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Chart of the WeekFollowing up from last week, the Pound moved upwards on Thursday and Friday but the luck of momentum was obvious due to the establishment of the current downtrend. The weekly candle closed bearish therefore this week we expected to see more weakness in the pair. Also, the Daily candle on Friday closed as a bearish reversal due to the selling pressure accumulated during the New York Trading Session. Therefore short trades will be ideal the first week of October
Short
by MarketMindsMastery
2
Decoding the Structure of the Federal Reserve System 🏦 If you've ever wondered how the U.S. monetary system functions and who runs the show, keep reading. In this article, we will break down the structure of the Federal Reserve System and help you understand how it operates. 🏦 The Federal Reserve System, often referred to as the Fed, is the central banking system of the United States. It was created in 1913 by the Federal Reserve Act and is an independent entity within the government. The Fed has a three-part structure, including the Board of Governors, the Federal Reserve Banks, and the Federal Open Market Committee (FOMC). 1️⃣ Board of Governors: The Board of Governors is the governing body of the Federal Reserve System. It consists of seven members appointed by the President and confirmed by the Senate for 14-year non-renewable terms. One person is designated by the President as Chair and another as Vice-Chair. The Board's main function is to set monetary policy, supervise and regulate banking institutions, and maintain the stability of the financial system. 2️⃣Federal Reserve Banks: There are 12 Federal Reserve Banks located throughout the United States. Each Federal Reserve Bank serves a specific geographic district and is responsible for carrying out the policies set forth by the Board of Governors. The Federal Reserve Banks are overseen by a board of nine directors, six of whom are appointed by banks in the district, and three by the Board of Governors. In addition to overseeing the banking system, the Federal Reserve Banks also provide services to financial institutions and the U.S. Treasury. These services include processing and clearing checks, storing currency, and distributing new currency. 3️⃣Federal Open Market Committee: The FOMC is the most powerful body within the Federal Reserve System. It is responsible for setting monetary policy, specifically the target for the federal funds rate, which is the interest rate that banks charge each other for overnight loans. The FOMC is made up of the seven members of the Board of Governors and five of the 12 Federal Reserve Bank presidents. The FOMC meets eight times a year to analyze economic data and determine appropriate policy decisions. Their decisions impact not only the banking system but also the overall economy. For example, if the FOMC decides to raise interest rates, it will become more expensive to borrow money, affecting everything from mortgages to credit card payments. Conclusion: The Federal Reserve System is a complex organization that plays a critical role in the U.S. economy. Its structure is designed to ensure checks and balances across its three branches so that no one entity has too much power. While the Board of Governors sets policy and oversees the entire system, the Federal Reserve Banks carry out those policies and provide essential services to the financial system. The FOMC, on the other hand, is responsible for setting monetary policy, affecting the interest rates that impact our daily lives. Understanding the Federal Reserve System is essential for anyone wanting to understand the U.S. economy. Knowing how the Fed operates can help individuals and businesses make informed decisions about their finances. With this knowledge, you can better navigate the ups and downs of the economy and protect your hard-earned money. ❤️Please, support my work with like, thank you!❤️
FOREXCOM:XAUUSDEducation
by VasilyTrader
6
IMPROVE YOUR TRADING | 4 TYPES OF TRADE CONFIRMATION ✅👌 "Look for a confirmation!" "Wait for a confirmation!" When I was learning how to trade and when I was watching and reading different trading educators, these words naturally pissed me off. What the hell are you talking about? What confirmation? It was a full-blown mystery...🤯 Then, once I started to mature in trading and trade full-time, I became an author on TradingView. Posting my forecasts and trading setups, I frequently mentioned the confirmation. And now the newbies that are reading me and learning from me are pissed off...🤬 That is so funny I guess. But the truth is that the confirmation must become a fundamental part of your trading strategy. It is your key to successful trading. What exactly is the confirmation? It depends on many many different things, in this article I will discuss with you the 4 main types of confirmation and give you detailed examples. 