More About Trading Psychology: Confidence

What is confidence? How it can make or break you as a trader?

Trading confidence is the psychology of initial success. it is the feeling or belief with a firm trust that you can rely on a strategy or trading plan. It is the psychological tool that traders have and use to fight fear and all emotions related to it. How do we gain confidence? We get it once we achieve the first success with any strategy that we come accross with.

A trader must be aware that confidence, while it is one of the best emotional tools we have to fight fear on trading, confidence can also mislead us to do something stupid. Sometimes too much confidence makes us think that our strategy is the best strategy and it always has its magic. This can lead you to increase lotsize more than what is stated in your trading plan. Over confidence can also make you enter pre-mature trades. For example, if you have 5 conditions in your strategy then your current analysis meets only 4, because of your confidence in your strategy plus greed, you won't wait for the fifth condition to appear. You will open a trade right away.

Confidence can also make us tweak strategies irresponsively. Tweaking, exploring, and experimenting are important for you to discover good strategies, but you have to do it right. You can not expect success if you keep integrating all strategies you find into one analysis. You have to be careful in combining different analysis. This is common to old traders that have been using generic strategies in predicting price direction. When they see a new strategy, they do their analysis using it, then at the other part of the analysis they will check their old generic analytical tools to confirm. There are 2 things may happen, 1) you will fail. 2) you may experience success but it slows the profit. You are not sure if it's really working or you just got lucky. You can't really tell at an early stage. In order for you to confirm that it really works, you have to do the same analysis for a long period of time and no short cuts. Based on what I have observed with hundreds of students that I've had, on the next trade, they would tweak even more.

To be successful, keep it super simple. Just follow the trading plan exactly the way it is stated in the rules, no ifs no buts. If you think there's a better way of doing it, (good, you are thinking) do it in a separate account for at least 3 months. 

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Why Forex Signals Don't Work

What are Forex Signals? According to Wikipedia "A forex signal is a suggestion for entering a trade on a currency pair, usually at a specific price and time. The signal is generated either by a human analyst or an automated Forex robot supplied to a subscriber of the forex signal service."

How the signals are sent to the clients? Forex signal providers are using different media on sending signals. They usually use one or more of the following; Twitter, FB Messenger, Telegram, test messages, emails, etc.

What are the problems with Forex Signals? 

As you can see in the definition of Wikipedia, a Forex signal is a suggestion for entering a trade on a currency pair at a specific price and time. The problem with this is no matter how good the entry suggestion, many subscribers will not get it right. This is because the signal is all about the Entry Plan. It doesn't mention what kind of Money Management to be used and most importantly, it doesn't tell the Exit Plan applicable to the entry plan. So what subscribers are getting is an incomplete suggestion. Some signal providers are sometimes giving Stop-Loss level as a part of the signal. Yes, SL is an exit plan. But SL is the lamest of all exit plans. If your SL is not a well thought and baseless SL, it is as bad as without SL with no basis. As I've been saying for years now, SL and no-SL are equally risky if you don't know what you are doing.

Another reason why Forex signals don't work is psychology. Traders have different attitudes towards trading. It will create a whole book if we are going to discuss everything :). If a strange Forex entry suggestion is given to a trader. The trader doesn't know what to expect from it. He doesn't know how the entry plan is analyzed. The trader is not prepared for that trading plan. He is not trained how to handle that kind trading plan. So the result of his trade will be erratic. As well as the behavior is most likely erratic. Most of the time, he panics.

So next time that you subscribe to a Forex signal, be sure the provider is giving you the whole package. It should include a money management plan, exit plan, and a clear training on what the signal is all about so you will behave properly on execution.

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The Theory of the Forex Price Tide

The Forex market is like the ocean. It is like a river. The water flows... the water CURRENT. This is the reason why money is called CURRENCY. It creates its own flow. It circulates. It can be exchanged for other money. The flow creates demand. The demand makes it flow, even more, STRONG CURRENT. There's one of the best ways to survive the flow of money; SWIM ALONG THE TIDE. SWIM ALONG THE FLOW. It makes your Forex-life easier. 

The Theory of the Price Tide states that at any given price of any financial instrument that can be traded on both LONG and SHORT positions, the price will certainly go either way. Simple idea right? But how come the majority of traders failed to prepare a plan for this? Because they predict the price destination. There's nothing wrong with price prediction. I know a few traders that can successfully predict price destination with good probability and success. But to most of the traders, they are not meant to think and analyze like that. People have a different level of thinking. A person can be a good doctor but cannot be a price-predicting trader. A highly intelligent accountant may not be a good price-trend analyst. This is the reason why most traders fail. If you will ask me if I am a good price-predicting trader, I would say... I AM NOT. :) Since day 1 that I admitted to myself that I am not that good at that, that's the time that I start to gain a real profit. Because I started to look at a different angle, an alternative way to analyze the market price. Thus, this simple theory made me design a systematic approach to trading that doesn't need to predict the price. I just need to go with the trend until it ends. When the trend ends, I designed a strategy to limit losses when I still have positions. Once you see this dimension of the market, you will discover more dimensions, more ways to get positive pips. You can use all indicators available and you wouldn't even think that they are lagging. For price-predicting traders, indicators are lagging, but for trend-riders like us, it is not.

Trend-riders like us may not be as smart as the rest of the analytical traders. But our life is simple. And we achieve the bottom line, CONSISTENT PROFIT.

If your ego is not high like us, you can be a TREND-RIDERS like us. Join the circle, click here... https://www.facebook.com/groups/FXFledgling/permalink/1416740741768152/

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