Trading – the game of the mind
First you need to change your mind from the thinking of the normal person to the speculator’s thinking. Almost all the traders I’ve met except for a few successful ones who have really made millions and billions trading the market are wasting their time trying to learn the easiest, such as reading data and charts, improving the inputs and practicing the outputs, etc. Trading is a game of the mind and, without the corresponding structure of consciousness, it is a deliberately losing game, even before its beginning. Preparing a trader’s mind is the first step for any successful trader, but almost all new traders neglect him, which explains why more than 95% of traders eventually fail.
Acquisition of knowledge of the market will not complicate anyone with average intelligence, after several years of diligent training. But neither the level of intelligence nor knowledge determines the result of the market actions of the trader. Decisive is the process of decision making, which is so difficult for most traders, but it is in it the main reason for the success or failure of any trader. Some are easy to make decisions and stick to them, but for the majority it is very difficult. Unfortunately, any decision-making process in the trade is a painful process, and people tend to avoid pain and seek pleasure, even temporary. In addition, sufficient knowledge of the market, together with a reliable trading system, is required (this is the second most important element of trading success.) The advantages of any system are based on the quality of the information obtained.
Having spent time on studies and studies to realize their knowledge and develop a system, a trader approaches the task of making decisions. How many traders can honestly say that without excitement they will leave for the ranch when a deal offered by their own system works (assuming that trading is a game of chance), leaving profits to grow weeks and months when the system recommends it, and how many can make the taking of losses into The routine process, when the situation requires. It’s all easy to say, but it’s so hard to do when it comes to real money on the market. I still do not sleep well when I have an open position, because even if the profit has grown to several hundred dollars, and the system tells you to continue, there is no guarantee that the profit will not turn into a loss in a day or two, something unexpected. Painful process for sensations. It is painful not to know what will happen in the future and fear damages. Only discipline helps a trader to overcome the painfulness of correct decisions at the right time, on which the outcome of the transaction depends. Therefore, I call trading a game of the mind. When I’m interviewing prospective young traders, I always look for a disciplined and determined person – I put these qualities first, but strangely enough, in most cases, come to think of themselves as geniuses, with good mental abilities, but without any discipline.
I always try to average the mid-term position when I’m convinced of the appearance of a new trend. So, starting position on USD / JPY from 135, I was added to 132 and 129. The same is for AUD / USD and EUR / USD. But to look at how kickbacks take away a lot of money is not an easy job, always causing a lot of pain. Most traders, even among the experienced, can not bear this pain and go out too early. But there is no other way to make big money, and we must endure the pain, “sit and accumulate”, until the medium-term trend remains intact. That’s why I always believe that the psychological aspects of trading are more important than anything else for successful trading. A mind game like poker.
Words of wisdom
Any market, be it real estate or forex, is a way of transferring money from the crowd to the few most fortunate. In speculation with real property, the masses make money, a lot of money, but this money is visible only on paper, as profits evaporate before they manage to translate the paper profit into hard cash. In most cases of forex speculation, the masses for a few years barely survive because of insufficient market knowledge and a deadly shoulder. Both these types of speculators bring the market so much hard earned money in exchange for a dream.
Each trader must find his own method / system, which is suitable only for him. Therefore, if Tom, a medium-term trader, uses his method to make money for three decades, his system may not be suitable for Dick and Harry, day traders, and vice versa.
Successful trading is the ability to get as much as possible when you are right and lose as little as possible when you are wrong. This is the essence of this business. Therefore, any theory or system that satisfies this rule is good.
The system is the soldier’s weapon in this market. You must acquire it as soon as possible. Otherwise, it will be like fighting with your bare hands with well-armed robbers. It is best to build the system yourself, because you will never feel comfortable with other people’s shoes, although borrowing good ideas from others is a good thing.
You can not make money if you do not follow most of the time behind a crowd or trend. However, one must be careful when the overbought-oversold area is approaching, and know how to turn over in a turning point for the movement with the opposite trend. Following the crowd does not require outstanding abilities and courage, but turning points where you need to take the necessary actions, require not only intelligence, but also great courage. Luck loves courageous.
Money management – it is here that most traders almost always act inappropriately, because of which, in the end, few winners remain. Capital management and discipline – that’s what makes a trader, not the elementary methods of entry and exit.
Forex trading: this is a game of feelings with the mentality of the crowd, where even the best players with the best predictions are knocked out of good positions by the magic of the price movement.
Trade in trend: accumulation and distribution
The forex market, like any other, works very simply. It accumulates for some time in a certain region and, once the accumulation is completed, it moves a certain distance, making a distribution, then the accumulation phase begins again, then again moves a certain distance, again and again. Daytrading can not lead to better results when the accumulation and distribution struggle, neutralizing each other in zigzag steps. At the same time, when the market starts to leave the accumulation area, day trading is a reliable way to interrupt profit. In general, trading within a day, in my experience – is not the best form of profit, contrary to some authors who are trying to prove this without making real money in this game.
