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Tradingpsyhology

Emotional rollercoaster in trading. Which stage are you at?"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor." - JESSE LIVERMORE Consider a trader named Jon, who began Forex trading with high hopes of significant profits. Jon had a solid understanding of technical and fundamental analysis, and on paper had developed a profitable trading strategy and system. However, he was not prepared for the psychological challenges of the stock market... Phase 1: Overconfidence and initial successes In the beginning, Jon executed a few trades that turned out to be very profitable. This initial success boosted his confidence to the highest level. He began to take larger positions, thinking he had a natural talent for forex trading. His overconfidence led to impulsive decisions and excessive risk taking. Phase 2: Reality check Because Forex can be very volatile, Jon soon scored a series of losses. He became anxious and stressed, and began to act chaotically and in a hurry. He opened riskier and riskier trades, and wanted to trade. Losses chased losses. His emotional state worsened, affecting his personal and professional life. Phase 3: Seeking help and education After significant losses and emotional turmoil, Jon realized he needed help. It was natural that he started by changing to another system, then another and another, and... Still without better results, he turned to trading psychology. He learned about typical emotional traps, such as fear, greed, trading with a vengeance "to trade," lack of discipline, and poor mental toughness. He also sought support from mentors. He learned that top-earning traders put 90% of their efforts on psychology. Similarly, in the richest trading funds - they spend huge money on psychological departments and programs to support traders. He sought knowledge on how they do it. Phase 4: Developing emotional resilience Jon gradually began to implement strategies to build mental toughness and manage his emotions. He learned to accept losses as part of trading, stick to his trading plan, beyond emotionally managing risk and capital, and avoid making impulsive decisions. He also practiced mindfulness and relaxation techniques to reduce stress while trading. Phase 5: Consistency and long-term success Over time, Jon's mental strength improved significantly. He was no longer driven by emotional ups and downs. He built discipline and learned to maintain it, and began to manage risk and capital effectively. As a result, his performance stabilized and he began to make steady profits, gradually building more and more capital. This is a typical trader's path, and reflects the typical challenges and experiences that many traders encounter in their "trading life." Unfortunately, in most cases it does not end so positively. Traders are unable (unwilling) to jump from 3 to 4. While it is the mastery of one's psyche that is often the key to long-term success in the forex market. And you, do you like to lose or make money? "Just as professional athletes work on their body and psyche, traders should start to learn about their strengths and weaknesses and create something like a mental gym or gym for themselves. The idea is to be technically better and mentally stronger. If I were to point out a few mental qualities of the best traders it would be the ability to focus in situations of chaos and volatility, the ability to stick to the plan despite everything, the ability to manage one's reactions to highly stressful situations (like special forces). In one sentence... Current traders face a simple choice: either strengthen their psyche and increase their market advantage, or many of them face losses and abandonment of their profession." - Dr. Dariusz Swierk If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers! Follow: www.tradingview.com
Education
by drSwierk
What are emotions in trading? Where do they come from?We have two channels with which we perceive the world. The first (customarily attributed to the left hemisphere) is the analytical channel - the stream of thought, we usually think is rational. The second (customarily attributed to the right hemisphere of the brain) is the emotional channel. We perceive what is happening around us emotionally. We can better understand the role of both channels when we turn to simple evolutionary biology. Thinking allows us to understand the world: to seize opportunities and avoid threats. Emotions and feelings tell us what is an opportunity and what is a threat. In other words, emotions give meaning to the events we perceive. In the vast majority of people (that's evolutionary biology again), the emotional channel is stronger. People who are completely emotionless are considered cold or even impaired. Strong emotions usually turn off the rational channel, because the primary function of emotions is to identify a threat, "turn off" thinking, redirect blood from less important organs (including the brain) to the muscles, initiate a hormonal response: prepare the body to fight or flee. The same way emotions work in trading. What is emotional trading, emotional investing? The problem begins when the emotional channel begins to strongly dominate the thinking channel. This is when actions occur that traders later say "I don't know how I could have done that". This is how the rational channel sums up thinking and acting under the influence of emotions. But... it just works that way. Strong emotions usually turn off the rational channel, because the primary function of emotions is to identify a threat. Strong emotions are triggered by a strong threat. The emotional reaction triggers a hormonal response which cuts off thinking, pumps blood to the muscles, injects cortisol and adrenaline (we become stronger, tougher and more resistant to pain). It's a survival mechanism - our body prepares to fight the threat or run away. Here you don't need to think, you need to be strong, fast, fit and resistant to pain. Thanks to this, as a species we have survived and dominated the planet. The problem arises when we have this reaction in front of the computer and strong emotions cut off our thinking, while we need a sober judgment of the market situation (a good rational channel) because we are not preparing to fight a tiger or a bear just to re-analyze a position in the market when something unusual has happened. How the best traders control emotions in trading The best traders have both channels functioning well even in the most difficult situations. This means that even under the influence of strong or even very strong emotions in trading, the best traders are able to make good decisions. The best traders are helped in controlling their emotions in trading by several important things: experience proper preparation ability to manage emotional reactions in trading Most of the best traders are able to act efficiently despite their emotions, and even treat them in some cases as a source of information about what other market participants are feeling, e.g. during a market panic. A trader may feel strong emotions in trading, e.g. fear, but will still correctly execute many entries in a row in a market panic. Here, traders who work alone are easier - they can cut themselves off from emotional news, TV and just don't read incoming news. Traders who work in trading rooms find it more difficult, because the atmosphere of panic is shared by everyone. How to control emotions in trading? The best tools to control such situations have special forces. Soldiers there are systematically put in life-threatening situations and they have to act soberly and precisely. The training that the best troops undergo includes breath regulation, process management (I'll explain in passing) and, of course, preparation in real life, simulation and visualization for whatever may happen during a mission. For a trader, there are situations that are critical, just as for soldiers - a few wrong emotional decisions can wipe out capital built up over many months. That's why - breath work, good preparation, awareness of risks and knowing how the stress response works (and inhibiting it) are techniques worth learning. The best traders work on their mental resilience using, among other things, military methods of working with stress (I write more about this in my Top Investor training here, I also describe the exercises used there). And one more thing - special forces soldiers have a much stronger psyche (mental toughness in other words), as do the best traders. And this is also worth working on. What emotional challenges do you have? Let me know in the comments. I will prepare options for solutions. If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers! Follow: www.tradingview.com
Education
by drSwierk
Improve your decision-making process in tradingThe trader's decision-making process is one of the most important concepts in trading for me. Why? Results depend on a good process. So what is a trader's decision-making process? Generally speaking, these are all the thought processes, analytical processes and decisions you make from the initial analysis ("idea") to the closing and analysis of a position. The entire thought process that goes on in your head. This approach came to my mind, even imposed itself when I thought about how AI in trading would make decisions - the best possible ones. Then the same principles were already obvious in application to traders. And still later it turned out that the best traders have specific elements of the decision-making process, practically absent in other traders. That's enough history, now what came out of it... What is a trader's decision-making process? A trader's decision-making process (or the decision-making process in trading) consists of two components: rational (analytical) and emotional. The more experienced the trader, the more importance he attaches to the emotional component - but in a specific sense. This does not mean that emotions dictate to the trader what to do. Very experienced traders treat their emotional state as an additional source of information, and are able to "stand by" and hear the voice of intuition above and beyond the emotional noise. To quote one experienced trader: "If I feel pressure in this situation it means that others in the market also feel it. The one who can withstand it better will win." What does a trader's decision-making process consist of? Let's break down your decision-making process into components. 1. It starts with analyzing the markets and choosing an instrument (specific stocks, specific currencies from the available pool - for example). What factors drive your choice, why did you choose this instrument and not another? Here we have the first decisions. On what basis do you make them? This is important, because if you start thinking about how to improve your decision-making process in order to have better results - you will understand that... perhaps it is possible to choose better. I'll state how the best do it: they learn to choose the best inputs from those available to them. In the sense that if they specialize in a certain sector of companies - they choose shorts or longs with the best views of profits. Of the many opportunities that are available, they try to choose the ones with the best prospects. The best traders try to choose only the best opportunities from among what is available in the markets they trade. They don't trade on everything. What does this mean for you? It means that you can, and even need (!) to work on your criteria for selecting an instrument, so that you choose the one on which you will find it easiest, on which you will earn the most (potentially). The selection criteria may be different for different Treders. In the case of AI systems, their development goes something like this: searching for the best opportunities from what is available. At the same time, it will take a fraction of a second to search, for example, five thousand companies in this regard. And from this vastness, the system will select, for example, 100 for further analysis and trade. I mention this to begin to slowly make you aware of what analytical and decision-making power you are dealing with, because you won't jump over it. But let's get back to the decision-making process. 2 We have selected for example, the best companies, what next? Let's assume that we want to enter the market, as long as the criteria are right. And here comes another question: where, among the selected companies, are the best situations? A simple example: we want to trade longs on companies with good fundamentals. Our selection factor at this stage of the decision-making process may be volume behavior. We are concerned with entering such movements, where volume is clearly increasing - which suggests that the interest of buyers is growing. At this stage we will rank the selected companies according to the best situations of increasing volume. Somewhere the volume is too low, somewhere it is too high, and the price is not rising much (which is not the best option). So we have several companies with the best situation at this stage. In this example we used volume, but we can analyze more elements: candlestick formations, Fibonacci levels, MACD, CCI and thousands of other indicators. We can also use confluence of indicators and situations, for example, the price reaches the average 200 from the top, is close to resistance and at the Fibonacci 62% level. Here several things meet at once, it can be an interesting decision-making place. With several combinations to choose from, ask yourself which indicators are best for your purposes? 3. Now it's time to decide how much capital you will invest. A trader's decision-making process is a series of analyses and decisions. Each distinct element of the decision-making process you can improve, address from different sides, analyze and improve according to different criteria. This gives you the opportunity to improve your results - improving one by one each element on which these results depend. How does the trader's decision-making process differ between experienced and novice traders? According to a study of institutional traders - less experienced traders use emotion avoidance strategies in the same situation. This makes a difference and a barrier for beginner and intermediate traders. The best traders are able to withstand a lot of long-term pressure by entering into it consciously, while less experienced traders at some point succumb and run away from the same position. Both groups of traders differ in experience, but not only - they differ in their strategies for dealing with emotions while trading. Because it turns out that not only experience matters. Studies show that traders with very high trading experience (e.g., more than 20 years) and not using strategies for working with emotions like the best traders - have poorer results. To give just one example: getting to the TP - due to the pressure of the markets, traders often run away from positions, emotions, the pressure on the psyche is too strong. The psyche is the filter through which all decisions pass. And it can disturb each decision and each step - from the initial analysis to the execution of the entry. The way you handle your emotions in trading allows you (or not) to survive chaos, volatility, uncertainty and panic, allows you to continue to enter the market when others have long given up, opens new doors to results. Proper handling of emotions is essential to a trader's correct decision-making process. A recipe for improving trading performance with the help of a trader's decision-making process In short: break down the way you make decisions into components. Learn as much as you can about how you can improve each of them. That's not everything, of course, but that's all you need to start with. In the future, I'll write more about the next steps and the best practices you can use there (click follow to get notified). If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
