Technical-focused strategies to survive in the market: Review of key points in Episode 6 [Hiroyuki Tamukou]
In this series, professional trader Hiroyuki Tamukai will lecture several times on trading techniques focused on technical analysis. In this final installment, this is a summary of the previous five episodes. It would be good to re-understand the essence of price movements in the forex market and review your own trading strategy.
※This article is a reprint and revision of an article from FX攻略.com October 2018 issue. Please note that the market information written in the body may differ from the current market.
Hiroyuki Tamukai Profile
Tamukai Hiroyuki. After graduating from university, he attempted qualification exams but gave up. Unable to find employment, he started a business out of necessity. He began investing during the course of running the business. Currently, after transferring the business, he is a private investor. He also plans and composes seminars for FX companies. His books include “FX Introduction That Even a Timid Person Can Win” (Ikeda Shoten) and “Conservatively Win with Two Chart Checks a Day for Part-time FX” (Jiyu Kokumin Sha).
Technical analysis is recommended for individual investors
In the five previous installments of the technical-focused strategy series, we have guided that individual investors can profit more easily using technical analysis than fundamental analysis, and what to use and how to use it. Knowledge of technical analysis can be used not only in FX but in other markets as well; I believe it is a lifelong skill. Even I, when I first started FX, thought, “I just want to make money,” so I was looking for tools that would profit.
In conclusion, there is no such convenient thing. If there were, Goldman Sachs would buy it for 1 billion yen. There is no magic in FX or other market trading that guarantees profit by doing this or knowing that. If you ever encounter a lure that says “You will surely profit,” you should suspect it is a fraud. Also, financial institutions like banks, which are financial professionals, are enthusiastic about selling investment trusts not because they earn from them, but because they prioritize commission income that is reliably earned at the counter rather than the volatile trading department’s income.
To profit and survive in a market where there is no guaranteed profit, knowing the basics of the market is the minimum requirement. One of them is money management, which is indispensable for those who use fundamental analysis. Trading with fundamentals bets on large trends, so if you get the flow wrong, you face a massive reverse current and rapid losses. Interest rates and policy moves operate on a half-year to multi-year scale (refer to the first installment of the May issue); therefore, there are many moments where the market temporarily goes against you over a long period. Entering the market during these counter-trend moments leads to losses. I believe there are three fatal points in trading with fundamentals: ① the economic trend and the individual investor’s time frame for trading do not align; ② the textbook economic thinking does not necessarily match market movements; ③ trading timing is not indicated. (Refer to the second installment of the June issue.)
In technical analysis, money management is also important, but unlike fundamentals, the charts teach you many things. The most representative are “trading timing” and “loss-cut locations,” and when you can derive this information from the charts, you can sometimes trade even in counter-trend situations. Also, if you know where to set your stop-loss, you can place a stop order in advance to escape an unfavorable market for you.
Furthermore, by combining technical mastery with consideration of fundamental factors, you can better anticipate the market. The chart may take this shape, and because an event will occur a few days later, you can devise a forward-looking strategy that links price movement, time, and events.
