10 Steps to Trading Profits


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How to Develop Mental Agility and Avoid Directional Bias

A massive problem many traders face is clinging to a strong idea of what the market ‘should’ be doing. I’ve done it myself in the past the result has been a very frustrating decimation of my account and the giving back of profits after a healthy trend.

We all know that markets are unpredictable and that anything can happen – so why is adopting this mind set in the heat of the moment so difficult?

A lot of it is the result of putting a lot of work into your analysis and simply not wanting to see what’s in front of you when it pans out differently.

Also if you follow the herd (not recommended) or other people’s biases then that just reinforces it. Especially if you take advice from big name institutions who like to call where the market is going – and are often wrong…

On the flip side some of the best analysis you can see always presents an alternate picture if plan A doesn’t work out. I highly recommend you incorporate this into your analysis as well.

A great example of this is the Elliot Wave principle. Whether you use it or not, find it useful or not or believe it is a valid method or not – is beside the point.

One thing Elliot does teach and develop is mental agility through the alternate scenario. This is a built in “if I’m wrong then plan B will kick in which is…” failsafe. This immediately prevents you from getting married to your trade ideas and also gives you an alternate plan of action if (and often when) the market does the opposite of what you thought it was going to do.

So – how are you going to incorporate this into your trading?

As with everything it takes practice until you do it subconsciously, in the mean time when you analyse a chart or a trade idea add a step in your checklist for an alternate plan B scenario.

You could end up turning your losing trades into winners.

Is Holding cash Going to Become Illegal?

(Video) Do They Really Want to Outlaw Cash?
Some bankers want to charge you for your deposits

By Elliott Wave International

Editor’s note: You’ll find the text version of the story below the video.

Learn how to win the “War on Cash”
Follow this link to access your FREE REPORT »

The U.S. economy slowed to a crawl in Q1: GDP (gross domestic product) came in at 0.2%.

When the next full-blown economic downturn arrives, cash will be the ideal refuge.

But savers and consumers face a startling prospect: Some people in high financial positions want to impose a ban on cash.

Why?

They advocate negative interest rates as a way to stimulate the economy. But they know this scheme has a problem: Most depositors would in turn use cash to avoid such a charge on their deposits.

A prominent economist has a solution: Simply eliminate cash.

“Cash… gives people an easy and effective way of avoiding negative nominal rates.”

[Citigroup’s chief economist] suggests three ways to address this problem:

  1. Abolish currency.
  2. Tax currency.
  3. Remove the fixed exchange rate between currency and central bank reserves/deposits.

Yes, [the chief economist’s] solution to cash’s ability to allow people to avoid negative deposit rates is to abolish cash altogether.

Bloomberg, April 10

If interest rates fall too far, even wealthy individuals and institutions may turn to cash.

The April Elliott Wave Theorist offers this perspective:

People and institutions holding billions of dollars have been trapped into accepting a negative interest rate — meaning a guaranteed loss on their money — because gathering, storing and employing an equivalent value of cash notes would cost more than the amount lost to negative interest. But there is a limit to this reverse usury. A large enough disparity would make it attractive even for billionaires to store cash instead of lend it. What is that interest-rate limit? Minus 2%? Minus 5%? If the limit is reached, even wealthy entities will opt for cash. That is, if the men with the guns let them do it. …

They want to ensure that you have no possible route of escape.

How will they do it? By outlawing cash.

“The Death of Cash” was the title of an April 23 Bloomberg article:

Beginning on May 1, [JPMorgan Chase] said it will charge certain customers a “balance sheet utilization fee” of 1 percent a year on deposits in excess of the money they need for their operations …

Pause for a second and marvel at how strange this is. Banks have always paid interest to depositors. We’ve entered a new era of surplus in which banks — some, anyway — are deigning to accept money only if customers are willing to pay for the privilege.

Further, for the first time in history, four central banks — the ECB, the Swiss National Bank, the Swedish Riksbank, and the Danish Nationalbank — all currently have negative policy rates.

Yet the war on cash has only started. Now is the time to learn how to win.

To that end, we’ve just put together a FREE report for you titled, “The War on Cash.”

