Risk Assessment – Don’t waste times assessing the wrong things!

Hi there guys. Now just giving you a quick uh run through of risk assessment. Right now the upcoming coaching sessions usually come from uh a key question I get from someone or uh that's or or something else that's happening in the market. Now this one is comes from one of our clients uh in New York and unfortunately it's like 2 a.m. for them. So, it's not ideal, but they'll be watching the video. And I thought, well, this is worthwhile because the same sort of thing is probably happening across the board. Now, let me run you through this. Now, this isn't meant to be a long- winded session at all. It's it's more to the point. If you've got any questions, let's answer those and then uh and then move forward, put into play. All right. Now, what am I talking about? Risk assessment. Don't waste time assessing the wrong things. All right. So, one thing that you want to be doing when you are looking at the market. Now, if I when I come to the market, say I haven't been in front of the screens for four or five hours or it's the morning or evening, I'll do a quick walk through of what's happening. Now, this isn't really risk assessment, right? This is where I'm actually just having a look at the news, seeing if there's any updates. I'll first of all probably have a look across the uh currencies and I'll be like, "Wow, okay, Euro's up about 20 ticks. Sterling's come back to life. It's all over the place and Aussie starting to cruise top side." Like, I'm just sort of looking what's going on. And from when I looked at the markets, seven, eight hours ago, they are starting to progress as I thought, right? And we are starting to see dollar Swiss getting close. So, things are looking good. But the at this stage I'm just looking right. I'm just having a look around the market. I'll be like uh checking the US bond yields going, "Oh yeah, they haven't moved much. That's good. They're pretty steady." Um I can see the the equity markets risk on day and that is turning up on the uh currencies. Got Euro, Sterling, Aussie, Kiwi going up, the dollar going down. Right. So I've got a a situation here where we've got a risk on profile. Now that's that's all I need to be looking at when I have a look across the major instruments and I've I've had a look but when it comes to actually looking you don't need to sort of go deeper and what I mean by that is when we are having a look okay whether it's um so I'll use the live trade signals as an example right so with the signals I would encourage you to use your knowledge of the market to sort of verify the signal itself see see what's happening. See if everything's lining up now. Things are lining up quite nicely because you got euro and dollar Swiss here, right? Um unfortunately that they are at opposite ends of where we need them, but they are moving in the right direction. This is something very good. Now, obviously sterling's not part of that equation. uh well not at the moment anyway and that's just due to the sort of isolated economic circumstances surrounding the UK at the moment now but what I would be looking for and even if I'm looking at the Aussie right um is just checking out what's going on when I come to risk assessment I'm starting when I see an opportunity and I see it lining up and it looking good now I start to sort of switch on now I don't need to go searching if I'm Looking at the Aussie dollar here. I don't need to go crazy through everything. Actually, let me just whilst I'm there, let me just go through euro because this is to me euro and dollar Swiss uh shaping up to be a couple of nice trades. Now euro. So I will just go into euro. I don't need to go across all the majors as far as initial risk assessment. If I'm looking at euro and it's going up, right? all dollar switch which is going down. Then I'll have a quick look to see if all the correlating pairs are lining up and I can see sterling is I'm like yeah okay that's good. Yeah, all looks good. I'll uh reassess the uh trend lines now that sterling's higher. I'll probably just bring this trend line up. Um I mean we did have that other high over here. Let me just get rid of that. So this is the sort of first step of the risk assessment is actually just readjusting your trend lines to fit in with where they are where the mark current market activity is. Okay. So you know and with that adjustment using this high in sterling you can see it looks very similar to euro right you're like okay this looks I'm I'm feeling a bit more confident about that. the um and I'll just just out of habit I will adjust any trend lines that aren't lined up at the moment. So now let's get into into Euro. Like I'm I'm happy with the correlations. That's all I need to see. Now what I would be doing is is deep diving into you know the euro just having a look at what it's doing across the board. Now Euro Aussie is has