It can be difficult and maybe impossible for some traders to set up proper trading methods to take advantage of the market over the long run.
The main explanation is that traders are always looking for the holy graal, the perfect methods which will work under any market condition. Bear in mind that there is no method that can work all the time.
Loosing in trading is part of the deal but the worst thing you can do as a trader is establishing a method and following it eyes closed.
I don't say that following a method is not worth it. It is very important to set up a plan and stick to it. However, there is something else too often forgotten that you have to take into account, while operating on your favorite market : the crowd psychology
How is it possible to know the crowd psychology and follow it?
The market, and more specifically technical analysis, gives you this information if you know how to read it.
We won't talk anymore about technical analysis in a way of mathematical algorithms or methods but more of people reactions and feelings. It's very different because it allows you to adjust your market entries and follow-ups.
Who are these people I am talking about?
They are the traders of course, just like you and me (individuals) plus specific actors like banks and institutions. The market is a sum of traders. Behind each operation, there is somebody (I won't talk about trading with robots because it's beyong my subject even if it's linked).
That's it for the concept and now, how does it work?
You will have to introduce some kind of feeling in your trading methods to understand things properly. I mean stand back from you charts (with all the studies and objects) and try to understand what is behind the market. In other words, ask yourself the questions ? What are they doing ? What is happening?
It will help you to understand why is the market moving so fast suddenly for example. Is it linked to my technical patterns or not ? If not, it could be a good idea to look at other timeframes to see if there is something significant like a support, resistance or specific pattern. At last, you can compare with other currency pairs if you are trading in forex for example.
In fact, you will have to avoid behaving like the crowd, trading with emotions and reacting rather than acting with a defined strategy. You will actually never enter the market when it moves fast. You will prefer a calm period to trade. Therefore, you will leave behind your emotions and trade like a pro. But you will still trade with the crowd, taking advantage of it rather that undergoing it.
After collecting all the necessary informations given by the market, you will have two options:
Everything makes sens to you : you can set up a plan and prepare a strategy (entry and exit conditions, targets and so on)
You can't see an obvious strategy : you should definitly forget this instrument and try another one
You may notice that this approach leaves no place to attitude like eagerness. You need to prepare your market before trading it.
We called the article "trading with the crowd" because we wanted to emphasize on the fact that you must follow the crowd, i.e. most traders, but never trade like it. It means entering the market before the emotions come in and leaving it before it is too late (i.e. when the excitment is at the maximum).
We don't give here a lot of tips for better trading but in fact, it is the best recipe for success. Indeed, all the technical aspects come afterwards. It's only a tool and certainly not the solution. It helps me a lot to take advantage of my trading year after year.
Source: Forexarticlecollection.com
The main explanation is that traders are always looking for the holy graal, the perfect methods which will work under any market condition. Bear in mind that there is no method that can work all the time.
Loosing in trading is part of the deal but the worst thing you can do as a trader is establishing a method and following it eyes closed.
I don't say that following a method is not worth it. It is very important to set up a plan and stick to it. However, there is something else too often forgotten that you have to take into account, while operating on your favorite market : the crowd psychology
How is it possible to know the crowd psychology and follow it?
The market, and more specifically technical analysis, gives you this information if you know how to read it.
We won't talk anymore about technical analysis in a way of mathematical algorithms or methods but more of people reactions and feelings. It's very different because it allows you to adjust your market entries and follow-ups.
Who are these people I am talking about?
They are the traders of course, just like you and me (individuals) plus specific actors like banks and institutions. The market is a sum of traders. Behind each operation, there is somebody (I won't talk about trading with robots because it's beyong my subject even if it's linked).
That's it for the concept and now, how does it work?
You will have to introduce some kind of feeling in your trading methods to understand things properly. I mean stand back from you charts (with all the studies and objects) and try to understand what is behind the market. In other words, ask yourself the questions ? What are they doing ? What is happening?
It will help you to understand why is the market moving so fast suddenly for example. Is it linked to my technical patterns or not ? If not, it could be a good idea to look at other timeframes to see if there is something significant like a support, resistance or specific pattern. At last, you can compare with other currency pairs if you are trading in forex for example.
In fact, you will have to avoid behaving like the crowd, trading with emotions and reacting rather than acting with a defined strategy. You will actually never enter the market when it moves fast. You will prefer a calm period to trade. Therefore, you will leave behind your emotions and trade like a pro. But you will still trade with the crowd, taking advantage of it rather that undergoing it.
After collecting all the necessary informations given by the market, you will have two options:
Everything makes sens to you : you can set up a plan and prepare a strategy (entry and exit conditions, targets and so on)
You can't see an obvious strategy : you should definitly forget this instrument and try another one
You may notice that this approach leaves no place to attitude like eagerness. You need to prepare your market before trading it.
We called the article "trading with the crowd" because we wanted to emphasize on the fact that you must follow the crowd, i.e. most traders, but never trade like it. It means entering the market before the emotions come in and leaving it before it is too late (i.e. when the excitment is at the maximum).
We don't give here a lot of tips for better trading but in fact, it is the best recipe for success. Indeed, all the technical aspects come afterwards. It's only a tool and certainly not the solution. It helps me a lot to take advantage of my trading year after year.
Source: Forexarticlecollection.com
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