Education
by drSwierk
What are the traits of the best traders?This article is hugely important, especially for traders outside the funds. The basis is to observe the best traders, specific behavior when they are successful. Interestingly, the same behavior is observed in the most outstanding athletes, businessmen, members of elite special units. The best of the best, when they are successful - they want to be even better. That's why - they don't stop educating themselves. They continue to learn about their strengths and weaknesses and work on them. They continue to train, research, develop technical skills - in our case, knowledge of markets, new analytical methods, new sources of advantage, new strategies, indicators and tools to facilitate their work. Professional development has become a lifestyle for them, something they do regardless of success or failure. The success they enjoy is certainly rewarding, but it is also contextual, an (inevitable) by-product. Interestingly, they often derive more satisfaction from this effort than from the success itself: in the market, in business, or from completing a very difficult mission. For them, learning, developing, overcoming themselves is a way of life, a passion that consumes them, a blessing that brings them success and a curse that consumes virtually all their time. In short - their secret is passion Passion enlightened, by that I mean that you know your strengths and weaknesses well and work with specifics. And if we're talking about specifics, we're also talking about measuring results, states, progress. But that's a story for a completely different article, which I'm sure will be written at some point. What are these qualities of the best traders? The trump card of the best trader consists of 2 parts, and in order to systematically make money you should have both. technical psychological Technical advantage - I understand it as all the skills and knowledge that make up your trading system. Do you know what exactly your advantage is? To show the extreme advantage I will use the example of the best traders. Everyone else has some kind of advantage "between" the best and the weakest (who do not have these qualities at all or at a very low level). What creates the advantage of the best traders? Access to unique knowledge, preferably before everyone else. Knowledge of companies' plans, new products (which is unavailable to others), especially in the case of stocks. The ability to reliably estimate the performance of companies before they are published Knowledge of political changes and their impact on markets Use of alternative data Taking advantage of market formations that pay well and that others don't know about. To this we can add: knowledge and ability to use technical analysis finding specific entry points and methods using formations that others have overlooked or using what is known, but in your own unique way How to build an edge in trading? The advantage of the best traders is usually built from several things at once. It can be a hybrid of several things, for example, they can use their knowledge of company movements, identify entry points through technical and volume analysis, and execute the entry itself through an automated system that makes great use of liquidity. The advantage of the best traders can come from better tools, e.g. to build positions, to maximize positions (there are some in the largest funds) improve performance and simplify life. You will find your advantage if you answer the question: on what basis do I make decisions about the choice of an instrument (company, commodity, currency...)? Some systems are based on fundamental analysis, macro analysis, company analysis, supply and demand analysis (e.g. commodities), then we have technical analysis, price and candlestick formations and a host of indicators. You will see your advantage (or lack thereof) when you ask yourself, what is unique about your system? You may answer that you are using, for example, well-known price formations, triangles, flags or similar. However, this may mean that you are doing the same thing as everyone else. There is nothing wrong with that if you are trading on a small scale, privately or as a hobby. However, if you are or want to be a professional trader this is not enough. Formations, elements of technical analysis sometimes work and sometimes not. If something is repeated over and over again, large traders will enter the market and use the accumulated orders for their own entries (stop hunting is an example) and your advantage will disappear sooner rather than later. A pattern that worked very well will suddenly cease to exist. The best traders not only know exactly what their advantage is, but also go to great lengths to improve it. This article is not intended to give you a ready answer of what to do and how to do it, but rather to point out a problem that could cost you a lot in the future. You should, like the best traders, know exactly what your trading advantage is and build on it. If you don't know that, I hope I patted you on the shoulder and told you that you fell asleep at the wheel. Nothing bad has happened yet, but you've already fallen asleep. So what is your advantage? Let us know in the comments! If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
Education
by drSwierk
Trading BTC : Dunning Kruger Effect 🐸Hi Traders, Investors and Speculators 📈📉 Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. Daytime job - Math Teacher. 👩🏫 Have you ever wondered what it takes to be a good and profitable trader? Have you wondered how long it will take before you would have mastered the art f trading? Myself and Dunning Kruger will let you in on a little secret - the journey of pretty much every person that has ever started trading is explained in the chart above. The Dunning-Kruger effect, in psychology, is a cognitive bias whereby people with limited knowledge (in a given intellectual or social domain) greatly overestimate their own knowledge or competence in that domain relative to objective criteria or to the performance of their peers or of people in general. This happens in trading all the time. In fact, we probably all started there if we're being honest . So - What causes the Dunning-Kruger effect? Confidence is so highly prized that many people would rather pretend to be smart or skilled than risk looking inadequate and losing face. Even smart people can be affected by the Dunning-Kruger effect because having intelligence isn’t the same thing as learning and developing a specific skill. Many individuals mistakenly believe that their experience and skills in one particular area are transferable to another. Many people would describe themselves as above average in intelligence, humor, and a variety of skills. They can’t accurately judge their own competence, because they lack metacognition, or the ability to step back and examine oneself objectively. In fact, those who are the least skilled are also the most likely to overestimate their abilities. This also relates to their ability to judge how well they are doing their work, hobbies, etc. The Dunning-Kruger effect results in what’s known as a double curse : Not only do people perform poorly, but they are not self-aware enough to judge themselves accurately—and are thus unlikely to learn and grow. So how can we prevent ourselves from falling into this trap? Here's a few things to keep in mind: To avoid falling prey to the Dunning-Kruger effect, you should honestly and routinely question your knowledge base and the conclusions you draw, rather than blindly accepting them. As David Dunning proposes, people can be their own devil’s advocates, by challenging themselves to probe how they might possibly be wrong. Individuals could also escape the trap by seeking others whose expertise can help cover their own blind spots, such as turning to a colleague or friend for advice or constructive criticism. Continuing to study a specific subject will also bring one’s capacity into a clearer focus. 💭Practice these habits to ultimately escape the double curse: - Continuous learning. This will keep your mindset open to new possibilities, whilst increasing your knowledge over time. - Pay attention to who's talking about what. Is the accountant talking about bodybuilding? - Don't be overconfident. This is self explanatory. I hope you enjoyed this post today! Please give us a thumbs up 👌 _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck
Education
by CryptoCheck-
58
Checklist: Challenges that even the best traders face (part 2/2)Challenge: Inner Strength - Uncertainty. Uncertainty is also a weakness that must be eliminated. It is the negation of "inner strength." An investor or trader who is uncertain about himself, his skills or his system is an investor who suffers systematic losses. Remember, however, that both overconfidence and overconfidence lead to losses. Mature traders are in an intermediate state, neither weak nor arrogant - they are attentive and alert, ready to react to the situation. Challenge: Inner Strength - Learning self-discipline. Any experienced trader you talk to will tell you that discipline is critical to their performance. I once read a study that traders who return from vacation have trouble disciplining themselves for a short time. This made me think that if self-discipline can be weakened by a vacation, perhaps it can be strengthened? From there it was only a step to looking for methods on how to do it. With help came modern brain research, neurophysiology and, again, special forces methods. How does a discipline learn the best? Most often through difficult experiences. Severe losses and mental transitions that force them to stick to rules and certain behaviors. A bank trader who started on his own account when asked how he learned discipline answered: Thru trial and error, I found whenever traders diverged from their routine they have the tendency to become sloppy and that usually is a sign of an impending losing streak and I have the scars to prove it. If you lose in three days the earnings you've worked six months for, you won't do certain things again. Meanwhile, difficult experiences are not the only way to learn discipline - just a rather arduous and risky way. I'm not just talking about the financial losses that are the inevitable consequence of a lack of discipline. I'm talking about something more serious - your psyche may not be able to withstand the strain. After a loss, you may want to trade back and, as a result, lose all your capital. I know traders who lost fortunes and left the markets. For some, the markets have damaged their psyche and they are unable to return. They would like to, but are unable to. That's why it's better to follow the right path, that is, not to expose the psyche to either too much loss or too much gain. Both can put a heavy strain on the psyche. Challenge: Inner Strength - Resistance to market pressure After learning self-discipline, we have building resilience to market pressure. The idea is that when entering the market with an order, traders feel different emotions and it is necessary to know what to do with them. For example - soldiers train shooting, but only on the battlefield it turns out whether they can act under pressure or not. That's when emotions and stress turn on, sometimes so great that it prevents action. I remember a story, probably from the Civil War, when it turned out that during a battle soldiers literally didn't know what they were doing. Back then, rifles were loaded with powder poured through the barrel. After the battle, many rifles were found loaded several times in a row. Soldiers loaded and did not fire. The record holder loaded the weapon more than 21 times! A trader needs mental toughness "in the heat of battle" in the market. Otherwise he won't get far. Challenge: the glass ceiling Let's go further. Another important element hitherto inaccurately known was the glass ceiling. This is the level of cash handling at which stress suddenly increases a lot. I have seen this in many traders, for example, one started with very small accounts and had this level at about $1,000. He was not able to break through, he was reaching and losing due to stress. The other, also a beginner had it at about 20 thousand. He felt severe stress, so he came up with his own way of managing cash. He started with a few thousand and when he got to 20 he would withdraw, leaving a few thousand. This gave him a comfortable trade and quite reasonable earnings. Challenge: Reacting to losses and... profits The next challenge is the reaction to losses and profits. This is actually one of the central themes in trading, along with stress, the glass ceiling and taming market uncertainty. This is where all the trader's skills come together. What we currently know: we have three areas of dealing with losses. Within them we have 23 methods, including basic and advanced methods, I will cover some of them in the future. Challenge: Zona For professional traders, a key element in their success is a state of mind, the so-called "zona." This is a state in which you are, on the one hand, focused and, on the other, fascinated by the subject of what you are doing. "Zona" is not specific to trading, it is specific to the human mind. Recall when you let yourself get caught up in a very interesting movie, book, something you were doing with distinct pleasure and satisfaction. Your senses are then sharpened, your concentration increases and everything goes as it should. It took us quite a while to understand two key things - where it comes from and what hinders it. We will address zonation in more detail later. Challenge: Correct decision-making process If you have it then your analytical skills harmonize with your decision-making skills, you make quality decisions. This is the most advanced level, where thoughts, feelings, emotions converge. Here the signal from the system should be made very and well, the execution must be of high quality and it is the product of high quality decisions. This may sound a bit esoteric, the topic originated as part of the management of quality policy in investment funds. An incentive system that does not burn out the best traders can later be based on HQT. If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