1️⃣ - PRICE ACTION CONFIRMATION That is actually what I prefer. Analyzing different markets and searching for decent trading opportunities often times we find some peculiar instruments to watch. Identifying the market trend and key levels we find the potential spots to trade from. But do we just open the trade once the "ZONE" is spotted? I wish it could be that simple... Trading just the zone, without additional clues brings very negative figures. We definitely need something else. Price action & candlestick patterns can be those clues. Accurate reflection of the current local market sentiment makes the patterns a very reliable confirmation. Dodji's, pin bars, double tops/bottoms ... Proven by history, the skill of identification & reading the patterns will pay off quickly. Being in some sense the language of the market, the patterns are the fundamental part of my trading strategy. 2️⃣ - FIBONACCI LEVELS Fibonacci levels are a very popular technical tool. Being applied properly it helps the trader to confirm or, alternatively, disqualify the identified "ZONE". With multiple different methods like confluence trading, fibs are applied in hedge funds and various banking institutions. The main problem with the fibs, however, is complexity and a high degree of subjectivity. Meeting different traders and watching different posts on TradingView I noticed that all traders tend to have their own vision. There is no universal system to apply here, a proper fib.confirmation technique can be built only with long-lasting backtesting and practicing. 3️⃣ - FUNDAMENTAL NEWS The figures in the economic calendar, news, tweets. Actual fundamental news can become your best confirmation tool. However, the main obstacle right here is the promptness, validity and reliability of the data that you get. The information shouldn't be delayed and it must be objectively true. The search for such a source is by itself is a very time-consuming and labor-intensive business not even mentioning its potential costs. And that is not all. Knowing how to make sense of that data, its proper perception, and understanding requires a solid economical and financial background and experience. At the end of the day, becoming an expert in fundamental analysis , the trader can easily sort the trading zones and trade only the ones that are confirmed by a decent fundamental trigger. 4️⃣ - TECHNICAL INDICATORS I believe all the traders apply some indicators. From a simple moving average to some complex composite algorithms, indicators play a very important role in trading. Being 100% objective and providing up-to-date real numbers and figures, they are our allies in a battle against subjectivity. For many traders, the various signals from indicators are considered to be accurate and reliable confirmations. Many algotrading solutions are operating simply relying on such signals and being able to bring consistent profits proves the power of technical indicators. What confirmation type should you rely on?🧐 I guess the main rule right here is that the confirmation must MAKE SENSE to you. You should feel the logic behind that. It must make you confident in your action, even in case of the occasional losses, it must keep you calm and humble. Let me know in a comment section what confirmation do you prefer! 💝Please, support my work with like and comment! Thank you for reading.
Editors' picks
Education
by VasilyTrader
16
8 WAYS TO IMPROVE YOUR TRADING | Tips From Experienced Trader 🤓 In my years in trading, I’ve been approached by the new and semi-experienced traders for help and advice, and that's how it's supposed to be. Those that «have become» help those aspiring ones. Then I thought that tens of thousands of people are joining tradingview every day, and most of them are beginners and inexperienced traders, So I decided to share some knowledge here with you today. Condensed wisdom of years in trading. 🦉 You see, trading is unique in that it is accessible to people of all walks of life. Your previous education, social status, and other barriers, that might prevent you from entering some industries are completely absent in trading. The only tool you need is your brain, as trading is essentially an exercise in pattern recognition and our cognition is based on pattern recognition and the endless chain of association.🧠 So the CORE is your ability to learn and recognize patterns, and everything else gets added like pearls on the string. Master these KEY points below, and the Gods of trading might smile at you! ✏️🗒️ MAKE A TRADING PLAN - Develop a strategy! This bit seems obvious, yet so many traders arrive to this idea only after losing their first account. Don’t be like that, and you will lose your first account much slower. Research all the main strategies that are out there, and dive deep into the one you found appealing(for any reason). This step might take a year or even more, yet, trust me, this will be time well spent. I would advise simple multi-timeframe top-down technical analysis. I might be biased, as that’s the strategy I use myself, but learning it will give you the basics that you will NEED ANYWAY, whichever strategy you will end up using later. Also, I would choose it because it is intuitive and simple to use. You will be able to identify key levels on the chart after a week of staring at the charts and then work your way up, polishing entries, adding indicators if you like. 