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EXPLAINED: How Gearing Works with CFDs and Spread TradingNot sure what happened but the image didn't show. Here it is again... This is the most important concept you’ll need to understand to accelerate your account. During your trading experience, with gearing, you’ll learn how to multiply your profits. But you can also multiply your losses, if you don’t know what you’re doing. So listen up. What Gearing is in a nutshell… Gearing also known as leverage or margin trading, is the function that allows you to pay a small amount of money, in order to gain control and be exposed to a larger sum of money. There is a very simple calculation you’ll use calculate the gearing for both CFDs and Spread Trading. Exposure Initial margin In order to understand this formula, let’s use three gearing examples with shares versus CFDs and Spread Trading. We’ll break it up into three steps for CFDs and Spread Trading: 1. Calculate the entry market exposure 2. Calculate the initial margin (Deposit) 3. Calculate the gearing We’ll also exclude costs to help simplify the gearing concept better. EXAMPLE 1: Buying AAS Ltd shares Portfolio value: R100,000 Company: AAS Ltd Share price: R109.00 No. shares to buy: 100 If you buy one share at R109 per share, you’ll be exposed to R109 worth of one share. If you buy 100 shares at R109 per share, you’ll be exposed to R10,900 worth of shares (100 shares X R109 per share). We know that to be exposed to the full R10,900 worth of shares, we needed to pay an initial margin (deposit) of R10,900. If we plug in values into the gearing formula, we get. Gearing = (Exposure ÷ Initial Margin) = (R10,900 ÷ R10,900) = 1:1 This means, there is NO gearing or a gearing of 1 times, with the share example as, what we paid is exactly as what we are exposed to. Easy enough? Let’s move onto CFDs. EXAMPLE 2: Buying AAS Ltd CFDs Portfolio value: R100,000 CFD of the underlying Company: AAS Ltd CFD Share price: R109.00 Margin % per CFD: 10% (NOTE: Find out on your trading platform or ask your broker for the margin % per CFD) No. CFDs to buy: 100 Step #1: Calculate the entry exposure of the CFD Entry exposure = (Share price X No. CFDs) = (R109.00 X 100 CFDs) = R10,900 NOTE: 1 CFD per trade, you’ll be exposed to the value of one share. 100 CFDs per trade, you’ll be exposed to the value of 100 shares. Step #2: Calculate the initial margin of the CFD trade Initial margin = (Exposure X Margin % per CFD) = (R10,900 X 0.10) = R1,090 This means to buy 100 CFDs, you’ll need to pay an initial margin (deposit) of R1,090. Step #3: Calculate the gearing of the CFD trade Gearing = (Exposure ÷ Initial margin) = (R10,900 ÷ R1,090) = 10 times With a gearing of 10 times, this means two things… #1: For every one CFD you buy for R10.90 per CFD, you’ll be exposed to 10 times more or the value of one AAS Ltd share. #2: For every one cent the share price rises or falls, you’ll gain or lose 10 cents. EXAMPLE 2: Buying AAS Ltd CFDs Portfolio value: R100,000 Underlying Company: AAS Ltd Share price: 10,900c Value per point: 100c (R1.00) Margin % per Spread Trading contract: 7.50% (NOTE: Find out on your trading platform or ask your broker for the margin % per share contract) Step #1: Calculate the entry exposure of the spread trade Entry exposure = (Share price X Value per point) = (10,900c X 100c) = 1,090,000 (R10,900) Note: 1c value per point per spread trade– you’ll be exposed to one AAS share 100c value per point per spread trade – you’ll be exposed to 100 AAS shares Step #2: Calculate the initial margin of the spread trade Initial margin = (Exposure X Initial margin) = (1,090,000c X 0.075) = 81,750c (R817.50) This means, you’ll need to pay an initial margin (deposit) of R817.50 to be exposed to R10,900 worth of AAS Ltd shares. Step #3: Calculate the gearing of the spread trade Gearing = (Exposure ÷ Initial margin) = (1,090,000 ÷ 81,750c) = 13.33 times This means, by depositing R817.50 you’ll be exposed to 13.33 times more or R10,900 (R817.50 X 13.33 times) worth of AAS Ltd shares. You now know how gearing works with CFDs and Spread Trading, in the next lesson we’ll cover how to never risk more than 2% of your portfolio for each CFD and Spread Trade you take. Did you enjoy this article? Trade well, live free. Timon Rossolimos Feel free to follow our socials below for more.
JSE:J200Education
by Timonrosso
How Gearing Works with CFDs and Spread TradingThis is the most important concept you’ll need to understand to accelerate your account. During your trading experience, with gearing, you’ll learn how to multiply your profits. But you can also multiply your losses, if you don’t know what you’re doing. So listen up. What Gearing is in a nutshell… Gearing also known as leverage or margin trading, is the function that allows you to pay a small amount of money, in order to gain control and be exposed to a larger sum of money. There is a very simple calculation you’ll use calculate the gearing for both CFDs and Spread Trading. Exposure Initial margin In order to understand this formula, let’s use three gearing examples with shares versus CFDs and Spread Trading. We’ll break it up into three steps for CFDs and Spread Trading: 1. Calculate the entry market exposure 2. Calculate the initial margin (Deposit) 3. Calculate the gearing We’ll also exclude costs to help simplify the gearing concept better. EXAMPLE 1: Buying AAS Ltd shares Portfolio value: R100,000 Company: AAS Ltd Share price: R109.00 No. shares to buy: 100 If you buy one share at R109 per share, you’ll be exposed to R109 worth of one share. If you buy 100 shares at R109 per share, you’ll be exposed to R10,900 worth of shares (100 shares X R109 per share). We know that to be exposed to the full R10,900 worth of shares, we needed to pay an initial margin (deposit) of R10,900. If we plug in values into the gearing formula, we get. Gearing = (Exposure ÷ Initial Margin) = (R10,900 ÷ R10,900) = 1:1 This means, there is NO gearing or a gearing of 1 times, with the share example as, what we paid is exactly as what we are exposed to. Easy enough? Let’s move onto CFDs. EXAMPLE 2: Buying AAS Ltd CFDs Portfolio value: R100,000 CFD of the underlying Company: AAS Ltd CFD Share price: R109.00 Margin % per CFD: 10% (NOTE: Find out on your trading platform or ask your broker for the margin % per CFD) No. CFDs to buy: 100 Step #1: Calculate the entry exposure of the CFD Entry exposure = (Share price X No. CFDs) = (R109.00 X 100 CFDs) = R10,900 NOTE: 1 CFD per trade, you’ll be exposed to the value of one share. 100 CFDs per trade, you’ll be exposed to the value of 100 shares. Step #2: Calculate the initial margin of the CFD trade Initial margin = (Exposure X Margin % per CFD) = (R10,900 X 0.10) = R1,090 This means to buy 100 CFDs, you’ll need to pay an initial margin (deposit) of R1,090. Step #3: Calculate the gearing of the CFD trade Gearing = (Exposure ÷ Initial margin) = (R10,900 ÷ R1,090) = 10 times With a gearing of 10 times, this means two things… #1: For every one CFD you buy for R10.90 per CFD, you’ll be exposed to 10 times more or the value of one AAS Ltd share. #2: For every one cent the share price rises or falls, you’ll gain or lose 10 cents. EXAMPLE 2: Buying AAS Ltd CFDs Portfolio value: R100,000 Underlying Company: AAS Ltd Share price: 10,900c Value per point: 100c (R1.00) Margin % per Spread Trading contract: 7.50% (NOTE: Find out on your trading platform or ask your broker for the margin % per share contract) Step #1: Calculate the entry exposure of the spread trade Entry exposure = (Share price X Value per point) = (10,900c X 100c) = 1,090,000 (R10,900) Note: 1c value per point per spread trade– you’ll be exposed to one AAS share 100c value per point per spread trade – you’ll be exposed to 100 AAS shares Step #2: Calculate the initial margin of the spread trade Initial margin = (Exposure X Initial margin) = (1,090,000c X 0.075) = 81,750c (R817.50) This means, you’ll need to pay an initial margin (deposit) of R817.50 to be exposed to R10,900 worth of AAS Ltd shares. Step #3: Calculate the gearing of the spread trade Gearing = (Exposure ÷ Initial margin) = (1,090,000 ÷ 81,750c) = 13.33 times This means, by depositing R817.50 you’ll be exposed to 13.33 times more or R10,900 (R817.50 X 13.33 times) worth of AAS Ltd shares. You now know how gearing works with CFDs and Spread Trading, in the next lesson we’ll cover how to never risk more than 2% of your portfolio for each CFD and Spread Trade you take.
