More About Trading Psychology: Confidence

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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. 

Why Forex Signals Don't Work

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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.

The Theory of the Forex Price Tide

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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/

More About Spread

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Spread is the difference between Bid Price and Ask Price. The difference is where the brokers get their own business profit less the commission they give to their introducing brokers (IB agents).

For the traders, the spread is taken from each trade transaction. This makes traders confused when looking at the chart. At the chart, the default price you see in most brokers is the Bid Price. This makes the Ask Price not visible but always moves with the Bid Price, above it. So every time you look at the price in your chart which is the Bid Price, always imagine that there is an Ask Price above it, moving with it.

If you want to see a visible movement of the spread. At the MT4 menu, click "New Order". A window will pop out. At the left side of the window, you will see red and blue lines moving. The red line is the Ask Price. The blue line is the Bid Price. Watch them move.

If your account is using a standard variable spread. You will see that the difference between Bid and Ask is changing. Since the spread is the brokers' business, spread changes with supply and demand. When the market is volatile, there are many transactions going on due to high demand. When there's a high demand for Forex transactions, the spread gets bigger as well.

Spread makes newbies confused. Since the price you see in the chart is only the Bid Price, you will notice that there are different behaviors on BUY LONG and SELL SHORT transactions.

BUY LONG = When you buy long, tho you see the Bid Price, the opening price will be the Ask Price. So when a trade is open, you will have a negative profit right away as the opening price is above the current price already. If you set a Take-Profit (TP) price point above, let's say 10pips, when the current price (Bid) moves upward and hit that TP and queued already in the server. It will be closed exactly at the current price. If you set a Stop-Loss (SL) price point below, when the current price moves downward and the current price (Bid) hits the SL price, it will not close yet. The SL will activate only when the Ask Price hits the SL price point. That's why you'll see in the chart that the price moves lower than the SL before it gets closed.

SELL SHORT = When you sell short, the current price (Bid) becomes the opening price. When you set the TP price and the current price (Bid) moves downward and hit the TP, it will not close right away. The Ask price should reach the TP price before it closes. So the current price (Bid) passes a bit below the TP before it closes. When you set the SL above, and the price moves upward. When the current price hits SL, it will close right away.
   

On Learning Forex Trading: Start It Right

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Newbies can relate to this...

You are seeing many tips and lessons in the internet on how to trade from different veterans and mentors. You have tried many of them but failed. So most of the newbie traders have thought that the internet is full of pretenders, fraudsters, and charlatans. So they would hate every Forex mentors they have seen online because they think they are fakes. Hold your horses. It may not always true. I think many of these Forex mentors have no intention to trick you. I think they are only guilty of one thing... They made you drive a BIG TRUCK right away... What⁉️⁉️


Forex Trading Is Like Driving

Learning how to trade is like learning how to drive. If you don't know yet how to drive, you can not expect to learn driving with a big truck. You will feel overwhelmed and may not learn it. Even if you do, the whole learning process is very hard, a very terrible experience. To avoid this bad experience, start it right. Start with a small car. It's the most easy and convenient way to start. You have to feel first how driving is. The learning curve will be shorter. The same with Forex trading. You should start small. While learning how to trade, you have to have a good feel of the market price movement first. To achieve that you have to start trading with a demo account right away, not to profit right away, but to feel the movement of the price. Immerse yourself to grasp the feeling. Absorb the idea that it's not just ups and downs, not just ranging and trending, and it's random, very difficult to predict the future price. Baby steps. You don't have to learn everything all at once. Learn one at a time. Learn while you are doing it. Just know where to get any information in case you come across a situation that you need help to learn something. Start learning using any customized tools that you come across with. Remember you don't have to master how each tool works. You just need to feel the experience of the market. Having a real feeling about the market can make you use any tool and indicator at your advantage. Any strategy taught to you, you've got a big chance to achieve success.

Enjoy the weekend :)

First Lesson In Trading Psychology

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When you decided to be a trader and be good with it in the future. You have to decide also to re-wire your brain on an unusual mindset.

 There is no Best Trader in the world. When you put yourself into this business, you have to believe that you can not be the best trader in the world and you can not beat the World Forex Market. You are only as good as your trading plan. You are only as good as your "Entry Plan". You are only as good as your Money Management plan. You are only as good as your 'Exit Plan". You are only as good as how you follow your trading plan. You are only as good as your last trade. Even if you hit the TP this morning and gain 20% in one trade, still you are not the best trader in the world or any group. Even if you hit 500% this month, still you are not the best trader in the world. Even if you hit 3,000% this year, still you are not the best trader in the World. Always think that the most important thing for you to do your next best is to plan for it. If you can not imagine how your next trade will end, good or bad, your past performance is all negligible. Keep this in mind.