Level up to trade forex successfully

My 2 cents worth:

Only in forex ..... is 2 cents (or 200pips) worth so much money. Every forex trader will drool when their trades run in their direction for 2 cents.

For stock traders, a run of 2 cents is not enough to cover the commission costs.

Oh how i love forex!!

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In level 11, i precluded to the fact that to be a successful trader, we must think and behave like water. When water is poured into a teapot, it becomes the teapot. Water does not argue its shape, it simply follows the shape of the container.

Likewise to trade successfully, we follow the flow of the market. If market is bullish, we buy. If market is flowing down, we sell. If market is stagnant and stuck in a pond, we trade the range. This is one of the simplest and most profitable rule of trading. Yet it is also most profoundly the hardest to master. We want to impose our will onto the market. We want to command the market to go where we want it to go. Therefore, to be successful, we simply follow the market. We follow where it wants to go. We let the will of the market become our will. There is no contradiction. No striving. No struggling. We flow, we become the teapot, we bend our will to the market.

For this next part, we need to understand the financial terminology of the money. Do you realize that the words society used to describe water are also the words we use for money? We want to really visualize money as water. Or better yet, visualize money as a giant river such as the Amazon or Mekong River.

Along both sides of the river, we have river banks. The river banks define the boundaries the river. It tells the river where to flow and where not to flow. We have banks in our financial systems, such as Citibank, UBS, central banks and etc. What the roles of our money banks? It fulfills exactly the same roles as the river banks. The banks dictates and orders the flow of the money.

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When river flows, we have river currents. The currents can be described as strong, weak, rapid, slow, warm, cold and numerous other words. So what alternative names do we give to money? That is right, we called it currencies. Surprise?! Not if you really think of money as water. We have strong currencies such as the Aussie dollar. And euro dollar is a weak currency due to its debt crisis. Think of currents when you think of currencies.

How about liquidity? About 70% of earth's water is in liquid form. Liquidity means the amount of money in circulation. High liquidity means high tide. Low liquidity means low tide. With the FED, Bank of England and Bank of Japan printing mass amounts of money, the world is flooded with huge liquidity. That money, like water, has to flow to somewhere. Notice again the word "flooded", another watery term.

In conclusion, i hope i have expanded your thinking of money. When you drink a cup of water next time, think $$$.

When i first started out trading forex, i had 1 LCD monitor on my computer desk. At that time, i was only trading EURUSD. It was manageable when i was flipping back and forth between the charts of various time frames.

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However, to be honest with you, I was not very successful in those early days. Perhaps it was a combination of me learning how to trade and plus the fact i was trading using 1 only screen. Over time i learn more about forex and my trading skill started to improve. Yet my trading account did not increase by much. The account was yo-yo-ing back and forth. Up and down.

Heck, sometimes EURUSD can be a real bummer when it is not trending and stuck in a tight range. I thought i might as well move on other pairs and see which other pairs are trending. I then began to branch out to other currency pairs, such as the majors on GBPUSD and AUDUSD. I hit a roadblock. It became rather tedious to open up 10 different charts and having to flip back and forth on 1 screen. Yes i do have 10 different charts displayed at the same time. I needed a second monitor. I paid more for a monitor with a larger screen size. And this new monitor is a IPS LCD monitor. IPS LCD monitors has a superior display panel technology, such as better viewing angles and color reproduction. And oh yeah, this is my personal preference. I recommend you to chose a monitor with matte screen. Not those glossy screens where the glare and reflection can be quite irritating.

Right now, i am watching my 3 favorite pairs (EURUSD, GBPUSD and AUDUSD) simultaneously on 2 screens. I do say also, every since my transition from 1 to 2, my profitability has increased. I am tinkering with the idea to add a third screen!!

My suggestion. Get a second monitor if you are currently trading on one monitor. It may help. It sure did for me!

Setting up a conducive trading room environment is important. Next up on the list to a good trading desk setup is your chair.

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When i trade, i can be at my trading desk for hours. And believe me, my bottoms appreciate it when it is sitting on a comfortable chair. So what constitutes an ergonomic chair?

1. Seat height. It should be easily adjustable so that your eyes should be at eye level to your screens.

2. Seat width and depth. Make sure it has sufficient space for your bottoms to move about.

3. Spinal support. Support for the lower back is vital. The design of the chair should be able to support the inward curve of your spine.

