In This Issue

New Forex Trading Platform

Importance of "Trading Psychology"

Reports and Expiration Notices

May 31st, 2006 — Issue #329

New Forex Trading Platform

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Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Robert Deel Stresses Importance of "Trading Psychology"

By Jim Wyckoff

(Note: I wrote this story a few years back, when I was a journalist with FWN.)

New Orleans-Nov. 18-FWN--THE FORMULA FOR TRADING success, according to Robert Deel, is: Self-Discipline + Knowledge + Experience + Skill = Success. Success = Profits.

Risk management and money management are key to achieving any success in a market, said Robert Deel, a registered investment adviser and portfolio manager for Strategic Management Decisions, based in Duarte, Calif. He was speaking at the Dow Jones Telerate Technical Analysis Group (TAG XVIII) meeting in New Orleans, held late last week.

A main precept of Deel's presentation is that traders must maintain the proper psychological mindset to be successful.

Traders should never "over-trade," and should establish "risk tolerance," said Deel. A successful trader quantifies, analyzes, and truly understands and accepts risk. "Emotional and psychological acceptance of risk is what determines your mental state in each trade," he said, adding that 90% of traders don't have an idea of their risk tolerance.

As a trader, you "must select a trading methodology that reflects your timeframe and risk tolerance," he said.

"Risk management seems like a contradiction in terms. The mere mention of the word conjures up demons of fear and panic. Risk properly defined is the measurable probability of loss. The key words, of course, being 'measurable probability." Most people think of risk as uncertain and not quantifiable. This is not the case," said Deel.

Deel said futures traders should select trades with a 4.0 or higher risk-to-reward ratio. For example, a trade that creates a maximum loss of $1,000 (via placement of stop), should be able to yield at least $4,000 in profit.

"Your ego and money can make you broke," Deel told the trading audience. "Winning can create powerful emotions which distort reality. The more you win, the better you feel, and your ego takes over. The joy of winning is the drug that gamblers live for," he said. "A gambler will lose money as many times as necessary just for the thrill of winning once."

"Never place a trade without perspective," stressed Deel. Like other speakers at the trading conference, he said physical stops (not metal) must be used.

"Money management addresses the preservation of existing and accumulated capital. Without the implementation of strict adherence to money-management principles, even the best trading strategy will not succeed. Risk management and money management are, in my opinion, critical elements of a successful trading and investing plan," said Deel.

Disclaimer:

Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. This is not a solicitation of any order to buy or sell, but a current futures market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

Jim has an excellent daily newsletter where he reviews different markets, alerts you for potential trades and much more. Included is his great bi-weekly newsletter with charts and a little longer term outlook. We recommend checking out his website, educational CDROM, and services at Jim Wyckoff

Economic Reports and Expiration Notices

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!