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Trading Psychology

Trading Psychology

🐼Mastering the Art of Forex Trading Strategies🐼 Key words: ,,,,, , ,, 🐼The world of forex trading is as fascinating as it is dynamic. To thrive in this fast-paced market, developing a robust trading strategy is paramount. In this article, we will explore the key points that can help you identify and refine your trading strategy, bringing you closer to success. 🐼Identifying Market Trends: Understanding market trends is crucial in making informed trading decisions. By analyzing moving averages, trend lines, and price patterns, you can identify the prevailing market direction and potential opportunities. 🐼Implementing Effective Risk Management Strategies: Mitigating risks is a vital aspect of any trading strategy. Set appropriate stop-loss orders, determine suitable position sizes, and manage leverage wisely to protect your capital and minimize exposure to potential losses. 🐼Incorporating Technical Analysis Tools: Technical analysis tools provide valuable insights into market behavior. Use oscillators like the Relative Strength Index (RSI) to identify overbought or oversold conditions, Fibonacci retracement levels to pinpoint support and resistance levels, and Bollinger Bands to gauge market volatility. 🐼Staying Informed about Market News and Economic Calendar Events: Keeping up with the latest news and economic events can provide valuable context for your trading strategy. Monitor economic indicators such as GDP releases, central bank meetings, and geopolitical events to understand potential impacts on currency movements. 🐼Conclusion: Crafting a successful forex trading strategy requires a comprehensive approach that covers market trend identification, risk management, technical analysis, and staying informed about market news. By incorporating these key points into your strategy, you can enhance your trading skills and increase your chances of long-term success in the forex market. Remember, forex trading is a continuous learning journey, so adapt and evolve your strategy as the market evolves. Please cheer me up with a like and a nice comment😸❤️ Please, support my work with like and comment! Love you, my dear followers!👩‍💻🌸

Education

by AnabelSignals

[Education] Itchy Hands Ruin Your Career I was impatient. I've always wanted my live trades to play out as fast. As fast as I click the "forward" button in TradingView replay function. When I'm not in a trade, I'm bored. I want to be in a trade. It doesn't matter if the trade does not fit my plan. I will find excuses to justify my actions because anything can happen in the market, right? I want to feel the joy and excitement every time I'm in a trade. But every time I don't trade my plan, I see my account balance getting lower and lower. This is when I realized I was gambling, not trading. Trading should be simple, boring and mundane. You should not feel anything from it. It's like working your day job. Do you feel happy analyzing spreadsheet? My mentor suggested that I trade on the seconds timeframe. It's the closest to the speed of backtesting. I agreed. I switched over to trade using the 15 seconds chart. When I was scalping, things are moving fast. Analysis and trade management needed to be quick and there is no time for me to stop, gather my thoughts and act. I took on many unnecessary losses because I wanted to be in all the moves. At the end, my $1,000 account ended in a $600 drawdown in 1 month. This is unsustainable. Not Following Your Plan Your biggest problem is not following your trading plan. You have a profitable trading system that you have backtested a lot. But why do you not trade according to it? Discipline. There is no one to keep you accountable for the trades that you take. If you're working in a day job, you will be discipline to arrive at work on time. You must meet your KPI, and to complete your job according to all the rules. In trading, you're your own boss. No one will be telling you not to take the trade if it doesn't fit your trading plan. No one will be telling you to risk only 1% and not 10% on a single trade. No one will be here to punish you for all the mistakes that you've made. Success and failure belong to you only, no one else. Without the discipline to follow your trading rules, you will be running around a circle. You will find some small successes, only to fall back into the same spot as you did a few months later. You will be a breakeven trader, unable to achieve profitability. Even worse, you will be in a drawdown, and will be unable to pull yourself back to profit. If you want to improve your trading to achieve financial freedom, I have good news for you. I have a bespoke mentorship and is currently accepting students. Do note that slots are highly limited and not everyone who is interested can join. Check it out here. Feeling The Pressure To Trade There can only be two reasons why you feel the pressure to trade. First, you're attempting a funded challenge and you're reaching the end of the time limit. Nowadays, there are many prop firms out there without any time limitations. This is better for your psychology and it's easier for you to pass since you do not need to force any trades. You are able to trade at your own pace, taking trades that fit your trading plan. Second, you're relying on trading as the only source of income to put food on your table. Trading is the worst hustle you can rely on to put food on your table, especially if you're a beginner. Trading is already difficult and stressful to begin with. You are dealing with the fact that 95% of the traders fail. You're dealing with human's fundamental nature of greed and fear. It took me 5 years to achieve consistent profitability. What are the odds that you're a genius? What are the odds that you will be profitable when you're starting out? There is no guaranteed income in trading. Trading is a great side hustle at the start. You need consistent cash flow from your day job to put food on your table. You will most likely lose money during your first few years of trading. Get your personal finance in order first. Make trading your main source of income later. How To Curb Your Itch You can create another small account. This account is to satisfy your urge to be in a trade. This way, you do not hurt your main trading account. You are able to look at how you are performing when you’re not following your trading plan. Compare this result to the results where you followed your trading plan. You will be able to see which is performing better. If you get better results for not following your trading plan, tweak your actual trading plan. Backtest them and see whether there is an improvement by implementing these changes. If yes, good! You’ve found improvement to your profitability. If not, you should realize that you must stick to your trading plan. But Keeley, trading on a small account isn't satisfying enough. Yes I know. But don’t forget, you’re deviating from your trading plan. You do not know whether this way of trading is profitable or not. You can be lucky for the first 5 trades and think that you’re doing fine. This is when everything will go wrong. You will take the next trade on your main account. You will take the first loss. It’s ok, this is just 1 loss out of the 6 trades you took. If you’re unlucky enough, you can lose 10 more trades this way and put a dent in your trading account. This could actually be a losing strategy. By continuing to trade like this, you will lose your trading edge over the long run. Do you want to lose a small $100 account or your main $10,000 account? The answer is clear for me. Accepting Change Fear and greed are the enemy of traders. They are innate in us and it’s hard to overcome them. Do you know that 95% of the traders are unprofitable? Do you know why people love to stay in their comfort zone, unwilling to try something new? Fear. Change is the only constant in life. Why change something that is working ? Why change your lifestyle for the better when you’re not suffering? You’re not doing bad, but you’re not doing well either. Everyone must choose one of two pain. The pain of discipline, or the pain of regret. Whenever we try something new, we experience anxiety. We are afraid of the unknown. Master your emotions - Thibaut Meurisse The most dangerous addiction in the world is comfort. People who’s living your dream life is not that smarter than you. They are simply better at overcoming the fear to take that very first step. It feels good to be trapped within your comfort zone. You have certainty. Negative emotions will find it hard to penetrate your bubble. Think about it. You are in your 20s or 30s right now. When do you plan on retiring? 60? 70? That’s still a long way to go. Can you imagine yourself working for another 30 to 40 years? That’s 8 hours a working day on average. There’s an average of 260 work days in a year. Assuming you took all your 30 vacation leave and 14 sick days off. You’re still working 1,728 hours a year. What if you work for another 30 years? That’s 51,840 hours, or 2,160 days or 6 years of your life. And you don’t even work only 8 hours a day. Slogging your life in a 9 - 5 on the weekdays, only to go home and watch Netflix and play video games. The cycle repeats. Look back into the past 2 years, what have you achieved? Do you want to continue living your life like this for 30 more years? Waiting for your paycheck at the end of the month, save and invest here so that you have enough money for a 5 days vacation to escape your mundane life. Then you’re back at it again with your savings wiped out. Life always begins with one step outside of your comfort zone. - Shannon L. Alder To create an extraordinary life, take full responsibility for your actions and decisions. Stop blaming external factors, and focus on the things you can control. If you can’t control what others think about you, then don’t. What are the things that you can control? How you treat yourself, your body and your mind. How you react to people and situations. How you think. What you do with your time. The people you choose to surround yourself with. How you treat others. Where you give your time, energy and attention. The contents that you consume. When you’re trying to do the extraordinary, the ordinary will try to stop you from doing. People don’t like to see you succeed. They heard that entrepreneurship is hard and risky. You could lose a lot of money. They think that they have the best interest in you. They like to stay in the comfort zone and you should stay there with them. They tell you to be realistic. You are not someone incredible of great success. Anything can happen. Ultimately it’s up to you to take the first step. There will be a lot of what-ifs and negative scenarios playing out in your head when you’re venturing into the unknown. The unknown is scary. But what if it turns out better than expected? What if everything should go well, actually went well? That’s something you can only find out if you take the first step. Framework Many of you focused a lot on the entry and the exit of your trades. You have screenshots of your before and after of all the $Tesla Motors(TSLA)$, CSEMA:S&P 500(.SPX)$ and $Apple(AAPL)$ trades. How about the process during the trade? Trade management is crucial in your trading career and is often neglected. You're interested in how many RR the trade can give you. You're interested in sniping the best entries with minimal drawdown. You're interested in trading using the smallest stop loss for the largest gains. Understanding trade management can save you from losses. Trade management is also dependent on your personality. Do you like to manage your trade? Or do you prefer to set your limit order and continue with your life, forgetting about them? You have to find a trade management system that fits your personality. You can incorporate many trading tools into your stop loss placement. You can incorporate tools such as moving average, structural highs and lows, opposing order blocks, ATR, Fibonacci extension, using time elements, and even volume. Set And Forget I use this for myself. As I’m trading on the 15m timeframe, I know that my trade can take a few hours or even days to play out. Since I don’t have any power to control the market, I don’t manage my position. I manage my position when there are news or when my trade is aligned with the higher timeframe order flow. By using this method, you accept all the possibilities that this trade will be a loser. You know the win rate of your trading system through your backtesting. This way, you trade according to how you backtest. This method gives you a lot of free time for you to do what you love. This gives you time freedom which every traders should strive to achieve. Trailing Stop Loss When price moves in your favor, the stop loss will follow behind the current market price. This ensures that you capture all the profits. When a retracement comes, price will take you out in profit. I seldom use this method unless there is a red folder news. I will shift my stop loss to at least breakeven, and trail my stop loss to structure highs or lows. I have a few accounts with different prop firms. I can set my stop losses to different structure highs or lows to spread my risk. If one trade gets taken out, other trades could still be in. When red folder news is happening, the price can move fast in one direction. Often times, price will retrace back in my favor. This is to secure my profits, in case the price moved against me and hit my original stop loss position. Taking Partial Profits I use this whenever there is a red folder news approaching. 2 minutes before the release, I will close half of my position and shift my stop loss if my position is in a profit. I will close 75% of my position if my position is in a drawdown. There is great volatility during red folder news. If I do not close any position, I’m risking more than I want. This is due to the risk of slippage during news. I talked a lot about it here. You can consider taking partial profits when the price hits structural highs or lows. You can also use a Fibonacci extension to determine when you should be taking partials. This is up to you and your trading plan. Results If you've been following me on my journey, you would have seen my growth to be a consistent profitable trader. Imagine receiving all these profit splits every other week. It gives a boost to my confidence. It also reinforce the fact that following my trading plan is the way to profitability. I have a funded account journey where I trade a $10,000 account, showing the ups and downs of how real trading is like on my YouTube channel. I post weekly updates on my progress and show you the reality of trading. I walk the talk, being transparent with my progress with the public. I know exactly what you're struggling with and I know exactly how to fix your issues. I’m sure you will benefit a lot from my free contents. Stay consistent. Stay safe. Success is just around the corner. If you enjoy such content, feel free to click the like button and subscribe for more. Let me know what are your thoughts and learning points in the comments below so others can learn from you too! Please let me know what kind of topic you would like to read next :) Happy weekend!

Education

❌Trading Mystery: Why 95% Of You Will Fail❓ 🟥The world of forex trading holds immense allure - the promise of financial freedom and the opportunity to make money from the comfort of your own home. However, it is no secret that the path to success in forex trading is treacherous, with estimates suggesting that a staggering 95% of traders fail to achieve their desired outcomes. So, what exactly goes wrong for these aspiring traders? Let us unlock the creative narrative behind this apparent mystery and delve into the reasons that prevent them from cracking the code. ♦️Lack of Proper Education: Just as successful carpentry requires the right tools, so does forex trading. Many traders dive into the financial ocean without a true understanding of its currents, waves, and hidden dangers. They overlook the importance of acquiring comprehensive knowledge about markets, technical indicators, risk management, and strategies. Without a firm grasp of these essentials, traders unwittingly chart a course for disaster. ♦️Emotional Tempests: Imagine being a captain of a ship, navigating treacherous waters while being plagued by anxiety and fear. Forex trading is not for the faint of heart. As the markets fluctuate, traders battle their own emotions, succumbing to impulses that lead to impulsive trading decisions. Greed, fear, and overconfidence can cloud judgment, causing traders to buy or sell impulsively rather than relying on calculated analysis. Emotion-driven trading inevitably leaves traders shipwrecked amidst the unforgiving tides of the forex market. ♦️Unforeseen Volatility: The forex market is a living organism that reacts to an array of factors, from economic data to geopolitical events. These dynamics can send currency values into a frenzy, defying logic and leaving traders bewildered. Sudden fluctuations, unpredictable trends, or unexpected policy decisions can capsize even the most astute trading strategies. By underestimating volatility, traders find themselves drowning rather than riding the waves. ♦️Inadequate Risk Management: Imagine moving forward without a life jacket while navigating choppy waters. This risky endeavor can lead to dire consequences, just like trading without proper risk management. Successful traders understand the importance of setting stop-loss orders, managing trade sizes, and allocating a portion of their capital to each trade. Those who disregard risk management find themselves sinking beneath the weight of their poor decisions. ♦️Overreliance on Automation: In recent years, the rise of automated trading systems has piqued the interest of aspiring traders. While these algorithms can streamline processes and enhance efficiency, they are not a guarantee of success. Blindly relying on automation without understanding how it works or constantly monitoring its performance may result in unexpected losses. It is essential to strike a balance between human insight and technological support. 🟥The realm of forex trading is a captivating one, tantalizing traders with elusive riches. However, becoming part of the 5% who succeed requires diligence, perseverance, and a deep understanding of the whimsical nature of the market. One must embark on this journey by arming themselves with knowledge, taming their emotions, embracing volatility, implementing effective risk management, and balancing human intuition with automation. Only then can traders hope to navigate the tempestuous seas and emerge victorious in their pursuit of forex trading success. 😸Thank you for reading buddy, hope you learned something new today😸 Do you like this post? Do you want more articles like that?

