Psychology of Trading Strategy (Psycho-Strategy)

What’s the Psychology of Trading Strategy (Psycho-Strategy)?

I’m sure you understand that the Psycho-strategy is a mere metaphor, however we are going to use the same Forex terminology to describe our hypothetical strategy.

The Psycho-strategy is the mind frame you have to set your mind to if you want to make constantly profit in the world of Forex. It’s the way you have to think and feel in the three stages of the trade; before opening a trade, while the trade is running and after closing the trade.

The first thing I have to advice you before reading this article is that you have to to believe that using the Psycho-strategy is not less important than using your technical and fundamental strategies if not important! if you can’t totally believe that I recommend you to skip this article and continue with your favorite technical and fundamental venerable strategies.

The Psychology of Trading Strategy (Psycho-strategy) setup:

The the Psycho-strategy uses three indicators: Discipline indicator, Greedy oscillator and Fear oscillator.We use these indicators not to tell us when to enter the market (there are much better techniques to enter the marker where the Psycho-strategy can help) but we are using them to refine our overall trading practice hence our success in the Forex world.

Let’s start with the most important indicator; the Discipline indicator:

Discipline indicator:

It is unquestionable that nobody could achieve a goal if he have not already set this goal. Give the best archer the best tools and tell him to shot aimless target! what do you think he will do?

In the Forex (and in live un general) you have to define your goal and keep it obvious if you want to achieve it. For example you have to determine how many pips you want to gain daily, weekly and monthly from your trading.

Your goal have to be realistic, attainable and measurable: realistic goal means you have to set a goal that is not impossible for you and anybody to achieve, for example you can be a millionaire from trading Forex for few weeks or months. attainable goal means you can easily achieve the goal for example gaining 100 pips daily is not impossible in Forex trading so it’s a realistic goal but 25 pips per day is more attainable goal, get it?

The goal you have set have to be measurable which means you can easily say I’ve achieved my goal of today or this month. Goals like “I want to be a millionaire or I want to get the maximum pips the market could offer” are not measurable goals.

The first line in the Discipline indicator is the Goal line, the second line in the Discipline indicator is the Rules line.

Any successful person has his set of rules which he extremely bind himself to it, you too have to set you trading rules and obey them to the end, for example one of successful traders rules “Set stop loss before trade”.

You have to discover your trading rules and more important to obey them to the end, of course you can change this rules occasionally (i.e. every six months you have to review your trading rules) but once you have set them you can’t change them “Rules couldn’t’ be changed while playing the game”.

The Discipline indicator now has two lines: Goal line and Rules line; these lines have to be unbreakable, untouchable, you have to limit you trade between these lines and don’ let Greedy or Fear indicators to breaks your Goal and Rules lines.

Fear and Greedy oscillators:

The fear making of loss and Greedy of making more profits are very like bulls and bears that imagined fighting each others and move the market accordingly. Both of the fear and greedy trying to break your Discipline indicators lines.

Fear of losing maybe advising you to ignore setting stop loss for you trade and break one of your trade rules. Fear maybe asking you to close a profitable trade once the market start to move against you for awhile.

Greedy acts the same trying to break your rules but inversely of fear; Greedy will tell you to continue in a profitable trade although you Goal has been achieved seeking more pips. Greedy will advice you to remove your trailing stop hoping o make the maximum of he market.

As long as Fear indicator and Greedy indicator oscillate between the Discipline upper line - Goal line - and lower line - Rules line - you will constantly make profits with the Psycho-strategy!

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Forex Trading Strategies - Stop-Loss - Do You Need to Use It Right Now? Pros and Cons

There are pros and cons of using stop-loss in your forex trading strategy. In this article I want to summarize the most important points of this topic and help you to understand if you need to use this trading instrument or not.

Pros:

You cut down your losses, so no matter what happens and no matter how the market moves, you won't lose more money than you set. This is also the main purpose for using this order.

You protect your deposit from the sudden big market movements against you. Remember - they can always happen, and this doesn't depend on your trading system. But you can protect your money from this dangerous trends by using stop-loss forex trading strategy and setting it properly according to your trading rules.

You can calculate your maximum total loss for your trading system. It usually happens on the "bad" market for your system and is a result of series of losses that come in a row. This wi! ll help you manage your risks better. Knowing the weak points of your system, you can always set your trading lots so you don't lose too much money even if things go the worst way.

