This
month ’s King of the Mini winner has
managed a colossal 798% gain in his account!
Download his trading statement to see how
he did it, and read a breakdown of his best
winning trade below!
The
King of the Mini Contest awards cash prizes
to the top five traders with the highest
percentage monthly gains, who also get
bragging rights for their respective countries!
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Over
$4000 in cash prizes
awarded monthly.Learn
more about prizes/contest
rules. Do you want to
be King of the Mini? Open
an Account.
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Though the range-trading
that traders experienced in July continued
into August, the euro did strengthen nearly
230 pips over the course of the past month.
At the beginning of each month US job creation
figures are released, giving an outlook
on the employment situation. Job creation
again disappointed in August, although the
trend over the last three months is indicative
of solid growth. The economy created 169,000
jobs on net compared with expectations of
about 200,000. Rapidly increasing oil prices
are another reason for the US dollar decline
in August. Light crude traded at $62.15
on August 1 but NYMEX traders bid the hot
commodity to over $70 on August 31 before
the October contract closed the month at
$68.94. Stories affecting the price of oil
dominated newswire services throughout the
entire month of August. Early in the month,
Valero Energy, one of the largest refiners
in the United States , said it would stop
producing and blending the additive MTBE
into gasoline because refiners didn't receive
liability protection regarding the additive
in the energy bill passed late in July by
Congress. Fear of supply disruptions drove
prices higher. The death of Saudi Arabia
's king Faud on August 1 rattled the oil
markets, even though the transition to his
successor was smooth and the country's oil
policy is not expected to change. Breakdowns
of US refineries (fires at Chevron's El
Segundo , CA and BP's Texas City refineries,
as well as a shutdown of Exxon Mobil's plant
in Joliet , IL ) and worries that heating
oil supplies will be tight during the coming
winter supported prices as well.
On August 9, the FOMC
raised the target fed funds rate by another
25 basis points to 3.5%. Statements from
the FOMC indicate that even with this tightening,
the Committee still views its monetary policy
as accommodative, providing support to the
economy. There were small changes to the
FOMC's statement, as the Committee said
that spending appears to have strengthened
since earlier this year despite higher energy
prices. This is yet another reminder of
the increasingly important role that the
consumer plays in the US economy. Over the
past few years, a number of factors have
encouraged consumer spending, from tax cuts
and low interest rates to skyrocketing housing
prices. The trend has been towards Americans
borrowing against their homes and saving
less. Though borrowing is what keeps consumers
spending, these mortgages are eventually
going to have to be paid. With the popularity
of adjustable rate mortgages (ARM's) in
recent years and the Fed still in a tightening
cycle, interest payments to creditors will
very likely increase. This scenario leaves
the consumer with less discretionary income,
which could have profound effects on an
economy where consumer spending accounts
for 70% of GDP.
Overtrading is one of
the biggest obstacles to success. Some traders
will make 100 trades or more in a month,
only to see a large percentage of their
trades stopped out by a whipsawing market.
Some traders have made fortunes by making
a lot of trades and taking small profits
on a good percentage of them. These traders
are few and far between. The difficulty
with this is that one or two large losses
can wipe out months of trading profits.
On the other hand, traders such as this
month’s King of the Mini spend less
time clicking buy and sell and more time
analyzing their charts. This “philosophy”
forces patience upon the trader and the
result is a higher probability of successful
trades. Long
GBP/USD on 8/7 at 1.7747, exit on 8/8
at 1.7872. Total Gain: 125 pips
When this trader found an opportunity,
he exploited it. Here is one of his more
successful trades last month. A careful
analysis of an hourly chart would have
brought to one’s attention the formation
of a triple bottom. Our trader enters
near support after GBP/USD tests 1.7750
for the third time in three days (thus
forming the triple bottom). A forceful
rally in the GBP follows and profits are
locked in at 1.7872.
Stochastics
Stochastics is an oscillator
– meaning it offers a measurement
of the deviance of currency pair’s
rate (price) from its normal levels. Like
all oscillators, stochastic offers indications
of when a currency pair is overbought/oversold.
Accordingly, it works well in markets
that are not trending, but rather just
fluctuating back and forth between an
upper level (resistance) and a lower level
(support). When %K crosses %D (when fast
crosses slow), it can be interpreted as
a trade opportunity. If both %K and %D
are above 80, it may be a good opportunity
to sell, as the asset is overbought and
expected to return back to a normal level.
Alternatively, if it is below 20, the
asset is oversold – and it may be
a prime buying opportunity, as a range-bound
market would imply that the currency pair
will head back to a more “normal”
price. This correlates with our trader’s
trade perfectly. Notice that the pair
is oversold (according to stochastics)
and that the %K line crosses above the
%D line. Stochastics indicated an overbought
level near the price that our traded took
profits.
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