🔁 Review your plan after every trading session! After you started trading, even on a demo, DO YOUR HOMEWORK, or else all the trading that you do is in vain, and you will NEVER LEARN. Start your day by reviewing the previous day’s trades, as you will have a fresh perspective that isn’t clouded by emotions of the moment. This WORKS WONDERS! Have a diary with trades, write down your thought process of how you arrived at the particular trade. Then write down your assessment of the next day nearby. Several months' worth of a journal like that is a GOLD MINE, where you can mine data, looking at what works, what does not, etc… ⚠️ DON’T RISK MORE THAN YOU CAN AFFORD TO LOSE - Protect your positions! USE STOP LOSS and place it the moment you entered the trade. Don’t let your mind play tricks on you. As your inner voice will tell you «Why SL? I will close that trade manually, If I see that I was wrong» Nah, you won’t. You are kidding yourself. So DO use SL, don’t give your money to the market makers! 💯 Don’t risk more than 5% of the account! Now that we know we need to use SL, I strongly advise you to never risk more than 5% of your account in one trade. In fact, I do not risk more than 1% per each trade myself. Use a lot calculator to help you determine how much you are risking in dollar value per trade. It is a bit boring, but will save you a ton of money! And who said trading needs to be fun, huh? You are a grownup and it's your job! 😌 BE DISCRETE AND DISCIPLINED -Once you have the system, don’t overthink it! After you mastered your system, backtested it on multiple pairs and begin trading on demo, stop worrying about whether the strategy is good or bad. You chose it, it showed results on the backtest, now get out and test it on the market. Time will show if your choice was correct. 📜 Follow the rules and reflect on the results later! Once the system is chosen, make the rules that are as simple and clear as possible so that you could approach each trade with a ready-made algorithm. This will take a lot of stress off your mind. 💢 CONTROL YOUR EMOTIONS - Too much anger or excitement alike hurt your trading! Having a strict algorithm helps massively, and when trading you need to learn to abstract yourself from the monetary values on the screen. These are just numbers, and you are playing a game of probability, so there will be winning and losing streaks. Learn to treat both with indifference. 🌁 Play it cool! Trading is a battle of wills. Whoever has the hardest balls wins. So be cool! ⌛️ BE PATIENT - Keep your eyes on the big picture! When even considering trading as a potential career, please accept the simple fact that there will be losses, a lot of them, all the time. You will NOT be making money for quite some time. Accept it as part of the game and it will be much easier for you physiologically. If you come with the make easy money fast mindset, you will lose! 🏅 Winning takes time! I’ll stress it again, learning trading will take a lot of time, and there are some hard times ahead of you, so prepare for this beforehand, and no, you are NOT unique or special, so you will have to go through the same trial and error ordeal as others. There are no shortcuts. ✔️ ACCEPT YOUR LOSSES AND MOVE ON - Remember that you are in this for the long haul! When feeling down because each trade this week was a losing one, imagine yourself free from the location, from your job, from all the constraints that usual people have, and remind yourself, that that’s exactly what you are working towards, because the moment you can make stable returns, you can multiply your income by a factor of x10 overnight. It might be a factor of an x100, it just depends on how big your balls are. So whenever you want to quit, think of what life could have been like if you persisted! 🚫 A loss is a part of the learning process! You will lose multiple accounts. There is no way around it! This is your way of learning, and no one has created a different one so far. You might be as good as a God on demo, but the moment you enter the real world emotions kick in and you will have to learn a lot again. So when entering trading, be prepared to pay the market a fair price for educating you. And remember that the reward is much greater still! 📰 READ THE NEWS - Current events can affect the markets! This one is certainly not for beginners! If you start doing that from the start, it will be too much info for you and you will get lost in the constant swirl of hot air that surrounds the markets. But once your strategy is good enough and you are beginning to be profitable, you might want to start paying attention to the key events and dates that might have an effect on your trading. I never actively trade fundamentals myself, but who said that you shouldn't? 