has been coming off Euro Kiwis come off a fair way. Euroyen sideways. Um, Euro Sterling, well, down and it's starting to pick itself up off the floor. Euro Swiss sideways and Euro CAD. You know what? If I just clean those trend lines up, it'll look largely sideways as well. Right now that we've got some new highs, some new lows, like the markets have just been getting beaten up in sideways trading now. and you would sort of really tidy up some of these other trend lines here as well and using this recent high. Okay. So, what I'm doing at this point by redrawing the trend lines is basically reassessing where momentum may shift and change. Um, and that's an important aspect as far as when I start to to lean towards putting a trade on, I need to start thinking about the whole risk risk assessment scenario, right? So now, like I'm looking across the the uh the crosses here, right? And what we can look at, let me just get this one on on the spot. Come on. Okay. So, just wanted to make sure I just was redrawing the trend lines for you. So, you can sort of see, you know, the process of of redrawing trend lines, adjusting things. You don't need to go and re like start from the very beginning and met stock can be a little bit temperamental with those levels. Uh, here you go to the bottom. I like to sort of just go to where it's been. So you can see where the choppy price action is. Now I can I can see very clearly what's happening here on Euro across the board. Right now what wi with the assessment I'm focusing on euro. So I don't need to go around and and check everything out. I need to have a look here. Now just having a look at the uh the signals as we go. Euro I liked all the Swiss, you know, they they they work as a pair. Euro Aussie it's bearish. Euro Sterling bullish, Euro CAD bullish, um, Euroyen bullish. So, I'm looking for signals. Now, if I get a signal that lines up with the actual move, that's when I'll sort of dig a bit deeper and just go and make sure that it everything's in the right place. And then at the and then as an extra point of assessment, you know, is there any economic numbers coming out that I need to be aware of? Um, so it's a it's a pretty quick process, right? What I'm not doing is say I'm looking at Euro and I'm and I'm looking to get long. I'm waiting. I can see it's in the wrong part of the um, you know, as far as momentum goes. Now, that doesn't mean it doesn't keep going up, but this is where I would go. Okay, it's in the sell zone. Now, can I find is there economic numbers coming out that will that will push Euro higher? Um you got ECB Lane speaking it speeches are hard to sort of work with the uh if I just come across go to the next day uh oh not next day sort of the next time frame you got a whole bunch of US numbers here right so this is where as I mentioned this morning industrial production numbers and the uh non-manufacturing numbers come into play right sometimes called the services PMI right these things are going to help me with this Euro trade so but they're not coming out anytime, okay? >> You know, in the next couple of hours. So, I've got a bit of time. So, as far as risk assessment, there's nothing to really unsettle the trade. Now, with those coming up, assessing this, I would go in and say, well, I don't like the fact that it's massively overbought at the moment. Okay. And this is the crosses, right? So, I'm not really focusing on the crosses. I just wanted to show you how you can just go straight into a cross. And if you like one in particular, then you could go straight into your template and get the cross up. In this case, the actual cross is the major euro against the US dollar. So, I can do a quick cross analysis hourly, daily, get these things lined up. I can draw trend lines, really work out where everything is. And of course, that doesn't jump on the right spot. Let me just show you how to get this on the right spot. One way you can do it, obviously if you blow it up into a bigger chart, it's easier. You can also use the zoom in function, but um so I got euro going up here, right? It's broken higher. Now, on a long-term time frame, I don't really need to move this trend line. What I'm really looking for is make sure it's above the bullbar pivot line. It is overall long-term trading sideways. It's not quite over overbought yet, and that can take a couple of days to get through that. This is the situation where if if it's looking a little bit overbought on the on the hour on the dailies, I'm not too concerned, but I am with the houries, right? That'll be enough to hold me off until the US numbers come out. So, all I'm doing is assessing the risk. The trend lines tell us where momentum may shift very quickly. Now, would I draw a trend line from the top here to the most recent level? Not necessarily, right? But what I would do is if I can just get that to jump on that spot again. Okay. Is have a look at