Categories
Forex Elliott Wave

Impulsive Waves Construction – Part 1

Previously we presented an ideal model of motive waves; however, the real market is not exactly perfect. In this educational article, we will develop the principles of impulsive waves.

The nature of impulsive waves

Before we begin to identify impulsive waves, we must consider the following rules that compose it:

  1. It must have five consecutive segments, or waves, that develop a trend.
  2. Three of these five waves must move in the same direction; this can be bullish or bearish.
  3. After the initial wave, a shorter sequence must be developed in the opposite direction of the first movement. This movement should never be greater than the advance of the first wave.
  4. The third wave must be larger than the second movement.
  5. After the third impulsive movement, a similar sequence to the second wave should be developed. However, the third segment trend must prevail over the fourth.
  6. The fifth wave, in most cases, will be more extense than the fourth movement. If the fifth wave is smaller than the fourth wave, this is called a “failure.”
  7. When comparing the lengths of waves 1, 3, and 5, the third wave does not necessarily have to be the longest. However, it should not be the shortest.

If one of these rules is not followed, then the movement is not an impulse, the structure corresponds to a corrective sequence.

The alternation principle

Elliott defines alternation as a law of nature, as the day and night alternates, the movements of a market also alternate. The alternation principle establishes that when two waves of the same degree are compared, they are different from each other.

We observe the alternation in:

  • The distance that price travels.
  • The duration of each wave.
  • The retracement of the depth of each impulse (waves 2 and 4).
  • The complexity of each wave, that is, the number of internal waves that compose it.

The following daily chart corresponds to the EURAUD cross. In the chart, we observe the alternation in price and time. The first bullish movement began on August 21, 1997, at 1.42014, this wave was developed on 118 days and increased 2,919 pips or 20.55%. Wave 3 surged on 131 days and reported an increase of 19.83% or 3,121.6 pips. Finally, the fifth wave grew in 81 days, advancing 3,059.5 pips, or 17.44%, reaching the high at 2,05983 on October 06, 1998.


In the following EURAUD daily chart, we recognize the alternation in the retracement. From wave 2, we observed that the retrace of wave 1, was developed for 44 days, and the cross plunged 8.05% or 1,377.9 pips. Finally, wave 4 fell 1,334.1 pips (7.07%) of wave 3 in 36 days.


Categories
Forex Elliott Wave

Planning your First Wave Analysis – Part 2

In a previous post, we talked about the ideal structure of an impulsive and corrective wave. Also, we discuss the starting point of the study of a market. In this opportunity, we will deepen the steps to identify a wave.

 

Watching the waves

 

Before continuing, we must consider the concept of “wave.” A wave is a defined movement of the market, which is reflected in a price variation. Depending on the price action, the change may have a higher or slower speed, but it will never be perfectly horizontal or vertical.

Depending on the sequence of a group of waves, the market may develop an impulsive or a corrective wave structure. An “impulsive wave” is made up of five waves with a relationship of the same degree. On the other hand, a “corrective wave” is composed of a set of three waves. The following figure shows an ideal impulsive and corrective wave.


Wave proportionality

Once we define the start point and the timeframe of the market study, we must consider that waves should have specified “proportionality.” Consider that some Elliott structures could not be easily visible by simple observation. For this reason, we must be flexible in terms of the selection of the timeframe to analyze. Remember that the same timeframe will not necessarily useful to examine all markets. Elliott, in his “Treatise,” reminds us that in markets with low volatility, the weekly chart may be more fit than the daily chart.

 

Price and time relationship

In a sequential movement, the price action is developed following the relation between price and time. On the following chart, we observe the Financial Select Index ETF (AMEX: XLF) on a weekly timeframe. In the example, we note that the sequence starts in the March 2009 low at $ 4.47, and ends when XLF reached the February 2011 high at $ 13.90. After this top, XLF developed a retrace in February 2011, which led to a higher low at $ 10.02.



In this example, there is a similarity in the advance and retracement of the price with the time. In summary, the movement of two consecutive waves of the same degree cannot be less than one-third (1/3) of the greater in terms of price and time.

Categories
Forex Elliott Wave

Planning the First Wave Analysis – Part 1

Before to start to analyze any market, it’s necessary to set-up the chart earlier to begin to identify motive and corrective waves. In this article, we will learn how to start to analyze the market applying the Elliott Wave Theory.

