Two psychological techniques to improve the entry and exit from the market

July 13th, 2015

Two psychological techniques to improve the entry and exit from the market

Mental Accounting
Everybody knows about accounting. But not everyone heard about mental accounting. Lets speak about it today. We will discuss how it relates to trading and how to use it. Or, if I may say so, how to deceive your thinking in order to improve your trading.

Various theories based on the fact that people always act the most favorable way, do not work in practice. Really, people take irrational decisions. They buy expensive goods that they do not need. They miss favorable deals moments. They lose a lot of money many other methods. How is it possible?
Psychologists have found that people behave and make decisions differently. It depends on how they perceive this situation.
Here are a couple of examples. And then we select several moments useful for trading.

Example one: If in the store you pay cash, you perceive price as a higher and calculate the amount more accurately. But if you pay by card, you often spend more than allow yourself paying cash.

Example two: You buy a lottery ticket where probability of winning is 1: 1000 000. But at this point, you believe that you will get a jack pot. But if an insurance agent comes to you and offer insurance in case with the probability 1: 10000, now you are sure that this trouble will never happen to you, and usually you reject the proposal.

How this feature appears in trading? It’s very simple. As soon as we have decided that the market will go in a certain direction, we begin to see generally only those signals which correspond to our expectations. We reject other objective signals or just do not notice them because they do not suit our expectation. Thus we avoid a major objective information that is unpleasant.

When we buy, we pay more attention to the bullish candle and often simply do not notice bearish signals. We expect and wish that the market moves according to our initial estimate. For information that the market turned against us, we usually just ignore. In other words, because of this mental mechanism, we tend to stay in a losing trade longer than necessary.

Now when we are aware of this trend our psyche to deceive us, it’s time to think about what to do to get an objective
look at the movement of the market.

Get a new perspective on the market entry.
Trader Adam Grimes wrote on his blog that one little secret had very positive impact on his trading results. He also said about existence of mental accounting, which he called stubbornness that affects almost all traders. Sometimes you need more courage and self-control to get in the market. Sometimes entering the market is preceded by hard work and multiple analysis to check it out and play it safe. But what will we do if there is information that does not meet our expectations? Sometimes the shock of understanding the fact that our position is unprofitable may cause stupor, which eventually will lead to catastrophically consequences.

Perhaps the promised little secret will sound too simple, but it is really very important. Simply put, that entering into market, always expect that there will be losses. Without that, how much work was done during the preparation of the transaction, how many factors show success of the transaction or how good were the conditions of entry, always expect that this position will be unprofitable. This way you will achieve a significant change in your perception. Instead of rejection signals which indicate that the market turns against you, now you will be more open
and are able to identify information that the market does not go in the direction you want. Now for you, it is not difficult to take this fact, because you suppose such situation from the beginning. If on the contrary it turns out that the deal is profitable well it will be as a pleasant surprise. Change your thinking in this direction and you will become less trapped in a losing trade. On the contrary, you begin to do what is necessary. For example, if the market
is not going in the right direction for a long time, you close position and wait for a better opportunity.

One more small correction to the topic of confidence in trading. It is very important, but I mean different form of trust. You have to trust your system and be sure that after a sufficient number of deals, you will be in profit. But just as important to be able to separate this knowledge from result of any individual deal. After all, each individual deal has the same chance of profit as a coin toss. Use this information and see how it will affect your results.

Change the view of the exit from the deal.

A major work is position management and exit. Think about how many books were written about the analysis, market signals, techniques of trading. And in how many of them is written something referred to the deal management? Throughout most attention is paid to the opening of the deal, and in fact no less value for profit has management of an open position.

You can try one exercise to manage the deal. This includes a few things: limiting risk, partial profit (or loss), opening additional positions or closing all open positions if you are loosing profit. All of this is serious difficulties, especially for beginners. Because it is associated with different emotions. The solution is to focus only on the exit.
Many professional traders work in a team and some of them give this very important. Group of traders tried
the following method: to work in pairs and when one trader finds a suitable opportunity and open positions, his partner was responsible for closing of this position.

It often happens that a trader before opening position analyzed situation for a long time. And when at last he
open it, he attaches great importance to signals in favor of the deal, not wanting to notice the obvious signs of a losing. If a trader is responsible only for the closing of the transaction, he is not susceptible to the emotions of attachment to the transaction and can objectively evaluate situation. In this case it is much easier to perceive that market shows.

The well-known trader Linda Rashke says about the importance of having an exit strategy prepared before the start of the working day. It makes sense – as long as you are not trading, your decisions are not subject to biases.

