Developing Emotional Resilience: Bouncing Back from LossesOkay, fellow TradingViewers, it’s time we tackle a topic that may make you a bit uncomfortable. But, rest assured — it’s for your own good! Today, we explore the realm of emotional resilience and, more precisely, how to bounce back from losses.
Losses are inevitable. Ask anyone — even the big dogs in the industry have gone through painful losses (as you’ll see at the end of this write-up). Drawdowns so severe that they’ve nearly put hedge funds out of business (just ask Ray Dalio). And yet, bouncing back from losses is what has helped these one-time losers to develop emotional resilience and make the best out of the experience.
Acknowledge the loss, but don’t overblow it
Accept that losses happen and they’re a natural part of the trading journey. No matter how skilled or successful you are, you will have losing positions every once in a while. First, make sure you find out what went wrong. And second, don’t dwell on the losses too much and don’t let them cloud your prospects of becoming a better trader.
Size your positions according to risk tolerance
Never let a single position wipe out your entire account if it turned against you. We know how attractive it is to bet big on currencies swings spanning European countries . But keep in mind that, in such case, the old market adage "You're as good as your last trade" will hold true and it may not be pretty.
There are two main ways to prevent the wipeout of your account with a single trade — don’t bet too big (or use too much leverage). If you do bet big, make sure you have a tight stop loss that won’t let your balance get washed out and drawn underwater. Always think about defense before you think about offense.
Let your strategy take care of your trading
You won’t have to be emotional if you let your strategy take care of your trading. Having the right trading plan will eliminate the need to react on the spot and make rushed decisions out of emotion. A solid strategy can empower you to withstand even the harshest market conditions with your chin up and trading account unscathed.
Embrace the power of habit and routine
In trading, consistency is key. Create for yourself a nice and easy-to-follow trading routine. This may include making your cup of coffee before you sit to do some chart reading. Or get a workout in before you read the daily news. Whatever will help you stay disciplined and emotionally balanced — do more of that.
Invest in yourself and then trade the markets
Your most valuable asset isn’t your trading account — it’s you. Invest time in learning, reading, watching interviews of successful traders and financiers. Read books on finance and trading, study the economic calendar , or sign up for a paper-trading account to test your trading skills risk-free. The more knowledge and practice you soak up, the more resilient and prepared you will become.
Know when to step back and get a break
Sometimes, the best thing to do after a loss is do nothing at all. It’s understandable if you feel emotionally unstable, off-kilter and overwhelmed when the markets gives you a slap in the face. Especially if you’re just starting out in the volatile trading space. What to do then? Unplug, unwind, recharge. The market will still be there tomorrow — go touch grass and come back with a refreshed perspective.
Celebrate the wins — no matter how small
Trading has to be about more than just coping with losses. Give yourself a nice pat on the back for every little victory. Made a successful trade? Or even got out at breakeven thanks to your stop loss? Perfect. Recognize and celebrate these moments. They’re little milestones to remind you that you’re on the right path to success.
Loss advice from the big dogs in trading
Let’s wrap up some with loss advice from the world’s best traders and see how they dealt with the blows of Mr. Market.
Paul Tudor Jones , hedge fund manager: “Losses are not your problem. It's how you react to them. Ignore losses with no plan, or try to double down on your losses to recoup, and those losses will come back like a Mack truck to run over your account.”
Ray Dalio , founder of the world’s largest hedge fund Bridgewater, on how he viewed a near-bankruptcy experience: “I needed to balance my aggressiveness and shift my mindset from thinking ‘I’m right’ to asking myself, ‘How do I know I’m right?’ It was very, very painful, yet it changed my way of thinking. It was one of the best things that ever happened to me.”
George Soros , pioneer of the hedge fund industry: “It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.”
Let’s hear from you
How do you usually deal with a trading loss? What’s the best thing a loss has taught you? Comment below and let’s spin up a nice discussion!
Losses
How to Use Stop Loss Orders in Trading?Stop loss order is the order that automatically closes your trade once it reaches a specified price target. Learn all about it here.
Table of Contents:
🔹What Is a Stop Loss Order?
🔹Why Stop Loss Orders Matter?
🔹Setting Stop Loss Levels
🔹Types of Stop Loss Orders
🔹Adjusting Your Stop Loss Orders
🔹Summary
In trading, reducing risks is oftentimes all that matters to achieving success. One of the essential tools to protect your investments from steep or unexpected losses is the stop loss order. Understanding how to use stop loss orders can unlock your path to profitability by allowing you to balance your risk and reward ratio. In other words, with the right stop loss setup, you can shoot for asymmetrical risk returns by keeping your drawdown small and letting your profits run.
Let’s dive into the exciting world of trading and see how stop loss orders can be your greatest ally in trading.
📍 What Is a Stop Loss Order?
A stop loss order is an essential risk management tool used by traders to limit potential losses on a trade. By using a stop loss order, you instruct your broker to automatically sell the asset you’re holding when it reaches a predetermined price level that is below your purchase price, or entry.
A stop loss order allows you to control your losses and protect your investments so you don’t have to sit glued to the screen all the time.
📍 Why Stop Loss Orders Matter
Stop loss orders play a big role in risk management. These easy-to-set trading tools help traders stick to predefined risk tolerance levels by limiting the amount of money they are willing to lose on any given trade.
Without a stop loss order in place, traders may give in to emotional decision-making during periods of market volatility, leading to potential losses. If you have a hard time cutting your losses If you have a hard time cutting your losses when —ok, we get it, you're a bigshot— IF positions go against you, setting a stop loss when you enter the market will do the hard work for you.
➡️ Risk Management: One of the primary reasons stop loss orders are essential is because they help traders manage risk effectively. This is crucial in volatile markets where prices can fluctuate rapidly, as it prevents significant losses that could otherwise occur if trades were left unattended.
➡️ Emotional Control: Trading can evoke strong emotions such as fear and greed, which can lead to irrational decision-making. Without a stop loss order in place, traders may be tempted to hold onto losing positions in the hope that the market will reverse in their favor.
➡️ Peace of Mind: Knowing that there is a safety net in place can provide traders with peace of mind. Stop loss orders allow you to do your thing in the market without obsessively watching charts and tickers. Set your stop loss orders and focus on other aspects of your market study like catching up on the latest market-moving news and analysis .
➡️ Preventing Catastrophic Losses: In extreme market conditions, prices can experience sudden and significant declines. Without stop loss orders, traders risk experiencing catastrophic losses that could wipe out a significant portion of their capital.
➡️ Enforcing Discipline: Successful trading requires discipline and adherence to a well-defined trading plan. Stop loss orders help enforce discipline by striving to ensure that traders stick to their predetermined risk management rules. If trading is about discipline and consistency, then stop loss orders are the stepping stone to success.
📍 Setting Stop Loss Levels
Choosing the appropriate stop loss level is a critical aspect of using stop loss orders effectively. Traders should consider various factors, including their risk tolerance, investment objectives, market conditions, and the volatility of the asset being traded.
A common approach is to set the stop loss below a significant support level or a recent low in an uptrend (if you have a long position) and above a significant resistance level or a recent high in a downtrend (if you have a short position).
Example: Suppose you purchase shares of a company called X (not Elon Musk’s privately held X Corp., which he created by rebranding Twitter) at $50 per share. You estimate that a 5% decline in the stock price would indicate a potential trend reversal. Therefore, you set your stop loss order at $47.50 per share to limit your potential loss to 5% of your investment.
📍 Types of Stop Loss Orders
There are several types of stop loss orders that traders can utilize, each with its own special characteristics. The most common types include:
➡️ Market Stop Loss: a type of stop loss order that triggers a market order to sell the instrument at the prevailing market price once the stop loss level is reached.
➡️ Stop Limit: with a stop limit order, you have to deal with two types of prices. The first one is the price that will trigger a sell and the limit price. But instead of converting your order into a sell based on current market prices, you set a limit price.
➡️ Trailing Stop Loss: A trailing stop loss order is dynamically adjusted based on the movement of the instrument’s price. It allows traders to lock in profits while giving the trade room to move in their favor.
Example: You purchase shares of a big tech company at $100 per share, and the stock price then rises to $120 per share. You set a trailing stop loss order with a 10% trail. If the stock price declines by 10% from its peak, the trailing stop loss order will trigger, selling the shares at prevailing market prices.
📍 Adjusting Stop Loss Orders
While setting stop loss orders is essential, monitoring and adjusting them as market conditions evolve is equally important. Traders should regularly reassess their stop loss levels to account for changes in volatility, price action, and overall market sentiment. Additionally, as profits accumulate, trailing stop loss orders should be adjusted to protect gains and minimize potential losses.