The safest and best way to make some money is to wait for the end of the “accumulation” and take the entire length of the “distribution” course in the form of a short-term transaction within 2-10 days, depending on the circumstances.
Technical analysis and graphs
Study 8-hour or 4-hour charts of bars or candles, especially look for patterns and a 20-period average on the charts for several months every day, and you’ll find what I mean by accumulation and distribution for short-term deals on Forex market. These processes are inherent in the market, so you can always decide which tactics to use at this stage. The rest is a matter of capital management and discipline, and, of course, experience.
From the technical side of trading, the first necessary action is to determine the trend in a given time scale and choose the proper trading strategy for that trend. Some hold positions for months, while others hold less than an hour or a day and their views on the trend are obviously different. For a trader who holds a position for months, daily fluctuations can only be meaningless noise, while for a day trader the same daytime fluctuation can become a monstrous tsunami. The presence of a technique for accurately identifying and identifying a trend and its reversal in the trader’s time scale, and adopting the right strategies for this trend is the first elementary step in a difficult school of trading.
I try to keep the technical analysis of any pair of currencies as simple as possible to see how you can use the situation to your advantage. For me, the strategy is to determine the “range of the transaction.” Always place a stop order when you open any new position. Mid-term reversals can be confirmed only on monthly, weekly and daily charts. Reading a chart can not predict the top or bottom of the movement, but can confirm a trend change as soon as it happens to take the right strategy for this new trend.
Each new cycle differs from the previous one, and this is the beauty of the market. It is extremely important to see the whole picture from a distance, instead of studying the minutes and hours under a microscope.
I use very primitive graphical methods. Look at the 8-hour EUR / GBP charts with 20 and 40 MA, pay attention to round numbers and breakouts (from consolidations, then you will understand that there is no more primitive method than this one, but there is not so effective). Buy on the falls to support, add to the consolidation breakout, treating two inputs as one trade, with one stop-loss level and hold it until the market goes in the right direction.
As a rule of thumb, a 20-period average on an 8-hour, daily, weekly and monthly chart helps determine the direction of the trend and the levels of resistance and support. I’m not sure if this will work in day trading.
Look at the weekly EUR / USD and USD / JPY from 10 RSI and the monthly AUD / USD from 10 RSI, watching the “patterns”, not the levels. So you will learn the primitive work of things, and it is better to do it together with even simpler means. RSI is useful “only on a weekly and monthly time scale.” You can ignore RSI on a short-term scale, as the inventor of RSI, Wilder, told us a long time ago.
If you are trading within a day, 30-minute and 15-minute candlestick charts in combination with MACD and MA can be more useful than hourly or even daily charts. Especially do not miss the long tails of candles, as confirmation of changes in the short-term trend. If you are an experienced trader, even one such candle is enough to pull up stops above or below the long shadow. When trading the dollar / yen, we look at the Swiss / yen, pound / yen and euro / yen together to confirm the top or bottom. When trading a pair of Euro / dollar or dollar / Swiss franc look at the pound / Swiss and the euro / pound together to confirm the same.
Using crosses and gold,
EUR / GBP and GBP / JPY have the property of leading USD / JPY and EUR / USD movement indicators. EUR / CHF is similar to EUR / GBP in the forecast value.
In short, EUR / GBP and GBP / CHF are leading indicators for EUR / USD and USD / CHF, and GBP / JPY, EUR / JPY and CHF / JPY are leading indicators for USD / JPY. EUR / JPY is very important for the direction of EUR / USD, while GBP / JPY plays the same role for GBP / USD. For example, yesterday’s weakness of EUR / USD largely began with EUR / JPY sales sending EUR / USD and USD / JPY down. As a rule of thumb, if the EUR / USD does not move and the EUR / GBP starts moving, this is a good indicator that someone will later lead the EUR / USD in the same direction, but when EUR / USD moves, but EUR / GBP did not move earlier or together, then it is very likely that the EUR / USD movement will not be long and will soon change to the opposite. The same applies to USD / JPY against EUR / JPY and GBP / JPY.
EUR / USD, EUR / GBP, EUR / JPY and GBP / CHF are somewhat correlated with each other. It just shows how money moves between these pairs. In fact, GBP / CHF and EUR / GBP in many cases move to a candle or two before EUR / USD. Watching the charts GBP / CHF and EUR / GBP, you can learn in many cases to enter before the movement of EUR / USD. The same is true for the GBP / JPY and EUR / JPY charts, which are ahead of the USD / JPY movement. A careful study of the movements of these pairs will show you also some more interesting things.