Group Experiment

Linda Raschke and Andrew Lo prepared an experiment in which the whole group had to open positions for which they indicate. Opening positions was required, without consulting the participants about the reliability of the deal. After opening a position, everyone had to take over control deal as they thought was right. Sometimes it meant instant closing position with a small loss. Participants were very surprised at considerable profit, despite the fact that all positions have been chosen by accident. The conclusion: trade management and closing it are perhaps more important than the opening.

How to get a new skill

Since we are talking about psychology, train thinking better on demo account. But for more efficiency it is recommended to train on real cent account. That is the minimum you need to risk that you are ready to spend on your training.

Choose the currency pair that is the most familiar to you. Read economic calendar and follow the fundamental news that could affect the behavior of the market. Work with minimum amount, but on a real account. The goal is not to tickle your nerves, but to check what emotions accompany risk real money. Random transactions generate this way: Draw two column, in the first note whether or not enter the market. In the second to buy or to sell. You can do it every hour. But if you prefer to work on the daily charts, it is sufficient to once a day. This technique may help determine how often you want to trade, and eventually develop a system by which to trade.
For example you want to control the market every hour and open two deals per day. You can even throw the dice when the point is 1 or 2, you open trade. The decision to buy or sell can take tossing a coin: heads – buy, tails – selling.
Mandatory rule – open trade immediately, without hesitation. Without thinking, without analyzing. Even if you want to close trade immediately, still open it. If you decide to keep trade open, then manage it carefully.

This is really an important exercise. Invest in it some of your time for a few weeks or even months
the results will surprise you.

Remember that the purpose of this exercise – get rid of all the emotions associated with the search for trades and opening them.
You can not feel any kind of affection or emotion to trade you have opened on the basis of throwing dice and coins. And therefore you can focus exclusively on managing the position and its closing. Because of this, you learn to respond to what market shows you.

Finally

I hope that the proposed unusual approach to trading psychology will reveal new horizons and help you change your view on the forex.
There is mental accounting, and it is useful to remember about it every day, even in ordinary situations.
As said Mark Douglas, famous psychologist dealing with trading “on the forex you can see only what you learned to see” And in order to get rid of restrictions that prevent you to see a lot on forex, we offer you this training.

Patience and experience, but what about discipline?

July 3rd, 2015

Trends, support and resistance lines, Fibonacci levels, formation and bar charts. Indicators and oscillators, etc .. In short, technical analysis. FRS, The Bank of England, the ECB, consumer price inflation, production inflation, unemployment, retail sales, export, import, debts of PIGS (Portugal, Italy, Greece, Spain), etc. In general, fundamental data. Oil price, the value of the index DJIA, S & P500, DAX30, the situation in the DX – dollar. indexes, etc. Or correlation.
Do you know all this? But how well? So what’s the catch? You do not have enough patience? You do not have the discipline? Problem is likely, in psychology, and not in the system.

In various textbooks and manuals, on Web sites there are many tips on how to trade successfully. Many of them are intelligent and helpful. But something is missing. So what?

They usually do not write about very important qualities of every successful trader. About patience, foresight, ability to learn and, most importantly about discipline.
It does not focus on the fact that the trader is actually a pure individualist. This certainly applies to the establishment of the trading system. Since each trader must create his own trading system. Of course he uses and the experience of others, but it is the original trading system. At some point, it will be similar to others, but still it is the original system. Usually nobody writes that a good trading system can not be created without a lot of experience gained from the long-term monitoring and analysis of the market. In short, everyone should long enough and patiently “sit” his trading system before the monitor.

For somebody it takes a year or two. For other even longer. If someone says that in six months he is ready to trade on a real account, I do not believe him.
I have been in this business for many years and constantly being improved. Of course now only in the details, but all the same time. Without a lot of patience and experience, not learning from own mistakes, no one will create a good trading system. And one more thing. Intense trading activity will change your life (not only in finances).
Are you ready for this ?!

The biggest problem of trading is perhaps the discipline. They say about discipline not so often. But this is the most important thing. Do you have experience and proven trading system? Do you have the concept of the market? Do you know how it behaves? Are you really good in technical analysis and understand the fundamental data? All this does not make you a good trader. You must have the discipline. In any situation your emotions have to be replaced by discipline. This is one of the main reasons why you are successful on demo account, but not on real money.

You should have been clear from the analysis of unprofitable or prematurely closed positions, that if you follow the plan, in most cases it would be good.