 

Setting-up the first chart

The first step consists of choosing the market to be studied, and then select a starting point for the analysis. Once we decided the market of interest and the inception point, in a monthly chart, we will identify the highs and lows of the asset in the order of appearance. After that, we must establish the relevant date and price of every segment.

As an example, the following chart corresponds to the DAX futures in a monthly timeframe. As you can notice, there are identified the “relevant” highs and lows from March 2000 until the present.

Once we defined the starting point,  we will begin the analysis by moving our timeframe from higher to lower. In means, from monthly to daily timeframe, and even to an hourly chart. However, this could demand you extra time to update the analysis.

The identification process

When the identification is complete, we must distinguish the start and end of each wave. From our example, we will start from the March 2009 low at 3,588.5 pts, until the January 2019 high at 13,181.5 pts.

The same process must be realized in the weekly and daily timeframe. As you can notice, we still do not begin to talk about motive and corrective waves. The reason is that the first step is to learn to recognize the movement under study.

As was discussed in the previous article, we will use labels to identify each wave. In our example of the FDAX monthly chart is as follows.




Summarizing, the monthly chart of the FDAX shows a bullish sequence which currently should be developing a wave ((5)). As we learned, waves ((1)), ((3)), and ((5)) moves in the bullish trend direction; it is a motive wave. The waves ((2)), and ((4)) retraces the main trend movement, or in other words, these waves are corrective of the principal trend.

Categories
Forex Elliott Wave

Fundamentals of Elliott Wave Theory – Part 3

Until now, we have defined two kinds of waves, motive and corrective. In this article, we will introduce the concept of “degree,” which will help us in the process of waves identification.

The concept of degree

Elliott defined a series of “degrees” to maintain a hierarchical waves order. This order is based mainly on the relationship that the wave develops over time. In other words, while higher is the time elapsed in the wave formation, greater will be the wave degree.

The term “degree” must be considered in relative terms about the price and time relationship. It should not be considered strictly according to the duration, for example, a day, a week, or a month.

The blue box shows a bullish impulsive wave developed over126 days which attained a 25.95% advance. This wave started from the low of December 26, 2018, when the price found support at 2,346.6 pts and ended on May 1, 2019, when it hit the top at 2,954.4 pts. If we remember the basic structure of a wave, we can see that the upward movement was developed in five waves.

In the red box, we observe a corrective wave sequence disclosed in three waves. This retracement began on May 1 and ended on June 3, 2019, when SPX plunged to 2,728.8 pts. The bearish move unfolded over 33 days and eased 7.67%.


R.N. Elliott, in his work “The Wave Principle” defined a series of degrees, with specific terminology and it’s as follows:

  • Grand Super Cycle.
  • Super Cycle.
  • Cycle.
  • Primary.
  • Intermediate.
  • Minor.
  • Minute.
  • Minuette.
  • Sub-Minuette.

However, Prechter & Frost, in “Elliott Wave Principle” added six degrees:

  • Supermillennium.
  • Millennium.
  • Submillennium.
  • Micro.
  • Submicro.
  • Miniscule.

Despite the wide-spread degrees, Hamilton Bolton says that the most common degrees used are Minor, Intermediate, and Primary.

Wave Labeling

Labels are useful to keep the order in the wave analysis. It’s necessary to assign a symbol on each wave of each wave that is studied. In the Elliott Wave Theory there is a set of labels for each degree as follows:

The wave labels are essential to understand the current market position and will allow us to respond to the question “where goes the market?”.

The following chart corresponds to the application of waves labeling. In this case, the SPX daily chart developed a complete cycle of Intermediate degree.


Categories
Forex Indicators

Five Great Things you’ve Never Heard about Bollinger Bands

 

Everybody knows Bollinger Bands, that kind of rivery thing surrounding prices. But almost nobody knows what to do with them. Maybe we can help a bit with that.

1 – Bollinger Bands and Trends

Bollinger Bands are based on Moving Averages. Therefore the central line is the 20-period moving average. As a corollary, if the price of an asset is above the mid-BB-Line, it usually is trending UP. Conversely, if it is below the mid-BB-Line, it tends to be trending down.

Fig 1 – Uptrends see prices moving near the +1 Bollinger line

2 – Bollinger Bands Are more Useful Customized

There is no need to use only the standard 2-StDev Bollinger bands. We, as traders, can create different band types. In my case, I use to draw 1-StDev and 3-StDev bands. The reason will come clear in the next bullet point.

