The amount of information available to new traders is overwhelming. Some is important, most is not. But which is which? It takes an experienced trader to know. Most new traders don't know what they don't know. You are absorbing 100% of what you read and hear, but you will only end up using 5% of the information, if that.
Trading is one of those careers where you do not become proficient just because you put in more time at the screen. Traders spend 10, 15, 20 years trading and they still find that they haven't had a profitable week or month, let alone a profitable year. Why is that? What are they doing wrong? Can they get on the path to success and ride the gravy train? Fortunately the answer is yes. There is a way forward but the trick is to get off the Crazy Train.
When you tell new traders that your trading mindset is more important than your strategy you can almost hear them put their fist to their mouth and cough "Bullshit". They know better than you. How can you possibly know more than they do. After all they are their own best fan. The truth is that trading is almost 100% psychological and almost nil broker, strategy, and computer upload speed. But that is not what the media and the gurus tell you. They tell you that your internet connection speed is the answer, you know nothing about supply and demand, if only you knew the secrets about support and resistance, if you become an expert in reading candle formations, etc., etc., etc. Blah, blah, blah. This is not where your power lies.
Early on in my trading journey I was very fortunate to come across a trader who I admire and respect and who through osmosis
Dictionary result for osmosis-/äzˈmōsəs,äsˈmōsəs/
the process of gradual or unconscious assimilation of ideas, knowledge, etc.
taught me the importance of the psychological side of trading over what most traders believe to be the Holy Grail-their strategy, back testing, their monitor array, etc. I was fortunate to trade live with this trader in his trading room before he closed the room and disappeared from public view to trade his own accounts. By trading live with him, reading the books he wrote, and watching his videos I was able to learn many important lessons about what separates professionals from the amateurs. This knowledge helped me to understand how financial markets are structured and what you need to do to participate profitably in the order flow. It is entirely a function of your approach and understanding of how markets work. It does not matter which moving average you use, and which broker you use. Winners rise to the top and losers sink to the bottom.
The longer you trade the more you will strive to simplify your trading. In the beginning you will test every strategy, time frame, indicator, chart pattern, etc. Eventually the realization will appear that you are just as equipped for success as any other trader on the planet. This awakening will give you the confidence to focus on your own trading and stop looking outside of yourself for answers. The answer always lies within.
Trading is a mental challenge and nothing more. The best systems are simple yet derived from years of experience and live market trading. In trading less is more. Trading is simple once you spend the countless hours understanding what trading really is and how you can reach the goals you set for yourself. Until then trading appears to be complex and consistent profits fleeting.
Alot of the initial angst a trader feels is due to the emotions of greed and fear which can be overwhelming. Eager to profit and scared to lose, the trader jumps into the market head first at first eager to see if this really works. After an initial period the trader goes back to the drawing board looking for answers. After all someone has got to have figured this out and if they can do it I can do it to to they think to themselves. And they are right. The challenge is learning enough about how the market functions to be able to make the proper decisions at the right time which will start to produce favorable results. In trading action does not mean profits. Action means some combination of wins and losses. Patient, deliberate action produces net profits.
In today's internet driven marketing bonanza marketers are eager to portray trading as an easy way out of the 9 to 5 rat race. The truth is that trading is challenging and although becoming a professional trader is an achievable goal it is not for everyone. Your personality will influence your trading and those that are competitive and able to persevere through the learning curve will be rewarded.
The reason trading is challenging is that a trader will not succeed until the trader is able to fully understand how money is made and lost. Switching brokers, platforms, computers, "strategies", indicators, etc. will not typically improve a traders results. They are essentially doing the same thing in a different way hoping for improved results. They become frustrated when their results remain the same as before the changes were made. This is a function of not fully understanding how market structure, order flow, misdirection and manipulation by those running these markets all contribute to traders doing the wrong thing at the wrong time. Learning proper execution will enable the trader to execute at the locations and in ways that will limit losses and increase profits. This is accomplished through understanding how the market functions and participating only when the probabilities of success increase. Participating for other reasons will lead to lower probabilities of success and therefore undesirable results. Patience plays a key role in the success of a trader. Those who have the patience to wait days, weeks and even months for conditions to optimize will always outperform those who are operating on short time frames who are easily baited into the market by any small movement in price.
At some time during your trading journey you need to sit down and think about what you are doing and how you may need to change the way you approach trading. Trading is challenging. The only thing stopping you from becoming a successful trader is you.
