You're interviewing for a job. After 20 or 30 minutes, you're asked: "Do you have any questions?"
The worst thing you can do is ask, "What is it your company does?" (Hey, it has happened.) The next worst thing you can do is say, "Um, nope, I don't have any questions."
You need to ask some questions! Asking questions shows your interest in a company and makes you look smarter (smart people tend to be inquisitive). Asking questions gives interviewers a chance to talk about themselves, a thing most people love. And--this is important--asking questions is a way to find out if you really want to work for these people.
Bottom line: Don't make the interviewer do all the heavy lifting. Take an active role in the interview process and improve your chances of landing a job.
So what should you ask? Here are 10 suggestions:
1. "Can you describe a typical day for someone in this position?" If your interviewer appears to be nervous or ill at ease, a non-abstract question like this is a good way to get the ball rolling.
2. "Could you talk about the history of this position?" Specifically, what you're trying to find out is how long the position has existed, how many people have held it, and why it is now available.
3. "What were the major strengths and weaknesses of the last person who held this job?" Or in other words, what kind of act would you have to follow. This is also a chance to find out what happened to your would-be predecessor. How this question is answered will tell you a lot about the dynamics and expectations of this workplace.
4. "What are this position's biggest challenges?" You're naturally curious about the downsides of the job. But find out in a way that makes you look confident and unafraid to tackle problems.
5. "In what area could your team use some improvement?" Do you get an honest-sounding answer? This is important. It's also an opportunity to talk some more about how your skills specifically match this company's needs.
6. "What are the prospects for advancement?" Asking this demonstrates that you have ambition, and makes you look like a big picture person.
7. "How would I be evaluated?" If you want to know an employer's true priorities, and what is really important about the position under discussion, ask this.
8. "Who are the most successful people in this company and why?" A clever way to get a glimpse of a company's values/ethos/culture and how the powers-that-be measure success.
9. "Why do you enjoy working at this company?" Okay, it's a softball question. But the answer, and the tone in which it is given, should tell you a lot. Basically, you are looking to see some sincere enthusiasm here.
10. "Do you have any reservations about me or my ability to perform this job?" It's a gutsy thing to ask. But consider doing so because it's a great way to get real-time feedback on you and your interview skills. Asking for criticism not only earns you points for courage, it could result in some very helpful information.
P.S. Do not ask questions that would be easily answered by consulting the company's website. You will look unprepared, even lazy. You'll also lose the opportunity to gather some valuable insight about this employer and the job on offer.
Thot I copied this here for myself in future just in case that I need this!
Sunday, August 29, 2010
Saturday, August 28, 2010
Directional Trading & Higher Time Frame Confirmation - by Jay Norris is the author of Mastering the Currency Market
Directional trading, also known as discretionary trading, is what most retail traders strive to succeed at. In this type of trading the traders attempt to figure out the market’s current direction, and either position themselves in that direction at the most opportune time, or wait till the market changes direction and position themselves to be able to profit from a continuation of this new direction. Contrary to what most beginning trader’s think, most traders who work for investment banks or proprietary trading shops are not directional traders.
Many traders employed by investment banks and prop shops are mechanics trained in the use of counter-trending methods who continuously scan markets in search of those times when one market price gets slightly out of line with a related market and they position there firm’s money in those markets so that when price snaps back into line they profit. They’re method is called arbitrage, and if they can borrow money at 2.6% and make 5 or 6% in their trading operations they are very profitable. The big investment houses in London and New York also employ traders called market makers. This is the trading category that most professional trader’s fall into today. In many ways they aren’t traders by most old school trader’s definition at all. They are computer programmers who write and service the programs that investment firms and trading boutiques use in an attempt to take the other side of every trade you and I make. When you read stories that the investment bank Golden Stash made money every day of the previous quarter it does not mean that they have the secret on how to pick and train traders, it means that Golden Stash’s market making operations managed to book, or get on the other side of a lot of trades and then offset those trades at a sliver of a profit. Big investment banks and prop trading shops aren’t interested in directional trading because it does not make sense from an odds maker’s perspective. The average directional trader places the odds against herself every time he buys or sells at the market. The minute she hits the button to enter a trade by buying the offer, or selling the bid, she gives up an edge. Professional market makers or arbitrage traders never, or rarely give up the edge of buying on the bid and selling on the offer They are not in business to predict where a market is going to move to next, they are in the business of buying the bid and selling the offer, and they want their computers to do that for them thousands of times a day in a hundreds of markets.
We on the other hand, are not interested in that fractional edge. We would much rather play the opposite of that game and only trade once, or twice a day, but position ourselves in a market that trends in our direction all day, or two or three days, or two or three months. The way we attempt do this is by trading in the same direction as the higher time frame trends, and recognizing when those trends are shifting. Knowing how to use higher time frame charts to confirm a price signal on a lower time frame is an essential skill for directional traders and one which can reward you nicely once you master it. Many students will become impatient and take a trade that is coordinated on the lower time frames, and not on the higher time frames. This is a mistake and more often a waste of time, energy and more important money. While you may not always have all the time frames line up, there will be times when this happens. More times than not though, if you are trading an intraday chart and have the current trend on the daily lined up in the same direction, you are going to have the wind at your back. If you have the knowledge to identify markets where the intraday trends are moving in the same direction as daily and weekly trends then you are going to put yourself in a position to reap the trader’s reward.
