EurAnalysis

No worries

Am only a part-time trader and full time Software Developer, been offered OPM but not taken ;-)

Cool .what's your worst experience in FX till date .

Worst experience .. hmmm ... one of my good friend got interested in Forex and invested some money to open a Forex Account (4 yrs back) he lost all the money and quit trading. Still blaming me for the loss.

What I can do if he peeped in my laptop, saw the MT4 terminal and got curious? Traded his own without trying learning first?

I have not invested much so i do not have any worst experience of loosing more money than investment but find it is not easy explaining it within your family and friends / surroundings.

Here people consider FX trading similar to gambling + more than that i guess . curiosity is the worst thing and some times it destroys much more than we may anticipate

very funny. i was looking at ur chart,why all ur lines going to 1.1750?

Am really not sure about the number 1.1750 rather I consider looking it as a Zone and there could be a Zone of 300 pips range in my opinion.

Consider a spring bed (my favourite example) the more momentum you gather to jump on a spring bed you'll find one Action and one re-action.

The First Action is you are pressing down the spring bed with gravity.

Now, there are further What-Ifs (a) the spring bed is broken due to the gravity and you reached the floor.

(b) The Spring bed touched the floor with you, the power from you transformed into the springs and together they pull back.

(c) The momentum you had, the spring bed is capable of holding much more weight than that ..so it throws you towards the roof.


In my chart I have used regression channels by Mr. Raff. It indicates short-term and long term momentums thats why using Raff is important in Forex because you always know the short term and long term trends.

Now as far as the point is concern 1.1876 was 2010 Jun Low .. if we are heading down and retest the zone ... higher possibility is creating a new Low ..thats the new Low Raff channels are showing (IMHO).

Allow me to interrupt the political and religious theme for today with something sweet. Dessert maybe?

This week's edition of "Things That Make You Go Hmmm". Enjoy.
.

SP near 2012 high. shall we pass? i'm dying of curiosity


discover the differences

Sunday morning muse.

Holy Grail of trading. Is there one? I think yes.

No trader will ever remain profitable unless the method employed proves out over time that after many many successive trades the account ends up larger. The techies refer to a positive expectency methodology.

It takes no genius to make money in a powerful directional move. As long as the Trader is on the right side of the move it is irrelevant what they do or claim is the magic method of the day, they will make money as long as the position tracks the market.

But 80% of the time there is no trend and most likely 95% of the time there is no unidirectional all powerful Trend.

So we have our charts and fundamentals. All in an effort to in the first case, create a picture of where we are in regards to price and the second case is where we are in regards to underlying perceived forces.

But the challenge is what is the market going to do next?

After all the indicators on the charts tell you it is overbought, they cannot tell you if it will then get more overbought, and then again even more.
Or will it reverse and by how much will it reverse.

We have our support/resistance analysis. All those moving average analysis, prior support/resistance levels from the horizontal lines, prior peak and valley swings. But still no chart on earth is capable of forcasting the very next bar to appear.

We have our volatility measures and bands to create a bounded model of the market. That still cannot predict what the market will do next, Reversion to the mean sounds good until the market decided to not revert to the mean and a tremendous anamoly hits and the tails become obese and not just fat. Death to an account for the reversion to the mean traders.

Back to the Holy Grail hunt. If there is one it is for a Trader to develope the ability to read the footprint of the market, For it is not in identifying the support or resistance level, it is in identifying what the market will do at that level. Who has the upper hand becomes the question to be answered. Those who wish to take the market up or those who wish to take it down, or does it end in stallmate.

Before there where easily accessible charts there was price. The study of price and what it speaks about market direction to come is a worthy study.

For to be successful one must identify the beginning of a move before the momentum computers kick in and distort the risk/reward parameters against the trader. Then identify whether to hold for a big swing or take a partial profit scalp, letting some ride or just take a quick scalp and out.

