The correlation between US Interest Rates and The US Dollar (DXYInterest rates and USD strength are positively correlated.
An increase in US interest rates will typically result in a strengthening of the USD.
The reason is...
Foreign investors tend to flock to US assets, such as bonds and fixed bank rates for higher returns.
Higher demand for US assets drives up their price, and as a result, the USD strengthens.
As for the relationship between USD strength and US stock market prices, it is more complex and can have both positive and negative effects.
On one hand, a strong USD can make US exports less competitive, reducing demand and potentially leading to a decrease in corporate profits.
This can weigh on stock prices. On the other hand, a strong USD can attract foreign investment into US stocks, driving up demand and prices.
There are other reasons for the correlation such as:
Interest rate differentials
When interest rates in one country are higher than in another, capital tends to flow to the country with the higher interest rates.
This results in an increase in demand for the currency of the country with higher interest rates, strengthening its currency i.e US Dollar.
Inflation expectations
Interest rates are also closely linked to inflation expectations.
When interest rates rise, it is generally expected that inflation will rise too, which makes the currency more attractive to investors.
Trade flows
The USD is the currency used in most international trade transactions, and as a result, changes in trade flows can have a significant impact on the value of the USD.
Tradinglesson
How to be a LASER Trader!Rinse and repeat.
That’s it…
It’s one simple little acronym you’ll never forget…
Ready?
LASER your TRADES
1: Look
The first thing you’ll need to do, is to go through your watchlist very quickly.
A watch list is a list of markets you’ll LOOK through when finding trades.
These markets can range from anything including shares, indices, commodities, currencies and crypto-currencies.
When you have your watch list, you’ll go through the list and get a feel for how the markets have moved for the day.
Example:
Before I trade anything, I LOOK at the JSE All Share 40 stocks that are in my watch list.
I then run through them briefly to see how the markets are performing.
2: Analyse
The second round of going through your watch list, is where you’ll look for specific trading setups.
Whether you trade using price action, patterns, indicators, volume etc…
This is where you’ll ANALYSE the charts individually.
Also with this step you’ll write down potential trades that are lining up.
3: Setup
The third step is to go back to the markets that you’ve written down – which you’re looking to trade.
You’ll then do your simple trading calculations and place your chart SETUPS so you can see where your trading levels are.
EXAMPLE:
If I see a trade that’s lined up, I’ll draw horizontal levels showing where my entry, Stop loss (risk) and take profit (reward) levels are…
I like to use:
Blue for entry
Red for stop loss
Green for take profit
4: Execute
You’re ready to JUST TAKE THE TRADE!
And then you’ll place your entry, stop loss and take profit levels. You’ll choose how many CFDs you’ll need to buy according to your money management rules.
And then hit trade!
5: Record
As soon as you’ve successfully taken the trade, head over to your journal (excel document) and record your trade transaction.
That’s how to be a LASER Trader…
And on a daily or weekly basis, you’ll repeat those steps…
How to Reduce Inflation in South Africa in 2023! - 5 WAYS!How to Reduce Inflation in South Africa in 2023! - 5 WAYS!
I got this excellent question today from someone Which I thought was an important question to answer considering the state of the Country of South Africa.
Hi everyone. In SA I always wonder how an ordinary person "employed or not" can contribute to bring positive change to our inflation?
A. Here is my answer...
As an economist, I can say in theory it is possible to bring positive change to the inflation rates but in reality – with corruption – I’m not sure it’s that easy.
Also, it’s the butterfly effect where we need to come together as a community (country) to work towards lowering inflation.
So on the one hand, there needs to be less spending unfortunately. Here are a few measures I can think of…
#1. Lower non-essential spending.
People need to stop spending unnecessarily on products and services and instead start saving more for their future. This will hamper and reduce the impact of inflation.
#2: Support your local places!
This world is becoming highly globalised not only where the rich get richer but the TOP stores and shops get richer too.
As a community, we need to start supporting the local businesses that have great quality products and services to.
We need to be more friendly to each other and help spread awareness to the small but great man.
This will help stimulate the local economy and bring on more job creation and economic growth.
#3: More investments in education
Education is key to help bring personal development and skills training. We need to educate our fellow people on business skills, high income skills, programming, AI, machine learning, savings, risk averse investments and encourage more businesses to help grow.
#4: Save more to invest more
When inflation is high it means people were spending uncontrollably which pushed up demand and lowered supply. Instead, we should encourage more savings in stocks, property, trading, funds, and personal finances to reduce the effects of inflation.
Instead of drinking sorrows away, spending on games to bide time – focus on less spending and more saving for the future – reducing the debt levels.
#5: Invest in renewable energy
Load Shedding is here to stay. And so we need to try to support more renewable energy initiatives that come about. Solar, wind and gas. This will definitely help reduce the cost of energy and curb inflation.
As I said, we can only do our part and hope for the best. We are a nation with hope, optimism and trust. But instead of just trusting the government we should also learn to support and trust our local businesses and methods to living a better life.
Hope that helps.
5 Reasons why others trade VS why I tradeIn the last 20 years, I always love asking this one question.
“Why do you want to trade?”
Have you ever written down the reasons why you want to become a trader and what your true motivations are?
When you answer this question, only then you’ll become more clear with the goals you wish to achieve and how to achieve them.
Here’s one clichéd answer, I don’t want you to write down…
“I want to make money”.
This answer is lazy, impersonal and it tells you and me nothing about who you are truly, deeply and emotionally.
If you think trading only teaches you one aspect of your life… I believe your eyes are still yet to be opened with the incredible possibilities that trading will bring you.
And so, in this article I’m going to share a few reasons for why people want to trade.
And then, I’ll share a few reasons why I trade…
Here are 5 reasons why people want to trade…
Reason #1: Diversification
“I want to diverse my portfolio with different asset classes. This way I can produce a stream of income through long-term investing via stocks and property, short term trading with Premium MATI Trader and medium term investing through index ETFs.”
Reason #2: Hobby
“I have spare time and money. And what better way than to spend my time trading and making an extra income while doing something I love?”
