Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.

Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.

Psychology Piece – What kind of trader are you?

Knowledge of good technical or fundamental analysis isn’t what makes most traders successful. Most can learn this quite well in a short period of time.

The ones that are successful master their emotions.

One of the most important things for the average retail trader to come to terms with is this very question. Here’s what you should ask yourself about the kind of trader you are. Once you determine this, it will be easier for you to decide how and when you trade and the style of trading you do.

1. Do you prefer to follow the trend or are you always looking for tops and bottoms (Reversals)?
2. What time horizon do you want to be in and out of trades in? 15 minutes, 4 hours, 4 days, 4 weeks?
3. How do you feel during periods of draw-downs? Does the amount matter when you are negative?
4. AND most importantly try to determine you biggest character flaw. Such as; Impatiens, Competitiveness, Righteousness, Etc…

It may seem obvious to most as you read this that this seems to be ridiculously basic. The truth is that most retail traders don’t take the time to put the basics in place. Trade in a way that best suits your personality and creates the least amount of anxiety for you. You need to create success to create more success.

As you become successful at what works best for you, then start pushing the boundaries as you learn to manage your anxiety.

I used to think that I enjoyed being right or correct. The truth is my ego hates to be wrong. So my personal system is finding tops and bottoms so that I have only one choice to make on where my stop-loss goes. Otherwise, I end up thinking I should have known better on where the stop belonged.

Here’s a little something to ponder about how our minds work.

The mind has, what I think, are two main modes of operation; Intuitive and cognitive. We are usually operating in a combination of both these modes except when fear overcomes us and we revert to our fear based reptilian ’fight or flight’ reactionary mind.

When fear takes over, we often think that we need act on intuition and flee the situation. In the case of a trade, it means to exit or take the opposite side.

The challenge as a trader is when do we listen to our instincts rather than our intellect or visa versa? And how do we overcome our fear based minds to be able to use the best parts of our instinct and intellect.

In these moments I believe we need rely primarily on our cognitive minds. So use a check-list for the reasons your are in or making the trade. Set profit goals and exit plans and revue this list before acting when your anxiety runs high. You see, I think it’s far too easy to mistake anxiety and fear for intuition. If you can remove your emotion in these moments, you will make better, more rational trading decisions.

How to guarantee your success in trading

Now that’s a hell of a comment isn’t it? Truth is you can guarantee your own success in trading. In fact you are the only one that can.

1. Trade only when your conditions for a trade are met.
2. Know what these conditions are - They should be written down in a format that someone else could clearly understand. This makes theme real and solid.
3. Have a plan for where to exit successful trades.
4. Have a plan on where to exit unsuccessful trades
5. Log what you do
6. Use sound money management practices

There, that’s it. That’s what will guarantee your success. I mean it. Of course it will take practice to always follow your rules and your plan. And of course sometimes you will have losing trades and it will feel bad. And as time goes by your success will improve. This I can promise.

Psychology of Winning: How to win in every trade…

Well at least, how to feel good about every trade… well… at least there is a way to feel responsible for every trade.

It is impossible to profit in every trade, however if you are the one making the decision to trade then you are the one responsible.

You see, fear is what keeps us from taking action that is our own. We want easy answers and fool-proof methods for trading. This just doesn’t exist. We look to others to provide the answers so we have someone to blame.

I was trading today and one of my trades didn’t go as planned. I said to myself… that’s just my luck! When I realized what I said to myself I needed to change how I was thinking about my trading. If trading is about luck then I have to make my own Good Luck! You see luck is what happens when opportunity meets preparation.

Bottom line… Take responsibility for every trading decision you make. You might find you pay more attention to each opportunity as it appears.

You gain strength, courage and confidence by every experience in which you really stop to look fear in the face. You are able to say to yourself, ‘I have lived through this horror. I can take the next thing that comes along.’ You must do the thing you think you cannot do.
-Eleanor Roosevelt

Trading with the tide… Being on the right side of a trade

Let me explain the big picture “sentiment” and then I will offer some explanation on how to take advantage of a strong tide flow.