Education
by drSwierk
Top traders' methods: A scenario-based view of the marketsThe best traders think in scenarios of market events. They know from experience that the market can do "anything," so it is better to be prepared for any eventuality. This approach is part of mental flexibility. It can take several forms. Flexibility in approaching the market reduces stress Flexibility in our approach to the market reduces stress - if we are prepared for different scenarios of events it is certainly hard to surprise us isn't it? A lot of stress comes from the fact that we like to attach ourselves to our analysis and our rationale, and we feel annoyed when the market acts differently. If you take several options for the development of events and prepare for each of them - you are already taking into account that, for example, one or even several orders will go to cost. With this approach, you are already prepared for the matter. You also don't succumb to the illusion of your own infallibility and need to be right. Experienced traders know that being right is useless and even harmful, what matters is making money, not being right. Flexibility can promote better profits. Flexibility can promote better profits when you think through several possible scenarios and prepare to... make money on each of them. - If the market falls, I'll do this, enter here and the TP will be here, and if it rises I'll enter at that place and set the TP like this. You prepare your psyche to act according to what the market will do - just like a hunter waits for the game to come out in one place or another. The market's subsequent denial of being "right" can take a toll on your self-esteem, and as you already know, this is an unfavorable phenomenon. Therefore, think in open-ended terms - that the market can rise or fall in different scenarios. Think how you will make money on each of them, and don't be attached to any direction, any behavior and any "right." Think how you will make money on possible ups and possible downs, and don't be tied to any direction, any behavior and any "rationale." Flexibility over the long term In the long run, you can simulate for yourself many different profit and loss scenarios. Especially simulating, recalculating a series of losses works positively. It is sobering. If you are prepared for the worst that can happen, and you are able to survive it and come out on top - you are on your way to professionalism. Be prepared for a series of battles and for the fact that even though you will lose some of them, in the end you must win the war. Tip: When preparing to enter the market, think about where you will enter, where you will put SL and where you will put TP. Think about the different ways you can manage an open order: what are your choices? Exit because the system gives a signal in the opposite direction? Exit because the market froze instead of moving in your direction? Exit because the indications of the indicators are changing? Think through the different possibilities of market behavior. Together with them, think through your reactions and your decisions. If you prepare in advance - the management of the order itself will no longer require thinking, but only the execution of the strategy adopted earlier. Such a situation is more advantageous, because the decision-making process in conditions when there is no pressure is better. If you think through your reactions and decisions earlier order management will no longer require thinking, but the execution of the strategy adopted earlier. Such a situation is more advantageous because the decision-making process in conditions when there is no mental pressure is better. Also think about what can knock you out, pull you away from your plan? What kind of distractions? Pets at home, family, phones? Think about how to eliminate these distractions or how to prepare for them when they occur. Traits of master traders Trading, systems, psyche is something unique. That is, every trader is different. At a certain level, traders participate in competitions, struggles with other traders. At the next level they are left alone, especially the best. And the best of the best start struggling with themselves. They are themselves yesterday's benchmark for what they want to achieve today. Thus, they enter the struggle with themselves, with this most important opponent. Therefore, think about it and imitate them. Be better today than who you were yesterday. And tomorrow be better than who you are today. Your new goal, which will lead you to the level of Master: "I will be the best trader I can be."
Education
by drSwierk
9
An component of every success story: Mental TaughnessIn whatever way you define your success - satisfying money, a good job, a happy relationship, financial security, the freedom to do what you feel like doing, we will always mention inner strength and discipline as factors that contribute to "someone succeeding." What is mental toughness in trading? We will define it by listing several situations and qualities that are then necessary. To begin with, I will just point out that at the root of each of them we have discipline and willpower. When you are waiting to play you need patience. When you are entering the market you need courage. When you are in the market you need mental resilience to pressure. When you are waiting to play and "something happens" you need resistance to temptation. To compel yourself, if necessary, to act or not act you need a strong will. In the long run, a strong will gives you self-discipline. Willpower is also another line of defense against toxic emotions. You need willpower when you are possessed by feelings of greed, fear, or a desire to get back at yourself. You need willpower so that when emotions arise, you can tame them so that they don't interfere with your ability to make good trading decisions. In addition to the above, you need motivation and its long-term, stronger relative - determination - to achieve success. Another element that we include in "internal strength" is resistance to failure. This is the ability to return to action after unfavorable events. Self-discipline is the ability to adapt over a long period of time to established (or imposed) rules, restrictions, plans of action. "Long term" is the key meaning here. This is important, because it is from the perspective of long-term earnings that we must now look at self-discipline. A good trader needs it over the long term, for many years. In fact, this is good news, as I will explain in a moment. This is because I am assuming that your level of self-discipline is not high, or even if it is to some extent - it is not fully conscious. And if it is - you will have enough time to raise and maintain your level of discipline. This is possible because the source of self-discipline, which is willpower can be trained, just like human muscles. The most important conclusion from modern research: discipline depends on willpower, willpower is an acquired trait, just like muscle strength, and it can be trained. What are discipline AND self-discipline? Self-discipline is the ability to adapt over a long period of time to set (or imposed) rules, restrictions, plans of action. It is assumed that their source is willpower. Willpower is similar to muscle strength. Willpower is your trait or skill that you acquire in the course of your upbringing and life. By doing systematic physical exercise, such as lifting weights, you will be able to, for example, double the weight you are able to lift after a certain period of time (assuming you haven't exercised before). The key here is a proper exercise program prepared on the basis of your knowledge of muscle structure and muscle strength building. Think of self-discipline as an opportunity to apply, to use willpower whenever you need it. And whenever you want it. Willpower is The ability to overcome your internal resistances, the ability to resist impulses, thoughts and desires. In trading it is important because: you must be able to accurately enter the market at the moment the system signals it - regardless of what is going on in your psyche, you must be able to resist the urge to enter the market when there is no signal from the system and the market has "just moved." you must be able to resist the impulse to increase the size of the order beyond what is reasonable (eliminate the danger of overtrading), you must be able to resist pressure and fear, both when you enter the market and when you are in it, you must be able to walk away from the market when you see that you are tired, broken internally, distracted, even when a signal is just coming in, you must be able to force yourself to analyze, to keep a trading journal - if you understand that it matters to your results. How do you accomplish all this? By using educated willpower (mental toughness). It has the advantage that you can train it in one field and transfer it to another (trading). If you have willpower "in life" then you can easily transfer it to actions in the market. It's the same as with muscle strength: if you have it in the gym you also have it when you want to move furniture at home. This is one of the most important discoveries of the last few years that we rely on. There are no different kinds of discipline, another in life and another in trading, so trained in one field it works in all.
Education
by drSwierk
What is the "glass ceiling" in trading?The glass ceiling is the level of cash at which the stress level suddenly and unexpectedly increases. Thinking of a specific sum that "causes" this effect in the psyche will indicate the size of the position exposed to risk. It also happens that traders talk about the "glass ceiling" when specifying the size of the account they have with a broker, but even so, the problem of the size of a single position remains at the root, since it is most often referred to as a percentage of the total account. Explanation of what is the size of the position exposed to risk. For example - with an account of $100,000, the size of 2% of the account is exactly $2,000. When we enter the market with a position of such size and in a situation when it is closed at SL we lose it - we say that we have exposed such a position to risk (losses). It happens that such feelings are aroused by the size of the position expressed in lots. Keeping an eye on the right profit/risk ratio gives us "mathematical" but not psychological security Many experienced traders say that you should not put, for example, more than 2% of your account at risk on a single position and no more than 6-8% of your account on several positions at the same time. This 2% has more of a mathematical rationale and less of a psychological one. Note that dividing an account of 100,000 into parts of 2,000 each (i.e. 2%), you would theoretically have to have 50 losses in a row to lose it all. Having a decent system and making sure to stick to the rules of the system this is unlikely, isn't it? Choosing a position with a profit to risk of three to one gives us "mathematical" safety. Simplifying - using systems with a profit to risk ratio of more than three to one, already with 30% of profitable trades (which is about one in three) we will get a nice profit. Simulation of 30% of profitable closed at 3:1 and 70% of losing at SL With 30% profitable trades on 100 trades, we will "earn" 30 x 3 x 2000 = 30 x 6000 = 180,000 Here 30 means the number of positions per hundred, the part 3 x 2000 means positions closed at a profit of three to one. In the same 100 transactions, losses will be: 70 x 2 000 = 140 000 Here we have 70 positions each of 2,000 closed at a loss. Profit = 180,000 - 140,000 = 40,000 Conclusion - even if only every third transaction results in a profit and the others in a loss - we come out with a profit. Percentage-wise, with a very good profit, over the course of 100 transactions we "earned": initial capital = 100,000, final capital = 140,000, percentage profit = 40% Learning to think in terms of multiple transactions allows you to keep a healthy distance from each of the individual inputs. Thinking in "series of trades" frees the psyche from having to focus on the importance of a single result, makes it easier for a trader to get over a single "profit" or "loss" and thus his trading is burdened with less stress. It is worth recalling this, as it is one of the necessary elements of maturing to the level of the best. However, it turns out that such calculations are less important for our psyche, which pays more attention to the size of the actual capital. In this regard, the level of the glass ceiling begins to have a critical psychological significance.
