In my last blog I said I would talk about patterns and specifically ‘Fractals’. When I went looking for info on them I found wikipedia has a fabulous entry that defines this very well. The reason I want to draw this to your attention is because patterns develop on charts based on the emotions of the total group of traders. When we can identify such patterns on the larger times frames, we can then start looking for similar patterns on the lover time frames to aid in identifying continuation and/or reversals in a given currency pair. Have a look at this link and stay tunes as I will then post charts of where such fractals have occurred and how this helps identify great trading opportunities.

http://en.wikipedia.org/wiki/Fractal

I thought I would throw this one in here as an interesting little tidbit of infomation because there is a great deal of tension in the market currently. The overall group psychology of global traders is likely going to cause quite a shift in many if not all sectors and indexes in the next few weeks.

I follow the fundamental news but trade primarily on ‘Technicals’. I also work on the premise that traders emotions and their reactions to the news is what moves the markets. So when we reach critical technical levels, expectedly Fibonacci ratios and trend-lines, the reaction of traders can really send the markets reeling.

Now back to the global connectivity. We all know that information travels faster than ever and we are all much more interconnected with the reach of the internet now and that many traders and investors trade many more markets than ever because of this. What this means is that we are seeing more and more correlation of markets as the world group of traders starts to act as one big emotional group rather than many regional ones. So one conclusion that can be drawn form this is that when we see one of the larger sectors reverse suddenly we should then see an almost immediate reaction in many if not all other markets. This is especially pronounced if the trigger market makes an abnormally large reversal move.

In future blogs I will explain how to see this in patterns in the charts and what ‘fractal’ means and how to use this theory for greater gains in Forex trading.

Cheers

Hi Christian. Thanks for asking for the link of my interview. I’ll post it here so everyone else interested can also access it.

http://www.robbooker.com/radio/archives/July24_2008_TraderRadio.mp3

Cheers

I want to thank Rob Booker for interviewing me today on his internet radio program ‘Trader Radio’. I know I really enjoyed it and believe that Rob and Jamie had fun too. it really was a lot of fun.

Here’s one of the things that came up in our conversation that we didn’t get to talk about. What is your relationship with money. What is your attitude about money or wealth or value. Here are a few questions we should all ask ourselves from time to time to be sure we are challenging potential negative belief that may be keeping us from accumulating wealth and/or security.

Do you know any rich people? Do you treat them the same way you treat others if you know they have a lot of money?Do you talk to them differently?
Do you like or dislike people with money?
What do you think when you see a person in a very expensive car? Do you envy them? Admire them?
When you eat out; in reading the menu, do you look for what you like? or look for what is priced right?

These questions are designed to make you think about how you relate to money. The most important one is whether or not you like people with money. Because if you don’t… how will you like yourself when you start to have some…

Good trading!

Thanks to tradermane for his/her comments that inspired this post.

tradermane talked about how trading is like golf and you are only really playing against yourself. In trading this is exactly what is happening as well. You see, the struggles we face as humans is we think it is us against the world at times, because of many of the experiences we have faced on our personal journey through life. We needed to compete to make the football team. We were compared to out classmates at school or our siblings to see who had the best grades. We have had to go on job interviews where there were many candidates for the position. Not to mention how many of us competed for the cutest girl or the hunky guy.

So it is ingrained in most of us that we are competing with the rest of the world and even the universe at times. That it all comes along to conspire against us. Here’s were we have to change our thinking. We must view the world or universe as there to support us. I know that sounds a little out there but be willing to believe that all we really need to do is to get with the flow of what is happening rather than competing with everything and everyone. When we are willing to see things this way we are less likely to hold on to the negative and move on to looking for and being willing to be open to the next oppertunity.

The best example of this is to not see the last loosing trade as the reason to not take the next oppertunity. I have a trading friend who hates the Canadian Dollar. He actually calls it ‘the Evil Canadian’. Of course it’s a joke but do you think he will ever see or be able to take a profitable trade on the USD/CAD even if the most ideal of situations presents itself?

Remember the market isn’t a persona of it’s own out to get you. It’s actually made up of all the combined emotions of all  the traders who are fighting with themselves  in every trade they make… Just like you!

I want to thanks Lizzie who wrote a comment about my last blog. She should be congratulated for her dedication to her trading plan. Please go back one article to find and read her comments. It`s great when readers write to make comments or ask questions. This helps me a great deal in coming up with ideas for new blogs. Thanks to all that have commented to date.