As a new trader you believe that you can out trade the other traders in the market and make money consistently, otherwise you wouldn't even attempt it. If trading were easy wouldn't everyone do it? If it worked where would the money come from to pay these traders everyday? Who would supply the money?
You are allowed into the market to test your skill trading against the pros who run these markets. The first step in becoming a successful trader is awareness of what is really going on and what action you plan to take in order to succeed.
How money is made and lost in the financial markets was and will always have to be the same as in the past, in the present, and hundreds of years into the future. Learning these principles and applying them to your trading is the first step to developing your mindset and put your thinking on a path to success.
Trading is a game and you need to participate in that game a certain way to win. Proper participation is a learned skill that comes from experience. You are not born with that skill.
If traders spent 10% of the time they spend on searching for indicators, software, and "strategies" thinking about what trading really is and what is really going on they would immediately improve their results by doing less of what doesn't work and begin the process of figuring out what does work and what does need to be done to get them on the road to consistent profitability.
On 11/8/17 we posted a blog "SNAP Being Snapped Up?" about the potential for SNAP CHAT stock with ticker symbol SNAP to move higher based upon the following observations:
These observations let to the analysis that SNAP was being quietly accumulated by Smart Money interests. Smart Money buys at the low when the news is negative and no one is paying attention.
Today a news release about SNAP caught our eye and we found the price had gone parabolic.
The price of Bitcoin has dropped below $11,000 as the Smart Money "Retail Flush" continues. The strongholders are dumping the price of Bitcoin and the overall scenario is picture perfect for them to set up their buy campaign.
The lower the price drops in rotations the more attractive the opportunity becomes. Smart Money buy low and sell high. They have already sold into the $20,000 high print and they are now reloading their positions. Expect the price to move in rotations on the way down so Smart Money can buy in stages and accumulate their position quietly and then drive the price back up as Retail investors look on.
Bitcoin is hovering around $14,000 as the Holidays come rolling in. The timing could not have been better for Smart Money to start up their cash machine. Now that the futures markets are online the Bitcoin Bonanza is turning into more of a two way market. The sell side is ramping up against the Bitcoin Bonanza Buyers.
In a simple case of what goes up must come down the price of Bitcoin is correcting and there may be more downside in the near future. Big B has already lost a significant percentage of it's value and it will be interesting to see the path that price moves in the coming weeks. Are the algos on or is this just a blip on the radar screen? Only time will tell but one thing is for sure-Bitcoin will definitely be the topic of conversation at many Holiday parties this year.
Technical analysis is used to measure/quantify activity and price movement in your charts and give you a basis to begin forming a potential trade idea. You need to use additional information before you enter a trade. By itself technical analysis has no reliable predictive quality.
“I will go short when this move retraces 50%” is not based upon anything other than a gut feeling or your opinion. There is no scientific evidence or data to back up your gut feeling. Backtesting can help you with probabilities but there is no 100% certainty in this game. The only certainty is that you are always operating in a condition of uncertainty.
You need additional information before you decide to trade. You need to put the probabilities in your favor. In the best case scenario you use repeatable patterns and conditions that you have seen over and over and only trade when these conditions are present and stay out of the market all other times.
You have to factor predatory algorithms into your analysis. Price is not moving on pure supply and demand, it is being skewed by the orders being pumped in by algos. If you completely ignore the presence of algos you will be frustrated. They will be stopping you out, driving price against your position frequently, and moving without you when they make the big moves. That is what they are programmed to do and they are very effective.
No one cannot predict when an event will happen, for example an earthquake or tsunami. You need a crystal ball to do that. But you can predict with 100% certainty how people will react and what their likely behaviors will be. As an example if you are in a movie theater and the fire alarm is pulled everyone will run for the nearest exit because that is what they were told to do. Once they see others running for the exit (even though they don’t see fire or smell smoke) they will follow the crowd out the door. The same is true with trading. Learn when the crowd is going to do something and start to trade against them with the Big Boys. That is how the Big Boys make their profits everyday. They do the same thing day in and day out, in a slightly different way to keep traders guessing.
The chart of SNAP or Snapchat looks like the stock is currently under accumulation. Chinese company 10Cent purchased a 12% interest in SNAP. The earnings reports for SNAP are negative and the Retail stock traders who bought SNAP the day of the IPO have probably sold it already and booked their losses. SNAP looks like the perfect candidate to
make a comeback or be purchased. Only time will tell what the future holds for SNAP. But in the doom and gloom there is a ray of light.