Many traders employed by investment banks and prop shops are mechanics trained in the use of counter-trending methods who continuously scan markets in search of those times when one market price gets slightly out of line with a related market and they position there firm’s money in those markets so that when price snaps back into line they profit. They’re method is called arbitrage, and if they can borrow money at 2.6% and make 5 or 6% in their trading operations they are very profitable. The big investment houses in London and New York also employ traders called market makers. This is the trading category that most professional trader’s fall into today. In many ways they aren’t traders by most old school trader’s definition at all. They are computer programmers who write and service the programs that investment firms and trading boutiques use in an attempt to take the other side of every trade you and I make. When you read stories that the investment bank Golden Stash made money every day of the previous quarter it does not mean that they have the secret on how to pick and train traders, it means that Golden Stash’s market making operations managed to book, or get on the other side of a lot of trades and then offset those trades at a sliver of a profit. Big investment banks and prop trading shops aren’t interested in directional trading because it does not make sense from an odds maker’s perspective. The average directional trader places the odds against herself every time he buys or sells at the market. The minute she hits the button to enter a trade by buying the offer, or selling the bid, she gives up an edge. Professional market makers or arbitrage traders never, or rarely give up the edge of buying on the bid and selling on the offer They are not in business to predict where a market is going to move to next, they are in the business of buying the bid and selling the offer, and they want their computers to do that for them thousands of times a day in a hundreds of markets.
We on the other hand, are not interested in that fractional edge. We would much rather play the opposite of that game and only trade once, or twice a day, but position ourselves in a market that trends in our direction all day, or two or three days, or two or three months. The way we attempt do this is by trading in the same direction as the higher time frame trends, and recognizing when those trends are shifting. Knowing how to use higher time frame charts to confirm a price signal on a lower time frame is an essential skill for directional traders and one which can reward you nicely once you master it. Many students will become impatient and take a trade that is coordinated on the lower time frames, and not on the higher time frames. This is a mistake and more often a waste of time, energy and more important money. While you may not always have all the time frames line up, there will be times when this happens. More times than not though, if you are trading an intraday chart and have the current trend on the daily lined up in the same direction, you are going to have the wind at your back. If you have the knowledge to identify markets where the intraday trends are moving in the same direction as daily and weekly trends then you are going to put yourself in a position to reap the trader’s reward.
Trading against the 90% that lose - copied fr Pivotfarm
We often hear figures about the 90% (or even more) that lose money on a consist basis. It’s a ‘fact’ often quoted by gurus and a common belief held by traders. The question for professional traders then becomes how do we benefit from this landslide of people on the wrong side of a trade?
Although an often discussed subject, how we actually use the ‘90% lose’ fact is not often approached. In this article we will discuss 2 freely available pieces of data that with the right analysis and interpretation can provide savvy traders with a great edge to trade against the 90% that lose.
COT Index
The Commitment of Traders Data is created by the CFTC – The Commodity Futures Trading Commission and is published weekly every Friday. This body gathers and publishes the open futures positions on all publicly traded US futures contracts as well as the corresponding options.
The data consists of 3 main categories.
Commercial Traders – These are the bigger players in the markets, the smart money and consist of large firms that actually use the commodity being traded, includes companies like…BP in the Oil and Gas Market, Nestle in the Cocoa and Sugar market. The main function of these traders is to hedge the price of the commodity that they trade in.
Large Speculators – These consist primarily of commodity fund traders and are mainly trend following. The position sizes of these traders tends to be in tandem with the movement of price.
Small Speculators – The little guys, individual traders and small firms, these are the traders that tend to be wrong in the market at the tops and bottoms of markets.
COT data is often misused and misunderstood, in its raw form the COT information describes the number of contracts long/short held by these groups. For example the Large traders component may have 56,000 contracts long S&p 500 emini and 23,000 contracts short. The net position would thus be +33,000 long. Many traders use the net number itself, we feel that this does not provide enough information. +33,000 sounds bullish, but the key is where is this number relative to the historical average of each commodity group.
This is where the COT Index comes into play, the construction of the COT Index is nothing more than putting this weeks net position into a format that will tell you where the current number is in relation to past numbers over the last 6 months. The point is, if the net position is the highest it has been over the 6 month period then the COT Index is 100 and if it is the lowest, then it is 0. Any variation between the two will constitute its respective relation to the historical average.
How do we use this data? We believe that the COT Index offers a good indication of market sentiment and future direction. The key is to follow the smart money (Commercial) and trade against the other 2 groups when they are at an extreme.
Extremes in the data are figures below 30.00 and above 70.00. The ideal situation for a short position is a low reading in the Commercial COT and high readings in the Large and Small trader numbers. For example the Commercial COT Index reads 5.97, this means that the net commercial position is strongly biased to the short side. The Large and Retail (our main contrarian focus) are reading 97.70 and 100.00 respectively, meaning they are the most long side biased they have been in the last 6 months. For traders this means that their focus should be on short side trades, the goal is to follow the commercial traders. This is the ideal alignment of the the groups for optimum success.
This scenario has been present in the EURUSD for the last 2 weeks. So we are expecting some continued short side bias in that pair
Remember this is longer term view so more swing oriented, however the swing view is also important for day traders when trying to line up the higher probability “trend” following trades.
Retail Traders Position Summary
Also known as the Long-Short ratio this is a tool primarily offered by Forex firms, we haven’t been able to come across the same data in the futures as yet. The data is based upon the collective trades and trading direction of many thousands of retail traders (the average Joe). This group of traders is notoriously wrong at predicting market direction, market tops and bottoms with some simple analysis we can look at this data and take a contrarian view, for example if over 70% of retail traders are long USDJPY this offers us a short bias. Savvy traders should then be focusing there energies on short side trades.
It is the 24th of August 2010 today over the 2 months over 70% of retail traders have been positioned on the long side of USDJPY the currency has had a sustained decline in that time, with a major breach of support today.
Although an often discussed subject, how we actually use the ‘90% lose’ fact is not often approached. In this article we will discuss 2 freely available pieces of data that with the right analysis and interpretation can provide savvy traders with a great edge to trade against the 90% that lose.
COT Index
The Commitment of Traders Data is created by the CFTC – The Commodity Futures Trading Commission and is published weekly every Friday. This body gathers and publishes the open futures positions on all publicly traded US futures contracts as well as the corresponding options.
The data consists of 3 main categories.
Commercial Traders – These are the bigger players in the markets, the smart money and consist of large firms that actually use the commodity being traded, includes companies like…BP in the Oil and Gas Market, Nestle in the Cocoa and Sugar market. The main function of these traders is to hedge the price of the commodity that they trade in.