Cons:

If your stop loss order was executed and than market movement changes, you can't profit from it because your deal is already closed. So you can't recoup your losses if your forex trading strategy doesn't imply opening additional deals to cover the losses.

Sometimes market is "stormy" - volatility increased, no particular trend. This usually happens when some important news comes out. On this market trader usually opens a lot of positions, and a lot of stop-loss orders execute again and again. This can summarize into one big loss.

You need to consider certain currency pair's volatility - and then set your stop losses according to it. If your SL (stop-losses) are too small it will cause a lot of series of small losse! s that can result into a big one. If your SL are too large, on! e loss c an drain all your profits, so your bottom line will be near to zero. So you need to take into consideration the volatility of the currency pairs you're working with.

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What is Carry Trade?

Additional Information
In an ever changing world, making profitable carry trades* (definition below) are not as easy as they use to be. Therefore we have created a dynamic carry basket that changes when the monetary policy outlook for a central bank changes or if there is significant event risk ahead. Follow the performance of the DailyFX Dynamic Carry Trade Basket.

What is Carry Trade
All that is needed to understand the carry trade concept is a basic knowledge of foreign exchange and interest rates differentials. Money shifts from around the world in seek of the highest yield and the benefit of trading currencies is that you are dealing with countries that have interest rates, which are charged or received every single day. If you are positioned on the side of positive carry, you have the right to earn that interest, which can be quite lucrative over time.

Protective Stop-Loss
Substantial gains made from interest rate differentials provide undeniable evidence that the carry trade strategy has been very successful over the past few years. Still, this strategy involves significant risks and an adequate protective stop is required. We are using a protective stop-loss equivalent to five times the average true range.

Position Sizing
Our position size varies according to each currency volatility. Generally, the more volatile the currency is, the fewer lots we trade. For example, let's assume you have $10,000 and you are trading 10K lots, you decide to limit your risk per trade to 3% or $300 and the 90 days average true range for the EURUSD is 100 pips. In this case, if you go long EUR/USD you could buy 3 lots, since ($10000 * 3%) divided by (0.0100*10K) = 3 lots. In case the final result is not an integer you should always rounded it down to limit your exposure.

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Forex Trading Strategy and Global Market Concerns

About forex trading strategy
A complete forex trading strategy is needed in order to dominate the global market. This article is helpful to a beginner trying to learn forex, to the skilled forex trader. The foreign exchange currency market is a popular place for specialized traders and brokers to trade world currencies. Known as Forex, the foreign exchange market is complex in the way it is influenced by a variety of factors and variables in world economies. Forex trading strategy is trading on a global scale, with local factors making impacts in a global market.
In recent news, worry about the current markets, bank and commercial trends have the Forex market in a bit of a bind. Forex analysts are saying that the U.S. economy is hinging on the labor market. Many use the U.S. currency as a safe zone for their funds as part of their Forex trading strategy. For those who are yearning to learn Forex trading, all of the global markets and current conditions and stabilities can seem a bit much to keep up with.
Many Forex trading strategy plans involve using indicators that can be applied to different currencies to help develop a Forex trading system that is universal. Currently, the labor market is an indicator many are looking at and the impact it will have on Forex trading strategy and the U.S. economy. The job growth in August will be a major factor on the Fed’s decision to further cut rates to spur the economy or leave rates alone.
Many in Forex training feel that 100,000 will be the benchmark or breaking point for the Fed. If job growth in August was less than 100,00 the threat of a recession increases and could lead to another cut in rates to offset the threat. If the job growth last month was greater than 100,000 then the market could stabilize for a bit and rate cuts might not occur. In the mean time it’s up in the air at the moment for Forex trading strategy for U.S. currency.