Fig 2 – 1,2 and 3 sigma Bollinger Bands as a Map of the Price Action

3 – Bands and Price Action

Bollinger Bands maps the price action. By that, I mean we can assess how much the price is away from the mean. If we think of the mean price as the consensus of value at a particular moment, Bollinger bands help evaluate if the asset is overpriced or underpriced and profit from that information. That is so because the lines are pictured at a standard distance from the mean.

There is one theorem about a broad class of probability distributions called Chebyshev’s inequality (also called Bienaymé–Chebyshev inequality). The Chevyshev’s inequality guarantees that there is a minimum of data values within a certain distance from the mean value of a distribution. And it does not need to be a normal or bell-shaped distribution for this theorem to hold. It only needs to have a finite average.

From these figures, we can see that if we spot prices moving beyond the +2 Bollinger line, there is a 75% chance the price moves back. If that price extension goes to the +3 BB-Line the chance of it retracing is 89% and so on. That applies to the negative side as well so, prices below -2BB-line and -3BBline have 75% and 89% chance of reversing.

That means Bollinger bands are terrific overbought and oversold indicators. Consequently, it pays to have visible at least a couple of bands in our charts. There bands: +1, +2 and +3 Sigma bands will map your price action beautifully.

 

4 – Prices Tends to Visit the Mean

From the extremes, the price tends to find support on its Mean price. That means the price tends to visit the mean Bollinger line before resuming the trend (of course, this also happens when the trend changes). One recurring pattern is for the price to move beyond +2 BB-line, creating one or two candlesticks with a large upper wick and closing lower. Then, the following candles move steadily back (or sideways) to visit the mid-BB line, and then start a new leg up. That also applies to downward trends. The price moves below the -2BB-line and even the -3BBline and then creates a large lower wicked candlestick to, then, move back to the mean.

Since the mean is a moving average, the mean continues moving up or down in the subsequent bars, so, it is not uncommon that the price moves quite horizontally as can be seen on the chart.

 

5- From Impulses to Corrections

Bollinger Bands warns about pauses and the end of a trend. It also warns about the continuation of the trend.

Bollinger Bands expand with volatility and shrink with le lack of it. When we spot that the Bollinger bands are starting to shrink, it is almost sure the trend has stopped moving. It might be a consolidation period or a reversal. Therefore, band shrinkage is a flag for traders to take some profits out of the table.

Sideways range-bound movements make the bands shrink. When a breakout of the range occurs, the bands expand, signaling a new period of increased volatility and price movements.

 

 

Categories
Forex Daily Topic Forex Psychology

Two Mistakes Novice Traders Should Avoid

On this article we are going to discuss two mistakes novice traders should avoid to succeed in the financial markets. Reading a book about trading or a strategy article on a website makes trading the markets seem easy, But that is far away from the truth.

Judgmental errors

“We typically trade our beliefs about the market, and once we’ve made up our minds about those beliefs, we’re not likely to change them” – Van K. Tharp

 

Joe Novice comes to the markets, after reading a marvelous book explaining to him how to win easy money in the markets. The book has beautiful charts describing how. Joe has learned a lot from this book. Now he knows what bull and bear candlesticks are. He has learned to distinguish patterns. Head and shoulders, double tops and bottoms, the Morning Star and its counterpart the evening star. He also learned some handy indicators such as the Stochastics, the RSI, and the MACD. Finally, he has also get acquainted with the concepts of support, resistance, and breakout. He thought that was key to succeed

Prices Move faster in real-time than on a book illustration.

Joe founded his account with his first $1,000 to experience the exciting world of big wins. Then he downloaded his MT4 station to begin operating. He created the setup recommended in the book and started looking for major pairs and decided that for his scalping purposes, he should use 1-minute charts.

The first thing that surprises Joe is that prices are continually moving. He was switching from pair to pair on his laptop, but nothing happened until he left the chart and moved to another one. The price action seems to occur only when he wasn’t looking! That made him think that he must concentrate on just a couple of charts at a time.

Also, Joe had a hard time making decisions. For some reason, the strategy explained in the book only was evident after the fact. The right moment to trigger the trade seemed never to show. He was late to pull the trigger most of the time, and when not late, the moment to pull it did not appear right.

Representation Bias

How can a trader make money using patterns and levels everybody sees?

The fact is that all technical analysts are able to spot support and resistance levels. So why people make money trading breakouts? Or don’t they?

People believe in charts as if they were truths. They believe that charts represent the activity of the markets. In fact, bars or candlesticks are just approximations to that activity. The issue is that what we see is the representation of past action, but we do not see the reasons why the price arrived at that place.