How many times do you find yourself trading against the current market sentiment? Are you long when the market is going short? Are you trying to trade a trend when the market is range bound?

If you know something about tides you know that there are smaller ebb and flows as well as much larger highs and lows. Think of the market as tidal so that you don’t find yourself trying to swim against the tide.

The two most important questions that I have had to learn to teach myself to ask before every trade (trading session) are:

1. What is the general sentiment of the market – (Range-bound or trending)
2. What is the current session sentiment – (Up or down)

When I feel reasonably confident I can answer these questions for myself, then I decide to go long or short. Otherwise what I tend to do is see every correction as a potential reversal. This causes me to try and trade against the tide.

• Buy on dips in a rising market.
• Sell on tops in a falling market.

Practice makes perfect - Discipline in trading

So here is the first one: Habits are habits - Some are good; some are bad
We all know this, but what do we do about it? How do we change a bad habit? How do we recognize and focus on good ones?
Here’s the bad news; Most of our habits where formed in childhood. Here’s the good news; all Habits can be changed! So how do we do this?

Here’s one of those metaphors I was talking about: Practice makes perfect! Have you learned to play a musical instrument? How about when you learned to ride a bike. Or what about when you got your drivers license? All of these things required months if not years of practice (like piano) in order for you to become proficient. Well trading is no different. And in fact, most of us would have employed a teacher or followed a course in all other things we have learned. Have you done this with trading? All brokers offer courses

The steps where important too: Practice in a safe manner such as drive a car in a parking lot or you used training wheels on our first bike. In the case of piano we would not have done a live performance without hours and hours of repetition and practice.Learning to change our bad habits into good ones.

One more thing. We did not attempt the next level without some sort of testing to see if we should move forward. Grades for piano, official testing for drivers license and of course help from Mom or Dad when we tried the bike without training wheels. And at best we moved slowly into the next phase of our progress in a safe manner. For sure we didn’t take our bike out into rush hour traffic until we likely had several years of practice on the local streets.

So here’s my advice. Practice your trading in a demo account and log everything you do. When you have reasonable records of success (I suggest 3000 trades or more) then move to one of the mini or micro accounts offered by most brokers. Then slowly increase your risk. Starting at just .050% of your account. That’s right! Just one half of one percent of risk by way of stop-loss. Then when you have proven success at that level you can slowly increase what you trade moving up to and no higher than 3% risk by way of stop loss. Talk to your broker and be sure you understand this fully. Nothing is more important to understand. And of course Practice makes perfect! As one of my mentors told me when I started; learning to trade is a marathon… not a sprint.

Does sentiment drive the market or does the market create the mood?

I believe it’s our psychology and emotions that drives us all. And as such, I believe that when combined as a group the predominant sentiment is what shows up in the market. My friend Dave also agreed although his thought started out as: People really want this crisis don’t they? So I think that negativity and fear exist on a group basis as well as on an individual basis. So when we are trading we need be sure to be following the Group. But how do we address our own stuff?

Let’s face it folks; fear is one of the greatest motivators. I don’t like it but I need address and respect it. I’ve heard it said that most people are not just fearful of failure but also of success. Because the question becomes: Who will they be if they are successful. It is such an unfamiliar place for most people.

There are many ways to work at overcoming such negative ego thoughts however as simple as it sometimes seems, changing a lifetime of thinking is a very large task indeed. I came across this author and his book recently “Spiritual Economics” “Eric Butterworth” and I thought it interesting that as much as he takes a spiritual view it addresses key thoughts on letting go of guilt and shame and negative beliefs.

This is not the only way… It is “A” way in the many. However if we are able to change our psychology and beliefs then we can truly prosper.

Do you believe you deserve to be financially abundant?

I’ve been asking questions lately about how people relate to money, abundance and our own perception of what we deserve. So here’s a great question to ask yourself.

Can you answer that question without defending the answer? Do you know what I mean by that? If your answer is not something within your control then your abundance will not truly improve. If you can’t truly say that you are making a choice to struggle and you are working on changing that mind-set, then you will stay stuck for some time I’m afraid.