So this is the art of the trade. Use those identifiable levels but think in terms of what does price tell me that the market has an intention of doing next. If the trader can do this with a enhanced probability then you have found your Holy Grail of trading, and over time you will grow that account no matter what particular form the market is taking.

Price is readable, maybe you will not get it all the time, but to get it more then less, increases probability of success. Combine a readable price action with a significant support/resistance level and then you will be able to get in at the beginning and out at the end. Capturing the filet migon of the market leg you are in.

This came from my Link In Site...

Quite possibly one of the most perfect quotes from another field of performance, which could be applied to trading.

“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” - Michael Jordan

What was that quote about curiosity and the cat ?

http://en.wikipedia.org/wiki/Curiosity_killed_the_cat

The actual phrase appeared as the headline to a story in The Washington Post on 4 March 1916 (page 6):
“CURIOSITY KILLED THE CAT.

Four Departments of New York City Government Summoned to Rescue Feline.

From the New York World.

Curiosity, as you may recall—

On the fifth floor of the apartment house at 203 West 130th street lives Miss Mable Godfrey. When she came to the house about seven months ago she brought Blackie, a cat of several years' experience of life.

The cat seldom left the apartment. He was a hearth cat, not a fence cat, and did not dearly love to sing. In other respects he was normal and hence curious.

Last Tuesday afternoon when Miss Godfrey was out Blackie skipped into the grate fireplace in a rear room. He had done this many times before. But he had not climbed up the flue to the chimney. This he did Tuesday. Blackie there remained, perched on the top of the screen separating the apartment flue from the main chimney, crying for assistance. Miss Godfrey, returning, tried to induce her pet to come down. If you are experienced in felinity, you know that Blackie didn't come down.

On Wednesday the cat, curiosity unsatisfied, tried to climb higher—and fell to the first floor. His cries could still be heard by Miss Godfrey; who, to effect Blackie's rescue, communicated with the following departments:
1. Police department.
2. Fire department.
3. Health department.
4. Building department.
5. Washington Heights court.

Among them they lowered a rope to Blackie. But it availed neither the cat nor them anything.
Thursday morning, just before noon, a plumber opened the rear wall back of the chimney. Blackie was taken out. His fall had injured his back. Ten minutes later Blackie died.
”
Despite these earlier appearances, the proverb has been widely attributed to Eugene O'Neill, who included the variation, "Curiosity killed a cat!" in his play Diff'rent from 1920:


“BENNY—(with a wink) Curiosity killed a cat! Ask me no questions and I'll tell you no lies.”

yeah, it is

The only holy grail that really works is don't use leverage. Trade loss because we kill it while in negative to protect capital. If you wait long enough the price will come back to you

You will be very lucky to loose 10% in one trade without leverage.

Here is an excerpt from this week's Grant William's "Things That Make You Go Hmmm". A perfect summation of how and why we have a common currency in 17 disparate nation s together with how and why it is in Germany's best interests to keep it alive in an ICU setting. Enjoy.

The European Union was created for political reasons. Economic considerations were a means to an end, and that end was to stop the wars that had torn Europe apart in the first half of the 20th century. The key was linking Germany and France in an unbreakable alliance based on the promise of economic prosperity. Anyone who doesn't understand the political origins of the European
Union and focuses only on its economic intent fails to understand how it works and can be taken by surprise by the actions of its politicians.

Postwar Europe evolved with Germany resuming its prewar role as a massive exporting power. For the Germans, the early versions of European unification became the foundation to the solution of the German problem, which was that Germany's productive capacity outstripped its ability to consume. Germany had to export in order to sustain its economy, and any barriers to free trade threatened German interests. The creation of a free trade zone in Europe was the fundamental imperative, and the more nations that free trade zone encompassed, the more markets were available to Germany. Therefore, Germany was aggressive in expanding the free trade zone.

Germany was also a great supporter of Europewide standards in areas such as
employment policy, environmental policy and so on. These policies protect larger German companies, which are able to absorb the costs, from entrepreneurial competition from the rest of Europe. Raising the cost of entry into the marketplace was an important part of Germany's strategy.