What if most traders really didn’t have the right information to make decisions. What if only a handful of privileged traders owned that knowledge? Let’s suppose that these smart guys have the privilege to see where is the real supply zone. The zone where they’d do the worst harm to the herd of dumb traders. Wouldn’t it be logical that they tried to stretch the price to that zone to collect the best available prices, then turn back and move the price to the opposite side?

Under that assumption, the next day or week, another technical analyst would see the price extension and figure out where the stop-loss should be. It will reason the optimal place to be just below that zone. However, the fact is that there is an action-reaction phenomenon in the markets. The actions of the market participants change history. The market is an experiment, on which the scientist influences the result with his acts. If he were to trade the previous day, he might have decided the same way as did those who were that day in the market, and, so, would be wiped as the others.

So, how should we proceed?

The strategy should have clear rules of entry, stop-loss, and profit-taking

Traders should back-test the strategy and optimize some parameters. Then they should forward test it in a demo account or using one micro-lot.

After a list of 30 trades, the trader should have a minimum of data samples to approximate percent winners and reward to risk ratio: The two most critical parameters of any strategy. We do not talk about drawdown here, because drawdown is a dependent variable: it can be computed knowing the percent losers and changes with position size.

When deciding about stop-loss placement, Do not use pivot levels. These are already known to the sharks of the market, and will inevitably fail.  The best stop-loss placement is using the Maximum Adverse Excursion technique, a concept by John Sweeney.

Of course, to be able to use MAE, you should record your trades accurately, recording also the MAE information.

 

Categories
Forex Elliott Wave

Fundamentals of Elliott Wave Theory – Part 2

Waves develop in two classes, impulses and corrections. Impulsive movements are characterized by having a five-wave structure. Corrective waves, on the other hand, growth creating a three-wave structure. In this article, we will introduce the concept of motive waves, corrective waves, and cycles.

Motive waves

Motive waves receive this denomination because they create movement, or “impulse” to the price action, as it follows a trend. In the following figure examining the case of a bull market, waves 1, 3 and 5, are impulsive waves. This structure is analogous for a bear market.


Corrective waves

Corrective waves, as the name implies, are characterized by pushing back the price of the dominant trend. From the previous figure, waves 2 and 4 correspond to the corrective waves.

Cycle concept

As we have seen previously, a wave is composed of five waves, and a complete cycle is composed of eight waves, an impulsive part and a corrective part. For convenience in the identification process, we will label motive waves with numbers and corrective waves with letters. Later we will see the usefulness of wave identification to understand the stage in which the market under study is.


When an eight-wave cycle is completed, a new cycle of the same degree begins, as shown in the following figure. This formation generates a five waves sequence of a higher degree. At the moment, you should not be worried about the identification symbols. Elliott defined the labels and should be understood as a tool to help in the study, and not an objective in itself.


Recognizing this structure is essential to understanding the nature of the wave theory.

Categories
Forex Elliott Wave

Fundamentals of Elliott Wave Theory – Part 1

Ralph Nelson Elliott developed the Wave Theory in the 1930s. Elliott discovered that prices followed a sequence of repetitive patterns in form, but not in time and amplitude. He called these patterns “waves,” he also recognized that each movement was composed of five waves.

The Elliott Wave Theory is not a trading system nor a forecasting tool, but, rather, a description of market behavior. In this sense, Elliott waves enable us to understand the current price position and the scenarios that can be anticipated from it. In our first Elliott’s wave theory article, we will review its history and its underlying principles.

Nature and waves

In 1934, R.N. Elliott published his work “The Wave Principle.” It is this treatise, as he calls it, explains the basics of wave theory. In this work, Elliott explains that everything in nature is governed by a law which its causes could be unknown. However, when the law is known, forecasts can be made, regardless of whether or not the reasons that originated it are known. Both nature and universe, some phenomena are repetitive and can be predicted; for example, the lunar phases, the year seasons, the tides, and so on.

Human interactions are part of nature and are no exception in wave theory. The most common socio-economic activity is realized in the financial markets. Elliott remembers us that “there is no socio-economic activity in which so many resources have been allocated and with neither successful results as financial markets.” In this context, wave theory allows us to have an understanding of the current state of financial markets and their possible next path.

The five-wave structure

According to R.N. Elliott, the financial markets as a socio-economic activity hold a specific structure composed of five waves. These waves move in the direction of the dominant trend and are identified as wave 1, 3, and 5. Similarly, as the market is moving forward, an opposite movement is identified as wave 2 and wave 4. These movements happen against the primary trend.