You see, if bad trades are the market’s fault, or the annalist’s fault, or the ‘big players’ got me, or the broker was stop-hunting or I’m never at my computer when the obvious moves happen, or I was trading the wrong pair, or my favorite; I just need the killer system! Etc… Get the picture!

As long as this is your thinking, you are giving your circumstances over to something else that you cannot change. However, if you take responsibility and focus on learning from every trade to improve, then you will start to see success.

I have a saying I tell my students when they ask if it’s easy. I respond; Trading is something we can all learn but the ability to stay objective in order to be profitable is what the real challenge is in trading. The only way to do this is to believe in yourself. That there is a way and you will find it. This doesn’t mean finding a system, rather it means finding your way of dealing with loss and gain and how you relate to it, to be more objective and deserving.

Is your relationship to Money ‘Healthy’?

I came across some old notes about how people all have a different relationship to money and that most of us have an unhealthy one.

This is just a crude self test and doesn’t address all of what one should do to discover their personal relationship with money however it is very telling if we ask ourselves what we think when we reflect on other peoples financial success. The bigger question of course is will we think of ourselves the same way as we become financially independent or perhaps is this keeping us from having greater wealth?

• Money is the root of all evil
• It’s more righteous to be poor than rich
• Most rich people probably did something bad or dishonest to get their money
• Getting rich takes too much work and struggle
• Striving for wealth won’t allow me much time for anything else in life
• If I really strive for wealth and don’t succeed I’ll fell like a failure
• Being successful is a matter of luck or fate
• I don’t have time to manage money

If you’re going to learn how to trade you need to learn how to lose

Remember when your mother would say: You need to learn to lose gracefully. I don’t know about you but I had no idea what she was talking about. I was angry and upset and mad at myself and everything and I didn’t even know what the word ‘graceful’ meant.

Fast forward 40 years latter and you know what… I still fill the same when I lose. So what can I do differently? First of all I have to recognize the problem. Realizing that it does me no good to stay mad and not address what’s happened. Then consciously look at the problem as a learning experience. What did I do right? Did I follow all my rules? Was money management good? Did I enter at the right place? Etc.

If I made any mistakes I congratulate myself for doing a good review and I re-enforce that I will be more structured to what was missed on my next trade. If I did everything right, then I knows it was the market that went against me and I know this will happen a certain amount of times per successful trades.

By doing this I learn how to lose gracefully and when I do lose, I have a plan to work through my upset rather than re-enforcing it. Do you have a plan to be graceful in loss?

How to choose a broker

Firstly let me tell you that I have a personal relationship with some of the annalists at FXCM in the New York office so my answers may be a little bias.

What is it you are concerned about? If you are worried you may loose your money on deposit with a broker then here are some things you should consider.

Regulations vary in each country. I was very fortunate several years ago when my broker RefcoFX collapsed under a scandal. My account was with RefcoFX Canada and my deposits were protected under Canadian regulations and I lost NOTHING. In fact my account was picked up by Man FX Canada and I have carried on with this broker without interruption. We have very good banking and brokerage regulations in Canada. If you reside in Europe you may consider FXCM UK as they offer segregated funds. This too offers a level of protection. Do a little more research to find out the regulations in each country and how your deposits are protected.

As far as how much they charge per transaction I think FXCM are quite competitive. Remember that some brokers offer lower spreads at less volatile times but the rates likely float and would result in higher spread during busy trading times. How fast orders are executed and fractional pricing also play a role. And does the broker with lower cost have a trading desk you can call in the event you computer is down and you need manual execution? Regarding the ‘Roll Interest’ this is a function of leverage for some brokers. Different leverages produce different costs of ‘Roll’. And don’t forget, you will be paid on ‘Roll’ as well if you are on the right side of the trade

My final advice for you is to call several brokers and talk to their customer service reps. Ask all these questions and then make an assessment based on what you believe provides you the service and protection you want.