Or, in the case of losing position, the loss might be much less. After such unsuccessful transactions everyone asks himself: “What is that? What did I do wrong? After all, my plan was all right. The answer is the lack of discipline. In using the trading system, in management of the transaction or in closing of unprofitable position, you did not have enough discipline. Common situation. You have a plan for this position. Determine the position and in a minute you are in the market. And a minute later, the market turns against you and you are losing. And that’s before you dilemma akin to Hamlet, close or not to close, that is the question.

More relevant questions were: whether the market is showing signals of reversal?
Can we talk about reversal by analysis of these attributes and fundamental data?

The answer to these questions:

– If Yes! – Immediately close the position. Because the situation has changed in comparison with the plan. Or set the delayed position in the opposite direction, and close the current loss-making one.

– If NO! Check your stop-loss and stay on the market, in accordance with the original plan. The same applies to the position with a small profit. For example, close a part of the position and move the stop – loss order to protect low income if it is safe.

These and other tactical points should be part of your trading system. They are experienced in such situations, and they do work! Do you know about them? So why you do not use them?!

I heard about the idea: “How you behave when driving, as you behave in trading.” I think this is truth. So the next
time when you plan a new deal and open position, try to switch from emotions to enforce discipline. With each deal realized such way, the level of your discipline will grow. Increase the level of discipline in everyday life, and you can be sure that this reflect on your trading only positively.

Intermediate goals in trading

June 25th, 2015

goal

Of course, you have read many times that the necessary condition to success in trading is setting goals. But is it all so simple? At first glance – yes, everything is planned. And then it goes according to plan or not. But the main question now is – what are your goals. Our goals can motivate us. Lead us to success. But they can also lead to deep depression if our goals are unattainable. After all, the problem may be in how we act, but what goals we have set ourselves.

Setting goals

Our goals have to lead us to success in life in general and also in trading. Our goals should motivate us and delight that we are on the right way. But unfortunately it does not happen always.

What goals really lead us to success? Large? Small? Long-term or short-term? But if the result will not be seen for at least 5 years? Will we have enough motivation to continue?

Three types of goals

It is not so easy to set a goal that will really move you forward. It is really not so easy as for axample to say: “Every month I make $ 50 000.”  Our psyche here again plays an important role. And more important thing how we use our psyche.

For example, how will you feel yourself if you set a goal to make $ 50 000 every month, but at heart, you doubt that you are actually able to do it. And what happen, if you will not be able to go on that income in a few months? What will be with your motivation and self-esteem?

Goals aimed at the result

We set ourselves goals like as to earn such a sum per certain time. Simply because we believe it is necessary. We want to be successful, productive and feel confident. We believe that these goals lead us to something much larger. For example in 5 years have a million dollars in the account. This may really seem motivating, but a lot of circumstances that would have to lead us to achieve this goal are not under our control.

Examples of such purposes may be like these:
-Every Day, I make $ 500.
-Every Day I make 20 successful trades.

But what if our trading system is based on the presence of a strong trend, and the market is for several days in the flat. What if the market does not just give opportunities to earn $ 500 every day? How would you feel if the plan is not executed? Whether it will add motivation? And if a few days in a row there will not be possibility to act on your plan? Increasing disappointment by the fact that every day you do not only approach the goal, but instead move away from it.

Goals aimed at the result can lead to excessive transactions. In an effort to reach a certain profit every day, trader often begins to break rules and enters the market with a completely inappropriate motivation.

Intermediate goals

Fortunately, there is something that can bring us much more satisfaction from trading – the intermediate goals. These goals are completely under our control, because their achievement depends only on us. These goals can be our guiding map that will ultimately lead us to the desired million. Zdest But there is one important nuance – the goals aimed at the result can demotivate, and if we feel that we cannot reach them. This can easily happen, because the factors that determine the achievement of goals are beyond our control and we can not influence on them. In addition, if we are aiming beforehand to a certain result, than we live and work with the feeling that we have not achieved our goal, that we are still far from it. Million on the account is yet and it can cause a feeling of uncertainty, guilt, self-doubt, depression and frustration.

Intermediate goals are different from the final goals that are not directed at the result, but to perform certain actions.

Examples of such goals are:

– This week, I’ll find on the internet a recording of the webinar dedicated to forex. I will listen it and write down check points to my diary.

– Every time before work, I look through the economic calendar for this day. I will not open positions half an hour before the event with a high severity level and for half an hour after it.

All the month I will trade only if there are all the conditions of my trading system.

– This week I will strictly adhere to my trading system. Especially for closing positions. The deal will be closed only when a there is condition “A”, despite of the misgivings, mood and so on.