Elliott, facing the question of why five waves and not another number, in his treatise explains that “it is a secret of nature” and it is not his goal to determine the origin or explanation of the five movements.

Elliott observed that wave 2 never moves beyond the beginning of wave 1, wave 3 is never the shortest, and wave 4 never enters the territory of wave 1. The following figure shows the basic structure of a five waves sequence.


Categories
Forex Harmonic

Harmonic price levels based on Music Theory

One of the most mind-boggling books regarding technical analysis and W.D. Gann was Tony Plummer’s book, The Law of Vibration – The Revelation of William D. Gann. It is easily one of the most enthralling and contemporary works for any Gannyst out there. Without going into extreme detail of the book, I want to focus on one part of this book that I found particularly interesting: Harmonics in Music. Back in the day, yours truly was a double-major in both music education and music performance (I was a Euphonium player – also the Trombone and Tuba). Anyway – on to the awesomeness of this article.

I want to stress that in the book, the author does not tell you how to apply the information into your trading or how to apply it on a chart. I think that is an homage of sorts to Gann himself (Gann also was very ‘cryptic’ about how to use his methods).

But I’m pretty sure I figured it out.

The Law of Three and Middle C

The opening of Chapter 6 in Plummer’s book begins with a quote from P. D. Ouspensky: “A study of the seven-tone musical scale gives a very good foundation for understanding the cosmic of octaves.” Plummer writes that Western music is based on a series of notes centered around the Middle C (The middle note of C on a keyboard, labeled C4). The Middle-C vibrates at a rate of 256 cycles per second. And one octave above that is the next C, C5. The rate of vibration of C5 is double that of Middle-C: 512.

In music, a scale is made up of 8 notes. In Music Theory and Aural Theory, or if you’ve watched The Sound of Music, you’re probably familiar with the song Do Re Mi. Do Re Mi is called solfege, or tonic solfa. The words: Do, Re, Mi, Fa, So, La, Ti, and Do represent the eight notes in a scale. And each one of those notes has its own rate of vibration. Here’s the table:

musicalharmonics

I’ve spent considerable time studying not only Gann’s own work, but also the work of Michael Jenkins, Constance Brown, George Bayer, James Hyerczyk, and others. One of the things I’ve learned from these Gann experts’ work was Gann’s use of Harmonics, which seems to be a broad term for calculating important price levels. There are various methods used that generally come to the same value area. Some of those methods are Gann’s Square of 9, Square of 24, natural squared numbers and others. Probably one of the most popular methods from the 1990s was a system called Murray Math. Murray simplified the application of harmonic ranges in both time and price. It’s useful, but not as accurate.

I’ve used a number of methods to apply Gann’s harmonics, and Plummer’s ratios have probably been the most effective. There is a piece of software called Optuma by Market Analyst. They actually have a tool that creates exactly what I figured out on my own. So it was pretty damn cool to use that software and see that I had come across a solution and application all on my own and have it confirmed by software created by people way smarter than me.

How I applied it

Using the vibrational number of 256, it’s easy to double that value and then double again. So 256, 512, 1024, 2048, etc, etc etc. These numbers, for whatever reason, appear everywhere in science and nature. Now, you can use these numbers for any type of stock, futures contract, forex pair or cryptocurrency. Here are some examples. Notice how much these zones act as support and resistance and how often prices trade within these zones.

Chart Examples

AUDUSD

AUDUSD

This AUDUSD chart is from using Optuma by Market Analyst. The harmonic values are starting at the octave of 65536 to 131072. I converted the 131072 to 1.31072. 65536 was converted to 0.65536.

XAUUSD (Gold)

XAUUSD

EURUSD

EURUSD

BTCUSD

BTCUSD

ETHUSD

ETHUSD

LTCUSD

LTCUSD

The rest of the images above are from Tradingview. I created a simple indicator that will plot out the lines depending on division or multiple of 256 that you want to use. You simply add the number you wish to, and it will plot out a full Octave from Do to Do.

Categories
Forex Elliott Wave Forex Market Analysis

Divergence between Gasoline and Crude Oil

A divergence between Gasoline and Crude Oil

Gasoline and Crude Oil are two energy commodities highly correlated. In the current session, Gasoline is moving bearish, but Crude Oil is moving bullish. We expect that Crude Oil would make a new lower high and continue inside the area between $70.61 to $73.06 to, then, develop a new bearish leg, with a target the zone between $63.47 to $60.28. Invalidation level is $75.24.