Forex(fx) Trading Strategy
A forex trading strategy can provide profit for a skilled speculator. A FX trading strategy is, simply put, a method for using foreign exchange rates of currency from various countries to buy one country’s currency when it is undervalued, and exchange it for another country’s currency with it is of normal or higher value, with the difference being profit.
A common forex trading strategy could involve US dollars and the Euro, the official currency of most European countries. To use a simple example of a forex trading strategy, a speculator would buy Euros when they were undervalued; let’s say two Euros equaled one US dollar. This would be unusual because normally the two currencies are almost equal.
By spending one hundred US dollars to buy two hundred Euros a speculator would be able to buy more goods in Germany, France or other European countries. When the market changed and became more even, the speculator would have twice as many goods as he normally would have, and would be able to exchange those goods for US dollars once again.
The difference would be profit. This is a very simple explanation of a forex trading strategy, but gives the basics to the new speculator.Of course, when coming up with a forex trading strategy the trader should only use money that he or she can afford to loose. This is speculation, as opposed to investment. The chances for profit are real, and could come quick but if the market turns the opposite way than expected the trader could actually loose money.
A forex strategy can reap large profits, but if anyone tells you that all trades will result in profit, they haven’t studied the market as well as they should have and they are not correct. Still having a sound forex trading strategy for a competent businessman can be a profitable venture. It requires study of the markets, which takes time and is usually best accomplished by reading financial newsletters and using tools available on the Internet.
Getting the advice of a professional forex trading strategy specialist can also be a sound choice. Professionals have the time, education and skills and can generally help a trader come up with a forex trading strategy that will result in profit more often than one could do without their help.The most sound forex trading strategy options are generally used by large multinational corporations who are often able to make steady profits.
Watching what large corporations do who are involved in forex trading, looking for patterns they may have set, can help a trader to get the benefit of the very expensive expertise used by these large companies. Making watching of the large traders a part of a person’s education is definitely a good place to start a forex trading education. Identifying the state of the market, determining the time frame you are working in, and the currencies that have fluctuation and getting the advice of professionals through self study can be the wisest forex trading strategy option available.

Setting The Strategy
When building a strategy using Forex Strategy Builder you should think for the long position only! When the testing algorithm of the program calculates the strategy, it performs mirror logic for both position directions. It is not necessary for the logic of the short position to be entered into the program. It makes this automatically.
The Open Strategy will send orders with price Price Open of the bar, but because of no filters to determine the direction. Two orders will be sent: Buy Market Order and Sell Market Order in the same time. The first order will open a position and the second one will close it immediately. The result is Position Neutral and Loss equal to the Spread.

Forex Trading Strategy Reviews
Bought this method a while back, a solid trading method that is VERY good. I do not like sitting at my computer so the long term method is great for this. Profitable ..... Oh yes. This method is not based in indicators rather fibnacci ONLY. I read the manual front to back 2,3 times then started to implement it, by far the best method to date I have come across.
Plus the eBook reads in a "just the facts ma'am" manner so if you're already familiar with trading concepts such as money management you can get a trading system going pretty quickly. I don't like going to seminars or buying fancy multimedia CDs. I just had to do about a month of paper trading with the system in order to get really confident and then I started making money.

Hedging Strategies In Forex
There are two new Forex articles that I have uploaded on my site today. They are written by Mary McArthur and they both are about hedging in Forex. Hedging is a simultaneous buying and selling of the same trading instrument. It has a great potential on the volatile and less trendy markets. One articles describes the Forex hedging in general, while another is about a grid hedging system, which exploits the fast swings in both direction on such currency pairs as GBP/JPY and GBP/USD:

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Forex Trading Strategies for Advanced Traders

The Forex Trading Strategies I Use Every Day to Make Consistent Profits

If you've been trading for a while, you know how hard it can be to find profitable trading strategies. There are so many forex strategies on the market today, it's very difficult finding ones that work and sifting through all the other ones that don't do squat.
That's why I created this section of the website. This is for the advanced traders who have used a forex broker, know how to trade, know what take profit targets are, stop loss targets etc. If you don't know what I'm talking about then you should not continue with this page because it will be confusing. Please visit our Novice Forex Traders section to learn more.

For the advanced traders still with me, I’d like to share some forex trading strategies that have worked well for me and I think are some of the best out there. As I mentioned in the About ForexBoost section, I’ve tried a lot of different trading strategies, and the ones I’m about to share are the best ones I’ve found. I mention these strategies on the website, but this area explains them more in detail. These strategies are in no particular order.

Forex Hidden Systems - Teaches 4 forex trading strategies. Three of them are day trading strategies and one is a swing trading strategy. These are very easy to learn and use so they're perfect for new and experienced traders.