Education

by ProSignalsFx

[Education] How I Lost Everything To Trading I wasn't always profitable. I lost a lot of money when I first started trading forex. I don't remember how I got started learning forex. But I know I started when I was serving in the army. I borrowed books from the library, watched many YouTube videos on trading. I was very knowledgeable on technical analysis. I know the concepts so well I could vomit them out to you. I didn't follow up on trading that much after my service ended. I came back to trading when I was working as an auditor. The fact that I had to work long hours with little pay brings me to look for an alternative source of income. I found out that we can make money through percentage allocation money management (PAMM). You invest your money into a trader, and whatever profit they earn, you will give them a % cut, and you keep the rest. I found this trader with a solid trade record. He has 3 years record with an average of 20% profit a month. He is trading with a $500,000 account. I thought that this trader was good. I calculated how fast my money will grow by putting money with him every month. I put in $1,000 for a start. A few months passed and it showed good results. I see the balance in my account increased too. That was when I decided to put all my savings in. I put $10,000 in, which was everything that I had. I was working overseas that day. I checked my account after work. I saw that my account balance was $0.98. I thought it was some bug. I refreshed the page a few times. I saw that the account manager has risked everything in 1 trade. I was shocked. I felt numb. What was going on? Red Flags I did some research online, found out that the broker actually fakes the trades of “top trader” over a span of 2 years. When more suckers like me put my money in these PAMM, they will burst the account with 1 stupid trade. I believe this stupid trade was not even executed, but a front for them to scam all our money. I realized that there were many red flags to begin with. None of the top traders offered any 3rd party verification through Myfxbook, MQL5, or even Fxblue. They don’t even give their investor passwords which are read-only to investors. It was a painful lesson. But it led me to the journey of trading by myself. From then on, I put in a lot of hours studying and backtesting technical analysis. Even right now, I’m not comfortable with putting my money with PAMM for diversification. I will need to know the trader, understand his trading style and the potential risk to reward of the trader. The Problem Is You Letting mathematics formulas do the compounding for your money is a bad expectation. You think trading is easy. You can trade from your room, or even overseas using your phone. Many people are posting screenshots of their profits consistently on the social media. You think that trading is the way to achieve financial freedom. This is a legit business and many people has done it. you can do it too. You start to play around with leverage, only to get your account wiped out after 4 trades. You deposit $100 more. you are on a winning streak. You have 4 wins in a row. you look at your account balance increased from $100 to $1,000. You’re unstoppable. You continued overleveraging your account. I mean, what can stop you now right? You’re basically a god of trading with 4 win streak. next thing you know, you wiped out your $1,000 balance. You repeat this cycle till you’re sick and tired. you proceed to find the next holy grail. Breaking The Loop Insanity Is Doing the Same Thing Over and Over Again and Expecting Different Results - Albert Einstein You need to break this cycle. you are only repeating what you’re losing. Relying on other sources for trading will not get you far. Yes, you might found a profitable signal provider. What if he don’t want to provide his service anymore? You will be back at where you begin, looking for another signal provider again. You will need a lot of time and waste money to make sure that the signal provider is legit. what if your profitable signal provider is experiencing a losing streak? will you continue to follow the signals? or will you start having doubt? will you take responsibility for all these losing trades? or will you blame your signal provider? To be consistently profitable in the long run, you have to trade by yourself. Everyone’s view on the market is different. You can be looking at a long on EURUSD, but I could have a bearish bias. Knowing how to trade by yourself is the key to success. You don’t need to rely on signal providers. You don't need to constantly monitoring your phone to check if there are any signals. You know the risk and reward and your expected win rate by trading yourself. It is you who put in the hard work of backtesting. You will be putting your own trades. You determine the amount of risk you will take. You take trades based on your lifestyle and personality. Do The Uncomfortable Stuff Trading involves a lot of uncertainty. This is a hustle that you can earn money without knowing what can happen next. Even though I'm a profitable trader, I do not know what will happen next. I can only guarantee that either I will lose the next trade with -1%, or a profit. I focus on what I can control, not what I expect for things to happen. When you trade according to your own plan, you understand the risk you are taking. It is scary to take your own trades at first. You don't know if your analysis is correct. You don't know if you will be successful. You don't know if you will be profitable. This is what every trader will experience. On my first trade, I was having adrenaline rush when price came back to tap my entry. I was looking at the chart for the whole day, even though I'm trading on the 15 minutes timeframe. I know and understand that I cannot control the price. But psychologically, I'm not strong enough to let my trade play out. This trade ended up with a loss. You have to start somewhere to learn how to trade by yourself. Without this, you will forever be trapped within the cycle of unprofitability. If you keep telling yourself that trading alone is hard and you are unable to be profitable, you are right. You are constantly letting your subconscious mind get used to this message. Your subconscious never rests. Even when you’re asleep, your subconscious is still running in the background. It will keep telling your body what needs to be done to keep you functioning. Being Trapped In The Loop I was the same as you. I skipped from strategy to strategy, trying to find the holy grail. I tried many things. from EA to signals to mentorship. I earned some, but I lost more. I lose before I even start. Buying EAs cost money. Subscribing to signals cost money. Signing up for mentorships cost money. I tried EAs that uses grid and martingale. I bought indicators that repaint themselves after price actions have happened. I’ve tried EAs made by creators who adjust it to best fit past data, but are actually not profitable in the live market. I’ve tried signals that gives a 20 pips TP 1, but 100 pips stop loss. They make big celebrations with fire emojis when TP 1 hits. When TP 2 of 40 pips hits, they do the same thing. Weekly result summary are also posted which includes both TP 1 of 20 pips and TP 2 of 40 pips. They remove losing signals too. This looks like it’s a profitable signals, but the risk to reward ratio for their signals are shit with low win rate. Some of the mentorships are cash grab. You pay them to give you video recordings and information. You can find them for free on Babypips. It’s debatable that all mentorships are a scam. Some of the mentorships I joined actually provided great values. I’m able to look into how profitable traders are trading. I can get insights on their thought process behind their trades. There is a platform for me to do my analysis. Mentors will comment on my analysis, telling me what I could do to improve, or even add their insights. Some also provide 1-1 calls which is what all mentorships should offer. Sometimes, it’s faster and easier to explain through a call rather than on text. Furthermore, they record the 1-1 sessions and I can watch them in the future. These 1-1 sessions can be Q&As, or even backtesting session. This is where I will do the backtest and the mentor will comment on my thought processes. I would consider myself to be lucky to have only lost $10,000. If I had more money, I’d lose way more for sure. After losing that $10,000, it led me on a journey to be a profitable trader now. I have no regrets on this journey. Mentorship Most people are unwilling to spend money for courses, knowing well that there are thousands of FREE online resources out there. But the problem lies in how do you sieve out all the unnecessary and useless information from such a huge amount of resources? Mentorships are made to solve these problems. They are built to solve and educate you on a specific skill and knowledge that you want to learn. They are built by people who have experienced the same problem as you did. This is the same as spending money on university courses. Most of you are willing to pay thousands of dollars and 3 - 5 years of your lives to get a 4 - 5 figured day job, yet you don’t bear to spend that few hundred of dollars to get the specific skillset that you need as an investment. My last mentorship costs me $2,000. I can tell you that it's the best investment I've ever made. Through the mentorship, it gives me different perspective from an active community. We look at the same chart every single day and anyone is free to critic our work. The 1-1 calls are also important to me. They gave me a good foundation, and I learnt a lot of advanced skills like psychology and risk management. I got to a point where making $916.05 is as easy as placing 1 trade, and getting 2% return on a 0.5% risk. Yes this profit comes from only 1 trade on my $50,000 account. I've covered the cost of mentorship through my funded account payouts. This return on investment will continue to accumulate. Sooner or later, I will be earning back whatever I've lost, and to quit my 9-5 job to trade full time. Stay consistent. Stay safe. Success is just around the corner. If you enjoy such content, feel free to click the like button and subscribe for more. Let me know what are your thoughts and learning points in the comments below so others can learn from you too! Please let me know what kind of topic you would like to read next :)

Education

Breaking the Cycle: The Perils of Repeating Trading Mistakes Trading in financial markets can be a challenging endeavor. It requires a combination of skill, knowledge, and adaptability to navigate the complexities of the market. Unfortunately, many traders fall into a common trap - they repeat their mistakes, often leading to failure. This article will explore why repeating mistakes in trading can be detrimental and explain how studying these errors can pave the way for long-term success in the markets. 1. The Importance of Recognizing Mistakes: One of the primary reasons traders repeat mistakes is the failure to recognize them in the first place. 2. The Consequences of Repeating Trading Mistakes: Continually making the same mistakes in trading can have severe consequences. By understanding the negative impact of repeated mistakes, traders can be motivated to break the cycle. 3. Psychological Factors: Psychological biases and emotions significantly contribute to repeating trading mistakes. Studying trading mistakes with a reflective mindset is crucial for professional growth. Techniques such as journaling, performance reviews, and seeking feedback can help traders gain valuable insights. 5. Identifying Patterns and Developing Strategies: Mistakes often reveal patterns that can be detected and analyzed. 6. Continuous Learning and Adaptation: The key to trading success lies in continuous learning and adaptation. The pursuit of knowledge is essential to avoid repeating trading mistakes. 7. Implementing Risk Management Measures: Developing sound risk management practices helps prevent repeat mistakes and protect against potential losses. Conclusion: Repeated mistakes in trading are detrimental to success, both financially and psychologically. However, by acknowledging and studying these errors, traders can learn valuable lessons and refine their strategies. Through continuous learning, self-reflection, and effective risk management, traders can break the cycle of repeating mistakes, leading to improved performance and long-term success in the trading world. Hey traders, let me know what subject do you want to dive in in the next post?

Education

by TopTradingSignals

I want to share with you some points about Risk Management This topic is so important, that´s why I wanted to share it with you and hope I can reach as much people as possible. Hope it will help some :) I saw in the last years many who crashed their accounts very hard, they lost a lot of money and for some it was very dreadful! It is hard to watch this people how they burn money and bring even his own family in financial danger. That´s why risk management in trading is so heavily important, to keep yourself and your life in balance. May be some will find very helpful, or some will remember this rules again :) I will keep it a bit shorter here as in my book, but the main points are still mentioned! I can´t say it often enough, always keep your rules during trading. Trading is not the way to get rich quick, it is a serious and hard business! It take a lot of time to learn, it requires a lot of patience and it will happen a lot of failures. This failures are even more important than your success! Success will not open up how it will not work, failures will. But let´s talk about risk management! For each investment you have to consider you take for each trade the risk to lose money, that´s why it is mandatory to handle each investment with a good risk/reward distribution. You have to keep in mind, the determined risk/reward is only theoretically and can result complete different. But with knowledge you can dedicate a good entry for your trades to keep your risk as low as possible. Determine important support and resistance levels and think about all situations what could happen and what will you do, if you are going into the red or into the green? Which levels are the best entries and exits? This all will help you to determine your riks/reward ratio. What is the Risk/Reward Ratio? Successful day traders are generally aware of both, the potential risk and potential reward before entering a trade. The goal of a day trader is to place trades where the potential reward outweighs the potential risk. These trades would be considered to have a good risk/reward ratio. A risk/reward ratio is simply the amount of money you plan to risk, compared to the amount of money you believe you can gain. For example, if you think a potential trade may result in either a $400 profit or $100 loss, the trade would have a risk/reward ratio of 1:4, making it a favorable setup. Contrarily, if you risk $100 to make $100, the trade has a risk/reward ratio of 1:1, giving you the same type of unfavorable odds that you can find in a casino. Which ratio should you desire? Like described above, finding trades with high risk/reward ratios (1:2 or higher), will help you maintain higher average profits and lower average losses, making your trading strategy more sustainable. The common suggestion between traders is a distribution of minimum 1:2 ratio. In reality there are often even better ratios available, if you do your technical chart analysis or financial stock analysis. But what should you do if you have to cut losses? We have to place our stop loss right below our support or other important levels we determined before. The purpose is to cut losses before they grow too large. Stopping out of a losing trade can be one of the hardest things for traders to do consistently. However, failing to take stops can result in margin calls, unnecessarily large losses, and ultimately account blowouts. How big should I enter a position? To lower your risk I recommend to think about your size to enter a position. Overall you shouldn´t risk money you need, only deposit money in your broker you can afford. Entering small can be the smartest way to safe your account. I suggest that because of four reasons: 1. You don´t risk to much of your funds and your stop loss should be tight anyway. 2. You can average down if the price is going in the other direction, but consider this option only if you are sure what you are doing. 3. You can buy the dips/pullbacks if the trend is strong and still heading in your desired direction. 4. Your emotional control is stronger if the price movement is heading in the wrong direction. This brings us to the next topic. Should you use leverage? Yes I know, big leverage will give you big gains...but as a beginner you will not have the experience to know which trade has a very big potential or not. Even experienced traders use only a small amount to enter a position and not the whole fund. If you use leverage the losses can be much higher and the problem with that is, if you lose money, your leverage will also decrease significantly and the losses are harder to recover after each loss. So what is the answer of the question, should you use leverage? For beginners we can easily answer: Take your hands of a big leverage! You can so hardly blow up yourself with that tool, it is ridiculous. Your way back into the profit zone will probably take years. But you have to save yourself and after a period of time, a period of taking profits and cutting losses you will gain knowledge until you feel much more comfortable on the market and you understand how trading really works, then you can consider to use leverage. Conclusion: As I said, I want to share only some big points about this topic, simple and understandable, because I think many new investors don´t understand how important that topic is! Safe yourself and have fun in trading and learning! Sincerely, TradeandGrow Trade safe!