Education
by drSwierk
6 reasons for losing discipline in trading and recommendationsWhy does trading discipline weaken or disappear altogether, and it happens that in retrospect we see that we did a lot of stupid things? Let's start with some clarification. When talking about discipline we will have two things in mind. The first is discipline as a single act - an act of willpower. The second is discipline as the ability to repeatedly apply willpower which manifests itself in sticking to a specific plan of action. This second discipline is the basis for sticking to the system. We have twelve basic reasons why our trading discipline weakens. Today I will give half of them. Lack of goals and action plans In order to talk about discipline as sticking to a plan first we must have a plan. Otherwise we have nothing to "stick to." We make a plan when we define some goal and the steps by which we can realistically achieve it. In a narrower sense, we have discipline as the ability to execute a signal correctly. Again, I will "tack on" to the terms we use. After all, what does it mean to "correctly execute a signal"? Well, it is sticking to the rules set for entry, position management and exit. Therefore, don't talk about discipline if you don't have a good understanding of the following: how the signal from the system looks like, how proper position management should look like, where and by what rules you exit the market. To sum up - we do not talk about discipline if we do not have a plan and do not know "to the end" what any of the three stages of the trade looks like. Until we know this we have nothing to "stick to". I know I'm repetitive, but again some time ago a trader (more than five years of market experience) with whom I was talking asked me questions about whether he was managing the position properly, perhaps he should have done otherwise. He asked me, who do not know his system at all! This is very common - traders use systems they do not fully understand. Recommendation of action By the way, I advised him to take 100 screenshots of complete entries and analyze them (to see what the market can do and prepare action strategies for any eventuality) and then to practice these management strategies on a demo or simulator. A good system and a good trading plan are like two railroad rails on which a heavily loaded train can run. If these rails are absent or weak then the result will be poor. A good, well-rehearsed system plus a trading plan is the foundation to which, adding discipline and more generally inner strength, you will achieve success. Lack of life discipline, quitting exercise There are not two "disciplines" - life discipline and trading discipline, but there is one, and that is the ability to apply willpower. A trader may have trouble with discipline if he is poorly disciplined in life in general. With the right exercises, the level of discipline will slowly begin to rise. However, when you stop - it will slowly begin to fall after a while. The level of discipline drops when we laze around for a long time, for example, during vacation trips. Of course, holiday laziness is nothing bad, sometimes it is a blessing :) However, it's also a good idea to impose some minimal tasks on yourself - like swimming x meters every day, morning jogging, push-ups, tummies, etc. This will keep your willpower levels up. When you return from vacation, you need to take a moment to "get into the cogs" again, and this is also natural. Experienced traders in such a situation use, for example, reducing their normal rate by half for the first few trades. Bad feeling, illness Like laziness and vacations, illness, a cold or a bad mood (such as a hangover) can work. The state of the body has a big impact on the state of the mind, when we have a high temperature, for example, we usually do not think soberly. This also applies to the application of willpower and therefore discipline. Recommendation Avoid situations where we have to sit down to the market and we are not in shape. We can figuratively say that the market, the system and... our state of mind pays, so we avoid situations when we have a problem with it. Overtrading Overtrading comes in two main forms: - trading with too high a stake, - execution of too many positions during a single session. The first form gives emotional unrest (just entering too high a position is already a violation of discipline) the second causes fatigue followed by loss of concentration. Recommendation The recommendation can be only one - we avoid such situations and treat their mere occurrence as a serious warning and a reason for immediate exit from the market, because something is wrong. Fatigue Fatigue from earlier work, for example, or fatigue from sitting for hours waiting for a signal. Often it doesn't make sense, because let's say we let one pass and the next one may be in an hour or two. Sleep Recommendation Set your alarm clock for 30 minutes, no more, and lie down, preferably in bed. Sometimes it's like I get up after 12-15 minutes, my brain is calm and rested, as if I were starting the day all over again. Try it out at the earliest opportunity. NOTE: no more than 30 minutes, because if you get sleepy you feel worse and concentration is worse. The second thing - use professional solutions and replace bright screens with dark ones with dark backgrounds. They are less glaring to the eyes and you will tire slower. Exercise your eyes' focal length. Exercise your eyes every hour - look out the window at some distant point on the horizon, then move your gaze to the window frame, do this 3-4 times. The exercise counteracts cumulative eye fatigue due to constant focus at close range. Regular breaks. While sitting in front of the platform, take breaks of about 10 minutes each hour. Don't sit for more than 3 hours at a time; most people have trouble focusing after 3 hours. If you want to sit more - do two sessions with a longer break - but use it by going for a walk, lunch. During the break, change the type of stimuli - that is, drop out of turning on a computer game or watching a movie, that's not how you will rest. Get some fresh air, your brain needs oxygen. Swapping the trading platform for a game or movie and continuing to sit in front of the computer is a bad idea, it's best to ventilate yourself. Lack of oxygen makes us tire faster, hence the need to ventilate the room. "Cigarette during a break" is a mistake. Force air circulation in an enclosed room. A good solution is a small fan that forces air circulation in the room. It gives air movement, meaning we breathe easier and tire slower. Can be used all year round, including winter. Loss of faith in the system Loss of discipline can be caused by loss of faith in one's own system. That's why I talk so many times about comprehensive testing and exhaustive learning of the system. The point is to have confidence in the system, in yourself, in your understanding of the market. This confidence comes through competence - comprehensive learning and practicing of the system. Here, once again, I want to draw attention to simplicity - the more complicated a car you have, the harder it will be for you to master it. So keep it as simple as possible.
Education
by drSwierk
Stress, loss and further implicationsIn the shorter term - high levels of emotion and stress cause lower intellectual performance. Lower intellectual performance is, in other words, less efficient thinking. This is the reason that we generally perform less well on any exams, such as forgetting the simplest and most obvious things. In the long term, constant stress - can lead to irritability, headaches, migraines, heart rhythm disturbances, stomach ulcers. Some believe that the biochemical reactions that stress causes in our bodies can cause heart attacks, strokes, and may be one of the causes of the formation and development of cancer. Attempts to relieve stressful situations with alcohol can lead to alcoholism. In trading, stress can not only lead to losses, I know of traders who are unable to continue their profession at all due to high levels of stress, had to stop. So this is a serious matter, and practically every trader I know has some way of dealing with stress and its effects. And I know that what I'm going to say now may be taken as boring, but I really have hundreds of pieces of evidence for this... In which situation on the exam do you have more stress: out of a pool of 500 tasks, you have rewritten all 3 times out of a pool of 500 tasks, you only did 100. Are you now able to tell how many times one situation is more stressful than the other? Try to estimate it, e.g. 1.5 times, 2 times, 3 times... 5 times.... Those who are asked indicate that it is usually 3 or more, rarely anyone indicates less. That's why I say that good preparation, good, comprehensive knowledge of the system and practicing it in a myriad of equal situations is the best recipe for good results and low stress. Because you will be very, very, very well prepared. Causes of stress in trading Losing money in the market can be a source of stress reaction. Especially if it is a significant sum for us. For everyone this sum can be different, and for everyone such a level exists, this is the so-called glass ceiling, which we will address in future texts. Profit can be the cause of a strong stress reaction, the bigger the more likely. I know of cases of traders in whom a large profit caused a traumatic reaction (mental shock). In one extreme case, a trader who made a huge sum on options in one day experienced such a strong mental shock that he was unable to show up at his office for a year. Just being in the market can cause a stress reaction. This is how it becomes associated in the trader's psyche at some point, so that later the stress reaction occurs constantly. We will soon see how this happens and how to change it to a positive reaction. Being out of the market can be stressful, especially if you wait a long time for a signal. Another case is when we exited the market, for example, under the influence of emotions and the market continued to move strongly in our direction and "if we had stayed in position we would have made a very good profit." Yet another example of a stressful situation is a lost opportunity, a clean signal that passed us by. Uncertainty is another source of stress, pointed out by virtually all researchers of the phenomenon. Trading is, in fact, the skill of managing uncertainty and risk - we enter the market with money not knowing "how it will turn out". It is necessary to become accustomed to this situation, experienced traders pay practically no attention at all to "uncertainty" - they know that the outcome of each individual order is not known, but nevertheless, at the end of the month, after a series of orders, they will still come out on top. Two primary sources of stress: external triggers and imagination The first is the very situation we are in, for example, with an open position in the market. The second source is our thoughts and the imaginations we create for ourselves. I have mentioned several times that our mind does not fully distinguish between reality and imagination. That is, the mere imagination, the memory of a stressful situation, can generate for us the same reaction as the event. Example: If you stop reading for a moment and recall a situation: an exam, an accident, a difficult interview, for example, for a job... in a moment you may have the beginnings of a stress reaction in your body. This is how worrying and uncontrollably imagining all kinds of negative scenarios works - it causes stress and robs you of your strength. Note: What is different is mental preparation - imagining black scenarios with the intention of dealing with them, preparing your own psyche and sometimes coming up with a response and line of action - such a proactive approach builds mental strength and makes us feel in control. Stress as the sum of stress from different sources I will conclude this brief introduction with another important point: if you have other stressful situations besides investing and trading then your stress level will usually be the sum of stresses. That is, other stressful life events, e.g., an argument, accident, illness, theft, stress in traffic on the street, jet-lag can also have a negative impact on your market performance, as can stress caused solely by factors related to investing. It is worth knowing that strong noise, crowds of people can also be a source of stress. The U.S. stock market, where traders shout bids one by one, where there is a crowd and noise is even an icon of a stressful environment. Each of us reacts differently to a potentially stressful event. There are those who will not experience a stress reaction in most of the situations described. According to researchers, their high resilience to stress may be related to the absence of several factors that foster stress: internal sabotage, internal conflicts, fear of success, tying the results. Here we are not without specific techniques not only to directly affect your stress levels in investing and in general - but also to improve your outlook on life, building optimism, strength and inner resilience. They are also designed