I rant for a while -- no surprise here -- about two huge myths on the subject of trading. But first let's dive into the charts of the week:

We’ve been following oil for a few weeks now. Oil is re-testing a trendline now, and I’ll be watching closely this week to see if it can break upward from here. If we do, I would not be surprised to see it reach $55-$60 within 30 days of that break.

And here’s Citigroup. The Federal Government seems to be inching closer to a complete nationalization of the bank. Maybe I’m wrong about that. But I don’t think I am wrong about the fact that the company is essentially insolvent. Here’s the latest move:

Where does it end with this stock? Will all the shareholders be wiped out? How much more of this can investors take? It’s a bank and it has a money problem. That’s got to be the worst problem for a bank to have, right?

I had a wonderful time in Atlanta with a group of traders over the past two days. Here are some thoughts that occurred to me during the time we met:

• Trading is “Too” Risky. Trading, in and of itself, is not risky. What we should say instead is: People are sometimes stupid. Certain people have just determined that they are going to self-destruct, and there is pretty much nothing that you or I can say to them to change that. Plenty of investors have gone broke investing in “safe” strategies. Plenty of investors in the world have done well trading, and I am not just talking about Warren Buffet.
  
  I am tired of hearing that trading is risky. Was it safe to buy bank stocks three years ago, as part of a “balanced” portfolio? Was it safe to invest in real estate? Was it safe to invest in the S&P 500 index 10 years ago? If your answer is, “It depends,” then I don’t want to hear anything you have to say about trading being risky. With any kind of investment, it always depends. Whether an investment or an investment strategy is risky has everything to do with how much money you are going to risk, not whether there are scary monsters that are more likely to eat you if you invest in commercial real estate versus the stock market versus the currency markets.
  
  It always depends on money management, and whether you “bet” your whole retirement fund on something, and whether you know anything about what you are investing in. It always depends on whether you are a psychologically balanced individual that does not have a propensity for self-sabotage. It always depends on whether you are prepared for the worst.

• There is One Strategy that Will Work. This is insane, whether the strategy is “buy and pray” in the stock market, or “moving average crossovers” in the futures market. There is no one strategy that is going to act as an ATM for any of us for the rest of our lives.
  
  The only system is you. You are the system. You are the central, most important element of your successful investment strategy. You are the only part of the equation that matters in the end.

Let me put this in another way:

Anything good that you get out of a trading strategy is temporary, and you had better maximize what you get out of it, because it is not going to last forever. It is not going to just permanently work in the same way, giving you the same predictable returns, for the rest of your life. So invest in yourself. Invest in becoming a better person, invest in getting educated on how you can teach yourself more, invest in learning as much as possible about managing risk in your trading and in your life.

Every investment theory and strategy has its weaknesses. Every system can and will break. Nothing is permanent in the markets. Teach yourself to be ready for when things go wrong, and spend a lot of time learning to recognize when your strategy isn’t working. Be ready for the worst. 99% of traders spend time charting out how much money they are going to make if their strategy continues to work well. And they are completely unprepared to deal with change, with problems, and with unexpected losses. And then they freak out when things go wrong.

Invest in yourself and don’t trust the market to provide for you. Provide for yourself.

The GBP/JPY is generally highly correlated to the Dow Jones industrial average, and the US equity market as a whole. Lately that correlation has become a bit disrupted but I expect it to return. More importantly, I will be watching the chart below – the 4 hour time frame – for a break below the blue trendline. If the currency pair breaks that level, I think we could see the pair move all the way down to 125.00 or much lower – a move of almost 1,000 points.

Here’s the chart. As usual, you can click on it to enlarge it.

You can read a bit more about a basic correlation study that I did on the EUR/JPY and the Dow by clicking right here. The EUR/JPY and GBP/JPY work in similar ways with the Dow.

Today I’m in Atlanta. It’s snowing here, which is unusual. It’s a lot of snow, too. Here’s a photo I just took:

It’s a clear reminder that what we don’t expect can always happen, and it pays to be ready. People here in Georgia are unprepared for driving in the weather, and last night most grocery stores sold out of water and milk and eggs. On that note, please remember to be ready for whatever the market hands you. Be hopeful for the best but please, please be ready for the worst.

Last of all, there are a couple of spots available still for Orange County seminar I'm doing, and we have announced the dates for the UK seminar here. If you’re ready to take your trading to the next level, I’d love the chance to work with you in person.

Happy Trading!