JSE:J200Education
by Timonrosso
EXPLAINED: CFDs versus Spread Trading 101What are CFDs and Spread Trading? Spread Trading (betting) and CFDs are financial instruments that allow us to do one thing. To place a bet on whether a market will go up or down in price – without owning the underlying asset. If we are correct, we stand a chance to make magnified profits and vice versa if wrong. Both CFDs and Spread Trading, allow us to buy or sell a huge variety of markets including: • Stocks • Currencies • Commodities • Crypto-currencies and • Indices. When you have chosen a market to trade, there are two types of CFD or Spread Trading positions you can take. You can buy (go long) a market at a lower price as you expect the price to go up where you’ll sell your position at a higher price for a profit. You can sell (go short) a market at a higher price as you expect the price to go down where you’ll buy your position at a lower price for a profit. EXPLAINED: CFDs for Dummies DEFINITION: A CFD is an unlisted over-the-counter financial derivative contract between two parties to exchange the price difference between the opening and closing price of the underlying asset. Let’s break that down into an easy-to-understand definition. EASIER DEFINITION: A CFD (Contract For Difference) is an: • Unlisted (You don’t trade through an exchange) • Over The Counter (Via a private dealer or market maker) • Financial derivative contract (Value from the underlying market) • Between two parties (The buyer and seller) to • Exchange the • Price difference (Of the opening and closing price) of the • Underlying asset (Instrument the CFD price is based on) EASIEST DEFINITION Essentially, you’ll enter into a CONTRACT at one price, close it at another price FOR a profit or a loss depending on the price DIFFERENCE (between your entry and exit). Moving onto Spread Trading. EXPLAINED: Spread Trading for Dummies DEFINITION: Spread Trading is a derivative method to place a trade with a chosen bet size per point on the movement of a market’s price. EASIER DEFINITION: Spread Trading is a: Derivative method (Exposed to an underlying asset) to Place a trade (Buy or sell) with a chosen Bet size per point on where you expect a Market price will Move (Up or down) In value EASIEST DEFINITION: Spread Betting allows you to place a BET size on where you expect a market to move in price. Each point the market moves against or for you, you’ll win or lose money based on their chosen TRADING bet size (a.k.a Risk per point or cent movement). The higher the bet size (value per point), the higher your risk and reward. The costs you WILL pay with Spread Trading and CFDs Both Spread Trading and CFDs are geared-based derivative financial instruments. As their values derive from an underlying asset, when you trade using Spread Trading or CFDs, you never actually own any of the assets. You’re just making a simple bet on whether you expect a market price to rise or fall in the future. If you decide to go with the broker or market maker who offers CFDs or Spread Trading, there are certain costs you’ll need to pay. Costs with Spread Trading With Spread Trading, you’ll only have one cost to pay – which are all included in – the spread. The spread is the price difference between the bid (buying price) and the offer (selling price). EXAMPLE: Let’s say you enter a trade and the bid and offer prices is 5,550c – 5,610c. The spread, in this case, is 60c (5,610c – 5,550c). This means your trade has to move 60c to cross the spread in order for you to be in the money-making territory. Also, if the trade goes against you, the spread will also add to your losses. Why the spread you ask? The spread is where the brokers (market makers’) make their money. Costs with CFDs Brokerage With CFDs, it can be different. Depending on who you choose to trade CFDs with, you may need to cover both the spread as well as the brokerage fees – when you trade. These brokerage fees can range from 0.2% – 0.60% for when you enter (leg in) and exit (leg out) a trade. NOTE: If the minimum brokerage per trade is R100, you’ll have to pay R100 to enter your trade. Daily Interest Finance Charge The other (negligible) cost, you’ll need to cover is the daily financing charges. If you buy (go long) a trade, you’ll have to pay this negligible charge (0.02% per day) to hold a trade overnight. However, if you sell (go short) a CFD trade, you’ll then receive this negligible amount (0.009%) to hold a short trade overnight. The costs you WON’T pay as a Spread Trader With spread trading (betting), you don’t own anything physical. When you take a spread bet, you’re simply making a financial bet on where you expect the price to move and nothing else. This means, there will be no costs to pay as you would with shares including: NO Daily Interest Finance charges NO Stamp Duty costs NO Capital Gains Tax NO Securities Transfer Tax NO Strate NO VAT NO Brokerage (all wrapped in the spread). The costs you WON’T pay as a CFD trader With CFDs, you’ll notice that there are similar costs with Spread Trading that you won’t have to pay including: NO Stamp Duty costs NO Securities Transfer Tax NO Settlement and clearing fees NO VAT NO Strate 24-Hour Dealings The great thing about Spread Betting or CFD trading is that, you can trade markets trade 24/5. I’m talking about currencies, commodities and indices. And with Crypto-currencies you can trade them 24 hours a day seven days a week. I have left out a very important difference between CFDs and Spread Trading… Gearing and how it works in real life…
JSE:J200Education
by Timonrosso
1
Trading 101 - What is a Derivative & why are they revolutionary?Derivatives trading! What I believe has been the absolute market revolution since shares. Derivatives might sound complicated and something you would hear from a professor or a know-it-all businessman – but they’re really not. I am no academic or even remotely one of the smartest guy’s in the world. And if I can grasp the idea and understanding of derivatives, I pretty much guarantee you will too. Also, if you want to take trading seriously and really make a living with it, you’ll need to understand derivatives trading sometime in your career. Let’s start at the very beginning. What is a derivative? – Collins English Dictionary – ‘A derivative is an investment that depends on the value of something else’ When it comes to trading, a derivative is a financial contract between two parties whose value is ‘derived’ from another (underlying) asset. Let’s break that down more simply: A derivative is a financial contract (CFDs, Spread Trading, Futures, Forwards, Options &Warrants) Between two parties (the buyer and seller) Whose value (the market’s price) Is derived (depends on or comes from) Another underlying asset (Share, index, commodity, currency, bond, interest-rate, crypto-currency etc…) You’ll find that the derivative’s market price mirrors that of the underlying asset’s price. Why trade using derivatives? The absolute beauty about trading derivatives is that they are a cheaper and a more profitable way to speculate on the future price movements of a market without buying the asset itself. You don’t get all the benefits with derivatives What’s probably important to note with derivatives, is this. When you buy a derivative’s contract, you’re not actually buying the physical asset. You’re simply making a bet on where you expect the price to go. EXAMPLE: When you buy actual shares of a company, means you’ll be able to attend AGMs (Annual General Meetings), Vote and claim dividends from a company. When you trade derivatives on the underlying share, means you’ll be exposed to the value of the shares and the price movements – and that’s it! As a trader, when you buy or sell a derivative, you’re not actually investing in the underlying asset but rather just making a bet (speculation) on where you believe the market’s price will head. This gives you the advantage and opportunity to: Buy low (go long) a derivative of the underlying asset and sell it at a higher price for a profit or Sell high (go short) a derivative of the underlying asset and buy it back at a lower price for a profit Remember when I said it was cheaper and more profitable? You can thank margin With derivatives, you’ll normally pay a fraction of the price of the total sum and still be exposed to the full value of the asset (share, index, currency etc…) The fraction of the price paid is called ‘margin’. EXAMPLE: To buy and own 10 Anglo shares at R390 per share will cost you R3,900 (R390 per share X 10 shares). To buy and be exposed to 10 Anglo shares using derivatives, and the margin of the contract is 10% per share, means you’ll only pay R390 (R390 per share X 10% margin per derivative X 10 shares). I’m sure you can see that with derivatives, you’ll be exposed to more and pay less which will gear up your potential profits or losses versus when trading shares. This is why we call derivatives, geared financial instruments. Enjoyed the article comment below and follow for more... Trade well, Live free Timon MATI Trader Also my socials are below thanks to Trading View.
