'Market and Human' Psychology perspectives with tips on how to avoid common mistakes by 
Looking at some of the charts these last few days I hear a voice in my head saying: That can’t keep going deeper? This move has to be over now… For sure this will start correcting next session! Sound familiar? Have you been looking at some charts and doing the same?
We are seeing an almost unprecedented move in favour of the USD over the last few weeks. Trader sentiment has definitely changed towards the Dollar and we are now in a correction of years of overselling.
What happens to our minds in cases like this is as the move goes deeper and deeper we go into a state of disbelief almost, about how far the moves are going. So we want to benefit from the move but part of our minds won’t allow us to jump into a trade in the current direction because it’s akin to jumping onto a moving train. So we watch, thinking that the move will be over soon and that we can catch the counter trend rally. What usually happens here is we do this far too soon and we are stopped out or go negative on our trades at which point we start adding to average down and find ourselves fighting a tide that turns into a tidal wave.
So how do we counter our bad programming?
On your trade plan/rules sheet write down at the very top the most important question to answer before making any trading decision. Are we in a “Trending Market”? or a “Correcting Market”? This is known in Elliott Wave Terms as “Motive Impulsive” “or “Corrective”. What this should do for you is identify what trading type to employ. In a Trending Market you should be trading CONTINUATION trades and in a Correcting Market you should be trading REVERSALS. If you learn to train your mind to key in on this first then when you look to trade, you thoughts should be focused on what is the next best trade rather than on the disbelief of how far the move is going.
Having said that; counter trends will come along in the next few days. Don’t try to guess when… Wait for a clear signal before any new trades. If you miss the counter trend, don’t worry, these moves are just the beginning of more to come over the next few months.
Dear Pierre,
I’m sure I’d be completely barking mad without my trading plan!! Or to put it another way “I wouldn’t believe what I see …. and my mind would be playing tricks on me.” (Forgive my ‘writers’ licence’).
Having just read your most recent Blog Post I realise how lucky I’ve been: Lucky to find Online Trading Academy and attend one of their workshops here in the UK; they recommended FXStreet.com and I found your blog – lucky? Yes and no. Luck played a part, but keeping a very open mind, together with a burning desire to gain the knowledge to trade Forex like a pro, is what led me to find you (and other bloggers) on FXStreet.
What’s this got to do with my trading plan? Well, right at the top of my plan, the very first thing I see is a little phrase I use when I start to look for a trade. It simply says “See what the charts are telling you, don’t tell the charts what you think you see.” For the next three things on my plan I must thank Phil Newton - I join his weekly ‘Breakout Trading’ webinars on FXStreet as often as I can. The three things are: Where is price now? What is price doing? How can I get involved? Phil’s three simple questions definitely make me focus on analysing the actual price action and decide if the market is trending up or down or going sideways (ranging, consolidating). It’s simple, it suits me, and it keeps me programmed correctly.
I’ve found that by conscientiously working hard to keep an open mind, constantly filtering and evaluating everything I learn, not having any preconceived ideas about what’s happening on the screen in front of me and sticking rigidly to my trading plan eliminates lots of the bugs in my programming.
What strategies do other Blog readers find useful I wonder?
Best regards,
Lizzie