📍 Summary
In conclusion, stop loss orders are one of the most essential and effective tools for traders seeking to manage risk and preserve and grow capital in the challenging world of trading. By understanding how to use stop loss orders effectively, you can rein in emotional decision-making, protect your investments, and increase your chances of long-term success.
Whether you're a novice or an experienced trader, integrating stop loss orders into your trading strategy is a smart approach to navigate the twists and turns of the financial markets. Remember, trading involves inherent risks, but with proper risk management techniques like stop loss orders, you can tilt the odds of success in your favor.
❓Do you use stop loss orders when trading? Which type ? Let us know in the comments ⬇️
The most important problems leading to lossesThe most important problems leading to losses in the market and how to deal with them
"I suffered a series of severe losses, and to this day I still can't recover from it." - this is how an investor friend described the more difficult period he was going through. Life events made him more stressed than usual and on top of that, a series of losses happened to him.
As a result, he was unable to return to the market. He sat in front of the computer, looked at the signals being drawn and... was unable to enter a position.
During a later conversation, he took out a thick binder full of color printouts of the market.
- If I had entered today I would have made a lot of money. I analyze the last few weeks and see how much I would already have in my account. My wife laughs at me for becoming a demo investor. She has already accepted that I sit in front of the screen for hours and don't trade.
This story has a fairly neutral ending. The standard of living and the family remained intact, and the investor was left with ample capital to live a quiet life, dating back to his days as CEO.
But for many investors, the inability to return to the market is a disaster, as they have to look for another source of income.
Other stories end worse. Much worse. Investors lose assets (sometimes not their own), embezzle company money, lose their homes (a loan in the bank against collateral), fall into alcoholism and drugs, get into mental problems. Those who carry emotional problems into the family lead to breakups and suffering.
In extreme cases, symptoms of post-traumatic stress disorder appear, which can drag on for years turning life into hell. In many of the situations described, further trading can be forgotten.
The problem of losses and how to react to them is very serious, especially since there are no good sources of solutions that can stop the problem or reverse it at all.
What the best traders do differently?
To "bite" the problem a few years ago, while researching top investors, I started asking myself questions - how do they deal with losses, what methods do they use, what has allowed them to survive so long without negative side effects? Long-term and systematic profits are surely some kind of guarantee that these people can cope.
Studying the best we discovered several reasons, some of them are due to the different approach to the system and the way they trade, some are the mental work techniques they used.
According to the research, the best traders approach the system and its results quite differently.
First of all , their systems are well prepared and tested. Among other things, this is the result of many years of experience in the market. Good preparation means less stress, weaker mental reactions during the trading, greater resistance to unfavorable turn of events, belief or knowledge that despite difficulties and losses everything will end well.
Second - they perceive the purpose of the system and the outcome of a single order differently. Here they fundamentally differ from others. They know that the outcome of a single order is unknowable, so they do not get attached to it. They also know from experience that, for example, at the end of the month they will still come out ahead.
Third , the fundamental uncertainty of what the market will do makes them not risk too much, a fraction of the account, hence the high margin of safety. It will allow them to "trade back" many times over. If they risk more) sometimes a lot more) they know very well why it's worth it, they don't make decisions on the spur of the moment. The opportunities they hunt for are very good indeed.
Fourth , they know the efficiency of their system and what the maximum sequence of losses can be for them. Knowing the "worst possible variant" is reassuring, being mentally prepared we are better able to withstand a series of losses. In beginners or the unprepared, the strength of reaction is increased by the element of surprise. Subsequent losses only increase the strength of reaction.
Fifth , while being with a position in the market, they do not think about its size, they do not treat it as "money". "Think about points, not money," as one billionaire trader says.
Recommendations of a psychological nature
In addition to the different approach in the "system" layer, we found several differences of a psychological nature between the best and the rest group. The following recommendations are based on them.
Each of us has our "pain threshold" for losses, i.e. the level at which we begin to feel them as troublesome. It is a good idea to set your "pain threshold" on a daily, weekly and monthly basis and never exceed it. The pain threshold is mainly due to the level of cash we are used to.
"Glass ceiling", that is, the size of the position, which begins to breed stress, even in traders - multimillionaires.
Another problem is related to this area, there are situations in which traders reach a certain level of capital and are unable to go further. This effect I call the "glass ceiling" effect.
One very experienced trader (a multimillionaire) told me that he feels a lot of discomfort with position size (i.e. possible loss) above half a million dollars. His solution - he doesn't go beyond that size, even tries to stay firmly below it, so he sleeps soundly.
Another currency trader told me how he was unable to break through a certain account size for several years. He was able to make a good result quickly (let's say it was 100,000) and then took five times as long to build another hundred. It cost him so much effort that in the end he decided that he would stick to an account size under 100,000 and specialize in what he does best - driving up to 100,000.
I have also had to deal with situations where the mental shock was caused not by a loss, but by a large profit made one day (400% of the account on huge traffic after a terrorist attack). This is the result of a strong breakthrough of the "glass ceiling" and the trauma that was created. And as a result of it, the trader for more than a month (until therapy) was unable to return to the market with even the smallest position.
The area of "glass ceiling" problems is still quite unknown. According to studies and observations, traders require some kind of therapy or the use of techniques to tame higher levels of profits and losses, because psychological reactions (which always occur) are a block to reaching higher financial levels.
For quite a number of investors, even those with good trading systems, achieving the higher level of profits they dream of is impossible for this very reason. Sooner or later (and the better the system, the sooner) they will encounter a level of capital at which they will feel uncomfortable and at which severe stress and great discomfort will begin to appear during the trading.
Toxic hope and the desire to trade-back
In studying how losses occur and accumulate, I have developed some additional tips. For your own financial security, it's worth treating the desire to trade-back and the greed that prompts you to increase your positions as two very toxic feelings. Hope ("that the market will turn around") works similarly.
Some of the traders surveyed have developed a reaction - as soon as these feelings arise they walk away from the platform and do something else while waiting for the market to recover.
Other experienced traders at the very beginning of the day - ask themselves an additional question, whether for some reason they are under pressure to trade (for example, because of losses) or whether they feel euphoric after earlier gains (which prompts carelessness).
It is good to know that recovery from difficult experiences is possible, only that it requires an individual approach. You can use methods of withdrawing memories, recoding (reframing) their meaning, or something of a lighter caliber if the loss was not very severe. This allows you to return to the market fairly quickly without negative effects.
I will describe one such method in the next issue of New City Trader. Thanks to it, a trader who was completely mentally shattered and unable to return to the market after an emotional shock - "got it together" in a few hours. This was one of my most interesting experiences, especially since the effect was practically immediate, and the problem never returned.
Summary
Summarizing the results of the study, it can be said that one of the goals of investors should be to take care of their mental comfort while trading, and for several reasons.
Firstly, our decisions are then better and quite naturally "zona" - the best mental state supporting investors - can appear.
Second, we have a better picture of the situation not disturbed by impatience, euphoria or emotional pressure of any kind.
Third, if we feel comfortable in our workplace we are eager to return to it, thus avoiding a situation where we feel compulsion and anger when sitting down to analyze. This in the long run can make us hate our job. There's no need for that, after all, we're trying to make money in the market in order to increase the quality of our lives, not decrease it, aren't we?
Fourthly, matters of psychology and comfort in investing are becoming better researched and there are more and more effective solutions.
Give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
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Do This And You Will Never Blow Your Accounts Again, Or PropfirmHello guys, in this video, I reveal the secret strategy I use for trading which helps me not to blow any account in forex trading.
If you enjoy this video, give it a boost, drop a comment and follow me here on tradingview.
🫀THREE BODY PARTS INVOLVED IN TRADING🧠
📊Trading is an art and science all at once, requiring various skill sets and tools to be successful. While a keen eye for market trends, quick decision-making abilities and financial literacy are essential in trading, it's the three body parts that are often overlooked but play a significant role in the process- the brain, the heart and the gut.
🧠The Brain: It's the most crucial and obvious part of the trading process. Your brain's decision-making activities impact every trade you make. You need to be analytical and rational, looking at data to make informed decisions on how to invest. Using a combination of market analysis, statistical models, and technical and fundamental analysis, traders rely on their brain to identify market patterns, assess news, and devise strategies to stay ahead of the curve.
However, trading purely on analytical data can lead to overthinking and paralysis analysis. You need to balance your analytical side with your emotional responses, which brings us to the next body part- the heart.