The Hardest Part of Trading Is Waiting

There are two voices I my head whenever I trade. One saying: Don’t miss the big move. The other says: Don’t jump the gun. So which one do I listen to? Well… both I guess. What I have learned over time (and am still learning to be better at) is that I have to be sure when I pull the trigger; that my emotions aren’t dictating my trading.

When I trade emotionally it’s because I am trying to make up for an earlier loss or lack of a gain where I missed a very good move. Both of these sentiments can get me into trouble.

In order to combat this, I pre-plan my trade and then wait for the trade to come to me. This is where I make the best and most consistent trades. Right now, I have to keep telling myself that a turn is coming and it will be strong. AND it has not started yet and I must be patient and wait.

This is definitely one of the hardest things for me to do. “Waiting” is not my nature as I always feel like I will be missing something. As a teacher of mine once said: Trades are like busses. There’s another one coming around the corner.

So don’t jump the gun and move back into the market when a turn is evident.

Don’t Throw Good Money after Bad

Don’t Throw Good Money after Bad. In business "Sunk costs" have been spent and cannot be recovered. Have you ever worked for a firm where there was an almost foolish tendency to stay with an old system and try to keep repairing it even when it was so inefficient because there had been a recent investment in the system or process?How about that old car. When someone spends thousands on the transmission only to have the motor blow up, that it will now cost several more thousands to replace or repair. When does it stop? Where to you get out?

The same goes for trading. So to be a good trader, one needs to not view a draw-down as a real value. It just simply isn’t. Even if the market turns in your favour, you still have to make up the total loss before you start making profit.

So learn to set firm stop losses and get out where you know you should the first time. Don’t throw good money after bad.

Trading as a Business – How to make money on the Markets

• How much money do you expect to make from trading? $1,000/month, $10,000/month, $1,000,000?
• Do you have a plan on how you will get there? How much you should increase every month towards your goal?
• Do you have a specific system that is written down? It should be in a form where you could give it to another trader and they would understand it. And even if you trade on fundamentals you MUST have a technical trading plan to go with it.
• Have you tested it over a period of time? How many paper trades have you done for your system? More than 100?
• Do you understand how to use a Stop-Loss to keep your risk at less than 5% of your account value?
• Is there planning for revenue and expenses and risk?
• Does a successful business launch into something without testing and risk assessment?
• Does a successful business now when to cut losses?
• Does a successful business have rules and guidelines and policies to follow?

Do you see what I’m getting at? You must measure and have a benchmark to measure against. If you don’t know what you are aiming at you will have no focus and no real way of knowing you are moving forward.

I’ve heard some other teachers and mentors say that the real test is in a live account because this changes the dynamic and real anxiety comes into play. I agree with them BUT I do not believe you simply jump into a live account without a road-map on what you plan to do. If you don’t know where you’re going… any road will do.

Do you believe what you see…Or does you mind play tricks on you?

What happens to our minds in cases like this is as the move goes deeper and deeper we go into a state of disbelief almost, about how far the moves are going. So we want to benefit from the move but part of our minds won’t allow us to jump into a trade in the current direction because it’s akin to jumping onto a moving train. So we watch, thinking that the move will be over soon and that we can catch the counter trend rally. What usually happens here is we do this far too soon and we are stopped out or go negative on our trades at which point we start adding to average down and find ourselves fighting a tide that turns into a tidal wave.

So how do we counter our bad programming? On your trade plan/rules sheet write down at the very top the most important question to answer before making any trading decision. Are we in a “Trending Market”? or a “Correcting Market”? This is known in Elliott Wave Terms as “Motive Impulsive” “or “Corrective”. What this should do for you is identify what trading type to employ. In a Trending Market you should be trading CONTINUATION trades and in a Correcting Market you should be trading REVERSALS. If you learn to train your mind to key in on this first then when you look to trade, you thoughts should be focused on what is the next best trade rather than on the disbelief of how far the move is going.

Having said that; counter trends will come along in the next few days. Don’t try to guess when… Wait for a clear signal before any new trades. If you miss the counter trend, don’t worry, these moves are just the beginning of more to come over the next few months.