Finally, Germany was a champion of the euro, a single currency controlled by a single bank over which Germany had influence in proportion to its importance. The single currency, with its focus on avoiding inflation, protected German creditors against European countries inflating their way out of debt. The debt was denominated in euros, the European Central Bank controlled the value of the euro, and European countries inside and outside the eurozone were trapped in this monetary policy.

So long as there was prosperity, the underlying problems of the system were hidden. But the 2008 crisis revealed the problems. First, most European countries had significant negative balances of trade with Germany. Second, European monetary policy focused on protecting the interests of Germany and, to a lesser extent, France. The regulatory regime created systemic rigidity, which protected existing large corporations.

Merkel's policy under these circumstances was imposed on her by reality. Germany was utterly dependent on its exports, and its exports in Europe were critical. She had to make certain that the free trade zone remained intact. Secondarily, she had to minimize the cost to Germany of stabilizing the system by shifting it onto other countries. She also had to convince her countrymen that the crisis was due to profligate Southern Europeans and that she would not permit them to take advantage of Germans. The truth was that the crisis was caused by Germany's using the trading system to flood markets
with its goods, its limiting competition through regulations, and that for every euro carelessly borrowed, a euro was carelessly lent. Like a good politician, Merkel created the myth of the crafty Greek fooling the trusting Deutsche Bank examiner.

The rhetoric notwithstanding, Merkel's decision-making was clear. First, under no circumstances could she permit any country to leave the free trade zone of the European Union. Once that began she could not predict where it would end, save that it might end in German catastrophe. Second, for economic and political reasons she had to be as aggressive as possible with defaulting borrowers. But she could never be so aggressive as to cause them to decide that default and withdrawal made more sense than remaining in the system.

Merkel was not making decisions; she was acting out a script that had been written into the structure of the European Union and the German economy. Merkel would create crises that would shore up her domestic position, posture for the best conceivable deal without forcing withdrawal, and in the end either craft a deal that was not enforced or simply capitulate, putting the problem off until the next meeting of whatever group.

STRATFOR (VIA JOHN MAULDIN)

Sry Ken, but thats not Holy Grail, but BS . I find fotos post very relevant. It is nice psychological form of trading and I think we could write pages about it. As a bachelor of chaos, I highly recommend to watch market and evolve with him.

Regarding no leverage. Haha. Leverage is top capitalistic financial instrument. Unfortuntaley, it is causing pretty much trouble, as people still aint prepared for such a weapon. So use it wisely, while you can.

T

foto

All that you have said in your post is right on. I can add to your post by going to the other part of the equation.

I call that Risk Management.

Risk Management involves two parts to the equation.

The first part is the Risk Management strategy itself and in my case I have developed one that works all the time 100%.

However the second part is the HOLY GRAIL to all forms of trading whether it is the Stock Markets, Commodity Trading or in this discussion, Forex Trading.

I saw a very good article on Forex Factory posted a few years ago that I will post here so that a proper professional explanation can be given better than I am capable of doing. I will have my closing comments after the article that I will now post.


Psychological Challenges of Speculative Trading

An Extract from the book of “Beat the Odds in Forex Trading” by Igor Toshchakov, published by Wiley

A successful trader’s career mainly depends on his or her psychological stability in stressful situations, which are common in the process of trading. Theoretical knowledge can be acquired by reading professional literature; practical skills and experience are acquired in the process of actual trading. The most difficult process is adjusting psychological stress, because in real life it is impossible to completely eliminate the stress factor influencing human activity. Underestimating the stress factor could play a mean trick on trader and even completely block their abilities to make reasonable decisions in real trading situations. The psychological stress of those trading in the FOREX (and any other) market is extremely high. Traders must work under permanent psychological pressure, making decisions in highly unpredictable and uncertain market situations.