Education

by TradeandGrow

Updated

How I Lost Everything Trading Forex I wasn't always profitable. I lost a lot of money when I first started trading forex. I don't remember how I got started learning forex. But I know I started when I was serving in the army. I borrowed books from the library, watched many YouTube videos on trading. I was very knowledgeable on technical analysis. I know the concepts so well I could vomit them out to you. I didn't follow up on trading that much after my service ended. I came back to trading when I was working as an auditor. The fact that I had to work long hours with little pay brings me to look for an alternative source of income. I found out that we can make money through percentage allocation money management (PAMM). You invest your money into a trader, and whatever profit they earn, you will give them a % cut, and you keep the rest. I found this trader with a solid trade record. He has 3 years record with an average of 20% profit a month. He is trading with a $500,000 account. I thought that this trader was good. I calculated how fast my money will grow by putting money with him every month. I put in $1,000 for a start. A few months passed and it showed good results. I see the balance in my account increased too. That was when I decided to put all my savings in. I put $10,000 in, which was everything that I had. I was working overseas that day. I checked my account after work. I saw that my account balance was $0.98. I thought it was some bug. I refreshed the page a few times. I saw that the account manager has risked everything in 1 trade. I was shocked. I felt numb. What was going on? Red Flags I did some research online, found out that the broker actually fakes the trades of “top trader” over a span of 2 years. When more suckers like me put my money in these PAMM, they will burst the account with 1 stupid trade. I believe this stupid trade was not even executed, but a front for them to scam all our money. I realized that there were many red flags to begin with. None of the top traders offered any 3rd party verification through Myfxbook, MQL5, or even Fxblue. They don’t even give their investor passwords which are read-only to investors. It was a painful lesson. But it led me to the journey of trading by myself. From then on, I put in a lot of hours studying and backtesting technical analysis. Even right now, I’m not comfortable with putting my money with PAMM for diversification. I will need to know the trader, understand his trading style and the potential risk to reward of the trader. The Problem Is You Letting mathematics formulas do the compounding for your money is a bad expectation. You think trading is easy. You can trade from your room, or even overseas using your phone. Many people are posting screenshots of their profits consistently on the social media. You think that trading is the way to achieve financial freedom. This is a legit business and many people has done it. you can do it too. You start to play around with leverage, only to get your account wiped out after 4 trades. You deposit $100 more. you are on a winning streak. You have 4 wins in a row. you look at your account balance increased from $100 to $1,000. You’re unstoppable. You continued overleveraging your account. I mean, what can stop you now right? You’re basically a god of trading with 4 win streak. next thing you know, you wiped out your $1,000 balance. You repeat this cycle till you’re sick and tired. you proceed to find the next holy grail. Breaking The Loop Insanity Is Doing the Same Thing Over and Over Again and Expecting Different Results - Albert Einstein You need to break this cycle. you are only repeating what you’re losing. Relying on other sources for trading will not get you far. Yes, you might found a profitable signal provider. What if he don’t want to provide his service anymore? You will be back at where you begin, looking for another signal provider again. You will need a lot of time and waste money to make sure that the signal provider is legit. what if your profitable signal provider is experiencing a losing streak? will you continue to follow the signals? or will you start having doubt? will you take responsibility for all these losing trades? or will you blame your signal provider? To be consistently profitable in the long run, you have to trade by yourself. Everyone’s view on the market is different. You can be looking at a long on EURUSD, but I could have a bearish bias. Knowing how to trade by yourself is the key to success. You don’t need to rely on signal providers. You don't need to constantly monitoring your phone to check if there are any signals. You know the risk and reward and your expected win rate by trading yourself. It is you who put in the hard work of backtesting. You will be putting your own trades. You determine the amount of risk you will take. You take trades based on your lifestyle and personality. Do The Uncomfortable Stuff Trading involves a lot of uncertainty. This is a hustle that you can earn money without knowing what can happen next. Even though I'm a profitable trader, I do not know what will happen next. I can only guarantee that either I will lose the next trade with -1%, or a profit. I focus on what I can control, not what I expect for things to happen. When you trade according to your own plan, you understand the risk you are taking. It is scary to take your own trades at first. You don't know if your analysis is correct. You don't know if you will be successful. You don't know if you will be profitable. This is what every trader will experience. On my first trade, I was having adrenaline rush when price came back to tap my entry. I was looking at the chart for the whole day, even though I'm trading on the 15 minutes timeframe. I know and understand that I cannot control the price. But psychologically, I'm not strong enough to let my trade play out. This trade ended up with a loss. You have to start somewhere to learn how to trade by yourself. Without this, you will forever be trapped within the cycle of unprofitability. If you keep telling yourself that trading alone is hard and you are unable to be profitable, you are right. You are constantly letting your subconscious mind get used to this message. Your subconscious never rests. Even when you’re asleep, your subconscious is still running in the background. It will keep telling your body what needs to be done to keep you functioning. Being Trapped In The Loop I was the same as you. I skipped from strategy to strategy, trying to find the holy grail. I tried many things. from EA to signals to mentorship. I earned some, but I lost more. I lose before I even start. Buying EAs cost money. Subscribing to signals cost money. Signing up for mentorships cost money. I tried EAs that uses grid and martingale. I bought indicators that repaint themselves after price actions have happened. I’ve tried EAs made by creators who adjust it to best fit past data, but are actually not profitable in the live market. I’ve tried signals that gives a 20 pips TP 1, but 100 pips stop loss. They make big celebrations with fire emojis when TP 1 hits. When TP 2 of 40 pips hits, they do the same thing. Weekly result summary are also posted which includes both TP 1 of 20 pips and TP 2 of 40 pips. They remove losing signals too. This looks like it’s a profitable signals, but the risk to reward ratio for their signals are shit with low win rate. Some of the mentorships are cash grab. You pay them to give you video recordings and information. You can find them for free on Babypips. It’s debatable that all mentorships are a scam. Some of the mentorships I joined actually provided great values. I’m able to look into how profitable traders are trading. I can get insights on their thought process behind their trades. There is a platform for me to do my analysis. Mentors will comment on my analysis, telling me what I could do to improve, or even add their insights. Some also provide 1-1 calls which is what all mentorships should offer. Sometimes, it’s faster and easier to explain through a call rather than on text. Furthermore, they record the 1-1 sessions and I can watch them in the future. These 1-1 sessions can be Q&As, or even backtesting session. This is where I will do the backtest and the mentor will comment on my thought processes. I would consider myself to be lucky to have only lost $10,000. If I had more money, I’d lose way more for sure. After losing that $10,000, it led me on a journey to be a profitable trader now. I have no regrets on this journey. Mentorship Most people are unwilling to spend money for courses, knowing well that there are thousands of FREE online resources out there. But the problem lies in how do you sieve out all the unnecessary and useless information from such a huge amount of resources? Mentorships are made to solve these problems. They are built to solve and educate you on a specific skill and knowledge that you want to learn. They are built by people who have experienced the same problem as you did. This is the same as spending money on university courses. Most of you are willing to pay thousands of dollars and 3 - 5 years of your lives to get a 4 - 5 figured day job, yet you don’t bear to spend that few hundred of dollars to get the specific skillset that you need as an investment. My last mentorship costs me $2,000. I can tell you that it's the best investment I've ever made. Through the mentorship, it gives me different perspective from an active community. We look at the same chart every single day and anyone is free to critic our work. The 1-1 calls are also important to me. They gave me a good foundation, and I learnt a lot of advanced skills like psychology and risk management. I got to a point where making $916.05 is as easy as placing 1 trade, and getting 2% return on a 0.5% risk. Yes this profit comes from only 1 trade on my $50,000 account. I've covered the cost of mentorship through my funded account payouts. This return on investment will continue to accumulate. Sooner or later, I will be earning back whatever I've lost, and to quit my 9-5 job to trade full time. Stay consistent. Stay safe. Success is just around the corner. If you enjoy such content, feel free to click the like button and subscribe for more. Let me know what are your thoughts and learning points in the comments below so others can learn from you too! Please let me know what kind of topic you would like to read next :) Happy weekend!

Education

🛎Mastering Key Forex Fundamentals🛎 ♦️Navigating the world of forex trading can be both thrilling and challenging. While it may seem overwhelming to keep track of all the complex factors that affect currency movements, some key fundamentals can significantly impact forex markets. In this article, we will discuss three essential forex fundamentals: non-farm payrolls, interest rates, and central bank policies, offering you a straightforward understanding of their significance and effects. ♦️Non-farm Payrolls: One of the most influential economic indicators in forex trading is the non-farm payrolls (NFP) report. Published monthly by the U.S. Bureau of Labor Statistics, the NFP report reveals the number of jobs added or lost (excluding the farming sector) in the United States during the previous month. ▪️Why it matters: The NFP report provides traders valuable insights into the strength of the U.S. economy. A higher-than-expected NFP figure indicates an expanding job market, economic growth, and potential currency strength. Conversely, if the NFP data disappoints, it suggests a weaker economy and can lead to currency depreciation. ♦️Interest Rates: Interest rates play a crucial role in forex trading. They reflect the cost of borrowing in a particular country and influence investor behavior and currency values. ▪️Why it matters: Changes in interest rates impact currency demand. When a central bank hikes interest rates, it attracts foreign investors seeking higher returns, leading to increased demand for the currency and potentially strengthening its value. Conversely, when rates are lowered, it may spur borrowing and economic growth, but can also result in currency devaluation due to decreased attractiveness for investors. ♦️Central Bank Policies: Central banks are instrumental in forex markets due to the control they exert over monetary policies. ▪️Why it matters: By adjusting interest rates, implementing quantitative easing measures, or intervening in currency markets, central banks can directly influence their nation's currency value. Statements and speeches made by central bank officials can provide insight into their future monetary policy decisions, guiding forex traders' expectations. ♦️To master forex trading, a solid understanding of key fundamentals is essential. Factors such as non-farm payrolls, interest rates, and central bank policies carry significant weight and can lead to substantial currency movements. Familiarize yourself with economic indicators, monitor central bank actions and announcements, and always exercise caution and risk management when trading forex. ♦️Remember, successful trading requires continuous education, practice, and experience. Stay informed, adapt your strategies accordingly, and remain patient as you navigate the dynamic and exciting world of forex trading. 😸Thank you for reading buddy, hope you learned something new today😸 Do you like this post? Do you want more articles like that?