Reason #3: Monetizing my ‘down-time’
“I’ve earned the same income for the last seven years and now I want to earn an extra income during my off-hours too. For the first time in my life, trading has helped me make money while I’m watching Netflix and spending time with my wife”.
Reason #4: Invest for my family and kids
“Most people depend on portfolio managers and hedge funds to invest their money for their family. I’ve decided to trade the funds I have for my kids instead and take control of the growth of their inheritance through trading.”
Reason #5: Keeps me sharp and well-informed
“Trading might not be making me super rich yet, but I got to tell you this. It is keeping my brain sharp, well-informed and helps with my skills with decision making.”
These are some of the reasons I’ve heard, which have stuck.
Now I want to share with you five extra reasons why I trade…
5 Reasons why I trade!
My reason #1: FREEDOM – Earn your own income when you want
I want the freedom to trade and build an income stream on my own terms, times and conditions.
My reason #2: Independence – Be your own boss
Trading gives me the platform where I am responsible for my own trading results. This gives me full independence where I take pride with my own financial decisions.
It gives me the place where I can grow my portfolio in a way that suits my personality and risk profile to a T.
My reason #3: Extremely fun – New career
Trading is not a job… This means, you don’t have to do it… But rather it’s an extremely productive and fun hobby to make your free time work for you.
This hobby is not like sports or gym where your reward is more on the physical side.
Trading is where you gain many different mental skills and bank a consistent income once you get it right.
My reason #4: Mind control – Control your emotions
Trading well means you have to lose at times. and when you do, you need to be able to cut out the ego and ‘baby tantrum throwing side’ away.
You learn to grow up, develop a thicker skin and become a mature trader.
This is one of the greatest benefits to learning to trade. It gets to the point where, after you’ve taken hundreds of trades, whether you take a loss or bank a profit, you’ll stay content.
You embrace failure with open arms, because you know that it’s one step towards winning.
My reason #5: Life skills – You learn risk, rewards and probabilities
Once you have mastered the four elements to trading success (Markets, Methods, Money and Mind) you develop a very strong understanding of concepts like:
Risk & reward management and probabilities.
This won’t only apply to trading but to almost every aspect in your life. You start taking accountability of events into your life.
Predictions turn into probabilities.
Risk evolves into calculated acceptance. And you start to see things as they are, rather than what you want them to be…
SO WHY DO YOU WANT TO TRADE?
Why Trend Lines are Powerful with Trading The closest predictor indicators when it comes to trading are:
Price action and volume.
I’m going to talk a bit about Price action today as Volume is a whole different cattle of fish.
With TradingView charting platform there are a few indicators to identify a trend:
Trend lines, Bollinger Bands, Moving Averages, Candlesticks and other bands and channels too numerous to mention.
#1: Trend Lines – Trend detector
Trend lines are perfect for pointing out the direction of the market.
Trend lines are a useful tool for identifying the direction of a market. They are a straight line that is plotted through a series of data points.
You can either plot a straight diagonal line to determine whether the market is going up or down.
Or you can plot horizontal lines to identify ranges, sideways consolidation areas.
That’s because trend lines plot through a series of data points on the charts to help point out whether the trends are moving up down or sideways.
There are a number of benefits with using trend lines including:
• Trend directions
To help identify the overall direction of the market, whether it is trending up, down, or sideways.
• S&R levels
Point out key support (floor levels) and resistance (ceiling levels) These are great for points of entry.
• Chart patterns and breakout levels
Chart patterns are also used with trend lines. Especially neck lines, brim levels, box formations etc…
• Points of reversals
We also use trend lines to wait for a break in structure. Once this happens, we can see if the market is about to change direction and reverse.
• Convert chaos into order
End of the day all technical analysis and price action is used for confirmation bias. To apply to a strategy and to make calculated and informed decisions on what to do if something happens. Almost like a If this then That!
I’ve used trend lines and price action since 2003 and they remain an important element to trading analyses.
End of the day, the market can only move up, down and sideways.
And you know why?
Because the famous psychology of demand and supply will always work.
And so they are here to stay and we might as well take advantage of it.
Money you can get back as a trader - Time you can't!When you're YOUNG you have time and energy but no money.
when you're an ADULT you have energy and money but no time.
When you're RETIRED and old you have money but less time and little energy.
So, yes you can make mistakes, yes you can learn to trade, and practice for a bit.
But DON'T do the following:
Make BIG financial mistakes - Because that time to recoup it may be too late.
Procrastinate with when to trade and why to trade - every day is an opportunity lost and an opportunity cost. Bite the bullet and do it well and risk aversely.
Jump from winning strategy to winning strategy because of drawdowns. All trading strategies come with drawdowns and trading in the financial markets can be a highly profitable endeavor, but it can also be a time-consuming and stressful one.
If you approach your trading with ONE strategy that suits you with a clear mind, a solid strategy, and a disciplined approach, you can maximize your chances of success.
As I like to say. It is better to have 9 years of experience trading 1 strategy than 1 year of trading experience for 9 systems.
It makes sense in my head.
Let's focus on the power of 1 and your time will be worth the wait for when you achieve your trading success.
Trade well, live free.
Timon
(Financial trader since 2003)
HOW IT WORKS: RSI (Relative Strength Index) IndicatorThe RSI is a popular momentum indicator used in technical analysis. It was originally developed by a mechanical engineer turned technical analyst J. Welles Wilder Jr.
It was first published in a 1978 book, “New Concepts in Technical Trading Systems” and in Commodities Magazine (Futures magazine) in June’s 1978 issue.
Today the RSI is one of the most popular indicators used to measure the speed and change of price movements.
In other words, it measures the strength of its trend direction (up, down and sideways) on any market by monitoring the changes in its closing price.
THE MAKE UP
The RSI is a line graph that moves between two extremes…
On the vertical axis (Y-Axis) the RSI line moves up and down in a range between 0 and 100.
NOTE: As the indicator is between a range, it is considered a closed indicator.
