| CHAPTERS |  |
| |
| LESSONS |  |
| |
Choosing your team Bulls vs Bears |
Unlike sports you don't have to stick with your favorite team - especially when their performance is all-time low. You can switch gears and join the "other" team.
If you were a bull (buyer) and the rally (uptrend) ended - then take your profits and wait for the bears(sellers) to kick in - and join them - ride the same currency pair - both ways - that's the beauty of forex.
Your loyalty is reserved for one thing: Money
Sounds cheesy!? - yes! - but we live in a capitalistic society and Forex is a zero-sum game - meaning - the market itself does NOT make any money - it is a platform for people to exchange money - there are two primary function of this market:
- the losers give their money to winners and
- winners grab their winnings from losers
At any given point only one team - either bulls OR bears - can be the winners for THAT specific period of time - choose the winning team - always.
Unlike sports or even political analogy for that matter - we don't root for any team or party - we root for our money. You are the single greatest fan of your money, your money is your team - you are its manager - literally.
The 64 million dollar question is: where can you get a better return on investment?
You need a two-tier approach:- Remove obstacles from your path
- Read the charts objectively (as they are) not subjectively (not as you would like to see them)
Removing Obstacles from your path - ofcourse, as the saying goes - I paraphrase: the solution is 50% in the question. so what are the obstacles?- Your knowledge of unneccessary things: That's right, you might have learnt "just too much" and worst of all you want to "apply all things learnt" into your trading system.
Have you ever seen a house and said wow! - it looks neat? - why does it look neat? - the obvious answer is "there is no clutter" -that's what you need to do with your "trading mind" - remove the clutter - called information about 100 different indicators & sorts that are screaming at you - all at the same time - keep what you need - meaning things that are FUNCTIONAL - and remove everything else. Keep your indicators, moving averages, volume readers - everything to no more than THREE - that means if you look at a chart - you can have ONE Moving Average or MA Crossover, ONE RSI/Volume/Stockhastics, ONE-THREE support/chart pattern - keep it clutter free.
- Your ego in check: You have nothing to prove to yourself or to anyone else - if you are looking for a ego boost or some sort of thrill up your sleeve - then go moose hunting - trading ain't for ya.
Most novice traders lose money because they refuse to accept that they were wrong on a particular trade - which then suddenly turns into a prayer of faith - wishing that the market will turn around and "prove them right" - No Sir-ee Bob! - you were wrong - you will be much the wiser to accept it.
This applies not just to your "open positions" that are going bad - even to those "entry orders" - if you thought the support/resistance is going to work and you realize it won't - for whatever reason - pull your order before it is executed - its ok to sit in the sidelines when in doubt.
- Don't jump from currency to currency: Trade no more than 3 currency pairs - and follow them everyday - see how they react to news - take your time to study each of these currencies from top-to-bottom - that is from monthly charts (which clearly indicate its year-long pattern), weekly charts (which reflects the path of the pair through the recent months), daily charts (which reflect the daily/weekly trends) - and finally your 4hr & 1hr charts - which reflect hourly trends. With so much homework to do for each pair - can you really afford the time and your capital on the line - for more than 3 pairs? - Stick to fewer pairs and rake in profit.
Read the chart Objectively - its one of the simplest things on earth - yet! most traders (90%) lose their money even after looking at the charts - how is it possible that the 10% who do make money can read it - and read it well?- Its very simple - not easy though!: Its an age old saying "Follow the trend" - animals use it during migration, even birds if you watch them in the evening you can see them going together in a group - in techincal terms its called "collective interest of the society as a whole - prospers individuals".
So, how do we follow the trend? - its really simple!
Count the last 5-10 candlesticks before the current one (If you are using bar charts - count bars) - if most of them , from recent to past (right to left on the chart) - have made new "higher highs" and "lower lows" - then market is Bullish.
If most of them, from recent to past (right to left on the chart) - have made new "lower lows" and "lower highs" - then the market is Bearish.
You can usually notice that the "lowest low" when the market is Bullish will act as a support - and "highest high" when the market is Bearish will act as a resistance - you can use them to define your Stop-order.
Markets react differently - yet they are also cyclical like our weather - you can expect them to act in a certain way during certain times - infact, just as we have names for our seasons - the traders from the past have names for these Chart Patterns- you can read more about them in the Intermediate Forex Guide
We wish you well in your trading - and we hope you will always choose the right team - the one that gives you a better return on your money.
|
|
Printer Friendly