What Global Connectivity is Doing to All financial Markets

I thought I would throw this one in here as an interesting little tied bit of information because there is a great deal of tension in the market currently. The overall group psychology of global traders is likely going to cause quite a shift in many if not all sectors and indexes in the next few weeks.

I follow the fundamental news but trade primarily on ‘Technical’. I also work on the premise that trader’s emotions and their reactions to the news are what move the markets. So when we reach critical technical levels, expectedly Fibonacci ratios and trend-lines, the reaction of traders can really send the markets feeling.

Now back to the global connectivity. We all know that information travels faster than ever and we are all much more interconnected with the reach of the internet now and that many traders and investors trade many more markets than ever because of this. What this means is that we are seeing more and more correlation of markets as the world group of traders starts to act as one big emotional group rather than many regional ones. So one conclusion that can be drawn form this is that when we see one of the larger sectors reverse suddenly we should then see an almost immediate reaction in many if not all other markets. This is especially pronounced if the trigger market makes an abnormally large reversal move.

Trading Involves Two People: You and You

Trading is like golf and you are only really playing against yourself. In trading this is exactly what is happening as well. You see, the struggles we face as humans is we think it is us against the world at times, because of many of the experiences we have faced on our personal journey through life. We needed to compete to make the football team. We were compared to our classmates at school or our siblings to see who had the best grades. We have had to go on job interviews where there were many candidates for the position. Not to mention how many of us competed for the cutest girl or the hunky guy.

So it is ingrained in most of us that we are competing with the rest of the world and even the universe at times. That it all comes along to conspire against us. Here’s were we have to change our thinking. We must view the world or universe as there to support us. I know that sounds a little out there but be willing to believe that all we really need to do is to get with the flow of what is happening rather than competing with everything and everyone. When we are willing to see things this way we are less likely to hold on to the negative and move on to looking for and being willing to be open to the next opportunity.

The best example of this is to not see the last loosing trade as the reason to not take the next opportunity. Remember the market isn’t a personal of it’s own out to get you. It’s actually made up of all the combined emotions of all the traders who are fighting with themselves in every trade they make… Just like you!

Face it; we make more mistakes under pressure!

It’s a fact… And those that trade announcements and do it well and consistently have learned how to work well in the most difficult of environments. I would even suggest that sort of mental discipline and ability is akin to being a fighter pilot.

So what do we regular folk do if we are not fighter pilot material? How do we win consistently? Let’s examine the pilot analogy further. What if you where just a typical pilot. Perhaps flying a small aircraft or maybe you work for one of the airlines. These days, just about any one of us could do this with how well built airplanes are and how the technology assists us.

What pilot trainers know is that whenever the stress level is heightened in a dangerous situation they teach pilots specifics on what to do in each possible situation. That right… they come up with 100`s of potential problems and then train the pilots to `Follow Procedure based on the perceived problem. In commercial aircraft there are manuals on board each aircraft that the co-pilot will refer to in the event of an emergency. In short, if things go wrong, pilots are trained to follow the rules! This is because without the rules, a pilot is more likely to ad to his mistakes in times of several stress.

So, when trading, your stress level is likely to lead you into rash decisions. This is why a plan and rules are so important. If you only make trades that are planned and executed by your rules this will help keep you out of bad trades and in good ones longer.

Stop - Stop - Stop - Stop - Stop - Stop - Stop - Stop - Get the Picture?

I’m trying to make a point here. Always stop and review your trade plan before making any trade and I always say that, before making any trade you need 4 things determined.

• Your entry point
• Your planed exit in profit
• Your planed exit in loss and
• Your money management

The rules or guidelines of your trading system are actually less critical then the 4 things mentioned above. Your money management should be based on one simple rule. No one trade, if a loss should ever exceed more than 5% of your account value. Truth is most traders, keep this number even lower.

So it doesn’t matter what your total stop loss is in pips. It could be 15, 50 or 500. Every trade style and type requires a different size stop. The key is to know when to cut your losses and move to the next trade.