🫀The Heart: When we talk about a trader's heart, we’re not talking about love or emotions but rather the emotional response to investing. The emotional fortitude required for trading should not be underestimated, and emotional intelligence is just as valuable a trait for a trader as anything else. Emotional intelligence refers to the ability to manage and regulate emotions under high stress, and traders need to possess it to manage the highs and lows of the trading world.
It's natural for a trader to panic or feel anxiety, especially during a volatile market. However, allowing your emotions to get the best can lead to poor decisions, such as selling too quickly or holding on too long. Hence, traders must control their responses by remaining calm and keeping their perceived ideas about market changes. The investor's mindset plays a vital role in trading to keep emotions under control, remain focused and stick to a well-considered investment plan.
🎲The Gut: The last body part is the least discussed but an essential body part for many traders - the gut. Many traders often say they've developed a gut feeling, which helps them make decisions about trading. However, the gut feeling is not mere speculation, it tends to be based on the knowledge and experience that a trader has accumulated over time. It's a combination of intuition and years of experience, which guide a trader toward quick decisions when the rational mind is stuck.
The gut feeling is the culmination of various inputs like market trends, trading experience, technical analysis, and trustworthy sources which the brain stores in the memory banks. No matter how advanced technology trading becomes, the human touch of trusting on the gut feeling remains an essential element in trading.
📝In conclusion, trading is dependent on the interaction between the brain, heart, and gut. As a trader, you need to keep a balance between the three body parts to succeed in the dynamic and fast-paced trading world. You must develop a trading strategy relying on data, experience, emotional intelligence and core beliefs so that you can make trading decisions that are right for you.
I Hope you guys learned something new today✅
Wish you all Best Of Luck👍
😇And may the odds be always in your favor😇
Dear followers, let me know, what topic interests you for new educational posts?
Why you should NOT view LOSSES as LOSSESI want you to stop thinking of trading losses as losses.
It’s having an effect on you emotionally and is stopping your full potential of growth.
Financial trading, like any other business or aspect of life, involves costs.
That’s just life.
In business, there are costs associated with equipment, rent, salaries, taxes, and legal fees.
In our personal lives, there are costs associated with household expenses like rent, groceries, insurance, medical fees, taxes, and repairs.
Similarly, in trading, there are costs associated with normal losses, daily interest charges, and drawdowns.
It’s crucial to remember that losses are an inevitable part of trading and should be viewed as a necessary cost of doing business.
Just as a business owner must invest money in equipment, rent, and salaries to run their business, traders must also be prepared to invest money in losses in order to be successful in the long run.
If you try to avoid taking a trade, because you are worried about the loses, you will miss out on the greater rewards for when profitable trading opportunities come your way.
When you see trading losses as costs…
You will be able to take a more objective and strategic approach to the trading decisions that you make going forward.
This can help you to minimize losses and maximize profits over time.
So there are few things you need to do to mange your costs (losses) emotionally and physically.
Action #1: Set realistic stop losses
Place your stop loss with every trade and never risk more than 2% of your portfolio per trade.
Action #2: Understand the concept of Risk to Reward better.
The risk-reward ratio is the ratio of the potential profit of a trade to the potential loss.
By understanding the risk-reward ratio, traders can make more informed trading decisions and can better manage their risk.
Action #3: Don’t feel your losses
If you feel 2% is too much to risk, risk less!
Get to the point with your life where a loss isn’t that much as with where the reward isn’t worth celebrating.
Overtime, you’ll slowly grow your account and your mind too.
🫀THREE BODY PARTS INVOLVED IN TRADING🧠
📊Trading is an art and science all at once, requiring various skill sets and tools to be successful. While a keen eye for market trends, quick decision-making abilities and financial literacy are essential in trading, it's the three body parts that are often overlooked but play a significant role in the process- the brain, the heart and the gut.
🧠The Brain: It's the most crucial and obvious part of the trading process. Your brain's decision-making activities impact every trade you make. You need to be analytical and rational, looking at data to make informed decisions on how to invest. Using a combination of market analysis, statistical models, and technical and fundamental analysis, traders rely on their brain to identify market patterns, assess news, and devise strategies to stay ahead of the curve.
However, trading purely on analytical data can lead to overthinking and paralysis analysis. You need to balance your analytical side with your emotional responses, which brings us to the next body part- the heart.
🫀The Heart: When we talk about a trader's heart, we’re not talking about love or emotions but rather the emotional response to investing. The emotional fortitude required for trading should not be underestimated, and emotional intelligence is just as valuable a trait for a trader as anything else. Emotional intelligence refers to the ability to manage and regulate emotions under high stress, and traders need to possess it to manage the highs and lows of the trading world.
It's natural for a trader to panic or feel anxiety, especially during a volatile market. However, allowing your emotions to get the best can lead to poor decisions, such as selling too quickly or holding on too long. Hence, traders must control their responses by remaining calm and keeping their perceived ideas about market changes. The investor's mindset plays a vital role in trading to keep emotions under control, remain focused and stick to a well-considered investment plan.
🎲The Gut: The last body part is the least discussed but an essential body part for many traders - the gut. Many traders often say they've developed a gut feeling, which helps them make decisions about trading. However, the gut feeling is not mere speculation, it tends to be based on the knowledge and experience that a trader has accumulated over time. It's a combination of intuition and years of experience, which guide a trader toward quick decisions when the rational mind is stuck.
The gut feeling is the culmination of various inputs like market trends, trading experience, technical analysis, and trustworthy sources which the brain stores in the memory banks. No matter how advanced technology trading becomes, the human touch of trusting on the gut feeling remains an essential element in trading.
📝In conclusion, trading is dependent on the interaction between the brain, heart, and gut. As a trader, you need to keep a balance between the three body parts to succeed in the dynamic and fast-paced trading world. You must develop a trading strategy relying on data, experience, emotional intelligence and core beliefs so that you can make trading decisions that are right for you.
I Hope you guys learned something new today✅
Wish you all Best Of Luck👍
😇And may the odds be always in your favor😇
Do you like this post? Do you want more articles like that?
Top Mistakes to Avoid After a Losing TradeI hope you already know that losing trades are inevitable in trading. No matter how professional a trader is, mistakes are made. It's part of the game, and the possibility of making mistakes should simply be factored into your trading strategy. But what really matters for success in the market is how you handle the fact of incurring losses.
Today, I've compiled a list of actions you should avoid after a loss:
Avoid immediately trying to recoup lost money. "Revenge trading" is a common mistake where a trader, after a loss, wants to take revenge on the market and quickly recover losses. This is purely a psychological and emotional problem. After a loss, it's better to take a break and objectively evaluate the situation before making a decision to enter into a new trade.
Don't look for someone to blame for your losses. It's very easy to find a reason for your loss: market conditions, manipulators, other traders, or Telegram channels where you seek signals. Ultimately, you must take responsibility for your own decisions and actions. Look for the real cause!
Don't rush to change your trading strategy after a losing trade. Radical changes in strategy after a loss can lead to new losses. Instead, re-evaluate the strategy and identify areas that need improvement, study the reason for the loss. A loss does not necessarily mean that the strategy is ineffective.
Don't ignore risk management. Until you deal with risk management, you will suffer losses in the market again and again. A trader must have a risk management plan to protect themselves from a series of losses.
Don't jump into hot trades on the spot and don't blindly follow the crowd. Take a break, conduct thorough analysis, and make a well-reasoned decision to enter into a trade. If you rush again or jump in with the crowd, it usually leads to even greater losses.
🌀Golden Cross And Death Cross Patterns Explained🌀
💱Today, we're talking about the exciting world of technical analysis, specifically the golden cross and death cross patterns.
💱So, what exactly are these patterns? Well, let me break it down for you. The golden cross pattern is a bullish signal in which a shorter-term moving average rises above a longer-term moving average. On the other hand, the death cross is a bearish signal in which a shorter-term moving average falls below a longer-term moving average. Simply put, the golden cross is a sign that the stock is on an upward trend, while the death cross indicates a downward trend.
💱Now, I can hear some of you thinking, "Why are we talking about crosses? Shouldn't we be discussing actual trends and data?" And I get it, the terminology can be a bit confusing. But the reason these patterns are so important is that they can give you an early indication of an approaching trend.
💱For example, let's say you're a savvy investor on the hunt for the next big thing. You spot a stock that's been on the decline for months, but suddenly, the shorter-term moving average crosses above the longer-term moving average, creating a golden cross. This could be a good sign that the stock is about to turn around and start heading upwards.
💱On the flip side, if you're already invested in a stock that's been doing well, but suddenly a death cross appears, it could be a sign to cut your losses and sell before the stock drops further.