Education

by ProSignalsFx

[Education] Falling In Love With The Wrong One Is Costly Trade what you see, not what you feel. Human are emotional creatures. Believe it or not, I had attitude problems in the past. I get angry easily and this is a bad trait to be a trader. In the beginning when I was still a noob, I would fund a live account without learning how to trade properly. I buy and sell base off moving average, RSI, MACD, and signals. You guessed it, I burst plenty of accounts. Even if I win some trades, I would lose many more next. Whenever I lose a trade, I will feel angry. When I feel angry, can you guess what I do next? I revenge trade. I don't believe that gold will not go higher. Let me take another long position. Wait what the.. my trade got taken out again? I think this is a stop hunt. Last try. This time the price will sure go higher. "Opens another long position with larger lot size". And you guessed it. I wiped out my account trying to catch a falling knife. Ditch Your Emotions Keep your feelings and emotions and aside when trading. The market doesn't care if you're happy or sad today. It will do what it wants to do. You can't control how the price move. Neither do I. Unless you have in control billions of dollars. If you do, why are you even reading this? The problem is not with the market nor your trading strategy. The problem lies in YOU. You are the common factor here. All strategies can be profitable with the right execution, trade and risk management. But why can someone else be profitable but not you? It seems like everything is profitable until you put your own money in isn't it? When you allow your emotions to take over, you won't be rationale. You will take actions based off your emotions. If you feel doubt, you will look for confirmation not to take a trade. If you feel angry, you will take revenge trades. If you feel happy, you will feel like you won't lose your next trade and get complacent. If you feel overconfident, you will risk more on your next trade. If you feel fear, you will close your trade early for small profits. If you feel tired, why the heck are you still on the chart? Feelings are subjective and the market has no interest in it. The Downward Spiral Trading based off feeling is like gambling. Gambling belongs in a casino, not the financial market. Let's say, you feel like the market is heading towards a recession. Would you blindly short the market if the price did not give you any confirmation? This is the problem with you. You let emotions take over your decision making skills. This is why you cannot achieve profitability. You might be in a trade, price goes against you and you’re in drawdown. You fear that the price will take you out. You cut your trade. Price reverse and hit your profit target. You could have won the trade by following your plan, but you let your emotions take control of your decision. When this happens too many times, your profitability decrease significantly. This makes a profitable strategy becomes unprofitable because your trade management sucks. Not only will you lose money trading like this, but also precious time. How long did it take you to backtest that trading system? 1 day? 1 week? How many times are you going to repeat this and waste even more time? Even if I give you the holy grail trading strategy, you will still not achieve profitability. It's not the system. It's you. You will NOT achieve success in trading if you cannot master your emotions. Say goodbye to your financial freedom and a life of enjoyment. The only thing you can enjoy is the occasional small wins that you cut before the trade becomes a runner. You will still be unprofitable. Follow Your Plan If I have to summarize how I became profitable, it will be to follow your plan. Trade what you see because only you know your own analysis. You've backtest enough to see how your edge will play out over a large number of trades. Do not let other people’s analysis interfere with your trades. They could be looking at the 1 minute timeframe, but you're trading on the 15 minute timeframe. Price is fractal. If price is bullish on the 1 minute, it can be bearish on the 15 minute. Why do you want a second opinion on your trade? When price shows you what it’s doing, react to it. Do not anticipate what the price will do and assume that price will do exactly that. But Keeley, it’s so boring to wait for price to come back to my entry. I might miss the trade. I will take a short here because I’m expecting price to go lower and tap into my long order. People want to be in the action. How many times do you expect price to make a bearish retracement and tap you into your long position? How many times did you actually open a short position and expect your long to get tapped in? If price did not give you any confirmation, don't take the trade. The market will do what it wants to do. You can't expect the market to do exactly what you anticipate it to do. Experience When I was scalping on the seconds chart, I was loving every moment of it. I was constantly in a trade, catching all the movements. If I lose, it’s fine. I would always think that I have more opportunities coming soon. I would expect price to do what’s playing out in my mind. This was not sustainable as I was taking too many trades within a short period of time. Even on a tight spread account, spread on lower timeframe accounts for a chunk of my risk management. Your trading psychology should be strong when scalping on the lower timeframe. Scalping a few pips per trade is doable but it's stressful. I thought my trading psychology was good, until I experienced a losing streak. The more losses I experienced during the day, my psychology got affected more. This goes the same for losses in the same trading session. I’d do stupid things like risking more than normal, taking trades that I don’t usually take. I also take trades without confirmation. I used my feelings to trade as I expected price to play out what I wanted. Eventually, the win’s going to come right? This happened for a few weeks and I burst quite a few challenges. I lose quite a lot of motivation and called quits. I’m quite a lazy person. I do not like to sit in front of my laptop stalking TSXV:SPDR S&P 500 ETF Trust(SPY)$ , $Tesla Motors(TSLA)$ or $Apple(AAPL)$ and trade for a few hours straight. I took a few weeks off from charts and reflected. I look deep into myself for answers. I got the answers. I will try to be sufficient just by trading the higher timeframe. This way, I do not need to sit in front of my laptop for a few hours. I have the freedom to do what I like without sticking to my charts. This sits well with me too as this trading style fits my lifestyle. This way, I can avoid overtrading. I can easily see what I trade because each candle took 15 minutes to be completed. This kept my trading psychology at tip top condition. Framework PBJ Framework No this is not peanut butter and jelly. Let's breakdown the following: Plan: Know what to look out for. Know what to do before, during and after trading. Before entering a trade, know how much you’re risking. Know your entry signal, confirmation, and stop loss placement. Do you take partial profits? If yes, where will you take the profits? How much position will you take at each partial profit targets? If the price did not meet any of the condition, DO NOT take a trade. Be in the moment: During the trade, know how you’re going to manage your trade. Do you shift your stop loss to breakeven? Do you take partial profits? Do you scale into your trade? Check your emotions. Are you feeling anxious? Angry? Confident? Tired? Excited? Your emotions have no say when you're trading. Journal: After closing the trade, journal your trade. Write down how you feel before, during and after the trade. Write down how did you manage the trade. Give it a score from 1 - 5. This will help you in the future when you’re reviewing your trades. When you have 100 trades recorded, you can finally do your analysis. Look at the times when you trade based on feeling. How do they play out? Are those trades profitable? Look for the common factor on all your winners and losers. The more information you record on your journal, the more analysis you can perform. Achieving Profitability Using the PBJ Framework, I see great improvement in my trading skills. I started to be more present and conscious of what I'm feeling. I recorded almost everything. From my pre-trading ritual to post-trading ritual, I have all the data I need. I know how my emotions change throughout the trading session. I know how often my edge will play out. I know which days are profitable. I know which trading sessions are profitable. I know which months are profitable. I know which are my most profitable pairs. I find peace with losing. Why? I have all the data. I have evidence that my edge will be profitable if I take all the trades that appears in front of me. I avoided trading on days and session where I have the least profitability. Not only did this increased my win ratio, but profitability too. I was once unprofitable. Since then, I found consistency and manage to get funded with FTMO and The Funded Trader. My first payout was small. It's only USD$200 on a $10,000 account. Even so, this is one big step ahead in my milestone. I was targeting one payout for 2023 and I've achieved this target in May. I got my second payout in June. My goal was to get $50,000 funding by end of this year, but I've already achieved it in May. I've now stretched my goal to $200,000 funded by end of this year. The Ordinary Life Life always begins with one step outside of your comfort zone. - Shannon L. Alder To create an extraordinary life, take full responsibility for your actions and decisions. Stop blaming external factors, and focus on the things you can control. Take full responsibility of your trades, your mindset, and your emotions. If you can’t control what others think about you, then don’t. What are the things that you can control? How you treat yourself, your body and your mind. How you react to people and situations. How you think. What you do with your time. The people you choose to surround yourself with. How you treat others. Where you give your time, energy and attention. The contents that you consume. When you’re trying to do the extraordinary, the ordinary will try to stop you from doing. People don’t like to see you succeed. They heard that entrepreneurship is hard and risky. You could lose a lot of money. They think that they have the best interest in you. They like to stay in the comfort zone and you should stay there with them. They tell you to be realistic. You are not someone incredible of great success. Anything can happen, especially in the market. You can win with a wrong setup, and lose with the right setup. It’s up to you to take the first step. There will be a lot of what-ifs and negative scenarios in your head when you’re venturing into the unknown. The unknown is scary. But what if it turns out better than expected? What if everything should go well, actually went well? That’s something you can only find out if you take the first step. Guidance Trading is the easy part for many people. All trading strategies are profitable if you backtest them enough. The hard part of trading is actually coming up with an exact trading plan and risk management system. Many of you drown when it comes to a trading plan. Not know where to start when creating one is also a very big issue. You need to train and strengthen your psychology and discipline yourself. But you need a coach to guide you to the correct path. This is why even world class athletes like Usain Bolt has a coach. A coach gives guidance and a holistic review on your You can choose to grow alone. But having a coach an an accountability partner will help you achieve your goals faster. Imagine spending a year learning psychology and risk management, only to find out you were on the wrong track. If you had a coach and mentor, you would have saved yourself one year of trial and error. You could be profiting from the market so much earlier. Remember, trading is not an easy hustle. It take years of hard work, losses and, breakeven before you can achieve consistent profitability. Stay consistent. Stay safe. Success is just around the corner. If you enjoy such content, feel free to click the like button and subscribe for more. Let me know what are your thoughts and learning points in the comments below so others can learn from you too! Please let me know what kind of topic you would like to read next :) Happy weekend!

Education

📉Mastering the Art of Control: Stop and Limit Orders Unveiled📈 📌In the thrilling world of forex trading, where fortunes rise and fall in the blink of an eye, having the ability to control your trades is paramount. Among the arsenal of tools at your disposal, stop and limit orders reign supreme. These magnificent creations empower traders to set their own boundaries and ensure that the roller coaster ride of forex trading remains under their command. So, buckle up and embark on this exciting journey of understanding stop and limit orders! 📌Understanding Stop Orders: Stop orders are like steadfast guardians, appointed to protect your hard-earned profits or minimize potential losses. Imagine them as your personal bodyguards ready to leap into action at the first sign of trouble. When you place a stop order, you determine a specific price at which your trade should be closed automatically if the market moves against you. This mighty order helps you sidestep the risk of your entire trade being wiped out by sudden market swings or unexpected news events. 📌Shining a Light on Limit Orders: Limit orders are akin to skillful negotiators, tirelessly working to secure the best possible price for your trades. Picture them as your savvy diplomats, taking charge of your trades and ensuring you reap maximum rewards. With a limit order, you specify a particular price at which you want to enter or exit the market. It’s like having an invisible hand that waits patiently until your desired price is met before executing your trade. This remarkable order empowers you to seize opportunities and helps lock in your well-deserved profits. 📌The Dance of Stop and Limit Orders: Now that we understand each order's unique strengths, let's witness the masterful coordination between stop and limit orders, as they work together seamlessly to protect and maximize your forex trading outcomes. By using stop and limit orders in tandem, you can create a framework that balances risk and reward, empowering you to navigate the treacherous waters of the forex market. 📌Example Scenario: Imagine you're trading EUR/USD, and you've just entered a long position at 1.2000. You're optimistic about the pair's potential, but you don't want your gains to vanish overnight. In this case, you place a stop order at 1.1950. This ensures that if the market takes a nosedive and reaches 1.1950, your trade will be automatically closed, safeguarding your hard-earned capital. Simultaneously, you set a limit order at 1.2100, securing your target profit level. It's like having a guardian angel watching over your trade, ensuring that once your desired profit is reached, your trade is closed automatically, guaranteeing you a win. 📌Conclusion: Stop and limit orders are the under-appreciated heroes of forex trading, granting you the power to control and protect your trades. With stop orders acting as your shield and limit orders as your sword, you can set your boundaries and seize opportunities with confidence. Harnessing the potential of these remarkable orders will elevate your trading game by ensuring you stay in charge, even when the markets are at their most unpredictable. So go forth, brave traders, and let your stop and limit orders pave the way to victory in the thrilling realm of forex trading! I hope this post was helpful to some of our beginner traders😊 Dear followers, let me know, what topic interests you for new educational posts?

Education

by SignalProvider

[Education] You Need An Easy Trading System It took me close to 5 years of losses and breakeven to reach where I am today. I'm handling 6 figures worth of prop firm funding and has many payouts from various prop firms. This didn't come easy. Like many traders, I started trading with the goal of achieving financial freedom and to leave his 9 – 5 job. I learned from free contents on YouTube. I know many concepts like smart money concept and multi-timeframe analysis. Even with so much knowledge, I am unable to put together a coherent system. Why? Knowledge is power, but action is king. I do not have a fixed strategy that I consistently trade with. Does this sound all too familiar? It does. It’s happening to you now, right? Many traders experienced what I experienced. I've been there, done that and is now profitable. You Need A Systematic System Knowledge is power but without action is useless. There is no point being a genius if you don't use your intelligence and knowledge for something. - Abu Bakr I know you have a lot of knowledge. I know you understand how different indicators worked and wave theories. So how do you put these knowledge into action? There are so many criteria to look out for. How do you know what will work, what will not work? What if you spent 2 days testing your strategy, only to find out that it's not profitable? How do you proceed from there? Do you tweak your system a little and backtest again? Or do you build an entire different trading system? This is a serious problem that you have to address. You will waste a lot of time on the wrong approach. You will backtest wrong. You will not get enough data from your backtesting. You will apply the concepts wrong. The bulk of your problem lies with not having a well thought out trading plan. If you don't know what or how to, I have a framework which I will go through later in the post. This gives you a good starting point to play around with. Anything you do here, get to 100 backtested data. After that, decide if you want to add in more criteria into your trading plan. I have a free trading journal here. You're indecisive. You backtest and moved on without any result. You need to pick 1 and stick to it. Basic Framework This is the framework of how I trade. 1. Markup your chart. Find the area of liquidity, point of interests, liquidity grab, direction of the market and demand and supply zones. Do your multi-timeframe analysis here. Higher probability trade is to buy at discount levels, and sell at premium levels. 2. Set alert at your point of interests (Where to buy and sell) 3. Write down your analysis on the chart. If the price hits your point of interest, I would expect X to happen. When X happens, I will do Y. 4. When the alert goes off, go back to your chart and see if your analysis in step 3 still holds. 5a. If yes, mark out roughly where your stop loss and profit target will be. See if the RR is decent enough. If yes, then wait for the price to give you a confirmation. If no, either wait for a refined entry on the lower timeframe, or to wait for another confirmation. 5b. If not, repeat step 1. 6. Wait for price to give you a confirmation. Calculate the lot size you need to open based on your risk management and place your order. 7. Once you're in the trade, you can either forget about your trade and let it hit TP or SL, or actively manage your position. This will depend on how you backtested your strategy. 8. Once your trade hits the TP or SL, journal it. Record your entry, take profit and stop loss. Take screenshots. Record your emotions and feelings before, during and after the trade. This is how a trading plan should look like. A clear plan of action and train of thought. There should be actions taken before, during and after the trade. Do not follow strictly if your trading strategy is different from me. You need to change it to fit your strategy and lifestyle. Amend it to fit your (i) trading style (ii) personality (iii) lifestyle. My trading style is SMC with VSA, trading on 15m. I have plans to transition to trading on the 1h TF when the time comes. I started from multi-timeframe analysis. A few months later, I discarded it even though it gives a higher win rate. Why? Because I’m lazy, so I made my plan fit to my personality. I also like to spend less time on the chart so I can have a life outside of trading. This fits my lifestyle. I started trading because I want time freedom. It will be ironic if I were to spend more time on the chart compared to working in a 9 – 5. The Holy Grail You must understand that most of the trading strategies work. It doesn't matter if it's price action, wave theory, or indicator based. You need to have a solid backtested result to rely on. Of course, the more concepts you put together, you can find confluence between them. This can get higher probability trades. But that comes with a tradeoff too - decision paralysis. Some part of your strategy might tell you to go long, but some are telling you to go short. It's an art of balance here. Before you take on any funded challenges, solve the above issue first. There is no point wasting money because you will be failing challenges. You are not prepared yet. Having A Guide Having a mentor to cut short your learning curve is cost-effective. Imagine spending 1 year on your own. You learn and test strategies that are not applicable to you, only to find yourself back to square 1. Mentorship could cost upwards of $1k, $2k or even $5k. No doubt, it's an expensive commitment. But think about spending $10,000+ on a university degree to work a 9 - 5 job. To me, it's a no brainer to go for mentorship as I can scale my income way faster than a 9 - 5 job. The only problem with finding a good and legit mentor is it's hard to find. Given the nature of this industry, there are many scammers. Some “mentors” do not actually trade. They rely on posting high profits screenshots to lure customers. It’s quite simple to filter these people out. (i) Common sense. If someone is posting high RR trades often, start to question. Why would he sell you his course or strategy if he’s so profitable. (ii) 3rd party verification like myfxbook and fxblue. Remind yourself that the results can be faked with white-label brokers. Make sure they verify their tracked account and he is using a reputable broker. (iii) Check if he has many prop firm payouts. It’s higher chance for someone to know how to trade with different prop firm payouts. (iv) He has transparency with his wins and losses by sharing his journey publicly. (v) Check his online work – blogs, newsletter, YouTube etc. See the values that he provides for free. This is a good indicator of the value you will get from his mentorship. I do have many mentors, and I agree that finding the right one is definitely a challenge. But once you've found that right mentor, everything will start to change. Everything will click and you will be on your path to consistent profitability. Stay consistent. Stay safe. Success is just around the corner. If you enjoy such content, feel free to click the like button and subscribe for more. Let me know what are your thoughts and learning points in the comments below so others can learn from you too! Please let me know what kind of topic you would like to read next :) Happy weekend!

