The top 4 critical points in forex trading

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Some are panicking and some are taking advantage of the chaos and making some serious money. Recession? Maybe. I got into forex trading around 1997 so I have seen a few major market crashes and have experienced the major crash in 2008 and made some serious money in some of the months.

Here are some critical points which will assist you in your trading:

Do not keep your trades open for long periods of time

The market saw massive volatility and it seems to be correcting at the moment, but nothing is fully clear. Nobody knows how the market is going to surprise us next and how the market participants are going to react. The market direction MAY HAVE changed, but there still is no confirmation. Therefore if you are NOT in a long term trade, don’t get into one. We are talking about the currency markets here. For stocks and other charted markets, different trading strategies apply. Do not get on the bandwagon of short selling just because you see the market bears reacting. Stop Hunting is the subject for the next 2 days so beware and this me talking about stocks it’s called portfolio rebalancing.

Trade the tops and bottom of ranges and breaks and retests of the tops and bottoms

While trend trading might be tempting at the moment, as I said before, the market is not as clear as we would love it to be at the moment. You know my rules when in doubt stay out. My currency flows are all pointing to different directions when it comes to trends. However, one thing that seems to be happening is range. So for us it is simple we will trade the top and bottoms of the ranges on a daily charts with 35 pips stop losses. From today onwards till the market gets back to normal, as soon as we are up 30 pips we will move stops to break even and take advantage of the market short term.

 

Using high leverage and larger position sizing out of greed is a NO NO NO!!!

Since the markets are not really foreseeable, try to avoid high leverage so if there is a sudden change in the market, you don’t end up wiping up your account. As we covered in the various articles on the Platinum blog, leverage is a double edged sword. While it can magnify your gains, it can at the same time multiply your losses as well. Platinum Traders should already know to use high leverage when they have at least 95% confident in the market direction. It is safe to say that no one really has confident in the market direction at the moment. The one thing I do not get on with any traders that loose their account within just one day I mean we are all mature here for an example you have a rule DO NOT RISK MORE THAN 1-2% how dare you even use more risk than this…If you are I suggest you should not be anywhere near trading as you will never make it blowing accounts happens once or twice when you are in your infant stages. If you are blowing accounts after 2 years of active trading.

I would love a personal chance to speak to you and believe me it will not be pleasant but it would be required.

Pay attention to stop losses on trade and trade frequency

While in normal times we are a fan of identifying a strategy and letting the markets run our position, this strategy is no good during current market conditions. Trading short term means you have to at least check your positions from time to time and be prepared to get out if the sentiment is not on your side. While you have set a stop loss for your position, you would still want to check the market sentiment, and if it is not strong enough to reach your target, you are better off just getting out with lower profit than staying in and hoping for the best.

Revenge Trading

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Revenge trading in Forex comes from one thing and one thing only, blaming the market for your loss. But let’s think about this. The question should be who is responsible when you have a loss? Of course, the correct answer is “You”. The market didn’t cause you to have a loss. So getting mad at the market and trying to seek revenge really doesn’t make sense, if you’re responsible for your actions, then when you seek revenge for the loss, you are actually attacking you as it was you who pulled the trigger. Forex trading is all about taking responsibility. I’ve seen enough days in trading to handle losses and believe me some big losses. Losses that would make you cry, because they did make me.

When you get mad at the market and try to get your losses back in an emotional way instead of a rational and logical way you are viewing the markets through your emotional filters and it is not the best state to be trading forex. If you are frustrated and angry, you are just going to make trading mistakes that will most likely cost you more money.
Many people are confused at why revenge even comes into play during trading. But it’s really very simple. Think about gambling, for example. You can only lose what you decide to bet. When you bet the money, it’s easy to take responsibility for your losses because most likely you had to actually physically place the bet on the table, and you can only lose what you decided to risk.
Let’s look an example: Let’s say you lose 35 pips in the last trade. Will 20 pips profit be enough in the next trade? The market may be clearly telling an objective observer that’s all there is in this trade (20 pips). But to the person who just lost 35 pips, 35 pips is what they will see in the markets, the trade rallies 20 pips they hold on for a bigger gain and it reverses ending up 20 pip loss, adding to the earlier 35 pip loss. Now we are in a state.