Forex Academy

Categories
Forex Psychology

The Importance of Mastering Trading Psychology

Introduction


As traders, we tend to learn the technical stuff and focus our attention on improving our technical analysis. Which is ok, but often, learning trading psychology is neglected. And at the end of the day, it is you who’s in charge of decision making, and you are the one entering your orders.

In my mind, mastering trading psychology is more important than learning chart patterns, complex wave theories, Fibonacci levels, etc. Even a layman can spot a trend, but then the decision has to be executed – do you buy or sell?

Our emotions govern decision making as they impact our rational thinking. You can do an exceptional technical analysis, but you may still lose money. You can do a poor technical analysis and still earn money.

The question imposes: why are traders who are knowledgeable about technical analysis still lose money?

The answer lies in the difference between real life and the markets and the ways we are conditioned to behave in real life vs. the mindset that is needed to be profitable in the markets.


Real-life vs. the markets


Cutting your loses 

In real life, people are not accustomed to losing. If your finger gets trapped inside the elevator hole, you would probably turn on the alarm, stop the entire building from using the elevator and call the fire brigade to help save your finger, right? You wouldn’t just cut it off and continue with your day because, in real life, fingers don’t grow back.

In the market, if your finger gets caught and you try to save it with your other hand, the other hand will get trapped as well, and you will lose both hands. So the solution would be to just cut your finger, as in the markets, fingers do grow back!

As you may have figured, the Finger analogy is when your position is starting to go against you. If you sit there and wait for it to bounce back, hoping you wouldn’t lose your money, you will lose more money. And the only solution is to cut your losses early on and have confidence that you will be in profit next time when you will be compensated for your losses and be in profit overall.

So this response has to be learned, as we have been conditioned to behave and think differently.

You shouldn’t be right, you should be in profit. 

Traders often feed their ego with their good analysis. Your ego tends to think that you should always be right and that being wrong is a very, very bad thing. That can sometimes create a bias rationale. For example, you have done tons and tons of research, and your fundamental and technical analysis; so, you have concluded that it’s a buy. You put your buy order.

After a day or two, you are in profit, good. But on the third day, the trade is starting to go against you. You keep saying to your self “it’s only a correction” I have done my research, and this can’t go down further. But it does. Even though you see you are losing money, you tend to keep your position opened. Why is that? Your brain creates a bias. It can’t even see an alternative bearish scenario, so you become loyal to yourself, as your ego also keep you congruent.

In real life, loyalty and congruency are great. If we didn’t have those traits, we would all be unreliable and spinless beings, and society as we know it would fall apart. But in the markets, you have to be able to adapt.

This is not about being right, you are not a fortune teller, you are a trader.

Numbing your emotions and the difference between knowledge and behavior 

Expanding your knowledge about financial markets and the ways of analyzing them is great, but you have to internalize it into your behavior patterns. For example, I smoke cigarettes, and I know that they are harmful. The knowledge about the harmful effects of smoking is not overpowering my internal emotions of the desire to smoke.

Another example is exercise. We all know that we should eat healthy food and exercise. But the fast-food tastes good, and our emotions are governing our decision making, and we end eating that burger. Our laziness chains us to our beds, and we hit that snooze button and sleep an extra hour, leaving us without any time to run in the morning.

That is why we, as traders, need to suppress our emotions of greed and fear that can impact our decision making.

Patience

In the modern-day world, we are bombarded with information through social media. If something doesn’t appear interesting, we are hesitant to watch it to the end. That conditions us to follow our attention and not to be in charge of it. And that’s ok in real life, as our attention is limited, and with so much out there, it would be impossible to keep track of everything.

But in the market, you have to leave that urge behind to know if it is a buy or sell, and get it over with. Trading is an activity.


Conclusion


The market environment is diametrically different from the real-life environment – it’s totally unpredictable, and we need a totally different mindset to overcome the challenges of surviving in that environment.

In real life, you would go to a train station ask a clerk where the next train is going, and if you like the direction, you would sit on that train, take a nap, and when you wake up, you would arrive at your desired destination. It is predictable, and we are accustomed to that predictability, and our behavior has been built around that predictability.

You would check your indicators in markets, make your projections, ask people what they think, where the train is heading, and still won’t have a definitive answer.

That’s why mastering trading psychology is so important. It is the way to help you find the right mindset to manage the unpredictable nature of the markets, and here at Forex Academy, we are here to help with our services.