🤏 Keep in mind big political events that can cause big moves! This! If the FOMC meeting is tomorrow, you better close all your positions today, because whatever analysis you made might get invalidated by what the FED minutes bring to the market. We are playing probabilities that we can predict based on past experience, but whoever is trying to predict the FED and the market's reaction to it is fooling themselves, so once such a whale enters the room our ability to predict rationally vanished, thus we need not trade that day at all. And the FOMC is just an obvious example. Important statistical data such as CPI, jobs, etc might affect the pair you are trying to trade, and you better know about it. As a famous trader’s saying goes «Not being in the Market Is a position too» 🆕 UPDATE YOUR TECHNOLOGY - Slow internet connection or an old computer might make you miss your trade! There is a side note yet do not neglect your workstation. Don't let it be dirty or messy, and make sure your equipment, i.e. a computer or a smartphone work properly. Missing a trade because of a bug is SUCH a pain! You don’t want that, right? 📈And not trading update charts is even worse as some level breakouts can happen in seconds. That one is less relevant today thanks to tradingview charts being awesome, yet always make sure that the data on the chart is given to you without a delay. Trading a setup that ain’t there anymore is not good… 🦉📚 These are the «words of wisdom» that came to my head today, and I really hope I helped some of you get back on track, or begin your path as a trader with a slightly better understanding of what is ahead of you. ❗️ JUST REMEMBER: IT IS POSSIBLE! But it will take time, money, and effort, so brace yourselves, and may the odds be always in your favor! 💖Adios, Amigos! Give me a like and comment, if you agree with what I said!💖
OANDA:XAUUSDEducation
by UnitedSignals
21
How to Assess Your Trading Performance|Consistency & Perspective Hey traders, 👨🏻‍💻I am trading forex for more than 8 years. During the last 5 years, I am actively posting my analysis & trades on TradingView. Growing my audience, it was very peculiar for me to contemplate the reaction of my followers to my trading performance. (by the way, we must say thanks to tradingview where the posting system does not allow to delete the posted trades so that each and every author is easily backtestable). 👩‍👩‍👧‍👧👨‍👨‍👧‍👧Those who follow me at least a half a year know that occasionally I have winning streaks when 9 out of 10 of my forecasts play out nicely. Sometimes, however, I face the drawdowns and catch a sequence of losing trades. And sometimes the performance is mixed with the probabilities being on my side slightly. 🥇While the reaction to winning streaks is quite predictable: I am praised by the members and get nice tips. The reaction to losing streaks is worth discussing in detail. It turned out that quite a huge portion of a trading community has a completely wrong understanding of a trading nature. 🤬The single loss is considered by them to be a failure, a mistake. Facing the sequence of losses, they quickly become negatively biased to the person that they have just recently praised. With the continuation of a drawdown, they blame the analyst and launch a barrage of criticism towards him. 🔍Then they are in a search again. They are looking for a trader that will be constantly right. Catching the new one during a winning streak, the cycle repeats. At some moment such people become disappointed in trading and drop this business... ❗️Losses, losing streaks and negative days/weeks/months are inevitable. If you want to become a full-time trader, you must be prepared for the fact that trading won't give you a stable income. Your equity curve will be in constant fluctuation. Your goal in this game is simply to lose less than you make. You must become disciplined enough to keep following the rules of your trading strategy no matter what. You must learn to be consistent in your actions. You should learn to perceive losing trades not as a failure but simply as the moment when the market takes its share. Feeding you, giving you the opportunity to make money out of thin air, the market definitely has a right to claim its dividends from you. ⭐️Change your mindset, learn to lose and the magic thing will happen. ❤️Please, support this idea with a like and comment!❤️
OANDA:XAUUSDEducation
by VasilyTrader
28