The Forex-Killer - This is a trade signal program for generating Buy, Sell or No Trade signals.

The Forex Trading Machine - Teaches 3 very easy to use forex trading strategies. Two are day trading strategies and one is a longer term forex trading strategy.

The Blade Forex Strategies - This also teaches 3 forex trading strategies. One is for quick scalps and the other two are for longer term trades.

Trading TIPS:

Tip #1: One very important tip is to never execute any technical trades when important financial news releases are due out. News can cause market volitility and can knock you out of good technical trades. I always start my technical trades when news is out of the way. A great news calendar to use if the Forexfactory News Calendar. I always have this calendar open every day so I know what news events are due out.

Tip #2: I personally do not get into any new trades between the hours of 11am and 2am EST. The best times to trade are the London Session into the NY session. Trading start to get going around 1:30am EST and starts to slow down around 11am EST. Price can be too unpredictable for my taste outside the hours or 2am and 11am EST so I dont' trade. The only time I break this rule is if there's a "tape bomb". A tape bomb is an unexpected news anouncement that shocks the market. This can cause the financial markets to go crazy and I don't want to miss out if I can trade it. A great example of a tape bomb was when the Fed announced they did a surprise 50 basis point interest rate cut before the financial markets opened. This was huge and we shorted the dollar immediately once we heard this announcement. A lot of traders made a killing that day. Tape bombs don't happen often but when they do, they're the best way to make easy money in the forex market.

source www.forexboost.com

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Inverted Pyramid Based Forex Trading Strategies

As a trader, you must develop a Forex trading strategy that will allow you to quickly identify flaws and make adjustments while continuing to trade. A classic approach used to evaluate risks in the currency trading system is the inverted pyramid approach. All macroeconomic factors that affect a chosen currency pair are a function of the top of the inverted pyramid. All technical factors are considered as you move down to the bottom of the pyramid. Traders assign weight to different parts of the pyramid. Purely technical traders may apply more weight to the bottom of the inverted pyramid (upside down triangle) while fundamental traders may apply more weight at the top.

In order to make use of the inverted pyramid you will need to understand the macroeconomic factors that are a function of the top of the inverted pyramid. These include international issues that influence the global trading community. These types of issues may be gauged from news reports and news feeds with global coverage. News networks, such as CNN, provide up to date coverage of terrorism, oil prices and other such issues.

In order to account for the technical factors that apply to the pyramid, you will need to determine specifics and sediment in the particular market within which you are trading and also for any market that impacts the market within which you are trading. You must decide the type of technical indicators that will be used in your Forex trading strategy. Some traders rely upon randomness and chance while others engage more complicated mathematical computations to calculate weighted moving averages. You must be able to develop and visualize a picture of the market, which identifies events that are of importance to affect the market. You also need to develop a general feel about the market. News reports and specific market reports will assist you in developing a picture of the market and also indicate of the direction in which the market is headed.

You will need to determine which currency pairs are volatile in relation to the macroeconomic environment and market conditions that have been identified. You will need to have knowledge of the market in order to identify and differentiate market indicators from events that bear no real significance. Your analysis of acquired data should indicate whether price movements represent a trend or volatility in the currency trading system. You will then be able to use this analysis to narrow your options to trades that offer the most potential.

You must be able to set floors and ceilings in your technical analysis to establish trading levels and then use those levels in your Forex trading strategy. Technical patterns that indicate the direction of trades in specific currency pairs should be developed. Once you have narrowed down to a specific currency pair for trade, you will then need to reexamine its market sediment as it applies to the technical analysis. You will have to identify entry and exit points for your chosen trades.

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Andrew Daigle is the owner, creator and author of many successful websites including ForexBoost at http://www.forexboost.com/ and http://forex-trading-system.typepad.com/ , Free Forex Training Resource for the Novice and Advanced Forex trader.