4. Backrest. Some of us are tall. Some of us are taller. Choose one that fits your back comfortably.

5. Seat material. Cloth fabric materials are cooler and breathe better. Avoid those synthetic leather types, they absorb and retain lots of heat.

6. Swivel. A must have feature.

7. Armrest. Your personal preference. Some like it, others don't like it.

For more information on how to choose a suitable office chair, click on the 2 links provided.

http://www.smartfurniture.com/humans...ice-chair.html

http://www.wikihow.com/Select-an-Ergonomic-Office-Chair

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I am spending fair amounts of time on this trading desk setup series. A conducive trading environment does help towards better trading. It causes our mind not to be distracted, and enables us to focus on the task at hand. That task is to look for opportunities to enter a trade when the trade comes. Trading is hard enough. Therefore i am making as many positive traits into my trading environment as possible.

For part 3, lets look at the setup of a good trading room. Here are some checklist recommendations to enhance your trading room.

1. Room with windows and curtains. We need sunlight. The sun actually helps to regulate our bio rhythm. we humans follow the path of the sun. When the sun rises, we rises with it. When the sun sets, our body slows it. If your trading room has no windows, such as basement rooms, i would recommend you to shift to a proper room.

2. Proper room temperature. Regulate your room temperature with either air-conditioning or heater. I stay in a tropical country. Air-conditioning is a must-must for me. Else i will melt in the sweltering heat. However, if you are living in a cold country, the reverse is for you. Get your room properly heated up to a comfortable temperature.

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3. Neatness and tidiness. As your mum used to say when you are a kid, "CLEAN UP YOUR ROOM!!" With a clutter-free and neatly organized room, you will be amazed at the ability of your mind to think clearly.

4. Ambience. I prefer trading in a quiet environment, so there are no televisions or radios in my room. And i closed my door and turn on the air-conditioning. Some of you have different tastes. If you like some ambient noise, play some soft music. Some others like to have their television tuned in to CNBC in the background. Do whatever you wish. Make sure it is nice and cosy, just the way you like it to your style.

Happy trading. If you have new suggestions to improving your trading room, email to me. I would love to hear from you. 8=)

Five orders of thinking

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Trading is a mind game. In order to win consistently in this game, we have to know what the big players (ie the operators such as hedge funds, international banks, central banks) are thinking. And we need to discern whether the small players (ie the retail traders) are trading with the big operators or not.

Ever since trading has shifted away from the floor pits onto the electronic screen, trading has become a mind-reading game. On the floor, we can hear, feel and breathe the excitement, boredom and sheer panic by the floor traders. We cannot literally replicate any of these on the computer screens any more. We can only gauge the mood of the traders via price action on our charting platforms. So in essence we are playing electronic versions of mind games with the market, with other traders, and with the price action.

When the market moves, we must inject our own emotions into that move. For example, while ECB Draghi is making a speech and EURUSD is dropping like a rock at the same time, what should we think? We say to ourselves, "Aha! I know what the market is thinking. The large players are selling and dumping their positions. I will join in the shorting."

Treating trading as a mind game forces us to think in a higher order of thinking. Here are the 5 orders of thinking.

1st order of thinking - we have to think for and of ourselves. I am feeling bullish today. I am not feeling well yesterday.

2nd order - we think of the meaning of the past and current price action. Is this price action a real breakout? Is this trend line going to hold?

3rd order - we think of what the retail traders are thinking. Do i trade with or fade the retail traders?

4th order - we think of what big operators are thinking. Do i know where the big operators are pushing the price to? If i know, i can follow them.

5th order - we think of the market as one single entity. The market is a living and breathing creature. It is alive! Think of the market as your girlfriend or wife. Or if you are a woman, think of it as your boyfriend or husband. Get to know your market as your girlfriend / wife. Talk with her. Understand her moods and emotions. Is it that time of the month already? Spend quality time with her. Buy her gifts. Bring her to her favorite restaurant. After spending years with her, you will gradually be able to predict her next move.

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Likewise, after you spend years observing the market movements, you develop an intuition for where it is going. This is the highest order of trading. Trading is truly truly a mind game.

Market is manipulated

“Market is manipulated!!” Chant it and repeat after me. “Market is manipulated!!” The sooner we get this truth into our trading psyche, the faster we progress toward our trading success.

