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  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. #951
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    some of the traps in the market can be overcome on by having good money management and also by7 trading using less leverage like the 1:100 leverage . it is the best type to enable us to trade away of the risk of the high volume . also by trading with small limits there is a very good chance to trade different positions away of the risk of the market

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    Registered user mexima's Avatar
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    supply and demand which is also called support and resistance , i really don't think there is trap on that level because market surly made confirmation candle on that level how ever on Fortuneteller syndrome market move on trend but market also do correction on every step like if it more 100% up side then it will do correction of 30% to 50% for example if market move 100 pip and and came back 30 pip which means market did 30% correction where you can take entry again .

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  4. #953
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    mexima, correction matter but it matter with some our management, if we are doing proper management in trading it means we can earn good profit from some ratio but without some management we can place any order here and can lose as well, actually when we are not using management we people can lose big orders and can earn smaller profitable orders, so that is not good

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  5. #954
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    there are many problems which can be very dangerous that most of the successful traders can face some of these traps like the unlikely predictions for the news which strongly influence the price every day , thus with the differnt strategies there are some of them can easily detect some of these problems here we can prove the abiulity of the professionalism in the trading and the high level experience .

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  6. #955
    Registered user Silhouette's Avatar
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    Quote Originally Posted by Abu George View Post
    there are many problems which can be very dangerous that most of the successful traders can face some of these traps like the unlikely predictions for the news which strongly influence the price every day , thus with the differnt strategies there are some of them can easily detect some of these problems here we can prove the abiulity of the professionalism in the trading and the high level experience .
    Sometimes the problems comes from ourself which actually we create for no reasons. For example, we know that market is going to move reverse by the strategy we have and it's strongly supported with more patterns after that. Unfortunately, since we have a bad habit of doubtful and lose our confidence with our trading, we can't use such opportunity to trade and let it go without getting any profits. We create our own traps and avoid them not to trade, not market.

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    rules made to be followed, not to be broken

  7. #956
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    one of the most dangerous traps that the market can deceive us , is at the times of the news , I think that this will help us to follow the market with all the types of the trading manners ,. so the fact of avoiding the trading direct according to the news expectations may not be very right . as such there can be very good manners to predict the next movement according to different types of analyzing like the technical analyzing

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  8. #957
    Registered user Rylai's Avatar
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    Quote Originally Posted by Abu George View Post
    one of the most dangerous traps that the market can deceive us , is at the times of the news , I think that this will help us to follow the market with all the types of the trading manners ,. so the fact of avoiding the trading direct according to the news expectations may not be very right . as such there can be very good manners to predict the next movement according to different types of analyzing like the technical analyzing
    At the same time, when market is releasing news many traders are gathering with their massive lots and creates big movement for short time. it's the moment where traders are losing and others are winning. in my version, such traps with news eats up all the loser's money and give the profits to those who wins the trade with their analysis. i always avoid this uncertainty in trading especially with news that i don't understand.

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  9. #958
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    there is no doubt that the market can be full of the traps which may not be expect able . thus the trader has to make higt own arrangements and has his own alternative plans . at these times of reflecting . so the right way to think with is very required to find good and effective strategies . also this may be very sm,art to find the market get clearer to you by time you think well

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  10. #959
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    market some time move unexpectedly but this is not act of always in mostly market move normally and if we have experience if we have learned market tacts we can really make good profit from its move, market have just two directions up and down so we need to identify one and i am sure with some months of practice can make us better at least to earn some good profit here on monthly basis

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  11. #960
    Registered user mexima's Avatar
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    Quote Originally Posted by naeem555 View Post
    mexima, correction matter but it matter with some our management, if we are doing proper management in trading it means we can earn good profit from some ratio but without some management we can place any order here and can lose as well, actually when we are not using management we people can lose big orders and can earn smaller profitable orders, so that is not good
    right it just because of bad management we never consider on the maximum profit how ever if we have loss float trade then we always wait to recover the profit or to reverse the market how ever professionally i open up the trade on every correction with pure money management and risk management.

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