On the horizontal axis (X-Axis), the RSI line moves to the right which is plotted as time.
NOTE: You can choose your own time frame i.e. days, hours, minutes etc…
For all you technical boffins…
If you want to know how the RSI is calculated, I’ve saved this at the end of the article.
As a trader you won’t need to worry about the maths at all.
Three trading signals you’ll use with the RSI
1. Overbought and Oversold levels
2. Patterns and Trend lines
3. Bullish and Bearish Divergences
Trading signal 1:
Overbought and Oversold levels
When we see the market’s price move up, this means the buyers are outweighing the sellers.
And the more higher closing prices we see, on a market, the higher the RSI line moves…
When we see the market’s price drop, this means the sellers outweigh the buyers.
And the more lower closing prices we see, on a given market, the lower the RSI line moves…
However…
If the buying continues at an unsustainable rate, the RSI will reach a point that traders call OVERBOUGHT (top heavy).
This is where we could start to expect the price to drop from these levels and for the market to enter into a correction (dip).
If the selling volume continues at an unsustainable rate, the RSI will reach a point that traders call OVERSOLD (undervalued).
This is where we could start to expect the price to turn up from these levels and for the market to enter into a recovery (upside).
Now that you understand overbought and oversold terms, let’s explain what I mean with the RSI chart.
Overbought RSI: 70 (Sell opportunity)
When you see the RSI line touch or cross above 70 (Red horizontal line), this is considered an overbought situation.
At this point, traders may start to anticipate that the rising trend is about to end.
Traders may then start to prepare to sell and short their positions, as they believe the market’s price has run up too much.
If the market then turns down and starts to drop in price, the RSI line will drop below 70 and head back to equilibrium at 50 (Black horizontal line).
Oversold RSI: 30 (Buy opportunity)
When you see the RSI line touch or cross below 30 (Green horizontal line), this is considered an oversold situation.
At this point, traders may start to anticipate that the falling trend is about to end.
Traders may then start to buy (go long) their positions, as they believe the market’s price has dropped too much.
If the market then turns up from the 30 mark and starts to rise in price, the RSI line will move back to equilibrium at 50 (Black horizontal line).
Trading signal #2:
Trend lines & Patterns
The second way to spot buying and selling trade ideas is with trend lines and patterns.
Uptrend confirmation
To confirm the strength of the market’s uptrend, you should be able to draw a support (floor level) under the high low RSI prices.
And when the RSI breaks below the support line, it could signal the end of the uptrend and a start to the next bear market.
Downtrend confirmation
To confirm the strength of the market’s downtrend, you should be able to draw a resistance (ceiling level) over the lower RSI high prices.
And when the RSI breaks above the resistance line, it could signal the end of the downtrend and a start to the next bull market.
These are great confirmation and reversal trading signals to use with your strategy.
NOTE: You can also base your buy or sell ideas on trading chart patterns…
Trading signal #3:
Bullish & Bearish Divergence
The third signal I use to spot trade opportunities with the RSI is looking at the market’s price VERSUS the RSI’s direction.
In short…
BEARISH DIVERGENCE – Warning for downside
If the markets price makes higher lows, while the RSI makes lower highs – it’s a warning for DOWNSIDE to come.
BULLISH DIVERGENCE – Sign for upside
If the markets price makes lower highs, while the RSI makes higher lows – it’s a signal for UPSIDE to come.
Either way with both bullish and bearish divergences, the RSI fails to accept the current market’s price movements.
And so it is making a probability prediction that soon the market will make a reversal in its current trend.
Ok so now you know how the RSI works. Let’s sum up what we learnt.
RSI Summary in 3 Trading Signs:
Trading signal #1:
Overbought & Oversold levels
Overbought zone X > 70 = Selling opportunity
Neutral zone: X = 50
Oversold zone X < 30 = Buying opportunity
Trading signal #2:
Trend lines & Chart patterns
Uptrend confirmation: RSI makes higher lows (draw support line)
Downtrend confirmation: RSI makes lower highs (draw resistance line)
Breakout confirmation: RSI breaks out of a chart pattern
Trading signal #3:
Bullish & Bearish Divergence
Bullish divergence: Market’s price – lower highs
RSI – higher lows
Bearish divergence: Market’s price – higher lows
RSI – lower highs
Here’s how to calculate the RSI
The most common (default) settings for the RSI is 14 (Which we’ll use))
There is a two-part calculation with the RSI.
Part 1: Calculate the RSI (step 1)
RS or Relative Strength is (Average Gain ÷ Average Loss)
Average Gain = (Sum of gains over the past 14 periods) ÷ 14
Average Goss = (Sum of losses over the past 14 periods) ÷14
Calculate the RSI (Step 1)
Part 2: Calculate the RSI (Step 2)
Once you have this result, we then smoothen the RSI result with part 2…
And so that’s how the RSI continues with each closing price of the time frame you choose.
Trade well, live free.
Timon
(Financial trader since 2003)
5 Signs You’re Doing GREAT As A TraderMoney should not tell you how well or bad you’re doing as a trader.
Percentages should reveal that all.
It’s all RELATIVE.
And so, in this TradingView piece, you’re going to go through a five signs checklist to see how well you’re doing as a trader.
Sign #1:
You have a personal trading strategy
Do you know what:
System you’re going to use to enter and exit your trades?
Markets you’re going to choose? and
Risk management principles you’re going to follow?
And have you found that system that matches your personality and time preferences?
If so… AWESOME! Tick it off the list.
Sign #2:
You’ve developed realistic trading goals
Once you’ve got your trading strategy in a bag, you should have all your goals written down.
Have you jotted down your trading strategy, stats, goals and expectations?
This is your game plan that you’ll need to follow when you trade.
You need to see what kind of outcomes you’re going to have with your trading.
• How many trades will you take per year?
• How many winners can you expect?
• How many losers will you take?
• What is your win rate?
• What % of your portfolio will you expect to achieve?
Sign #3:
You’ve experienced a bad trading patch
I feel this is the initiation side to getting to a higher level as a trader.