JSE:J200Education
by Timonrosso
BACK TO THE FUTURE VS TRADINGI watched the Oscars recently and saw Michael J. Fox receive his humanitarian award. This brought me back to my childhood with the legendary Back to the Futures movie... Also this year we saw The Back to the Future stars Doc Brown (Christopher Lloyd) and Marty McFly (Michael J. Fox) reunited and shared the stage at the New York Comicon 2022. This is where they reminisced over their iconic roles in the beloved film trilogy. There were a bunch of mixed emotions but mostly the feeling of nostalgia and childhood memories… And so, I watched the trilogy and I found it was super interesting to watch a movie when at the time, they were trying to predict the future by making a number of predictions about 2015… They certainly got a few spot ons such as: • Smart watches • Hover boards • Virtual reality headsets (which we use Quest, PlayStation and even HTC) • Talking from TV to TV (Instead we use tablets and smart phones, but close enough) • Donald Trump like figure as president They also made a few wrong predictions like: • People wearing their pockets inside out • Dogs having drones walk them (but we do have drones though) • Mechanical car fuel attendants • Pizza hydrators But overall, there is a very big lesson we can learn from this… If scientists, businessmen, producers, directors and actors can’t accurately predict the future, nobody can. And trading the financial markets are similar to “Back to the Future” movies. It’s unpredictable and normally plays out differently to what we think… Thing about the future is… When you know what is going to happen and you act according, the future changes… Let’s say you know what’s going to happen at a certain point in the future. If you act according to what will happen in the future, then your action will change the future. So, if the future is so unpredictable, how can anyone ever make money from trading? Simple. You don’t need to know the future when you trade When you take a trade, you should never try to predict where the market will go. Instead, we should base the future predictions and decisions on one word. Probability. If the market is moving up, there is a higher chance it will continue to move up. (It’s going up for a reason). If the market consolidates in a sideways formation and then the price breaks down, there is a higher chance the price will continue to move down. We say, go with the trend rather than against it… Our job is not to predict every turn and bank a profit from every point move. Our job is to anticipate a change in the market, wait for confirmation and then act accordingly to follow the MORE likely scenario… You might not get it right 30% to 40% of the time, but you can get it right 50% - 70% of the time during certain market environments… That’s all I do when I do trades and analyses… I base probabilities on where a market is more likely to go at a certain time… If I’m wrong, I adjust – rather than deny… This was a short reminder of why you don’t need to predict the markets to make it as a trader. Did you enjoy this short piece? Let me know in the comments. It's a passion to help share the knowledge I've gained over the last 20 years as a trader. Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
2
Is Trading Like Playing Poker? Is trading a form of gambling? With hesitance, I would say yes. However, I would rather call trading a form of strategic gambling as both require elements of risk, reward, strategy and decision making. In the next two weeks or so, I’m planning to publish a new online FREE book called “Poker Vs Trading”. Who knows, by the end of it all you may take up professional poker playing as well as trading… Let’s start with the similarities. SIMILARITY #1: We can choose when to play (Strategy) Traders and poker players don’t play every hand that is dealt to them. With poker, when a hand is dealt, we can choose to either play the hand, based on how strong it is, or we can choose to fold and wait for the next hand… With trading, we wait for a trading setup based on the criteria of our strategy i.e. MATI Trader System. You’ll then have the exact criteria and money management rules to follow in order to take a trade or wait for the next trade. SIMILARITY #2: Amateur poker players and traders tend to go the ‘tilt’ (Emotional roller-coaster) Emotions are a main driver which leads to traders losing their cash in their account or poker players losing their chips very quickly. With poker, you get players who let their emotions take over where they start betting high with an irrational frame of mind. These emotions lead them to losing their chips very quickly. This is when they enter the state of what is called ‘going the tilt’. With trading, amateur traders also tend to act on impulse and play on gut, instinct, fear and greed after they’ve undergone a losing streak or a winning streak. This often leads them to: ~ Taking a series of losses. ~ Losing huge portions of their portfolio. ~ Holding onto losing trades longer than they should. ~ Entering a mindset of revenge trading. SIMILARITY #3: We know when to hold ‘em and when to fold ‘em (Cut losses quick) We have the choice to reduce our losses when it comes to betting a hand or taking a trade. With poker, if the players start upping the stakes and you believe you have a weaker hand in the round, you can choose to ‘fold’ and lose only the cost of playing the ‘ante’. With trading, if you’ve taken a trade and it turns against you, you have a stop loss which will get you out at the amount of money you were willing to risk of your portfolio… SIMILARITY #4: We know the rake (Costs involved) There are always costs associated with each trade we take or each hand we play, which eats into our winnings. With poker, it’s the portion of the pot that is taken by the house i.e. the blinds and the antes. With trading, it’s the fees charged by your broker or market maker, in order to take your trade. These fees can be either the tax, spread and/or the brokerage. SIMILARITY #5: Aggressive trading and betting before the flop (High volatility) There will always be a time of strong market moves and high betting. With poker, you get times where players like to bet aggressively and blindly before the flop is revealed. It’s these times that lead to the amateur poker players losing their chips very quickly. With trading, you get economic data i.e. Non-Farm-Payrolls, black swan events and Interest Rate decisions when big investors and traders like to drive the market up or down before the news even comes out. NOTE: I ignore both forms of hype as it is can lead to a catastrophic situation. SIMILARITY #6: We bet and trade based on the unknown Every bet and trade we take and play is based on incomplete information of the future. With poker, we are dealt hands then bet on decisions based on not knowing what cards our opponents have and/or what is shown on the river. We then have the options to call, bet, raise or fold during the process.With trading, we take trades based on probability predictions without knowing where the price will end up at. This is due to new information which comes into the market including (demand, supply, news, economic indicators, micro and macro aspects). SIMILARITY #7: We lose A LOT! (Losses are inevitable) Taking small losses are part of the game with both poker and trading. With poker, it is important to wait patiently until you have a hand with a high probability of success. Some of the best poker players in the world, fold 90% of the starting hands, they receive. Some professional poker players can go through weeks and months without a win. With trading, we can lose over 40% to 50% of the time. In general, I expect around two losing quarters a year. I know that when there are better market conditions, it will make up for the small losses. SIMILARITY #8: You must learn to earn (Education is vital) You need to understand and gain as much knowledge as you can about poker and trading before you commit any money. With poker, you need to understand: • The rules of the game. • The risk per move. • The amount of money you should play per hand. Once you know these points, you’ll be able to develop some kind of game plan with each hand you play. With trading, you need to understand: • The MARKET (What, why, where are how?)NB* • The METHOD (What system to follow before taking a trade). • The MONEY (Risk management rules to follow with each trade) • The MIND (The frame of mind you must develop to succeed) SIMILARITY #9: Perseverance is the key ingredient to success You need to take the time and have the determination to become a successful trader and poker player. With poker, you’ll need to keep at it and apply strict money management rules with each hand played. With trading, you’ll need to know your trading personality, know which trading method best works you and understand your risk profile… I’ll leave you with a quote from Vince Lombardi (American football player, coach, and executive): “Practice does not make perfect. Only perfect practice makes perfect” Do you think trading is like poker? If you enjoyed this daily lesson follow fore more! Trade well, live free. Timon MATI Trader
Editors' picks
JSE:J200Education
by Timonrosso
26
How to increase your win rate in trading.The first three years of my trading career were a nightmare. I was all alone, trying to study and apply the course material I bought from a guru who ghosted me a few months later. He didn’t teach me anything besides telling me how to study the course and what my future will look like with trading. I followed his instruction, failed, and told him about the outcome. The response I always got was to study again. After some time I stopped following his advice. I decided to study what other successful traders were doing. And I found the cause of my problem - not taking responsibility. At first, I didn’t understand how I’m not taking responsibility. Because I forced myself to study the course and apply everything taught. But as I questioned myself and searched for the answers, I bumped into an AHA moment that was a game changer. It improved my trading performance. I unconsciously devoted myself to creating and mastering my 3 edges, which are my: 1. Technical edge. 2. Risk management edge. 3. Psychological edge. Following the steps we'll discuss below, allowed me to become responsible. And made me realize that taking charge of your trading career early on is important. Because it shortens the journey from being an unsuccessful trader to a successful one. Not Taking Responsibility For Your Trading Results Prevents You From Succeeding There are other factors that lead to avoiding being responsible, such as: 1. Focusing on the outcome instead of the journey. 2. Not documenting our performance. 3. Blaming the markets and brokers. Without realizing that it's holding us back. Taking responsibility creates integrity. Many people have been taught to believe that accepting responsibility weakens their position or causes them to look bad. But in reality, the inverse is true. By taking responsibility and accepting the consequences, we create safe places of trust and learning. We then stay in a learning loop that makes us better traders. With that said, let me show you how to stay in the loop and become a full-time successful trader. Step 1: Create a Trading and Risk Management Plan Having a plan will get you to cut distractions to keep you focused. But it needs to clearly outline all your strategies, rules, and processes for execution, managing, and reviewing to do that. It will save you a lot of time and allow you to run your trading business smoothly. Like any other successful business, they have the plan to run successfully. So, take time to create your own trading and risk management (business) plan. It must include your: - objectives and executive summary, - trading system strategies and rules, tools, and checklists, - risk management strategies, - as well as processes for planning, executing, managing, and reviewing your trades. Step 2: Document everything you do in your Trading Journal. Keeping a trading journal that has your thought processes written in it before, during, and after your trades, will allow you to execute the next step. Thus having it will keep a record of what led to missing, losing, or winning a trade. You need that data. If you don’t have it, you won’t be in a learning loop, which will result in being stuck in the same place. So, create a simple journal on Notion or buy one on Amazon. If you decide to create it in Notion, it must include your: - entry, stop loss and take profit details that have reasons behind the trade, - emotions before, during, and after the trade, - before and after chart images. Now with all the data, it's time for the next step. Step 3: Review your performance 2-4 times a month. This is where you become responsible for your trading. This is where you start and stay stuck in a learning loop that insures trading success. This is where you become the top 5% who make it. What you need to do here is simple. Set a time or day to review your performance using your journal and software that’s like (or is) Myfxbook. You can do this daily, weekly, or monthly. Not quarterly or yearly. Unless you’re a veteran trader who knows what they’re doing, why they're doing it, and how they should continue doing what they do to stay successful. That’s the stage you should be aiming at. If you haven’t reached it, review your performance daily, either after your trading session or before sleeping time. Follow the above steps and start molding yourself into one of the best traders in the world who are rich, famous, and free.