💱Now, don't get me wrong, these patterns aren't foolproof. There are plenty of instances where a golden cross or death cross doesn't accurately predict a trend. But it's still a valuable tool to have in your toolbox when it comes to analyzing the markets.
💱So, whether you're a seasoned investor or just dipping your toes into the world of stocks, keep an eye out for those golden and death crosses. They may just give you the edge you need to make informed trading decisions. Happy investing!
I Hope you guys learned something new today✅
Wish you all Best Of Luck👍
😇And may the odds be always in your favor😇
Do you like this post? Do you want more articles like that?
❌NO RISK OF LOSS=NO CHANCE OF GAIN✅
*️⃣There are several reasons why losses are part of the game:
1️⃣Emotion: Traders, just like all human being, are prone to emotional bias, which can lead to impulsive decision making and ultimately to losses.
2️⃣Probability: Even with the best trading strategy, there will be losing trades. It's important to remember that not all trades will be successful, and losses are a normal part of the process. A successful trader should aim to have more winning trades than losing ones.
3️⃣Markets are unpredictable: Even the most experienced traders can't predict market movements with 100% accuracy. Unforeseen events, such as natural disasters or major political announcements can cause sudden changes in market conditions, leading to losses.
4️⃣Risk is inherent in trading: All forms of investing involve some level of risk. In trading, the risk is even greater due to the fast-paced nature of the markets and the fact that positions are often held for shorter periods of time.
5️⃣There is no Holy grail strategy: There is no one strategy that will work in every market condition and for every trader. Different strategies work better in different market conditions, and a trader should be flexible and adaptable to changing market conditions.
▶️It's important to remember that losses are a normal part of trading, and traders should not be discouraged by them. Instead, traders should focus on managing risk, learning from losses, and continuing to develop and refine their trading strategies over time.
I Hope you guys learned something new today✅
Wish you all Best Of Luck👍
😇And may the odds be always in your favor😇
Do you like this post? Do you want more articles like that
❗️PLAN VS FOMO EFFECT❗️
☑️A trader with a plan is someone who has a well-defined trading strategy that outlines their entry and exit points, risk management approach, and overall trading philosophy.
☑️They have a clear understanding of the markets they are trading and make decisions based on objective analysis and research. They are disciplined and stick to their trading plan, even in the face of losses or market volatility. They avoid impulsive decisions and emotions like fear of missing out (FOMO) that can lead to bad trades.
☑️On the other hand, a trader with FOMO is someone who makes impulsive decisions based on fear of missing out on potential profits.
☑️They may jump into trades without fully understanding the market conditions or conducting proper research. They may also ignore their risk management strategy, in an effort to make quick profits. They often enter trades based on rumors or tips from others, rather than their own analysis.
This type of trader is more likely to make poor trades and suffer significant losses.
☑️In summary, a trader with a plan is someone who is disciplined, objective, and systematic in their approach to trading, while a trader with FOMO is impulsive, emotional, and reactive in their approach.
I Hope you guys learned something new today✅
Wish you all Best Of Luck👍
😇And may the odds be always in your favor😇
Do you like this post? Do you want more articles like that?
Losses are Just the Costs of TradingLosses are nothing!
Come on.
Don't you pay for food, electricity, taxes.
Don't you run your company with expenses and costs?
Don't you spend every now and then on a vacation, time away and even unpaid leave?
This is life and it should be NO different with trading.
Trading losses are nothing but costs that come with achieving future success.
But... and it's a big but.
Just like you can control whether to spend your ticket on Economy or First Class.
Just like you can choose to go to a 3-star hotel or a 5 star.
Just like you can choose between a chicken dish or a lobster.
So to must you manage your risk with trading.
The learning fees, and the losses you take with trading can all be controlled at a point with obviously your volume, the markets you choose and where you place your stop loss...
Every trade needs to be taken into consideration with high risk management skills.
Don't be scared of trading losses- it comes with the territory as with life.
What do you think? Does this help?
Trade well, live free.
Timon
MATI Trader
Financial trader since 2003
Smart Money vs Retail traders (How to Think Like Smart Money)😱 There were a few people there talking about their losses, that they had no idea what to do and I wrote this to them:
It's mostly the fault of mainstream media + youtubers + twitterers etc. It's really easy to communicate the simplest approach that everyone understands and subscribes too. Note that if everyone is on the same side... Usually most people are wrong. They take past events too much at face value. But the market is constantly changing. Its to buy on the upside and not during pullbacks + HODL HODL HODL. With that said they really have no idea where they should get out and get in. That's fine by the way. News can be picked up by any of us from the news portals. They don't inform anyone about the negative side of things. It's a tough place to be and you can't take it half as seriously as it is communicated. Unless you are an investor (REAL) you are looking at the market long term. A multi-year perspective. Of course it doesn't pay off here either. The crypto market is still pretty damn small. No one is too late. Now most of you are losing time, but everyone has to start somewhere. I was in the same situation in 2017. I was drowning. Now I'm still looking at these corrections from + xxxxx% profit. Unfortunately we have to give ourselves time in the market and endure pullbacks of -20-30-40-50-60% to see 3000% profits. Realizing upwards during the upswing is not a bad thing. For me, a huge part of my strategy is to have a lot of money on the sidelines. That's why. Especially on 4H trend changes I sell everything that is not bullish. Then I sell others too if they break the trend and just trade.
💡 We are in the best market in the world, but psychologically the hardest market. If you learn to manage these things and use volatility to your advantage rather than your disadvantage, then it's a game changer.
💡 Institutions (fund managers, pension funds, banks and whales) think in long term horizons and monitor price action based on that (Years, Decades) Small investors, retail traders monitor things in low time frames (Minutes, hours, days). Small investors quickly switch between optimism and pessimism based on current price movements and news in the media. It can be a bull market one day and a bear market for a small investor the next. Institutional investors are not sentimental, they assess the growth rate of the market sector, the total market size available, the adoptation/acceptance, the growth of the network, the analysis of revenues (to predict profitability years and decades in advance). If an institutional investor draws a conclusion, they hold it until the underlying financial situation changes. Small investors usually have limited money to invest, so they often resort to leveraging, which typically results in full liquidation. Leveraged trades have "unlimited" potential losses, and therefore small investors (who do not like to buy spot because it is not "cool") can easily "drop out" of trading because of the "unlimited" losses from leverage. Think about it... as a retailer, you have your precious and hard-earned money on the line. Do you have time to lose what you've worked hard to earn, or even more? Why can't you accept that this is a profession? We study in university for 3-10 years to get an average salary afterwards. But here we are not willing to spend a couple of years without constantly taking time away from yourself with losses? Levrage are not bad. The user is the dangerous one.
😱 There is a reason why 90% of retail traders lose money.
💡Institutionalists brazenly exploit those with few resources and fear. Institutional investors have access to billions of dollars worth of resources and have teams of quantitative/statistical experts who control the automated trading algorithms.
Institutional investors have deep pockets and can influence the general sentiment of the market through the press (news, social media and interviews). Institutional investors influence the news that small investors read. Institutionalists are well known for advertising higher prices to retailers to "buy at the top", This is the FOMO factor (Fear of Missing Out). They are also notorious for creating tremendous market fear (FUD - Fear Uncertainty and Doubt), which encourages retailers to "sell at the bottom".
💡 Institutions are also actively involved in futures, options and derivatives markets. They all actively benefit from short-term price cycles as well as longer-term accumulation strategies. The institutions are sophisticated, financially strong and have expertise. Institutions make money by attracting small investors into the market (via FOMO) and then liquidating their positions (via FUD). In the market, one person's loss is another person's gain.
💡 There is a learning curve that 90% of your people want to skip and get rich overnight. Unfortunately, this is not reality. Knowledge is incredibly important. If you want to be a doctor, or a surgeon, you don't just walk into the operating room and say give me a knife and I'll cut this guy open and operate him without any knowledge. You really have to know what you're doing. If you're an engineer or you want to be an engineer, without training or knowledge, it would be very difficult for you to build a bridge or a skyscraper. You need the knowledge. If you want to be a teacher, but you don't know the subject matter, it would be very difficult to teach students in a meaningful way if you don't even know what you are teaching. So it is essential to acquire knowledge, but that knowledge has to come from the right people. So mentoring is also vital. Everyone must also understand the psychological aspects of investing and trading. Because a lot of people lose money in the financial markets. Not because they are stupid, but because their emotions get the better of them. Focusing on learning is incredibly important, it changes your life. Of course, this doesn't just apply to investing and trading. It applies to everything, which is why the financial markets are so incredible in their ability to create meaning in life, if people are open to it, and if they don't focus too much on money, then money will simply be the result of doing things the right way. Over time, if you do things the right way, you will become rich, you don't have to become a millionaire overnight. If you want to do that, you will probably lose all the money you put into the hands of institutions that want your money, want you to be captivated by a fantasy world.