to help you become a more relaxed and happier person pursuing your goals by playing the markets with as little stress and emotion as possible. High and low susceptibility to stress vs. performance on different time frames (TF) Stress arises as a result of our reaction to external events, and we can also generate it ourselves - by thinking. People who worry have elevated stress levels because of this. In extreme cases, people who worry can fund themselves with constant high levels of stress. Often these people perceive virtually any event as stressful. If this is the case, they will find it difficult to invest, not only because there are new stressors, but because the overall stress level can quickly spiral out of control. And high stress levels mean poorer market perception, poorer quality analysis, poorer quality decisions. On the other side of the scale, we have people who can get through a lot of stressful situations without any special problems. Putting things in perspective and generalizing slightly, we can say that people with higher levels of stress can achieve better results with higher time scales (weekly, daily, four-hourly) and worse results with speculation on lower TF: day trading, quarter-hour, five-minute, one-minute. Tip: two phases of "getting by" in the market for people with high stress levels. I understand the situation of many investors who want to start with a small capital and "make a quick buck." This usually requires a lot of transactions in a short period of time, just to build up capital. I don't want to comment on this right now, I just want to share one observation. If you are a less stress-resistant person - consider two phases of your game. The first, when you accept a higher level of stress and actively apply the exercises and tips I give in the lessons - keeping an eye on your stress level. The second - when you consciously move to higher TF, where the strain on your psyche will be lower. The point is to make sure you don't overdo the level of stress on your psyche, because many traders had to leave the market for this reason and there was no one to get them out of trouble. Another important point: if you have a high level of stress in your life think of some way to change it before you get serious about investing or trading because you may not work out mentally. Stress levels decrease with increased experience and skill Of course, it is also the case that the level of excitement and stress decreases over time. Recall what it's like after taking a driving course, when after a while driving is no longer stressful and often becomes a pleasure. In trading, it can be similar. The more competent you become, the more familiar you are with the system and the market, the less stress you will experience. Of course, we have a level of glass ceiling when stress suddenly builds up, but we'll address this topic too in future lessons. How to recognize a stress reaction? Read the following description very carefully, because based on it we will learn how to deal with stress: short-term and long-term. When something sudden happens, you are the object of an attack on the street, you are about to be hit by a car your body reacts automatically with a reaction we call "fight or flight" or "fight or flight". These reactions occur automatically: Muscles tighten in anticipation of action. Breathing speeds up and deepens. You may also hold your breath for a moment in a situation of imminent danger. The heart rate increases, the volume of blood ejected during each contraction increases, and blood pressure rises. The glands inject hormones into the blood that speed up the heart rate, respiratory rate, muscle activity, and the breakdown of nutrients needed by the muscles. Pulmonary tubules dilate, blood vessels in the muscles and brain expand. Pupils dilate and auditory sensitivity increases. The body prepares itself for action: fight, defend or flee. This is a reaction inherited from ancestors, assisting a person at the time of danger.
Education
by drSwierk
Risk/Reward favors downside shift to risk Off Sentiment.. BTC has reached a crucial point in which candles appear to be failing around 35K. We must consider potential scenarios to begin the new month of November. In One of these scenarios we may anticpate a retracement to capture fomo liquidity. Fomo liquidity is psychological concept in trading that refers to the chasing of price. New Monthly candle retracement for liquidity purposes. Current : 34775 33,372 TP 1 TP 2 30,300 Weekly Level Trade idea Fakeout back below 35K
COINBASE:BTCUSDShort
by ShrewdCatfx
1
BITCOIN SHORTER TIME FRAME UPDATE Bitcoin (BTC) is currently operating within a bullish channel and has recently experienced a bounce off the support provided by the ascending trendline and the 100-day moving average (MA). The cryptocurrency is presently trading within the Ichimoku cloud, accompanied by the Relative Strength Index (RSI), signaling a bearish divergence move. For bullish trend confirmation, it is imperative for the bulls to regain momentum and achieve a decisive breakout above the horizontal resistance level, approximately around 38,000. Conversely, a sustained breakdown of the ascending trendline would suggest the potential for a short-term correction. In simpler terms, Bitcoin is following an upward trend, finding support at the ascending trendline and the 100-day moving average. However, caution is advised as the RSI is signaling a potential bearish divergence. A clear breakthrough above the resistance at 38,000 would be a positive indicator for a bullish continuation, while a sustained break below the ascending trendline could indicate a short-term correction in the market. This chart is likely to help you make better trade decisions if you consider upvoting it. I would also love to know your charts and views in the comment section. Thank you
BITSTAMP:BTCUSD
by CRYPTOMOJO_TA
The Road to Trading Mastery: the Pyramid of SuccessGreetings, esteemed members of the @TradingView and all Vesties out there! The Pyramid of Trading Success, a conceptual model designed to guide you through the essential principles and steps for success in the dynamic trading world. This pyramid serves as a roadmap, helping you build a robust foundation and ascend to proficiency and profitability in your trading experience. Let's explore the key layers that make up this pyramid: 1. Emotional Well-being / Financial Stability / Trustworthy Broker (Base of the Pyramid) At the foundation, prioritize emotional well-being, self-awareness, and financial stability. Constructive self-evaluation and rational thinking are your allies. Choosing a trustworthy broker adds integrity to your trading experience. 2. Robust Safety System Implement a robust safety system by practicing swift loss-cutting, avoiding unreliable assets, refraining from gambling, and adopting a long-term mindset for sustainable success. 3. Portfolio Management Rely on statistics, discard ineffective approaches, monitor market trends, consider long-term goals, and stay informed about economic indicators for effective portfolio management. 4. Asset Allocation Diversify your investments strategically to spread risk, drawing on years of experience in trading financial markets for optimal decision-making. 5. Tools Utilize the right tools by conducting strategy backtesting and considering automation. Backtesting refines your approach, while automation streamlines execution, minimizing emotional biases. Steps for Strategy Backtesting: Define strategy parameters, financial market, and chart timeframe. Search for trades based on the specified strategy, market, and timeframe. Analyze price charts for entry and exit signals. Record and calculate returns, considering commissions and trading costs. Compare net return to capital for a percentage return over the specified timeframe. 6. Remaining Focus on essentials covered in the first five points. Avoid distractions like social trading or complex indicators. A disciplined approach, grounded in fundamental principles, is key for tangible results in your trading journey. By following the Pyramid of Trading Success, you're adopting a comprehensive and methodical approach to trading, increasing your chances of achieving sustainable success in the dynamic world of financial markets. We welcome your valuable feedback on our article about the Trading Pyramid. Your opinion matters, and your insights can help us tailor our content to better meet your needs.
INDEX:ETHUSDEducation
by Vestinda
2
Parallel Universe: Expert's Guide to the Art of Losing MoneyDisclaimer: Warning! The given tips are born from the minds of financial disasters and for entertainment purposes only. These are the results of the imagination of unsuccessful traders with a knack for making impressive losses. These master traders are known to make their financial mistakes by making huge losses. Unsuccessful traders are honored members of FRBF - Financial Ruins of Big Fortune with lifetime achievement of negative portfolios and returns. We do not recommend following the suggestions from the unsuccessful traders otherwise we have to add you to FRBF club. Well, well, if it isn't the tired soul tired of seeing green numbers in their trading account. Can you believe it? I always have seen a dream of world's biggest loser trader. Apparently, 99% of traders out there are making money, and we're stuck in the miserable 1% who might be losing. But hey, if you're sick and tired of making money, you've stumbled upon the perfect spot. Get ready for a wild ride as I unveil the secrets to drain your hard-earned cash and proudly join the prestigious FRBF - the Financial Ruins of Big Fortune. Buckle up, my friend! 1) Borrowing Money: You should borrow money from every possible resource. Remember that Saving money and working hard for financial stability is just for cowardly people. Debt is the only key to get success in the trading world. If you have bad luck, you can get your creditors good luck by borrowing their money. Imagine when your creditor will knock on your door, and you will be running and hiding from them! How thrilling is this! It's a surefire way to reach new heights of financial ruin. 2) Avoid Using Stop-loss: We should totally ignore those stop-loss orders. There's this fascinating study that suggests traders who actually use stop-loss orders tend to have lower losses compared to those who don't. who needs that kind of useful information? Not us! We're not beginners here, are we? If you use stop-loss, it will exit the trade when market sentiments are changed. You will never be able to make huge losses. Let's just toss those stop-loss orders right out the window and dive headfirst into the exhilarating world of uncertainty. Because what's more exciting than watching our trades go haywire with no safety net? So let's embrace the thrill, ignore risk management, and revel in the rollercoaster ride of potential financial ruin. 3) Hold Losing Positions & Never cut losses: Who needs to admit defeat when we can simply cling to hope and pray that the market will miraculously turn in our favor? It's such a fantastic strategy to hold onto those sinking ships, watching our losses pile up like trophies of our unwavering determination. Cutting our losing positions? Pfft, that's for amateurs who actually care about preserving their capital and minimizing losses. We, on the other hand, choose to ride the wave of delusion and hold onto our sinking investments with unwavering faith. After all, why learn from mistakes when we can repeat them endlessly? So let's keep clutching those losing positions tightly, and maybe, just maybe, the market will eventually bend to our will. 4) Avoid Managing Risk: Risk management will not let you become an unsuccessful trader. Forget about preserving your capital and protecting yourself from substantial losses. Let's just dive headfirst into the deep end and throw caution to the wind! So, according to your brilliant logic, let's ignore risk management and trade in five stocks with a 1:3 risk-reward ratio. We'll lose $3 in three stocks and $6 in the remaining two trades. Brilliant strategy, right? Who needs profits when we can lose money consistently? 