When you have the strategy and goals in a bag, you’ve got to then put it all into play.
And during this time, there’ll be once or twice a year a couple of weeks where you’ll go through a bunch of losing trades.
If you have the right money management principles, you should be able to EASILY weather through this time.
The markets move up and down and sideways… And during one of these periods, it will NOT fit well with your system.
But let me tell you this, once you’ve gone through your drawdown period, and the markets become more favourable.
It is the most exhilarating feeling, for your portfolio to make new highs once again.
Go through this my friend, and you’ve ticked off another sign you’re doing GREAT.
Sign #4:
You continue to EVOLVE
Sure, the trading strategy might not change.
The risk management side won’t change.
But there are a few things that will change, that you’ll need to adapt into your trading.
First, markets, stocks and currencies are unlisting and listing ALL the time. And your trading strategy requires a watch list that works best with your system.
So, you have to evolve to dump and add markets into your watch list that complement your trading strategy.
You might also find a technique to increase your win rate and ride your winners up.
If you can evolve as a trader, TICK it off the list.
Sign #5:
You are INDEPENDENT
Do you care about your family, friends, pets and strangers opinions on the trades you take or have taken?
No? GOOD!
Tick it off the list.
Nobody in this world, can tell you what to is right to buy or sell according to the strategy you use.
You have the stats, you have the goals and you have your game plan.
So how did you do?
Trade well, live free...
Timon
(Financial trader since 2003)
53 Important Trading Acronyms and AbbreviationsHere are 53 trading acronyms and abbreviations to remember and apply to your trading.
I’ve also listed them in alphabetical order to make it easier to spot!
ATH - All Time High
ATM – At the Money
ATR – Average True Range
BB – Bollinger Bands
B/O - Breakout
Be - Bearish
BE - Break even
BOS - Break of Structure
Bu - Bullish
CFD – Contract for Difference
DD – Drawdown
DMA – Direct Market Access
EMA – Exponential Moving Average
E/R - Earnings Report
ETF – Exchange Traded Fund
FA - Fundamental Analysis
FOMC – Federal Open Market Committee
FOK – Fill Or Kill
FX – Foreign Exchange (Forex)
GTC – Good ‘Til Cancelled
HH - Higher High
HL - Higher Low
HOD - High of Day
HFT – High Frequency Trading
HTF - Higher Time Frame
ICO – Initial Coin Offering
IPO – Initial Public Offering
ITM – In the Money
JBTD – Just Buy the Dip
LH - Lower High
LL - Lower Low
LOD - Low of Day
L/S – Long or Short
LTF - Lower Time Frame
MA – Moving Average
MACD – Moving Average Convergence Divergence
MS - Market Structure
OI – Open Interest
O/N - Overnight
OTC – Over the Counter
OTM – Out The Money
NFP - Non Farm Payrolls
P&L – Profit and Loss
PIP – Percentage In Point
PRE - Pre Market
R/R - Risk / Reward
RSI – Relative Strength Index
S/R - Support and Resistance
SL - Stop loss
TA - Technical analysis
TF - Time Frame
TP - Take profit
YTD - Year To Date
Can you think of anymore?
Let me know in the comments.
Trade well, live free.
Timon
(Financial trader since 2003)
Why the INNOCENT traders always get scammedI received a very important question from a dear member named Bakang. He asked
"Why do people who show the most dedication are the ones who gets scammed most of the time".
Now, I have given an indepth answer with certain reasons and a book I wrote, because of how important this topic is...
Please read it and share it to your friends, family and groups. You just might be helping them avoid being scammed themselves.
Here is my answer:
Thank you for your question and it is a very common problem in society.
There are many reasons why innocent people tend to fall for scams when it comes to the stock market and other high promising schemes.
Reason #1: Humans are just too trusting
Humans have a tendency of trusting the fellow man and believing in the greater good of them. They read about how they’ll make fortunes with them using secretive and insider information – and they make you feel a part of something.
Then as soon as they have your money, they leave you and head over to the next victim like a snake in the grass.
Reason #2: Hot next thing
Every scammer tries to outwit another scammer’s intention. They see what one scammer is offering and they make even more false promises, lies and tendencies.
Then the innocent person is lured in because they don’t want to MISS this ‘once in a life time opportunity’. This has been happening for thousands of years, and human nature is unlikely to change.
Reason #3: Being persuaded by top marketers
The biggest type of scammer is the loudest, most charismatic and they show off things that they don’t have. Or the money they do have it’s from the people who have been scammed.
This is where you read the loudest promos, false and misleading information and advertising.
Also, my favourite is where people read FAKE testimonials with life stories on how something changed their lives…
Reason #4: Fear, Greed and Ego
Most people who are scammed fall for the two big sins of life. Fear and Greed. They fear to miss out on these opportunities and fear that it will never come again.
They have greed where once they’re lured in, they believe in it and deposit a lot more money having this undeniable faith they will be rewarded.
EGO is the one that is hardly spoken about but I think it’s equal to fear and greed.
Ego is where they refuse to believe it’s a scam. They believe they made the right choice joining them and where they want to prove to everyone, he/she was right and they were wrong.
Reason #5: Lack of education
The first way people are scammed is when they don’t have the starting education and understanding of the true and real principles that come with the venture they’re in. They think, because they have money they will win.
But when you dig into the actual principles and education, you’ll realise that there is and has never been a get rich quick way into anything. Everything requires risk and probabilities to achieve some kind of reward in the medium to long term.
Other reasons!
There are other reasons like feeling desperate to do something, acting urgently without thought, being persuaded by others and believe wrong and false information on a website.
It is up to you and me and all of us to better educate ourselves, avoid any scams and to choose the right people to trust and learn from…
Hope this helps and feel free to share this to spread awareness to fellow traders.
Trade well, live free.
Timon
MATI Trader (Trader since 2003)
3Cs of trading - Must readI call it the
3 Cs of trading
Trading the financial markets can be a challenging and rewarding endeavor.