When you learn to draw lines where you are willing to be wrong… You will then be RIGHT about managing your account correctly.

Personal responsibility and accountability. That’s it. Did you think it was a method or system or some sort of secret? Everybody wants the magic key or formula. Even me. When we don’t win, we blame others or we think the big boys are all out to get us and they know what is going on and they keep it a secret.

One part of the above statement is true. They know the secret. Well it’s not actually a secret it’s an acceptance of sorts. All successful traders are so, because they know their wins as well as their losses are their own doing. Period! When they take a loss they blame no one. They accept the loss as a managed trading decision.

So how do we know when we are not being responsible for ourselves and how do we overcome the problem? Here’s the key - If you are in any way shape or form blaming any other thing, person, and broker, large $ traders, your wife/husband, cat, dog… Get the picture. YOU made the trade

So you want to be right? Be right about your money management!

I was talking with one of my mentors; and in our conversation we spoke about how the ego needs something to grab a hold of. Something to be right about to justify its existence as the larger part of our personality.

As our ego developed, (when we were younger) it played an important part in our growth and our safety. However, in circumstances like trading, a strong ego unquestioned can drag us deep into a bad trade in order to try and prove itself ‘right’.

So here’s a way to re-employ your ego. Make your focus of being right your money management. Set out a proper money management plan and stick to it. Set definite stop-loss areas and stick to them in order to never risk more than 2% of your account on any one trade.

In the long run, having a solid money management commitment will enable you to always move forward in your trading account. Being right isn’t what is most important. Being consistent and well managed is.

What Drives Some Traders to Add To Loosing Trades

First of all there is a legitimate system of trading that is called averaging down and is most commonly used in equities. It is where you increase your position in order to average down the price where you entered in order to recoup your losses sooner. This is not what I’m talking about here.

There are statistics that show how retail traders, (you and me) especially beginners, often add to loosing positions and then usually give up their positions at a loss just before the price action goes in their favour. In fact, the brokerage house; FXCM reports on this regularly based on the observation of current orders. That’s right. Most traders stick with bad positions and get out of good ones too soon.

Simple… We hate to be wrong. It’s that basic. Think about it. When was the last time you were really wrong about something. How did it feel? Did you feel embarrassed? Like you should have known better? I know that is usually my first reaction.

Here’s the analogy: As adults, when we work, we usually have learned our jobs pretty well. We go through our routine doing everything we would normally do with few or no mistakes… everyday.

In trading the market frequently goes against us. For most traders, even the very best, the win ratio is often not a lot greater than 50% to 60%. So every second or third trade is a loss. Can you imagine what it would be like to do your job if every other thing you did turned out WRONG? It doesn’t matter what your job is, I don’t think anybody can work in an environment where this is the case.

So, we have to take a different view of our trading. That doing a good job means more positive trades then negative ones. We have to see that a job well done is when this ratio stays above 50% and we manage our risk well to keep our wins bigger than our losses.

Be ‘Smart Lazy’ when you work your system

Can’t remember where I read this before and I wish I could credit the writer. I learned a lot from remembering this simple edict. I searched the Net to see if I could find the article without success. However I did come across an interesting website http://www.lazyway.net that seems to depict the meaning the writer had intended. I would suggest you follow up with a visit to this site and am finding the daily input very helpful.

What the original article was trying to say was… STOP outsmarting yourself by adjusting the trading system. That’s right… almost all new traders constantly break the rules of the system they are employing. In turn what happens is when introduced to a new system, they see it as the Holy Grail and do what I call ‘System Jump’ as the new system is the answer to better trading.

What we need to do to be successful is not become better at understanding a new system but rather at simply following one. Be LAZY and just follow the rules of the current system you’re using. Don’t change them, don’t adjust them, don’t add to them, and most of all… Don’t blame the system for your lack of capital growth in your trading account. Be LAZY and try not to think too much!

In the book the way of Way of the Turtle, there is a lot of reference to how difficult it is for anyone to follow even the most simplest of rules when trading. That there is a disconnect between what rules traders say they are following AND what it is they do.

