Psychological aspects of trading, tips...

I'm going to write here a series of tips for those interested... based in my experience and many of them based in psychological aspects of trading which is something important and sometimes forgotten.

- I have noticed that all the breakouts when the price moves very fast in very few minutes... define a support / resistance level... that almost always is going to be retested, not only retested but hunted. Let's say one is lucky to enter a trade and price moves a lot of pips in 1 minute... then you say. ok let's try to ride this one because I made a good entry! Big traders know this. And will try to give you a little of headache and won't let you ride that so easily because a moment of luck.

- Also if you want to ride a trend without suffering too much you have to enter when price is doing the opposite in a shorter timeframe. Let's say you want to ride a trend down... then if you don't want a big drawdown you have to enter when price is going up and then when you think it is overbought... wait a bit more for another impulse and then try to enter. But this is very risky because you never know if this is only a retrace in current trend or if this is the one impulse that changes the trend...

- Another important psychological aspect in trading is to look at charts and price movement while you entered a trade. If you entered a trade let's say.. in the H4 timeframe... It is better for you to go out, turn off the computer and come back at least 4 or 8 hours later... that's 1 or 2 bars... you can't do anything looking at the charts but suffer.... or maybe if you entered and see that 5 minutes after that.. price has moved against you but you consider that.. oh then this is a betetr price to enter... I'll reenter here again and close the first one at +0 pips.. Big mistake ! You are overrisking your trade then. And it is a sign of lack of Money Management.

will put more things if it is considered interesting.

http://pix.motivatedphotos.com/2008/...4-moar-!!!.jpg

Hi,

I think your first point is not entirely correct in terms of what you describe as "the big boys know".

The reason we see retracements after (sometimes violent) breakouts, is that the levels which have been broken lead the price into areas where stops (limit orders) are resting. The less a certain area has been frequented by the price in recent time, the more stops (limit orders) can be found above that last high or low and while during the approach to these peak points many traders jump on the bandwagon, once the imbalance of the actual trading volume vs the resting stop (limit order) volume changes in favour of the later, a retrace begins.

regards
daytrading

I agree with you. Thanks for adding more information. You are right. But Also what I wanted to say... is how far does that retracement go... Many times it goes a bit more than the original breakout level... to capture those breakeven stops set on the breakout. If a retracement is not inmediatelly covered 100% price may continue for some time... but manytimes.. maybe after some days... price will close the gap of the violent breakout. So violent moves are like gaps in price. And market has to retest all those prices of the gap.

Great advice! I usually don't like 'psychological' advice, but this had nothing to do with psychology Just great (and very timely) advice!

Hi,

That is a good observation.

It shows the fluid concept of the market - its like a water spill. You knock over a glass of water and by watching it spread on the surface, you will never know precisely how far it will travel before it stops.

You can repeat the experiment with the same amount of water in the glass on the same table from the same position, and although it will look similar every time, it won't be the same.

So, we should not look for precise points (in approaching the marktes) but for areas. Areas which have a greater probability to pose less risk than others.

As you can see my wording excludes the notion of precision - since there can be none. The only part on the traders side which does (and has to) include precision is the applied risk in terms of position size and possible stop. Those are the only aspects anyone in the markets can control.

regards
daytrading

One thing... I think it is clear but who knows...

I'm not saying that one can trade against that breakout because price is going to retest the breakout point... as I say... it can take days... But it could be useful when the trend has changed and you are looking for resistance or support points... sometimes you ask.. why price keeps going and going? It's oversold in all my indicators!! My tip is. forget about indicators... price number is the leader. price levels. support and resistance levels of those breakouts.

Hi,

Patience and readiness - that's all one needs.

regards,
daytrading

That's what you have got to say, especailly when someone is really trying to help from his experience? if is not enougH why dont you just add something with value like others did .Instead of cluttering it?

btw keep up it emda

that's what you have go to say, especialy when someone is really trying to help form his experience? if is not enough for you why dont you add something with value as others did? instead of cluttering it? keep it up emda