BITFINEX:BTCUSDEducation
by Doji-2k1
1
Trading Psychology – FOMO #2JS-Masterclass: FOMO-Trading #2 In the first FOMO tutorial, I have summarized the characteristics of a FOMO trader and explained contributing factors which encourage FOMO-trading. In this tutorial, I will compare the typical behaviors of FOMO traders versus disciplined traders and give tips to overcome FOMO-trading. FOMO TRADERS VS DISCIPLINED TRADERS The process of placing a trade can be very different depending on the situation in hand and the factors that are driving a trader’s decisions. Here is the trading cycle of a FOMO trader vs a disciplined trader – as you will see, there are some fundamental differences that can lead to very different outcomes. TIPS TO OVERCOME FOMO Overcoming FOMO begins with greater self-awareness, and understanding the importance of discipline and risk management in trading. While there is no simple solution to preventing emotions from impacting trades and stopping FOMO in its tracks, there are various techniques that can help traders make informed decisions and trade more effectively. Here are some tips and reminders to help manage the fear factor: • Be aware that there will always be another trade. Trading opportunities are like buses – another one will always come along. This might not be immediate, but the right opportunities are worth the wait. • Everyone is in the same position. Recognising this is a breakthrough moment for many traders, making the FOMO less intense. Join a social trading platform or a trading service to get in contact and share experiences with other traders – this can be a useful first step in understanding and improving trading psychology. • Have a trading plan and stick to that. Every trader should know their strategy, create a trading plan, then ALWAYS stick to it. This is the way to achieve long-term success • Taking the emotion out of trading is key. Learn to put emotions aside – a trading plan will help with this, improving trading confidence. • Traders should only ever use capital they can afford to lose. Always define your stop-loss levels before you enter a trade and always stick to that. This helps to minimize losses if the market moves unexpectedly. • Knowing the markets is essential. Traders should conduct their own analysis and use this to inform trades, taking all information on board to be aware of every possible outcome. • FOMO isn’t easily forgotten, but it can be controlled. The right strategies and approaches ensure traders can rise above FOMO. • Keeping a trading journal helps with planning. It’s no coincidence that the most successful traders use a journal, drawing on personal experience to help them plan. Overcoming FOMO doesn’t happen overnight, it’s an ongoing process. This article has provided a good starting point, highlighting the importance of trading psychology and managing emotions to prevent FOMO from affecting decisions when placing a trade.
BITSTAMP:BTCUSDEducation
by JS_TechTrading
1
My Interview with US Successful Trader Peter L. BrandtThe Internet has truly made the world a smaller and a more accessible place. In 2013, I stumbled across world-renown trader, author and owner Peter L. Brandt, on Twitter and his blog. I sent him a request for him to join one of the most elite South African trader groups on Skype. We had some fantastic chats over the next couple of days. There are words of wisdom that are far too essential to let them slip by. I’ve collated some of the timeless lessons Peter L. Brandt shared with me. I hope you enjoy the interview and find it useful for your trading career. Timon: I’ve never met a trader who trades long time-frames on Forex and commodities, do you believe technical charts can be used to predict market movements? Peter: I absolutely positively do NOT believe I can predict the markets. I absolutely positively do NOT believe charts are predictive tools any more than a MACD, COT, Moving Averages or anything else. My win rate is historically around 38%, although I made some changes to the system in an attempt to boost that to 45%. Generally, 100% of my profits come from 10% of my trades. It is a matter of trying to keep the other 90% from being a net loss. Timon: I agree with no one being able to predict the market movements, however, I believe in probability predictions. If there is a breakout to the upside, there is a higher probability for the market to continue moving in the direction of the breakout. What is your take on when unfavourable markets bring about a 15% or more drawdown on your portfolio? Peter: Drawdowns come with the territory. The question to always ask for discretionary traders is, whether their trading rules are out of sync with the markets? If they are out of sync with their rules? or both? If I know the problem are my rules being out of sync with the markets, I will never stop trading because I cannot time my rules. I may cut back on the size during a losing period. Timon: As my trading mentor and dear friend Igor Marinkovic says, “Your biggest drawdown is still to come and so is your biggest winning streak.” What are your thoughts on risk management principles? Peter: As a general rule — very general rule — an excellent trader with a great grasp of money management should have an average annual ROR that is 1.5 to 2 times their worst drawdown, over the past three or five years. For me, this is mandatory Even daily patterns are made up of many hourly patterns that morphed, which are made up of many 15-minute patterns that morphed etc... — I call it ‘Chart Morphology’. The trick is to determine which patterns are real and which patterns are more likely to morph. Sometimes a market reveals itself by failing. It is because of morphology that I seek patterns that are 10 to 12 weeks or longer. I’m also not worried about markets changing so drastically that all conventional systems stop working. The reason is my belief that markets are and have always been driven by fear, greed and money flows. These things will always be the same. Timon: Yes, that’s why I don’t believe in Holy Grail systems. I believe in finding the system that suits your personality and risk profile. Along the way, one should not feel scared about making mistakes, but be sure to avoid them from being too costly. What would be your final feedback on trading in general? Peter: Sounds like you are well on your way to a long and profitable career trading. Mistakes are the tuition charged by the markets for learning. Unfortunately, the markets often decide the tuition rate, not us. Hence, I only risk 0.5% per trade. You have to develop your own style. I have never met another truly skilled trader who has copied his or her style from another trader. This is true from a tactical standpoint, but from a money management standpoint most skilled traders think very much alike.
JSE:J200Education
by Timonrosso
2
Trading Psychology – FOMOJS-Masterclass – FOMO (Fear of Missing Out) Definition FOMO – Fear of Missing Out - is a relatively recent addition to the English language, but one that is intrinsic to our day-to-day lives. A true phenomenon that affects many traders and can be a major hurdle to become a successful trader. For instance, the feeling of missing out could lead to the entering of trades without enough thought, or to closing trades at inopportune moments because it’s what others seem to be doing. It can even cause traders to risk too much capital due to a lack of research, or the need to follow the herd. For some, the sense of FOMO created by seeing others succeed is only heightened by fast-paced markets and volatility; it feels like there is a lot to miss out on. To help traders better understand the concept of FOMO in trading and why it happens, this tutorial will identify potential triggers and how they can affect a day trader’s success WHAT IS FOMO IN TRADING? FOMO in trading is the Fear of Missing Out on a big opportunity in the markets and is a common issue many traders will experience during their careers. FOMO can affect everyone, from new traders with retail accounts through to professional and institutional traders. In the modern age of social media, which gives us unprecedented access to the lives of others, FOMO is a common phenomenon. It stems from the feeling that other traders are more successful, and it can cause overly high expectations, a lack of long-term perspective, overconfidence/too little confidence and an unwillingness to wait. Emotions are often a key driving force behind FOMO which can lead traders to neglect trading plans and disrespect their trading strategy. Common emotions in trading that can feed into FOMO include Greed, Fear, Excitement, Jealousy, Impatience and Anxiety CHARACTERISTICS OF A FOMO TRADER Traders who act on FOMO will likely share similar traits and be driven by a particular set of assumptions. Below is a list of the top things that guide a FOMO traders’ behavior: 1. Listen too much to the news. ‘They are all doing it so it must be a good idea’. 2. Be too much focused on potential profits versus thinking risk first. 3. Not sure but just let’s give it a go. 4. Getting frustrated in hindsight: ‘OMG, I should have seen this coming’. 5. This will be a great opportunity and if I do too much analysis, I will miss this great opportunity. What factors contribute to FOMO trading? FOMO is an internal feeling, but one that can be caused by a range of situations. Some of the external factors that could lead to a trader experiencing FOMO are: • Volatile markets. FOMO isn’t limited to bullish markets where people want to hop on a trend – it can creep into our psyche when there is market movement in any direction. No trader wants to miss out on a good opportunity • Big winning streaks. Buoyed up by recent wins, it is easy to spot new opportunities and get caught up in them. And it’s fine, because everyone else is doing it, right? Unfortunately, winning streaks don’t last forever • Repetitive losses. Traders can end up in a vicious cycle: entering a position, getting scared, closing out, then re-entering another trade as anxiety and disappointment arise about not holding out. This can eventually lead to bigger losses • News and rumours. Hearing a rumour circulating can heighten the feeling of being left out –traders might feel like they’re out of the loop • Social media. The mix of social media and trading can be toxic when it looks like everyone is winning trades. It’s important not to take social media content at face value, and to take the time to research influencers and evaluate posts.
BITSTAMP:BTCUSDEducation
by JS_TechTrading
Trading-Psychology: Fear & GreedFear & Greed Trading psychology is different for each trader, and it is influenced by the trader’s emotions and biases. The two main emotions that are likely to impact the success or failure of a trade are greed or fear. Greed is defined as the excessive desire for profits that could affect the rationality and judgment of a trader. A greed-inspired trade may involve buying stocks of untested companies because they are on the rise or buying shares of a company without understanding the underlying investment. Greed can also make a trader stay in a position for too long in an attempt to squeeze every event out of the trade. It is common at the end of a bull market when traders attempt to take on risky and speculative positions to profit from the market movements. On the other hand, fear is the opposite of greed and the reason why people exit a trade prematurely or refrain from taking on risky positions due to concerns of incurring losses. Fear makes investors act irrationally as they rush to exit the trade. It is common during bear markets, and it is characterized by significant selloffs from panic-selling. Fear and greed play an important role in a trader’s overall strategy and understanding how to control the emotions is essential in becoming a successful trader.