– During this year, I find a professional trader and reach agreement with him about regular consultations.

These goals are not complicated and are easily accessible. And most importantly – these goals lead to success. They bring you closer to your final goals.

So why should we not put final goals aimed at a specific result?
Targeting only on result hides a serious threat. This creates a subconscious pressure, nervousness, anxiety and frustration.
Such goals are really dangerous.

Lifestyle and trading – two views, of value ​​and growth

June 17th, 2015

Already in the 17th century, when the first public company appears in Holland, investors were wondering whether to buy or not to buy. And most importantly, why.
Over time, there are many approaches to trading. Two main are a method of cost (value) and growth.

It is hard to discern investors that are guided by different views, since they both follow developments in the economy, various economic data and different financial indicators (profitability, dividends, etc.). How they are different, so that’s how they perceive this information. Price approach says: “This company (currency) has good results in recent years and is sold at a good price, so I buy it. ”

The principle of price approach is to determine of the “true” value of the assets and compare that price with the market price. In addition, you can analyze the performance as price/volume of sales, the dividend yield in recent years, etc. The price trader compares the various assets and defines them as “overrated” or “undervalued” and accordingly adjusts his investment portfolio.
Growth trader looks to the future, tracks the trends in the economy in order to benefit from them. He iss not interested in financial instruments that probably already passed the period of its greatest growth. Under the same terms like price trader, he is looking for the opposite values. For a few dollars, he tries to buy an asset, which in the future will be successful in the market. New products and services of companies that are managed by competent management, with an emphasis on research and investments will probably be the most profitable. Although the dot-com bubble in 2000, is not the best example. Total euphoria caused by the IT boom in Millennium has established in the minds of many investors fantastic expectations about the future profits of “growth” companies.
After an impressive growth of their shares was a sharp fall.

So, which style to choose? The only right answer is not to try to go two ways at the same time. The basis for a successful investment portfolio is its maintenance and management, in accordance with a certain style – on certain rules, of value or growth. Throwing from one approach to another, will lead to the inevitable crash.

Therefore, it is advisable to stick to a certain style of life. Of course this applies to trading too – the creation of a particular style of trading and following it is a prerequisite for success.

Why you do not follow your trading system

June 11th, 2015

oneway

Why you do not follow your trading system?

We often hear how important to adhere the trading system to turn profit.
To create trading system is only half the battle, but to act strictly adhering to the chosen system – a task more difficult.

Today we try to understand why most traders do not follow the plan they had chosen.
One of the most common reasons why traders are not able to stick their trading system are unexpected events. Yes, there are times when market moves exactly as described in the tutorial, and you can use the situation to 100% and get maximum profit. But more often market does not move exactly as you expected.
When something unexpected happens, this drives some traders to panic and move them out of balance. They lose their composure and begin to act impulsively. And usually they make something that does not correspond to the plan.

To avoid such impulsive behavior, it is necessary to take into account all potentially possible scenarios, even before you enter the market. You must have a plan how to act in any situation (off the Internet, unexpected news of that may significantly change the market movement). So nothing unexpected can happen, and you will know how to react in this situation. There will be no panic.

Another case when trader can step back from the chosen plan – a series of successful deals. In such situation a trader can relax too much, begin to consider himself a king of the market and simply lose the ability to distinguish the signals. After a series of successful deals, you can begin to feel yourself too self-confident and open positions that do not correspond to your initial trading system. Also negative effect can have a series of losing deals.
Under the impact of losses the mental mechanisms begin affect on the trader to protect him from the psychic pain. And here can appear situation when a trader begins misunderstood signals.
And as a consequence, not only to join in the obviously unprofitable deal, but do not notice the clearly profitable one.
To deal with all these situations and associated emotions, you should to keep a psychological diary. Its meaning is that you get used to pay attention to your mental state and use it in the analysis of your trading. Of course it’s better to do this every day after your trading. The basic idea is that it will remind you that your plan is based on clear rules. And you will always see the which risks brings your deviation from the plan.

Another problem is the lack of confidence in the trading system. The significance of this problem is that trader starts to think that following a system is not mandatory. And sometimes he thinks that it’s not always going to work if he follow the plan. This causes the trader start to select positions under the influence of emotions and use only a part of the system. Trader begins to discard signals which he does not “feel”. And now, following a plan becomes completely
unnecessary.
In the long term this means a loss of all sense of the trading system. And without a system you get, at best minimal profit. At worst, it brings you huge lost.

