PSYCHOLOGY

PSYCHOLOGY

Below is basic psychology a trader needs to understand before beginning to trade. Ensure the following concepts are understood and planned out before trading:
  • Understand the asset class you are trading (i.e. don’t follow 20 pairs at once)
  • Think independently and use your own analysis (turn off the TV and rumor sites)
  • Develop and adhere to your personal trade profile and compressive trade plan
  • Utilize and exercise impeccable equity management (1-1.5% risk per trade for new, 2% for exp.)
  • Don’t assume to know where price will go (i.e. no predictions), setup your trades per your analysis in anticipation IF the market moves in your direction
  • Think in terms of probability and not absolutes, there are no absolutes in trading
Trade like a Sniper

 Traders who learn to pick and choose their trades like a Forex “sniper” are typically the ones who succeed.  Traders who fail act like machine-guns by shooting at everything they see (overtrading) and/or tend to run out of ammo (money) very quickly.
  1. Less is More
    • Wait patiently for anticipated target to come into view as a result of your own analysis.
    • Act only when your set of criteria are met.
  2. Higher Time Frames
    • The higher the timeframe the more reliable the target, information is presented. Looking at Monthly or Weekly time frames only does not give you enough targets to trade.
    • Base most of your analysis off of Daily and 4-Hour charts to identify high value, probability targets.
    • Work with the lower timeframes (1-Hour and 15-Min) to manage the circumstances around the trade.
  3. Patience
    • Most beginning traders lose money in the markets, and most beginning traders are also anything BUT patient.
    • For beginner traders, fight the tendency to make yourself trade because you have the idea that trading will earn you money. Only smart trading with a plan can make you money.
    • Wait for confirmation by multiple factors before jumping into a trade to avoid false moves.
  4. Fear and Greed
    • Combat natural tendencies of fear and greed by documenting and diligently following a trading plan.
    • Make trading about following rules, plans, and risk management.  NOT about emotions.