Learn how to access this NEW report by following this link.


This article was syndicated by Elliott Wave International and was originally published under the headline (Video) Do They Really Want to Outlaw Cash?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

EUR/USD – Trade What You See and Don’t Believe the Hype

One of the toughest lessons a trader has to learn is to trade what you see and not what you think should happen – or for that matter what other people say will happen.

Having a strong bias guide your decisions is a sure fire way to not just consistent losses but very frustrating ones at that.

Listening to other people’s predictions puts you in a much worst position – even when they are big market players who are supposed to be really good at this stuff (with access to information we retailers don’t have).

To illustrate this I’ll refer to a call made by Barclay’s last week  on April 26th to – “Sell EUR/USD At Current Levels: Here Is Why? – Barclays”

I don’t know what kind of timeframes you trade on or how wide your stops are but selling at ‘current levels’ on Mon 27th would have put you underwater by a good 370 pips a few days later and on the wrong side of some fairly bullish action that isn’t looking to be over from my view of the EUR/USD chart. If this breaks to the upside I hope no one following Barclay’s call decides to hang in there….

EURUSDSBDaily-050515EURUSDSBDaily-050515EURUSDSBDaily-050515

 

Now I’m by no means making any kind of call – this thing could do anything but short term those green candles tell a different story along with higher lows and price trading above some of the moving averages I watch (20,50,100 EMA) for the first time in a while.

Might just be a correction to the higher degree trend, could be the start of a sideways range – who knows. I’ll trade what I see.

I don’t have an issue with banks making calls, but telling us to sell ‘at current levels’ is quite specific.

Trade what you see and don’t believe the hype!

3 Words That Could Turn Your Trading Around

I’m going to tell you about a simple check you can do for every trade to help avoid one of the worst mistakes losing traders make and make the best out of trades that don’t work out.

One of the biggest challenges many traders face is how to handle being wrong. The combination of your analysis being wrong and losing money can cause account destroying behaviour patterns such as moving a stop loss to give it room to turn around and re-entering failed trades over and over.

Left unchecked these habits can let 1 simple trade become a major disaster leading to a desperate “got to make it back ASAP” spree that inevitably ends in tears.A strong need to be right (ego) is a massive cause of failure for retail traders. You can see it all over the place on Internet forums and social media.

People who argue with each other - especially the ones who will argue "to the death" that their view of the world is “right” and anyone who disagrees with them is “wrong” – are rarely successful at this business.

On the flip side the best traders respect other’s methods and understand that people are different and so is what works for them. They also understand that anything can and does happen in the markets and manage their risk and edge to win long term. They also understand that any form of drama has absolutely no place in a situation where one needs to be in a good, calm and objective state to make sound decisions.

Add this step to every trade you take

If you want to systematically eradicate any unwanted tendency to need to be right from your trading do this:

As part of your trade checklist, add a step called “if I’m wrong” or “alternate scenario”.

In the Elliot Wave principle there is an analysis step called the ‘point of ruin’ where your wave count is invalidated if price moves to a certain level. Many analysts also map out alternate counts beforehand so they can quickly switch sides.

The alternate scenario step prepares you mentally and emotionally for the event of ‘being wrong’ and opens your mind up to the possibilities and opportunities if that is the case.

So just add 3 words “If I’m wrong” and analyse the alternate scenario before you put on the trade. Do this for every trade and you’ll work that need to be right out of your system.

I’ll leave you with my favourite quote from Paul Tudor Jones:

“Don’t be a hero, don’t have an ego. Always question yourself and your ability. Don’t ever think you are very good at this – the second you do – you are dead…”

 

Technical Analysis vs News Trading – The Gloves Come Off

Like many other technical traders I feel that news events have little impact on price movements if any. Even big releases like the NFP or FOMC announcements don’t appear to have any lasting effect regardless of how much a number may be more or less than the market expected.

But so many people hang on these announcements like they are valid trading signals. Blindly trading news events is about as close to gambling as it gets. I personally see the monthly NFP report as a gambling opportunity more than anything else.