Whether we like or not, whether we acknowledge it or not, it is what it is. Market manipulations happen all the time. It happened 100 years ago with the bucket shops. Read “Reminiscences of a Stock Operator.” It is happening now with fixing of the LIBOR rate. See article below. And it will happen again 100 years from now.

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You see. The market is basically a buying and selling of information. He who has the late-est and best-est news, earli-est and fast-est usually wins the trading game. You know from a reliable grapevine that Company ABC is rumoured to be a takeover target. The share price is currently trading at $10. What do you do? You buy all the shares you can afford to buy! When the takeover news becomes public information, the news drives the herd to get excited and starts buying. The share price goes up. You then sell your shares at $20 to the herd who are buying it at $20 from you. Those who get caught by the authorities for insider trading are few and far between. The majority of insider trading simply slips under the radar unnoticed.

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Trading is a rigged game. So wake up traders. If you decide to continue to play this game, be wary and be aware.

Mindset between a losing trader and a winning trader

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Mindset of a losing trader

When i win:
•[self praise] Wow! I am good.
•[over confidence] Look at me. Trading is easy.
•[ego and boastful] I am going to tell my friends, my family, my dog and pet hamster how much $$$ i made yesterday.

When i lose:
•[blames the market] &%#^$* What is wrong with them markets?!?! You are going in the wrong direction!!
•[blames the tipster] Why did i listen to that lousy guy? He made me lose money.
•[pride] I am never ever going to cut my losses. It may turn around. I am buying more since it is cheaper now.

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Mindset of a winning trader

When i win:
•[appreciative] Thank you Mr Market for the profits. You made my day!
•[My analysis was correct] I plan my trade and trade my plan. And it turn out be a winner!
•[Let my profits run] Hopefully it turn out be a great trending trade.

When i lose:
•[self evaluation] Hmmm. My analysis is wrong. Let me find out why.
•[humble and willing to learn] Ok, here is the reason. Try not to repeat the same mistake again.
•[What's next?] Lets move on. Lets find the next great trade.

a very informative thread. Keep it up!

thanks!

I saw your water posts, and it reminded me of this. Have you ever seen this?

Your mindset post is so true. I used to boast how I made some money on a demo account, then I lost a chunk of my initial equity. That taught me to think differently and that emotion literally has no place in the markets.

Have not seen the video before. Thanks for the vid. I heard before that water has memory. Wondering if there is any way to apply this water memory concept to trading.

You got any ideas??

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We have eyes yet we do not see. When our eyes are opened, we saw what was always right there in front of us. It is "hidden in plain sight." I have talking about 88.6% for the whole of this week. Once i know the "what", it becomes that much easier to find the "where."

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88.6% as a trading strategy, when utilised with other trading tools, should yield profitable results over time. Below is a screenshot of another 88.6% on the AUDUSD 1hr chart.

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Do not ignore this simple trading system. Plot the FIBO retracement levels IN ADVANCE. When the markets makes a high and a low, preferably on a larger timeframe such as the 1hr or more, put in the FIBO levels immediately. Then watch what prices do when it retraces to the FIBO levels. If the FIBO levels coincide with previous major support and resistance levels, this gives double confirmation. This should give the trader extra confidence that the trade will be profitable.

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I remember when i was young, i bought some magic ink. When i wrote onto a piece of paper with the magic ink, the words remain hidden and invisible. The box of magic ink contains another set of ink. So to see the hidden words, i had to rub this second ink onto the paper and the words will appear after several seconds. Anyone remember that?

In one of my previous post, i talk about the invisible being made visible. From a naked price chart, there is no way to tell why price reverses at certain price levels.


http://www.forexmindgames.com/2013/0...invisible.html


Yet when i added the magic ink of pivots, the chart shows its true colors.


This time i am showing another example on the EURUSD. See the chart below. It is a naked price chart. No indicators, no RSI, no MACD, no trendlines, no Elliott wave, nothing. Why do price turns?

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Remember the magic ink. Lets see what happens next when i add the magic ink.

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I hope you see clearly now. The magic ink has been added onto the chart. I have been using pivots as one of my trading tools for many years now. So i would like to add a word of caution. There are some periods in the past where the markets completely ignore pivot lines. But recently, especially in the last 2 months, pivot lines are in vogue again. When it is in fashion, stick with it and use it. When it is out of fashion again, as all trading tools always does, do not use. But do not discard it. Keep it there, until the markets are in love with it again.