Month:

…YES, I don’t Care about The Fundamentals. I Love Technical Analysis!

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picture of a musician that also understands technical analysis

The majority trading experts tell you to disregard the fundamentals and concentrate on the technical analysis.

Pretty much every trading publication you select is stuffed with a wide variety of strategies that use technical patterns, indicators or combination of both.

Nearly all retail traders can explain the distinctions between the RSI and Stochastic indicators, but would be baffled by the meaning of PMI reports or the IFO survey.

 

Fundamentals are hard.

Yes, they are confusing and often times contradictory.

They require understanding of the context; an understanding of what is going on behind the scenes right now, or what might develop in the future based on today’s economic conditions.

It requires you to follow the Micro, as well as the Macro developments of the particular currency, you trade. The Fundamentals analysis certainly appear less objective than a couple of trend lines or Fibonacci ratios on a chart.

 

I can’t tell you how many times I’ve seen traders get into a trade simply because “…hey man, it looked good on a chart.”

I mean, risk their hard-earned money on a simple Moving Average crossover. And the saddest part of all is, putting on the trade right before the Major news announcement!

You would think, that they’d checked the Calendar for the scheduled news releases, but again “…hey man, who cares? Everything I need to know, is in the charts.”

Photo credit: jamelah via Visual Hunt / CC BY-NC-ND

Be sure to also read:

Are You still Making an Error Trades, even though You have a Trading Plan?

What moves the price?

Only two things, really. Imbalance in Supply/Demand, and the Economic Information; the Macro-picture, and the Micro-releases.

If you believe that your genius new tweak to your ADX settings is the key to your future success, but you have no clue of who Jannet Yellen, or Mario Draghi is, well… I’ve got news for you! You are stepping into the mine field without even knowing it.

Sooner or later, your trading account will suffer a blow from one of their’s “verbal-mines,” as I call them.

In fact, 90% of all retail traders would be much better off if they knew less about technical analysis, but knew more about the weekly scheduled economic events.

Here is some “tough Love” for you my fellow technical analysis junkie:

If you know the difference between the RSI and Stochastic, but can’t tell me who, in Finance world, the above mentioned people are, then you’re a figaro-trader.

If you worship Fibonacci and can defend a thesis on Price Action but have no clue as to what time of the day and what week the Non-Farm payrolls are released, then you’re even a bigger figaro-trader!

boxers in the ring and one of them knows technical analysisPhoto credit: jimbo0307 via Visual hunt / CC BY-NC-SA

Check-out: If You think, you can beat these guys at their own Game…

Conclusion

If you are just watching the price, and not following the news, you are like a  boxer that just stepped into the ring, with one hand, tied behind his back.

Is there any wonder why 90% of retail traders fail to succeed in financial market?

Without any awareness of the Macro-events and the Micro-releases retail traders simply fall prey to more sophisticated and well-informed professional traders.

What Do You Think?

Why 90% of retail traders fail at their craft…

What are the reasons for a failure…

Please leave a comment and let us know.

 

 

Are You still Making an “Error” Trades, even though You have a Trading Plan?

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a guy sitting by the computer with the regret on his face, clearly he has no trading plan

It’s been said that pilots make an excellent trader, because they are taught to be exceptionally thorough, and learn to follow a checklist.

I’ll paraphrase  Marty Schwartz, the greatest S&P trader of the  90’s, he once said:

“A great trader is like a great athlete.” “You have to have natural skills, but you have to train yourself how to use them.”

I would say the following:

“A great trader is like a pilot.” You have to have a checklist, and follow it to a tee.”

This is easier said, than done…

The actual reality is, None of us will be disciplined a 100 %.

Neither will anyone else that has a heartbeat.

To deny this fact, is essentially deny the very essence of our nature.

Meaning, we are humans; we tend to make errors.

 

picture of a head that has trading plan

Trading psychology plays a major role in determining whether you are going to succeed in this field, or not. Your mental state, especially an emotional background, will be a true reason separating you from the loosing herd.

You might have a rock-solid trading plan, but certain emotions like fear, greed and regret will affect your decision-making process anyway.

Here is the thought for the brain:

If a strategy alone was the true determinant of success, than most traders would’ve been millionaires.

Photo credit: TZA via Visual hunt / CC BY-NC

So, what is an error trade?

Below is a compact checklist of what I think to be an error trades:

 

  • Missing out on the entry, thus being late to the actual trade

         (This, I account to the analysis-paralysis. Over thinking, and over analyzing the setup.)

  • Moving your predetermined stop order

         (Wishful thinking. Hoping of a market turnaround.)

  • Rushing, or forcing entering the trades too early

         (Fear of missing out on opportunities.)

  • Placing the wrong take profit

         (Not understanding risk-to-reward ratios.)

  • Not following your predetermined risk parameters

        (Lack of discipline and patience.)

  • Not initiating a trade, when your system provides a clear signal

        (Lack of confidence. Not believing in yourself. This happens a lot after the several

         stop-outs.)

 

Back in the days, when I was day-trading, I had my good days and bad days.

After doing my back test, and reviewing one of these bad days I came to a realization.

Even though, I followed my trading plan, but if, and only if,

I have had eliminated my error trades, I’d finish the day in positive.

Be sure to also read: What Are The Qualities Of a Great FOREX Platform…

This what I can suggest, to avoid these situations

Open two accounts, plain and simple!

Shield yourself from the error trades, by creating two accounts.

With the first account you’ll be making disciplined trades; you’ll be following your outlined trading rules to a tee, and tracking any “errors” you make.

With the other one, you can be more lenient with yourself and make all the errors you want as you experiment with new ideas.

This will be compared to a simple dress code scenario. When you are at home, or with your friends, you usually ware casual clothes, right? On the other hand, when you are on a date, not only you want to look good, but also to feel good. You wear the nicest clothes, and deliver your best attitude.

Think of the first account, as being your “dating-account.”

And the second, being the “casual-account.”

You’ll be amazed at what a difference this little trick will make to your trading.

a pretty girl with happy emotion on her face, she definitely has a trading plan

 

Conclusion

Even though you might have a solid trading plan, you still are a human being. You are bound to make mistakes, the “error trades.”

The best option to improve one’s profitability happens to be, not by constantly fine-tuning the parameters of your strategy, but by attempting to remove the errors you are already making.

Start tracking your errors.

 

What Error Trades Have You Made in The Past?

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