Large Speculators – These consist primarily of commodity fund traders and are mainly trend following. The position sizes of these traders tends to be in tandem with the movement of price.
Small Speculators – The little guys, individual traders and small firms, these are the traders that tend to be wrong in the market at the tops and bottoms of markets.
COT data is often misused and misunderstood, in its raw form the COT information describes the number of contracts long/short held by these groups. For example the Large traders component may have 56,000 contracts long S&p 500 emini and 23,000 contracts short. The net position would thus be +33,000 long. Many traders use the net number itself, we feel that this does not provide enough information. +33,000 sounds bullish, but the key is where is this number relative to the historical average of each commodity group.
This is where the COT Index comes into play, the construction of the COT Index is nothing more than putting this weeks net position into a format that will tell you where the current number is in relation to past numbers over the last 6 months. The point is, if the net position is the highest it has been over the 6 month period then the COT Index is 100 and if it is the lowest, then it is 0. Any variation between the two will constitute its respective relation to the historical average.
How do we use this data? We believe that the COT Index offers a good indication of market sentiment and future direction. The key is to follow the smart money (Commercial) and trade against the other 2 groups when they are at an extreme.
Extremes in the data are figures below 30.00 and above 70.00. The ideal situation for a short position is a low reading in the Commercial COT and high readings in the Large and Small trader numbers. For example the Commercial COT Index reads 5.97, this means that the net commercial position is strongly biased to the short side. The Large and Retail (our main contrarian focus) are reading 97.70 and 100.00 respectively, meaning they are the most long side biased they have been in the last 6 months. For traders this means that their focus should be on short side trades, the goal is to follow the commercial traders. This is the ideal alignment of the the groups for optimum success.
This scenario has been present in the EURUSD for the last 2 weeks. So we are expecting some continued short side bias in that pair
Remember this is longer term view so more swing oriented, however the swing view is also important for day traders when trying to line up the higher probability “trend” following trades.
Retail Traders Position Summary
Also known as the Long-Short ratio this is a tool primarily offered by Forex firms, we haven’t been able to come across the same data in the futures as yet. The data is based upon the collective trades and trading direction of many thousands of retail traders (the average Joe). This group of traders is notoriously wrong at predicting market direction, market tops and bottoms with some simple analysis we can look at this data and take a contrarian view, for example if over 70% of retail traders are long USDJPY this offers us a short bias. Savvy traders should then be focusing there energies on short side trades.
It is the 24th of August 2010 today over the 2 months over 70% of retail traders have been positioned on the long side of USDJPY the currency has had a sustained decline in that time, with a major breach of support today.
Saturday, August 14, 2010
Set and Forget Forex Trading – Keep Your Day Job by Nial Fuller
Set and Forget Forex Trading – Keep Your Day Job
Very often aspiring forex traders become lost in a web of confusion with the amount of data that the various financial media outlets plaster all over the internet and television. It is extremely easy to experience “analysis paralysis” while trying to trade forex or any market for that matter. There are so many competing ideas and trading methods along with more fundamental data coming out every day than you could ever hope to digest, it can be very overwhelming to even try and make sense of it all and develop a trading plan based off this amount of information. One of the biggest psychological mistakes that almost every aspiring trader makes on their journey to success is firmly believing that the amount of economic data analyzed and (or) having a technically complicated or expensive trading method has a direct linear relationship with profiting in the market. In reality, as any professional trader will attest to, these factors usually have an inverse relationship with trading profits, at least after certain point. This essentially means that once you do a certain amount of analyzing market data any further time spent analyzing this data is likely to have a negative effect on your trading; it causes you to lose money.
Why it’s Counter – Productive to Analyze too Much Market Data
It may seem confusing or counter intuitive to the aspiring forex trader when they first hear the fact that too much analyzing of market data can actually cause you to lose money faster than you other wise would. This is one of the inherent psychological traps that so often keep aspiring traders from consistently profiting in the forex market and is the reason why many of them blow out their trading accounts and eventually give up all together. The main reason why this occurs is because human beings have an innate need to feel in control of their life and of their surroundings, it is an evolutionary trait that has allowed our species to perpetuate its existence and ultimately arrive at our current modern day level of civilization. Unfortunately for the aspiring forex trader however, this genetic trait of all human beings works against those trying to succeed at forex trading. In fact, most of our normal feelings of wanting to work harder than the next guy or spend extra time studying and researching for our jobs or for school are feelings that are really not beneficial to success in the forex market.
The problem with trying to apply the idea of hard work to forex trading is that beyond a certain level of technical chart reading and awareness of which economic events are the main catalysts for price movement there really is no beneficial aspect to spending more time on tweaking a trading system or analyzing more economic reports. The bottom line here is that there are literally millions of variables involved in trading the forex market; each person trading the market is a variable and every one of their thoughts about the market is a variable because these are all things that can cause price to move. So, unless you are somehow able to keep track of every trader in the market and all of their thoughts, you essentially have no control over price movement and trying to further analyze economic data or trying to come up with an overly complicated method is essentially just a meaningless attempt to control something that simply cannot be controlled.
Thus, the underlying problem of why so many people fail at trading the forex market begins with the idea that they feel a psychological need to control their surroundings and when this emotional state meets the uncontrollable world of forex trading it almost always has negative consequences. This problem works to snow-ball itself as well because once a trader loses a few trades he or she begins to get angry and wants to “get back” at the market. The way they do this is by reading another trading book or buying a different trading system that seems more likely to work or by analyzing the inner workings of every economic report they can find and trying to predict how it will affect market movement. Once this process has begun it is very difficult to stop because it makes logical sense to us that if we put more time in and do more work we will eventually figure out how to make more money faster in the forex market. The difficult truth to all of this is that, as stated earlier, after you reach a certain degree of technical and fundamental understanding, any further research or system “tweaking” beyond that point will actually work against you and the rate at which you study more and do more research is probably about the rate at which you will lose your money in the market.