BITSTAMP:BTCUSDEducation
by JS_TechTrading
Trading-Psychology: Fear & GreedFear & Greed Trading psychology is different for each trader, and it is influenced by the trader’s emotions and biases. The two main emotions that are likely to impact the success or failure of a trade are greed or fear. Greed is defined as the excessive desire for profits that could affect the rationality and judgment of a trader. A greed-inspired trade may involve buying stocks of untested companies because they are on the rise or buying shares of a company without understanding the underlying investment. Greed can also make a trader stay in a position for too long in an attempt to squeeze every event out of the trade. It is common at the end of a bull market when traders attempt to take on risky and speculative positions to profit from the market movements. On the other hand, fear is the opposite of greed and the reason why people exit a trade prematurely or refrain from taking on risky positions due to concerns of incurring losses. Fear makes investors act irrationally as they rush to exit the trade. It is common during bear markets, and it is characterized by significant selloffs from panic-selling. Fear and greed play an important role in a trader’s overall strategy and understanding how to control the emotions is essential in becoming a successful trader.
BITSTAMP:BTCUSDEducation
by JS_TechTrading
Overcome Fear of Missing Out 🤮MAIN TALKING POINTS: What is FOMO in trading? What characterises a FOMO Trader? Factors that can Trigger FOMO DailyFX analysts share their FOMO experiences Tips to overcome FOMO WHAT IS FOMO IN TRADING? FOMO in trading is the Fear of Missing Out on a big opportunity in the markets and is a common issue many traders will experience during their careers. FOMO can affect everyone, from new traders with retail accounts through to professional forex traders. In the modern age of social media, which gives us unprecedented access to the lives of others, FOMO is a common phenomenon. It stems from the feeling that other traders are more successful, and it can cause overly high expectations, a lack of long-term perspective, overconfidence/too little confidence and an unwillingness to wait. Emotions are often a key driving force behind FOMO. If left unchecked, they can lead traders to neglect trading plans and exceed comfortable levels of risk. Common emotions in trading that can feed into FOMO include: Greed Fear Excitement Jealousy Impatience Anxiety WHAT CHARACTERIZES A FOMO TRADER? Traders who act on FOMO will likely share similar traits and be driven by a particular set of assumptions. WHAT FACTORS CAN TRIGGER FOMO TRADING? FOMO is an internal feeling, but one that can be caused by a range of situations. Some of the external factors that could lead to a trader experiencing FOMO are: Volatile markets. FOMO isn’t limited to bullish markets where people want to hop on a trend – it can creep into our psyche when there is market movement in any direction. No trader wants to miss out on a good opportunity Big winning streaks. Buoyed up by recent wins, it is easy to spot new opportunities and get caught up in them. And it’s fine, because everyone else is doing it, right? Unfortunately, winning streaks don’t last forever Repetitive losses. Traders can end up in a vicious cycle: entering a position, getting scared, closing out, then re-entering another trade as anxiety and disappointment arise about not holding out. This can eventually lead to bigger losses News and rumours. Hearing a rumour circulating can heighten the feeling of being left out –traders might feel like they’re out of the loop Social media, especially financial Twitter (#FinTwit). The mix of social media and trading can be toxic when it looks like everyone is winning trades. It’s important not to take social media content at face value, and to take the time to research influencers and evaluate posts. We recommend using the FinTwit hashtag for inspiration, not as a definitive planning tool. As well as affecting traders on an individual level, FOMO can have a direct bearing upon the markets. Moving markets might be emotionally driven – traders look for opportunities and seek out entry points as they perceive a new trend to be forming. DAILYFX ANALYSTS SHARE THEIR FOMO EXPERIENCES Traders of all levels of experience have dealt with FOMO, including our DailyFX analysts: “Trade according to your strategy, not your feelings” – Peter Hanks, Junior Analyst “Strategize. Execute. Stick to the plan and don’t be greedy. All types of traders make money; pigs get slaughtered” – Christopher Vecchio, Senior Strategist “Trade decisions are not binary, long vs. short. Sometimes doing nothing is the best trade you can make” - IIya Spivak, Senior Currency Strategist “If you don’t deal with and temper FOMO in trading – it will deal with you” – James Stanley, Technical Strategist “No one trade should make or break you. With that said, if you miss an opportunity there is always another one around the corner” – Paul Robinson, Currency Strategist TIPS TO OVERCOME FOMO Overcoming FOMO begins with greater self-awareness, and understanding the importance of discipline and risk management in trading. While there is no simple solution to preventing emotions from impacting trades and stopping FOMO in its tracks, there are various techniques that can help traders make informed decisions and trade more effectively. Here are some tips and reminders to help manage the fear factor: There will always be another trade. Trading opportunities are like buses – another one will always come along. This might not be immediate, but the right opportunities are worth the wait. Everyone is in the same position. Recognising this is a breakthrough moment for many traders, making the FOMO less intense. Join a DailyFX webinar and share experiences with other traders – this can be a useful first step in understanding and improving trading psychology. Stick to a trading plan. Every trader should know their strategy, create a trading plan, then stick to it. This is the way to achieve long-term success Taking the emotion out of trading is key. Learn to put emotions aside – a trading plan will help with this, improving trading confidence. Traders should only ever use capital they can afford to lose. They can also use a stop to minimise losses if the market moves unexpectedly. Knowing the markets is essential. Traders should conduct their own analysis and use this to inform trades, taking all information on board to be aware of every possible outcome. FOMO isn’t easily forgotten, but it can be controlled. The right strategies and approaches ensure traders can rise above FOMO. Keeping a trading journal helps with planning. It’s no coincidence that the most successful traders use a journal, drawing on personal experience to help them plan. Overcoming FOMO doesn’t happen overnight; it’s an ongoing process. This article has provided a good starting point, highlighting the importance of trading psychology and managing emotions to prevent FOMO from affecting decisions when placing a trade. TURN YOUR FOMO INTO JOMO Now you know how to spot and stop FOMO in its tracks, find out how to embrace JOMO in trading and change your mindset for greater success. Source: DailyFX
OANDA:XAUUSDEducation
by Hsan_BenAhmed
2
Indecision is the enemy of success.The most successful traders have one thing in common: they know when to pull the trigger. They don’t hesitate. They don’t second-guess themselves. They make a decision and they stick to it. Indecision is the enemy of success. It’s what causes trading losses. If you can’t make a decision, you’ll never make any money in the markets. The trick is to not let indecision steal your opportunity. When you see a good trade setup, don’t hesitate. Take action and be confident in your decision. Remember, even if it turns out to be a wrong decision, it’s better than no decision at all. Follow Me For More 👉 @MarketsCoach
BITMEX:XBTEducation
by UnknownUnicorn33550147
Dealing with losses...before they happenLosses 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.