The reality is that you need the knowledge to fight the big players and win.
💡Self-control is also a must. All wealth will pass without self-control. Self-control makes you keep the money you earn. There are many examples of this among people who have won huge amounts of money without earning it. For example, people who win lottery. These people basically give back all the money they made because they didn't really earn it. A lot of times, the money they didn't earn is put back. When you earn money with self-control, you never have to give it back! It is yours and will continue to grow.
💡 The key is to get off your ass and get moving. Remember these things and you'll be fine.
Handling losses like a pro!Hey traders,
Ever wondered how some of the professional traders can lose tens of thousands of dollars and still not be phased? Well, today I am going to chat about how and why they have the ability to remain consistent and trust the process, and how you can do the same.
Enjoy!
📌Prospect theory; what is it?
Humans are not psychologically good traders by nature !
Have you ever wondered, why trading with real money is overwhelming for you?!
The reason should be sought in the psychological aspect of the case. If you lose amount money in the market, you must gain several times ,so the feeling of happiness overcomes the pain of your initial loss!
although all traders, even successful traders, have tasted loss and it is an inevitable part of the trading journey !But the successful traders have learned how to control the psychologically of it and not be limited by the feelings of a loss!
Prospect theory : also called loss-aversion theory is a theory of behavioral economics and behavioral finance that was developed by Daniel Kahneman and Amos Tversky in 1979. .Daniel Kahneman the author of ' Thinking, Fast and Slow ' book is a Nobel Laureate in Economics who is a psychologist by training. He won the prize mostly for his work in decision making, specifically Prospect Theory. This book distills a lifetime of work on the engine of human thinking, highlighting our cognitive biases and showing both the brilliance and limitations of the human mind. This summary attempts to capture some of the more interesting findings.
Based on results from controlled studies ,he describes how individuals assess their loss and gain perspectives in an asymmetric manner (see loss aversion). For example, for some individuals, the pain from losing $1,000 could only be compensated by the pleasure of earning $2,000 or even more. Thus, contrary to the expected utility theory (which models the decision that perfectly rational agents would make), prospect theory aims to describe the actual behavior of people.
In the original formulation of the theory, the term prospect referred to the predictable results of a lottery. However, prospect theory can also be applied to the prediction of other forms of behaviors and decisions.
Prospect theory: stems from Loss aversion, where the observation is that agents asymmetrically feel losses greater than that of an equivalent gain. It centralises around the idea that people conclude their utility from "gains" and "losses" relative to a certain reference point. This "reference point" is different for each person and relative to their individual situation. Thus, rather than making decisions like a rational agent (i.e using expected utility theory and choosing the maximum value), decisions are made in relativity not in absolutes.
Consider two scenarios;
100% chance to gain $450 or 50% chance to gain $1000
100% chance to lose $500 or 50% chance to lose $1100
Prospect theory suggests that;
When faced with a risky choice leading to gains agents are risk averse, preferring the certain outcome with a lower expected utility (concave value function).
Agents will choose the certain $450 even though the expected utility of the risky gain is higher
When faced with a risky choice leading to losses agents are risk seeking, preferring the outcome that has a lower expected utility but the potential to avoid losses (convex value function).
Agents will choose the 50% chance to lose $1100 even though the expected utility is lower, due to the chance that they lose nothing at all
These two examples are thus in contradiction with the expected utility theory, which only considers choices with the maximum utility. Also, the concavity for gains and convexity for losses implies diminishing marginal utility with increasing gains/losses. In other words, someone who has more money has a lower desire for a fixed amount of gain (and lower aversion to a fixed amount of loss) than someone who has less money.
source: wikipedia
Well, with these concepts , we conclude that Losses loom larger than gains!
the Psychological value of a loss equal or even less than previous profit, can
really affect our mindset , and feeling for trade, actually trading bots are
better than us in this aspect, or better to say ;humans should have a proper
trading system , also should cultivate our discipline and diligence to be a good
trader(psychologically ) !
this article is For informational purposes only!
How To Develop A Profitable Trading MindsetIt’s an unavoidable reality that your forex trading success or failure will largely depend on your mindset. In other words, if your Forex trading psychology is not right, you aren’t going to make any money! Unfortunately, most traders ignore this important fact or are unaware of how critical having the proper mindset is to Forex trading success. If you do not have the correct trading mindset, it doesn’t matter how good your trading strategy is, because no strategy will ever make money if it’s used by a trader with the wrong psychology.
Note: I would love to hear how you plan on using the points discussed here to improve your Forex trading mindset. Please leave me your comments and feedback below after reading today’s lesson!
First, you need to change how you think about trading
One of the things that gives traders a lot of trouble, is getting too attached to any one trade. In fact, you should have zero emotional or mental attachment to any one trade you take.
As I discussed in my article on randomly distributed winners and losers, whilst your trading edge might have a certain winning percentage, let’s say 60%, you need to understand what that means…
What a 60% winning percentage means: It means that over a large enough sample size or series of trades, you can expect to win about 60% of the time.
What a 60% winning percentage does NOT mean: It does not mean that any one trade has a 60% chance of being a winner.
Many traders get confused into thinking that ‘this’ trade will be a winner, or even that ‘this’ trade has a 60% chance of winning, when in fact this is simply not the case.
To think about this from a different perspective, imagine a large jar of marbles of two different colours, let’s say red and blue. Let’s say each marble represents a trade that you took, there are 100 marbles total, 40 red and 60 blue. The red marbles are losing trades and the blue marbles are winning trades. So, you have 60% winners and 40% losers, when translated to your trading method, this shows that you can expect to win 60% of your trades.
HOWEVER…here’s where the thinking part gets tricky. If you shake up that jar of marbles so they are randomly distributed within the jar, and you stick your hand in blindly and pull one out, you don’t know if it will be a red or blue marble. Thus, you would not be ‘expecting’ a blue marble, because you know there are red ones in there as well, randomly distributed.
This is how you need to think about your trades. You need to think about them being randomly distributed events, even if you expect to win 60% or even more, over time. Once you begin to realize that any given trade has an equal chance of being a winner or loser, you will stop giving too much emotional and financial importance to any one trade. Once you do this, it opens up the pathway to carefree trading and allows you to truly induce the proper trading mindset.
I get emails from traders telling me they are ‘excited’ about a trade setup. This makes me cringe because it implies they’re expecting something from that trade setup, they’re expecting it to work out for them. But, they shouldn’t. They should have no expectation of any ONE setup, because each setup has a random outcome. It’s the SERIES of trades while trading our edge (price action) that gives us a chance to make money.
When you remove all expectation and attachment to any one trade, you automatically begin to do other things properly, like managing your risk properly and not fiddling with trades after they’re live. Because you realize that each trade setup may or may not work out, you don’t want to over-commit to it and you don’t want to get in its way. You risk an amount you’re OK with losing and you let the market do ‘its thing’, because you’re just letting your edge play out over a series of trades.
Think in probabilities to avoid emotional trauma
Think about a slot machine for a minute. You put money into a slot machine knowing upfront that it’s a random event, so you have no real expectations of winning or losing on any pull of the arm. Thus, expectations of the outcome of a slot machine are in alignment with the reality of the event itself.
In trading however, you see a pattern form in the market and because maybe the same pattern worked for you last time you start to expect that it will work again this time. Once you commit to this way of thinking you are setting yourself up for potential disappointment and emotional trauma. You are forgetting that each trade has a random outcome that is unconnected to your recent trades. Just because this same exact pin bar was a winner before, does not mean the next one will be, even if it’s exactly the same.
Now, obviously if you have an effective trading edge like my price action strategies, you can greatly improve your chances of a winner over a slot machine, but still, the outcome of any one event (trade) is random. So, you cannot allow yourself to be affected by the result of any one trade.
This trade has no influence or connection to the next trade. If this trade was a loser, the next trade might be a winner (or loser) and if this one was a winner the next one might be a loser (or winner). If you have a 60% win rate on your edge, remember that it is realized over a SERIES of trades, and that might mean you have 5 or 10 losing trades in a row. It doesn’t mean you panic though. You stick with your plan and strategy and you keep taking the trades as they form, because you need to trade a large enough sample size to see your edge play out.
