Monday, 26 September 2011

Comfortable Lies and Uncomfortable Truths

Lying comfortably hold you back from making progress as a trader?
Are time and effort is focused at the present time towards the comfortable, and probably better spent in learning to accept some uncomfortable truth?
Lie is simple: The stock market in the extraordinary success secrets. There are only five copies. Being one of the few fortunate to have the Forex Orgasmatron.
Uncomfortable truth: There is no secret internal exchange market. There is no secret. Orgasmatron Forex will not make you satisfied! There is no holy grail system of magic that can make all your dreams. Success requires talent. Talent needs time and effort to develop them.
Lie is simple: I only have this type of trade with discipline and I will succeed.
Uncomfortable truth: Trade is not about to take the listing style of blind. Trading is to know when to take the pattern of entry, and when you to avoid it. And on those occasions when you do not take the input, so it knows when to hold your position, and when it is zero.
Lie is simple: If you only set a target of three times the risk to me, so I just need to correct 25% of the time.
Uncomfortable truth: As you improve your target, and will reduce your percentage of wins as well. You not only can increase your target, and we expect to maintain the same percentage to win. Very likely could end up getting close to winning 25%. And how it can affect your mind? The objective should be suitable for the market environment. Sometimes, in some environments, the market does not offer three times the risk.
Lie is simple: I just need to trade without emotion, and I will be fine.
Uncomfortable truth: You can not! You people! Emotions are part of being who you are. You can not block them out. You need to understand them and learn to work with them.
Lie is simple: I stopped taking the middle of the country.
Uncomfortable truth: Maybe you stopped and put in the place is really stupid!
There are many more just.
Review all your beliefs on trade, particularly in the development of a dealer.
Ask yourself seriously ... Is really just a simple lie?
Here are some inconvenient facts ... To replace some of your lies:
Will be available when you start working with reality, and learning to operate and manage the risks in an uncertain environment.
Develop strategies based on the realities of the market environment - the identification of areas on the chart for the price of other possible sources orderflow merchant. And then learn how to exploit these areas.
Examine the structure of the market!
Management studies!
The study of theories of learning!
Study of decision-making, especially as it relates to the certainty!
Psychological studies peak performance!
And the implementation of deliberate practice, and learn to trust strategy and your ability to trade that notwithstanding any doubts and fears, through a process of trial and error.
It's not about learning some of the rules of entry and circulation, such as robots. But the "transformation" dealer.
Truth hurts. And it does not sell e-books. But it's still the truth! The sooner one receives it, the faster can start the journey towards true "to" merchant.

Monday, 12 September 2011

Support and Resistance

Despite all the hype from the internet marketers who try to sell you the latest trading ‘secrets’, the fact is there are NO secrets.
Identify setups which provide the potential for lower risk and/or higher probability trades.
Enter and manage those trades in a consistent and disciplined manner.
Minimize risk.
Manage your money.
Manage your emotions.
Journal your results, and review them to identify what’s working and what’s not working.
Keep doing what is working, and
Improve what is not working.

If you’re not trading successfully, it’s because you’re not doing one (or perhaps all) of these things. There are no secrets!

So, it’s time to stop searching for this holy-grail solution and get down to some good old-fashioned work.

And where better to start than the first item on the above list - a setup which provides the potential for a lower risk and/or higher probability trade.

Every technical analysis book on the market shows a number of charts with horizontal lines, and labels them support or resistance. Why is that? Because they look cool, and you can show your friends how clever you are at analyzing the market? Well, yeah, perhaps that’s part of it. But have you ever really stopped and asked why you should care if the price action can be bounded by a line? What does it really mean if price has been unable to break through a particular level in the past? Why should you care if price consistently rallies every time it falls to a certain level?

The reason we care is because support and resistance are providing you with setup areas with the potential for lower risk and/or higher probability trades. While there are numerous ways to define an area of low risk and/or higher probability trading, I have not personally found one that works for me as well as the concept of support and resistance.

So, how do support and resistance work?

Price moves due to an imbalance between supply and demand. When there is more demand than supply, price rises until they are once again balanced. When there is more supply than demand, price falls until once again the supply/demand balance is restored. We can also use this concept to explain support or resistance areas.

Let’s first consider resistance.

Price rises while demand is greater than supply. As price rises though, it will become less attractive to the buyers, leading to reduced demand. And it will become more attractive to sellers, leading to increased supply. If the supply/demand ratio can be tipped in favor of supply, price will fall.

Resistance is simply an area which has shown past evidence of halting a price rise. Price hits the resistance zone, and turns around to fall again. If it helps, think of resistance as a ceiling that resists any further price rise.

Support works much the same. Price falls while supply is greater than demand. As price falls though, it will become less attractive to sellers, leading to reduced supply. And it will become more attractive to buyers, leading to increased demand. If the supply/demand ratio can be tipped in favor of demand, price will rally.

Support, then, is simply an area which has shown past evidence of stopping a price fall, and leading to a price rally. If it helps, think of support as a floor that supports price.

At this point you might have two questions.

(1) Just because we can identify support and resistance in the past, how does that help us with our trading right now? After all, we don’t trade history; we trade the hard right edge of the charts; and

(2) How does this provide us with the opportunity for a higher probability and lower risk trades?

Previous support and resistance can be found in a number of areas – previous swing highs or lows, areas of congestion, round numbers and gaps. When price returns to these areas, there is a good chance that they will once again act as support or resistance. This occurs for one of the following two reasons:

(a) Traders expect it to act as support or resistance, and so trade accordingly, thereby creating support or resistance; or
(b) Traders have a psychological need to trade in this area, which once again creates the support or resistance zone.

The simple fact that we can now expect these areas to provide support or resistance again, and therefore stall and possibly turn price, provides us with a higher probability trade.

And the closer we can get our entry to the point of support or resistance, the lower our risk on that particular trade, because our stop can typically be placed just beyond that support or resistance zone.

Till then, review your setups, and ask yourself whether you’re planning your trades in an area which provides a low risk and/or high probability trade.

And please remember, although support and resistance allow a trader to identify areas in which price is likely to stall and possibly reverse, there are no guarantees. You need to always ensure proper application of risk and money management.