When you initiate a trade in Forex you are trading against Professional traders from banks, hedge funds, and liquidity providers known as market makers. These traders are part of large organizations which employ quantitative experts who write computer programs to automate their trading activities. As these programs enter orders into the market they are executed faster, more frequently, and more accurately than manual traders. This gives them an advantage because there is no human intervention to cause execution errors such as hitting Buy instead of Sell, closing a winning trade early, or letting a losing trade run. These algorithms can be backtested and adjusted by human traders as needed. In addition to reducing trading errors and increasing execution efficiency algo trading reduces transaction costs and improves pricing. Many algo's use mean reversion strategies where orders are gathered from high and low prices before the price moves back to the mean. The algo's can be programmed to weigh volume, average price, etc. or whatever metric is desired. This is how hedge funds reduce market risk in addition to hedging their trades.
The algo's are particularly effective on the down side as sell orders are triggered in a cascading domino effect. Price generally moves up in a slow stair step fashion and when it is time to fall under it's own weight it falls rapidly and some traders can only trade the bull moves and not the bear moves. Our brains are hard wired for excitement and we like to work in crowds of excited participants, not alone when fear is the order of the day. That is one of the reasons that Smart Money has such an easy time letting prices fall under their own weight and they buy as the price is falling through the floor. There is no one else buying as the price falls, most are selling furiously as fear grips them and they want to get out before the bottom. Of course the price always seems to mysteriously bottom out and reverse and move higher again.
Ignoring algorithmic movement in modern financial markets will cost your dearly. Traditional technical analysis needs to be carefully employed while considering how modern algos move price in a never ending mean reverting dance. The algos are programmed by humans and humans tend to do the same things over and over, especially if it works effectively. Observing the algorithmic movement will help you negotiate the order flow if you consider where and when traders are being trapped into bad trade locations based upon general market conditions, fundamentals, news, and market structure.
Trader's success checklist:
An interesting article from http://money.visualcapitalist.com/
The Global War on Cash
The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.
There is a global push by lawmakers to eliminate the use of physical cash around the world. This movement is often referred to as “The War on Cash”, and there are three major players involved:
1. The Initiators
Governments, central banks.
The elimination of cash will make it easier to track all types of transactions – including those made by criminals.
2. The Enemy
Large denominations of bank notes make illegal transactions easier to perform, and increase anonymity.
3. The Crossfire
The coercive elimination of physical cash will have potential repercussions on the economy and social liberties.
Is Cash Still King? Cash has always been king – but starting in the late 1990s, the convenience of new technologies have helped make non-cash transactions to become more viable:
By 2015, there were 426 billion cashless transactions worldwide – a 50% increase from five years before.
Year# of cashless transactions2010285.2 billion 2015426.3 billion
And today, there are multiple ways to pay digitally, including:
The First Shots Fired
The success of these new technologies have prompted lawmakers to posit that all transactions should now be digital.
Here is their case for a cashless society:
Removing high denominations of bills from circulation makes it harder for terrorists, drug dealers, money launderers, and tax evaders.
But for this to be possible, they say that cash – especially large denomination bills – must be eliminated. After all, cash is still used for about 85% of all transactions worldwide.
A Declaration of War
Governments and central banks have moved swiftly in dozens of countries to start eliminating cash.
Some key examples of this? Australia, Singapore, Venezuela, the U.S., and the European Central Bank have all eliminated (or have proposed to eliminate) high denomination notes. Other countries like France, Sweden and Greece have targeted adding restrictions on the size of cash transactions, reducing the amount of ATMs in the countryside, or limiting the amount of cash that can be held outside of the banking system. Finally, some countries have taken things a full step further – South Korea aims to eliminate paper currency in its entirety by 2020.
But right now, the “War on Cash” can’t be mentioned without invoking images of day-long lineups in India. In November 2016, Indian Prime Minister Narendra Modi demonetized 500 and 1000 rupee notes, eliminating 86% of the country’s notes overnight. While Indians could theoretically exchange 500 and 1,000 rupee notes for higher denominations, it was only up to a limit of 4,000 rupees per person. Sums above that had to be routed through a bank account in a country where only 50% of Indians have such access.