One of the way to avoid this is to keep trading diary and analysis of statistics. It is hard to argue with statistics that monitors all accurately. And when it will be clear that the trading system actually works and brings positive results, there will be the motivation to continue follow the trading system.
For the same reason it is useful to test your system on the history of deals. Through such analysis, we can quite quickly verify our trading strategy over a long period. This adds our system more credibility.

The next problem is discrepancy between the trading plan and the type of personality.
Sometimes it may happen that you will feel the need to enter the market, simply because the trading system requires it. Or you can commit less deals, because your lifestyle does not allow you more. This can lead you to inconsistency and confusion in the work, because you will stick to the rules only occasionally.
This will ruin the results as a whole. And you again wonder whether your system is suitable for you. In other words, whether your system is suitable to your plan?
Maybe you use a moving average, and you ought to trade with the trend. Or you focus on intraday trading, but your calling is long-term trading. You need to understand the feature and adjust your plan to it. As soon you introduce your trading system according to your nature, you will do the next step on the path to successful trading.

In conclusion we should say that for following a plan for a long time, you need much more than just discipline. You must to be sure that the plan is right for you, fits your character, takes into account all possible scenarios and confirmed by statistics.

10 Rules of Success

June 1st, 2015

success

10 Rules of Success

Forex let you make good money. You can travel around the world, work from any part of the world, but it requires knowledge, patience, initial capital. And most importantly, you must love this business.

Rule number 1: Accept the truth

Trading is often a coincidence. Imagine that we flip a coin 100 times. It is likely that one side drop out more than the other.
In trading we have roughly the same situation. There is enough statistical probability that your trading method will win more times than lost, and profits will be guaranteed higher than losses.

2: Plan your trading and then proceed according to plan

Your main target on the way to successful trading is strict adherence to your business plan. There are hundreds of trading systems, but without a clear plan, they do not cost anything.
3: Who does not spend too much – cannot lose too much

One of the biggest mistakes that beginner can make is to invest in a single deal too much money or get started with high risky instruments. Most people starting trading act lightly and often risk excessively. Of course the more money you use the great opportunities you have. And it depends on experience whether it will be profits or losses.

4: Do not think about money

Everybody needs money, and none likes to lose them. I do not think that you will like to see the money disappears from your account much faster than coming.
The main difficulty is to understand that the loss – it’s just a part of the process. Losses will be. In order to win, you must lose something.
If you cannot change your attitude towards money, then at least try not to think about it too much. Instead of money, focus on the numbers and general result.

Rule 5: Avoid emotions

Is it possible that subconsciously you want to lose money? Pre-programmed to self-destruction can occur at any time, especially among traders involved in intraday trading. If the price is constantly flashed before your eyes, you can lose control. You can start to feel that the price is playing with you, teasing you. So you must be very careful to avoid emotional trading.

Rule 6: Be your own boss

You are the only person who is responsible for your trading. For your success or failure you will be responsible only to yourself. No market no trading system not the government. Only you. Monitor your behavior during trading. Very carefuly track of your feelings. This will give you very useful information about your activities.

Rule 7: Think positively

Try to think and talk positively, otherwise you give your subconscious command to act in the opposite way. If you think negative, then the results will be relevant. Therefore be more positive.

Rule 8: Less often means better

The best time to trade is usually within the first two hours after market opening. Some traders also like to work in the last half an hour before closing.
Many short-term traders have the rule “three deals and finish.” If your trading limited to three deals per day, the stress level is reduced to a minimum.

Rule 9: Enjoy your life

Do you know, what do you trade for? Think about what motivates you. Successful traders live a balanced life. There is no point in spending a whole day on the trading.
Go out, meet with friends, meet new people. Forget about trading for a moment.

Rule 10: Keep a trading diary

Write down your thoughts. If you hesitate or fear with a deal write it down. When you finish trading write why.
Look at the depth of your soul. Maybe you will be surprised what you see there.

 

 

 

Traders diary

May 29th, 2015

Is it possible to evaluate your trading system objectively? Is there any sense to write a traders diary? Or you need to create a special program to monitor statistics? What results and output we can get? How can we use results and statistics? Should we be consistent and write completely everything or better not to be involved in details and just jot down only the most important data?

The way to success in trading is usually difficult, and moreover goes through a nasty area that probably no one likes – a bureaucracy, a lot of papers, statistics evaluation and investigation. In short, logging trading or traders diary. But this is an absolutely necessary condition to create a good trading system and most importantly to have a good feedback.

Trading Diary is a mirror of your personality and your trading strategy.

Can you imagine that you are using your trading system for about a year and do not have trading diary? If so, then you have only a single summary – if you are in profit or in loss. At best, you can calculate the profit or loss and their percentage.