Less is more in Forex – Set it and Forget it
So how does the aspiring trader achieve consistent profitability in the forex market if we are genetically primed to fail at this endeavor? The very first step in this process is just accepting the fact that you cannot control the uncontrollable forex market and checking your ego at the door. The forex market does not care what you have done in your life before; it has no emotion and is not a living entity. It is an arena where human beings act out their beliefs about the exchange rate of a certain currency pair. These beliefs are a result of emotions, and human emotion is very predictable when it comes to money. The point here is that the people mentioned in the previous section who are doing extensive amounts of research and trying to find the “holy grail” trading system are the ones who are trying to control the market and thus trading based off emotion and providing the predictability for the professionals to take advantage of. The paradox here is that professional traders do very little actual technical and fundamental “homework”; they have their defined edge in the market and they simply check the market once a day or so and see if their edge is there. If it is not than they just wait for tomorrow because they know that the forex market is a continuous stream of self-generating opportunities, thus they do not feel pressured or anxious to trade. If their edge does show up then they set their orders and walk away, accepting the fact that any further action will only work against them because it will be a vain attempt to control the uncontrollable and would not be an objective action.
The logic of “set and forget” forex trading is this; if your trading edge is present than you execute your edge and do not involve yourself further in the process unless you have previously defined the action in your trading plan. Traders that decide to mess with or tweak their trade once they enter it almost always kick start an emotional rollercoaster that leads to overtrading, increasing position size, moving their stop loss further from their entry, or moving their profit target further out. These actions almost always cause the trader to lose money, the reason why is because they were not objectively thought out, but were influenced by an emotional reaction that was caused by trying to control the uncontrollable.
Make Money and Save Time by Doing Less
It is a statistical fact that traders who trade off longer time frames such as 4 hour, daily, and weekly charts and hold their positions for multiple days, make more money in the long run that traders who “day trade” off intra-day charts. The reason many people are attracted to day trading is because they feel more in control of the market by looking at smaller time frames and jumping in and out of positions frequently. Unfortunately for them they have not figured out that they have the same amount of control as the swing trader who holds positions for a week or more and only looks at the market for twenty minutes a day or even less. The ironic fact about forex trading is that spending less time analyzing data and finding the perfect trading system will actually cause you to make more money faster, many people are attracted to speculative trading for this very reason but soon afterwards forget about the fact and start spending countless hours digging themselves into a huge psychological trap that many times they never dig out of. All you need to do to consistently make money in forex is develop a written out trading plan, that includes a risk management scheme, with a definable edge and check the market one time a day for ten to twenty minutes. If your edge (price action signals and setups) is showing up than you set up your entry, stop loss, and target and walk away until the next trading day is over.
Trading in this manner actually elicits a snowball type effect of positive habits that work to further perpetuate your trading success. This entire article can be summarized in the following two sentences; people who spend more time analyzing market data and trying to perfect their trading system inevitably induce a cycle of emotional mistakes that work to perpetuate their trading failures and eventually result in lost money and lost time. People who realize that the market is uncontrollable and build their trading plan around this fact will inevitably arrive at a “set and forget” type mentality that induces an emotional state that is conducive to on-going market success and consistent profitability. The trading method used is one of the least important variables, but generally a simple method that offers a definable and profitable edge such as price action analysis is the best method to use to maintain your “set and forget” mindset.
Very often aspiring forex traders become lost in a web of confusion with the amount of data that the various financial media outlets plaster all over the internet and television. It is extremely easy to experience “analysis paralysis” while trying to trade forex or any market for that matter. There are so many competing ideas and trading methods along with more fundamental data coming out every day than you could ever hope to digest, it can be very overwhelming to even try and make sense of it all and develop a trading plan based off this amount of information. One of the biggest psychological mistakes that almost every aspiring trader makes on their journey to success is firmly believing that the amount of economic data analyzed and (or) having a technically complicated or expensive trading method has a direct linear relationship with profiting in the market. In reality, as any professional trader will attest to, these factors usually have an inverse relationship with trading profits, at least after certain point. This essentially means that once you do a certain amount of analyzing market data any further time spent analyzing this data is likely to have a negative effect on your trading; it causes you to lose money.
Why it’s Counter – Productive to Analyze too Much Market Data
It may seem confusing or counter intuitive to the aspiring forex trader when they first hear the fact that too much analyzing of market data can actually cause you to lose money faster than you other wise would. This is one of the inherent psychological traps that so often keep aspiring traders from consistently profiting in the forex market and is the reason why many of them blow out their trading accounts and eventually give up all together. The main reason why this occurs is because human beings have an innate need to feel in control of their life and of their surroundings, it is an evolutionary trait that has allowed our species to perpetuate its existence and ultimately arrive at our current modern day level of civilization. Unfortunately for the aspiring forex trader however, this genetic trait of all human beings works against those trying to succeed at forex trading. In fact, most of our normal feelings of wanting to work harder than the next guy or spend extra time studying and researching for our jobs or for school are feelings that are really not beneficial to success in the forex market.
The problem with trying to apply the idea of hard work to forex trading is that beyond a certain level of technical chart reading and awareness of which economic events are the main catalysts for price movement there really is no beneficial aspect to spending more time on tweaking a trading system or analyzing more economic reports. The bottom line here is that there are literally millions of variables involved in trading the forex market; each person trading the market is a variable and every one of their thoughts about the market is a variable because these are all things that can cause price to move. So, unless you are somehow able to keep track of every trader in the market and all of their thoughts, you essentially have no control over price movement and trying to further analyze economic data or trying to come up with an overly complicated method is essentially just a meaningless attempt to control something that simply cannot be controlled.
Thus, the underlying problem of why so many people fail at trading the forex market begins with the idea that they feel a psychological need to control their surroundings and when this emotional state meets the uncontrollable world of forex trading it almost always has negative consequences. This problem works to snow-ball itself as well because once a trader loses a few trades he or she begins to get angry and wants to “get back” at the market. The way they do this is by reading another trading book or buying a different trading system that seems more likely to work or by analyzing the inner workings of every economic report they can find and trying to predict how it will affect market movement. Once this process has begun it is very difficult to stop because it makes logical sense to us that if we put more time in and do more work we will eventually figure out how to make more money faster in the forex market. The difficult truth to all of this is that, as stated earlier, after you reach a certain degree of technical and fundamental understanding, any further research or system “tweaking” beyond that point will actually work against you and the rate at which you study more and do more research is probably about the rate at which you will lose your money in the market.
