I started my trading back in 1985 in commodities; and we are talking about the real stuff. Communication was done by telex in those days and even at the bullion desk the telex machine was still in use. Charts came by post and where manually adjusted or we just used paper and pencil. But technical analysis was not the major driver. It was flows and fundamentals and to this day I am convinced these two factors really move the markets and establish trends.
Of course I use technical analysis. I use it though in its plain fashion; prices, support and resistance. In Forex I experienced that the market seems to adhere also to Fibonacci’s which I include as well.
So what’s the story?
Even as a professional at an institutional level it is tough to make consistent money. As a private trader it is close to impossible, if one does not adhere to a pre-defined path and rules.
The path has three major steps and a well thought out project plan is the supporting tool to achieve simplicity of thought and trading.
The core steps are well known: Personal goals and sound education are leading to the trading system.
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The core of trading is a change in perception. Traders have to thrive on insecurity. We do not know what happens the next moment. That holds true for all traders around the world. The challenge is that humans do not like insecurity and the attached risks. That is one of the reasons insurance companies make their money.
And basically that’s all there is to it. Cherish and accept the moment. Accept that we do not know what is coming next and be positive of the next moment in time and opportunities presented to you.
Mostly we go into the market with an opinion and if the market does not confirm the opinion we are not happy about that, especially if we feel punished by being stopped out.
Sorry, but with that attitude the trader is on a losing path. He will always be emotional. Try to view the market with the eye of a child. Go back to those curious open minded eyes and place your trade with the acceptance that you know, that you do not know what is next (Rumpsfeld could have been a trader). Be grateful if you are stopped out and the market protected you from worse things to come and be grateful when the market stops you out at your limit point and rewards you. Do not expect too much in regards of profit. Predefine your profit target and do not bank on the home run. Accept the market as it is and always stay open minded and curious.
But you only can do that, if you keep your approach of probability trading simple. The simple chart shows you the price action. The only thing you need to know is what will probably change the price. In other words what impulse, being it news, chart levels or a like will motivate traders to act and what kind of probability can be attached for a potential either UP, DOWN or SIDEWAYS move.
To sum up:
Mind: Think in the presence and trade probabilities
Basics: Try to identify the global flows and news that will influence flows and potentially set/confirm/change trends. Study charts (prices) in their basic fashion and always look at three time frames (for example week, day, hour) for the overall picture.
Market: Have an open mind and simply enjoy and be curious like a child of the next move.
This article was written by: Gerhard Wildies
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