Bottom line is that it does not know a good system to trade that will make you profitable in the long run; but rather it will be your ability to apply your system consistently that will make you a successful trader.

Can You Describe the Trades you’re in? Why we need “Good Habits”

If someone asked you why you entered a particular trade, would you be able to list the criteria you used to enter? And what about your stop-loss; can you provide a clear explanation as to why you chose it? And do you have a clear target on where you will exit in profit? And if not, do you have a clear price or set of criteria for moving your stop-loss when you are in profit.

Whether you are new to trading or have been doing it for some time, successful or not, you need to be able to answer these questions before entering any trade. I’m not suggesting you need to recite each trade from memory, however if you can’t, then do you have the trade(s) logged?

Why is this so important? You were clear in the moment you made the trade right? The trade met all you’re criteria for entering right? Well I ask you… How would you know if you can’t explain it clearly now or refer to it in you trade log?

For me personally, I have learned that with a plan, I stay in trades much longer for much greater profit. It was certainly difficult at first, especially when waiting to move my stop-loss based on my criteria for better swing trades. In fact, having a good set of rules and criteria for when I move my stop has made the biggest difference to my trading success over the years.

How to Stay In Positions Longer For Greater Profits

I knew that would get your attention… That’s what everybody wants right… The Holly grail of trading right? Staying in positions for days or even weeks and gaining 300 to 700 pips in a trade, right?

Well this is possible but very few traders actually want this. It would seem anyway, because I would argue that if this were the case, I (and you) would know a lot more traders that actually stay in positions for a number of days or even weeks. And I know very few. So there is a disconnect between what traders SAY they want and what they DO.

I don’ know the exact statistics but from my experience in coaching and training other traders I would say that learning trading isn’t what’s difficult, but rather learning to remain in the right position at the right time for greater profits is what the real challenge is. Simply knowing this and actually doing it is what separates the really good traders from the rest of the pack.

What is, in my opinion, the biggest single difference between the average trader and the best of traders is in the way they approach their own challenges around the psychological pitfalls we all encounter. And what is the one trait these extraordinary traders have in common? Is it their technical expertise? Their knowledge of economics? Luck? Experience? Here it comes… the part where you say to yourself: “Yeah this guy is going to say it’s discipline and that this is what will make me a better trader.

Most of us got into trading because of its promise of providing freedom. And now, you keep being told you need more focus and discipline. This doesn’t sound like freedom does it.

Finding an easy way of doing what’s hard. Cause let’s face it folks. We either act… or we are acted upon. So let’s learn to trade smart, not hard.

The Psychological Utility of Technical Analysis

Technical analysis is sometimes studied as if it contains a grain of secret knowledge or portrays an intrinsic truth about currency movements. Often it is said that a specific chart formation will produce a specific price movement.

Technical analysis does nothing of the sort. A chart is a reflection of past prices, nothing more. In itself a graph cannot predict future price movements. A currency does not trade up or down because of a formation on a chart. It moves because market participants make basic assumptions about future price behavior based on the record of past price action. A charted history of price action is the cumulative story of thousands of trading decisions; it is a record of the past behavior of millions of individual traders.

Price information is meaningful only because traders’ decisions give it predictive power. A simple proof of the limited forward intelligence of historical price action is the well attested notion that fundamental developments always trump technical analysis. If the Federal Reserve raises rates unexpectedly or the Chinese Government announces it will no longer buy US Treasuries there is no chart formation that has ever existed that will prevent the dollar from rocketing up in the first instance or plummeting in the second.

Technical analysis does not produce price movement. I state the obvious because in the endless attribution of trading cause and effect to ‘the market’ it is easy to lose sight of the actual composition of the market--thousands of individual decision makers. The translation mechanism for technical analysis runs from the information contained in a chart, through the assessment of that information by market participants to the trading behavior of those individual market participants.