Less is more in Forex – Set it and Forget it
So how does the aspiring trader achieve consistent profitability in the forex market if we are genetically primed to fail at this endeavor? The very first step in this process is just accepting the fact that you cannot control the uncontrollable forex market and checking your ego at the door. The forex market does not care what you have done in your life before; it has no emotion and is not a living entity. It is an arena where human beings act out their beliefs about the exchange rate of a certain currency pair. These beliefs are a result of emotions, and human emotion is very predictable when it comes to money. The point here is that the people mentioned in the previous section who are doing extensive amounts of research and trying to find the “holy grail” trading system are the ones who are trying to control the market and thus trading based off emotion and providing the predictability for the professionals to take advantage of. The paradox here is that professional traders do very little actual technical and fundamental “homework”; they have their defined edge in the market and they simply check the market once a day or so and see if their edge is there. If it is not than they just wait for tomorrow because they know that the forex market is a continuous stream of self-generating opportunities, thus they do not feel pressured or anxious to trade. If their edge does show up then they set their orders and walk away, accepting the fact that any further action will only work against them because it will be a vain attempt to control the uncontrollable and would not be an objective action.
The logic of “set and forget” forex trading is this; if your trading edge is present than you execute your edge and do not involve yourself further in the process unless you have previously defined the action in your trading plan. Traders that decide to mess with or tweak their trade once they enter it almost always kick start an emotional rollercoaster that leads to overtrading, increasing position size, moving their stop loss further from their entry, or moving their profit target further out. These actions almost always cause the trader to lose money, the reason why is because they were not objectively thought out, but were influenced by an emotional reaction that was caused by trying to control the uncontrollable.
Make Money and Save Time by Doing Less
It is a statistical fact that traders who trade off longer time frames such as 4 hour, daily, and weekly charts and hold their positions for multiple days, make more money in the long run that traders who “day trade” off intra-day charts. The reason many people are attracted to day trading is because they feel more in control of the market by looking at smaller time frames and jumping in and out of positions frequently. Unfortunately for them they have not figured out that they have the same amount of control as the swing trader who holds positions for a week or more and only looks at the market for twenty minutes a day or even less. The ironic fact about forex trading is that spending less time analyzing data and finding the perfect trading system will actually cause you to make more money faster, many people are attracted to speculative trading for this very reason but soon afterwards forget about the fact and start spending countless hours digging themselves into a huge psychological trap that many times they never dig out of. All you need to do to consistently make money in forex is develop a written out trading plan, that includes a risk management scheme, with a definable edge and check the market one time a day for ten to twenty minutes. If your edge (price action signals and setups) is showing up than you set up your entry, stop loss, and target and walk away until the next trading day is over.
Trading in this manner actually elicits a snowball type effect of positive habits that work to further perpetuate your trading success. This entire article can be summarized in the following two sentences; people who spend more time analyzing market data and trying to perfect their trading system inevitably induce a cycle of emotional mistakes that work to perpetuate their trading failures and eventually result in lost money and lost time. People who realize that the market is uncontrollable and build their trading plan around this fact will inevitably arrive at a “set and forget” type mentality that induces an emotional state that is conducive to on-going market success and consistent profitability. The trading method used is one of the least important variables, but generally a simple method that offers a definable and profitable edge such as price action analysis is the best method to use to maintain your “set and forget” mindset.
The Psychology of Forex Traders Profits by Nial Fuller
Hey Everyone .. Welcome to This Weeks Forex Trading Lesson. Today, we touch again upon that never-ending debate, particularly amongst newer traders, about the role of psychology in becoming a profitable and successful trader. How much does it play a role in trading? Some argue it plays no role and that all that needs to be followed are one’s trading signals. Others swear that it’s role is 80-90%. How these percentages are calculated or how accurate they are is irrelevant. The truth is, psychology can make or break you.
We are all different. Some traders are incapable of changing their behavior and no matter what system they have decided to follow, they just cannot do it. Certain personality traits are in the driving seat and cause them to break all their rules. For instance, a personality type marked by greed combined with emotional traits such as impulsiveness will create the conditions leading to the eventual demise of even the most innately gifted trader. An over-confident personality susceptible to being governed by emotional forces such as impatience is a similar destructive psychological amalgamation; anything that moves is seen as a potential trade. Then there are the others – incidentally of whom there are very very few – who seem unaffected by their emotions when they trade.
Most of us belong however to a third group in our trading – we go through four different stages in our learning curve:
Stage 1 – we completely ignore or are unaware of the importance of psychology in our trading. Instead, we concentrate completely on the technicals.
Stage 2 – we could call this stage realization. We begin to realize that there is another element we have been missing. We become adept at reading the charts and yet we are not consistently able to make or keep money. So we start reading books and listening to others and the message is: our personalities are getting in the way.
Stage 3 – the role of psychology becomes unimportant again but not because we are ignoring it or are unaware of it as in Stage 1. We just do not have to worry about it any more. Inner barriers are overcome and we have managed to change ourselves and our behavior to the extent that we can execute our forex trading plan and follow our rules automatically. We no longer have to consciously think about the clutch or accelerator or the brakes, we just drive the car.
It is important to understand that Stage 3 is attainable and it should be our goal. Sadly, most traders get stuck at stage 2. They think about the role of psychology and their personalities continuously and to such an extent that they go round and round in circles. Their growth and development as a trader comes to a halt as they delve deeper and deeper into the inner workings of their minds. Stage 2 can be taken slowly but to become a successful trader, it has to be left behind at some point.
Stage 4 – this is a different dimension altogether and it may take years to achieve
So let us look at each of these stages in more detail.
STAGE 1 – UNAWARENESS OF THE IMPORTANCE OF PSYCHOLOGY IN TRADING – there is little to be said about this stage – it is painfully obvious only when we have entered stage 2.