How I work in Forex: Nzd-Usd analysisIn this article, I show you my way of working in Forex, starting with the choice of the currency pair, passing through all aspects of the operation (position size, maximum loss, etc.), until the analysis of the currency pair and the strategy to be adopted (entry-level, stop-loss and target). Looking at the table of currency pairs I follow, the one that caught my eye was Usd-Nzd. The price is at a level that is not sustainable in the long run for the New Zealand economy. In the last few years, the area 0.72300/0.72800 has been a very important level for Nzd-Usd and above that, the currency pair would be in an area of excess price (actually, already above 0.70000 Nzd-Usd is in an area of excess price). The operation that I am going to open has an optical of the medium-long period, if you are not in a position to hold open the position also for several months, do not replicate it. Let us proceed. The first thing I decide in each of my operations is how much I am willing to lose. My maximum loss is not equal for all the operations, with some more "particular" I have a smaller propensity to the risk. An example is precisely this operation. Although Nzd-Usd belongs to the currency pairs so-called "Majors," the New Zealand dollar is very similar to an "Exotic" currency, therefore with less volume and consequently more volatile and easily speculate. And besides, I already have other long positions on USD. For these reasons, I have decided that my maximum loss on the whole operation is $ 500, and based on the stop-loss, I will decide the position size to open. I now analyse Nzd-Usd trying to understand how it might move in the coming weeks and establish the type of trade and the entry-level. Above, you can see the daily chart with the Nzd-Usd sensitive levels highlighted. New Zealand had less impact from the covid-19 pandemic and this allowed its economy to be less affected. This led to a strong rise in its currency to the 0.75000 area against the US dollar. New Zealand, however, has a strongly export-based economy and a currency so strong, as mentioned earlier, is not sustainable in the long run. The New Zealand dollar also strengthened as many expected the central bank to intervene with a rate hike, "the Committee agreed that the risks to the economic outlook remain balanced, conditional on ongoing stimulatory fiscal and monetary policies. The Committee agreed that, in line with its least regrets framework, it would not remove monetary stimulus until it had confidence that it is sustainably achieving the consumer price inflation and employment objectives. Given that uncertainty remains elevated, gaining this confidence is expected to take considerable time and patience." However, this is currently unlikely, at least in the short term. Also because in recent months the New Zealand economy has slowed down, "Economic activity in New Zealand slowed over the summer months following the earlier rebound in domestic activity. December quarter GDP was weaker than expected and more recent indicators suggest that momentum has reduced. Some members noted that supply chain disruptions could potentially constrain domestic activity in the near term. In addition, business credit growth and investment remain subdued." As for the US, the focus in recent weeks has been on inflation following the entry into force of Biden's economic stimulus plan, "with inflation running persistently below this longer-run goal (2%), the Committee will aim to achieve inflation moderately above 2 per cent for some time so that inflation averages 2 per cent over time and longer‑term inflation expectations remain well-anchored at 2 per cent." In the March "Summary of Economic Projections," the PCE inflation forecast for 2021 rose to 2.4% from 1.8% in December, and the Core PCE inflation forecast rose to 2.1% from 1.8% in December. Inflation is forecast at 2.0% in 2022 and 2.1% in 2022 for both. In the same document, you can see (you can find it on the Federal Reserve's website) that in March compared to December the GDP forecast was raised (to 6.5% in 2021 from 4.2% in December) and the unemployment rate lowered (to 4.5% in 2021 from 5.0% in December). Macroeconomic analysis shows what has already emerged above with New Zealand's data deteriorating in recent months while US data is improving almost steadily. If the vaccination continues apace, the US economy will recover quickly, as the UK economy is doing in Europe. Once the analysis is complete, how do I intend to proceed? I do not want to open the operation at once. The moment is particular and I would not be surprised to see Nzd-Usd go up even 300 pips. So, I decided to open a spy order at 0.72400 to see how the currency pair will react to that level. I will place the primary order, which is larger in size as it is closer to the stop-loss, at 0.73700. For both orders, spy order and primary order, I destine the same maximum loss, which I had decided to be $ 500, so my maximum loss for the two types of orders is $ 250 each. Now with the Value-at-Risk, I calculate the stop-loss and with the stop-loss, I calculate the size of the two orders. To be precise, I use CVaR to calculate the stop-loss (it is all explained in my book on fundamental analysis in forex) and the calculation gives me a stop-loss at 0.75200. I now calculate the two position sizes. Ultimately, I will open a short position of $ 9,000 at 0.72400 (spy order) and a short position of $ 17,000 at 0.73700 (primary order), with a stop-loss at 0.75200. As for the target, I always like to see how the currency pair moves to assess where to take profit. This, somewhat summarised, is how I work in Forex, how I analyse a currency pair and how I organise the whole operation.