5) Never Pay Attention to News & Events: Who needs to stay informed about current events and news when it comes to trading? Ignorance is truly bliss, especially when it comes to making informed decisions and understanding market dynamics. Let's just close our eyes and ears to all those pesky news articles, economic reports, and major events that could potentially impact the market. Who needs to know about interest rate changes, geopolitical tensions, or corporate earnings releases? They're just distractions, right? Instead, let's rely on our sheer intuition and gut feelings to guide our trading decisions. (6) Overtrade Consistently: Overtrading is the key to financial prosperity in the trading world. Forget about patience, strategy, and carefully planned execution. Instead, let's indulge in a frenzy of excessive trading and drown ourselves in a sea of transactions. Who needs quality over quantity when it comes to trades? Let's throw caution to the wind and execute as many trades as possible, disregarding any semblance of rational decision-making. Because, clearly, more trades automatically translate into more profits, right? Why bother with analyzing market trends, studying charts, or conducting thorough research when we can just click that "Buy" or "Sell" button incessantly? After all, trading is just a game of chance, and blind luck is definitely on our side. 7) Never Use Technical Analysis: Technical analysis? Nah, it's all smoke and mirrors, right? Who needs those fancy charts, indicators, and patterns to make smart trading decisions? I mean, who has time for that? Sure, by using technical analysis, you could potentially have a better sense of when to enter or exit trades and where to set stop-loss levels. You might even be able to forecast market movements using theories like Elliott wave, price action, chart pattern analysis, or volume analysis. But who needs all that when you can just wing it and tap the buy and sell buttons without any plan or analysis? Who needs strategies or insights anyway? Forget about those losers who waste their time studying charts and analyzing market trends. Real traders, the ones who consistently lose money, don't bother with technical analysis or any other form of analysis for that matter. They rely solely on their gut feelings and blind luck. That's the way to go! 8) Emotional Trading: emotional trading Is a brilliant strategy! Who needs logical decision-making when you can base all your trades on impulsive emotions? Forget about analyzing charts, patterns, or market trends. Just let your feelings guide you like a compass in a hurricane. Why bother with calm and rational thinking when you can succumb to the rollercoaster ride of fear, greed, and impulsiveness? It's truly a magnificent way to sabotage your trading success and ensure that your portfolio becomes an emotional wreck. So go ahead, throw logic out the window, and embrace the chaos of emotional trading. Because nothing says financial stability like making impulsive decisions based on fleeting emotions! Good luck on your wild emotional trading adventure! 9) Always Trust Unregulated Brokers: Unregulated brokers are the epitome of trustworthiness and reliability. Who needs regulatory oversight and investor protection when it comes to handling our hard-earned money? Why bother with ensuring the safety of our funds or verifying the legitimacy of a broker? It's so much more exciting to entrust our financial well-being to anonymous individuals operating in the shadows. Who needs transparency, accountability, or adherence to industry standards? Unregulated brokers provide the perfect opportunity to navigate the treacherous waters of the financial world without any safety nets. It's like playing a high-stakes game of roulette with our life savings! 10) Always trade on others' advice Trading on others' advice is the secret recipe for success in the trading world. Who needs to develop their own knowledge, skills, and expertise when we can rely solely on the wisdom of others? Let's throw out our own analysis, research, and intuition, and blindly follow the advice of random strangers on the internet or that "hot tip" from a friend's cousin's neighbor's dog. After all, they must be financial geniuses with impeccable track records, right? Who needs to understand the underlying fundamentals or technical aspects of a trade when we can just mimic the actions of others without question? It's so liberating to surrender our autonomy and decision-making abilities to the masses. It's a foolproof strategy that guarantees confusion, frustration, and, of course, financial ruin. 11) Never Ever Take Profit It's such an intelligent strategy to watch our gains evaporate right before our eyes. Why bother with securing our profits and protecting our capital when we can hold on to winning positions indefinitely? It's so much more thrilling to experience the roller coaster ride of market fluctuations and see our unrealized gains dwindle away. Let's ignore those pesky market indicators, trailing stops, and profit targets. After all, who needs a concrete plan when we can simply rely on greed and the hope that our winning trades will magically keep going up forever? And let's not forget the joy of regret when a once-profitable trade eventually turns into a massive loss. Who needs financial stability and consistent growth when we can embrace the unpredictable nature of the market and bask in the glory of missed opportunities? 12) Learning From Mistakes Learning from our mistakes and evolving as a trader is overrated. Who needs personal growth and improvement when we can stay firmly planted in our cycle of financial self-destruction? Let's ignore those pesky lessons that losses teach us. Why bother reflecting on our trading errors, analyzing our strategies, or seeking ways to improve? It's so much more exciting to repeat the same mistakes over and over again, expecting different results each time. Who needs progress and development when we can remain comfortably stagnant in our trading endeavors? Let's embrace the thrill of consistent failure and pretend that we're on the cusp of a breakthrough while repeating the same ineffective tactics. And why stop repeating mistakes? Let's add a touch of delusion and convince ourselves that this time, things will magically turn around. Because, clearly, doing the same thing repeatedly without learning from it is the secret to unbounded success. 13) Fall for "Get-Rich-Quick Schemes" "Get-rich-quick schemes" are the epitome of financial wisdom and stability. Who needs a long-term, sustainable approach to wealth when we can chase after elusive shortcuts to instant riches? Why bother with hard work, patience, and diligence when we can throw caution to the wind and blindly trust those promising overnight success? Let's believe in the magic of "secret formulas," "guaranteed profits," and "hidden strategies" that are conveniently packaged in flashy marketing campaigns. Let's not forget the joy of handing over our hard-earned money to these self-proclaimed experts, who undoubtedly have our best interests at heart. After all, it's not like they're preying on our gullibility and desperation for a quick financial fix, right? 14) Trade Based on Rumors Baseless rumors and gossip are the most reliable sources of information for successful trading. Who needs verified facts, data, or market analysis when we can simply rely on hearsay and unfounded speculation? Why bother with conducting thorough research or verifying the authenticity of information? Let's just blindly believe every rumor that comes our way and make trading decisions based on pure gossip. It's so much more thrilling to embrace uncertainty and place our trust in unverified whispers. Who needs to understand the impact of real market drivers or economic indicators when we can make impulsive decisions based on the latest unfounded chatter? It's like playing a game of financial Russian roulette with our hard-earned money. To be continued... :D Idea by @Money_Dictators on @TradingView Platform
SKILLING:US30Education
by Money_Dictators
8
Fear Fear is a natural human response to potential threats, serving as a vital psychological mechanism that safeguards us from danger. This reaction shouldn't be a source of shame, yet it's also crucial not to let fear dominate every aspect of life. Excessive worry about potential outcomes can lead to a diminished quality of life. However, fear can also be a valuable tool that keeps us attentive in specific situations. Fear can be referred to by various names, such as apprehension, unease, concern, or tension. When an individual perceives a threat, one of these emotions comes into play. It's simple: no threat, no fear. This emotional and physical sensation should be recognized as having its limits, and the key is knowing how to manage it effectively. Now, how does fear manifest in the realm of trading? In trading, fear is a common experience for every trader. It's universal! However, some traders learn to master it, while others are overcome by it. One of the most significant fears in trading is the fear of initiating a trade. The thoughts and emotions that urge you to enter a position can be forceful enough to sow doubt in your trading setup. This can be due to a lack of chart data, the fear of financial losses, or the simple fear of making an error. Pervasive self-doubt won't lead to favorable outcomes in the long run. Overcoming this fear is essential, and having a well-defined trading strategy is pivotal. It's a place where elements like risk management, trading timing, factors, timeframes, triggers, tools, and the rules you must adhere to are clearly outlined. If any of these components are absent from your setup, then what's the point of continuing? Why establish a trading strategy if you don't intend to follow it? It's essential to set clear boundaries and acceptable losses, fully understand them, and accept them. When a 1% loss of your capital no longer feels emotionally burdensome, you'll be in a better position to analyze situations rationally and make informed decisions. Another common fear among beginners is the trepidation of trading with real money. This fear is essentially the fear of losing. While practicing on a demo account is beneficial for gaining experience and refining your trading style, it's crucial to recognize that a demo account can't fully prepare you for real trading. Don't be afraid to transition to real money trading. Some traders profit, while others pay with time. Consider your long-term prospects and where you envision yourself in one, five, or ten years. Challenge yourself to step out of your comfort zone. Control your emotions, including fear. Make confident and well-informed decisions, and consistently adhere to the rules you've established. Remember, every journey starts with that initial step. • Look at my ideas about interesting altcoins in the related section down below ↓ • For more ideas please hit "Like" and "Follow"!
COINBASE:BTCUSDEducation
by Crypto4light
Trading Psychology : 5 Questions to Ask your self Before TradingWhen it comes to trading, it's often said that success is not just about having a winning strategy; it's equally, if not more, about mastering the psychological aspects of trading. when i started trading , I struggled with this concept, and it led to blown accounts, financial losses, and a destruction my mental health. However, through perseverance, reading books , and self-improvement, I managed to get my expectations and psychology in check, and the transformation in my trading results was remarkable. In this article, I'll share the five crucial questions I ask myself before making any trade. These questions have helped me develop a disciplined and resilient trading mindset, and I believe they can do the same for you. 1. Does this trade fit my trading plan? Before even considering a trade, it's vital to have a well-defined trading plan. Ask yourself if the trade aligns with your plan's criteria. This question reminds you to stick to your strategy and avoid impulsive decisions driven by market noise. 2. Am I mentally and financially ready to accept the risk of the trade? Trading is a risky activity , its important to know if you are mentally able to handle potential losses and also it's crucial to assess whether you are mentally prepared to trade , if you are not feeling good mentally don't trade period. , Additionally, ensure that you have the necessary financial resources to accept the risk involved in the trade. Trading should never jeopardize your financial stability. 3. Am I trading based on FOMO (Fear of Missing Out) or a well-thought-out plan? FOMO can be a trader's worst enemy. Ask yourself if you are entering a trade out of fear that you might miss out on an opportunity. A well-thought-out plan should drive your decisions, not emotions. always remember that EVERY SINGLE DAY there are new and better opportunities in the market . 4. Am I experiencing overconfidence (euphoria)? FOMO can be a trader's worst enemy. Ask yourself if you're entering a trade out of the fear of missing out on an opportunity. A well-thought-out plan should be the driving force behind your decisions, not emotional impulses. Overconfidence can lead to reckless trading. Evaluate your current state of mind. Are you feeling overly confident, perhaps due to recent successes? Remember that the market can be unpredictable, and overconfidence can cloud your judgment. remember that EVERY SINGLE DAY there are new and better opportunities in the market you are not missing out on anything you are just waiting for the best opportunity that fits your trading rules and strategy . 5. Am I in the present moment (mindful)? Trading, as Mark Douglas beautifully emphasizes in "Trading in the Zone," demands a state of mindfulness. Are you fully immersed in the present trade, or do your thoughts wander elsewhere? Staying in the zone of mindfulness enables you to make grounded and rational decisions while responding adeptly to dynamic market shifts. ask yourself Are you fully engaged in the trade at hand, or are your thoughts scattered? Staying in the present moment allows you to make more rational decisions and react effectively to market changes.