where the previous high was. Now, this is where to me this is where horizontal trend lines come into play, okay? They're not like you don't just draw them every day. I'm looking at the say the previous highs here and if I just come back. Okay, so you know what? since uh well it's not a long-term time away November I mean I can click on that say November 17th 16th somewhere around there that's been a high since then right so you know what since we don't have any real trend lines in play that's when a previous high can act as uh not really act as support or resistance but tells you it's more of a pivot point potentially right especially with that double uh top close to this level. Now, that may see as far as risk goes or a potential move, you see a break of that that pivot line, that's when you may see Euro really start to accelerate. Right? At the moment, it's massively overbought. Right? So, assessing the risk of a of a decent move here, it may go, but there's no data to really drive it. It's going to be momentum driven, and this may actually stall until we get the US numbers. So, Brad, can I ask a question >> with this? Right, the the um what I'm not doing is I'm not going into every uh release trying to work out what what's moving. I'm not looking for anything else. I'll have a look at the the correlating pairs, right? So, if I have a look at the calendar and I'm looking through, I'm going, "Yeah, euro." Well, sterling may have an impact on euro. It's not at the moment. We've got Euro numbers, got US numbers, right? So, you're just looking across the board at the initial things that may move euro, right? I don't need to go in and see is there any Aussie numbers coming out? Is there any Kiwi? Is there any anything else coming out? Like, unless it's Swiss or Euro related, I'm not too interested. All right. So, that's where you don't want to waste your time. Like all I've done just then is assess euro, right? Okay. What's going on here? >> I don't need to um I don't need to, you know, go through and see what's going on on everything. Like I'm not going to go into the yen and see what's going on there. If I'm looking at euro, I'm not going to go into CAD or Kiwi or Aussie. I just need to know that they're actually moving in the same direction and that's enough, right? So with your um so you can save yourself endless hours because if you do get a uh and just using the signals again, if you do get a good signal coming up here and I'm just looking at Euro, then um what you want to be doing is really sitting back and uh just focus on that. go through the bits and pieces that you're looking for. Don't get don't waste time going through everything else, right? Unless you've seen something that actually looks good. Otherwise, when you get into like as I said at the start, when you come back to the screens, you're looking at the news, you might see something that might uh get your interest. Um you might see a shift in the in the bond yields and you might see something exciting over here. That's when you're going to go into start digging into a currency. Then you get into the risk assessment process. So don't think the first your analysis isn't the risk assessment, right? Because it's not. When we come back into Euro and we're looking at um Euro here, once we get it all assessed as going, yeah, this thing could be going up. Uh I've got a horizontal trend line here coming into play. Now, what is this? What is the risk of this thing going up here? Is is there really a a chance of it to hold or is it so overbought that you know what this is actually probably going to pull back, wait for the um US numbers to come out, they come out weak, then we get the the the actual uh go ahead, hit the button and start trading euro, >> right? >> Yeah. So any >> So have you got any questions there? >> Brand this here. >> Good day. >> Yeah, just specifically on the um Euro US. >> Yep. >> Serendipitously, I'm actually in the trade at the moment. Uh I did a trend line break. I'm actually up about 32 points at the moment. >> Nice. >> Um given what you've just said and and look, when those announcers come out, I I won't lie, I'll be asleep. um using the exercise that you've just gone through then where I mean I'm actually making some decent money here. Do I exit now or just let it run? What what's the >> you would uh yeah the worst case scenario for you right now I just see dollar sort of breaking down there is um you move haven't moved to break even right >> which is none. Yeah. >> Yeah. That's so that's you know what if you're going to sleep right all things being equal equal when an instrument starts trending the data all trends right so the d US numbers have all been pretty weak um on the weaker side so to me >> it's worth a um a logical uh well I wouldn't say gamble but a logical way to to keep the position open is to go well you know what how can I stay in the position would