Education
by TradingwDavid
2
Trade Forex Like an Investment BankWhat I will explain to you today is exactly how you should trade the Forex market and that few traders do. What I am going to tell you has great value. You will hardly find that information in other videos or courses, and surely not for free. It comes from over 25 years of experience in financial markets, even as a fund manager. I tell you immediately that if you are not willing to toil, it’s useless for you continuing to read. I won't give you the magic formula to get rich just by pressing a button. Do you think I have become a professional trader, that is a person who trades for a living, in a day or month? I spent several years to study; I had a hard time (most of all at the beginning). I had to overcome several difficulties before I became the trader I am today. Hard work, in trading like in every field of life, is the basis of success. So, how should you trade the Forex market? First, a mistake most Forex traders make is to consider a currency pair as a single market, a price. But a currency pair is not a stock or commodity. Instead, you have to see a currency pair as two opposing economies. For example, you don’t have to see Eur-Usd as a single market, but as the Eurozone economy versus the American economy. Why should you trade Eur-Usd like Apple or Facebook? On the one hand, you have an individual company, on the other side, two economies. So, get used to considering a currency pair, not as a single market, a price, but as two opposing economies. Now you also understand why most traders who use technical analysis are losers. It’s certainly not an indicator in the overbought or oversold zone that makes a currency pair rise or fall. After having understood this fundamental aspect of the Forex market, the next step is to buy the strength and sell the weakness. But to do that, you have to compare the two economies. First equation : strong economy means strong currency and weak economy means weak currency So, let's see how you should proceed First, for each economy, you need to research the macroeconomic data that make the currency market movements. And this is the simplest thing to do. Several sites show this data in real-time. We can divide the main macroeconomic data into 4 areas: 1) Interest rates. 2) Growth (Gross Domestic Product). 3) Employment. 4) Inflation Then, you have to compare and interpret the data to understand, for both the economies, what the situation is. And this, at least initially, is a little less simple. You have to create two tables, one for each of the economies, and insert the main macroeconomic data. Once you have completed this step, by using the data, you need to compare the two economies to figure out which one is stronger. You can also create a graph with Excel or other software for each data, so as to get a more immediate visual image. For example, if the graph of the unemployment rate in the United Kingdom is falling while that of the United States is moving sideways, even though the American economy remains stronger than the British one, right now it’s the British economy that is strengthening over the American one. Second, you have to read the reports of the central banks, and listening to the speeches (or reading the transcripts) of their Presidents. These are fundamental to understand the monetary policy implemented by each central bank. Also, you find the situation in the country and often a vision of the world economy. Statements and Minutes are therefore essential for understanding the next moves of a central bank concerning interest rates. Second equation : raising interest rates leads to a stronger currency and reducing interest rates leads to a weaker currency The reports, and speeches of central bank Presidents, are essential also because the decisions on interest rates are sometimes known before their release. Which means that a decision has already been priced into the market. It’s probably a process that may be difficult to implement initially, but believe me that, over time, you will be able to analyse a currency pair simply and clearly. Certainly, better than with technical analysis. That was the first pillar of your Forex trading. You have seen how you have to analyse a currency pair. First, you have to see a currency pair not as a market, a price, but as two opposing economies. And then, you have not to use the technical analysis and indicators, but studying and understanding the fundamentals that drive a currency. Now, let's see the second pillar. After analysing a currency pair, you need to