Your goal should be to eliminate the potential for the market to disappoint you by realizing that trading is not about being right or wrong. This is how you to need change. You need to eliminate any potential for disappointment from your trading by thinking in probabilities. Remember the jar of red and blue marbles the next time you enter a trade. You are simply blindly dipping your hand into the marble jar each time you take a trade, so don’t expect to pull out a blue marble, just know that it will be EITHER a red OR blue marble, and that once you pull them all out, you will have 60 blue (winners) and 40 red (losers). IF you can do this, you will be thinking in-line with how the market actually exists and you will be putting yourself in position to profit from the market, rather than getting battered by it like you probably are now.
How to eliminate trading mistakes and start making money
All blown out trading accounts are the result of a snowball effect of trading mistakes. You get too attached to a trade that you ‘just know’ looks ‘so perfect’ it ‘can’t possibly fail’, and so you double up your risk or triple it, hoping to hit a ‘home run’. When that trade then fails, you experience severe emotional trauma and frustration. This causes the snowball effect to begin. You start feeling mad that you lost, you get angry, so you jump back into the market and risk even more, hoping you make back your lost money. This can go on and on until you blow out your account, which doesn’t take very long.
The point is, all of this emotional strife and frustration and the snowball of trading mistakes it causes, can be AVOIDED by changing how you think. That is to say, by thinking about your trades in terms of probabilities, as discussed above, you will circumnavigate the main reason most traders lose money; expectation.
Think about when you were demo trading. You probably did awesome, as many forex traders do. Why did you do awesome? Because you had the right trading mindset… You had no real expectation about any trade because no money was on the line so you didn’t care if it that particular trade lost or won. That’s it right there; you have to not care if you lose or win on any one trade, and you do that by thinking in terms of probabilities. IF you can do that, you will be well on your way to finally making consistent money in the markets.
A lot of people seem to be unaware of the fact that they are trading with a mindset that is inhibiting them from making money in the markets. Instead, they think that if they just find the right indicator or system they will magically start printing money from their computer. Trading success is the end result of developing the proper trading habits, and habits are the end result of having the proper trading psychology. Today’s lesson is going to give you the insight you need to develop a profitable trading mindset, so read this lesson carefully and don’t dismiss any of it, because I promise you that the reason you are struggling in the markets now is because your mindset is working against you instead of for you.
Step 1: Have realistic expectations
The first thing you need to do to develop the proper Forex trading mindset is have realistic expectations about trading. What I mean is this; don’t think you’re going to quit your job and start making a million dollars a year after 2 months of trading live with your $5,000 account. That’s not how it works, and the sooner you ground your expectations in reality, the sooner you will begin to make money consistently. You need to accept that you cannot over-trade and over-leverage your way to trading success, if you do those two things you might make some quick money temporarily, but you will soon lose it all and more. Accept the reality of how much money you have in your trading account and how much of that you are willing to lose per trade. Here are some other points to consider:
• Only trade with disposable ‘risk’ capital – Disposable capital is money you don’t need for any life expenses, including retirement or other long-term things. If you don’t have any disposable or risk capital, then keep demo trading until you do, or stop trading all together, but whatever you do, do not trade with money you are going to become emotional about losing. Always assume you could lose whatever money you have in your account or in a trade…if you’re truly OK with that, then your good to go, just make sure you don’t lie to yourself…REALLY BE OK WITH IT. Trading with ‘scared’ money (money you can’t afford to lose) will lead to severe emotional pressure and cause ongoing losses.
• Make sure you can still sleep at night !– This is related to the above point about disposable capital. But the difference is that you need to ask yourself before EVERY trade you take if you are 100% neutral or OK with potentially losing the money you are about to risk. If you can’t sleep at night because you’re thinking about your trade, you’ve risked too much. No one can tell you how much to risk per trade, it depends on what you’re personally comfortable with. If you trade 4 times a month you can obviously risk a little more per trade than someone who trades 30 times a month…it’s relative to your trade frequency, your skills as a trader, and your personal risk tolerance.
• Understand each trade is independent of the previous one – This point is important because I know that many traders are way too influenced by their previous trade. The fact of the matter is that your last trade has absolutely ZERO to do with your next trade. You need to avoid becoming euphoric or over-confident after a winning trade or revengeful after a losing trade. The fact of the matter is that every time you trade it should just be seen as another execution of your trading edge; if you just had 3 consecutive winners you need to avoid risking more than usual on your next trade just because you are feeling very confident, and you need to avoid jumping back into the market right away after a losing trade just to try and “make back” what you lost. When you do these things you are operating 100% on emotion rather than logic and objectivity.
• Don’t get attached to your trades – If you follow the 3 points we just discussed you should have little chance of becoming too attached to your trades. Don’t take any trade personally, just because you lose on a few trades in a row doesn’t mean you suck at trading, likewise if you win on 3 trades in a row it doesn’t mean you are a trading “God” who is immune to losing. If you don’t risk too much per trade and you aren’t trading with money you need for other things in your life, you probably won’t get too attached to your trades.
Step 2: Understand the power of patience
I think one of the biggest realizations that allowed me to turn the corner in my own trading was that I didn’t have to trade a lot to make a decent monthly return. Think about it, most people consider a 6% annual return very good for a savings account, and if you average 12% a year on your retirement fund you are pretty happy. So why is it that most traders expect to make 100% a month or some other unrealistic return? What’s wrong with making 5 or 10% a month? That’s still exceptional over the course of one year. Whilst I can’t imply you will make a certain percentage per month, if you just understand that slower and more consistent gains are the way to long-term success in the markets, you will be far better off at the end of each trading year. Here are some other points to consider about patience:
• Learn to trade on the daily charts first – By learning to trade on the daily chart time frames first, you will naturally take a bigger-picture approach to the markets and you’ll avoid most of the temptation to over-trade that the lower time frames induce. Beginning traders especially need to slow down and learn to trade off the daily charts first. Daily charts provide the most relevant and practical view of the market. YOU DO NOT HAVE TO TRADE EVERYDAY to make a solid return each month.
• Quality over quantity – I consider myself a “sniper” of the market; I wait and I wait and I wait, sometimes for days or even 1 week without trading, then when I see a price action setup that triggers my “this one is a no-brainer” alarm…I pull the trigger with ZERO emotion. I am always fully prepared to lose the money I have risked on any one trade because I do not trade unless I am 100% confident that my price action trading edge is present.
• User your ‘bullets’ wisely – To really hammer-home the power of patience in developing the proper trading mindset, you need to understand that being patient will work to instill positive trading habits within you. Patience reinforces positive trading habits, whereas emotional trading reinforces negative ones. Once you begin to trade patiently you will see how using your “bullets” wisely works…you only need a few good trades a month to make a respectable return in the markets, after you achieve this via patience, you will learn to enjoy NOT being in the markets…because it’s then that you are “hunting your prey”. This in contrast to the frazzled and frustrated trader who is staying up all night staring at the charts like a trading zombie who just will not accept that they need to trade less often.
Step 3: Be organized in your approach to the markets
You NEED to have a business trading plan, a trading journal, and you need to plan out most of your actions in the market before you enter. The more you plan before you enter the higher-probability you will have of making money long-term. You are ALWAYS going to interpret the market more accurately whilst you’re not in a trade…so pre-planning everything increases your odds of making money since you will be working more on logic than emotion.
• Have a trading plan – I know it can be boring, I know you might think you don’t “need” to make one, but if you don’t make a trading plan and actually use it and tweak it as you learn, you will start trading on an unorganized and probably emotional path. A trading plan doesn’t have to be a very dry and boring document; you can get creative with it. You’re trading plan could be that you write your own weekly commentary before each week begins, plan out what you will do and look for in the upcoming week…just make sure you have a “plan of attack” before you enter any trade.
• Keep a professional trading journal – You need a track record, you need to record your trades, you need to do this in a forex trading journal. This is a critical component to forging the proper Forex trading mindset because it gives you a tangible document that you can look at and instantly get raw feedback on your trading performance. Once you start keeping a journal of your trades it will become a habit, and you will not want to see emotional results staring back at you in your trade journal. Eventually, you will look at your trading journal as something of a work of art that proves your ability to trade with discipline as well as your ability to follow your trading plan. This is something any serious investor will want to see if you plan on trading other people’s money.