BITSTAMP:BTCUSDEducation
by xAB777
Introduction to Behavioral FinanceIntroduction Behavioral finance is a captivating field that explores how human psychology affects financial decision-making. Traditional finance models assume investors are rational beings, making logical choices to maximize wealth. However, behavioral finance acknowledges that emotions, cognitive biases, and herd mentality often lead individuals to deviate from rationality. In this article, we delve into the intriguing world of behavioral finance, investigating the psychological factors that influence investors and traders and how these elements impact their decision-making processes. Cognitive Biases: The Subconscious Pitfalls Cognitive biases are ingrained mental shortcuts that our brains use to simplify information processing. Although helpful in everyday life, these biases can lead to significant errors in investment decisions. Common cognitive biases include: a. Confirmation Bias: Investors tend to seek and favor information that supports their existing beliefs or opinions, ignoring contradictory evidence. This leads to a skewed perception of market trends and an unwillingness to challenge preconceived notions. b. Overconfidence Bias: Many investors overestimate their ability to predict market movements, leading to excessive risk-taking and potentially significant losses. c. Anchoring Bias: This bias occurs when investors fixate on a particular piece of information (e.g., the purchase price of a stock) and use it as a reference point for future decisions, disregarding changing circumstances. d. Loss Aversion: Investors often fear losses more than they value gains, causing them to hold onto losing positions for too long in the hope of a turnaround, leading to missed opportunities. Emotional Influences on Decision-Making a. Fear and Greed: Fear and greed are potent emotions that profoundly impact investment decisions. Fear can trigger panic selling during market downturns, while greed may fuel excessive risk-taking in pursuit of high returns. b. Regret Aversion: Investors tend to avoid making decisions that might result in regret, such as realizing losses on investments. This reluctance may lead to inaction and failure to rebalance portfolios as needed. c. Herding Behavior: Humans are social creatures, and this extends to financial markets. Herding behavior occurs when investors follow the actions of others, even when it may not be in their best interest, potentially exacerbating market trends. d. Availability Heuristic: Investors often rely on easily accessible information or recent events to make decisions, leading to an overemphasis on recent market trends and news. Conclusion Behavioral finance sheds light on the critical role psychology plays in investment decision-making. Cognitive biases, emotions, and herd mentality can lead investors astray, affecting their financial well-being and market stability. Recognizing these psychological factors is essential for investors and traders seeking to make more informed and rational choices. As financial professionals continue to explore behavioral finance, the integration of psychology with traditional finance models promises to enhance our understanding of market dynamics and human behavior in the world of finance. By embracing the insights offered by behavioral finance, investors can take steps to minimize biases and make more objective and strategic investment decisions for long-term success.
Education
by financialflagship
Understanding the Learning CurveWelcome to @Vestinda new article about Learning Curve! We are delighted to share this insightful piece with our valued community on @TradingView ! At Vestinda, we believe in empowering traders with knowledge and tools to navigate the cryptocurrencies and futures trading. In this article, we will explore the concept of the learning curve and its relevance to the trading journey. Whether you are a novice trader or a seasoned professional, understanding the learning curve can be instrumental in your path to success. If you focus and invest time into a subject, you will eventually reach a level of mastery. The actual level clearly depends on the amount of invested time and to a significant extent on your inherent abilities to acquire the specific knowledge. I could probably spend a decade on quantum physics and not progress beyond the level of ‘enthusiastic beginner'. However, attaining mastery is seldom a smooth and linear journey. It is more like a curve in the mathematical sense, characterized by uneven ups and downs, reflecting the usual 'bumps in the road' that we all experience when dealing with challenging topics. There is a pattern in the process of learning something new (knowledge, skills, etc.), which was formulated by the American psychologist Albert Bandura. This pattern is depicted in the form of a graph known as the Bandura curve. The graph demonstrates the relationship between time (number of attempts), the level of human competence in what they are studying, and their expectations. If you have ever enthusiastically started a new training, holding high hopes for it, and then quietly gave up, blaming others or anything else, then you are not alone. To avoid repeating this in the future, it's important to understand how human psychology and the system work, and that each of us is part of this system. Below, we will provide recommendations on what to pay attention to. So, the Bandura curve shows the stages a person goes through when beginning to learn something new. 1. Clueless (You don't know what you don't know) When you first venture into trading cryptocurrencies and futures, you are essentially clueless about the intricacies of the market. The concepts, strategies, and tools may seem foreign and overwhelming. It's like staring at a vast landscape without a map, unsure of where to even begin. 2. Naively confident (You think you know, but still don't know what you don't know) As you begin your learning journey, you might gain some basic knowledge and techniques. This newfound understanding might lead to a sense of naively confident. You believe you have a handle on things, but in reality, there's a lot you're still unaware of, and the market can surprise you with unexpected turns. 3. Discouragingly realistic (You know what you don't know) With more experience, you come to a point of realization that there is much more to learn. The challenges and complexities of trading become evident, and you may face setbacks that test your resolve. It can be a discouraging phase as you grapple with the reality of how much you still need to learn. 4. Mastery achieved (You know it) Through persistence and a commitment to learning, you gradually achieve mastery in trading cryptocurrencies and futures. You've gained a comprehensive understanding of the market dynamics, developed effective strategies, and learned how to manage risks. You can now navigate the market with confidence and consistently make informed decisions. Remember: The learning curve in trading is a natural part of the process, and each stage brings its own valuable lessons. Don't be disheartened by challenges or setbacks; they are opportunities to grow and improve your trading skills. WHAT TO DO? ✅ Embrace the journey of learning and growth, recognizing that mastery takes time. ✅ Stay humble and open-minded, acknowledging that there is always more to learn. ✅ Be patient with yourself during the challenging phases and use them as motivation to improve. ✅ Keep refining your strategies and adapting to the ever-changing market conditions. Can you identify which stage you are currently in your cryptocurrency and futures trading journey? Remember, each stage brings you closer to becoming a proficient trader. We hope you found this article on understanding the learning curve in trading cryptocurrencies and futures helpful! If you have any thoughts, questions, or personal experiences related to the topic, we'd love to hear from you. Please share your feedback in the comments below. Your input is valuable to us and can help us create more content that resonates with your interests and needs. Thank you for being part of our community!
INDEX:ETHUSDEducation
by Vestinda
3
The Pyramid of Trading SuccessGreetings, esteemed members of the @TradingView community and all Vesties out there! The Pyramid of Trading Success is a conceptual model that outlines the fundamental principles and steps needed to achieve success in the trading world. It serves as a guiding framework for traders to build a strong foundation and gradually ascend towards becoming proficient and profitable in their endeavors. The pyramid consists of several layers, each representing a crucial aspect of trading mastery: 1. Emotional Well-being / Financial Stability / Trustworthy Broker (Base of the Pyramid) Sought-after Qualities: Self-awareness, Constructive Self-evaluation, Rational Thinking, and Objectivity. Prioritizing emotional well-being and financial stability is essential in the world of trading. Maintaining self-awareness allows you to understand your emotions and reactions, helping you make better decisions. Engaging in constructive self-evaluation enables you to learn from mistakes and improve your strategies. Rational thinking and objectivity ensure you approach trading with a clear and level-headed mindset. Additionally, choosing a trustworthy broker is crucial for the security of your funds and the overall integrity of your trading experience. 2. Robust Safety System Practice swift loss-cutting, avoid unreliable cryptocurrencies and low-quality stocks, refrain from gambling, and abandon the notion of overnight riches. Implementing a robust safety system is paramount in trading. Swift loss-cutting helps limit potential losses and protects your capital. Avoiding unreliable cryptocurrencies and low-quality stocks minimizes risk and safeguards against scams. Refraining from gambling ensures that you approach trading as a calculated investment, not a game of chance. Finally, abandoning the notion of getting rich overnight fosters a long-term and sustainable approach to achieving financial success. 3. Portfolio Management Rely on statistics and discard ineffective approaches. Monitor market trends regularly, consider long-term goals, stay informed about economic indicators. Effective portfolio management relies on a statistical approach to decision-making. By analyzing historical data and trends, you can make informed choices and discard strategies that have shown ineffective results. Regularly monitoring market trends helps you stay on top of changes and adapt your portfolio accordingly. Considering long-term goals ensures that your investment decisions align with your overall financial objectives. Staying informed about economic indicators provides valuable insights into the broader market conditions that may impact your portfolio. 4. Asset allocation Diversify your investments to spread risk. Requires years of experience in trading financial markets. Asset allocation is a key strategy to manage risk and optimize returns. Diversifying your investments across various asset classes, industries, and geographies helps reduce the impact of market fluctuations on your overall portfolio. Achieving effective asset allocation often requires years of experience in trading financial markets to gain a comprehensive understanding of different investment opportunities and their performance characteristics. 5. Tools Conduct backtesting of your strategies and consider automating your investments. Utilizing the right tools is crucial for successful trading. Backtesting allows you to test your strategies on historical data to evaluate their performance before implementing them in real-time. This helps refine your approach and increase the likelihood of success. Additionally, automating your investments can streamline the execution process, ensuring timely responses to market conditions and minimizing emotional biases. Here are simplified steps for strategy backtesting: Define strategy parameters, financial market, and chart timeframe for testing. Search for trades based on the specified strategy, market, and timeframe. Analyze price charts for entry and exit signals. Record all trades and calculate the gross return (including both winning and losing trades). Deduct commissions and trading costs from the gross return to find the net return. Compare the net return to the capital used to calculate the percentage return over the specified timeframe. 6. Remaining Focusing on the essentials covered in the first five points is critical for your success as a trader. Avoid getting distracted by other less crucial elements such as social trading or overly complex indicators. While indicators can be useful tools, it's important to remember that they are derived from basic price and volume data. Instead of searching for elusive patterns or magical chart overlays, devote your time to mastering the fundamental principles discussed earlier. This disciplined and pragmatic approach is more likely to yield tangible results in your trading journey. By following the Pyramid of Trading Success, traders can develop a comprehensive and methodical approach to trading, increasing their chances of achieving sustainable success in the dynamic and challenging world of financial markets. We would greatly appreciate your valuable feedback on our article about the Trading Pyramid. Your opinion matters to us, and your insights can help us improve our content and tailor it to better meet your needs.