For me having an awareness of high impact news releases is only necessary to see if there could be any short term volatility that could risk a technical trade I idea I’m sizing up. Sometimes I’ll even time an entry or exit based on where the market might get pushed to after an announcement. That’s as close to trading the news as I get

News is Reactive – Something Else Drives the Market

The more I learn about Socionomics, Elliot Waves, Fractals and Fibonacci numbers in nature the clearer it becomes (to me) that however sophisticated the human race is we are still animals and we still move in herds. These cycles of boom, bust are just a natural process playing out…

…and the news announcements and fundamentals react to try and maintain balance and control.

What Does This Mean for You?

So as a trader looking to make it into the coveted top 5% who actually make it – what does this mean for you?

  • Are you having problems which could be due to a method that relies on news announcements?
  • Do your trades get stopped out because of high impact reports that cause temporary volatility?
  • Do you often find yourself on the wrong side of the market even though the direction doesn’t make sense and it should be going the other way?

Get With the Trend

Many of the most successful traders have learnt to identify and trade with the trend. Can you do this?

Here’s a weekly chart of the US Dollar Index. The wedge formation starts prior to the 2008 financial meltdown. Does that chart pattern look like a financial meltdown to you? (click image for full size)

dxysbweekly

The preceding big down move definitely looks like a bubble…

So what’s next for USD and other markets?

I’ll be watching my charts and not the news (unless it poses a threat to any of my open positions)…

Is Get Rich Quick Ruining Your Mind-set, Expectations and Trading Profits?

I’m not a fan of trading robots, or Holy Grail systems or ‘secret’ backdoor loopholes. Anyone with an ounce of common sense knows that you can’t just spend $99 and then get rich doing nothing with no experience or skill or work.

So why is this stuff so popular and why do people keep buying it?

Because it’s marketed so effectively and the people peddling this stuff really really know what they’re doing when it comes to pushing emotional and psychological buttons that get people to ‘take action’.

And this marketing is everywhere. Even if you know better it could still be chipping away at you in a ‘brand awareness’ way planting and nurturing the myth that making money from trading is quick and easy.

How to Tell if You’re Being Affected by Bad Products and Marketing

In my practice of mindfulness and self-awareness I’ve noticed a thought and feeling pattern that gets triggered sometimes when I see an offer that has pushed my psychological and emotional buttons.

I feel a sense of urgency like I’m being left behind and leaving money on the table. Even when my sense of reason kicks in and overrides any subliminal advertising messages I still feel like I’d better hurry up and get back to my charts and make sure I’m not missing any important opportunities.

This is causes pressing (trying to force the market to make you money) and over trading which we all know never ends well.

What To Do When You Recognise This Pattern

As with any undesirable thought and behaviour pattern, the key to overcoming it is awareness and observation. When you observe a thought pattern and take a pause you interrupt it. Observing it from a 3rd party viewpoint will often dissolve the feeling and prevent any automatic behaviours from playing out.

You can do this with taking 1 single conscious breath. Here’s Eckhart Tolle describing the process:

You can do this any time you become aware of a feeling or thought pattern that often results in a bad outcome. Take revenge trading after getting stopped out as an example.

Incorporate this practice into your trading and let me know what it does for your results.

How Watching Market Psychology Can Help You Time the Market

Editor’s note: You’ll find a text version of this article below the video.

Two economic reports hit the newswires Thursday morning (March 6). Both were important, yet each one had the opposite implication for the trend.

The market chose one report over the other, and the question is, why — and what can we learn from that?

Both reports came out at the same time, 8:30 Eastern on Thursday morning. One was from Europe, where the European Central Bank said that they, “…decided to keep the key ECB interest rates unchanged.” That suggested that the European economy was getting stronger.
The second report was from the United States, where “…the weekly applications for jobless benefits fell to a three month low.” That also was a sign of economic improvement.

Immediately after, the euro jumped to a new high for the year against the U.S. dollar. But why did the euro gain, and not the dollar? After all, the news from the US was also positive?

The answer comes down to understanding market psychology. All things being equal, it’s the bias of the traders that determines the market’s fate. The question is, how do you know what traders are thinking?