But let’s think about this. Does one trade really have anything to do with the other? The market doesn’t know or care how much you made or lost in the previous trade. It has no bearing whatsoever on your next trade or your next fifty trades. One trade has nothing to do with the next trade. They are not related in any way, other than in your own mind, you almost have to be Zen like, present and in the now moment. Attempting to get back in one trade what you lost in the last trade doesn’t make any sense. You can only profit from what is available in front of you. And again, the opportunity or lack of has nothing to do with your last trade or last three trades.

When you feel compelled to get back what you just lost. The flight or fight mechanism kicks is, your survival instincts as money now a days is very much attached to our survival. We move from the pre-frontal cortex to the reptilian part of the brain and become highly emotional. You want to flow with the market, not fight it. You can’t fight it, because you can’t win that way. You can’t change what the market will do. You can only change yourself.

 

 

 

Trade the FOMC live with Platinum Trading Academy

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Hope you are doing well today! This is really an important post today and the reason that I would like you to make a special note of this is, due to the one of the LARGEST EVENTS OF THE YEAR. It is the FOMC decision day. Once this decision has been made, all the currency pairs have a chance to get one direction and there is a lot of pips to be made. If you would like learn how to trade this event

Book a FREE Consultation with one of Platinum’s senior mentors and we will show you exactly what to expect in the next 3 money making months.

On September 17th, the US Federal Reserve will announce if it raises the interest rates for the first time since 2006 or not.

There are so many questions surrounding this event and we at Platinum Trading Academy like to break down the whole event from the basic understanding of the event to charting the advanced trades.

Platinum’s fundamental overview on the fed decision is as follow:

FOMC: Federal Open Market Committee
President: Janet Yellen

Platinum Fundamental View

FOMC, WILL THEY? OR WILL THEY NOT?

I have been talking to my traders regarding this indecisive person by the name of Yellen, it is way beyond my scope after 15 years of trading to actually understand what is going through the mind of this person. We have been hearing nothing but empty promises of increasing the interest rates. First September then October than December. I mean she has an addiction of making false promises well -don’t they all? Here are my thoughts; for seven or eight years, the U.S. has basically had zero interest rates. All I hear is how good the U.S. economy is and how resilient the U.S. economy is, for all this good and resilience it can’t handle a 0.25% rate hike after eight years? Give me a break? Either the U.S. data is as questionable as the Chinese data, or Wall Street has Janet Yellen’s arm twisted so far up her back that she can’t sign the piece of paper sanctioning the rate increase. One thing I do know is that Main Street USA needs confidence, if rates do not move they will believe that they are being fed a load of nonsense once again and confidence in the economy will nose dive. Main Street functions on the mental state of the U.S Economy and the U.S. economy needs confidence as it is consumer driven. This consumer confidence feeds so many internal markets, housing, home improvements, retail spending, wholesale inventories etc.

If Yellen carries on behaving in this manner and does not sign this document authorising the interest rate, she will become another Bernanke.
With regards to the U.S. economy, the bravado from political commentators and analysts versus the actual economic data, which is mixed, makes for great TV but the continual mixed messages regarding the U.S. economic recovery and its strength is frankly confusing to many people. All this does is create uncertainty and affect confidence. It is quite a bizarre and this continued uncertainty is bad for the markets.

Should the FOMC raise rates?

I think that after the dust has settled my long and well-known fundamental views on divergent monetary policy by central banks will come into play. The USD should strengthen across the board. I do however have this buy the rumour sell the news feeling. This 0.25% hike has had so much press coverage for months, but, it could be the biggest non-event ever after the dust settles.

Should the FOMC delay “All bets are off”

As far as I am concerned for a good few days, although unless the FED changes monetary policy, very unlikely, it just means the rate increase is more inevitable and closer moving ahead? However, a delay, in my opinion is a weakness, and frankly it will create uncertainty and we will have volatility based around uncertainty, which is the worst type of volatility to have. Should a delay happen, the analysts on CNBC would be running around like headless chickens trying to be the one who makes the most outrageous timing prediction moving ahead? You can just imagine the exaggerated headlines to keep viewers hooked… “Christmas at the FED is off”… “Janet Yellen has no time to buy a turkey this year as she agonizes over rate hike” and so on. Any proposed rate increases around December will, of course, create additional headlines and could affect sales around Thanksgiving (November 26), “Black Friday” and “Cyber Monday”. This is why I think the FED might raise this week.

