“Will it?”

On Tuesday, we saw UK inflation data beat the market’s estimates which backs up the Bank of England’s comments last week that interest rates in the UK will need to rise sooner and faster than expected. The Pound initially moved higher on the news, however, gave back most of the gains through the US trading session and this is a sign to me Traders aren’t willing to drive stocks back lower on just the UK inflation report, they need more and that more is coming today.

US inflation data is due out tonight at 12.30am AEDST and this is the number the market is waiting for. When you’ve watched currency markets as closely and for as long as I have you pick up on tell-tale signs that tell you traders are not willing to re-enter the market long or short with any conviction until the Elephant again enters the room. A baby Elephant entered the room overnight with UK inflation data and the stronger than expected UK CPI reading confirms a rate rise at the next BOE meeting is a strong possibility. The big Elephant in the room and this week’s major market driver is going to be the latest report on US inflation. Once we see the US CPI number released just after midnight tonight traders will show their intentions. A stronger than expected US inflation reading will once again likely see traders sell stocks, rally US bond yields, and send the Aussie and Kiwi Dollars trending back lower against the greenback. It would likely cause what is referred to as a Risk-off trading session. Traders are paranoid US inflation is going to rise faster than most expect and if it does the US Fed is going to raise the official cash rate at least 4 times this year. That would highly likely see the sell-off in stock markets continue and also push the AUD and NZD back towards their 12-month lows.

Other than the Yen being supported through the US trading session on Tuesday, currency crosses have been range-bound this week and you only need to look at the economic calendar and it will tell you there has been no high impacting US economic news to inspire traders to trade. These are the weeks that require discipline and patience as each time you open your trading platform there is a temptation to trade. This little voice inside your head says “I might miss out, I need to trade to make money.” It’s this little voice you must suppress and override because when you let it control your actions and you win, you are now cursed. You are bound to let it tell you what to do again and this spells disaster for novice traders. Stifle and suppress that little voice, trust only the trading plan and risk management processes you have (provided you know what they are and can execute) and focus your attention on replicating the process.

I don’t think 98% of traders give the following much consideration or have ever thought about trading this way. If you ponder the following points and then can’t bring yourself to commit to improving your discipline then you need to quit trading today because you will only continue to lose money. What you are about to read is profound and if you embrace it and take action then trading can be the most rewarding financial experience of your life. But only a few of you will!

To win at trading you need to commit to learning to play the game. But the game is not about learning a better system or strategy, the game is mostly being a better you! The game is learning to control you! Making money comes down to how you control your behaviour when you play the game, and when you master “you”, you will ultimately master the game. When you master the game you will realise that anyone can trade, anyone can make money trading but 98% of them are focusing their attention in the wrong area. Ponder the points below and if the penny doesn’t drop then you must quit trading today.

1. You trade a market that is a 50/50 probability. It goes up or down.
2. There is legitimate trading edges (systems) you can learn that can give you an opportunity over a given number of trades to be at least correct 50% of the time.
3. If your edge is only correct 45% of the time and never improves above 50% can you still make money?

Below is a reward v risk analysis Alex Kozulin showed LTG members at our last 2 Day Boot Camp. It simply shows what your return on investment would be annually if you had a success rate of 45% and took 10 trades in a month. What varies is the reward to risk-return using 3 different examples. When using a 1.5 : 1 reward to risk the annual return is 15%. Meaning that if a losing trade on a $10,000 account is $100 dollars (1%) the average winning trade at a 45% success rate is $150. If you achieved a reward to risk ratio each month of 1.75 : 1 the annual return goes to 28.56% with 1% risk per trade and if you achieved a 2:1 reward v risk ratio on each trade the annual return is 42%. All with a 45% success rate and 1% risk per trade, and losing more times than you win.

Has the penny dropped yet? Do you realise that if you simply get disciplined and learn to control “you” and how you behave as a trader with your risk and reward the opportunity you have is mind-blowing! It’s not going to come down to the system, what it’s going to come down to is how you control your discipline when it comes to letting trades run to the targets of 1.5 : 1 or better and handling the losing streaks that are part of trading a probability based game.

About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

If you would like to speak to one of our Senior Client Advisors regarding the relative client opportunities offered at LTG GoldRock and how you can follow along with our Professional traders each day in our live trading room please contact us today or you can register for one of our a live coaching and trading webinars by clicking here.

The post Today’s Key Market Drivers: 14th February 2018 appeared first on LTG GoldRock.