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Weekly Conversation: Meet Michael Boutros

Weekly Conversation: Meet Michael Boutros

2011-05-13 22:01:00
Jamie Saettele, CMT, Michael Boutros,
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I sat down this week with DailyFX’s newest member, Michael Boutros, to discuss his philosophy on trading and analysis. The conversation was so much fun that we’ve decided to do it on a weekly basis. Of course, future discussions will focus on current market opportunities.

Jamie: Welcome to the team Mike, I’ve seen your work and find it impressive (you wouldn’t be here if it wasn’t) but our readers probably aren’t as familiar. In a general sense, how do you approach analysis and trading?

WeeklyConversation051311_body_usdjpy.png, Weekly Conversation: Meet Michael Boutros

Michael: Well, I first start by getting a broad overview of the fundamentals driving exchange rates to get an overall bias on a specific pair. Interest rate differentials, relative growth prospects, and market trends and themes all come together to give you a clearer picture that cuts through the noise and chatter often created by media participants. Once I've developed my bias, it’s all technical. I begin by identifying key levels and barriers that have provided either support or resistance for a given pair. With trade direction having already been determined, I then use a combination of technical overlay indicators and oscillators to locate key levels that I believe the market will target. My strategies cater to short-to-medium term traders looking for consistent modest gains. The way I see it, one of the best methods of risk management is to avoid gunning for the homerun on every trade. Over the 7+ years I’ve spent in FX markets, both on and off the trade desk, I’ve witnessed that often times the most successful traders are those who are flexible in their strategies, targeting intra-day gains that do not risk a substantial amount of their overall portfolio value.

Jamie: You mentioned big picture stuff like interest rate differentials-I follow those as well. A lot of traders that employ fundamental analysis pay close attention to economic releases such as jobs data, GDP, etc., How do approach economic releases? Do you consider them at all?

Michael: I am always aware of the economic calendar, even as it pertains to countries whose currency is not often traded. The thing to remember about economic data is that no one indicator tells the whole story. Often times the media and various market participants will put so much emphasis on a particular print that they fail to see the underlying themes playing out in the background. Often times the market has already priced in these fundamental announcements and will discount the data ahead of the release. One of the most common questions I get is “the data came in better than expected, why is the currency not rallying?” Having said that, economic data is crucial in assessing the overall fundamental strength of a given economy and more importantly, how it compares to others. Specifically in FX, it’s not just the strength of the data that matters, but the relative strength in comparison to other competing economies.

Jamie: Right, retail traders in my opinion pay too much attention to economic releases. I like to say that they are trying to describe every tree in the forest rather than the forest itself. Such noise only distracts the trader from what is truly important. I think we've got a good idea of how you filter the market for opportunities from a fundamental standpoint - are there specific technical indicators or patterns that you favor for timing?

Michael: Sure, there’s an arsenal of technical indicators out there to which hundreds of traders will attest to. It’s been my experience that the use of too many indicators, or the attempt to master too many often lead to indecisiveness and an overall lack of conviction when entering a trade. One of the overlay indicators I use most, and is often overlooked, is the Fibonacci extension. Unlike the Fibonacci retracement, which every trader at some point has been introduced too, Fibonacci extensions work extremely well in identifying key levels in trending markets. When applied correctly, they provide the user with targets for entry/exit points, specifically in medium to longer term uses. The extension uses historical data points to project possible future key levels as opposed to the retracement which simply takes the last significant move of the pair. Over the years I have also used Ichimoku clouds, Bollinger bands and Elliott waves, of which I know that you are the master Jamie. Overloading on indicators can be dangerous and often leads mixed signals that do not end well.

Jamie: I traded well with Elliott as the basis for my decisions in 2010 but have had a rough go with it this year, so let's hold off on the master title. We all know that Mr. Market is the master and has no problem serving large slices of humble pie. My recent experiences serve as evidence. I agree with your view on using too many indicators. Almost all indicators are calculated from price so they all move together anyway! There really is no point in looking at one or two indicators that are derived strictly from a recent price history. I like RSI. I’ve developed other indicators that incorporate range size and proximity to support and resistance. These offer information that is different (and therefore valuable) from traditional price indicators. Do you prefer to trade specific pairs?

WeeklyConversation051311_body_eurusd.png, Weekly Conversation: Meet Michael Boutros

Michael: That’s a great question I often get from traders. The fact of the matter is once you are confident with you strategy or style of trading, you can find opportunities in any tradable asset. Whether it’s FX, commodities or equities, the methods used are the same. Now having said that, often times I will find myself concentrating on specific pairs, or regions just on the basis of comfort level with regards to the underlying fundamentals. But in general the way I see it, trading is trading. If you take the time to do the research, and have a set game plan, you can find opportunities in any market.

Jamie: I agree that price behavior exhibits common tendencies across markets. I've always been of the mind that it is best to set your criteria and then filter the market for the setup. If you look too hard you might see something that isn't there.

Michael: That leads to me to another point. One of the most important aspects that I think is crucial for traders to understand is that patience is part of the game. Too often investors will search wholeheartedly to find a trade that isn’t ready to be found yet. Or to put it in your words Jamie, they’re looking so hard they start to see a setup or opportunity that isn’t really there. Waiting for your entries and exits are just as important as the charts and indicators you use. Nothing you can do will push or accelerate the markets, you just need to wait until the setup is there. Sort of like baking a cake; you can stare at it in the oven all you want, but it won’t be ready until it’s ready. It might look like the edges are good, and in fact you may convince yourself that it may be ready. But the proof is in that first bite. Likewise, if you lose your attentiveness and wait too long...well you get the picture.

Jamie: Haha, interesting analogy, please feel free to bring in baked goods to the office. Hopefully, our conversation will aid in familiarizing you with our readers. I look forward to working with you!

Michael Boutros is a Technical/Fundamental Analyst specializing in the FX markets.Michael’s experience include stints at Gain Capital Group (Forex.com) and MG Financial Group. He has published analysis for Forexnews.com, FuturesFXNews.com, VelocityTrade.com and was regularly featured on Nasdaq.com. He obtained his Economics degree from Rutgers University, and minored in Philosophy. With the start of his career rooted on the trade desk, Michael’s commentary caters to intra-day traders looking for insightful FX and inter-market analysis.Send requests to receive his reports via email to mboutros@dailyfx.com.

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday), technical analysis of currency crosseson Wednesday and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forex Stream. A graduate of Bucknell University, he holds the Chartered Market Technician (CMT) designation from the Market Technician Association. He is the author of Sentiment in the Forex Market. Send requests to receive his reports via email to jsaettele@dailyfx.com.

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