If you want to know the level of a trader, look at his trading diary. Of course if he trust you so much that will show you his diary. If he does, his diary will show you a lot.

What can you find out from the well written diary:

– The number of deals during a given period
– The success of trading sнstem in percentage
– Nominal estimate of profit or loss
– Percentage estimate of profit or loss
– The success of individual currency pairs in %
– Average grade of profits and losses
– The percentage of drawdown
– The success of long and short positions
– The average value of stop loss
– The size of the operated position
– Conditions of entry and exit
– Psychology of entry and exit
– Other notes on individual deals

In other words, you will find out everything you need for further improving and customize your trading system.
Consistency, attention and patience are the necessary conditions for the proper conduct of the trade diary. Although it is very tedious and laborious work, but only it can fully show where you make mistakes, which currency pairs are not suitable for your strategy, if you need to calculate the size of the stop loss differently etc.

There is not necessary to use any complicated software. Everything you need can be written to Excel, or even on paper (for conservative traders).

At the initial stage, you need to consider what statistics are needed for the future optimization of your trading system. Every system has its own specifics and every trader has his own preferences. In addition, a lot will depend on what time periods you are trading. Of course data and conclusions 5 minute period will be materially different from one hour frame. Analyzing and recorded data depend on your goals at the moment. For example, if you want to improve the ratio profit/risk, then you need to keep track of the average profit and average loss and possibility to increase level of take profit and reduce stop loss. And analysis will help you to understand how the number of deals will reduce, if you increase take profit for example on 10 points.
At the same time, how it will affect profitability in total.
When you know which data you want to analyze, all you neeв to determine what parameters to track. Ideal to issue it as a table. At the base will always be the date, the currency pair, the size of the position, the time period, the time of entry, exit, etc.

trading diary
The table prepared in this way can always be changed and supplemented in order to have all the necessary data for control and correction of your trading system.

Try to discard superfluous information, not to lose a lot of time filling the table. On the other hand seek to find all the necessary information. Do not underestimate the importance of statistics. Discover all the advantages of this boring science, and use it for your benefit. Keep control of all that you can control in your work.

How to reduce stress trading forex

May 26th, 2015

no stress

How to get rid of stress while trading forex?

Have you concentrated on trading so much, that in the final it had a negative impact on the results? This is a classic example of stress, so called “productive” stress. Nervousness usually occurs when you check every detail so carefully that every action expose total criticism.
This behavior is also characteristic of the athletes, students and people of art, has a negative impact on performance as a whole, because in the pursuit of the ideal, a person often stops to see the obvious things and losing the ability to think sensibly. Being traders, we are constantly exposed to the pressure of “pursuit of profit”. As a result we often forget about the need to follow the plan, or the importance of risk management.

Lets consider a few things that can help to deal with stress and nervousness increased during trading.

Forget about the “perfect deal”

Most psychologists who study trading have come to the conclusion that the most common source of stress is perfectionism. Traders obsessed with that the need to find the perfect moment to open and close the deal, maximize profits by controlling the size of the deal and never have unprofitable positions.
Such commitment to the ideal, always end with deep frustrations in yourself. Because in reality, it is impossible to achieve all of these moments.
Instead of looking for “perfect deal” and trying to avoid losses completely, remind yourself that there is nothing unusual in the fact that the market does not always go in the direction you want. Controlled loss or a situation when you have earned a few points less than was possible – is not the end of your career as a trader. This is a common situation.

Focus on the process, not on profit

For someone can be very difficult to forget about the “perfect deal”, because it is wrongly interpreted as a lack of ambition. If you are in such situation, it is better for you to set goals based on adherence to the process and not on the achievement of profit.

For example plan that you will stick to your investment plan, limit the losses and increase profits. At the end of each trading day, you can ask yourself the following questions: did I have entered the market as required by my trading system? Did I do all necessary modifications of my positions? Do I retain appropriate control of risk? If all the questions you answered yes, you are going right. If you want to be perfect, focus on good trading and management activities and processes.

Increases the risk slowly

Next cause of nervousness in trading is an inordinate increase the risk, instead of gradual increase. This usually
happens when a trader after a series of successful deals, starts to be too confident and during the following deals risk unnecessarily.
Without relevant changes in the psyche, this can contribute mental pressure, even if you continue to trade in the same manner. To visualize this, imagine yourself a professional football player who is going to hit a penalty in the final minute of the unresolved match. Are you going to do something that you have done a lot of time. But the mental pressure in attempt to get the winning goal is much larger than typically. In such situation, even the most experienced players lose their composure. So there is nothing surprising in the fact that traders can avoid much more mistakes when they realize the risk.
To avoid this, you can increase the risk gradually, in any case not to double or triple your position in a moment.
Also, what can help you, to remind yourself that the only thing that has changed – the amount of risk, and the rest are working as usual and you stick to the same plan as always.