OANDA:XAUUSDEducation
by Mihai_Iacob
12
TRADING - TRUTH VS LIE 📉📈 A financial background can be useful for understanding how forex and other markets work. However, more beneficial are skills in math, engineering and hard sciences, which better prepare traders for analyzing and acting on economic factors and chart patterns. It doesn’t matter how much awareness you have about financial markets – if you can’t process new data quickly, methodically and in a focused manner, those same markets you thought you knew so well can eat you alive. ANSWER: LIE EXPERT TIP: To prepare for trading, focus on developing analytical skills rather than boning up on financial knowledge. Trading is like running a business. In order to be successful, you need to learn from mistakes and have rules in place to help protect your capital. Like a business, it’s crucial to have appropriate strategies on hand for varying market conditions. Setting up a business is easy, and similarly, trading is easy too. Developing successful strategies and making money? That’s the hard part. ANSWER: TRUTH EXPERT TIP: It will seem easy if your early trades go well, but long-term profitability is a different matter altogether. Make your life easier by researching your trades, using the right position size, setting stops and keeping a handle on your emotions. Can you be successful with a small trading account? It depends on your definition of successful. An account needs to be large enough to accommodate proper risk parameters. But success is relative; a high rate of return is based on percentages and not on monetary amounts. For example, a 20% return is a 20% return regardless of the account size. However, if your 20% return isn’t worth enough in hard cash, it might be hard to incentivize yourself to improve as a trader. ANSWER: IT DEPENDS EXPERT TIP: Your account size will depend on your goals and your prior success. Naturally, experienced traders will have a larger account but to begin with, concentrate on that rate of return percentage. Bragging rights be damned: the number of trades you win is irrelevant. Profitable traders simply make more money than they lose. Say you win five trades and make $5,000, but lose one trade and lose $6,000 – you have won more trades than you have lost but are still down overall. Profitable traders will set rigid risk-reward parameters for a trade – for example they might risk $500 to make $1,000, a risk-reward ratio of 1:2. If a trader makes five trades using this method, loses three of them and wins two of them, the trader is still $500 in profit ($2,000 profit-$1,500 loss). Don’t be afraid of taking a few hits: if your process is sound, one big winning trade can reverse your fortunes. ANSWER: LIE EXPERT TIP: Many successful traders will be losing more trades than they win, but oftentimes it won’t bother them. Focus on getting the right setups rather than worrying about the ones that got away. How much time you spend trading, and monitoring trades, will depend on your trading style. Those employing a scalping strategy, for instance, will make a large number of transactions per day, entering and exiting many positions, and will need to pay close attention to their trades on the shortest timeframes. However, position traders won’t need to spend as much time monitoring, as their transactions may last weeks, months or even longer – meaning long-term analysis will account for short-term fluctuations. ANSWER: IT DEPENDS EXPERT TIP: Ask yourself what type of trader you are. Shorter timeframes will mean monitoring and analyzing constantly – being ‘always on’. If you favor a more relaxed approach you may be suited better for position trading. Some traders advocate a ‘mental stop loss’ when the market gets tough – that is, relying on oneself rather than a computer to set a level at which to exit a losing position. The problem is, a ‘mental stop loss’ is just a number that makes you worried about the money you’re losing. You may fret about the direction of the market - but you won’t necessarily be compelled to exit your trade. A fixed forex stop loss is completely different – if your stop loss price trades you are out of the position, no ifs or buts. Exercising proper money and risk management means setting solid stops. Period. Answer: TRUTH EXPERT TIP: It can be so easy to neglect your stop loss. When a trade is going your way, the dollar signs can blind you - but you should protect yourself against the market turning. Spreads may represent the primary cost of trading, but they aren’t the be-all-end-all when it comes to choosing your market. You may find an asset that has a wide spread but represents a strong opportunity due to its volatility. Similarly, you may find an asset with high liquidity and a tight spread, but that isn’t showing much trading potential. Above all, you should let your trading decisions be governed by setups presented by the market, not the size of the spread. Answer: LIE EXPERT TIP: The spread can represent a significant cost to traders – but don’t let it be the sole factor dictating your choice of asset. The economic analysis key to a fundamental approach helps give traders a broader view of the market. Sound knowledge of the underlying forces of the economy, industries and even individual companies can enable a trader to forecast future prices and developments. This is different to technical analysis, which helps to identify key price levels and historical patterns, and provides conviction for entering/exiting a trade. It’s true to say that expertise in economic analysis is important. However, so too is expertise in the technicals. Many successful traders will look to combine fundamental and technical analysis so as to be in a position to draw on as wide a range of data as possible. Answer: TRUTH EXPERT TIP: It may be worthwhile to devise a strategy accounting for the nuances of both technical and fundamental analysis. News can create big moves in the market, but that doesn’t mean trading the news leads to the biggest opportunities. For a start, the volatility of important news events often makes spreads wider, in turn increasing trading costs and hitting your bottom line. Slippage, or when you get filled at a different price than you intended, can also hit your profitability in volatile markets. On top of these drawbacks, traders could get locked out, making them helpless to correct a trade that moves against them. ANSWER: LIE EXPERT TIP: ‘Trading the news’ can seem like a fashionable thing to do, but market movements can be unpredictable at the time of major releases. It’s often best to steer clear during such high volatility. Excluding emotions from trading is an impossible endeavor. It can lead to more internal conflict than benefits, which is why managing emotions is a better way of looking at it. You have negative emotions like fear and greed that need to be managed without suppressing positive ones like conviction that help drive you towards the best opportunities. Answer: TRUTH EXPERT TIP: Even the most experienced traders feel emotion in the heat of the markets, but how they harness that emotion makes all the difference. Source: DailyFX
OANDA:XAUUSDEducation
by Hsan_BenAhmed
2
Trading Psychology: 4 Dangerous Emotions Traders Must AvoidWhen I was a naive, newbie trader, I didn’t pay much attention to my trading psychology. I was more focused on the technical chart patterns and trade setups. However, I soon found out the hard way that… Ignoring the psychology of trading was destroying my trading results. That’s when I began making a serious effort to master my personal trading psychology. I started reading trading psychology books, and even worked with a personal trading coach. I was definitely on the right path to mastering trading psychology, but wished I would have started learning sooner. That’s why NOW is the perfect time to start getting your trading psychology edge. But why is it important to understand stock market psychology? Understanding stock market psychology paves the way for your long-term trading success. That’s why this exclusive new mini-lesson of top trading psychology tips is just for you. How do you develop trading psychology? Some trading sites advise new stock and crypto traders to gain experience by paper trading with a simulated account. This can be helpful to learn the basics of trading, but it’s a much different ball game when real money is on the line. Your true emotions in trading will only be revealed when risking your own money with actual trades. Therefore, the best way to develop your trading psychology is simply by working your way through hundreds of live trades with real capital. Keep a basic journal and note when you feel the dangerous emotions below start creeping in. This is the only way to truly identify your personal strengths and weaknesses in trading psychology. 4 Most Dangerous Emotions to Avoid: Fear, Greed, Hope, and Regret Investing decisions in any market in the world are driven by 4 powerful emotions of Fear, Greed, Hope, and Regret. Left uncontrolled, these emotions can have a seriously negative impact on your trading account—but only if you let them. Your personal ability to master these key emotions directly determines your long-term trading success. So here’s a quick rundown of how fear, greed, hope, and regret can harm your trading results. Most importantly, I have also included actionable ways to avoid these emotions in your trading. FEAR – The most powerful human emotion that affects your trading Fear is a distressing emotion caused by a feeling of impending danger. This results in a survival response, regardless of whether the threat is real or imagined. Traders consistently report fear as the emotion they struggle with the most. Fear has even caused people to jump off buildings during market panics. FEAR is the reason markets typically fall much faster than they rise. It took the Dow Jones Industrial Average 24 years (1983 until 2007) to rally from 1,000 to 14,200…BUT it only took 2 years (2007-2009) to lose HALF of that multi-decade gain. Why? Uncontrolled fear rapidly leads to panic—which leads to poor decision making in the markets. When traders become driven by panic, they often sell their positions at any price. That’s why stocks frequently cliff dive when group fear starts kicking in. Fear can also rear its ugly head after you experience a string of losing trades. After suffering many losses, fear of “yet another loss” can make it mentally challenging to enter new swing trade setups. When paralyzed by fear, you miss out on profitable trading opportunities. If it’s a quality trade setup, then don’t let fear prevent you from buying (be careful not to confuse this with revenge trading). Remember that each trade you enter is completely independent of the previous trade. Therefore, losing money on a prior trade does not necessarily mean you will lose on the next trade. Fear is not always bad, as it can help keep losses small. For example, fear of a bigger loss can get you out of a bad trade you should no longer be in. If you immediately sell your stock or crypto when it hits your preset stop price, then the fear of a bigger loss protects you from major losses. When there is fear, steer clear! If the market is in a state of panic, don’t fight the downtrend. If you’re in doubt, get out! Don’t try to rationalize or come up with excuses to stay in losing positions beyond their stop prices. HINT: Ignore the news and internet forums to prevent lame rationalizations for staying in losing trades. When there is too much fear in the markets, our flagship swing trade alerts service simply shifts to cash until a new buy signal is received. This prevents fighting strong downtrends in unfavorable conditions. GREED – Too much greed decreases your trading profits Greed is an excessive desire for money and wealth, but is a natural human emotion. A healthy amount of greed can help drive your trading profits, but too much greed will have the opposite effect. How to know when it’s too much greed Greed is when you have already made a large profit on a trade, BUT are still obsessed with how much more you could have made if you stayed in the trade longer. The mistake with this reasoning is that all gains are not real until the position is closed. Until then, a winning trade is only a profit on paper. Greed can also cause traders to make bad trades by ignoring solid risk management rules, which signals a lack of discipline in your trading or investing. To keep greed at bay on a winning trade, sell partial share size to lock in profits, then trail a stop higher on the rest. Proactive trade management like this is why our exclusive Wagner Daily stock picks have been consistently profitable over the past 20 years. HOPE – A fake friend who will take your money (but only if you let it) Hope, a feeling of anticipation and desire for a certain event to happen, may be the most dangerous emotion for traders. If you are an active trader or investor, the feeling of “hope” in your day to day trading activities must be avoided at all costs. Why is hope so dangerous for traders? Hope may prevent you from immediately selling a losing trade that hits its stop price—which is the top rule with most trading strategies. When you blow a stop, you will usually wind up with a much bigger loss than you planned to risk. You may get lucky with a second chance to exit (especially in a forgiving bull market). However, this is definitely not a situation you want to be in. A weak stock typically continues much lower before bouncing, which is why you must always honor your stops. Otherwise, that’s when hope can really sneak up on you! Hope will convince you to just “hang in there a little longer” because: “Big news is coming soon” “This stock will surely rally after their next earnings report” (Insert your favorite bullshit excuse here) Meanwhile, while you’re busy hoping, the price plummets and has a catastrophic effect on your entire trading account. Rest assured, the market will eventually punish you by taking your money when you slip into “hope mode.” But the good news is that YOU alone can easily prevent this scenario from happening. Simply always set protective stops to pre-define your maximum risk per trade. Be rigidly disciplined to follow your trading plan, and hope will never become an issue in your trading. Plan your trades, and trade your plan. REGRET – Remember the next opportunity is always just around the corner Regret is defined as a feeling of sadness or disappointment over something that has happened—especially when it involves a loss or a missed opportunity. It is only natural for a stock trader to regret entering a losing trade or missing out on a winning trade. But to master your trading psychology, do not hyper-focus on losing trades or missed opportunities. If you lose money on a trade, then simply evaluate what went wrong, learn from it, and move on. Don’t waste time regretting your original decision to enter the trade. What’s done is done. Conversely, you may feel regret when you miss an opportunity. This is human nature. However, you must train your mind to simply move on to the next trading opportunity—which is always just around the corner. When you allow this type of regret to control you, it becomes too easy to “chase trades” with risky entry prices. If you chase, your risk/reward ratio of the setup no longer meets the parameters of healthy trade management. Let’s say you plan to buy $DUDE stock at a $60 buy trigger price, with a swing trade target around $70. If you buy it, you plan your initial stop at $55. This gives you a 1:2 risk/reward ratio (risking $5 to gain $10). $DUDE stock rallies, but you miss your original $60 buy and instead chase the price to an entry at $65. If you don’t significantly raise your initial stop, you now have a negative risk-reward (risking $10 to gain $5). In this case, your regret of missing the $60 entry caused you to chase it to $65 (next time, just wait for a pullback). Avoid feelings of regret to ensure the math of trading is always in your favor. We always target a bare minimum risk/reward ratio of 1:2 for swing trades in our stock and crypto swing trade alerts services. Successful traders keep their minds disciplined to avoid remorseful thinking. original source