One of the keys to success in trading is making informed...
Choices - Choose the markets you want to trade, the strategy, the time frame, choose your mentor and choose your times and plans...
Next you need to take calculated:
Chances - Take a chance to execute, to deposit money in your account, to set up your trades and lineups.
And then be willing to adapt and make.
Changes - Changes to your strategy, journal, system and whatever you need to evolve with the current market conditions and environments.
Did you find this helpful? I'd love to hear your feedback
Trade well, live free.
Timon
MATI Trader
How To Handle And Minimise Your Losses in A DrawdownI want to cover different ways to handle yourself during a drawdown to minimise your losses.
Minimise Drawdown Part #1:
Lower your risk per trade
There are times when the market will be in a bad market environment…
This is when no matter whether you buy or sell, you end up just taking a whole bunch of losses.
The first trick is to pinpoint when the market is in a bad environment.
For me as a breakout trader, I wait for the main index to move in a sideways trend.
This way, I know I have a medium to low probability of the trades to work out.
If you can find out when the market is in a bad environment, then you’ll know when to lower your risk.
In my case, I drop the risk from 2% per trade – down to 1.5%.
If my portfolio continues to drop, I will lower the risk further to 1% per trade until the market rectifies itself.
This is the first way to minimize your losses.
Minimise Drawdown Part #2:
Lower the number of trades you take
You’ll know when the markets are looking S#@t all around.
This is because the large stock markets tend to lead the emerging markets.
And when this happens, the second best thing you can do is limit the trades you take.
If you find you’re averaging around five to nine open trades at a time, it might be time to start cutting down.
Because what if all nine trades end up to be losers, due to the bad market environment?
Well you’ll find yourself down around 18% of your portfolio.
So instead, limit the number of trades you’ll hold during the drawdown phase. Maybe it will four to five instead…
Just remember that being neutral and holding cash is ALSO a trading position.
Minimise Drawdown Part #3:
Hedge your positions
This doesn’t always work, but it has saved my ass a couple of times.
When I find I’m long (bought) five stocks.
And I see that the market has completely changed direction to the downside. I know that there is a higher chance that I’m going to get stopped out.
So to limit my risk, I’ll immediately look at stocks that I can trade short (sell).
For example, I am currently long four stocks. And all four stocks are in a the negative. So, in the last two weeks I’ve decided to short three resource stocks (as a hedge).
This way, I’m now down only 3% of my portfolio rather than 5% since the drawdown…
Minimise Drawdown Part #4:
Other ways
The other powerful way to control your drawdown is to lock in profits when the trades are going your way. You can think of it as a trailing stop loss.
I personally often raise my stop loss when the market moves where the risk to reward is 1:1…
This way I know I’ll lock in a gain, should the market turn against me.
There are many ways you can adjust your stop loss including:
• Trail the stop loss as the price moves further away from the trending Moving Average
• Trail the stop loss after the market’s price moves a certain percentage
• Trail the stop loss when you see volume starting to drop
• Trail the stop loss when an indicator is oversold or overbought
• Trail the stop loss after the market’s price moves to a certain risk to reward
FINAL WORDS
Drawdowns are inevitable. And you need to know how to manage your Drawdowns…
You now have some ideas on how to handle your drawdowns better.
Trade well, live free.
Timon
MATI Trader (Financial trader since 2003)
Feel free to follow my socials below. I love writing about trading and sharing my 2 decade experiences.
How Much to Recover After a Trading DrawdownA Drawdown is a drop in a portfolio value after one or more trades. It’s when the portfolio dips from the highest high.
Once you’ve entered into the inevitable drawdown phase, you’ll need to know how much you’ll need to recover.
That’s where the drawdown calculation comes in…
The Drawdown Formula to recover after a portfolio drop
Let’s use three examples of traders with drawdowns.
Example #1: Timon is down 5% of his portfolio in the last three months.
Example #2: Alex is down 50% of her portfolio in the last three months.
Example#3: Artemis is down 76% of their portfolio in the last three months.
Next we’ll need the Drawdown Formula
Required gain = -1
Let’s put in three drawdown percentages to see what we need to recover to get our portfolios back to what they were…
EXAMPLE #1: Timon’s drawdown = 5%
Required Gain = – 1
= – 1
= 5.26%
EXAMPLE #2: Alex’s drawdown = 50%
Required Gain = – 1
= – 1
= 100%
EXAMPLE #3: Artemis’s drawdown = 76%
Required Gain = – 1
= – 1
= 316%
In the above examples, I need to recover 5.26% of my portfolio to get it back to its highest level.
While Alex and Artemis needs over 100% and 316% to return their portfolios to what they were.
Now you know how to calculate what you need to recover after a trading drawdown.
FINAL WORDS
Do you now get that you need to take your drawdowns more seriously?
With any business or venture, you should always be wary when you enter into a tough time.
In fact, you should never be down more than 20% on your trading portfolio, business or in any other financial venture…
Once you start going below 20%, it will take a heck of a lot longer to get back to what it was…
That’s why this article is only part one…
Trade well, live free.
Timon
MATI Trader (Est. 2003)
Feel free to follow our socials below.
6 Thinking Hats for a TraderIf you don’t know the 6 Thinking Hats by now, I have to ask.
How do you solve problems, deal with arguments or make decisions?
I do forgive you though, as these strategies are not ones we learn in school.
In fact, when I first read about this strategy, I got to say every aspect of my life changed (including trading).
I hope this article will change your life too.
Let’s start with the main man himself.
The Author of The Six Thinking Hats
Edward de Bono is a world-renown lateral thinker, writer and philosopher.
In fact, he was the first person to use the term ‘Lateral Thinking’.
Born in 1933, in Malta, Edward has achieved a number of degrees and has published over 85 books (mostly on thinking and the use of language).
But out of all his works of art, there is one of the most popular techniques that changed the world and changed the way we think.
It’s called The Six Thinking Hats or 6TH.
Here’s how it works
There are six different imaginary hats, with each having a different colour.
