Lets start by saying that market evolve and change through time. Its is enough to say that today almost 90 % of all transactions are made by artificial intelligence algorithms. Yes humans set the to operate in a certain way following rules but they are super fast and without emotions. They dont care if they are wrong in a certain trade, their pride isnt hurt. We also have algorithms that can adapt and learn from market conditions, they are called neuron algorithms. They learn from their own mistakes and they learn fast. So its its important to follow this changing market conditions in order to adapt and profit from market.
Humans adapt to certain enviroment, and they are comfortable in it. We enter our comfort zone, where everything goes by the rules and nothing surprises us. Thats the way we are. But if you want to learn and evolve you must step out of your comfort zone. Perfect example of stepping out of your comfort zone is backpaking. Backping takes you out of your comfort zone into unknown territory where you have to adapt to new places, new people and you can see how you react to these new conditions.
In trading routine is your enemy because if markets are changing so should you, if you dont want to loose money. Be ready to change. You should always be alert and thinking what is changing in the market and how to react to it. We had a couple of times this year that stock market suffer severe sell off and then in opposite of all rules of technical analysis market continue with its uptrend. This is an example of changing market conditions and if you are in your comfort zone you will not notice that and you wont adapt.
So how to step out of your comfort zone and test yourself? Try new trading style, trade different markets, try different time frames or reading material about different trading perspectives. If you are a short term trade look at the bigger picture and maybe you get some new ideas where markets should go. Sometimes it helps to take a break from trading and reasses your trading decisions and put things in order. If you are active all the time its hard to take a break and look at the market without any emotions.
Showing posts with label technical analysis. Show all posts
Showing posts with label technical analysis. Show all posts
Monday, August 30, 2010
Wednesday, August 25, 2010
Starting with practice account
The best way to start and learn trading without loosing to much money is with practice accounts. Every forex or stock broker enables you to trade with virtual money. With practice account you are instantly in the action. You can test your trading strategy, your technical analysis and following the trading plan. You start to trade without fear of loosing money. Practice accounts are great to get you started but they cant replace experience on trading with real money. When dealing with real money emotions come to play.
With practice accounts, you can learn about different terms like stop loss, market order, limit order, trailing stop-loss orders...You can see how the system is working and you can learn from brokers help library, almost every broker has one. So spend some time trading with practice account and learn about technical analysis in the process.
With practice accounts, you can learn about different terms like stop loss, market order, limit order, trailing stop-loss orders...You can see how the system is working and you can learn from brokers help library, almost every broker has one. So spend some time trading with practice account and learn about technical analysis in the process.
Thursday, August 19, 2010
Trading plan
No matter which trading style fits you best you should have trading plan or you will mostly likely start losing money immediatly. Trading plan is a set of rules you have set for specified trade based on the analysis you have made. Its is important to follow rules of your trading plan if you wish to succedd.
Components of a trading plan:
Position size - You must determine your position size. Each position should be too big to enable you to comeback if your prediciton of market direction is wrong. If you put all your money in one position consequences of wrong predicition are substantial.
Profit exit plan - technical analysis is the best way to determine exit point or profit taking. Usually profit taking occurs at resistance zones, where sellers rush in to take their profits.
Stop loss - Where to exit a losing position must be set before you enter trade and you should change your stop loss in almost no case. When you have a losing position emotions kick in and you are not thinking clearly and you will almost certainly make mistake. Depending on your trading style stop losses are set differently.
Those are the simple rules that you must follow if you want to stay solvent in markets. It is amazing how many traders dont use rules. Rules help you eliminate emotions which forces you to do irrational moves and hurt capital. Developing a trading plan and sticking are two mains ingredients of trading discipline.
Components of a trading plan:
Position size - You must determine your position size. Each position should be too big to enable you to comeback if your prediciton of market direction is wrong. If you put all your money in one position consequences of wrong predicition are substantial.
Profit exit plan - technical analysis is the best way to determine exit point or profit taking. Usually profit taking occurs at resistance zones, where sellers rush in to take their profits.
Stop loss - Where to exit a losing position must be set before you enter trade and you should change your stop loss in almost no case. When you have a losing position emotions kick in and you are not thinking clearly and you will almost certainly make mistake. Depending on your trading style stop losses are set differently.
Those are the simple rules that you must follow if you want to stay solvent in markets. It is amazing how many traders dont use rules. Rules help you eliminate emotions which forces you to do irrational moves and hurt capital. Developing a trading plan and sticking are two mains ingredients of trading discipline.
Choosing trading style
In technical analysis we have different trading style which all vary depending how much time you will spend for trading. There are a lot of different trading styles but we can form three main categories.
Short term
Short term trading in stock markets means that positions are usually held from one day to several days. Shorter time frames are used for technical analysis of stock or currency pairs. In forex markets it means holding position from a few seconds to maximum one hour. In stock market timeframes used for short term trading are usually five and ten minutes up to thirty minutes or one hour.
Medium term
Medium term position in forex markets are held for duration from a few minutes to a few hours. In stock market it means holding a stock from one day up to a week. Time frames used for medium term trading are one, two hours and up to one day time frame.
Long term
Long term trading in forex markets means holding position for weeks or months. Its is based on macroeconomic events. There is a lot of volatility and price fluctuations. In stock market it means investing like Warren Buffet. If you are a long time investor you hold your stock for weeks and months. Time frames used for long term trading are weekly and monthly time frames.
Short term
Short term trading in stock markets means that positions are usually held from one day to several days. Shorter time frames are used for technical analysis of stock or currency pairs. In forex markets it means holding position from a few seconds to maximum one hour. In stock market timeframes used for short term trading are usually five and ten minutes up to thirty minutes or one hour.
Medium term
Medium term position in forex markets are held for duration from a few minutes to a few hours. In stock market it means holding a stock from one day up to a week. Time frames used for medium term trading are one, two hours and up to one day time frame.
Long term
Long term trading in forex markets means holding position for weeks or months. Its is based on macroeconomic events. There is a lot of volatility and price fluctuations. In stock market it means investing like Warren Buffet. If you are a long time investor you hold your stock for weeks and months. Time frames used for long term trading are weekly and monthly time frames.
Sunday, August 15, 2010
Technical or fundemental analysis?
What is techincal analysis? If you look to wikipedia description goes something like: Technical analysis is a security analysis discipline for forecasting future price movments with past market data, especially price and volume.
What is fundemental analysis? Fundemental analysis is a analyisis based on analyzing company financial statements, management, competitors and market conditions. Fundemental analysis for curencies consists of:
country economic reports, interest rate policy, monetary policy, trade flows.
Techincal analysis is the key for making a well defined trading strategy. With technical analysis you can set your entry points, exits points in both direction (profit or loss) and you can avoid making emotional decisions during market time.
Forex traders usually follow technical analysis when they are making decisions what to buy and what to sell. People who use technical analysis usually say that all fundemental data is included in price of the stock or currency pair, so there is for spending time study fundemental data. People on both sides think their side is better. I think that combination of both works the best.
What is fundemental analysis? Fundemental analysis is a analyisis based on analyzing company financial statements, management, competitors and market conditions. Fundemental analysis for curencies consists of:
country economic reports, interest rate policy, monetary policy, trade flows.
Techincal analysis is the key for making a well defined trading strategy. With technical analysis you can set your entry points, exits points in both direction (profit or loss) and you can avoid making emotional decisions during market time.
Forex traders usually follow technical analysis when they are making decisions what to buy and what to sell. People who use technical analysis usually say that all fundemental data is included in price of the stock or currency pair, so there is for spending time study fundemental data. People on both sides think their side is better. I think that combination of both works the best.
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