STAGE 2 – REALIZATION – after the trader becomes aware that what he or she thought was easy is certainly not, they begin to search for answers. Articles and books are read, information is sought on the web and forums are visited. The realization grows that his or her inner mind greatly influences his or her trading performance and that it is not always under conscious control.
In our daily lives, we are often confronted with the knowledge that our emotions lead us to do and say things we should not. We become angry when someone cuts in front of us in a queue or we get stuck behind some ‘idiot’ who doesn’t seem to realise that the speed limit is 30km/h and not 20km/h. What prevents us from delivering a left jab to these annoying individuals? What prevents us from walking into a cafe and lifting a delicious-looking piece of cake from someone’s plate? Self-control, self-discipline and social mores dictate our behaviour.
But what would happen if these controls were lifted and our inhibitions released? Could we restrain ourselves? Would we act out our emotions? With moral or ethical constraints no longer in place, would we succumb to temptation?
The answer is probably yes. And this is exactly the nature of the trading environment. There are no external factors to prevent us from causing damage to our accounts. There is nobody leaning over our shoulders to say ‘stop!!!!’ In the absence of external constraints, we need much stronger self-discipline and self-control in order to continue following our forex trading plan and rules. Those rules have to be found, built on and structured entirely by us. And then they have to be implemented and reinforced by us alone. Is there any other profession that requires such dedication and so much work on ourselves to become successful? Is it any surprise that trading is so hard to master and that 95% of traders fail in the process?
So what is the solution? We have to realise that the market is an uncertain environment. And that what is more important than anything else is the right mindset. In fact our success as traders is directly correlated to our ability to create this mindset and practice strong self-discipline.
But there is another even more crucial fundamental difference between the potential consequences of displaying emotions in the real world and world of the markets. In our social environment we can utilise emotions such as anger, rage, or the evocation of sympathy or pity through a display of sadness to influence or manipulate those around us to give in and succumb to our needs and demands. The market however, does not work that way for it is an environment that is totally and utterly impervious to our emotional displays. When trading, the only entity whose behaviour will be moulded by our emotions is us, for the merciless and immutable workings of the market dishes out losses and rewards solely on the basis of one factor: a rational determination to follow our rules.
STAGE 3 – CLARITY AND LIBERATION
As the chrysalis becomes a butterfly, a trader is born. We are no longer slave to our emotions and we are in control of our actions. No longer do we jump in and out of trades, nor do we micro-manage them once they have been placed. We set our stop and take profit target and then we walk away. We allow the market to ‘do it’s own thing’ by employing a set and forget trading style. As in our daily lives, so much is outside our control and the only power we have lies in the way we react to the cards that are dealt us. Thus we are not over-elated when our take profit is hit, nor do we fall into deep despair when we incur a loss. In fact, there is a direct negative correlation between the intensity of our emotional reactions to either events and our success as a trader.
Suddenly we can see the emotions of the herd on our charts without being part of that herd any longer. Thus we do not react to those herd-emotions but instead are able to evaluate and use those emotions to our advantage.
This clarity is liberating. Clarity and liberation constitute this stage of a trader’s development, if we have developed the ability to see clearly and understand what is happening. We now have the freedom to choose how we react. We are master of our own trading versus being part of the herd.
What else can a trader expect from this stage of development? He or she becomes a detached observer of the market, never involved emotionally yet constantly evaluating the emotions of other traders, waiting patiently for the right set-up to appear and not compromising by entering the market on low-probability trades.
The transition from Stage 2 to Stage 3 does not happen overnight. Like all learning experiences it is a process and a gradual one which is made up of a series of small clicks, each being another piece of the puzzle falling into place. There is a realization of how the market’s logic is not the same as the conventional Aristotle kind of logic, which was incorporated in the late 19th century into modern formal logic. There dawns the understanding of how Smart Money acts versus how the herd behaves and of how a chart reflects emotions. The knowledge develops that the trader does not have to participate in any market event, that he or she is free to choose which battles are to be entered into. Each click comes as a result of yet another lesson taught by the market, which is the greatest teacher of all. Rarely does it miss an opportunity to punish the trader for making mistakes. If you are an avid student of the market, you will listen carefully and take notes, collecting knowledge and experience. Ore goes in and steel comes out. This process takes time but it is worth it.
When you arrive at this point in your trading career, you will discover that this metamorphosis has transformed you not only as a trader but as a person. You will find that in your daily life you have more self-control and self-discipline, are more patient and less impulsive.
This sounds almost too good to be true. And there is indeed a big ‘BUT’. For this transformation is not necessarily a constant state. There will be times when those bad habits return and you suddenly realize that you have slipped back a few rungs on the ladder. You become over-confident, trigger-happy and complacent. You enter into less optimal trades and disregard your rules. The sooner you notice this, the sooner you can get yourself back on track. For the discarding of old destructive trading habits is not a single event but a process. It seems to be a human failing that when we achieve success, we tend to stop doing what led to that success in the first place. However, as frustrating as this may seem, when you overcome these set-backs and return to the right path, your skill of dealing with this phenomenon becomes better. Relapses are less frequent, you recognize them sooner and eliminate them faster. They will finally cease altogether when your reactions to the market become second nature.
STAGE 4 – the last stage of a trader’s development is easy to understand even if it is not easy to implement. If the trader is ready for the transition, then it will not be difficult.
The early stages of trading are full of emotional decisions which lead to erroneous entries and exits. These are the emotions that drive the herd. But as you slowly recognize, take control over and lessen their effect on your trading, they do not disappear entirely. The trader at this level has learned to separate them from his or her trading behavior and observe them in an objective and detached manner. Instead of becoming their slave, the trader can use them to his or her advantage. If you can feel the panic deep within yourself that ensues when there is a huge sell-off, those are exactly the emotions the herd is feeling too. Similarly, if you can feel that irresistible temptation to buy that enormous upward parabolic spike, you are slotting into how the herd feels too. How often have you sat and watched it go up and up and up until it becomes too unbearable to resist and you buy, only to find that the last traders have hit ‘buy at market’ already?