Education

The Traders in Gold and Forex The world of trading in gold and forex is a challenging and relentless arena where fortunes can be made or lost in a matter of seconds. Three of the most popular styles of trading in these markets include scalping, day trading, and swing trading. In this article, we will take a closer look at each of these trading styles and explore the differences between them. ✔️Scalping is a popular trading style in which traders aim to enter and exit trades quickly, usually within a few seconds or minutes. Scalpers are looking for small market movements and use technical analysis and chart patterns to identify opportunities. The profits from scalping trades are often small, but when done correctly and consistently, they can add up to significant profits. Scalping requires a high level of discipline, attention and focus, and the ability to make quick decisions. ✔️Day trading is another popular style of trading where traders hold positions for a day, opening and closing trades within the same trading session. Day traders use charts, technical indicators, and fundamental analysis to identify trends and price movements. They focus on generating profits by taking advantage of these short-term price changes. Day trading requires a lot of patience, discipline, and emotional control as there can be periods of volatility and unpredictability that can cause stress. ✔️Swing trading is a medium-term trading strategy in which traders hold positions for several days to a few weeks. Swing traders use a combination of technical and fundamental analysis to identify medium-term trends and then enter and exit trades based on these trends. Swing traders aim to capture larger price movements and hold their positions longer than day traders. Swing trading requires a lot of patience, discipline, and the ability to handle market fluctuations. Please, take a look at the example of a day trade. The trade was taken by our team on intraday time frames. The order was executed on an hourly time frame and the trade was closed within the same trading day. In comparison to the previous case, here is a swing trade. It was taken on a daily time frame and we were holding that trade fore more than 2 weeks. In conclusion, gold and forex trading require a lot of skill, discipline, and patience, and different trading styles suit different traders. Scalping, day trading, and swing trading are three popular styles of trading. Scalping is a fast-paced, high-risk trading style, while day trading requires a lot of discipline and emotional control. Swing trading is more patient and slow-paced but offers bigger profits if done correctly. Each style requires different skills, risk tolerance, and technical analysis. The key to successful trading in these markets is to find a style that works best for you and stick to it. What do you want to learn in the next post?

Education

by UnitedSignals

✅The DO’S And DON’TS Of Risk Management❌ ❤️Risk management is a crucial component of forex trading to help minimize potential losses. In this article, we’ll explore the do’s and don’ts of risk management in forex trading. 🧡DO’S 💁🏼‍♀️Set a stop-loss order: A stop-loss order is a pre-set level at which a trade will automatically close, thus limiting the loss on an open position. 💁🏼‍♀️Diversify your portfolio: Spread your investments across multiple currency pairs to avoid exposure to a single currency’s risks. 💁🏼‍♀️Use leverage wisely: Leverage allows traders to invest more than their account balance. However, it also increases the potential risk. Only trade with leverage if you fully understand how it works. 💁🏼‍♀️Keep an eye on economic events: Economic events can impact forex markets. Keeping a close eye on them can help you adjust your trading strategy accordingly and avoid unexpected losses. 💁🏼‍♀️Use risk-reward ratio: It is essential to have a clear risk-reward ratio in mind before entering a trade. This ratio should be based on your established trading strategy and the probability of success. 💙DON’TS 🙅🏼‍♀️Don’t invest more than you can afford to lose: This is a fundamental rule of investing in any financial market. Never invest more than you can afford to lose. 🙅🏼‍♀️Don’t let emotions drive your trading: Emotions such as fear, greed, and hope can lead to impulsive decisions and cause significant losses. 🙅🏼‍♀️Don’t ignore fundamental analysis: Fundamental analysis helps traders understand a country’s economic and political situation, which can significantly impact forex markets. 🙅🏼‍♀️Don’t follow the herd: It is essential to have your own trading strategy and stick to it. Following others' trades blindly can lead to significant losses. 🙅🏼‍♀️Don’t trade without a strategy: A trading strategy helps you make informed decisions and minimize the risks of trading. Not having a strategy can lead to impulsive decisions and significant losses. 🖤 In conclusion , risk management is a crucial component of forex trading. It is essential to follow the do’s and don’ts mentioned above to minimize potential losses and make informed decisions. Remember, successful trading comes with experience, discipline, and patience. Happy trading! Please cheer me up with a like and a nice comment😸❤️ Please, support my work with like and comment! Love you, my dear followers!👩‍💻🌸

Education

by AnabelSignals

The Anchoring Bias: Navigating the Pitfalls of Trading Decisions Introduction: In the fast-paced world of trading, making accurate decisions is crucial. However, traders are not immune to cognitive biases that can lead to irrational behavior and potentially significant financial losses. One such bias is the anchoring bias, which refers to the tendency of individuals to rely too heavily on an initial piece of information when making subsequent decisions. This article delves into the concept of anchoring bias in trading, offering insightful examples to help traders identify and mitigate its negative impact. Example 2: Anchoring on market predictions - A trader reads a market analyst's prediction that a particular stock will experience rapid growth. - Armed with this anchored expectation, the trader ignores other relevant factors, such as the company's financials or market trends, and invests a significant amount of capital into the stock. - The anchoring bias leads to tunnel vision, disregarding critical information that may alter the stock's predicted trajectory, exposing the trader to avoidable risks. Conclusion: Understanding the anchoring bias is vital for traders seeking consistent success. Becoming aware of this cognitive bias, and actively working to question and diversify our decision-making processes, empowers traders to make more objective and rational choices in an ever-changing market landscape. Remember: anchoring should not become the heavy anchor that weighs down your trading potential. Hey traders, let me know what subject do you want to dive in in the next post?

Education

by TopTradingSignals

[Education] You Are Dumb For Not Using A Stop Loss I always thought that stop losses are useless. Whenever I see price taps me out, and go in my direction. Whenever price comes close to my stop loss, the spread will somehow widen and take me out, and go in my direction. I was always angry about this. “The broker must be trading against me! I must hide my stop loss!” I stop using stop losses. For some trades, I won because price couldn’t tap me out and go in my direction. I thought I was a genius by not trading with a stop loss. I became confident. This worked until it didn’t work. It was NFP. It’s 10 seconds away from news release. I was trading a $1,000 account. My trade was in $8 drawdown. I looked at the chart, knowing that I will close the trade if it goes against me. The price became very volatile. 5…4…3…2…1… Nothing happened. The price feed seemed to have lagged. A few seconds later, I saw an enormous bullish candle, against the direction of my trade. The $8 drawdown became $200 drawdown. I got wrecked. I’m supposed to close the trade at a 1% loss, and it became a 20% loss. It’s fine. After a strong impulse, the price will retrace, right? I hoped for the price to make a bearish retracement. But every minute passed, and the chart prints more bullish candles. I closed the trade at a $435 loss. What’s supposed to be a $10 loss turned out to be a $435 loss, 43x more than what I risked. Types of Broker When I started trading, I didn’t even know the existence of A-Book Brokers or B-Book Brokers. They do make a lot of difference in trading. A-Book brokers route your trades directly to the forex liquidity providers, who in turn routes them to the interbank market. B-Book brokers will trade against you. our profits are their losses, and your losses are their profits. There is a clear conflict of interest here. The problem here is that you deposit your money into brokers without reputations. Finding a reputable broker will reduce the probability of them purposely taking out your stop losses. But if you think about it, why would they want to take your $10 stop loss to ruin their reputation? Your trade must be deep in drawdown often for your broker to manipulate your trades. You should relook into your strategy instead of blaming your brokers. Impact On Psychology Trading with a stop loss gives you a peace of mind. Imagine that I had use a stop loss on my NFP trade, I do not need to stalk my trade. I don’t need to worry that the server lagging, which made me unable to close my trade. Without using a stop loss, I can’t close my trade when price hits my stop loss level. This too can happen if your internet connection lagged or is down during that crucial period of time. Your psychology must be very strong to trade without a stop loss. Believe me. You will wait for a few seconds to close. Hoping that trade will turn in your favor within that few seconds. You will end up losing more. Trading with a stop loss is good for your trading psychology. You know that whatever happened, you will lose what you’ve risked. You do not need to stress that you might risk too much on a trade. Trading is a marathon, but many of you have the wrong impression that this is a get-rich-quick hustle. Consider trailing your stop loss when you’re in profit or set them to breakeven when the price moved. Remember, anything can happen in the market. You might be in profit now, but the price can shoot past your stop loss the next minute. If you’re not fast enough to react, you will close your trade at an unfavorable price. Taking Partial Profits Taking partials is better for you. You don’t need to worry if there are any situation where you cannot close your trade in time. Taking partials is important if you don’t want to shift your stop loss. Assume that your trade runs 1R in profit, you can close half. This yields 0.5R. You can choose to keep your original stop loss. When price comes back to take you out, your result will be breakeven. Always remember, a small win is better than a full loss. Consistent small wins will be beneficial in prop firm challenges. Time limit will stress you out. Consistent small wins make you feel like you’re progressing towards passing the challenge. Risk Management There are a lot of ways to profitability. You can either have a high win rate, but low risk-to-reward ratio, or a low win rate, but high risk-to-reward ratio. I’m sure you want a high risk-to-reward ratio trading strategy. Before that, you have to understand how your psychology works. Are you able to execute the same trade that fits your trading strategy again and again? You need to follow your plan despite losing 10 or 20 trades in a row. Will you start to doubt your trading strategy? Your account balance going lower and lower every time you take a trade. Once you’re trading live, you have to accept the risk for each trade you’re taking. You have to accept that you can be wrong more than you’re right. You cannot control the outcome of your trades. You can control the amount of risk you take per trade. I recommend risking 1% or lower for each trade. The goal here is to focus one capital preservation. By limiting your risk to 1% a trade, you are able to keep your account balance safe. Compare this to people who risk 20% or 50% a trade. In a few losing trades, their account balance will be very close to $0. These are the gamblers that do not have the right risk management skills. News Trading I always thought that trading news is the same as trading at any time of the day. Price will go to wherever it needs to go. Since my backtest don’t take into consideration of news, I can trade news in live market too. But after the incident where I lost 43x more than what I risked, I stopped trading news. If I have an open position and in profit, I will close half of my position and shift my stop loss to breakeven. If my position is in drawdown, I will close all the position. The risk of slippage does not justify the reward. If your normal RRR is 1:3 with a 33% win rate, the risk of slippage can turn your potential RRR to be 1:1 because you can potentially lose 3% instead of 1%. Rewarding Journey When I started to focus more on capital preservation, profits comes to me. It’s counterintuitive. It’s normal to think that to be profitable, we need to focus on profits. Having a strict trade management helps a lot with my psychology. I know how many losses I will need to lose my account. Knowing this, it helps with my psychology as I give myself the room to make errors and take losses. I know that my trading strategy is profitable in the long run. I know how much drawdown I can expect from my trading strategy. To be like me, you need a lot of backtest data. I have 1,000 trades logged, which is why I am comfortable trusting my trading strategy. Following to my trading plan allows me to not focus on the noises and my emotions. I trade mechanically. This has allow me to pass various prop firm challenges and gotten various payouts. I have another payout that’s coming in this Tuesday. I’ve always wondered what’s the feeling of constantly getting withdrawals. Now I know how it feels. I’m progressing ahead to leaving my 9 – 5 job. My 2023 goal was to get funded and get 1 payout. It’s not even the end of June 2023 yet, and I’ve achieved my goal. Right now I’m accumulating more accounts from all my payouts. It will take awhile, but I will reach my next milestone of managing $600,000 soon enough. Accountability Partner The hardest part of trading alone is sticking to your own rules. In a day job, you report to your manager and boss. When you’re trading, you’re reporting to yourself. It is hard to be accountable to yourself. Having an accountability partner or a mentor is the best solution to solve this problem. Do you know why legends like Oprah Winfrey has a coach? A coach gives guidance and a holistic review on your performance. They act as an accountability partner. They push you and hold you accountable for your actions. Having someone there for you when you feel down and unmotivated can be motivating. It’s hard to find a suitable mentor or accountability partner given the nature of the financial market. There are a lot of scammers out there selling course materials which you can find online. You need to know that the person selling the course or mentorship does not rely on sales for a living. But instead, he must be earning most of his income from trading. Look at his content, see if they resonates with you. Look at his track record, are they afraid of showing 3rd party verification? Do they only show you screenshots of trades that have already happened? Do they only show their results on excel sheet? If you’ve been following me on my journey, you would have seen my progression. I’ve manage to break free of my unprofitable self to a consistent profitable trader now. Remember, trading is not an easy hustle. It take years of hard work, losses and, breakeven to achieve consistent profitability. Stay consistent. Stay safe. Success is just around the corner. If you enjoy such content, feel free to click the like button and subscribe for more. Let me know what are your thoughts and learning points in the comments below so others can learn from you too! Please let me know what kind of topic you would like to read next :)