be to give you ease to allow you to sleep would be to just move it to break even. Uh how how many points are you about 35 points in the cash at the moment? Is that right? >> Yeah. And and stops are you know uh you know three four pips in the money sort of stuff. >> Okay. So um now just before you go to sleep, right, this is where you can actually have a look, right? There's we've already sort of had a quick look at the uh the calendar, right? And you can sort of see what numbers are coming out. um you got some, you know, it's a bit of euro bits and pieces, but really the um to me the US numbers are probably the sort of key aspect of it. Um and they're sort of in the middle of the night, right? So, what I would be doing is like you got a number of hours and it's well worth leaving this thing on because the market is moving. Now what I would say is even looking at this sort of trend line here um you could actually just move your stop loss your above your entry to say be 12 points below the trend line right >> the the like the one aspect and also is you could take partial profit and let some of it go that's that's not a bad idea as well considering that it is overbought at the moment massively overbought Now, as I said, this doesn't mean it doesn't keep going up, but the um what you want to do when you're trying to build capital is is keep the train going. Now, one easy way is move your stop loss to break even and maybe take half the position off the table because you know what, you've assessed the risk here and there's there's a there's a decent amount of risk in the sense that it is going to come off because it's massively overbought. So, you've got half the trade in play. Um, and then you take half the cash off the table before you before you go to sleep or before you turn the screens off. Now, that'll give you the luxury and and like all we're trying to do is make sure say the trade goes back down, you've already t tapped in half the cash and you the other half, well, it's at break even. You haven't lost anything. If you're in in a case where you're trying to build capital, then if you actually go put all your eggs in one basket and go, you know what, I'm just going to move it to break even and then it goes down. It's almost like a losing trade even though you haven't lost money. >> Yes. >> Okay. And that happens a lot. And I've seen we got a couple of traders who trade quite large who hit break even seven times out of 10. Now I be I've been saying to them for some time like just take profit even if it's 30 points just get used to locking in some cash. So one one key aspect one key question here Earl would be sort of are you in the sort of initial building capital phase or are okay well in that case there I would almost go you know what you've got to be objective and think well >> okay so this thing sort of breaking technically higher starting to go up it's showing signs but it is overbought what would I do here if I didn't have a euro position right that's where you can sort of come come in and go, "Oh, it's a hard one." Right? Because you you've got a position that is and this isn't like an epic trend line by any stretch. Let me just roll this back a touch. I mean, it's when it does that. There we go. Okay. So, see this trend line? It's got basically two touches. It's just broken through on the third one, right? And it's we've got that horizontal trend line. um you know that that could be deceiving you a little bit. But if you're in a building capital phase and you're not sure, this is a scenario where you know that is the only trend line really we've got to sort of work with that recent high because otherwise that was over here and you can see where it's it's peaked up. um this situation here, you might even think, well, if it can get above, you might have a look at this and go, you know what, if it can get above 55 here, 11655, I'll give it a chance to run. And that's where you keep half the position on. Right now, it's sort of stalling at 116 sort of 50 5055. There's nothing coming out that's going to change it. If there's any sort of numbers, this is where the numbers can really help you out, right? Because if you get a say a euro employment or inflation number right now, you're like, "Ah, this gives us the answer because it's either going to give us some momentum topside or downside and then you can make some decisions." But >> I get this asked a lot by a lot of traders. Brad, what do you think I'm actually long? And I'll use this as as an example, not that you you've done this, but I'm like, uh, you're long. First thing I'll go, are you in this sort of initial capital building phase, which is zero to sort of 10%. And they go, yes, I am. Well, if you're asking me and you're not sure, the answer is take profit. Lock in the cash. Now, that's not a bad idea, but like if you're like, be objective. Yeah. You you'd be like, well, it's massively