Thursday, April 23, 2015

Use a Filter

I have a spectrum of resources in my overall trading regime that I use to acquaint myself with the current foreign exchange trading environment. I access price quotes from multiple sources, charts, news feed, and bank reports from highly trained research teams, periodicals, and financial news broadcasts.

I am a technical analyst and rely most heavily on my analysis of the price patterns identified in the charts. I also watch the micro and macro fundamental developments in the larger global regions as an aide to understanding what is transpiring with price patterns. Charts do not lie. Although the additional resources are important to maintain a pulse on the market, be very careful what you allow to influence or block your analysis and view of any opportunities to trade. I see many developing traders move from strategy to strategy driven by their insecurities and belief that someone else holds the golden wand! Developing traders will move from strategy to strategy with no clear plan. If you do this, I can guarantee that you will lose. This advice is worth a minimum of 10K to 1M to you!
Some years ago, countless authorities were predicting the GBP/USD to hit 2.000 when the currency pair rallied 3,500 pips to 1.9100 between Aug 2003 and Feb 2004. I specifically recall watching a string of currency strategists on Bloomberg unanimously calling for the GBP/USD rally to continue to 2.000 that year.
Technically, I observed on the charts that the currency had just completed a distinct top formation suggesting it may experience some pullback, at least for the time being. While all other strategists were bullish GBP/USD, one lonely sole sat in a chair at the Bloomberg studio and plainly said, “The Pound is done.” Within 5 days, the GBP/USD dropped 650 pips. If I had listened to the majority of “talking head” professionals on Bloomberg, who had their own reason for believing the rally would continue, I would not have taken the short position for a modest gain of a few hundred pips for the week.
You will miss some very good trades listening to others opinions. Furthermore, others opinions can keep you out of good trades. The more comprehensive your knowledge of the market the more you can trust in your own methods, which you have tested, understand and have a clear knowledge of the rules that guide your decisions.
Do not consider any other traders commentary when you are already in a position with a

defined exit plan.
There is no other person in the world that knows your mind, emotion and will. How can a separate mind possibly tell you how and when to enter and exit a trade if they have no understanding of the foundation your trade is based on?
The market environment is constantly changing, so an opinion or insight one hour can completely change course in the next hour. In this case, “all bets are off!”
If you do not filter the opinions of other analysts and traders, you may end up very confused and never make a trade, because every opinion will be pointing in different directions for different reasons with different plans. Listening to others will keep you out of good trades, put you into bad trades and talk you out of a good position you are in. It is likely that your trading results will improve when you become an independent thinker.

You must believe and trust in yourself and your own methods.

No comments:

Post a Comment