Education

Getting Over Emotional Barriers to Successful Results Investing plays a crucial role in personal finance, serving as a vital avenue for individuals to expand their wealth and financial security over an extended period. Despite its significance, numerous individuals shy away from investing due to various perceived obstacles that hinder their progress, including a lack of knowledge, fear of risks, and limited resources. Unfortunately, these barriers can impede individuals from reaching their financial goals and securing their future. In this comprehensive article, we will delve into the common obstacles that hinder successful investing, and we will present practical tips and strategies to overcome them effectively. Our ultimate objective is to empower individuals by eliminating these barriers, enabling them to make well-informed investment decisions and ultimately achieve long-term financial prosperity. Emotional Aspect Emotions exert a profound influence on the realm of investing, often stealthily shaping our choices and behaviors without our conscious awareness. Fear, greed, and even overconfidence can distort our judgment and result in suboptimal investment decisions. Recognizing and effectively managing our emotions becomes paramount for achieving success in the realm of investing. This article aims to delve into the profound impact of emotions on investment endeavors, pinpoint prevalent emotional biases that can derail our investment strategies, and offer pragmatic advice for navigating the emotional landscape when making investment decisions. By gaining insight into the intricate interplay of emotions and investments, we can enhance our investment outcomes and attain greater financial security for the long term. Lack Of Knowledge The misconception that successful investing revolves solely around buying and selling the right stocks can lead investors astray. This oversimplified viewpoint fails to acknowledge the intricacies of market dynamics and the multifaceted factors that drive investment performance. Moreover, investors often overestimate their ability to outperform the market and unwittingly expose themselves to unnecessary risks. Another common pitfall is the allure of strong performance, which tempts investors to chase the latest trendy sector without fully comprehending the underlying reasons or associated risks. This behavior can result in an unbalanced portfolio with an excessive concentration of funds in a single investment, such as their employer's stock, which undermines diversification. Furthermore, a significant number of investors lack a comprehensive understanding of fundamental investment concepts, such as bonds, interest rates, and central bank policies, which can profoundly impact their decision-making. For example, some investors may avoid bonds altogether, unaware of their potential advantages in situations such as company bankruptcy, or fail to recognize the influence of rising interest rates on bond prices. Lastly, investors often struggle with determining the appropriate time to sell a substantially appreciated stock, failing to capture profits or free up capital for other investment opportunities. This oversight can result in an imbalanced portfolio that excessively favors the appreciated stock, exposing investors to unnecessary risk. Market fluctuations inevitably prompt portfolio readjustments, sometimes to the dismay of investors. Rebalancing involves selling some of the best-performing investments to acquire quality stocks that have lagged. Understanding these fundamental concepts and adopting a more rational approach to investing can empower investors to achieve greater financial success and navigate the complexities of the market with confidence. Concentrating Too Much On The Details Despite many investors proclaiming to prioritize a long-term investment perspective, their decision-making is frequently swayed by short-term market movements and fleeting notions. While the importance of establishing long-term financial goals, such as purchasing a home, saving for education, and preparing for retirement, is widely acknowledged, many individuals neglect to devise sound financial plans to actualize these aspirations. This lack of strategic planning renders their choices vulnerable to the unpredictable fluctuations of the market, heightening the likelihood of impulsive decisions that undermine their ability to achieve long-term goals. Invariably, when the market experiences an upswing, the average investor hastily plunges into stocks and mutual funds in an attempt to capture some of the profits amassed by seasoned professionals. Conversely, during a market downturn, panic often grips the average investor, prompting them to sell investments near the market's nadir. Regrettably, this cyclical pattern frequently repeats itself, resulting in investors enduring substantial capital losses and growing disenchanted with the stock market. Methods For Overcoming Emotional Obstacles To enhance the likelihood of success in investing and trading, several strategies can help overcome barriers. Consider the following tips: Educate yourself: Lack of knowledge is a major obstacle to successful investing. Invest time in learning the fundamentals, including different investment types, risk management, diversification, and market trends. Online courses, workshops, seminars, and financial advisors can assist in expanding your knowledge base. Develop a plan: Create a well-defined investment plan that aligns with your financial goals and risk tolerance. This plan should encompass a diversified portfolio, clear investment objectives, and a strategy for monitoring and adjusting your investments over time. Maintain discipline: Avoid making impulsive decisions driven by emotions or short-term market movements. Stick to your investment plan and resist the temptation to chase fads or engage in impulsive trades. Embrace long-term focus: Successful investing requires a long-term perspective. Don't overly fixate on short-term fluctuations; instead, concentrate on your long-term objectives. Seek assistance when needed: Don't hesitate to seek guidance when necessary. Working with professionals like financial advisors, accountants, or investment experts can provide valuable insights and help develop a personalized strategy tailored to your specific needs. By implementing these strategies, you can overcome barriers to successful investing and increase the likelihood of achieving your financial goals. Conclusion Investing presents its fair share of challenges, often impeding individuals from reaching their financial goals. Emotional biases, limited knowledge, and getting lost in intricate details are common barriers faced by investors. However, by effectively managing emotions, acquiring knowledge, formulating a clear investment plan, maintaining discipline, adopting a long-term perspective, and seeking assistance when needed, investors can overcome these barriers and attain lasting financial success. It is vital to understand that investing is a journey that demands patience, perseverance, and a willingness to learn and adapt. By implementing these strategies, investors can conquer emotional obstacles and make well-informed investment decisions that yield profitable outcomes.

Education

The Psychology Of Trading: How To Manage Your Emotions.The significance of psychology in trading cannot be overstated, as it serves as a cornerstone for achieving success. Failure to acknowledge its importance can have disastrous consequences. A notable example is the case of Nick Leeson, who single-handedly caused the downfall of the venerable 200-year-old Barings Bank, a financial institution of such stature that even Queen Elizabeth II entrusted her funds to it. The losses incurred amounted to a staggering 2 million pounds, highlighting how the lack of emotional control in trading can lead to catastrophic outcomes. Understanding and managing one's psychological state is crucial for traders at every level, without any exceptions. It holds true for beginners who may be working with a modest capital of a few hundred dollars, as well as for seasoned professionals who operate with million-dollar deposits. The ability to control emotions, maintain a disciplined mindset, and make rational decisions amidst market fluctuations are vital components for long-term success in trading. By recognizing the impact of psychology and taking steps to develop a strong mental framework, traders can navigate the complexities of the financial markets with greater resilience and achieve their desired outcomes. What Is Trading Psychology? Trading psychology encompasses the behavioral aspects that shape an individual's actions within the realm of financial markets. These actions range from identifying optimal entry points to executing profitable trades. Renowned trader and fund manager William Eckhardt once remarked that intelligence is largely unrelated to success in trading. Based on his observations, individuals of average intelligence, yet diligent in their approach and possessing discipline and self-control, consistently achieved trading success. This observation underscores the crucial role of psychology in trading. Only through complete control over one's actions can traders earn stable profits, rather than relying on occasional wins. The development of trading psychology is a process that unfolds over time. Beginners often find themselves prone to making repetitive mistakes, but with a focus on self-control, they can cultivate these necessary qualities. The key lies in the ability to learn from one's own mistakes and grow from them. By recognizing and addressing psychological factors such as fear, greed, and impatience, traders can enhance their decision-making abilities and gain a deeper understanding of market dynamics. Through continuous self-reflection and a commitment to personal growth, individuals can refine their trading psychology, leading to more consistent and successful outcomes. How Do I Handle My Emotions As A Trader? Indeed, while constant practice and self-control are essential components of addressing psychological challenges in trading, a more detailed approach is necessary for effectively resolving these issues. Below are some key strategies that can contribute to overcoming psychological obstacles in trading: 1) Self-awareness: Develop a deep understanding of your own psychological tendencies, strengths, and weaknesses as a trader. Recognize the emotions and biases that may influence your decision-making process. 2) Journaling: Maintain a trading journal to record your thoughts, emotions, and actions during trades. This practice can help you identify patterns, errors, and areas for improvement. Regularly review and reflect on your journal entries to gain valuable insights into your psychological state while trading. 3) Emotional regulation: Learn to manage emotions such as fear, greed, and impatience. Implement techniques like deep breathing exercises, meditation, or mindfulness practices to cultivate emotional stability and prevent impulsive decision-making. 4) Risk management: Establish and adhere to a well-defined risk management plan. Determine the maximum acceptable level of risk for each trade and set stop-loss orders accordingly. This approach can help mitigate the negative impact of emotional decision-making during turbulent market conditions. 5) Positive reinforcement: Celebrate your trading successes, regardless of their magnitude. Acknowledge and reward yourself for following your trading plan and executing disciplined trades. This positive reinforcement can strengthen your confidence and reinforce desirable trading behaviors. 6) Continuous education: Invest in expanding your knowledge and skills through ongoing education. Attend trading workshops, webinars, and seminars to enhance your understanding of both technical and psychological aspects of trading. Engaging with a community of traders can provide valuable support and insights. 7) Seeking support: Consider joining trading forums or finding a mentor who can provide guidance and support. Discussing challenges and sharing experiences with fellow traders can offer fresh perspectives and encourage personal growth. Remember, addressing psychological challenges in trading is an ongoing process that requires dedication and perseverance. By implementing these strategies and adapting them to your individual needs, you can develop a robust psychological toolkit to navigate the complexities of the market and enhance your trading performance. Learn To Rest Trading is undoubtedly associated with stress, and it is crucial to find effective ways to alleviate psychological pressure. No one can sustain constant worry about open trades or missed opportunities without experiencing negative consequences. Just as athletes prioritize physical and mental preparation before important games or competitions, traders can benefit from a similar approach. Taking care of both physiology and psychology is essential in achieving a balanced state of mind. To effectively manage stress in trading, consider the following recommendations: Establish a routine: Create a structured daily schedule that includes not only trading activities but also time for physical exercise, relaxation, and leisure. This routine helps maintain a sense of balance and prevents trading from becoming the sole focus of your life. Physical activity: Incorporate regular exercise into your routine. Engaging in activities such as going to the gym, taking walks, or participating in sports can help reduce stress, improve overall well-being, and promote mental clarity. Healthy lifestyle: Pay attention to your diet, sleep patterns, and overall self-care. Eating nutritious meals, getting sufficient sleep, and practicing relaxation techniques like meditation or deep breathing exercises contribute to a healthier physiological state, which in turn positively impacts your psychological well-being. Maintain social connections: Engage with friends, family, and fellow traders to maintain a support network. Sharing experiences, discussing challenges, and seeking advice from trusted individuals can alleviate feelings of isolation and provide valuable perspectives. Take breaks: Allow yourself regular breaks from trading to recharge and rejuvenate. Stepping away from the screen, engaging in hobbies, or spending time in nature can help reduce stress levels and provide a fresh perspective when you return to the market. Mindfulness and stress management techniques: Incorporate mindfulness practices into your daily routine. Techniques such as meditation, deep breathing exercises, or visualization can help calm the mind, increase self-awareness, and improve resilience in the face of stress. Remember, trading should be a part of your life, not the sole focus. By nurturing a well-rounded lifestyle that includes physical activity, relaxation, and maintaining social connections, you can effectively manage stress, enhance your psychological well-being, and ultimately improve your trading performance. Don't Focus On The Problem And Find Unconventional Solutions Trading is inherently dynamic, and challenges are bound to arise. Profitable strategies can lose their effectiveness over time, and market conditions evolve, rendering old analytical methods obsolete. It is important to recognize the risk of becoming fixated on a specific problem without finding a guaranteed solution. One common example is the endless pursuit of optimizing a trading strategy. Traders may dedicate days or even weeks attempting to fine-tune a strategy, only to find their efforts in vain. In such situations, it is crucial for traders to possess the ability to recognize when to let go and seek alternative approaches. If attempts to optimize an existing strategy prove futile, it may be time to explore new strategies or even consider a shift in trading style altogether. Adaptability and the willingness to embrace change are essential qualities for traders. Instead of becoming overly attached to a single approach, being open to non-standard solutions can be immensely valuable. This might involve exploring different trading methodologies, incorporating new indicators, or even considering alternative markets. Finding a new strategy or adjusting one's trading style requires a combination of self-reflection, continuous learning, and experimentation. Being proactive in seeking innovative solutions ensures that traders can navigate evolving market conditions and maintain a competitive edge. Remember, trading is a dynamic endeavor, and the ability to adapt and explore new possibilities is key to long-term success. By embracing change and being open to new strategies, traders can navigate the challenges that arise and continue to thrive in the ever-changing landscape of the financial markets. Fearless Analysis Brett Steenbarger's analogy between trading analysis and the principles of Alcoholics Anonymous highlights an important aspect of personal growth and development in trading. Just as it takes courage for individuals to admit their problems and seek help in recovery programs like Alcoholics Anonymous, traders must also be willing to acknowledge their mistakes and take responsibility for their actions. In the trading world, it is common for individuals to deflect blame onto external factors such as the market, market makers, or indicators, rather than accepting their own errors. However, true progress can only be achieved when traders are mentally capable of saying to themselves, "I made mistakes, and that's why I lost money. The external factors played a minimal role." By embracing this mindset, traders can take ownership of their actions and begin the process of self-improvement. Accepting personal responsibility for mistakes allows for self-reflection and learning from past experiences. It enables traders to identify areas for improvement, refine their strategies, and develop a more disciplined and effective approach to trading. Acknowledging the problem is indeed the first step toward finding a solution. This fundamental principle holds true not only in trading but in all aspects of life. By confronting our shortcomings, we open the door to personal growth and development. It empowers us to make necessary changes, learn from our mistakes, and ultimately enhance our trading performance. In summary, having the courage to admit mistakes, taking responsibility for one's actions, and acknowledging the role of personal accountability are crucial steps in the journey toward becoming a successful trader. Evaluation Of Hypothetical Scenarios Being prepared for all possible scenarios is a crucial aspect of successful trading. Relying solely on one scenario and assuming a 100% guarantee is unrealistic and leaves traders vulnerable to unexpected market movements. For instance, in the case of a well-established downtrend where a currency pair consistently breaks through support levels, it may appear likely that the trend will continue. However, it is important to acknowledge that no outcome can be guaranteed with absolute certainty. While the probability of a reversal might be relatively low, it is still essential for traders to evaluate this scenario and consider potential levels where the downward movement could potentially halt, as well as identify potential targets in case of a reversal. By considering multiple scenarios, traders are prepared for different market outcomes. If one scenario fails to materialize, they can quickly shift to their backup plan of action. This approach avoids panic and ensures a clear understanding of the unfolding market conditions. It benefits traders both emotionally, by maintaining a composed mindset, and practically, by helping to recover from any potential drawdowns. If losses occur according to the first scenario, the backup plan allows for swift recovery and helps compensate for the incurred loss. Having multiple scenarios and contingency plans not only provides traders with a more comprehensive approach but also fosters adaptability and resilience in navigating various market conditions. It enables traders to effectively manage risk and make informed decisions based on evolving market dynamics. In summary, a trader's ability to embrace multiple scenarios and swiftly switch to alternative plans when necessary contributes to emotional stability, risk management, and the potential for recovering from losses. Being prepared for all possibilities strengthens a trader's overall strategy and increases the chances of achieving consistent profitability. Detached Attitude To Trading In the world of trading, the psychology of the quiet trader refers to the ability to approach trading with a calm and detached mindset, devoid of intense emotional reactions. While it may be unlikely to experience intense emotions in a typical day job, achieving a similar state of detachment and routine in trading is a valuable skill to develop. At the beginning of their trading journey, it is natural for traders to experience a range of emotions that can interfere with decision-making. However, with consistent practice and experience, the trading process can become more routine and automatic. Placing orders and managing positions should become a habitual process that no longer elicits strong emotional reactions. Larry Hite, a renowned trader featured in Jack Schwager's book "Stock Market Wizards," highlighted the importance of trading being utterly boring. Hite's trades were devoid of captivating stories that interested his colleagues. This perspective underscores the idea that successful trading involves striving for consistency and routine in every trade. The art of trading lies in developing a disciplined approach where all trades become similar to each other. This means treating each trade as part of a well-defined strategy, adhering to predetermined rules, and executing trades without being swayed by emotional highs or lows. By cultivating this mindset, traders can maintain a calm and objective perspective, making sound decisions based on analysis and strategy rather than being influenced by fleeting emotions. It is important to note that achieving the psychology of the quiet trader requires ongoing practice and self-awareness. Emotions may still arise, especially during challenging market conditions, but the goal is to minimize their impact on trading decisions. Through continuous learning, self-reflection, and discipline, traders can strive for a state of emotional detachment and routine in their trading activities. In summary, the psychology of the quiet trader emphasizes the importance of approaching trading with a calm and detached mindset. By striving for routine and consistency, traders can reduce the influence of emotions and make objective decisions based on their trading strategy. Developing this skill requires practice, self-awareness, and a commitment to ongoing improvement. Keeping Track Of Your Actions Keeping a trader's journal is often overlooked by many beginners in the trading world. It may initially appear unnecessary, as the signals and trades seem clear in the moment, leaving no room for the perceived time wastage of jotting down notes. However, this approach ultimately deprives traders of a valuable foundation for future trade analysis and improvement. While trading reports can be downloaded from the trading terminal, they are not an adequate substitute for a trader's journal. Trading reports typically only include basic information such as trade details (entry and exit times), closed position results, and expenses incurred. On the other hand, a trader's journal goes beyond these raw data points, allowing traders to record the reasons behind their trading decisions and evaluate their emotional state during each trade. By maintaining a journal, traders can gain insights into their decision-making processes and learn from past experiences. It provides an opportunity to review trades and analyze the effectiveness of their strategies. Additionally, tracking emotional states throughout trades helps traders identify patterns and better understand how emotions can impact their performance. In addition to the journal, it is recommended that beginners create a checklist to ensure the adherence to their trading rules. Writing down and assessing the filters used to evaluate trade signals on a sheet of paper, assigning points to each filter, and evaluating entry points can be effective techniques. Over time, traders may become adept at mentally checking these criteria, but the act of physically documenting them helps reinforce consistency and discipline. Both the trader's journal and checklist serve as valuable tools for self-assessment and improvement. They provide a structured framework for traders to reflect on their trades, identify strengths and weaknesses, and refine their trading strategies. By consistently using these techniques, beginners can develop a deeper understanding of their trading approach and enhance their overall performance over time. In summary, while it may seem unnecessary at first, maintaining a trader's journal and utilizing a checklist can greatly contribute to a trader's growth and improvement. These practices offer valuable insights into decision-making processes, emotional states, and the adherence to trading rules. By incorporating these techniques into their routine, traders can refine their strategies and make informed adjustments to achieve greater trading success. Regular Practice As mentioned earlier, taking breaks in trading is important for maintaining a balanced approach and managing stress. However, it is crucial to clarify that taking breaks does not mean completely giving up trading for an extended period. Consistency and regular practice are key to developing and refining trading skills. In the event of a challenging period or a losing streak, it is necessary to pause and take time to normalize one's psychological state. This break allows traders to step back, reassess their approach, and work on addressing any mistakes or weaknesses. Taking the time to reflect and learn from past experiences can contribute to personal growth and improvement as a trader. However, it is essential to emphasize that the break should not transform into a long-term avoidance of trading. Once the trader has regained their psychological equilibrium and made necessary adjustments, it is important to resume trading. Consistent practice is vital for maintaining trading skills and staying in shape, similar to how weightlifters need regular training to retain their form. Drawing a parallel to sports, just as weightlifters would lose their physical form without regular practice, traders need consistent engagement in the markets to hone their skills and adapt to changing conditions. By regularly participating in trading activities, traders can stay sharp, stay updated with market dynamics, and refine their strategies. In summary, while breaks are valuable for maintaining psychological well-being and addressing trading challenges, it is important not to abandon trading for an extended period. Regular practice and engagement in the markets are necessary for traders to stay in shape and continuously improve their trading skills. By striking a balance between taking breaks when needed and consistent practice, traders can navigate the markets effectively and increase their chances of success. Trading Will Be Unprofitable From Time To Time Indeed, it is crucial for beginners to understand that not every trade will be profitable. It is unrealistic to expect a 100% success rate in trading, and even the most successful traders experience losses along the way. What matters is the overall statistics and performance of their trading strategy. Successful trading is not about winning every single trade, but rather about having a strategy that generates a greater number of profitable trades and/or profits that exceed the losses. Traders should focus on the bigger picture and assess the effectiveness of their strategy based on the cumulative results over a period of time, such as a day, week, or month. Instead of fixating on the outcome of each individual trade, it is more important for traders to pay attention to whether their trades adhere to their predetermined rules. If a trade is closed based on the application of a stop-loss order, and the decision was in line with their strategy, then it can be considered a successful trade, regardless of the actual outcome. By shifting the focus from the outcome of each trade to the consistency and adherence to the trading plan, traders can maintain discipline and objectivity in their decision-making. It allows them to evaluate the effectiveness of their strategy based on a broader perspective and make informed adjustments as needed. In summary, it is crucial for beginners to understand that not every trade will be profitable. The key to successful trading lies in the overall performance of the strategy, with a focus on the compliance with predetermined rules rather than the outcome of individual trades. By adopting this mindset, traders can maintain discipline, manage risk effectively, and increase their chances of long-term profitability. Possible Failure Is Not Related To Your Personal Qualities Absolutely, the outcome of the first attempt in trading does not define a person's intelligence or talent. It is important for beginners to recognize that initial failures are a common part of the learning process. In fact, even intellectually developed individuals may face challenges in trading, and there is no direct correlation between intellectual capacity and trading success. Famous traders have observed that intellectually developed individuals may find trading more difficult. This could be due to various factors such as overanalysis, overthinking, or struggling to detach emotions from their decision-making process. However, it is crucial to remember that trading skills can be developed through discipline, persistence, and a willingness to learn from mistakes. Mistakes are not a disaster but rather opportunities for growth and improvement. They serve as valuable lessons that can be used to refine decision-making methods and trading strategies. With dedication and a commitment to learning, traders can make corrections and progress in their trading journey. Success in trading relies more on discipline and persistence than innate talent or intelligence. Developing the ability to stick to a trading plan, manage risk effectively, and maintain emotional control are critical factors in achieving long-term success. By cultivating these qualities and learning from mistakes, traders can enhance their trading skills and increase their chances of success in the markets. In summary, the outcome of the first attempt in trading does not determine a person's intelligence or talent. Mistakes and challenges are part of the learning process, and success in trading is not solely dependent on innate abilities. By emphasizing discipline, persistence, and a commitment to continuous improvement, traders can overcome obstacles, learn from mistakes, and increase their chances of achieving trading success. Conclusion Losing a trading deposit does not indicate a lack of intelligence or suggest that trading is not suitable for an individual. It is important to understand that losses are a natural part of the trading journey and can provide valuable lessons for personal growth and improvement. Instead of viewing a lost deposit as a failure, it should be seen as an opportunity to learn from mistakes, gain experience, and continue working towards success. Learning from other people's mistakes is indeed beneficial in trading. By studying the experiences and insights of successful traders, one can gain valuable knowledge and avoid making similar errors. However, personal experiences and mistakes also play a crucial role in the learning process. Analyzing one's own trades, identifying what went wrong, and drawing conclusions from those experiences can lead to valuable insights and improvements in future trading decisions. It is essential to approach trading with a growth mindset, understanding that setbacks and losses are temporary and can be stepping stones to success. Rather than being discouraged by mistakes, it is important to embrace them as opportunities for growth and development. By learning from both personal and others' mistakes, traders can refine their strategies, strengthen their decision-making skills, and increase their chances of achieving success in the markets. In summary, a lost trading deposit does not determine an individual's intelligence or suitability for trading. It is a chance to learn, grow, and refine one's approach to trading. By utilizing personal experiences and drawing lessons from both personal and others' mistakes, traders can enhance their knowledge, skills, and ultimately increase their potential for success in the world of trading.