That’s where Elliott wave analysis comes in. Wave patterns in price charts reflect the struggle between the bulls and the bears. So by tracking wave patterns, you can anticipate which side will ultimately win.

Let’s take a look at what the waves were saying before the surge in the euro on Thursday. The day before, our Currency Pro Service told subscribers that the euro was forming a wave pattern called a triangle.

A triangle is pattern that moves against the primary trend, so when it ends, the old trend resumes — in this case, up. On Wednesday, that allowed us to make a very clear forecast for the euro-dollar:

EURUSD
[Posted On:] March 05, 2014 03:27 PM

From nearby levels further consolidation through waves D and E [of the unfolding triangle] should set the stage for a thrust above 1.3824.

On Thursday morning, not only did the euro hit its Elliott wave target, it actually went as high as 50 points above it.

The lesson here is obvious. In the world of finance, where every day you have multiple news reports competing for your attention, focusing on market psychology goes a long way.

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This
article was syndicated by Elliott Wave International and
was originally published under the headline How Watching Market Psychology Can Help You Time the Market.
EWI is the world’s largest market forecasting firm. Its staff
of full-time analysts led by Chartered Market Technician
Robert Prechter provides 24-hour-a-day market analysis to
institutional and private investors around the world.

3 Ways to Stop Anger and Frustration From Derailing Your Trading Dreams

Acting in anger and making bad trading decisions that result in losses is something that a lot of people do on autopilot. By the time they realise what’s happened it’s too late and they find themselves “in the market wishing they were out”. If this common problem effects you then the following steps will help you eradicate it from your trading.

As traders we encounter anger inducing situations a lot – almost daily. It’s a regular part of trading life and without a strategy to deal with it you can find yourself angry a lot of the time and suffering losses as a result.

When things don’t go your way you’re hit with a double whammy of:

1. Being wrong
2. Losing money

This is a horrible combination and for most traders what happens next is a knee-jerk reaction that rarely ends well. It’s all very well knowing that revenge trading and trading in a bad state of mind is wrong and you shouldn’t do it. But in the heat of the moment the compulsion often outweighs this wisdom and the unconditioned trader either does it without realising or *consciously decides* to do it in a “I know I shouldn’t do this but I’m so mad I’m gonna do it anyway!” kind of way,

So how do you reprogramme yourself to stop doing this and develop the emotional strength to power through these challenging situations?

1. Expect these situations to happen – when you understand and accept that the market is going to kick you around it’s a lot easier to deal with it when it happens. However “wrong” or frustrating the event is just know that your systems will deliver losing trades, whipsaws will happen, stop loss hunts will happen, “unconfirmed Twitter rumour” news spikes will happen, central bank intervention will happen. Assuming you have a positive system to follow with rules and you exercise proper money management none of these types of events should ever be a big deal.

2. Prepare yourself for when they do happen. When you know and expect bumps in the road it makes sense to be prepared. In this case you should expect that when these events occur you are going to feel a certain way. Know that you will feel an urge to scream, throw something out the window and make rash trading decisions you will later regret. So have a defined course of action lined up. It could be – step away from the computer, count to 20, go outside, walk/run around the block, hit a punchbag – anything to interrupt the automatic action/reaction pattern and open up a space to make a sound and rational decision

3. Develop an indifference to individual trades. This can be hard at first but with continued practice gets easier. Make it one of your trading goals to view wins and losses the same way you view credits and deposits in your bank account. Do you beat yourself up for being wrong when you see a mortgage payment on your statement? Of course not. Can you view trading losses – and wins the same way? That’s your challenge – your goal – think you can do it?

If yes then go and do it! developing the self mastery required to trade successfully is all about doing, not just knowing. Practice these points and you’ll end up doing it naturally.

3 Ways to Predict Stop Loss Hunting and Profit From Institutional Greed

We all know that big money likes to push the market around and flush out stop losses. It’s no secret and it’s something we must accept as traders.

angry_compressedThey know where the stops are, they have the means to move the market through certain levels and they will not pass up any opportunity to shake the tree until every apple has fallen.