Each trader goes through mistakes, failures, and losses in his or her own way, in accord with his or her personality and temper. Some might blame their failure on market’s “wrong behaviour”, which didn’t comply with the trader’s brilliant forecast and caused the failure of the magnificently planned speculative combination. Others blame themselves and their own inabilities to make right decisions in situations, which afterwards seem to be simple. It is an interesting fact that, in hindsight, traders usually find the decision that should have been made at the lost critical moment and can reasonably prove their point of view. Why can they find the right decision so easily and quickly in hindsight? Was the trader unable to do so at the right moment? I don’t think it can be simply explained by looking at yesterday’s situation from today’s point of view. I do not think it can be explained by the fact that classical technical analysis at allows for multiple explanations of almost any market situation. It is always possible to find an appropriate basic explanation for any market shift after the event takes place. In the heat of the moment, however, the trader was influence by stress, and that stress caused the error. This is proven by the fact that most novice traders show exceptionally good (and even phenomenal) results trading dummy accounts but can’t even come near those result when trading with real money.

Being permanently under stress, a trader can often make insufficiently considered, impulsive, and therefore, wrong decisions that result in losses or premature liquidation of profitable position, that is, in lost profit.

Sometimes, after a few successive failures with various trades, traders become fearful of the market. They are in as state of psychological stupor, and even a simple market situation may cause panic. They cannot overcome their emotions or soberly evaluate the current situation, and they are unable to make any decision – reasonable or otherwise. In many cases when the market situation shifts against the trader’s position, they can only passively watch the growth of their losses, because they are unable to make any decision at all. Often, after the market stabilizes and traders have the opportunity to calmly analyse daily diagrams of currency fluctuations, they come to the conclusion that the main cause of failure was not the lack of knowledge or training but their own emotions.

However, the situation cannot be reversed. Time has passed, money has been lost, even everything should be begun again.

Another problem that causes severe and even catastrophic consequences is the trader’s wilful thinking. In this case, treaders are sure that their forecast of market trends is solely correct. They feel the market cannot and should not give any surprises. They do not consider other options that could be helpful or they think of other options in a vague and uncertain form. Sometimes, traders consider a market shift against their positions. They acquire new contracts at a lower price in the hope that the market situation will come back, and all the positions will become highly profitable. Afterwards, as the situation worsens, they will be able to come out of the market without serious losses. Being sure they are right, traders lose the ability to critically evaluate the condition of the market and accordingly their own position in the market. In this case, they consider only those basic and technical features that justify their wishful thinking, and they discard the contradicting features. This wishful thinking costs them dearly and can lead to psychological frustration. The market’s “wrong behaviour” not only deprives traders of a certain amount of money and often ruins their trading account, but also undermines their self-esteem and their hopes of being a winner in the trading battle.

After such a loss, traders blame themselves, repeatedly going through the details of the unsuccessful trade. They blame the market for the “wrong behaviour” or themselves for errors in what then seems an absolutely clear situation. Sometimes, the trader-market relationship takes the form of a vendetta. Traders consider the market as their personal enemy, treat it in an unfriendly way (even with hate) and dream of immediate revenge.

Doing so, they miss the fact ht at they are essentially blaming nature for changing sunny weather to rain. It is very important to be prepared beforehand for this change. Traders should always have close at hand one or few options in case of sudden change of the situation/weather, so that their foresight assures their good time or good profit.

The third main psychological problem is trader uncertainty, especially when traders are inexperienced in abilities and skills – specifically about each market position they hold. Immediately after each position is opened and a money contract is bought, treaders start questioning their choices.


This is revealed most vividly in the case of a moderately active market at the moment of fluctuations close to the opening price of the position. Any moment (even insignificant) against their position causes traders to have an irresistible desire to sell the recently acquired contract to limit losses, until it is too late and the market does not shift too far away from their position opening price. On the other hand, an insignificant market shift in the desirable direction causes the same desire to eliminate the position, until it provides for any (even tiny) profit and before this profit does not turn into losses.