Education

The Ups and Downs of Investment Risk: Navigating the Risk Level 👉🏻The world of investing can be a wild ride, full of twists and turns that can lead to either high gains or crushing losses. That’s why it’s important to understand the different risk levels that come with investing in various assets. Let’s explore the three main categories of investment risk levels: low, moderate, and high. 💹Low Risk If you’re risk-averse and prefer a steady, predictable return on your investment, low-risk options are the way to go. These are investments with low volatility and minimal chance of losing money. 💹Moderate Risk If you’re willing to take a bit more risk for potentially higher returns, moderate-risk investments might be a good fit for you. These typically have a higher volatility rate, but still have a good chance of earning a positive return in the long run. 💹High Risk For those willing to take on the highest level of investing risk in search of the highest returns, high-risk investments might be worth considering. These have the highest potential for extreme highs and extreme lows with significant volatility. 👉🏻It’s important to note that each investor’s risk tolerance is different, and what might be a high-risk investment for one person could be a low-risk investment for another. So, when considering investment options, make sure to weigh both the potential rewards and the accompanying risks. 👉🏻In conclusion, investing involves a certain amount of risk, but understanding and balancing those risks can help you make informed decisions that align with your financial goals. Whether you opt for low, moderate, or high-risk investments, do your research and seek advice from financial professionals to determine which level of investing risk is right for you. Happy investing! 😸Thank you for reading buddy, hope you learned something new today😸 Do you like this post? Do you want more articles like that?

Education

by ProSignalsFx

Why Every Trader Needs a Mentor: Learn from the Experts Trading can be a lucrative career, but it's not easy to navigate the markets on your own. This is where a mentor comes in - an experienced trader who can guide you through the ups and downs of the stock market, teach you strategies and provide valuable insights that will help you succeed in trading. In this article, we will explore the benefits of having a mentor in trading and provide examples of how a mentor can help you achieve your financial goals. 1. Gain a wealth of knowledge: 2. Get personalized guidance and support: 3. Build confidence: 4. Network and gain exposure: In conclusion, having a mentor in trading is a valuable asset for any trader who wants to succeed in the markets. Whether you are a new trader or an experienced professional, working with a mentor can provide you with personalized guidance, expert knowledge, network building opportunities and help you build your confidence. So don't hesitate to seek out a mentor to take your trading career to the next level. Hey traders, let me know what subject do you want to dive in in the next post?

Education

by TopTradingSignals

Learn The Market Volatility | The Double-Edged Sword Have you ever wondered why the certain trading instruments are very rapid while some our extremely slow and boring? In this educational article, we will discuss the market volatility, how is it measured and how can it be applied for making smart trading and investing decisions. 📚 First, let's start with the definition. Market volatility is a degree of a fluctuation of the price of a financial instrument over a certain period of time. High volatility reflects quick and significant rises and falls on the market, while low volatility implies that the price moves slowly and steadily. High volatility makes it harder for the traders and investors to predict the future direction of the market, but also may bring substantial gains. On the other hand, a low volatility market is much easier to predict, but the potential returns are more modest. The chart on the left is the perfect example of a volatile market. While the chart on the right is a low volatility market. 📰 The main causes of volatility are economic and geopolitical events. Political and economic instability, wars and natural disasters can affect the behavior of the market participants, causing the chaotic, irrational market movements. On the other hand, the absence of the news and the relative stability are the main sources of a low volatility. Here is the example, how the Covid pandemic affected GBPUSD pair. The market was falling in a very rapid face in untypical manner, being driven by the panic and fear. But how the newbie trader can measure the volatility of the market? The main stream way is to apply ATR indicator, but, working with hundreds of struggling traders from different parts of the globe, I realized that for them such a method is complicated. 📏 The simplest way to assess the volatility of the market is to analyze the price action and candlesticks. The main element of the volatile market is occasional appearance of large candlestick bars - the ones that have at least 4 times bigger range than the average candles. Sudden price moves up and down are one more indicator of high volatility. They signify important shifts in the supply and demand of a particular asset. Take a look at a price action and candlesticks on Bitcoin. The market moves in zigzags, forming high momentum bullish and bearish candles. These are the indicators of high volatility. 🛑 For traders who just started their trading journey, high volatility is the red flag. Acting rapidly, such instruments require constant monitoring and attention. Moreover, such markets require a high level of experience in stop loss placement because one single high momentum candle can easily hit the stop loss and then return to entry level. Alternatively, trading a low volatility market can be extremely boring because most of the time it barely moves. The best solution is to look for the market where the volatility is average, where the market moves but on a reasonable scale. Volatility assessment plays a critical role in your success in trading. Know in advance, the degree of a volatility that you can tolerate and the one that you should avoid. ❤️Please, support my work with like, thank you!❤️

Education

by VasilyTrader

Revealing the secret of pro trading It takes a period of 3-5 years to obtain a degree. Gaining experience in a reputable 9-5 job typically requires 5-10 years. To become a professional athlete, one needs to undergo 10 years of training. If you don't achieve millionaire status in trading within 6 months, it's common for people to give up. However, it's important to recognize that patience and consistency are essential. Trading is not excessively complicated, as it can be broken down into a few key components. - Having an edge. - Practicing effective risk management. - Controlling emotions and executing trades. It's crucial not to overcomplicate matters. Your trading edge serves as your offensive weapon. Risk management functions as your defensive weapon. Your ability to balance these weapons, along with controlling emotions, is crucial. Having a trading edge makes you a good trader, while skillful risk management makes you a great trader. The capacity to control fear and greed elevates you to the status of a legendary trader. A trading system allows you to generate profits, while effective risk management safeguards your capital.