I used the index USD and EUR / GBP (or GBP / CHF) as a direction indicator from the late 70’s, with sufficient accuracy in determining medium-term trends. I never lost money on medium-term transactions, relying on these indicators. But they do not work when the Pound is deliberately devalued.
AUD / JPY is one of the important pairs that affect the AUD after the Dollar, Euro and Pound. Usually, the falling AUD / JPY is good for the Yen bulls.
Gold is a mirror of the Dollar for hedging purposes, and their correlation is excellent. Sometimes, when I’m tired of rechecking too much information, changing with every hour, I just watch Gold. The Gold chart is one of the main charts that you should always observe when trading on Forex. The EUR / GBP chart, along with the EUR / JPY chart, is also an excellent mirror for the EUR / USD direction most of the time. Gold charts, EUR / GBP and EUR / JPY tell the history of the market, while Gold and EUR / GBP most often lead the rest of the world of forex.
Always place a stop order corresponding to your risk profile when opening any new position. Mid-term reversals can be confirmed only on monthly, weekly and daily charts. Reading a chart can not predict the top or bottom of the movement, but can confirm a trend change as soon as it happens to take the right strategy for this new trend.
When setting stops, you should consider the main mood of the market in this time scale, the situation with the liquidity of the market at this time and the size of the position. The stop level can be based on technical levels or on some amount of money or a percentage of total assets. Each trader must develop his own unique style of using stops. But unfortunately, all this can be learned only by giving the market money for training.
Yes, as a position trader, I never use close stops. The same goes for trailing stops. All of them I have very far from the market, so that they are not affected by market noise. The initial stop, I always have at a distance of 1% of all my assets.
You can avoid problems in most cases, leaving trailing stops on the market, that is, not setting a profit target. Then any winning transaction will work until the market itself tells you to leave, hitting your trailing stop. When you enter the market on a signal, and then move the trailing stop as profit accumulates, thereby removing the most difficult part of the decision-making process.
Tips for USD / JPY
One of the most stupid rules of the thumb in the USD / JPY trade is that it rarely walks 700-800 pips in a row without correction for 200 or more pips in the middle of the turn, and almost always rolls back to 350 points from the beginning of its movement at 700-800 pips . All this is due to the liquidity problem in the Yen market.
The present battle of bulls and bears for the medium-term trend in the market of the Yen always takes place approximately on the line of the 20-day MA.
Positional yen traders hold positions up to several hundred pips. Intraday transactions require a much more dexterous approach. As a position trader of the Yen, please never buy below a falling daily 20 MA, and never sell above a growing daily 20 MA, regardless of how attractive the situation looks. Start buying only when the day 20 MA starts to rise from any level – this is not only a safe, but also a proven way to make money, although it looks so simple.
Reaction to news
News or data is always read by the market in the direction of the prevailing mood of the market. The data can well show the state of the market. If the data is bad, and the price rises or does not react, it should be a bull market, when the best choice is a buy strategy on the bottom. Conversely, if the data is good, but the price does not grow or even fall, this is a downward trend, when the best strategy is to sell on the rebound. A significant point will be when bad or good news no longer affects the price the way it used to. Changes in the mood of the market are usually accompanied by just such a reaction to the news.
The first hour after the opening in Tokyo sets the tone of the day’s liquidity, at this time most of the major players try to solve their problems, so that not then do not experience difficulties during the day. The opening of Sydney is often used by some players as an ambush hour, as a temporary window before the opening of Tokyo. There is a rule of thumb – if the Yen jumped at the opening of Tokyo, then perhaps this movement will continue throughout the day, and maybe even a few more days.
One hour after the opening of Tokyo, London and New York – the time of the greatest liquidity of the market. At this time market makers set the trend for the session time or even for the whole day. You can see the majority of session or day movements started either at the opening of London, or Tokyo, or New York. Particularly consider the discovery of London. Other markets are too thin for large traders.
On Forex, one must think about how to take the nearest goal correctly, instead of worrying about the distant future. The nearest target can be 2 pips, or 20 pips, or 200, or 500, depending on the trader’s style.
Everything is possible on Forex.
Good quality information is everything in this game.
The bottoming on USD / JPY is the basis of all risky deals.
We always learn to trade, and every day we learn from each other. This is the beauty of trade and life in general.
Do not worry about what the market will do. Let it bother you what you will do when the market reaches your “point of pain” or “point of happiness”.
Forex players can work in secret, but they can not hide their movements on the charts.
Yes, no liquidity and no conviction players make the market resemble a tramp waving in his usual field.
A good dream is essential for good trading, but most traders that I know seem to be sleeping with one open eye.