select your trade entry. But before… Never forget : in the medium to long-term, it’s the fundamentals that drive a currency pair, but in the short-term, it’s speculation to do it. For this reason, to buy for example Eur-Usd just because your analysis has told you that the currency pair will rise, it’s a bad idea. So, how should you decide when to enter? By using subjective probability. I tell you that no strategy can give you the perfect trade entry. It’s all about probability. Subjective probability is the numeric measure of chance (probability) that reflects the degree of a personal belief in the likelihood of an occurrence. Subjective probability judgments are people's evaluations of the probability of uncertain events or outcomes. It contains no formal calculations and only reflects the subject's opinions and past experience. Now, let's see how to use subjective probability, in trading. Before, an Advice : avoid trading with many markets. Focus only on those you know well. Because it’s essential to know well the currency pair that is being traded, how it behaves and moves, so you can understand what the key levels are. In this way, you will know which are the price levels with the highest odds of success for your trade entry. Let me give you an example with the currency pair EUR-USD. Look at the chart above. You will certainly have noticed how the X.XX20 levels (i.e. 1.0920, 1.1020, 1.1120, 1.1220, etc.) for EUR-USD are often, not always, sensitive price levels. That's just one aspect, a characteristic of EUR-USD. Once you understand how the currency pair moves, when you know it perfectly, you will no longer even need to open the chart to decide your trade. And what about the take profit? First, you need to know when to take your profit before opening the trade (you have to decide it in your trading plan). Then, it has to be a take profit statistically achievable and have a Risk/Reward at least 1:1. To select your take profit, you have to put into the field all your knowledge of that currency pair, and how you did with the trade entry, use subjective probability. This was the second pillar of your Forex trading. You have seen how to select your entry and exit points in trade. You have to use subjective probability, and thanks to your experience and knowledge of a currency pair, choose the trade entry with the higher odds of success. Now let's see the third and final pillar. How to select the stop-loss and cancel the emotions. It is well known that success in trading is determined by our emotionality. You have to put yourself in the best conditions to trade. The problem with the management of emotions is that we are all different. So, it’s impossible to have a system that works for everyone, without distinction. To erase your fears, anxieties, before opening the trade, you have to decide how much you are willing to lose with that trade. Then, you have to set the stop-loss on equity, that is the current value of your trading account, not the price. But where to set the stop-loss? You have to use the Value-at-Risk (VaR). Value-at-Risk measures the potential loss in value of a risky asset or portfolio over a defined period for a given confidence interval. The key elements of Value-at-Risk are: 1. a specified level of loss in value; 2. a fixed time period over which risk is assessed (1 day, 1 week, etc.); 3. a confidence interval (usually 95% or 99%) Let’s see an example. If the Value-at-Risk on Eur-Usd is 1.81% at one-week, 95% confidence level, there is an only a 5% chance that the value of Eur-Usd will drop more than 1.81% over any given week. Unfortunately, here I can't explain the calculation, but you can find it on my Forex e-Book and for free on the internet, in particular on YouTube. At this point, all you have to do is calculate the correct position size to open, based on the maximum loss that you are willing to suffer, and that you must have already decided in your trading plan. That's the way to dispel your doubts about how to set the stop-loss, how to cancel your emotions because using the Value-at-Risk, you are working like an investment bank, a fund manager. This was the third and final pillar of your Forex trading. You have seen how to cancel your emotions thanks to Value-at-Risk. Now you have all the information to become a profitable trader in Forex trading, to trade like an investment bank. You can get significant results in Forex trading, maybe even better than mine, but only if you apply what I explained to you, and you will work hard. Happy trading to you all!
Education
by TradingwDavid
7