Education

Understanding Market Corrections:Definition & Key Considerations Investing in the stock market has the potential to generate substantial wealth over the long term, although it comes with inherent risks. One notable obstacle that investors frequently encounter involves safeguarding their capital during periods of declining stock prices. When the market undergoes a downturn, the inclination to panic and sell off investments to evade additional losses can be strong. However, this reactive approach often results in even greater financial setbacks and hinders the ability to capitalize on future market rebounds. In this comprehensive article, we will delve into the concept of a market correction and delve into various strategies that can assist investors in preserving their capital amidst market downturns, enabling them to emerge stronger when the market inevitably recovers. Market Correction: A Comprehensive Explanation In the realm of financial markets, a market correction is a notable event characterized by a substantial decline in the value of a financial instrument. This decline typically ranges between 10% to 20% and can encompass individual stocks of a specific company or even extend to encompass entire market indices comprising a vast array of companies. The duration of a correction can vary significantly, ranging from as short as a single day to as long as a year, with the average duration spanning approximately four months. Market corrections can be triggered by a myriad of factors, each with its own unique catalyst. These factors can range from a company's disappointing financial performance and weak earnings report to more extensive global geopolitical conflicts. In some instances, corrections may occur seemingly without any discernible external cause. It is worth noting that market corrections are not exclusive to stocks alone. They can manifest in various other financial instruments such as commodities like oil, platinum, and grain, as well as currencies, funds, specific industry sectors, or even the entire market as a whole. This exemplifies the widespread impact that a correction can have across diverse segments of the financial landscape. To illustrate the significance of a market correction, let's consider an example from recent history. In the year 2018, the prices of over 500 companies experienced a decline of 10% or more. This widespread correction exemplifies how fluctuations in market conditions can influence a substantial number of companies simultaneously, affecting their valuation and investor sentiment. In conclusion, a market correction denotes a notable decline in the value of financial instruments, with the range typically falling between 10% to 20%. The causes behind these corrections can be diverse and encompass factors ranging from company-specific issues to broader global conflicts. Moreover, corrections can impact various financial instruments and market segments, underscoring their potential for wide-reaching consequences within the financial landscape. Example : AMZN stocks Daily chart showing a correction in 2018 - 2020 Market corrections are not uncommon events within the realm of financial markets. On average, a decline of 10-20% in the stock market transpires approximately once a year. These corrections, characterized by a significant decrease in stock prices, serve as reminders of the inherent volatility and fluctuations present in the market. While corrections of 10-20% occur relatively frequently, more profound market declines exceeding 20% are less frequent, transpiring approximately once every six years. These substantial corrections are often referred to as market collapses, signifying a more severe and prolonged downturn. One illustrative example of a market collapse occurred in response to the global pandemic outbreak in March 2020. The COVID-19 pandemic triggered a swift and severe decline in stock markets worldwide, leading to a precipitous drop of approximately 38% within a matter of days. This extreme correction exemplifies the impact of unforeseen events and external factors on market stability and investor sentiment. It is important to recognize that market corrections and collapses are not solely confined to a particular asset class or geographic region. They can have a broad-ranging effect, transcending national boundaries and impacting various financial instruments, indices, and markets worldwide. In summary, market corrections, defined by significant declines in stock prices, are regular occurrences, transpiring approximately once a year with a magnitude of 10-20%. Market collapses, on the other hand, encompass more profound declines exceeding 20% and typically transpire once every six years. These events serve as reminders of the dynamic nature of financial markets and their vulnerability to various factors, such as the recent pandemic-induced collapse in 2020, which had a profound impact on global markets. Example : SPX500 / US500 stocks Daily chart showing a correction in 2020 Investors who adopt a long-term investment strategy tend to navigate corrections with relative ease, primarily due to their extended investment horizon. By committing their funds for a substantial period, typically ranging from 5 to 10 years, these investors are less likely to be perturbed by temporary price declines. On the other hand, individuals who rely on leverage or engage in short-term trading bear the brunt of corrections, experiencing greater challenges and losses. The impact of a correction can be readily observed by examining the chart depicting the historical performance of any given company. By selecting the annual or five-year chart display, one can identify specific time periods when the asset's value experienced temporary declines. Additionally, it is crucial to consider the decrease in stock price subsequent to the ex-dividend date, commonly referred to as the dividend gap. It is essential to note that the dividend gap phenomenon is distinct from a correction and should be treated as such. What Causes A Correction? A correction in the stock market can be triggered by a multitude of factors and events that impact stock prices. These events can range from speeches given by company executives, investor reports, pandemics, regulatory changes, economic sanctions, natural disasters like hurricanes and floods, man-made disasters, to high-level meetings of world leaders. Even the most stable companies can experience declines in their stock prices due to these events. It is important to recognize that human behavior also plays a significant role in causing market corrections. The stock market is inherently driven by human participation and investor sentiment, which can sometimes lead to corrective actions. For instance, if a popular figure like Elon Musk garners significant attention and support, investors may pour money into his company beyond its actual earnings. Eventually, the overvaluation of such a "hyped" company may result in a decline in its stock price. Furthermore, investors often attempt to follow trends in the market. When a particular stock shows an upward trajectory, more people tend to invest in it, thus increasing its demand and subsequently driving up its price. However, as the price reaches a certain peak, some investors choose to sell their holdings to realize profits. This selling pressure can initiate a correction, causing those who entered the market later to incur losses. Therefore, blindly chasing market trends without careful analysis may prove detrimental. Additionally, corrections can exhibit seasonal patterns. For example, during the summer months, prior to holidays or extended weekends, investor participation in trading may decrease. This reduced trading activity leads to lower liquidity in stocks, creating an opportunity for speculators to exploit the situation. Such periods often witness sharp price fluctuations, potentially resulting in stock prices declining by 10-20%. It is crucial to understand that corrections are a natural part of the market cycle, and it is neither productive nor feasible to fear them indefinitely. The market cannot sustain perpetual growth, and corrections serve as necessary adjustments. By acknowledging their inevitability, investors can adopt strategies that are mindful of market dynamics and position themselves accordingly. How Long Do Corrections Last? Between the years 1980 and 2018, the US markets experienced a total of 37 corrections, characterized by an average drawdown of 15.7%. These corrections typically lasted for approximately four months before the market began to recover. Consider the following scenario: an investor commits $15,000 in January, experiences a loss of $2,355 during the correction, and by May, witnesses their portfolio rebounding to $15,999, based on statistical data. However, it is important to note that outcomes may deviate from this pattern. It is worth noting that the magnitude of a stock's decline directly impacts the duration of its recovery. As an illustration, during the financial crisis of 2008, US stocks tumbled by approximately 50%. The subsequent recovery of the stock market extended over a period of 17 months, primarily attributed to the active support provided by the US government and the Federal Reserve. This underscores the notion that severe market downturns necessitate more prolonged periods for recuperation, even with significant intervention from regulatory bodies. Dow Jones Industrial Average index drop in 2008 The timing of a market correction is often challenging for financiers and experts to predict with certainty. In retrospect, it becomes clear when a correction started, but identifying the precise moment beforehand is a complex task. Taking the aforementioned example of the market collapse in October 2007, it was not officially acknowledged until June 2008. This highlights the inherent difficulty in pinpointing the onset of a correction in real-time. Following a correction, the market's recovery period can vary significantly. In some instances, the market may swiftly regain stability and resume an upward trajectory. However, in other cases, it may take several years for the market to fully recover from a correction. The duration of the recovery depends on a multitude of factors, including the severity of the correction, underlying economic conditions, government interventions, and investor sentiment. Hence, it is crucial to recognize that financiers and market participants can only definitively determine the start and extent of a correction in hindsight. The future behavior of the market after a correction remains uncertain, and it is possible for the market to swiftly recover or take a considerable amount of time to regain stability. How To Predict A Correction Predicting the precise timing, duration, and magnitude of a market correction is inherently unreliable and challenging. There is no foolproof method to accurately forecast when a correction will occur, when it will conclude, or the extent to which asset prices will change. Some economists and analysts attempt to predict market trends by employing various theories. For instance, Ralph Elliott formulated the Elliott Wave Theory, which posits that markets move in repetitive waves. By determining the current phase of the market—whether it is in an upward or downward wave—one could potentially profit. However, if such theories consistently yielded accurate predictions, financial losses during corrections would be virtually nonexistent. It is crucial to acknowledge that market corrections are an inherent and inevitable part of market cycles. While attempting to predict corrections may be enticing, it is important to remember that they will inevitably occur, regardless of how long it has been since the previous one. Relying solely on the absence of a correction for an extended period as a basis for investment decisions warrants careful consideration and analysis rather than being treated as a definitive indicator. Advantages And Disadvantages Of Market Correction Advantages and disadvantages of market corrections can be summarized as follows: Advantages of a market correction: 1) Buying opportunities: Market corrections often present favorable buying opportunities for investors. Lower stock prices allow investors to acquire shares at discounted prices, potentially leading to long-term gains when the market recovers. 2) Rebalancing opportunities: Corrections can prompt investors to rebalance their portfolios. Selling overvalued assets and reinvesting in undervalued ones can help optimize investment returns and maintain a diversified portfolio. 3) Expectation adjustment: Market corrections can serve as a reality check, helping investors reassess their expectations and risk tolerance. This can lead to more informed investment goals and strategies. Disadvantages of a market correction: 1) Financial losses: Market corrections can result in substantial losses, particularly for investors who panic and sell their investments at lower prices. Reacting emotionally to market downturns may amplify the negative impact on portfolios. 2) Economic implications: Market corrections can have broader economic repercussions. They may lead to job losses, reduced consumer spending, and slower economic growth, potentially affecting industries and sectors beyond the financial markets. 3) Psychological impact: Market corrections can trigger fear, uncertainty, and anxiety among investors. These emotions may drive impulsive decision-making, such as selling investments hastily or hesitating to re-enter the market when conditions improve. It is important for investors to carefully evaluate the potential advantages and disadvantages of market corrections and consider their own risk tolerance, investment goals, and long-term strategies when navigating such market events. What Should You Do During A Correction? Correction can make an investor richer or poorer or have no effect at all. The impact of a market correction on an investor's wealth depends on their actions and decisions during that period. It is impossible to predict with certainty the duration or direction of asset value changes during a correction. However, there are general tips that can help investors navigate through a correction and potentially safeguard their finances: 1) Maintain a calm and rational mindset: During a correction, it is crucial to approach investment decisions with a cool head. Instead of making impulsive moves, take the time to understand the underlying causes of the correction and consider expert opinions and news. 2) Avoid excessive borrowing: It is advisable not to use borrowed money for investments, especially during a correction. This reduces the risk of incurring debts and potential losses. For beginners, it is often recommended to limit investments to the funds available in their brokerage accounts, particularly during a correction. 3) Assess company fundamentals: Evaluate the fundamental strength of a company by analyzing key metrics and ratios. Comparing a company's value with others in the same industry can provide insights. If a company is not overvalued, it may indicate that there is no fundamental reason for a correction, and its value may likely recover in due course. 4) View the correction as a buying opportunity: Prominent investors like Warren Buffett and Nathan Rothschild have emphasized that corrections present excellent opportunities for investment. If a stock's price has fallen, consider purchasing it based on the company's performance rather than solely focusing on the size of the discount. Maintaining some savings in cash allows for timely investments in undervalued assets. 5) Acknowledge the normalcy of corrections: It is important to recognize that corrections are a regular part of market cycles and serve as tests of an investor's composure. Following an investment strategy that includes provisions for investing during periods of 10-20% lower stock prices can help protect savings and optimize long-term returns. By adhering to these general tips and maintaining a disciplined investment strategy, investors can better navigate market corrections and potentially preserve and enhance their financial well-being. Conclusion In summary, market corrections are an intrinsic aspect of the stock market's ebb and flow, and it is essential for investors to anticipate and navigate them effectively. During such periods, the inclination to succumb to panic and hastily sell investments can be strong. However, maintaining composure and adhering to prudent strategies that safeguard capital are crucial for weathering corrections and emerging stronger when the market inevitably rebounds. While corrections present challenges, they also offer advantageous opportunities, such as the ability to acquire stocks at discounted prices. Conversely, the potential for substantial losses exists, emphasizing the importance of a measured approach. A long-term investment strategy, rooted in sound analysis rather than reactionary emotions, serves as a vital compass for surviving corrections. By focusing on the broader picture and resisting the temptation of short-term market fluctuations, investors can position themselves for long-term success amidst the natural ebb and flow of the market.

Education

Ninja Talks EP 16: Rain > Bird > Worm True story: Yesterday I was having a cigar perched under an umbrella in the rain - not ideal, but peaceful nonetheless. And out pops a family of birds to feast on the worms that rise to the surface in need of some high quality H2O - little did I know, this would become one of my favourite trading metaphors of all time! The Rain = Despair/Panic The Birds = Conscious Investors The Worms = Unconscious Investors Look at it like this, when there is despair in the markets and most Bambi traders are caught offside - they panic - they lose hope, and despair grips their fragile little psyche like a 1 year old baby gripping a blueberry for the first time. They begin to pop to the surface and "show their hands" - which is completely unconscious emotional behaviour not rooted in reality, experience or indeed even their very own strategy. They're ripe to be plucked from the market. That's where the Bird (conscious Investor) comes in - after patiently waiting for hours, days, weeks or even months, the conscious investor enters as the worm exits their positions (either manually or automatically by way of stop loss). The bird claims the prize... ...and the worm never learns. This cycle is as old as the markets themselves and is just a constant reminder that, as Warren Buffet once said; "The stock market is a device for transferring money from the impatient to the patient." From the unconscious to the conscious. From the worm to the bird. From the amateur to the pro. This is trading. The most patient trader who can abstain from emotional and physiological urges gets to observe more data from the market, thus giving him a higher level of certainty to act on said data - and when it's time to act, fear is nonexistent in his mind. Understand? See you in the next episode Ninjas!

Education

by NinjaTradingServices

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Select market data provided by ICE Data services. Select reference data provided by FactSet. Copyright © 2025 FactSet Research Systems Inc.© 2025 TradingView, Inc.

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