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Trading with Strategy

Trading successfully is by no means a simple matter. It requires time, market knowledge and market understanding and a large amount of self restraint. ACM does not manage accounts, nor does it give market advice, that is the job of money managers and introducing brokers.
As market professionals, we can however point the novice in the right direction and indicate what are correct trading tactics and considerations and what is total nonsense.
Anyone who says you can consistently make money in foreign exchange markets is being untruthful.
Foreign exchange by nature, is a volatile market. The practice of trading it by way of margin increases that volatility exponentially. We are therefore talking about a very 'fast market' which is naturally inconsistent. Following that precept, it is logical to say that in order to make a successful trade, a trader has to take into account technical and fundamental data and make an informed decision based on his perception of market sentiment and market expectation. Timing a trade correctly is probably the most important variable in trading successfully but invariably there will be times where a traders' timing will be off. Don't expect to generate returns on every trade.

Let's enumerate what a trader needs to do in order to put the best chances for profitable trades on his side :

Trade with money you can afford to lose :

Trading fx markets is speculative and can result in loss, it is also exciting, exhilarating and can be addictive. The more you are 'involved with your money' the harder it is to make a clear-headed decision. Money you have earned is precious, but money you need to survive should never be traded.

Identify the state of the market :

What is the market doing? Is it trending upwards, downwards, is it in a trading range. Is the trend strong or weak, did it begin long ago or does it look like a new trend that's forming. Getting a clear picture of the market situation is laying the groundwork for a successful trade.

Determine what time frame you're trading on :

Many traders get in the market without thinking when they would like to get out, after all the goal is to make money. This is true but when trading, one must extrapolate in his mind's eye the movement that one expects to happen. Within this extrapolation, resides a price evolution during a certain period of time. Attached to this is the idea of exit price. The importance of this is to mentally put your trade in perspective and although it is clearly impossible to know exactly when you will exit the market, it is important to define from the outset if you'll be 'scalping' (trying to get a few points off the market) trading intra-day, or going longer term.

This will also determine what chart period you're looking at. If you trade many times a day, there's no point basing your technical analysis on a daily graph, you'll probably want to analyse 30 minute or hour graphs. Additionally it is important to know the different time periods when various financial centers enter and exit the market as this creates more or less volatility and liquidity and can influence market movements.

Time your trade :

You can be right about a potential market movement but be too early or too late when you enter the trade. Timing considerations are twofold, an expected market figure like CPI, retail sales or a federal reserve decision can consolidate a movement that's already underway. Timing your move means knowing what's expected and taking into account all considerations before trading. Technical analysis can help you identify when and at what price a move may occur. We will look at technical analysis in more detail later.
If in doubt, stay out:If you're unsure about a trade and find you're hesitating, stay on the sidelines.

Trade logical transaction sizes :

Margin trading allows the fx trader a very large amount of leverage, trading at full margin capacity (in ACM's case 1% or 0.5%) can make for some very large profits or losses on an account. Scaling your trades so that you may re-enter the market or make transactions on other currencies is generally wiser. In short, don't trade amounts that can potentially wipe you out and don't put all your eggs in one basket. ACM offers the same rates regardless of transaction sizes so a customer has nothing to lose by starting small.

Gauge market sentiment:

Market sentiment is what most of the market is perceived to be feeling about the market and therefore what it is doing or will do. This is basically about trend. You may have heard the term 'the trend is your friend', this basically means that if you're in the right direction with a strong trend you will make successful trades. This of course is very simplistic, a trend is capable of reversal at any time. Technical and fundamental data can indicate however if the trend has begun long ago and if it is strong or weak.

Market expectation :

Market expectation relates to what most people are expecting as far as upcoming news is concerned. If people are expecting an interest rate to rise and it does, then there usually will not be much of a movement because the information will already have been 'discounted' by the market, alternatively if the adverse happens, markets will usually react violently.

Use what other traders use :

In a perfect world, every trader would be looking at a 14 day RSI and making trading decisions based on that. If that was the case, when RSI would go under the 30 level, everyone would buy and by consequence the price would rise. Needless to say, the world is not perfect and not all market participants follow the same technical indicators, draw the same trendlines and identify the same support & resistance levels. The great diversity of opinions and techniques used translates directly into price diversity. Traders however have a tendency to use a limited variety of technical tools. The most common are 9 and 14 day RSI, obvious trendlines and support levels, fibonnacci retracement, MACD and 9, 20 & 40 day exponential moving averages. The closer you get to what most traders are looking at, the more precise your estimations will be. The reason for this is simple arithmetic, larger numbers of buyers than sellers at a certain price will move the market up from that price and vice-versa.

This article written by Nicholas H. Bang

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