USE your own emotional reactions as a mirror to gauge the emotions of the herd. Once you recognize them then you will also know how the herd is going to act. Together with your improved and strict self-control, such an approach will put you on the right side of the market. And the right side is not usually the side of the herd.
However, I administer two warnings:
First, do not try to integrate this element of trading into your arsenal too soon. It is better to remain at Stage 3 long enough to become confident and consistent before you attempt to move onto Stage 4, which demands the implementation of a great deal of experience and self-control.
Secondly, as you progress on your journey, you may discover that you stop experiencing those herd-like emotions altogether and that your impulses are completely in synchronization with your own analysis and actions. When this happens, your attempt to read YOUR impulses as a window to the HERD’S impulses may backfire as you begin trading as a contrarian trader to yourself rather than the herd. Essentially then you become part of the herd again!
Look at it like this... There is a space between external influences and your reaction. YOU create this space by pausing before you react and your freedom of choice lies within that space. And YOU CAN CHOOSE the impulsive emotional reaction – or not. You can choose to ask yourself what reaction would be the best, what emotions are driving the price move and who is likely to be behind it, either smart money or the herd and you can choose to position yourself on the right side and make decisions which support that choice. You can choose to listen to your own emotions during that pause, evaluate the first impulsive response you felt compelled to make and analyze whether it was a valid decision or purely one that the herd would make, THUS MAKING YOUR FIRST IMPULSE A WINDOW INTO MASS PSYCHOLOGY.
We are all different. Some traders are incapable of changing their behavior and no matter what system they have decided to follow, they just cannot do it. Certain personality traits are in the driving seat and cause them to break all their rules. For instance, a personality type marked by greed combined with emotional traits such as impulsiveness will create the conditions leading to the eventual demise of even the most innately gifted trader. An over-confident personality susceptible to being governed by emotional forces such as impatience is a similar destructive psychological amalgamation; anything that moves is seen as a potential trade. Then there are the others – incidentally of whom there are very very few – who seem unaffected by their emotions when they trade.
Most of us belong however to a third group in our trading – we go through four different stages in our learning curve:
Stage 1 – we completely ignore or are unaware of the importance of psychology in our trading. Instead, we concentrate completely on the technicals.
Stage 2 – we could call this stage realization. We begin to realize that there is another element we have been missing. We become adept at reading the charts and yet we are not consistently able to make or keep money. So we start reading books and listening to others and the message is: our personalities are getting in the way.
Stage 3 – the role of psychology becomes unimportant again but not because we are ignoring it or are unaware of it as in Stage 1. We just do not have to worry about it any more. Inner barriers are overcome and we have managed to change ourselves and our behavior to the extent that we can execute our forex trading plan and follow our rules automatically. We no longer have to consciously think about the clutch or accelerator or the brakes, we just drive the car.
It is important to understand that Stage 3 is attainable and it should be our goal. Sadly, most traders get stuck at stage 2. They think about the role of psychology and their personalities continuously and to such an extent that they go round and round in circles. Their growth and development as a trader comes to a halt as they delve deeper and deeper into the inner workings of their minds. Stage 2 can be taken slowly but to become a successful trader, it has to be left behind at some point.
Stage 4 – this is a different dimension altogether and it may take years to achieve
So let us look at each of these stages in more detail.
STAGE 1 – UNAWARENESS OF THE IMPORTANCE OF PSYCHOLOGY IN TRADING – there is little to be said about this stage – it is painfully obvious only when we have entered stage 2.
STAGE 2 – REALIZATION – after the trader becomes aware that what he or she thought was easy is certainly not, they begin to search for answers. Articles and books are read, information is sought on the web and forums are visited. The realization grows that his or her inner mind greatly influences his or her trading performance and that it is not always under conscious control.
In our daily lives, we are often confronted with the knowledge that our emotions lead us to do and say things we should not. We become angry when someone cuts in front of us in a queue or we get stuck behind some ‘idiot’ who doesn’t seem to realise that the speed limit is 30km/h and not 20km/h. What prevents us from delivering a left jab to these annoying individuals? What prevents us from walking into a cafe and lifting a delicious-looking piece of cake from someone’s plate? Self-control, self-discipline and social mores dictate our behaviour.
But what would happen if these controls were lifted and our inhibitions released? Could we restrain ourselves? Would we act out our emotions? With moral or ethical constraints no longer in place, would we succumb to temptation?
The answer is probably yes. And this is exactly the nature of the trading environment. There are no external factors to prevent us from causing damage to our accounts. There is nobody leaning over our shoulders to say ‘stop!!!!’ In the absence of external constraints, we need much stronger self-discipline and self-control in order to continue following our forex trading plan and rules. Those rules have to be found, built on and structured entirely by us. And then they have to be implemented and reinforced by us alone. Is there any other profession that requires such dedication and so much work on ourselves to become successful? Is it any surprise that trading is so hard to master and that 95% of traders fail in the process?
So what is the solution? We have to realise that the market is an uncertain environment. And that what is more important than anything else is the right mindset. In fact our success as traders is directly correlated to our ability to create this mindset and practice strong self-discipline.
But there is another even more crucial fundamental difference between the potential consequences of displaying emotions in the real world and world of the markets. In our social environment we can utilise emotions such as anger, rage, or the evocation of sympathy or pity through a display of sadness to influence or manipulate those around us to give in and succumb to our needs and demands. The market however, does not work that way for it is an environment that is totally and utterly impervious to our emotional displays. When trading, the only entity whose behaviour will be moulded by our emotions is us, for the merciless and immutable workings of the market dishes out losses and rewards solely on the basis of one factor: a rational determination to follow our rules.
STAGE 3 – CLARITY AND LIBERATION
As the chrysalis becomes a butterfly, a trader is born. We are no longer slave to our emotions and we are in control of our actions. No longer do we jump in and out of trades, nor do we micro-manage them once they have been placed. We set our stop and take profit target and then we walk away. We allow the market to ‘do it’s own thing’ by employing a set and forget trading style. As in our daily lives, so much is outside our control and the only power we have lies in the way we react to the cards that are dealt us. Thus we are not over-elated when our take profit is hit, nor do we fall into deep despair when we incur a loss. In fact, there is a direct negative correlation between the intensity of our emotional reactions to either events and our success as a trader.