• Think BEFORE you ‘shoot’, not after – All of the planning and preemption that I just discussed is analogous to thinking before you shoot. A gun is a very powerful weapon, we all know that we need to think before we shoot one, even if we are just hunting or shooting at a gun range. Likewise, the markets can be very powerful “weapons” in regards to making or losing you money. So, you want to do as much thinking before you enter a trade as you can, because after you enter you are going to naturally be more emotional and you don’t want to put yourself in a position of constantly entering regrettable trades. If you plan your actions before you enter, you should not regret your trades, even when you have losing trades. I never regret any trade I take because I don’t trade unless my edge is present and I’m always comfortable with the amount of money I have risked on any one trade.
Step 4: Have no doubt about what your trading edge is
Finally, don’t start trading with real money if you aren’t really sure how to trade your edge. You are obviously not going to develop the proper trading mindset if you jump into trading a live account without being 100% confident in what you’re looking for. Whatever your edge is, make sure you’ve found success trading it on a demo account for at least 3 months or more before you go live. Don’t just “dive in head first” without being totally comfortable in your approach…this is what most traders do and most of them lose money too.
• Have 100% confidence in your edge – I have 100% confidence in my price action trading strategies…that’s not to say that I am foolish enough to believe EVERY trade will win, but I am totally confident that every time I trade my edge is truly present. I don’t compromise my trading edge by taking setups that look they are “almost” good enough…I simply don’t trade in that case. I only take price action setups that I feel in my gut are high-probability valid representations of my edge. Therefore, I am never fearful or worried about any trade I enter, even if it ends up losing.
• Don’t gamble – There are skilled traders, and then there are people who gamble in the markets. If you take a calm and calculated approach to your trading and wait patiently for your trading edge to appear, like a sniper, then you are a skilled trader. If you just “run and gun” and veer off course from your trading plan, you are a gambler. So, are you a Forex trader or a gambler?
• Price action trading helps develop the proper trading mindset – My trading edge is price action, and I fully believe that the simplicity of price action trading helped me develop and maintain the proper Forex trading mindset. We don’t need tons of messy indicators on our charts and we don’t need Forex trading robots or other expensive software. All we need is the raw price action of the market and our magnificent human minds to interpret it; it’s up to us to harness this power.
The price action of the market gives us a map to follow, and a pretty obvious one at that, if we can ignore the emotional temptations that arise in our minds we will have no problem profiting off of this price action map. I trust today’s lesson has provided you with some insight into how you can develop the proper mindset and ignore the emotions and break the habits that destroy your trading success.
Getting Over the Agony of LossesHey Guys!
When a trader takes a loss, it can be quite hard. It can strip you of your motivation to trade. Or perhaps even sway your quality of life. But that doesn't have to be the case. Do you ever wonder why experienced traders don't have a fit after a loss, whilst beginner traders can go into a chatic godzilla-like tantrum? No, it's not because they're enlightened in some way or simply not prone to anger. It's because they understand what trading is "truly" about.
Trading is simply about refining your strategy and honing it until it is capable of extracting consistent profits from the markets. Moreover they understand that in order to refine a strategy they will have to take losses from time to time. How else will they know if their strategy needs refining or not? Thus the experienced trader views a loss as an opportunity to further refine their strategy and more importantly views these losses as a necessary component to propel their trading to the next level. Now, viewing losses from this perspective, who in their right minds will throw a fit every time they take a loss?
So just some advice to the beginner trader. If you don't have a specific strategy that you're working on and are hopping from strategy to strategy; consider making your own strategy. Of course this can be a mixture of strategies you came across in your trading education, but ultimately the strategy must be constructed with your original signature. This means that you understand the nuts and bolts of the strategy and thus have the ability to refine it when necessary. Once you begin this refinement process, upon a loss and the anger starts to kick in, you'll find that refining your strategy with the lessons learned from the loss will diffuse that anger that erupts inside of you. It will become an antidote that if persisted, will get you on the peaceful road to trading success.
I hope this helps! Have a great day guys!
Ken
The importance of confirmationsHey Traders,
How many times in your trading career have you had a set up that you are so confident in and is so clean that you just enter it without checking for confirmations? How many times have you seen price retract into a demand or supply area with so much force that you simply think it cannot go wrong? This trade setup right here is a prime example of why it is so important to check for confirmations and ensure that the lower time frames are indicating exactly what you want to see prior to entering a trade and not entering a trade out of fear of missing out and buying as soon as the price dips into a demand zone. Let me know in the comments if this relates to you or you've ever had an issue like this.
The analysis on the four hour had me very confident once we had broken over the recent highs. We indicated after a very long and steady downtrend that we could potentially start seeing a movement to the upside. Once we did get a clear structure break, it was followed by a strong push to the downside in which I like to call The Archers pullback. Price retraced straight back down into our demand area, which means we ticked step one and now we were looking for step 2 and Step 3.
As you can see, looking at the one hour chart, we had a steady downtrend formed prior to having a strong news release which pushed price down into the demand zone. Once we had this trendline formed, what I simply wanted to see was an area of consolidation, potentially a descending channel. Then a break of this trend line followed by a pull back followed by a break of structure down on the 15 minute. But what you can notice is as we have this trendline drawn an we dip into the demand zone, that price didn't break the trend line. It simply went sideways and did form a descending channel, but to the point where we broke the recent demand and set a lower low. In turn, it made this analysis invalid.
It is highly important that with all trade setups like this, especially trading the higher time frames, that we dive into the lower timeframes to ensure that the demand or the supply is entering the market the way we're anticipating so we can trade the distance with confidence. If we do not wait for confirmations then we are sitting blind and entering what you would call FOMO trades. Entering with much higher risk. As we can see here, price can just rip straight through these areas and we must be prepared to not take trades. If we were to enter blindly into these areas, this trade would of resulted in a loss on the account.
Do you find this analysis helpful? Should we chat more about this in the future?
Commodities In 2021 and a View for 2022It is official- Inflation is no longer “transitory,” according to the US central bank. After blaming rising prices on pandemic-inspired supply chain bottlenecks throughout 2021, the Federal Reserve swallowed its pride, admitting inflationary pressures are far more structural than “transitory.” Economist Mohamed El Erian called “transitory” the worst call in the Fed’s history.
What the Fed, US Treasury, and most mainstream economists have not said is that the blame lies at their feet. The liquidity tidal wave and stimulus tsunami lit the inflationary fuse in 2020 that continues to burn in early 2022.
The dollar index may have rallied by 6.34% in 2021, but its appreciation is little more than a mirage. The foreign exchange market conveniently measures one currency’s value against another. The dollar’s ascent may make the greenback the strongest fiat currency, but it is the best horse in the glue factor when it comes to value. All fiats have lost purchasing power since 2020, and the dollar is no exception. The stock market, real estate prices, cryptocurrencies, and commodities have all experienced substantial price appreciation, which is also a mirage. Fiat currency’s purchasing power continues to decline, and that trend remains firmly intact as we head into 2022.
Commodity prices began rallying after reaching bottoms in early 2020 as the pandemic swept across the world. The rally continued in 2021 and looks set to take prices to higher lows and higher highs in 2022.
2021 was a very bullish year in the commodities asset class
A composite of 29 of the leading and most liquid commodities futures and forwards that trade on the US and UK futures and forwards exchange moved 4.73% higher in Q4 2021 and 26.79% higher in 2021. In Q4, the leading sectors posted the following results:
Base metals moved 9.65% higher
Grains gained 9.31%
Animal proteins moved 4.73% higher
Soft commodities appreciated by 4.25%
Precious metals posted a 2.80% gain
Energy commodities fell 3.02%
In 2021, four of the five sectors posted double-digit percentage gains while only precious metals moved lower:
Energy was 54.13% higher
Base metals gained 38.09%
Soft commodities rallied 31.57%
Grains moved 29.71% to the upside
Animal proteins appreciated by 19.16%
Precious metals fell 11.91%
The overall performance was highly bullish as inflationary pressure, pandemic-inspired supply chain bottlenecks, and other factors pushed prices to multi-year, or in some cases, new all-time highs.
An interesting observation between a commodity composite and the S&P 500
In a sign that inflation pushed all asset prices higher, the performance of the leading stock market index and commodities asset class was virtually the same.
The long-term chart of the S&P 500, the most representative stock market index, reflects a 26.89% rise in 2021.
The commodity composite that includes the leading precious and base metals, energy, soft, gains, and animal protein markets was 26.79% higher. The results are uncanny but reflect inflation’s impact on prices.
Thirty-three winners and eight losers for the year
Winners outnumbered losers by better than four-to-one in the commodities asset class that includes 41 different markets.
Metals, foods, and energy commodities posted the most significant gains. Thirty-two of thirty-three markets that moved higher posted double-digit percentage gains, and thirteen markets were up over 50%.
