Archive for the ‘Psychology’ Category

Discipline paid off

Thursday, April 1st, 2010

What a month, March was a very difficult one, since the beginning of the month I started with the left foot with a couple of loosing trades, I was in red all the way from the beginning of the month to yesterday

Of course I felt that I needed to do something, a quick gain here or there, but at the end I stuck to the system and it paid off. Two good trades in the yen crosses changed things around. What a good feeling ha???

A couple of banks are closed today, tomorrow more banks will close plus the NFP announcement is due tomorrow… Today it’s probably a good day to call it a week! See you next Monday!

Have a good one!

Raul Lopez
http://www.straightforex.com/

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Nothing worth trading today

Tuesday, March 23rd, 2010

I spent the whole morning figuring out which currency pairs to trade, looking here and there, but nothing caught my attention.

For some reason I didn’t like any currency pair, not because of the same reason, some of them are trading at an important level, some others are trading in an undefined range, etc.

First I thought I was doing something wrong, but no, sometimes the market is not tradable, and we need to accept that fact. What is our job as traders? To make money, right? Some traders think our job is to be in the market every day.

Sometimes the market doesn’t want to be traded, and we need to be able to determine when the market is trading in such circumstances.
I’m off for today, hope to see more opportunities tomorrow.

Trade Safe!

Raul Lopez
http://www.straightforex.com/

Posted in Education, Psychology | Comments Off

The Unexpected Event

Friday, January 15th, 2010

Yesterday I was talking to an old trading pal about the impact of the Aussie unemployment report (real good numbers by the way, jobs gained were +35.2K and the market expected 10.2K and the unemployment rate was 5.5% against 5.8%). Anyway, he traded that report, just a few seconds before the announcement he went long and held the position for a few hours making a quick pip there.

Of course it is always good to get pips here and there, but what I always keep in my mind is the alternative history (in the economic arena this is similar to the opportunity cost). In this case, what if the market went down instead? (You know sometimes the market moves against the fundamentals), even if you use SL orders, the market could gap then your loss will be unbearable to take, you would wait and see if the market recovered but it continues to move against you. The worst scenario here would be to blow up your trading account just for a quick pip: this is the results of your alternative history, are you willing to take this type of risks?

Lets put it this way, if you keep trading the unemployment announcement say for 2 or 3 years, the “unexpected event” (of the market moving against you after that announcement) will arise sometime during that period and the result will be devastating. I ask you again, are you do you have a shield for the “unexpected event”?

Please feel free to comment.

Trade Safe!
Raul Lopez

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Posted in Education, Fundamental, Psychology | Comments Off

Trading and emotions

Friday, October 30th, 2009

Fear and greed are the emotions that have the most impact on traders and investors, they make us make irrational trading decisions, Can we get rid of them?

I don’t think so, they are part of the human nature. Think about this: why dot you jump into a lion’s cage? Because you are afraid of what could happen to you, right? So, this fear is keeping you alive, the fact that you are afraid is actually helping you. And know the question is, can we apply this in the trading environment? Can we make our fear to work on our favor? Of course we can.

Let’s put it into the trading perspective: when you developed your system, you defined what seemed to you a low risk trading opportunity (i.e. when the stochastic figure when from overbought to the neutral territory, or you got a candlestick pattern in the direction of the market condition, etc). What happens when you get in to a trade when there is no signal? You don’t have a low risk trading opportunity, aren’t you afraid of losing? We all should.

Now, I know most of the time it’s difficult to get rid of these emotions, even the most experience traders experiment them. The difference between experience and novice traders is that, the first ones don’t make trading decisions when there are in a trade, all trading decisions such as: when to close the trade, when to take partial profits, when to add to the position, were made way before they entered the into market, because they know that in the moment they entered the trade, emotions will kick in and will make them have an “irrational” bias, that most of the time makes them make wrong trading decisions.

So my advice here would be to have a well defined trading plan for everything:

  • Under what circumstances you are going to close the trade
  • When to add to the position or when to take partial profits
  • Trading size, where to set SL and TP orders
  • Etc etc etc

This way you won’t have to make them when you are not likely to think objectively.

Trade Safe!

Raul Lopez

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Posted in Education, Psychology | Comments Off

A few thoughts about forecasts…

Friday, January 23rd, 2009

I’ve always wondered what’s behind this human need of knowing the future. We see this in all areas of life, but in trading, I think it causes most of us a great deal of damage, specially in our trading accounts.

Is it even possible to forecast a major pair?

Alan Greenspan doesn’t think so (he mentions this in his new book, and let me tell you, he was a hell of a forecaster, he could forecast the trend of almost anything, but currency pairs). And to tell you the truth, I don’t think so either. You know currency pairs (and other instruments) move based on expectations, what traders: like you and me, investors, banks, companies, even tourists think about the “right” value of the currency pair. So, in order to be able to forecast the value of a given currency pair, we need to know what all of them think about that currency pair, you think this is possible? Mmm…

When we think we know the direction of a currency pair, we tend to marry that “view” of the market, so we start opening position is that direction, when the market goes against us, we think “sweet, I’m going to get even a better price”, at some point, taking a loss becomes unbearable and we hope the market comes back to our entry point so we can get out (and sometimes it does hit our entry point but we keep that trade, hoping it will turn around).

What if, instead of thinking where the market is heading, we just follow the market, if it moves up, we look for a long opportunity, if it moves down, we look for short opportunities… Wouldn’t trading be easier this way? It would…

Think about it, and feel free to post your comments.

Hey, let me tell you something… WE DO NOT NEED TO KNOW THE FUTURE TO PRFIT FROM THE MARKETS. This is a fact…

Cheers,

RL

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