Middle East conflict and bond yield movements, it'll be interesting to see if they hint at future rate changes.

➡️ Bank of Japan's Big Decision: There's some buzz that the Bank of Japan might make some changes to how they control interest rates. If they do, it could shake things up for the Japanese yen and Japan's stock market.

➡️ Bank of England's Rate Decision: Most experts think the Bank of England will keep interest rates the same, especially with the UK's economy showing signs of slowing down. But, high inflation might make them consider a rate hike.

➡️ US Data Releases: Many important data is coming from the US. This includes info on manufacturing, services, and job growth. These numbers give us a hint about the health of the US economy and can influence decisions on interest rates.

10 Lessons From Unsung Market Wizards

In the fast-paced world of trading, where legendary investors often hog the limelight, it's easy to overlook the invaluable lessons learned by everyday traders. Over the past three decades, Jack Schwager has diligently gathered the stories of these lesser-known yet highly accomplished traders in his latest book, "Unknown Market Wizards." These traders, while never officially working in finance and investing solely in their personal accounts, have achieved remarkable returns that rival even the most celebrated industry professionals. As we delve into their narratives, we uncover ten essential takeaways that can illuminate your path to trading success.

1. There's No One-Size-Fits-All Approach:
These traders used many strategies—fundamental, technical, or a blend of both, and sometimes none of the above. Some held trades for months, while others for mere minutes. The lesson here is that there's no universal trading formula. Success lies in discovering an approach that resonates with your beliefs and personality. For instance, one trader transitioned from technical to fundamental analysis, resulting in increased success. Another found unconventional approaches outside of traditional analysis techniques.

2. Maintain a Detailed Trading Journal:
A trading journal houses invaluable information about your successes and mistakes. Regularly updating and reviewing it can substantially improve your trading process. One trader, for example, identified common characteristics among his winning trades through his journal. This revelation helped him pinpoint his trading edge, significantly enhancing his performance.

3. Identify and Stick to Your Edge:
Trading isn't about mastering every asset class or market; it's about making profits. If your strength lies in a niche area, such as small-cap biotech stocks or identifying thematic trends, embrace it. Avoid the temptation to venture into unfamiliar territories simply because you feel you "should."

4. Seek Asymmetric Payoffs:
Exceptional trades often offer potential payoffs significantly larger than potential losses. For example, some traders relentlessly search for "ten baggers," stocks that can surge tenfold in value. These opportunities provide an appealing payoff asymmetry, where the potential gain far surpasses the theoretical maximum loss of 100%. However, prudent risk management, including protective stop-loss orders, should remain an integral part of your strategy.

5. Prioritize Portfolio-Level Risk Management:
Beyond individual stop-loss orders, consider the correlations between your portfolio positions. Assets that move in tandem can expose your portfolio to simultaneous losses. To mitigate this risk, consider adding inversely correlated positions to your portfolio.

6. Step Back After Significant Losses:
Many successful traders take a break from trading when their portfolios experience substantial losses, typically ranging from 10% to 20%. This pause serves two purposes: first, it provides an opportunity to reassess your strategy if proven ineffective, and second, it prevents emotions from dictating impulsive decisions to recover losses.

7. Don't Hope for Trade Success:
Hoping for the success of a trade without a solid understanding of why it should succeed is a red flag. Base your investments on a well-defined process rather than speculative hope. If you merely hope for a trade to work, consider exiting it.

8. Differentiate Between Outcomes and Decisions:
A trade's outcome doesn't inherently reflect the quality of the trade. Even an impulsive trade can yield profits by chance, and a well-executed trade can result in a loss. Distinguish between adhering to your process and making mistakes in your trading decisions.

9. Cultivate Patience:
Successful traders exhibit patience in two crucial aspects: waiting for suitable opportunities within their expertise and sticking with winning trades. Avoid the temptation to make suboptimal trades out of impatience, and instead, ride profitable trades while securing gains along the way.

10. Embrace Market Volatility:
Consistency in trading profits is elusive. There will be periods of opportunity scarcity, which might lead you to make suboptimal trades out of a desire for consistent profitability. Remember that trading profits inherently fluctuate, and losses are a part of the journey.

These ten lessons offer invaluable guidance for both aspiring and experienced traders. Trading isn't solely about making money; it's about making informed decisions that align with your strategy and objectives. Success in trading requires a comprehensive understanding of market dynamics and, most importantly, a disciplined approach. So, whether you're just beginning your trading journey or seeking to enhance your existing skills, these insights can set a great foundation for your profitability.

SIP, LAUGH, TRADE 😁

📈LATTE LINEUP📈

-EURUSD- (+$15,000 profit)

The setup was shared in our Nexus Hub at the end of last week, and I executed the position on Monday. On the Higher Time Frame (HTF) of the 8-HR chart, we noticed that the price made a new high and then retraced to retest the previous resistance as support. It then pushed deeper towards the 100% Fibonacci level, where strong buying pressure was evident through strong rejection candles. This provided enough confirmation to shift our focus to the Lower Time Frame (LTF) of the 1-HR chart to look for a suitable entry point.

After our higher time frame (HTF) confirmations, on the lower time frame (LTF), we were hoping to see an upswing in the market sentiment. This shift would be from a pattern of lower lows and lower highs to higher highs and higher lows. Fortunately, this is exactly what transpired. We witnessed a break and retest of the 1-hour resistance level, validated by bullish rejection candles. I seized the opportunity and went long on the candle closure, placing my stop loss below the previous lows and targeting the previous HTF high.

The trade went in my favour, resulting in a profit of over $15,000. I secured the position to break even and now plan to ride the move to our target. To stay in the trade, I need to see the price action continue to form higher highs and higher lows, which aligns with my bullish outlook.

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-USDCHF-

HTF (12-HR): The price movement is currently showing a clear bearish trend. It has recently dropped below the previous support level, resulting in a new lower low. Now, there is a retracement to retest the previous support level as resistance, which coincides with the 50%-61.8% Fibonacci level. Upon analyzing the candlesticks, we can observe that the selling pressure is beginning to set in, as indicated by the bearish rejection candle. Moving forward, let's switch to the lower time frame to seek out a suitable entry point.

LTF (1-HR): After observing the bearish rejection candle of the higher timeframe (HTF), we can see a clear formation of a head and shoulders reversal pattern on the lower timeframe (LTF). Our goal is to witness the selling pressure of the HTF translate into a shift in market structure from higher highs and higher lows to lower lows and lower highs. To initiate a sell position, I will wait for a break and retest of the 1-hour support level, which should be confirmed by bearish rejection or engulfing candles. I will place a stop loss above the previous high and aim to target the previous HTF low.