Each time you put on a hat, you change the way you think about something. It also helps you see with better clarity and with a different perspective.
Whether you’re having an argument, making a decision, solving a problem, building a business or creating a trading strategy – the 6 Thinking Hats will help streamline the process.
If you’re with more people, make sure everyone is wearing the same hat at a time, to avoid conflict.
Let’s now get into the inner workings of the 6 Thinking Hats, and how it can apply to your trading and other aspects in life.
HAT #1: WHITE
NEUTRAL VIEW
This is the hat that contains all of the information, facts, data, figures, metrics and statistics.
When it comes to trading there are certain facts that you need to have considered including:
The broker you choose
The affordability
The costs involved
What equipment you have to trade
Back testing, forward testing and real testing data and statistics with your strategy.
HAT #2: RED
EMOTIONAL VIEW
The second hat you’ll put on is the RED HAT.
When you put this hat on, come to terms with what you feel.
I’m talking about your intuition, your fear, your greed and your gut feeling.
Then when it comes to trading ask yourself these questions…
· Can you handle risking money you have?
· Do you feel you have the discipline to pursue trading on a weekly basis?
· Do you enjoy the idea of trading?
· How much money do you think you can easily deposit into your trading account?
· How much money do you think you can psychologically handle losing, if you take 10 losing trades in a row?
· Do you think you can sleep easily at night knowing you have your money tied up in the markets?
Once you go through all the feelings and you answer the questions, then you can move to the third hat.
HAT #3: YELLOW
POSITIVE VIEW
This is the hat you’ll find is the one, you want to leave on when you think.
It’s the hat that contains all the benefits and rewards.
When you put this hat, you’ll think of the following with trading:
What are the benefits to trade?
How much money do you want to make a year trading?
Why will your trading strategy work?
What are your goals as a trader?
Why is trading the best decision for your financial future?
Feeling good? Well you’re supposed to when you put on the yellow hat.
But we still have three more hats to go…
HAT #4: GREEN
CREATIVE VIEW
With every decision comes extra out of the box thinking. And that’s where the green hat comes in.
When you put on the green hat, this is where your imagination should help you with brainstorming, new ideas and add-ons to the think tank process.
With trading, there are just so many different ways to be creative. And you’ll find that with ever evolving markets, you’ll need to adapt and adjust course.
Here are some ideas to think of when you put on the green hat.
How can I let my winners run further systematically?
How can I increase my win/rate i.e. Trailing stop loss
What indicator can I use for peripheral vision to help with my confirmation on each trade?
I should create and print a few psychology sticky notes to help with my trading.
I should name my system to be more personal with it
I should find ways to tweak my system which will help with the performance
I should have a trading consultation with Timon to help build and optimise my trading strategy better J.
HAT #5: BLUE HAT
PROCESS VIEW
When you put on the blue hat you should think of three main things…
Systems, criteria and planning.
This is where you’ll choose the criteria you’ll follow with your trading strategy.
What indicators are you using?
What parameter’s are you using with the indicators?
What time frame works best?
What calculators do you need whenever you trade?
This is where you’ll find the main work takes place once all the planning is done…
And one where you’ll eventually marry a strategy to help grow your portfolio.
HAT #6: BLACK HAT
NEGATIVE VIEW
When you put on the black hat, four things should arise instantly.
Difficulties, problems, weaknesses and risks…
I saved this hat for last, because it’s the only hat that will most likely help you decide whether trading is for you or not.
But you can re-arrange the hats according to your won preference.
The main things to ask when you put on the black hat, with trading is:
What are the dangers of trading, risks, financial risks and time risks?
What if the system stops working?
Why are you sceptical about trading?
What if the current markets go into an unfavourable territory?
What if the market drops to zero when I’m in a long trade?
FINAL WORDS:
How awesome!
You now have The Six Thinking Hats to your every decision making process.
You’ll find that it will force you out of the mono-lateral way of thinking which you’ve habitually had your entire life.
You’ll see things with new perspectives and compartmentalize issues in new ways…
It might even pro-long your marriage or improve your relationships…
If you enjoyed this article, I would love to hear your thoughts
Trade well, live free.
Timon
MATI TRader (Established 2003)
LEAVE ME ALONE! LEAVE ME ALONE!
Once you have entered a trade and set your trade levels (such as stop-loss and take-profit), LEAVE IT ALONE.
It is important to let the market play out and not interfere with the trade.
This way you'll follow your trading plan and not be swayed by emotions or external factors.
Also, if you leave it alone it will also stop you from taking impulsive decisions in the future, which can be super dangerous in the long term.
Once you've done your bit and left the trade to do its thing, once it hits your stop loss or take profit - you'll be able to track, record, evaluate and monitor your trading results.
This cuts out the subjective feelings, emotions and opinions.
It's the play of patience that will help you to learn how to trade well for your financial future.
Do you know what it takes to be an Algo Trader?To be an algo trader, you typically need to have a strong background in computer science and programming, as well as a good understanding of financial markets and trading strategies.
Here are some of the important elements you need to be a top Alog Trader:
Experience with database management and data analysis
Knowledge of statistical analysis and machine learning techniques
Understanding of financial markets and trading strategies
Strong analytical and problem-solving skills
Attention to detail and ability to work under pressure
Overall, to be algo trader requires a combination of technical expertise, financial knowledge, and strong analytical and problem-solving skills.
It can be as simple as having an easy and proven mechanical strategy that you can demo, back test, forward test, analyse, monitor and evaluate your results.
This way, you'll have a decent idea on what your system and strategy potentially could yield in the near future.
Trade well, live free.
MATI Trader
Feel free to follow our socials below if you enjoy this content :) Thank you.
TRADERS! One step is a step forwardHello traders,
Are you feeling stuck in your trading journey?
Are you constantly asking yourself
"WHICH WAY AM I MOVING?"
Let me tell you something: as long as you are taking one step at a time, you are moving forward.
It's easy to get caught up in the day-to-day ups and downs of the financial markets. We can get so focused on the short-term fluctuations that we lose sight of the bigger picture.