Reduce for some time the amount of the trading capital.

Another way is to reduce positions and capital. We strongly recommend you to work with such a sum to the possible loss (your Stop-loss order) that can be mentally and financially acceptable for you. Thus your trading will become emotionless and stress-less. For everyone this amount can be different. Everybody has hiss own financial resources. Someone will work with standard lots, and someone with a mini or micro lots.
For example, if you are currently trading on a real FOREX account with 10 000$, but when you open a position, you start to get nervous and tracking on virtually every pip and you are afraid every loss (even if it is 2% of the capital), then reduce your capital for example to $5000. And at the same time work with half of your usual position (lot). After that your trading would have to be less emotional.
Once when you gain confidence in your system and again start to make a profit without stress, you can gradually increase the capital to initial $10 000.

Move away from the monitor in time

Excessive work also causes nervousness and stress. There is nothing surprising. The inner desire to earn sometimes overshadows rational thinking. Instead of following trading system, we allow emotions to win. And when succumb to the urge to return what we lost, we can be in a situation where we open a deal after a deal. And before you get yourself, you lose a large number of money.
The most reasonable in this situation is to move away from the monitor as soon as we incur the maximum acceptable loss.
Sometimes week pause can help. This means that you should completely forget about trading for a week and divert thought with something else. Remember nothing will not run away from you, the financial markets will exist for a long time.

Starting to use longer time period, helped a lot of traders. For example in stead of using 15-minute charts start to use hour or four-hour charts. You will trade less, but you have better signals and more time.

Liberalize

It is well known that we have the greatest fear when we are faced with something unfamiliar.
Another way of getting rid of stress is constant development (new trading systems or ideas for improving existing ones). But here, you need to keep a sense of proportion and carefully select the information being taken. Only qualitative information, which will be held through a filtr of common intelligence, can benefit.
Read books, search information in internet, visit several webinars. It is also useful to visit good workshop with an experienced lecturer. The experience gained from the person who if successful in forex trading and ready to share his knowledge is really immeasurable. This will not only help you to improve your professionalism, but also increase your motivation to work and further education.

Trading is also complicated by the fact that for every decision you must take full responsibility. Sure it is nice to have someone with whom you can consult about each deal. But again, you need to choose carefully with whom to turn to for advice.

Live a full life

When your world revolves only around the forex and the market is not moving in the direction you want, you can feel that everything collapses. If trading is the only thing that feeds you and no more exists for you, you are very vulnerable. And you can easy fall into a deep depression. As teaches old wisdom – “do not put all eggs in one basket.” If you do not adhere this rule, it is easy to get to the very unpleasant situation.
For distraction from thinking about forex for the time when the market moves against you, you should get something else to direct your activity on. It does not matter whether it is a soothing activity, or on the contrary extreme sport, the main thing is to change activity.

Output

The main thing is to worry if sometimes you were too nervous and this has led you to more stress. If you feel that it begins again, get away from the monitor, remind yourself that perfect performance and perfect traders exist only in a perfect world. They do not exist in reality.
Go back to your real expectations, and you’ll be surprised how easy following the plan and realistic goals will change your trading.

How to become a trader

May 21st, 2015

start

What you need to do to become a trader?

When a person decides to become a trader, he is interested in a lot of questions: how to do it, how much time he have to spend in order to achieve his goals, what difficult can appear, and so on?
Lets try to describe what you need to do to become a trader.
Should warn in advance – every trader selects a set of action on his own. That means that it is impossible to describe the exact necessary algorithm.

I offer a general scheme, which can take advantage of a novice. So, consider the 8 steps that you must follow in order to become a successful trader.

1. Go from talking to action!

If you decide to start learning forex trading, you must immediately begin to act. To do this, find the original information: who are called traders, what forex is and how it function. The more information – the better. Try to learn everything related to the subject of finance. Further examine in details, what deal is: how they open, who buys and who sells, which profit or loss they can bring, the best programs for traders.

There are other ways – take a course or talk on the discussion forums.

2. When all terms become clear, and the word “graphics”, “trading strategy”, “platform”, “quotes” and others from this sphere will no longer be strange for you, you can proceed to the opening a demo account. This virtual account is perfect for studying, because it does not require real money. At the same time try to combine your theoretical knowledge with the practice will be useful.

