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Thread: Traps of the market

  1. #1
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    Traps of the market

    Hi traders!

    I’ve been talking about this numerous times, but nevertheless I see traders making the same mistakes over and over again. I’ve made special webinar on this topic, where I have provided my own view on this dilemma. Now I’ve decided to make a readable version of it.
    I’m doing education groups for traders for about 3,5 years and have my personal statistics of how traders think and what traps do they fall in. I have put this stats in a «top-list» below.


    #1. High/low fallacy.

    The most frequent mistake that traders make usually occurs when price was standing for an extended period of time in some trading range and had broken out eventually to a new highs/lows.

    Traders usually look back to 3-4 days, and rarely know what’s happening on at least one timeframe higher than theirs. So, they have seen numerous false breakouts before and now they think in the say – «this breakout will be false as well». Too often, it is far from true. Market conditions change and they (markets) transit from bracketing to trending conditions.

    There’s a common psychological explanation for this trap. When traders are so bored about low volatility (that usually is associated with the trading range), they become excited with volatility break. They see good prices that «will not hold for too long». It often leads to impulsive trade.
    It is pretty common phenomenon – when we are forced to make a decision, when time is running out, we will more than likely make wrong decision. Our brain operates from «template», from reactive mode when we lack time to make a decision. Reactive thinking means that you don’t keep an eye on a big picture, your attention is absorbed by the current price action in the right side of the chart.

    Attachment 10902

    Solution: I would recommend you to have chart with at least 1 timeframe higher than yours. The goal of it is to make your attention wide, to know not only what’s happening here and now, but what is your global trade location, what trend is on the upper timeframe? Traders have 2-3 monitors not for fun, it really helps them to see the picture in whole, not in fragmentarily.


    #2. Volatility bias.

    Many traders become to trade move actively after volatility breaks, in other words they tend to be more active after «trending» days – days with extended trading range. But if you analyze market statistics for at least last 5 years, you will see that more often market tend to consolidate within a body of the elongated candlestick (of course, I’m talking now about daily charts) for 2-3 days.

    There is a very simple explanation for such market mechanics. Big market participants rarely come to the market and drive it to a new prices, instead they prefer to act as a market makers – to provide liquidity. In other words – they don’t chase running market, they try to accumulate position in consolidation before (most frequently) or after (more rarely) the breakout to make sure that their average fill will not be the worst.

    On Forex market, days with extended volatility often don’t mean anything, it can be simply a «shakeout» or a single player stepping in the market without intention to continue pushing it to whatever side.

    Attachment 10903

    Solution: Don’t chase the market, find accurate trade location after market settles or when breakout is ready to occur, not after that.


    #3. Fortuneteller syndrome.

    This is the last but not least trader’s trap. It occurs when traders are too emotionally (as well as cognitively) connected to their forecast or market view. They often think in this mode: «If market reaches X point, it will definitely reach Y point.» In other words, confidence in one part of a forecast increases significantly after another part of forecast is completed.

    Attachment 10904

    Solution: As a solution, we should always remember that market can do anything in any time. Our overall market view can be right but market can go to your targets not in the shape of straight line. Always manage your risk, have a plan for different scenarios.


    Good luck and don't fall into any traps!

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  2. #21
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    it is a strategy which in this business we are able to create a trade that is able to do well with the basic fundamentals that can we can do the good and right in a trade how do we have to have a backup strategy in the business in which we are really able to to generate trades according to the analysis and prediction of the trade

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  3. #22
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    Quote Originally Posted by Value trader View Post
    Volatility
    Volatility is most bad thing in market that destroy the smooth of market currency. We cannot trade on forex cause a trader should do this business with proper skill and knowledge. But most of the time our analysis goes wrong and we have nothing to do. So that in this situation we have to work in forex with proper skill, that is useful to us and make money easily.

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  4. #23
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    Market has mane face.
    As price get change of currency due to many factors.
    Lie economy of country and world, industrial data, employment data, other news,political situation and some time manipulation by big traders.
    So we have to be prepared to see any kind of situation and for that small quantity trading is the best thing to avoid any kind of panic and major loss in your trading account.

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  5. #24
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    the most difficult problem I face in the Forex market and I consider it as aver hard trap it is haw to understand the economic news and how to translate the meaning of every event before the time of it``s releasing .so many difficult to have this tarp and for a long time can`t to solve it more over .if you have a solution to my problem would you please help me

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  6. #25
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    Quote Originally Posted by Abu George View Post
    the most difficult problem I face in the Forex market and I consider it as aver hard trap it is haw to understand the economic news and how to translate the meaning of every event before the time of it``s releasing .so many difficult to have this tarp and for a long time can`t to solve it more over .if you have a solution to my problem would you please help me
    To be honest there are no traps of the market only mistake that are made by the trader. But most of the time it is just bad luck that take over you when even the best of plans go wrong as if they were made by a two year old. Believe it has happened to me and i have lost big time in this process so be careful.

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  7. #26
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    the market in the forex market familiar with the tricks and the traps . and of the most hard problems of the market is to betrays you even you arranged for youir trades and very sure of the analysis and did all your filters then the fact comes against your expectations to your loss . then you seek to make compensate for your loss , you may not be able to do this .for the market is still have tricks

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  8. #27
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    basically the main reason why people fail in this business is because there not understand this business, it always better to understand the market from high time frame when trading the market we loss when trading is because we trade against the market trend when trading,if we understand how to go with the trend we are bound to make something when trading

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  9. #28
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    You have mentioned all three point are important to observe.Because market always react uncertain behavior.There are various traps in market which create us confused.We always like to trade when volatility increase.And most of the traders want to trade those pairs which has more volatility.It will be effective for new traders like me to check market trap and take good decision.

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  10. #29
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    We should chose pairs and appropriate time to trade. There are several sessions involved in the Forex trading like Tokyo , Europe , USA, Sydney etc. Europe and Usa session are the most popular and witness a great deal of activity. When there is a good deal of activity particularly in EURUSD pair. It give me more chance to maximize my earning from forex trading business . Forex is not easy money.

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  11. #30
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    I wish forex working traders can adhere to the aspects as above, it is the way that will really make the trader get the success in the doing of it. There so many aspects you will pay attention to or see in the market, but you will only need to be careful in the way you do your working acceptance. Wet considerably, try to pay outstanding attention to the outstanding and stages in the market.

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