But here's the thing: those short-term fluctuations are just noise. They may affect your account balance in the short-term, but they don't define your long-term success as a trader.
So how do you stay focused on the long-term and keep moving forward? Here are a few tips:
Set clear goals for yourself.
hat do you want to achieve as a trader? Do you want to be consistently profitable? Do you want to learn a particular trading strategy? Whatever your goals may be, make sure they are specific, measurable, and achievable.
Keep a trading journal. Writing down your trades, your thought process, and what you learned can help you reflect on your progress and identify areas for improvement.
Seek out education and mentorship.
There is always more to learn in trading, and having a mentor or joining a trading community can help you gain new perspectives and stay motivated.
Remember that trading is a journey, not a destination. It's easy to get caught up in the thrill of making a big trade or hitting a home run.
But the most successful traders are the ones who are in it for the long haul. They are the ones who are consistently learning, adapting, and improving.
So don't get discouraged if you have a few losing trades or if you feel like you're not making as much progress as you'd like. Keep taking one step at a time, and you will get there.
Trade well, live free.
Timon
MATI Trader
Feel free to support me and follow my socials below...
How Blockchain Works in 6 StepsThe future of apps, programmes, trading, investing and businesses all lie in one underlying technology – Blockchain.
You’ve probably heard about it when it comes to crypto-currencies.
But it extends so far beyond them.
In this section, you’ll think of it in a whole new level where you’ll be able to:
• Understand blockchain in a nutshell
• Understand the power and possibilities it will bring to the world
• See the trading and investment opportunities to come
Let’s get to it…
What blockchain is in a nutshell…
In short, a blockchain is one continuous digital ledger of records and transactions which are organised, verified, and positioned next to each other in ‘blocks’ linking a permanent and transparent chain of other ‘blocks’.
Here’s a short illustration on how a Blockchain works…
The important concept with blockchain is that, the chain “ledger” of transactions are neither stored in a central location nor is managed or run by a single entity.
We say the blockchain is decentralised, secure and the transactions are added permanently in a transparent and resilient manner using cryptography (special codes).
The parties between the transaction will also remain anonymous while enjoying the security, transparency, speed and cost efficiency.
This will have major advantages over centralised systems in a way that:
• The transactions will be easy to track
• There’ll be less manipulation and corruption
• There’s more transparency
• There’ll be less costs and less middlemen.
NOTE: To alter one block, you’ll need to change every block throughout the network (which is virtually impossible).
And as the historical blocks information stays the same – you’ll be able to forever track the old transactions with the given public information.
I’m talking about these main sets of information each ‘block’ has.
1. The data of the new block (code or digital fingerprint)
2. The hash of the previous block (code – letters & numbers)
3. A time stamp
4. Transaction data
Once you understand the process and how secure a blockchain is, you’ll see how it will not only disrupt industries but it will also change the global and financial economy as we know it.
Trade well, live free.
Timon
MATI Trader (Financial trader since 2003).
Feel free to follow my socials for more real-time posts!
Why Multitasking is Dangerous for Traders – 6 REASONSWe have come to believe that juggling multiple tasks, will somehow reward us eventually.
But with trading, I can’t think of anything worse.
In fact, I think it’s counterproductive to multi-task when making financial decisions for your trading.
And no! Lying on the couch, or on the beach with your phone while talking to friends is ALSO a no go.
Here’s why I think multi-tasking is dangerous…
DANGER #1:
You miss crucial opportunities:
If you’re focused on watching TV, eating chips and watching TikToks at the same time, I guarantee – you will miss out on high probability trades.
You need to have full focus and pay attention to the markets, when you’re trading or it will affect the quality of your trading and setups.
Danger #2:
Delays in trading decision making
Multitasking can slow down your decision-making process and prevent you from acting in a timely manner.
Think about it… It’s one more video to watch, it’s 10 more minutes until the show ends. Let me just finish my beer first.
The market waits for NO ONE!
So act accordingly.
Danger #3:
Stress levels through the roof
You’re going to make impulsive, emotional decisions.
You have your heard earned money in an account ready to take on the local and global markets.
If you have sounds, food and other distractions in the background – it will affect your stress.
This will not only put you off trading but might also scare you out of it completely. These types of decisions can be costly in trading.
I mean, trading can be stressful enough on its own.
Add multitasking to the mix and your levels of stress and increase feelings of anxiety will sky rocket.
This can lead to burnout and negatively impact our overall performance.
Danger #4:
Drop in prod
You might feel that you can get more done by multi-tasking but it actually will decrease your productivity and efficiency.
When we try to do too many things at once, it takes us longer to complete each task and we may not do them as well as if we had focused on them individually.
Danger #5:
More mistakes
Trading needs to be laser focused!
If you multi-task you need to remember something. You are human and you are susceptible to making mistakes and errors.
You might miss a trade setup.
You might type in the wrong trading levels.
Or worse… Trading volume.
You might miss opportunities to lock in profits through adjustments.
Just take it one trade at a time and focus on the time in the markets…
Danger #6:
Ruin relationships
Ok this one is a bit of a stretch, but I think it relevant.
If you multi-task while trading, what about the rest of your life.
You most likely will multi-task while eating dinner, talking to friends, driving or even spending time with your children.
This can most definitely have a negative effect on not only your trading but your life, relationships and will lead to even more stress…
If you’re still reading this then I want you to do something for me.
I want you right now to take a DEEP breath in….
.
.
.
.
.
And out…..
Just slow down. Take it easy. Focus on one thing at a time and enjoy the process.
Be more present and you will find life will be a lot more easier in your everyday.
I am writing this because I want you to start your year on a calm, focused and powerful note.
You got this.
Trade well, live free and take it EASY!
Timon
MATI Trader
How a Simple Cup of Tea Can Improve Your TradingTraders are always on the lookout for ways to improve their performance.
They are always trying to find ways to make better decisions in the markets.
While most people might not think to turn to tea as a solution, it turns out that…
This simple beverage can actually have a surprising impact on trading.