NASDAQ:QQQEducation
by rp-mtg
Theory Of Visualization And Powerful Concept For Trader 🌆In today’s TradingView Post, I’m going to talk about the one Concept that Nobody Talk About and It Is Very Useful For Traders. You see, very often traders are bent on making trading a Right or Wrong endeavor. The moment they place their Trade, they do it with an expectation of Profit. Now, on this trade.  And that’s the Wrong Mental approach to have, that’s the Wrong mentality to adopt in this endeavor. Because the Market doesn’t work like that. To Trading requires clear rules about the actual trade execution as well as with regards to the mental condition. Both requires training which on the one side can be achieved through Screen Time And Focus however Visualisation one the other side represents an Effective Concept to further strengthen the own Abilities off the Screens. In This Post we Investigates the Concept of Visualisation and Try Make it to the Topic For Trader. ok let's go . * . * . * "THE THEORY OF VISUALISATION" Brain Studies provide a Strong Scientific basis for How and Why Visualisation works. In Some Neuropsychology Research reveal that Thoughts Create the Same Mental instructions as Actions. Mental Visualisation has an impact on many Cognitive Processes in the Brain Confirming the Brain is getting trained for the actual Physical performance during the Visualisation in other words We Stimulate the Brain activity through Visualising the same way as when Actually performing the Action. The Thalamus is the Responsible Part of Brain which serves this Unique role , ranging from relaying Sensory and Motor Signals , as well as regulation of Consciousness and alertness It makes no distinction between Inner and Outer realities, Therefore , any idea that is Visualised intensively enough will take on a semblance of reality in the brain - the actual belief becomes neurologically real and the brain responds accordingly. This effect has specifically been visible when people Meditated intensively on a specific goal over an extended period of time. The Brain begins relating to that Meditated idea as of it were reality . During the research, Neuroscientists discovered Two VERY FUNDAMENTAL Characteristics the Brain that Help Visualisation Work the way it does.. First : the Brain thinks in Pictures Second : the Brain cannot distinguish whether something is just Imagination or actually Experienced. ( And There are people who believe that pain and illness are not real. They usually also believe that the universe is essentially a figment of our imagination. How we got imagination without having a brain escapes me, but think “The Matrix” without an underlying reality .) Lets Back To The Topic... Just Remember this. Brain Think In a Image And Cannot Distinguish Whether is Real or Not.. THE BLUE-PRINT It was noticed that Visualisation creates Neural Pathways in the Brain which act as a Blueprint to be Followed in the actual Physical Performance concluding while Visualising the brain creates the same neural pathways as actually doing it. Psychologist Sian Leah Beilock of University of Chicago has done Research in this Area and considers Visualisation an important aspect for setting any goal since much the Unconscious Brain is build around a Visual Construction of the world. Many studies have confirmed that Visualising the performance actually improves the Execution in the Real World. Neural Connections are formed and the Strength of the Connections is directly proportional to the intensity of the Individual's Imagination feeling strengthens the Neural Connections. Famous Actor Arnold Schwarzenegger have confirmed to use Visualisation techniques to cultivate a sense of belief , build confidence and create momentum to realise their ultimate goals. " The more I focused in on this image and worked and grew, the more I saw it was real and possible for me to be like him .” - Arnold Schwarzenegger " It’s the same process I used in bodybuilding: What you do is create a vision of who you want to be — and then live that picture as if it were already true .” - Arnold Schwarzenegger TRANSFERRING THE CONCEPT TO TRADING Finally , transferring this concept to Trading , Screen Time can be extended to Visualisation Getting into a Meditative mode and Visualising your Trading Plan and Rules helps to better Internalise them getting a clear picture of what to look for. Additionally , different Trading Scenarios can be visualised like the Perfect Trade Including the location and setup, Reversal and Breakout situations. Also Scenarios where a Sense of Anxiousness is Experienced can be Recreated during the Visualisation to Train dealing with the Respective Emotions and be better prepared in live Situations. When a Concept is Visualised over and over , the Brain begins to respond as the concept was real the Respective Neural Connections are formed. Ideas for Visualisation can be taken directly from the recent experience or trade reviews for example providing a clear focus on what to visualise. As a result , those Concepts begin to feel more obtainable and Real Motivating other parts of the take intentional action the Physical World... CONCLUSION The Brain not know whether your Visualisisation is real or not and Try to Visualize Sweet and Bitter moments Over and Over in Trading to Create a Respective Neural Connection to build Confidence ,etc That will helping you in Trading.. END.. *Thank For Reading Guys no more words. Just Wishing you Profitable Weeks!! Regard Valerus Source: Bladerunner 2049 Movies Wallstreet Journal Uctrading
CRYPTOCAP:XRPEducation
by Zestiria
3
If you lost deposit...COINBASE:BTCUSD Who is at fault? Let's start by acknowledging that we shall identify who is to blame for the irreversible. Who exactly is at fault for the money you lost? A market that is unprofitable? A market maker seeking increased compensation? A deceiver who desires to put everyone out of business? A signalman looking to overcharge for his signaled closed channel? Children who find it difficult to focus? Always a troublesome partner? No, you alone are at fault. You initiated the deal with your own two hands, which resulted in the destruction of everything. Nobody else compelled you to risk everything. Realizing this should cause you to cease blaming others for the results of your own behavior. It gets worse when you realize that your actions caused the money to be lost; it consumes you internally and prevents you from thinking clearly. You shouldn't worry, though, because life continues on. regain your composure. Errors are acceptable Each of us has the right to make errors because we are all human. Making mistakes is a necessary part of learning because otherwise, how would we know what is worthwhile and what is not? Just understand that mistakes are a necessary part of our journey and give yourself permission to make them. We learn from our failures and gain priceless experience that helps us reach higher heights. There are numerous examples of people who went completely bankrupt making a comeback among the Forbes list participants, using the priceless expertise they received as a result of their past errors to increase their earnings, accelerate their business growth, and improve as entrepreneurs. We all know all this famous success stories so the same is true with traders. How did Jesse Livermore come to be the subject of the memoir "Memoirs of a Stock Operator"? He completely lost all of his money and occasionally had to start again from nothing. He persisted and saw the setbacks as vital lessons that he could use to his advantage to eventually succeed. Work on your flaws Work diligently to correct your errors, consider your past, and determine what caused you to fail. What were you going through right when it all started? What feelings did you experience? What were you contemplating? What did they desire? You work Will you be able to make regular long-term gains with your current trading approach and mindset? Study technical analysis, system trading, money management techniques, trader psychology, and all that comes after if the answer is no. You can only succeed with system trading, restraint, and patience. Find someone whose primary source of money is trading, who is knowledgeable about the aforementioned, and trade with him if you don't have the willingness or time to do all of this and trading is your secondary source of revenue. However, when looking for someone like this, exercise extreme caution and thoroughly research his prior experiences. Are you plagued by the thought of wondering why, after earning a sizable sum for themselves, they didn't remove money from the market? Did you have any objectives or was money your main concern? Unless, of course, you are a fan of waste paper, money cannot be an end in itself; it can only be a means for achieving goals. It is not unexpected that you did not withdraw money if your aim was an illogical abstraction, such as a "abstract house," "abstract automobile," "abstract journey," and so forth. Change of direction You must express the objective clearly in order to succeed: The statement "I want to buy a good apartment" will not be effective, but the statement "I will purchase an apartment with panoramic windows in Paris, will be effective. If you don't know why you need money, trading will become for you a toy that rapidly becomes boring and destroys your life. But keep in mind that the objectives should be realistic and truly vital for you. This strategy will enable you to consistently take winnings from your trading account, set aside money for your objectives, and enhance the quality of your life. Enjoy yourself Don't go overboard a while frequently withdrawing money from a trading account. Make sure to spend at least a little money on your family and friends. You will thus be able to envision the outcome, feel inspired, and replenish your mental resources, which you can then use to make money. Put your affairs in order. You should bring yourself into balance after addressing the errors. Take care of your personal affairs, devote time to loved ones, your health, your children, pursue self-education, and relax in order to do this. Money and fresh ideas will undoubtedly come to you, and you'll discover a way out of the predicament. Life continues; it has not ended. You have a roof over your head, pleasant living conditions, food, water, good health, close friends, and many other things that you take for granted. Trust me, your life is someone's dream. Remember that many people do not have access to all of this, so be grateful for what you do have and enjoy life; everything else is just a minor annoyance. For your own benefit Due to the harsh circumstances, you will begin to see opportunities that you previously missed because of your comfortable lifestyle. However, your perspective will change totally as a result of these extreme circumstances. You now have experience, something most people do not. Your own success formula must include experience. He is the one who will keep you from making snap decisions and assist you in working through a challenging circumstance. "People become weak in good times. Poor people create poor times. People become resilient under tough times. Good times are made by strong individuals." The more challenging and challenging it is for you, the more probable it is that you will succeed if you manage. "A person wins internal victories during a tough time, and external victories during a prosperous time." Success, wealth, and acclaim will come to those who are diligently working on developing their character without giving in to hopelessness and despair. If you look around, you'll observe that most individuals behave in the exact opposite way during difficult times: Such people start to look for someone to blame for their difficulties when they become depressed, start drinking, and moan to everyone around them. This is due of their moral weakness, and they blame the government, presidents, officials, bankers, family, and friends. The victim's position entirely negates a person's advancement and ends his accomplishment. A person who is upset by fate criticizes more successful and strong people rather than making changes in his life and improving himself. ✅Hope you enjoyed the content I created, You can support with your likes and comments this idea so more people can watch! * Look at my ideas about interesting altcoins in the related section down below ↓ * For more ideas please hit "Like" and "Follow"!