Suddenly we can see the emotions of the herd on our charts without being part of that herd any longer. Thus we do not react to those herd-emotions but instead are able to evaluate and use those emotions to our advantage.
This clarity is liberating. Clarity and liberation constitute this stage of a trader’s development, if we have developed the ability to see clearly and understand what is happening. We now have the freedom to choose how we react. We are master of our own trading versus being part of the herd.
What else can a trader expect from this stage of development? He or she becomes a detached observer of the market, never involved emotionally yet constantly evaluating the emotions of other traders, waiting patiently for the right set-up to appear and not compromising by entering the market on low-probability trades.
The transition from Stage 2 to Stage 3 does not happen overnight. Like all learning experiences it is a process and a gradual one which is made up of a series of small clicks, each being another piece of the puzzle falling into place. There is a realization of how the market’s logic is not the same as the conventional Aristotle kind of logic, which was incorporated in the late 19th century into modern formal logic. There dawns the understanding of how Smart Money acts versus how the herd behaves and of how a chart reflects emotions. The knowledge develops that the trader does not have to participate in any market event, that he or she is free to choose which battles are to be entered into. Each click comes as a result of yet another lesson taught by the market, which is the greatest teacher of all. Rarely does it miss an opportunity to punish the trader for making mistakes. If you are an avid student of the market, you will listen carefully and take notes, collecting knowledge and experience. Ore goes in and steel comes out. This process takes time but it is worth it.
When you arrive at this point in your trading career, you will discover that this metamorphosis has transformed you not only as a trader but as a person. You will find that in your daily life you have more self-control and self-discipline, are more patient and less impulsive.
This sounds almost too good to be true. And there is indeed a big ‘BUT’. For this transformation is not necessarily a constant state. There will be times when those bad habits return and you suddenly realize that you have slipped back a few rungs on the ladder. You become over-confident, trigger-happy and complacent. You enter into less optimal trades and disregard your rules. The sooner you notice this, the sooner you can get yourself back on track. For the discarding of old destructive trading habits is not a single event but a process. It seems to be a human failing that when we achieve success, we tend to stop doing what led to that success in the first place. However, as frustrating as this may seem, when you overcome these set-backs and return to the right path, your skill of dealing with this phenomenon becomes better. Relapses are less frequent, you recognize them sooner and eliminate them faster. They will finally cease altogether when your reactions to the market become second nature.
STAGE 4 – the last stage of a trader’s development is easy to understand even if it is not easy to implement. If the trader is ready for the transition, then it will not be difficult.
The early stages of trading are full of emotional decisions which lead to erroneous entries and exits. These are the emotions that drive the herd. But as you slowly recognize, take control over and lessen their effect on your trading, they do not disappear entirely. The trader at this level has learned to separate them from his or her trading behavior and observe them in an objective and detached manner. Instead of becoming their slave, the trader can use them to his or her advantage. If you can feel the panic deep within yourself that ensues when there is a huge sell-off, those are exactly the emotions the herd is feeling too. Similarly, if you can feel that irresistible temptation to buy that enormous upward parabolic spike, you are slotting into how the herd feels too. How often have you sat and watched it go up and up and up until it becomes too unbearable to resist and you buy, only to find that the last traders have hit ‘buy at market’ already?
USE your own emotional reactions as a mirror to gauge the emotions of the herd. Once you recognize them then you will also know how the herd is going to act. Together with your improved and strict self-control, such an approach will put you on the right side of the market. And the right side is not usually the side of the herd.
However, I administer two warnings:
First, do not try to integrate this element of trading into your arsenal too soon. It is better to remain at Stage 3 long enough to become confident and consistent before you attempt to move onto Stage 4, which demands the implementation of a great deal of experience and self-control.
Secondly, as you progress on your journey, you may discover that you stop experiencing those herd-like emotions altogether and that your impulses are completely in synchronization with your own analysis and actions. When this happens, your attempt to read YOUR impulses as a window to the HERD’S impulses may backfire as you begin trading as a contrarian trader to yourself rather than the herd. Essentially then you become part of the herd again!
Look at it like this... There is a space between external influences and your reaction. YOU create this space by pausing before you react and your freedom of choice lies within that space. And YOU CAN CHOOSE the impulsive emotional reaction – or not. You can choose to ask yourself what reaction would be the best, what emotions are driving the price move and who is likely to be behind it, either smart money or the herd and you can choose to position yourself on the right side and make decisions which support that choice. You can choose to listen to your own emotions during that pause, evaluate the first impulsive response you felt compelled to make and analyze whether it was a valid decision or purely one that the herd would make, THUS MAKING YOUR FIRST IMPULSE A WINDOW INTO MASS PSYCHOLOGY.
Friday, August 06, 2010
Up-date for my trading week
Frankly I am disappointed with myself....totally screwed-up for my forex trades as I lost about 3/4 of my total profit in my fund in just two days of trading. Why? I didn't put in a stop-loss for my trades becoz I felt USD/JPY and USD/CAD were already too low to fall lower. But they both did so....until I gave up on Thursday and kena stopped out. Then when the non-farm job data came out....I still go "long" for USD/JPY but didn't do a thing for USD/CAD. Yes....USD/JPY continued to fall while USD/CAD "fly", worst I kena stop-out for both my "short" trades for EUR/USD and GBP/USD.
Well...back to the drawing board!
Well...back to the drawing board!
One from my old memories
Yes, just chanced on a food blogspot about Penang food. And it brought back old memories of my time there. Btw I was born there...but I came back to Singapore with my parents when they shut up shop there. Wow...about near to 40yrs ago to be actual, it was 39yrs back!
Yes...this food blog is http://makanpenang.blogspot.com
Yes...this food blog is http://makanpenang.blogspot.com
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