So as a participant in this shark infested territory you can either be a victim or a beneficiary. Many choose the victim route, but a few smart traders have worked out how to make this inescapable fact of life work for them –and here’s how…

1. Know where the obvious stops are.

If you have a good idea where a large amount of stops and entry orders are then you can pretty much view them as a red rag to a bull (or bear!). The most obvious places to look are:

  • Longer term (higher timeframe – daily/weekly) support and resistance levels
  • Key Fibonacci levels – 61.8, 31.2, and 50% retracements of large swings (daily charts are best)
  • Obvious looking trendlines
  • Pivot point levels
  • Psychological round numbers
  • Combinations of these levels – A.K.A – confluence

Brokers and institutions have the advantage of knowing exactly where stops are, we have to figure it out and when you know how to read a chart properly it isn’t that hard

2. Time it so you know when they are most likely to go for it

Stop hunting is more likely to occur when price is near a key level that many traders are ‘hiding’ behind. If stops are there and price is near it is extremely probable that they will push price through it if only to test if a level holds and grab as many stops as they can. Can you use this to your advantage?

However there are times when liquidity and volatility allows them to do this more easily and catch unsuspecting traders unaware. They are mostly:

  • High impact news releases
  • Market open and closes

If price is near a key level with stops behind it then these are the times to watch and execute any strategy that exploits predictable institutional greed.

3. Use volatility in your strategy and expect whipsaws

So you have an idea of where the stops are and an idea of when they might push for them… So what do you do next? How far will they push it? Will they create a false breakout to catch out the angry stopped out traders revenge trading the other way?

It doesn’t end at the stop hunt, when price gets to a key level they will play more games with false breakouts and whipsaws.

Ever seen those big moves after news releases that make no sense at all and reverse a few times before taking off in a given direction?

Getting filled and closing out at a good price is a lot easier when you factor in volatility with an indicator like ATR (average true range). Any decent trading platform will include this and it will make your life a lot easier if you plan to trade around stop hunting, false breakouts and general institutional fun & games.

Next Steps

We’ve just covered 3 basic ways you can make predictable big money behaviour work for you. There is nothing you or I can do to stop them doing it so the best course of action is to learn how to ride their coat tails when they do it.

This post has just scratched the surface but should have opened you up to many of the possibilities. If you want to learn more about discretionary trading and reading market sentiment from raw price action have a look at the MTI ebook that’s included in the TT kick start bundle here

Really Simple Trading – Sticking to the Plan

As a continuation of last week’s post on a trend trading method with an example on AUD/USD this is a follow up as I’m now in this one having been watching it since last week.

Based on the current trend structure I was looking for a pullback at the 0.9500 level which lines up with a 38.2 % Fib retracement of the recent downmove (daily chart) and also lines up with one of the EMA’s I use (150). It’ all there, the round number, the Fib retracement, the EMA and the previous resistance level which I now anticipate will act as support (click for full size image):

audusdsbdaily-fibs

 

audusdsbdaily-triggered-291013

 

 

Looks pretty tasty – and now it’s triggered and about 12 or so pips in my favour (stop is 50 and I’m targeting at least 200). So why am I telling you all of this?

This morning when I saw it heading toward my desired entry point I had some trouble putting on the order. I found myself second guessing the analysis and almost passed it up because I was worried the bearish price action looked too strong. If I had allowed this fear and second guessing to prevent me putting on this trade I would  have derailed myself quite badly overall in the following ways:

1. I’d weaken my confidence in my edge and analysis

2. I’d introduce an element of shooting from the hip

3 . I may well end up watching a trade I intentionally missed out go where I thought it might. This could lead to frustration and possible further mistakes.

So faced with this dilemma I gave myself a slap round the face and told the scared part of me to just grow a pair and trust my plan and edge.

If it doesn’t work out it would still be a good loss because I followed my plan and rules. It may still not work out and that will be fine.

Either way at least I’m not on the sidelines when I should be in the game. It could have easily turned out differently had I allowed the fear and uncertainty to call the shots.

Do you trust your plan and edge and ability to execute it whatever happens next?

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