Of the eight markets that moved lower in 2021, five were precious metals. The sector may have lost 11.91% in 2021, but it moved 27.85% higher in 2020. Gold reached a new all-time high in 2020 and palladium in 2021, before the shiny metals corrected. Iron ore, the worst-performing commodity in 2021, was nearly 73% higher in 2020. Soybean meal rose by over 43% in 2020. Cocoa posted a marginal gain in 2020 and a market loss in 2021.
Three reasons the bullish relay race will continue
The ascent of commodity prices since the 2020 lows has been nothing short of a bullish relay race, with one market handing the bullish baton to the next.
Three factors favor a continuation of bullish price action in 2022:
Inflation : The Fed may be talking a hawkish game in early 2022, but action speaks a lot louder than words. At the December FOMC meeting, the committee forecast a 0.60% Fed Funds rate in 2022 and a 1.90% short-term rate in 2023. Even if inflationary pressures recede, real interest rates will remain in negative territory, which is fuel for higher inflation. As fiat currencies’ purchasing power declines, commodity prices are likely to continue to make higher lows and higher highs.
The supply chain : Geopolitical issues and the pandemic’s legacy continue to create bottlenecks preventing commodities from moving from producers to consumers. Moreover, tensions between the US and Russia and the US and China develop roadblocks for commodities and distort prices, creating gluts in some regions and shortages in other areas.
Policy : The shift in US energy policy to address climate change changed the fundamental equation for fossil fuels. OPEC and Russia now control world petroleum pricing. Increased regulations on US drilling and fracking will weigh on supplies. Moreover, addressing climate change dramatically increases the demand for battery metals and other commodities that are critical inputs for greener energy via alternative and renewable sources. Energy is an essential input for all commodity production. As energy prices rise, it puts upside pressure on all commodities, including grains, animal proteins, and metals.
Inflation is a vicious cycle that is challenging to address once it gains speed. The US Fed and other world central banks are far behind the inflationary curve in early 2022.
Bull markets rarely move in straight lines
Bull markets can experience brutal corrections. In 2021, we saw copper drop from a new record high at nearly $4.90 per pound in May to below $4 in August. Lumber dropped from over $1700 per 1,000 board feet in May, a record high, to under $500 in August. Crude oil fell from its highest price since 2014 at $85.41 in October to below $63 in early December. Natural gas tanked from $6.466 per MMBtu in early October to below $4 in December and January. Many other commodities suffered equally ugly corrections. However, most found bottoms and have rallied from the higher lows than in 2020.
I expect a continuation of higher lows and higher highs in the commodities asset class in 2022. The trend is always your best friend, and it remains higher in the raw materials asset class since 2020.
2021 was a bullish year in commodities, and I expect that trend to continue in 2022, but the road to higher prices is likely to be very bumpy.
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Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
Winning is easy. What matters is what you do when you loseHey traders!
In this video we go over mindset and what matters more than winning in trading, it is how you deal with losers!
We hope this video helps you form an edge in your trading and help give you growth and development, something every trader should seek!
Good luck trading!
How to manage & deal with consecutive losses in trading ?
Trading Psychology: How to manage & deal with losses/consecutive losses in trading ?
Hi everyone:
Today I want to go over a very key trading psychology lesson on how to deal with losses, especially consecutive losses.
This is bound to happen to any traders, whether you are new or experienced. ITs something all professional traders will have to deal with on a regular basis.
Understand that, dealing with losses psychologically is the key factor in the success of a trader.
This is because losses are inevitable, and trading is a probability, which trades that you take will end up both in wins and losses.
However, traders usually can not accept losses, due to their ego, greed and other emotional factors.
Aside from having a good risk management, trading plan, and trading strategies, traders can still experience the psychological emotions of losing.
This is due to the fact that we are humans and we are an “emotional” animal. We don't want to be wrong, at all.
Taking a loss is like getting slapped in the face by the market, which we have egos to fight against.
What ends up after taking losses or consecutive losses, it puts traders at a disadvantage where their emotion is high, and likely to “revenage” trade to chase back losses, which end up in a deeper hole.
To deal with such psychological phenomena, take a step back and observe your situation:
First, did you follow your trading plan/strategy on how to enter, set SL/TP, and management ?
Second, did you take an emotional trade due to greed or fear of missing out ?
Third, have you journal down your losses and review them to make sure they are trades you really want to risk your capitals on ?
By now you will see why we need to review these. Trading is a probability, not right or wrong. It's a random variable that you are putting your $ at risk.
So if you understand the rules and plans that you follow and execute a trade accordingly,
then there should NOT be any negative emotions towards the outcome of the trades, whether they are winners or losers.
When I discuss the trades I entered every week in my trade recaps videos, I am always happy to enter a position, even if it goes to a loss.
This is because I have done enough backtesting, chart work, and plan to enter a position.
I understand strictly from a probability point of view, I could have a higher strike rate, and more often the trades will end up as a winner rather than a loser.
However, I also understand and acknowledge that some trades will end up in a loss, disregard mine technical analysis or other’s fundamental analysis. It is what trading is all about.
When I have consecutive losses, I will always review the 3 points I mentioned above and make sure they are all valid for me.
Then I simply will take 1 day off from the market, chart, phone, and just get your mind clear. Come back strong after 1-2 days of rest, and have a positive mindset.
What traders often do when they have consecutive losses is to right away re-enter back into the market and try to chase back their losses.
This has always been the downfall of losing and it creates anxiety in traders’ minds.
Such a negative experience is going to stay in the traders’ mind longer and deeper, compared to consecutive winners.
So wise we understand that is the case how our brain is "programmed” into thinking, then it's up to us to do the opposite, and fight the urge to “revenge” our losses.
At the end of the day, no one is trading your trading account, except yourself.
Taking ownership of your account, learning to control our emotions, understanding the probability side of trading, and learning to let go, drop our ego will help us in the long run in this industry.
I hope these pointers can help some traders who are still struggling with this concept.
It's impossible not to take losses, but professional traders deal with it on a regular basis and still remain consistent in the long run.
Thank you
I will forward some Trading Psychology educational videos below on some of the topics explained today.
Trading Psychology: Revenge Trading
Trading Psychology: Fear Of Missing Out
Trading Psychology: Over Leveraged Trading
Trading Psychology: Is there Stop Loss Hunting in Trading ? How to deal with it ?
Dealing with losses... before they occurLosses are part of this business. People do not react well to losses. Badly handled losses in trading can trigger bigger losses. Furthermore, these have the dangerous potential of wiping out entire accounts. If you want to make it as a trader you need to have a solid psychological approach to accept and handle losses.
Lots of internet articles are suggesting that the way to prevent debilitating losses in trading is to follow risk management rules. What are those rules about? Basically, they are simple thresholds indicating the maximum $ /percentage you should risk per trade, day, month, etc. Having such rules is a must but it’s not enough. You can still lose much if your mind is not actually prepared to implement them. That’s why many traders set rules only to break them in the most inappropriate moments.
People do not follow their own risk management rules because they are not psychologically prepared to accept losses. They are not prepared for the pain caused by a loss or a series of losses.
The single most efficient way to handle losses is to accept them consciously and unconsciously. One of the most dangerous ways to react to losses is “revenge” or “on tilt” trading. This happens when the pain caused by a loss is so high that the trader loses his / her rationality and only wants his / her money back, disregarding most of the things he/she actually knows about the market. The brain cannot accept the emotional discomfort and the fastest solution is to quickly find a trade to make the money back. Most of the time, the quickest trade is in the same instrument (FX pair, stock, etc) that generated the initial loss, by averaging down/up or flipping. Some of the most experienced traders can work their way out but the vast majority will only make things worse.
In order to prevent this kind of psychological slippage, you need to prepare your mind to consciously and unconsciously accept losses BEFORE they occur. With the help of a psychotherapist or by yourself you can perform visual exercises where you will imagine yourself being in a losing position and reacting the right way. This would desensitize you if done right.
The technique I always use each time I open a position is to do that desensitization process “on the fly”. I watch the market and I see an opportunity. BEFORE opening the position, I imagine myself in the posture of facing that trade ending in a loss. After that, I imagine that trade going the way I want. I might even go back and forth (in my mind) a few times between losing and winning. This way, I prepare my unconscious mind. If I cannot imagine myself easily handling the loss (or the win) I will simply reduce size.
Pay attention though, I am not recommending here to imagine yourself constantly losing because this would do more harm than good. This would be a separate topic about the power of visualization exercises.
Trading Psychology 101: DevotionYour beliefs shape the way you live life. Change your beliefs, change your life.