COINBASE:BTCUSDEducation
by Crypto4light
The Secret Of Emotional Control For TraderOf everything in existence, the human mind is definitely the most fascinating thing out there. It enables us to make plans, invent things, coordinate actions, analyze problems, learn from our experiences, share knowledge…. Not even mentioning how it’s able to do those things. The chair you’re probably sitting on, the roof over your head, the clothes on your body, your computer, phone—none of these things would exist but for the ingenuity of the human mind. The fact is, it gives us an enormous advantage as a species. It enables us to shape the environment around us and have them conform to our likings so that we can thrive even better. But not surprisingly, this unprecedented ability to control our environment gives us high expectations of control in other areas as well. THE ONE THING NOBODY TELLS YOU ABOUT EMOTIONAL CONTROL.. Now, in the material world, control strategies generally work well. If we don’t like something, we can usually figure out a way to avoid it, or even get rid of it altogether. -Inconvenient weather conditions? Well, you can’t get rid of that, but you can avoid them by hiding under a shelter. -A bear outside your door? You can chase it off by making loud noises, throwing spears or rocks at it; shooting it. As you see, pretty straightforward… BUT WHAT ABOUT OUR INTERNAL ENVIRONMENT? Some people don’t even suspect that there is an internal environment, to begin with. For them, the world is all about what’s on the outside. Thoughts, memories, emotions, urges, physical sensations, sometimes seem to have a life of their own. And we can’t we simply avoid or get rid of the ones we don’t like, just like we would in the outer world. A LITTLE EXPERIMENT I want you to try this: As you keep reading this paragraph, try not to think about a Yellow Elephant. Don’t think about the Color. Don’t think about how big or small the elephant is. And by all means, don’t even think about whether it’s the African type or the Asian one. Take a couple of seconds and do this… Now tell me… you couldn’t stop thinking about the elephant, could you? You certainly couldn’t stop it from appearing in your mind – that’s a thought right there. LET’S TRY SOMETHING ELSE … Recall something that happened to you. Any memory will do – let’s say a recent and particularly painful trading loss – and try to get rid of it for good. How’d you do? LAST ONE … Try not to think for at least 60 seconds. If you’ve done the experiment, you must get the point by now: thoughts and feelings are just not that easy to control. It’s not that you have absolutely no control over these things because the reality is that you do have a certain degree of control, but it’s just that you have much less control than you might think you do. Let’s face it, if those were that easy to control, wouldn’t we all just live in perpetual bliss? What’s more, wouldn’t we all be successful traders, banking money at every turn? Of course, there are a few self-help gurus who claim that it’s possible to live in such a state all the time. Such people often get really rich, their books sell by the million and they attract huge numbers of followers desperate for ‘ T H E answer’. I see that a lot in the trading world as well. Many are after T H E answer – which also has to be a quick and easy one. But that kind of answer doesn’t really work because it’s often not the right answer. My guess is that if you’re a reader of this blog, you have already gone down that path and been sadly disappointed. BUT THEN, WHY IS THIS MYTH OF EMOTIONAL CONTROL SO COMPELLING? Because the people around us seem happy. They seem to have their shit figured out. They seem to be in control of their thoughts and feelings, and of their destiny. But ‘seem’ is the keyword. The fact is that most people are not open and honest about the struggles they go through with their own thoughts and feelings. And especially not the “pro-traders” out there! They put on a brave face and keep a stiff upper lip. They’re akin to the proverbial clown with some bright face paints and chirpy antics, which we all we see, but deep down inside, they’re crying… OK, SO WHERE DOES THAT LEAVE US? So, at last, we come to the practical part of this post. Not being able to control your thoughts and emotions all the time isn’t a fatality. In fact, you can certainly reach your goals in trading and live a well balanced and perfectly happy life without exerting (or trying to exert) control over your thoughts and emotions. You’ll just need to get into the habit of practicing the Art of Non-Attachment . Let’s give it a try in a controlled setting: First, sit and comfortably and put aside a few minutes. Have some difficult and uncomfortable feelings to deal with. If you’re a Trader , I’m sure you must have that – a painful loss , something that’s currently a problem, something that worries, disturbs or stresses you. Once you’ve brought that to the forefront of your mind, focus on it and let the Uncomfortable feelings arise. At this point you must be saying ‘ What !’, ‘Is he crazy? I don’t want to feel that sh*t!’ Well, I don’t know anyone who likes to feel Discomfort . But the idea here is acceptance – being willing to feel “that sh*t” while making sure you’re just a witness and not a participator. Willingness simply means that you’re allowing it to arise as it is and not be entangled in judgments about how you don’t like it or how you’d like it to be. Why develop such Willingness ? Because throughout your life, Uncomfortable feelings will inevitably Arise. If you keep trying to avoid them, you’ll simply perpetuate the cycle of blind reactivity; you’ll create additional discomfort, and you won’t be maximizing your trading performance (and your life). By making room for your thoughts and feelings and willingly letting yourself feel them (even though you don’t want to), you’ll: -Change your relationship with them. -Discover their impersonal and impermanent nature. -Develop wise-discernment so that you can keep and entertain the ones that are helpful and let go of the ones that aren’t. In other words, The More We Turn Away From Our Demons (the harder we try not to look at them) the Bigger and Scarier they appear. Accepting Discomfort has only one purpose: to help you take your life forward in whichever direction you want . But now, enough of the talk… It’s time to practice, and I sincerely hope you will remember to put into application this simple exercise in non-attachment whenever needed... END Thank You Guys This Is Words From My Great Mentor 'Yvan'... I Hope You Enjoy This Post And Sorry For Not Uploading Like Weeks!! heck I'm Really Busy Irl And For Now I Wishyou Profitable Weeks!!! -Regard Valerus. SC: Bladerunner 2049 Drowning By GabrielGajdos Yvan
NASDAQ:AAPLEducation
by Zestiria
4
Trading Psychology (Part 1)A philosophy I engage in when trading the markets - I am not self-employed as a trader. - The market is my boss and my trades are my employees. - I merely manage those employees. Traders often have to think fast and make quick decisions, darting in and out of positions on short notice. To accomplish this, you need a certain presence of mind. You need the discipline to stick with your own trading plans and know when to book profits and losses. Emotions simply can't get in the way. It’s NOT that winning traders formulate better trading strategies It’s NOT that winning traders are smarter It’s NOT that winning traders do better market analysis One personal characteristic that almost all winning traders share is that of self-confidence . Winning traders possess a firm, basic belief in their ability to BE winning traders.
OANDA:XAUUSDEducation
by JinDao_Tai
How you trade impacts how you feel 😀It's no secret that managing your trading psychology is the biggest challenge in your trading journey. Some say it counts for 80%+ of what's needed to be successful. I totally agree... However, there's a key factor in this for me. How you actually trade to start with! Correct trading psychology starts by realising you need a strategy. If you're guessing with no real plan or risk management surely you're going to be more stressed and overwhelmed than a trader who has a plan, has the data to support his strategy and manages his risk? So once you get your system/strategy nailed on, this in turn will help manage your fear. Greed is another factor, but this comes from your expectation. Expectations and reality need to be aligned with one another. Your expectations can come from your data and your testing. But if you've skipped this step you'll be chasing unrealistic expectations. Not just in terms of % gains, but in understanding your drawdown periods too. So in summary both are completely related. You give me a trader that's really struggling with his trading mindset and fear and within a month they won't be feeling the same way. Likewise, if give me a trader who is calm and in tune with his system and emotions, we'll quickly change this by getting him to trade randomly! No trading psychology means no trading strategy, No trading strategy means no trading psychology. These two elements are so intertwined. Thanks for looking at my idea. Darren 👍
Education
by pow_removetheguesswork
2