The amazing benefits of drinking tea with trading.
Benefit #1: Relaxation
What is amazing about tea is its ability to help you relax and calm you better.
In the fast-paced and high-stress world of trading, it’s easy to get caught up in the excitement and intensity of the markets.
This can lead to impulsive, emotional decision making that can be costly. Once you have a cup of tea, it can help you take a step back, relax and allow you to approach the markets with a clearer and more rational mindset.
Benefit #2: Focus
Tea can also improve focus and concentration.
Many traders rely on caffeine to help them stay alert and focused, but it’s important to remember that too much caffeine can lead to jitters and anxiety.
Tea, on the other hand, contains a lower amount of caffeine and also includes antioxidants and other compounds that can help improve cognitive function.
My favourite tea is good old Rooibos “Red Bush” which is a special tea from South Africa that doesn’t contain any caffeine.
When you sip on a cup of tea, you’ll find it will help improve your focus and attention to detail.
This is crucial when analysing the markets and making financial decisions.
Benefit #3: Health
Great health is great wealth.
Another benefit of tea is that it can improve with your physical health.
You’ll find trading can be a sedentary job, and it’s important to take care of our bodies in order to maintain optimal performance.
Tea is packed with antioxidants and other compounds that can help improve digestion, boost the immune system, and reduce the risk of certain health conditions. When you add tea into your daily routine, you will most definitely improve your overall health and well-being, which can in turn improve your performance in the markets.
Of course, it’s important to remember that tea is just one piece of the puzzle when it comes to improving trading performance. It’s important to have a solid trading strategy, stay informed about market developments, and manage risk effectively.
In conclusion!
Not only does this simple beverage promote relaxation and calmness, allowing you to approach the markets with a clear and rational mindset, it can also improve focus and concentration, thanks to its lower levels of caffeine and cognitive-boosting compounds.
And, let’s not forget the physical benefits – by incorporating tea into your daily routine, you can improve your overall health and well-being, leading to better performance in the markets.
So, trade well, live free, and don’t forget to enjoy a cup of tea!
Timon
MATI Trader
(Financial trader since 2003)
Happy New Year 2023 - Only 1 tip for you!If you don't know your trading levels, then you don't have a game plan...
The only time you're ready to trade is where you have the exit plan in mind through risk and reward as well as WORST case scenario...
Are you ready to trade in 2023!
My only tip for this year is go where you are appreciated NOT where you are tolerated.
Trading View is such a special place because we all have one thing in common.
To take control of our own life without any dependency.
I've been trading since 2003 and now have the platform to share some ideas and experiences that I've gone through to eventually trade for a living from 2011.
Welcome to 2023. May it be a year of learning, improving, growing and profiting.
Trade well, Live free...
Timon
MATI Trader
What Billionaires Taught me About TradingDid you ever wonder why influential people wear the same clothes every day?
• Mark Zuckerberg wears his famous round neck grey t-shirt.
• Richard Branson wears his famous pair of jeans.
• Steve Jobs wore his black turtle neck.
• Barack Obama wears either his blue or grey suit.
Well other than promoting their signature look, there is a much more deeper and important reason for it…
You might want to consider this analogy for not only trading, but for every important aspect of your life.
Why Mark Zuckerberg wears the same outfit
Facebook CEO, Mark Zuckerberg held the first ever public Q&A session at FB California headquarters in November 2014.
During the hour session, he was asked why he wears the same grey t-shirt every day.
Here was his answer:
“I really want to clear my life to make it so that I have to make as few decisions as possible about anything except how to best serve this community,”
“I feel like I’m not doing my job if I spend any of my energy on things that are silly or frivolous about my life,”
Less decisions – More success
This concept to make one decision on what outfit to wear, is to help prevent ‘cognitive fatigue’.
One less decision to worry about in life will save your brainpower capacity to help make decisions that matter for the future.
Besides, the more decisions you make – the more complicated life is.
Ok, so you got the gist…
Here’s what this lesson taught me about trading
As a trader, there is plethora of events taking place every day.
There are countless factors to consider:
• Markets
(Forex, shares, indices, commodities and cryptos)
• News events
(Employment, GDP, macro & micro announcements)
• Indicators
(Moving averages, RSI, MACD, Price action etc…)
• Time frames
(Tick, 5 minutes, 30 minutes, daily, weekly)
• Strategies
(Moving average crossovers, breakout patterns, volume analysis)
It’s enough to test everything until the end of time!
That’s why, I have personally worn the same metaphorical outfit for the last 14 years.
NOTE: It took me 7 years to find this outfit!
1 Strategy – MATI Trader System
1 Time frame – Daily
1 Indicator – Price action
1 Risk level – 2%
1 Financial instrument – CFDs
It’s all about finding what you find comfortable, consistent and sustainable…
How to find your one outfit when you trade
This is most definitely a self-introspection journey to find the ‘outfit’ you will be wearing as a trader.
To start, write down your trading strategy and markets you want to trade…
My biggest tip – Keep it simple, minimalistic and comfortable…
WARNING! This will reflect on your tradingThe world thrives on drama, gossip and most people just want it to end by the way they think...
I can't blame them because most people are struggling to live their lives where they are working from pay check to pay check. Where they are hoping their boss will give them a half day off.
Where they are constantly feeding the fat cats of the world and paying taxes from their salaries.
But then trading comes along, where you can have some degree of control of your finances and investments.
Where you can risk what you wish and play the rules with growing a portfolio,...
BUT if you bring in your emotional aggression and tendencies, it will reflect on your trading...
Instead, you should work on yourself more.
Don't be angry over unnecessary things
Don't make a mountain out of a mole hill
Don't risk anything you can't afford to lose
Don't get angry over a small loss - you are in the trading den to make money NOT to be right
Take 10 DEEP breaths in and out before you make any impulsive decisions or take any abrasive action.
Focus on change and the whole world, your mind and your trading results will change with you...
Let me know if this helps by commenting below or at least liking this post.
Trade well, live free,
Timon
MATI Trader