The Hindu has reported that there have now been 112 reported deaths associated with the Indian demonetization. Some people have committed suicide, but most deaths come from elderly people waiting in bank queues for hours or days to exchange money.
Caught in the Crossfire
The shots fired by governments to fight its war on cash may have several unintended casualties:
Jeff Desjardins is a founder and editor of Visual Capitalist, a media website that creates and curates visual content on investing and business.
When Conor McGregor steps into the UFC octagon he has one thing on his mind. To submit his opponent as fast as possible. He is confident because he has done his homework and he has a game plan. He doesn't wait for the bell to ring to start doing the heavy work. He does the heavy work in training. He comes prepared physically and mentally. McGregor is not the toughest or the most talented. But he is the most obsessed. And he works harder than anyone else. He has gone from a $180/month Welfare recipient to one of the richest Pro athletes anywhere in the world.
A few takeaways for your Forex and Cryptocurrency trading from Conor:
In the world of investing everyone has the goal of making money, the lure of "easy" money attracts the masses. For some it will become a lifelong career. Others are looking for a quick buck. Many dream of "trading" their day job for an exciting life as a professional trader.
The usual path is to scrape together a small stake and fund a live account to test the waters while learning. New traders and investors will have to be patient while they figure out what investing and trading really are. Everyone brings a little bit of a gambler's mentality because gambling is exciting and entertaining. Casinos fill up every day with those willing to risk their hard earned money at a chance to make easy money. Most leave the casino with less than they went in with but they are satisfied they got their money's worth.
Bringing a gamblers mentality to the financial markets will not serve you well. After paying to play you will have to win a mind game where those you are competing against have more money, more information, and more time to profit than you do. It is an unfair game but those are the rules.
Smart Money always has the advantage. They didn't have to be in on the beginning of Bitcoin in order to profit. They have enough resources and clout that they can manipulate the price and get early investors and traders to sell as much of the coins as Smart Money cares to buy by driving the market lower and into their waiting hands. Timing for them is on a long horizon and they don't have to make quick decisions like day traders.
The early investors in a cryptocurrency like Bitcoin are in good shape if they still own their coins but they could potentially feel the heat when a big correction starts to erode their paper profits. Smart Money has the ability to drive the price to levels that most will look at in disbelief. That is part of their business model. This "shock and awe" manipulation gives them the ability to buy advantageously when the price reaches extreme lows and everyone is panic selling, and sell into the exuberant highs where everyone is furiously buying into a bull trap. The media is Smart Money's marketing department and they do a great job at putting out the rumors just at the right time.
Investors have a long time horizon and they have to have the patience of a saint to sit through the long sideways accumulation and the large corrections as the price reaches into new high prints. The traders are the more skilled and experienced operators who have developed methods to profit from shorter term volatility and fluctuations in price, and the gamblers are the ones that are funding the winners because they are always getting in and out at the wrong time due to their lack of regard for risk and proper execution.
Trading is one of the few things that doesn't get easier the more you do it unless you make the right changes and do certain things and avoid certain things. If you continue to do the same thing over and over and expect a different result you are setting yourself up for disappointment. If you are using simple, widely known and commonly used strategies and methods with very little forethought and effort your results will be breakeven or less. The big players make their profit from those who are less skilled and experienced in this zero sum game. Less skilled and experienced traders all do the same things at the same time and they are part of a group known as the "herd". The "herd" is trading the surface of these markets including stocks, Forex, cryptocurrencies, futures, etc. Changing your "strategy" isn't enough. Changing your broker, platform, etc. will not bring you success. The road to profitability is to take a different path. When the herd is buying as price moves to new highs you want to be out of the market looking for the best place to strategically place your pending sell order, waiting patiently for the market structure to send you a signal that your probability of success is at it's maximum. Ditto on the sell side.
You don't need to spend years learning more technical analysis. The game is about proper execution and order flow not about who knows the most technical analysis. The simpler your system the better. But it has to be used with an advanced understanding of how the trading game is played and what are the best ways to enter and exit the market. You cannot jump into these markets at anytime anywhere in the market structure and expect to make a constant profit. Your active participation will be amply rewarded by trading losses.
You need to condition your mind through repetition and gain the confidence to trade in a way that goes against your inner voice or "gut feeling" to buy at the high and sell at the low. You know from experience that following that inner voice will lead you astray. Start to think outside the box and do things differently and you will probably start to see some improvement in your trading results.