Preparation to trading and tricks of the market
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    Preparation to trading and tricks of the market

    Hi traders!

    Most of traders prepare to trading studying charts. What is a chart? This is a static image that shows you beautiful channel or trend and some traders wonder – what in the world is difficult here? (after that they go to forum and post a thread «Forex is easy»)

    But when they start trading in real environment, it’s no longer that easy, because if their timeframe showed nice rising candle that goes from low to high – in real time market could have rushed higher immediately, then drop reverting color of the candle to black, and then rush higher again for another retest.

    Guess what happens? If beginner trader observes such behavior, he forgets all his patterns, because market never acts in smooth and predictable manner.

    There are lots of examples in martial arts, when fighter was very good in training (for example, boxer was very good at making punches with punching bag), but when it comes to real fight, his opponent makes something unexpected and his plan disappears – he start making mistakes and finally can’t respond in appropriate manner.

    The same is in trading. Observing charts too much and preparing for expected event makes you anxious and nervous when something unexpected happens.

    Brett Steenbarger in his book «Enhancing trader performance» describes interesting example – there was a famous fighter pilot Colonel John R. Boyd called «40 second Boyd» - he was able to ride the tail of any challenger within period of 40 seconds. He invented so called «OODA» abbreviation – «Observation, orientation, decision, action».

    If your actions are predictable, if you act near hot spots of liquidity (near support/resistance lines e t.c.), you immediately get inside the OODA loop of professionals –they know your actions and will use your liquidity for their favor – more often than not you will see rapid liquidation breaks after small growth or messy shakeouts to the upside after small decline.

    That’s why decision making process in trading is not just about observing charts and treating trading as computer game like «Arcanoid», where the ball should bounce back after touching the line. It’s about ongoing competition between professionals and amateurs, where odds are stacked against amateurs.


    How to prepare?


    First of all, simulated trading is better than simply working with historical charts. If you can run the simulation process (when market moves like in real time), you would be more prepared to the action. But it’s also not the panacea for preparation.

    Somebody says, that you should test your trading system. Well, of course, it’s useful to make some research, but most of the patterns can’t be tested because they need trader’s discretion, and there’s no algorithm that can imitate trader’s discretion (algotraders will argue with me).

    I would say that you should improve your discretion and decision making process – it’s useful to examine – what thoughts go through your head when you are making a trade? Journal them, then analyze. If you find your explanation about a trade not satisfying, just quit this trade. If you are acting because «we seem not go lower» or something like that – you are on the hook of professionals.

    Some time ago I started practice of «immediate journaling». I was making analysis, making trade, then journaling very quickly – what are real reasons for entering this trade? I mean, I was checking myself whether I had unconscious impulses that leaded me to this trade (boredom, anxiety e t.c.). If I understood, that there were some emotional issues, I looked at this trade again. After I cleared myself from emotional pressure, I could see if this trade as synchronized with the market. I might have seen no reasons to hold that trade after that. This practice helped me a lot to improve self-awareness and decision making process in whole. And it’s much more valuable, that studying 5000 charts.


    Good luck!

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    Last edited by Value trader; 04-16-2014 at 03:09 PM.

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    Registered user opan's Avatar
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    preparation in forex trading it is extremely important because without preparation we will not be trading well, with not a good trading loss means there will be many who come to us, that's why I say we have to understand a good preparation in forex trading and preparations to be carried out in forex trading if we want high profit

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    Quote Originally Posted by uchexxx View Post
    Okey you've made some very brilliant and important points and thanks for sharing but I would like to add, as you said that you prefer to trade based on your discretion and smart dicision making compared to trading based on patterns,well I have a different opinion on this aspect,how would you trade if you don't already have an idea of price behaviors,or should I say price patterns,because having this knowledge would serve as a guideline.
    Chart patterns doesn't show you price behavior in real time - I'm not saying that patterns are useless but traders rely on them too much.

    Analysing historical patterns after they are formed is differently from observing the same pattern in real time. I would bet, that 80% of traders will be mistaken in identifying pattern forming in the real time.

    Example - recent thread on AUDJPY showed consensus on "possible reversal" - there was pretty "resistance" level there.
    Most of traders got stopped there.

    How do you think - why? Because they just wanted to play a reversal. They were relying too much on the image (preferred image) rather on real price action. Image looks pretty - especially image of reversal, but when it comes to identyfing real opportunity, you will find that you should rely on real price action (not just patterns) - how price goes? Is tempo high or low? Is market aggressive on buying/selling side? Demand or supply drives the market?

    Image will help you stick your attention to a situation, when you are surfing between charts looking for opportunity, but once you have found any pattern, you should examine it and dig deeper looking what's going on.

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    It is certainly very true that just observing the charts for patterns to repeat themselves as they did in the past is not a good way to trade in forex, and that is where proper preparation comes in to play. A trader should be very informed about the fundamental factors behind price action to be able to make accurate analysis.

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    i never can say that forex trading is easy. so preparation is very important thing to do before start in real trading. i lose a lot opf money in three years ago , so forex is not easy for me. knowledge and preparation are the key of succes in forex world.and i never trust the market.

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    In my own view of the market, the beginner traders should always try not to make anything that is smart in the market. They should still on the look on mode in the market. I believe that this article should be more for the experienced trader in order to manage the emotion and the anxieties that hey have in the market. And as for teh case of the beginners, double checking of your signal is the way.

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    Quote Originally Posted by jonking View Post
    It is certainly very true that just observing the charts for patterns to repeat themselves as they did in the past is not a good way to trade in forex, and that is where proper preparation comes in to play. A trader should be very informed about the fundamental factors behind price action to be able to make accurate analysis.
    There is no doubt that every business in which too much risk involved needs good preparation before any one can do it perfectly,i little disagree with you dear because in forex business history always repeats,it means traders who just doing trade based on technical analysis can not be wrong because they always uses charts pattern with repetition..

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    It is certainly very true that just observing the charts for patterns to repeat themselves as they did in the past is not a good way to trade in forex, and that is where proper preparation comes in to play. A trader should be very informed about the fundamental factors behind price action to be able to make accurate analysis.

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    Preparation of trading is very important because with these preparations we can at least trade with good results. I usually make arrangements through trading demo practice I often do before a live trading, the trading demo I use to test my strategy and apply to many currency pairs repeatedly. If the test result is successful, then I will apply it to the live trading, and if the results are bad, then I have to learn again through demo trading.

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    Quote Originally Posted by cozard007 View Post
    In my own view of the market, the beginner traders should always try not to make anything that is smart in the market. They should still on the look on mode in the market. I believe that this article should be more for the experienced trader in order to manage the emotion and the anxieties that hey have in the market. And as for teh case of the beginners, double checking of your signal is the way.
    Are you hearing what you are saying? :)

    "...the beginner traders should always try not to make anything that is smart in the market"

    Do you expect after that to make even small amount of money? How are you going to trade then?

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