overbought at the moment. Yeah. So, it wouldn't be a bad idea to take profit and then look to reload again on a a dip lower. Right now, to me, euro is going up. If we got slightly stronger US numbers, all that's going to do is slightly push it down. These aren't US numbers that are going to change the trend. It might give us a chance to get into the trade at a better level, right? Where everything does line up, right? And what I mean by that is ideally we have it in this sort of scenario as it is going higher and then we're cooking with gas. We're breaking trend lines. We're coming out of an oversold situation. You've got momentum on your side. This trade I would say Earl, hold on to the trade. >> Yep. >> Okay. Because you're like you've got everything going for you. Like there's nothing to to worry about. The only worry about is um waking up tomorrow, right? Because you you want to see where it is tomorrow. And that's all that I would be sort of thinking of. Whoops, lost my screen there. Um yeah, so just risk assessment. Ask yourself like to me it wouldn't be much. If I'm 0 to 10%, I'm in the cash 30 odd points. Uh there's there's data out in about 5 hours, 6 hours, and it's massively overbought. The chance is this thing just drifts lower. You know what? So, I'm out. I've assessed the risk of the trade and all things being equal, I haven't got the perfect setup right now. Uh, so you've actually cashed in the trade. You've done a good job, right? You identified the opportunity. You you've held on to the position and that's what we're looking for, right? So, and all you want to be doing is to me is looking to get long euro on dips, right? And when it gets to situations where it doesn't look like it might have momentum to keep going just at the moment, that's when I would assess the risk of that and and just either take the close out the trade or not. And one key aspect of assessing the risk is just looking at the numbers, trying to be objective and just having a look going, okay, right, what have we got? Yes. No. Um, well, there is there's some things coming out of uh some PMI numbers there. I mean, they're not I wouldn't have those read. And then I mean, French, the German ones you'd have a look at. I mean, there's a few different things, you know, that that's that's all you can do. So, with that risk assessment, once again, you just focus on what you're looking at. There's no need to go digging around and going, "Oh my god, is is Euro going to keep going? I better go and assess the risk of sterling. It's like forget it. That's just that's a different thing. It's just doing the same sort of thing. There's no need to go in and start digging around having a look at all the levels. Now, one thing you would know as you trade a bit more, you would know that sterling, euro, Aussie, Kiwi, these things trade as a pack, right? And the ones at the top trade as a pack as well, Swiss, yen, and CAD, just because the way they're traded. So if you see they're all moving the same way, you're like that just gives you confidence to really zoom into the one you're looking at, right? Which which in your case early is euro. >> Okay. And that's pretty much it. Like it's I didn't didn't want to sort of over complicate things, but what I'm sort of saying is when you come back to the screens, you have a look around, you're having a bit of a fiddle, you look at your charts, you go, "Oh, I like that." or the the interest may come from just finding a good signal that lines up. Then that's where you just go and investigate that and then focus on that trade. Don't worry about the global market and what's happening everywhere else. You do have a quick look around and just assess the risk of your trade and put it on or not is what I should be saying. Okay, make sense? >> Yep. Thank you. >> All right. Thanks Earl. Daniel, I think you're in the gym. >> Yeah. Yeah. Thanks very much. Yeah, with a good doing bench press benching at the moment. >> What are you benching there, mate? 150 kilos. >> I'm doing dumbbells. 37ks. Yeah, 237 dumbbells. >> All right, mate. Good on you. Uh anyway, we'll talk later in the week. We'll get you set up. All right, guys. Thanks for joining me. I'll get this up on the coaching sessions page >> and uh and if you guys have more questions too like >> the best you can actually direct what we're going to be doing. I'll add some stuff to the discord because I want you guys to tell me what you want to know, right? I got a lot of details inside my head, but I just sometimes may not think of the exact same things that that you guys are. And and while we're sort of talking there, just see that little cheeky little stop run there and a dollar Swiss dipped down to like 06. This is straight back up. >> That's a bit smelly, right? That's uh potentially >> moving back into the range. Anyway, hope that helped you, Earl. Thanks, Danny. We'll catch you later. Cheerio. Second.