3. After you pass the first two stages, the fun begins. Let’s try to learn how to earn by trading. This part of the training is complex, so it may take some time.
On average, to learn how to earn by trading, may take a few years (2-3). Of course there are other cases when people do it much faster. But you should not hurry. The trader is a profession, not just a way to earn easy money.

4. You can understand how to create your strategy, studying the thematic literature. Today there are many books about forex trading. You can see and learn other people trading strategies, styles and approaches to trading. After trying a few of them you can understand what is suitable for you.

Also useful would be to study the materials on money management and learn how to manage your capital.

5. This step follows from previous. All knowledge is required to apply in practice. For example, after reading about the graphical analysis, and going into a graphics program, it is necessary to look yourself shapes in the chart. And seeing a certain method of money management, try to apply it in your trading.
So everything you learn, you should try on practice. Only such way will let you find your own approach.

6. After you pass all the previous steps and determine your approach to trading, another difficult stage begins: creation of a strategy that will be profitable.

7. Open a real account. It is important not to invest large sums at once, but try your technique during several months. Results will show if your technique successful or not. If yes – excellent, go on. If no, do not worry, just analyze your mistakes and correct them.

8. And the last point: psychology. All traders risk, and thus the emotions of some of them may just rolls over. It is important to learn to control and suppress emotions. Because if your emotions lead you, you have no chance for success.

Pass each step in order and you will certainly be able to become a successful trader. But it is necessary to note once again that this plan is just approximate.

So you can see that you have to learn trading by yourself. Yes, you cannot study this profession in university. But, fortunately, there is the opportunity to learn from successful traders.

Remember,  all depends on your desire.

I wish you success!

Create your own forex trading system

May 18th, 2015

forex chart

If you try to find forex trading system, you will see that there are hundreds of offers in the Internet. They offer you a super forex trading system and promise make you a millionaire overnight for a very moderate price.

The proposal is often accompanied by graphics that clearly show the exceptional performance of the system. And you may get an idea that several hundred dollars not too much for a miracle system. And you are sure that the magic system will return invested money after just a few deals. However, the reality is not so easy.
The proposed forex trading systems may be workable. The problem is that traders have bought the system and often suffer losses simply because of a lack of discipline. They just not adhere to all rules, required by the system.

Perhaps instead of paying hundreds or even thousands of dollars for trading system, which you do not understand, better spend time and create your own system.

It is not so difficult to create your own trading system. And it will be your system. System that is sharpened especially for you. But here the decisive factor also is discipline and compliance with rules.

Objectives of the forex trading system

Besides the natural goal – getting good profit, you need to have other goals that will help you become successful at  forex.
There are two purposes – to recognize the trend as soon as possible and protect you against quick changes of trend.
If you manage to achieve both objectives in one system, then you will have a good chance to become a successful trader.
However, to achieve both objectives in single system is not very easy, because they are essentially opposed. If the system allows to identify a trend in the very beginning, it will often give false signals. But if your system protects you from false vibrations trend, the more likely it will also “protect” you from most lucrative deals. Therefore it is important to find a compromise solution that will make both goals to be achieved.

Testing trading system

After you create your system, you need to try it. There are special programs to test the system on the history. However, better to test the system manually. Thus the psychological factor will be used, and you control discipline. In any case this can not be done in a hurry.
It is better for a long time to create, test, and improve the system than lose money. When you are enough confident in your system, start to test it on demo account. Let it take several months before you start to work on real money.

The first point that needs to be taken into account is what type of trader you are. Do you prefer quick results or you are ready to wait a few weeks or even months? Do you want to monitor the charts every day, or once a week is enough? These questions will help you determine the time period which you should operate.

Find indicators that show the emergence of a new trend. It is directly related to the purpose – to identify the emergence of a new trend as early as possible.
For this purpose usually used the moving average, or its combinations with different time periods.

You also need to find an indicator that confirms the trend. This problem is related with our second goal – to protect us from false market fluctuations.
For this you can analyze several time periods, as well as channels and trend lines.

Further moment is risk management. Determine the allowable amount of damages per one deal. As it is unpleasant, but losses also should be planned.
Then, planning opening  and closing the position. And the most important is the closing. Plan where your goal is – point of closing.
Write down your system on paper and strictly follow it. This is a crucial moment in the creation of the system. Write down the rules of your system, and always adhere them whatever happens. Once again, the discipline provides a large part of the success. And if you not follow the rules, the entire value of the system is reduced to zero.

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