Even if the FOMC raises rates and it’s viewed as an error in the future, the FOMC have a secret weapon QE Bloody 5!!

There is so much to consider for the FOMC, therefore it may be sensible to trade small if not at all until the news is out.

How to adjust your trading mindset to trade with the FOMC EVENT:

 

I have highlighted several potential opportunities within the USD majors for this coming week. I am however very cautious this week given that the FOMC will dominate proceedings. My feelings are that we will just mainly be range bound up until the FOMC release. My gut feeling is that as usual when there is a major news announcement all that happens is that most well-traded pairs gravitate to the middle of their range in anticipation of the data release. From a trader’s perspective this week, in my opinion, whilst I can fully understand wanting to be long the USD ahead of the FOMC on Thursday, I would certainly be in the camp of, if you have trading positions open, they should be smaller. In my opinion, this is the week to pull back a little on being over exposed ahead of the FOMC.

How to manage your open positions in major News events

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At Platinum Trading Academy we Prepare our traders for every single event which is linked to the markets one of the sticking points for traders is around how to handle open positions when major news announcement are approaching. There are several forex trading strategies that I trade where this plan wouldn’t be ideal and I will highlight these as I write. The point however, is that this information should at least show the importance of having an idea what to do with a position when there is about to be a major news announcement. For me, please bear in mind, when I say major news, I mean RED news event that are listed on Forex Factory or our Forex News Section. I would take no action if an announcement with low or moderate impact was on the horizon.
Also, I am only interested about announcements that pertain to the specific currency pair. In other words, a big EUR announcement would not make me alter my USD/JPY position. Why do we need to worry about news announcements when we already have a position, and we already have a stop loss and limit/profit target in place? We worry about this because a major news announcement can move the market a great deal. The examples below will show how these announcements can create more risk than normal.
A few things to always remember when reading about this subject are that -

  • You can always reduce risks by adjusting your position size. It is easy to add back and adjust your cost average after the news event is over.
  • A lot depends on what type of trade you are currently live with. For me my approach on news is different for Longer Term Analysis, Daily View Trades or Platinum Trading System Trades (Short term trades)
  • It’s all about RISK v REWARD
  • It’s all about PLANNING YOUR TRADES and TRADING YOUR PLAN

Example 1:

IF YOUR POSITION IS NOT IN PROFIT

We would, in most cases, leave the existing position intact. There is an exception to this rule. If the trade is 90% of the way to the stop loss position already with the broker (e.g. -50 pip stop and within 5 pips of stopping out) I would just close this trade. The reason for this is the concern that a big move against the trade could create a gap. If the gap goes past the stop then you could lose more than the risk tolerance in place, this is not good. If the trade is not near the stop losing place, just prior to the news it may be fine to leave the trade live and see what happens.

Example 2:

IF YOUR TRADE IS AT BREAK EVEN

With this scenario that trade would usually be left live. However, there are a couple of exceptions.
First, if you think that there is a chance the news could gap beyond the stop loss, you should exit the trade. This is rare but this could apply to a very short-term trade. Secondly, another reason to exit the trade is - if the original charting pattern or Platinum Analysis, no longer appears to be valid if the original reason you placed the trade is gone, it makes no sense to continue. One would normally not expect this as most trades should be well thought out in advance but with a less defined strategy it could be a situation that you find yourself in.