Sacred and trouble traders rush and race about. They open and liquidate their positions too often, and experience many small losses and gains.

Within a short period of time, they turn intermittently into bulls or bears.

As a result, they suffer losses on a dealer’s spread and/or commissions when there were no significant market changes, and all the market fluctuations were no more than just regular market “noise”. Such losses are typical for beginners and individual traders with small investment capital or little experience and insufficiently psychological preparation.

Not uncommon are cases of traders’ impulsive decisions on trading, without any plans or serious preliminary market analysis. The position is opened under an impulsive, invalid emotional reaction. Often, it can be explained by traders’ fear of losing a brilliant opportunity to earn money they think is being offered by the market at that moment. I have witnessed these attempts to jump onto the last carriage of a departing train, and such attempts have ruined a lot of traders. Many traders cannot calmly watch any kind of market movements. Some of my students have confirmed this reality. If they have no positions at the moment of more or less significant market movement, they consider it as a lost opportunity to gain profit. This can inflict a serious shock to them.

When they have no position, they seem unable to realize that each market movement can be considered both ways, and the opposite situation can quite possibly develop. Statistics show that, at each market movement, the chances to lose are much higher than to profit. How does it happen that reasonable people (who in everyday life, without any emotion, can watch a bank casher counting other people’s money) consider the fact of market movement as a threat to their own pockets?

Why is other people’s money in the hands of a bank cashier not considered as a lost profit, whereas capital shift on the market and the corresponding quote fluctuations are causes of negative emotions? I think the answer is in the illusory simplicity of business itself, which is considered by many people as a good and simple opportunity to earn a lot of easy money. Similar notions are widely spread among novice currency traders. The soon traders abandon such ideas, the sooner they become professionally efficient traders.

The most difficult problem for every trader (regardless of their experiences) is to learn as quickly as possible how to recover quickly from losses, which are inevitable in this business. At the same time, they must learn to handle shocks and psychological damage inflicted by the losses, because there situations could negatively influence their future work.

The losses themselves and the fear of losing, both of which permanently torture traders, negatively influence their ability to make reasonable decisions in a complicated situation. These factors also undermine traders’ ability to follow their own rules about trade strategies and systems.

I have become personally acquainted with hundreds of traders and have watched their activities. I have taught many students, and have had my own experience as a trader at various steps of my career in the currency market. Therefore, I have come to the conclusion that the main causes of trader failures in speculative operations in the FOREX marker are without a doubt those associated with psychological trauma – the inability to control their own emotions and to find an adequate way to fight stress.
__________________
Good Money Management (MM) is the key factor to success.

CurrencyMan:

The KEY is to have a excellent Risk Management Program in place concerning your own personal habits and way of living and thinking.

Your fears, greed and ego will play out in the markets as you trade each day.

My Mentor Fred taught me that trading forex is a way of life. He was very disciplined both in mind and body and his work ethic guaranteed his success. I hope this post is helpful to those that want to improve their results. Have an excellent trading week.

Hi Tom,

I think you may have misunderstood what Ken was trying to say.

With low leverage, a trader/investor does not need a tight stop to limit losses. In fact as long as the trade in entered at a swing high anticipating a move lower (or a swing low anticipating a move higher), then you may not need to take a loss, and if you do, most likely only a small one which will be cancelled out by an additional recovery position for what will most likely be a net gain.

In contrast, using high leverage, you have no choice but to take a loss if price moves against you because your risk limit is reached much quicker and before the move against you has a chance to exhaust itself and correct.

I couldn't have said it better PT.

What are the odds in Forex? Simple, either up or down. The best odds we find in any games or business. Then why it has caused so many grievances - when greed kicks in lead to overleverage - when the price go against our positions lead to fear then emotions. Bad cocktail in this business.

No, I understood. I didnt mean to offend Ken and think my post was quite clear. Top capitalistic product, Highest achievement of financial engeneering, Source of many trouble. Use it wisely, while you can.

T