Luay Afouneh, a.k.a Technician among the circles of TradingView.com, is one of the professional traders and distinct experts on online trading community. He recently spoke to Gita Evele, Exante’s PR Manager, to discuss how he uses technical analysis for his trading and what kind of a picture do his charts paint for gold.
How long have you been trading and what was your motivation to start on the first place?
I was initially introduced to the financial markets in general and, in particular, to Forex 12 years ago. Like any newbie with lack of sufficient knowledge and experience I was taken by the idea of making some good money in a matter of minutes. I was attached, started looking and trying before figuring out that trading is just like any job that requires skill, patience and dedication of hard work. I spent the first years learning and reading everything I can get my hands on about trading, spending most of my days staring at the charts.
Being a trader who primarily uses technical analysis for investment decisions, what to your mind makes it the best predictor of future movements?
To be honest, there is a big difference between trading and forecasting. I personally do not try to forecast the market. In fact, to my mind, that is the biggest mistake most traders make, because you will simply fail when you attempt to predict where the market is heading at any and every certain point. The primary reason for it is the fact that I do not believe there is actually a tool that can do it all the time. It is very difficult to get yourself unattached to this idea. Trying to always guess what will happen next is a recipe for failure, being able to get yourself out of the “constantly forecasting” losing game is the main step towards success.
When it comes to trading my main goal is to make a profit and I do not care about forecasting. What I do is I wait for some sufficient signals or a confluence of technical tools, spot situations in the market that might be high-probability. Therefore, I do not predict when trading, I anticipate the right conditions to make a trade.
Considering that there are various factors that could impact the price of gold (end of quantitative easing and the strengthening of the US dollar, demand of physical gold in the jewelry market, gold reserves by the central banks, gold’s status of a “safe haven” in times of recessions etc.), do you ever incorporate economic trends into your technical analysis?
I generally use technical analysis as the main tool for identifying trades. However, I do take into consideration the major themes of the economy that are driving the financial markets and what is happening with the sentiment as it can give you the right confidence to support your view or technical trades.
In terms of gold, history has taught us that the economy, the political conditions and uncertainty are cyclical, and so is the price of gold. Having said that, I believe that gold will never lose its luster as there will always be periods of insecurity and economic turmoil. The list of tailwinds is uncountable and there is always a chance of a black swan event. Therefore, I think that everyone should have a part of their savings invested in gold.
You have previously mentioned that you do not forecast where the market is going, but is there anything the technical’s are telling you about where gold is heading?
Actually we have some positive signals for gold over the short-term. Although the long-term trend that started in 2011 peak is still negative, the full downside target for the double top break out that completed in April 2013 was met at $1130 last November. So what happened is that we have touched the full downside target for the double top pattern and now I think gold is starting to show signs of recovery over the short term, a bullish formation with a key resistance level at 1250. Therefore, I am monitoring this level carefully. If we continue to stabilize above the 1250 for the coming days, then I believe gold is heading to the 1345 level and then maybe to 1400. To sum up, the picture for gold is starting to improve.
What advice would you give to those traders who are just starting to trade gold or any other financial instrument?
If I give a trading advice, I prefer not to talk about the technicalities as every trader has his/her unique approach that he/she develops over time and through experience. However, I would like to take this opportunity to stress some key general issues that are attached to the field of trading. I believe the main obstacles that traders face are not in the technicalities, it is more in the psychology and the misconception of trading.
In my view, there are four principles that beginners and intermediaries should follow.
The first principle is dedicating enough time for the learning process. While some people consider trading to be easy and quick, I believe the process should cover the following steps: learn, practice, derive conclusions, apply them, experiment, improve and start over. Prior to risking any real capital, be sure to repeat this approach several times.
Secondly, be well capitalized and do not have high expectations. It is not a get-rich-quick scheme, trading is like any other investment, we receive regular income on the invested capital. So, for example, if you have invested 5,000, be realistic you will not get 500 per month, at least not in a consistent manner.
Furthermore, as I have previously mentioned, do not forecast. What I suggest doing is waiting for the right technical conditions and then putting them into action.
And finally, you should have the ability as well as the mentality to withstand losing trades and not give up. This is particularly relevant when you face a losing streak, it is completely normal in trading to have a period of 4 or 5 consecutive losing trades.
Read more in our series of interviews:
Profesional trader and Manager at TradingView.com Tim West - The secrets of successful trading
Head of FX at JCI Capital Giovanni Pozzi - The future of the world main currencies
CEO of Da Vinci Invest Hendrik Klein - Comments on choosing a broker
Reputable Russian asset manager Grigoriy Isaev - On Russian Rouble and Centrl Bank of Russia actions