Example 3:

IF YOUR POSITION IS IN PROFIT

This is probably the most difficult of the three scenarios to manage. In the first example, the trade is more likely to be stopped regardless. The second example happens very infrequently. Example 3 is quite tricky. If the currency pair that you are trading is about 50% to the limit/target or better, personally, I would seriously think of exiting the trade. The reason is you can go from a nice profitable trade to a losing trade in an instant, or even be stopped out. However, there could also be some subjectivity in that level depending on how much you think the announcement could move the pair relative to the size of the pattern. The main objective is that you do not want to go from a profitable trade to a losing trade in a short amount of time. Psychological philosophy comes into play here, but for me it’s all about the risk reward. I would adjust the trade size and take profits off the table. The position size can always be added to after the news event is over, if it is the right thing to do. A news event generally represents a move that is random, rapid and usually large. Therefore, I always ask myself questions such as, “If I had a 50/50 chance of the currency pair moving up 30 pips or down 30 pips, would I take it right now?” This is a very basic and very simple example, it is like lots of things associated with forex trading, a grey area, and it generates lots of different and conflicting views. The easiest approach is just ignore the news, but I think by following the criteria listed above, forex trading results could be improved when you have a position in the market as a major news announcement it about to be released.

Psychological Pitfalls in Forex Trading

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Psychological Pitfalls in Forex Trading

The desire to be a millionaire in a day

The desire to be a millionaire in a day manifests itself in many ways. The main ways are fear and greed and they inevitably lead to other problems. If you think about it, the majority of the issues newbies have stem from the desire to be a millionaire in a day. Things such as

  • Over-trading
  • Poor Money Management by risking too much

FOREX TRADING will not make you millionaire in a day. It will likely take some time before you are trading well.
FOREX is a career in the long run, if you are successful, it can give you a very relaxed life.

Fear of losing

From a young age we are taught that money is important and that without money you have no real value. We are conditioned to believing that to be successful when we grow up, that we must have lots of money. This is because the reverse is also true. If you lost money then you are a failure as it is the opposite of making money. This in turn leads to some newbie traders being afraid to pull the trigger and actually take a trade.

Some newbies trade demo accounts for two years, never summoning the courage to open a live account. Some newbie traders with live accounts panic whenever they enter a trade and in turn make rash decisions.

Take a look at people like Richard Branson, Donald Trump, Alan Sugar and Warren Buffet. These guys are billionaires (or close enough to it) and each of them has failed many times. Richard Branson has spearheaded many failed ventures. Did those failures set him back though? Hell No!

I think losing some money to the markets is actually beneficial. It teaches you some very important lessons. What is damaging is the fear of losing money. The fact that you think about it puts you at much greater risk of it actually happening. You have to trade with a positive attitude. So get rid of those fears and worries, they will not do any good to you.

The truth is that you are going to lose money in the markets, it’s unavoidable. Every professional trader has lost money. Not every trade will be profitable. The market simply doesn’t always work in your favour, and there are times especially as a newbie, that you will be stung. If you end up blowing your first live account … so be it. As long as you pick yourself up and try again, you will be a better trader for it.

 

 

The need to be right

This is a good one. Peter opens his platform and enters a dumb, baseless, long trade. He targets 100 pips and has a 50-pip stop loss. The trade goes against him immediately.
It goes down, first ten pips, then twenty pips, and then thirty pips. When it reaches forty pips Peter decides he doesn’t want to lose another trade and moves his stop loss down.
The price keeps falling:

100
120
150…

Eventually, Peter closes out his trade and he has lost a huge portion of his account.

Peter was not able to accept that he has taken a losing trade. He kept pushing the stop down in the hope that it would eventually turn around. The need to be right is an account killer.
At Platinum Trading Systems, as you are aware we use fixed stop losses 20 pips for intraday and 35 pips for long term and these are line with my RISK MANAGEMENT targets and ATR’s for stop losses. In addition, sometimes during a “SQUEEZE” they are moved to accommodate the increased level of volatility.

Being undisciplined

I saved this one for last because, even though it is one of the most common and dangerous pitfalls, it is rarely discussed. A trader who lacks discipline can never make it in this business. Many traders are guilty of lacking discipline for many reasons.

The main culprits are what I like to call “System Jumpers”. These are the traders that are constantly tweaking and changing their trading methods. These traders do not realize that learning to trade a system efficiently takes time.

System Jumpers are traders who lack discipline to stick to, and learn how to trade a system. They try it for a week and when it doesn’t work they jump to the next system or method
Another common action of an undisciplined trader is abandoning a perfectly good trading method. Every trading method has period in which it performs below average. No matter how versatile a method is, it cannot perform at peak efficiency in all market conditions. A true trader has the discipline to stick it out through hard times.