Limiting your emotional exposure to the markets

There is a good common sense post from a fellow forex trader about how to limit your emotional exposure to the markets.  Some of you may relate to constantly checking your positions out of curiousity when you don't have to!  Check it out.

http://www.forexforays.com/2006/05/limiting-your-emotional-exposure-to.html

This trader must have gone through what I am right now because he has another post about depriving yourself of sleep to catch the more volatile times the forex market offers.

http://www.forexforays.com/2006/05/trading-at-all-hours-get-some-sleep.html

Popularity: 1%

How to correctly identify the trend

There's an article on Trading Markets written by Dave Floyd titled, "How to Correctly Identify the Trend."

The article shows 3 examples where by just looking at the chart without any indicators, one can mistakenly identify the wrong trend direction.  Add a moving average and identify the slope to determine whether to buy or sell on pullbacks or buy or sell on rallies.

This article is recommended and is short and simple.

How to correctly identify the trend

Popularity: 5%

Eliminating Five Basic Mistakes

There was a webinar titled, "Eliminating Five Basic Mistakes from your Analysis" this week presented by Ian Copsey.  I found this webinar and the corresponding Powerpoint presentation very useful because I have been guilty of these mistakes.  Before I summarize and attach the powerpoint presentation (I also converted it to PDF), who is Ian Copsey??

According to the moderator, Ian Copsey is one of the foremost FX technical analysts in the world,
with over 20 years experience in financial markets. He began his career
in Barclays Bank’s FX trading room in 1982 then moved to head their FX
sales desk in Hong Kong in 1988 where he spent almost 5 years.

Either way the guy has got experience and that's what counts.  

So what are the 5 basic mistakes and also the verdict of whether I'm guilty or not of making such a mistake? 

1. Trend Line Drawing Mistakes  Verdict: GUILTY
• Use 3 touch guideline.  By waiting for 3 touches, the trendline becomes stronger and more reliable 
2. Double Tops and Double Bottoms  Verdict: GUILTY
• WAIT FOR CONFIRMATION which comes on break of peak or trough
3. Head and Shoulders  Verdict: GUILTY
• Wait for Completion of pattern
4. Momentum Indicators  Verdict: mistrial
   
• Momentum studies are not meant to be used in trending markets
• Use ADX/DMI to determine trend then use 2 other methods to determine better trading opportunities
1. More sensitive version of RSI
2. Breaks of momentum trend lines
• After a trend, when should momentum indicators be used?
• When there is a divergence
• a divergence is not a reversal signal and trades should not be based on the fact the divergence has occurred.  Look for other signals such as:
1. A break of trend line
2. break of a pattern
3. break of sequence of high and lows
5. Confirm your analysis  Verdict: GUILTY
• What kind of complementary techniques are available?
1. momentum - used in consolidation and divergence after trends
2. trend line breaks
3. fibonacci projections from elliott wave
4. pattern breaks
5. time cycles

The PDF or powerpoint presentation is really worth the quick 15 minute read.

 eliminating 5 common trading mistakes 08/04/2006,11:23 952.99 Kb

 Eliminating Five Basic Mistakes 08/04/2006,11:31 1.17 Mb

Popularity: 4%

Inside the Mind of an Elite Currency Trader

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A new book was released last month titled "Warrior Trading : Inside the Mind of an Elite Currency Trader" by Clifford Bennett.  It seems like I've purchased every currency trading book available except this one.  I may go to Barnes and Noble and see if it's available to skim through.  Here is a description of the book:

One of today's leading currency forecasters shows readers how to
develop the focus, attitude, and mental discipline of top traders

Warrior Trading provides traders with a path to trading success by
developing a mentality and emotional framework common to successful
traders. Warrior Trading includes an enhanced discussion of technical
analysis, and an explanation of how global economic forces are changing
and impacting the markets. Filled with in-depth insights and expert
advice, this comprehensive guide explains the importance of
understanding the market's underlying fundamental and technical
reality-letting traders take advantage of those moments when the
perceptions of most traders are at odds with the underlying reality to
score big in the market.

 

Popularity: 3%

What Markets Am I Going to Trade?

This is a continuation of my trading plan.  I have added a link to the left main menu called My Trading Plan.  You can view the latest trading plan at any time by clicking this link or going to http://www.forexproject.com/trading_plan/ 

The second question I will ask myself is "What Markets Am I Going to Trade?"

I will be trading the Foreign Exchange market only.  Specifically I will be looking to trade the EUR/USD currency pair only until I can develop a consistent trading strategy.  Once I become more comfortable trading the EUR/USD, I will slowly integrate more currency pairs into the mix.  I will allocate 100% of my fund to trading forex.

This year, I want to look further at trading the following:

·         Mini-sized Dow (YM)
·         E-mini S&P (ES)
·         E-mini Nasdaq (NQ)
·         E-mini Russell (ER)
·         Soybeans (S)
·         Mini-sized gold (YG)
·         Corn (C)
·         Wheat (W)
·         Crude Oil (CL)
·         Mini Crude Oil (QM)

Popularity: 2%

Developing Confidence for Traders

Here’s a posting by Troy Peterson (private trader) titled, "Do you have confidence as a trader?."

Your level of confidence as a trader will have a huge positive impact on your success. The more confident you are the less time you will spend on second guessing your decisions. The more confident you are the more positive energy you will focus toward your desired outcome.

Confidence is based on two things; what you do and who you are. When a trade stops for a loss your confidence becomes rattled. This is because confidence is based on what you do. When confidence is based on who you are and your ability as a trader, one who is prepared for all outcomes whether a loss or a profit, then you are consistent with yourself no matter what the result. You will feel confident because you took the loss as intended or because you closed with a profit. You will choose correctly in either scenario! This is because confidence is based on you.

Each time you correctly make a decision in trading whether it is for a loss or gain, the more confident you will become with your ability to act accordingly to the current market situation in a manner that is appropriate. Your confidence is now based on your awareness as a trader (you) not on failures, mistakes or missed opportunities. Let me say that again . . . Your confidence is now based on your awareness as a trader, one who will make the correct decisions.

Help build confidence by reviewing your trades diligently to discover when, why and how you chose to act during the time of the trade. It will help your understanding of the markets and yourself. The more you choose to learn from each trade failure and success the stronger and more confident you will become. This confidence will increase your flexibility in your decisions and your behavior. This flexibility will help create comfort in your trading. This comfort will feed your confidence and the cycle continues.

Begin working on your confidence today. Believe in yourself and have faith in your abilities. Please don’t fall prey to falling someone else’s calls in the market blindly. Stick to your edge and realize that trading the markets is about you.

Popularity: 1%

Yen Swing Trade Analysis

TRADE

Date: Friday, February 24th

Entry: Short USD/JPY at 117.05

Reason for trade/setup: With a downward trend in motion, I was looking for a swing trade to short the USD/JPY.  I was waiting for price to retrace back up where a minor Asian session breakdown occurred several hours prior at 117.10.  The DMI indicator was used as confirmation that the existing trend was still in place.

Initial Stop:  117.19; the high of previous bar

Initial Target:  116.40

RESULT 

Exit: 116.76

Reason for Exit:  End of day

Profit/loss:  +29 pips/ +$745.10 (3 lots)

Trade executed according to plan? yes

Outcome: This trade entry went exactly according to plan so much so that it surprised me.  The price didn’t reach my limit and that didn’t surprise me. 

Thoughts:  The market doesn’t generate trades like this everyday and this setup would only apply to trending markets.

 

 

 

 

 

Popularity: 6%