Another way to approach this idea is to ask, just who is the ‘market’ and what is it trying to accomplish every day. It is likely that much of the $3.2 trillion daily volume in the FX market is speculative. Everyone in the currency market from the hedge fund trader with $1 billion under management, to the euro trader on the Deutsche Bank interbank desk to the retail trader in her study, is trying to do exactly the same thing, take home daily trading profits.

Interestingly, the overall worldwide foreign exchange trading volume in 2007, the year of the last measurement, increased almost 50% from the prior survey in 2004 of $1.9 trillion daily. The counterparty reporting segment to which retail foreign exchange belongs boosted its share of turnover to 40% from 33% according to Bank for International Settlements in Basel (BIS, 2007) which conducts the tri-annual survey.

To return to my previous point, if every market participant is attempting to do the same thing, namely trading profits from the day’s activities, how do they all go about it?

The first thing every trader does, in New York, Tokyo, London and in every land in between is to pull up charts and look for trading opportunities. Every trader looking for profit is judging the same charts. Everyone sees the same price history, and everyone identifies the same potentially profitable chart formations. And, in the absence of other factors, the majority of traders will come to the same trading conclusion based on the observed chart formations.

Example: If euro has been in an up channel for two weeks and is approaching the bottom of the channel most traders looking for an opportunity in euro will bet on the continuance of the up trend and the maintenance of the channel. They will place buy orders just above the floor of the channel. And much of the time the charts will have been proven correct, the euro will indeed bounce from the floor of the channel. But it bounces not because, for instance, the ECB is expected to raise rates at some future date, but because of the fit between the goals, information and assumptions of the market’s traders.

Traders need profits, all charts contain the same information and all traders operate with similar assumptions about market behavior based on chart formations. If enough traders place their buy orders above the bottom of the channel it becomes likely that the euro will bounce off the floor of the channel and continue the upward channel formation, barring external events of course.

There is powerful self-fulfilling logic in technical analysis. It works, because everyone trading believes it will work and makes their trading decisions accordingly. For a retail trader this knowledge is the most accessible and effective trading strategy that exists.

Is it Man vs. Market? Or something else entirely?

IT’S YOU AGAINST THE MARKET. That’s what they’ll tell you. You’ll read about it on the message boards, at the Expos, and you can’t get away from the sense that there is a mysterious entity which means to seriously harm you, to get you, that wants your entire account and wants to leave you in ruins.

All wanting you to lose.

All because it’s a zero-sum game, and because your loss is their win. The market is selfish. It’s demanding. It’s never closed.

It’s impossible to understand fully. It’s bigger than you are. It wants to take from you. It’s Goliath. And let’s be honest: you’re not David.

Is any of that true? And if it is true, what chance do you ever have of making money?

It’s Man vs. Market. You against everyone else. Or is it?

Who’s out to get you?

IT’S COMMON KNOWLEDGE THAT THE ENTIRE MARKET — ALL TRADERS, BROKERS, FINANCIAL PROFESSIONALS, DEALING DESK OPERATORS AND CUSTOMER SERVICE REPRESENTATIVES — ARE ALL OUT TO GET YOU. After all, who are these people, anyway? We don’t know their names, so it’s much easier to ascribe to them all sorts of intentions. But if we stop for a moment, what do we see?
Go to a message board. What do you see?
There are persistent pessimists and bossy know-it-alls.
There are uniformed opinion givers and there are naïve newbie’s.
There are mechanical purists, technical junkies, programming geniuses, mellow moderators, and prolific posters.
Are any of these people out to get you? I mean, seriously?

Do any of them want to hurt you? The worst you can say about any of them is that they are afraid. At their best, they are profitable sometimes and unprofitable at other times. But they are, almost all of them, enormously generous people. They are sympathetic to your plight, considerate of your questions, and willing to spend time inside of a community for the betterment of the group.

Even if they wanted to cause you harm, could they do it? Individually, certainly not. But even as a mass of traders, how would they organize to harm you? When’s the last time a group of these people on a forum got together to intentionally push the EUR/USD to your stop loss?

GOOD TRADING METHOD

Cheers and happy trade
P.I.H Nambiar