So here`s the topic: We Make More Mistakes Under Pressure!

It`s a fact… And those that trade announcements and do it well and consistently have learned how to work well in the most difficult of environments. I would even suggest, that sort of mental discipline and ability is akin to being a fighter pilot.

So what do us regular folk do if we are not fighter pilot material. How do we win consistently. Let`s examine the pilot analogy further. What if you where just a typical pilot. Perhaps flying a small aircraft or maybe you work for one of the airlines. These days, just about any one of us could do this with how well built airplanes are and how the technology assists us.

What pilot trainers know is that whenever the stress level is heightened in a dangerous situation they teach pilots specifics on what to do in each possible situation. That right… they come up with 100`s of potential problems and then train the pilots to `Follow Procedure`based on the perceived problem. In commercial aircraft there are manuals on board each aircraft that the co-pilot will refer to in the event of an emergency. In short, if things go wrong, pilots are trained to follow the rules! This is because without the rules, a pilot is more likely to ad to his mistakes in times of severe stress.

So, when trading, your stress level is likely to lead you into rash decisions. This is why a plan and rules are so important. If you only make trades that are planned and executed by your rules this will help keep you out of bad trades and in good ones longer.

So… Plan your trade and trade your plan.

Cheers

I’m trying to make a point here. Always stop and review your trade plan before making any trade and I always say that, before making any trade you need 4 things determined.

• Your entry point
• Your planed exit in profit
• Your planed exit in loss and
• Your money management

The rules or guidelines of your trading system are actually less critical then the 4 things mentioned above. Your money management should be based on one simple rule. No one trade, if a loss, should ever exceed more than 5% of your account value. Truth is most traders, keep this number even lower.

So it doesn’t matter what your total stop loss is in pips. It could be 15, 50 or 500. Every trade style and type requires a different size stop. The key is to know when to cut your losses and move to the next trade.

When you learn to draw lines where you are willing to be wrong… You will then be RIGHT about managing your account correctly.

Why did we have such an active day yesterday and then a sudden lull in volatility today? This is always a good question to ask when the market seems unusually quiet. I was talking with a trading buddy the night before last as I had called him to ask if he saw any big moves coming. The reason I was expecting this was with all the pairs I was following I thought we were at thresholds on many and that a sudden volatile move was about to happen.

Well… here we are again.

As my mother used to say; somebody is waiting for the other shoe to drop. Let’s look at the markets right now.

• Deepening credit crisis in the US
• EUR/USD at all time highs
• EUR/JPY just off 10 year highs
• Financial markets dropping
• OIL looks like it is finally correcting
• Gold on the move again to $1000.

All the above suggests we are just seeing the beginning of some very volatile moves. The best thing to do here is WAIT for your trade to come to you.

Personal responsibility and accountability. That’s it. Did you think it was a method or system or some sort of secret? Everybody wants the magic key or formula. Even me. When we don’t win, we blame others or we think the big boys are all out to get us and they know what is going on and they keep it a secret.

OK, I’m going to give you the KEY. Read on.

One part of the above statement is true. They know the secret. Well it’s not actually a secret it’s an acceptance of sorts. All successful traders are so, because they know their wins as well as their losses are their own doing. Period! When they take a loss they blame no one. They accept the loss as a managed trading decision.

So how do we know when we are not being responsible for ourselves and how do we overcome the problem? Here’s the key - If you are in any way shape or form blaming any other thing, person, broker, large $ traders, your wife/husband, cat, dog… Get the picture. YOU made the trade.

Learn this one thing. I said it was simple… I didn’t say it wasn’t hard!

I was talking with one of my mentors; Zoltan Vass. And in our conversation we spoke about how the ego needs something to grab a hold of. Something to be right about to justify it’s existence as the larger part of our personality.

As our ego developed, (when we were younger) it played an important part in our growth and our safety. However, in circumstances like trading, a strong ego unquestioned, can drag us deep into a bad trade in order to try and prove itself ‘right’.

So here’s a way to re-employ your ego. Make your focus of being right your money management. Set out a proper money management plan and stick to it. Set definite stop-loss areas and stick to them in order to never risk more than 2% of your account on any one trade.

In the long run, having a solid money management commitment will enable you to always move forward in your trading account. Being right isn’t what is most important. Being consistent and well managed is.