Trading Psychology: How to trade economic data.
As traders, one of the biggest challenges we face is deciding what factors to consider when opening a trade: should we base ourselves on charts, news, macroeconomic data?
Many opt for a combination of all these elements, and although all traders go through the same stages, there are different routes to success. The problem with following the crowd is that you end up doing exactly what everyone else is doing.
The solution: forge your own path, with all the challenges this entails.
Most traders follow the news, analyze the data and then compare them with the charts to try to determine the best entry point. And as if that were not enough, they often seek the opinion of other online traders to confirm their decision. However, consulting the opinions of others can be counterproductive, as they can alter, for better or worse, any personal opinion about the analysis we are conducting.
We always tend to think that others know more than us and that if they think differently, it must be for some reason and that we will not be the ones who are right.
This is just another example of market psychology and the human tendency to always follow the crowd, regardless of whether it is right or not.
I believe that in order to make a living from trading, research must start with yourself, it is essential. And this is necessary to confirm or refute the information with which the market bombards us every minute.
You need very intense training and experience to make a living from trading.
How many traders trade intraday based on economic calendar data? How many really make money? It’s not worth it.
Aware of the multitude of traders who congregate around the platform at key times, market makers have all kinds of tricks. Their favorite; the sweep. Up, down and both sides at the same time.
Is a mental stop better? In my case, no. I don’t know how mentally strong you are, but the word says it all: mental-stop. When you expose yourself to letting the mind think, you are entering dangerous psychological terrain and it is very difficult, if you are losing, to close with discipline in each and every operation.
Notice that I say in each and every one, because with not respecting a single one and that the price does not return in that operation to the entry point, it will be your elimination as a trader.
Therefore, anything that can cause a loss is worth discarding.
Greed doesn’t let you, we know that with a data in favor of our position you can make a lot of money but if the data is contrary and also forms a gap, no one will save us. And let’s not talk about if you are leveraged. Being leveraged and having the position run against you is one of the hardest experiences a trader can have.
Seeing how your capital is destroyed at forced marches, how losses increase, how you are not able to close because you expect a recovery to do so is dramatic.
Realizing that first loss, which at first seemed big to you and now doesn’t seem so much. You would “kill” to lose only that.
Then, once you are losing a lot you will no longer be able to close. There comes a time when you assume it and let the losses run as far as they go. You have accepted it. You risk the account in the hope of recovering.
This means hours of waiting for the desired recovery. In addition, the market is very rogue. After the fall comes the rebound, usually up to half. You get the idea that it is going to recover completely and instead of closing you hold on to see if the moment comes when you no longer lose anything.
The market will make you believe that this is going to happen. You may even average (add more positions) so that the recovery is faster and by the way, if the price goes beyond where you have opened the first operation, you even come out with profits.
But, as I say, the market is very cruel and when you start to dream and have hope again, it turns around and falls with even more force if possible, crushing your account and destroying your morale.
The result we all know. If the account does not have enough capital to withstand the bleeding, margin call will “come to see us”. And if it does, it will take you days, weeks, months or even years to recover your capital, if you do. Days, weeks, months and even years without liquidity to do what you like the most, trading.
In view of this, stoploss, as well as avoiding any situation that makes you lose is more than justified.
Many opt for a combination of all these elements, and although all traders go through the same stages, there are different routes to success. The problem with following the crowd is that you end up doing exactly what everyone else is doing.
The solution: forge your own path, with all the challenges this entails.
Most traders follow the news, analyze the data and then compare them with the charts to try to determine the best entry point. And as if that were not enough, they often seek the opinion of other online traders to confirm their decision. However, consulting the opinions of others can be counterproductive, as they can alter, for better or worse, any personal opinion about the analysis we are conducting.
We always tend to think that others know more than us and that if they think differently, it must be for some reason and that we will not be the ones who are right.
This is just another example of market psychology and the human tendency to always follow the crowd, regardless of whether it is right or not.
I believe that in order to make a living from trading, research must start with yourself, it is essential. And this is necessary to confirm or refute the information with which the market bombards us every minute.
You need very intense training and experience to make a living from trading.
How many traders trade intraday based on economic calendar data? How many really make money? It’s not worth it.
Aware of the multitude of traders who congregate around the platform at key times, market makers have all kinds of tricks. Their favorite; the sweep. Up, down and both sides at the same time.
Is a mental stop better? In my case, no. I don’t know how mentally strong you are, but the word says it all: mental-stop. When you expose yourself to letting the mind think, you are entering dangerous psychological terrain and it is very difficult, if you are losing, to close with discipline in each and every operation.
Notice that I say in each and every one, because with not respecting a single one and that the price does not return in that operation to the entry point, it will be your elimination as a trader.
Therefore, anything that can cause a loss is worth discarding.
Greed doesn’t let you, we know that with a data in favor of our position you can make a lot of money but if the data is contrary and also forms a gap, no one will save us. And let’s not talk about if you are leveraged. Being leveraged and having the position run against you is one of the hardest experiences a trader can have.
Seeing how your capital is destroyed at forced marches, how losses increase, how you are not able to close because you expect a recovery to do so is dramatic.
Realizing that first loss, which at first seemed big to you and now doesn’t seem so much. You would “kill” to lose only that.
Then, once you are losing a lot you will no longer be able to close. There comes a time when you assume it and let the losses run as far as they go. You have accepted it. You risk the account in the hope of recovering.
This means hours of waiting for the desired recovery. In addition, the market is very rogue. After the fall comes the rebound, usually up to half. You get the idea that it is going to recover completely and instead of closing you hold on to see if the moment comes when you no longer lose anything.
The market will make you believe that this is going to happen. You may even average (add more positions) so that the recovery is faster and by the way, if the price goes beyond where you have opened the first operation, you even come out with profits.
But, as I say, the market is very cruel and when you start to dream and have hope again, it turns around and falls with even more force if possible, crushing your account and destroying your morale.
The result we all know. If the account does not have enough capital to withstand the bleeding, margin call will “come to see us”. And if it does, it will take you days, weeks, months or even years to recover your capital, if you do. Days, weeks, months and even years without liquidity to do what you like the most, trading.
In view of this, stoploss, as well as avoiding any situation that makes you lose is more than justified.
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