INDEX:ETHUSDEducation
by Vestinda
2
Traders' Inverse Relationship with Breakouts⚡Retail traders often find themselves entangled in false breakouts or breakdowns. However, it's important to recognize that taking advantage of breakout opportunities isn't inherently flawed. The key lies in being mindful of the associated risks and never trading beyond what is considered an acceptable level of risk. By doing so, traders can protect themselves from unnecessary losses and navigate the market more wisely. ⚡Another crucial aspect of successful trading is planning for potential failures. While the solution seems simple – cutting losses and exiting the trade – it's essential to define what constitutes failure beforehand. Identifying these conditions before entering a trade allows traders to establish clear criteria for when it's time to step back and avoid further losses. ⚡To increase their chances of success with breakout trades, traders can consider adopting a strategy of trading pullbacks after a breakout has occurred. Typically, stocks pull back to retest their breakout levels, presenting attractive trading opportunities. While this approach can mitigate some failures, it's important to acknowledge that no trading strategy is foolproof. There may be instances where traders miss out on certain opportunities due to a lack of pullbacks, leading to feelings of "Fear of Missing Out" (FOMO). Remember, trading involves inherent uncertainties, and no strategy guarantees a 100% success rate. ⚡Lastly, traders should keep in mind that support levels offer potential buying opportunities, while resistance levels indicate potential selling opportunities. Being attentive to these key levels can assist traders in making informed decisions and improving their overall trading performance. Regards Do hit boost 🚀 for motivation.
NSE:RELIANCEEducation
by Bravetotrade
2
Gold trading idea for the next weekend Gold is at key level as respect their 1983 Supply zone and price rejected till 1959 and started growing's up to break the 1983 level the overall trend in buy so you can find buy setup which give respect to your plan. The possible moves are under; 1. If found some strong evidence on 1960 rejections then open buy positions with proper money managements, but make sure you see any rejections and confirmations candle. 2. 1948 zone also marked as smart demand zone and support from where last time market pump up. 3. 1940 zone also marked the major demand zone and you will get prefect entry with high reward setup. Note: The overall trend in buy so you can open up the buy positions and make sure to strong your physiology and control the emotions.
OANDA:XAUUSD
by Bloom_Forex_Official
Understanding US Economic newsUS Economic Indicators: We know about trends and trend changes, but why a trend changes? The tops and bottoms of the market are determined by the fundamentals, like news releases, while the technicals show us how we get between those two points. So a news release can be the cause or trigger of a trend change. So it is to our advantage to at least be aware of upcoming news releases. Here are some releases to watch for: Non-Farm Payrolls Non-Farm Payrolls have proven itself to be one of the most significant fundamental indicators in recent U.S. history. As a report of the number of new jobs created outside the farming industry each month, a positive or negative NFP can get traders to act very hastily. A better than expected figure is very bullish for the dollar, whereas a more sluggish number usually results in the dollar being sold off. There is another component of unemployment released on the same day: The Unemployment Rate. Unemployment measures the amount of people that are out of a job, but are actively seeking one. If this number is smaller, then it means that the people that are seeking jobs are finding them, possibly meaning that businesses are well off and that the economy is expanding. The NFP is a number, usually between 5-6 figures, whereas the Unemployment rate is a percentage. A higher NFP number and lower unemployment number are generally bullish for the dollar and vice versa. It is difficult to trade the NFP and Unemployment Rate only because many times traders will not pay attention to what seems to be the most significant components, but will instead focus in on what reinforces their bias. Also, the release causes a significant amount of volatility in the markets. FOMC Rate Decision Interest Rate decisions for the Fed Funds Rate are very important when trading the U.S. Dollar. When the Fed raises interest rates, the yield offered by dollar denominated assets are higher, which generally attracts more traders and investors. If interest rates are lowered, that means that the yield offered by dollar denominated assets is less, which will give investors less of an incentive to invest in dollars. When the decision is made about the rate it is always accompanied by a statement where the Fed gives a brief summary of what they think of the economy as a whole. When reading the statement it is important to check the exact language. Many times by the time that the decision is published, it is usually factored into the market. This means that only slight fluctuations are seen if the decision is as expected. The statement on the other hand is analyzed word for word for any signs of what the Fed may do at the next meeting. Remember the actual interest rate movement tends to be less important than the expectations for future interest rate moves. Retail Sales The Retail Sales figure is an important number in a series of key economic data that comes out during the month. Because it measures how much businesses are selling and consumers are purchasing, a strong retail sales figure could signal dollar bullishness because it means strength in the US economy, whereas a less-than-expected number could lead to dollar bearishness. Again, the logic behind this is that if consumers are spending more, and businesses are making more money, then the economy is picking up pace, and to keep inflation from creeping in during this time period, the Fed may have to raise rates, all of which would be positive for the US dollar. Traders tend to use the Retail Sales figure more as a leading indicator for other releases such as Consumer Confidence and CPI, and thereby don’t usually “jump the gun,” unless the numbers are terribly out of proportion. Foreign Purchases of US Treasuries (TIC Data) The Treasury International Capital flow (TIC) reports on net foreign securities purchases measures the amount of US treasuries and dollar denominated assets that foreigners are holding. A key feature of the TIC data is its measurement of the types of investors the dollar has; governments and private investors. Usually, a strong government holding of dollar denominated assets signals growing dollar optimism as it shows that governments are confident in the stability of the U.S. dollar. Looking at the different central banks, most important seems to be the purchases of Asian central banks such as that of Japan and China. Waning demand by these two giant US Treasury holders could be bearish for the US dollar. As for absolute amount of foreign purchases, the market generally likes to see purchases be much stronger than the funding needs of that same month’s trade deficit. If it is not, it signals that there is not enough dollars coming in to match dollar going out of the country. As a side note, purchases by Caribbean central banks are generally seen to be less consistent since most hedge funds are incorporated in the Caribbean. Hedge funds generally have a much shorter holding period than other investors. US Trade Balance The Trade Balance figure is a measure of net exports minus net imports and tends to be negative for the U.S. as it is primarily a “consuming” nation. However, a growing imbalance in the Trade Balance suggests much about the current account and whether or not if the U.S. is “overspending” on foreign goods and services. Traders will understand a decreasing Trade Balance number to implicate dollar bullishness, whereas a growing disparity between exports and imports will lead to dollar bearishness. Because the figure precedes the Current Account release, it pretty much helps project the direction of change in the Current Account and also begins to factor in those expectations. Current Account Balance The U.S. Current Account is a figure representing the total accrued deficit of the U.S per quarter against foreign nations. Traders will interpret a greater deficit as bad news for the U.S. and will consequently sell the dollar, whereas a shrinking deficit will spark dollar bullishness. Usually, the Current Account Deficit is expected to be funded by the net foreign securities, but when ends don’t meet in these data, the Current Account could signal a big dollar sell-off. Additionally, because the Current Account data comes out after the Trade Balance Numbers, a lot of its expectations begin to get priced into the market, so a surprise to either side of expectations could result in big market movements for the dollar. Consumer Price Index (CPI)/Producer Price Index (PPI) The Consumer Price Index is one of the leading economic gauges to measure the pace of inflation. Many investors and the Fed constantly monitor this figure to get an understanding about the future of interest rates. Interest rates are significant because not only do they have a direct impact on the amount of capital inflow into the country, but also say much about dollar-based carry trades. If the inflation number comes in higher than expected, traders will interpret that to mean that an interest rate hike is more likely in the near future and will thus buy dollars, whereas a figure that falls short of expectations may cause traders to wait on the sideline until the Fed actually makes a decision. Essentially, trading a negative change in CPI is much more difficult than trading a positive change due to the nature of different interpretations. A significant increase in the CPI will result in much dollar bullishness, but a decrease will not necessarily result in dollar bearishness. The CPI measures inflation at the retail level (consumers), while the PPI measures the inflation at the wholesale level (producers). Gross Domestic Product (GDP) The U.S. Gross Domestic Product is a gauge of the overall output (goods & services) of the U.S. economy. If the figure increases, the economy is improving, and often the dollar will strengthen. If the number falls short of expectations or meets the consensus, dollar bearishness may be triggered. This sort of reaction is again tied to interest rates, as traders expect an accelerating economy to be mired by inflation and consequently interest rates will go up. However, much like the CPI, a negative change in GDP is more difficult to trade; just because the pace of growth has slowed does not mean it has deteriorated. On the other hand, a better than expected number will usually result in the dollar rising as it implicates that a quickly expanding economy will sooner or later require higher interest rates to keep inflation in check. Overall though, the GDP has fallen in significance and its ability to move markets since most of the components of the report are known in advance Durable Goods The Durable Good figure measures the amount of capital spending the U.S. is doing, such as on equipment, transportation, etc., both on a business and personal level. Essentially, the more the U.S. spends the more the dollar stands to benefit; the opposite is also true. This is because increased spending could very well be a harbinger for inflation, and thus consequently, interest rate hikes. Traders will usually focus in on the durable goods figure, but not too deeply, as it usually precedes data regarding housing starts and the annualized GDP figure release. Therefore trading based on the Durable Goods number is only voluminous when stagnancy in other key economic releases has been confirmed by a market consensus.
Education
by Mihai_Iacob
21