Masterforex-V: The 12th grade: The Basics of Trading Psychology. - Masterforex-V

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The 12th grade: The Basics of Trading Psychology.

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Posted 08 January 2010 - 16:42

12-th grade. Basics of Trading Psychology.



I. Before studying and trading, ask – do you need it? Forex, unlike any other activity – is high extreme.
Fundamental
principles of Forex Trading.



And so, you found out about the existence of such a tempting and attractive “get-rich quick” scheme without any serious education and training as Forex. Forex is described like that when you are invited to short-term forex courses. Even the ratio of successful traders and losers does not seem so terrible for you at the background of bright prospects. Don’t believe that trading can be learned quickly. Studying FOREX you have to see the whole picture, the relationship of each movement of prices of various Timeframes, feel it. You will never be a master of the situation, you will only be able to follow the market. Profession trader requires making decisions, taking responsibility for their adoption, rather than looking for clues and hints outside.

Major misconceptions about Forex market

1. Forex trading doesn’t require serious training.

2. Transactions in Forex market is like roulette game – players make bets, someone wins and all the rest are losers.
Forex – is not roulette, because on the basis of exchange rate price changes lay certain patterns and regularities. The value of the currency depends on economic performance and political developments of the country; determined by preferences and expectations of market participants. 3. One’s winning can be achieved only at the expense of others’ loss.
In forex market, not everyone play on the change of prices, there are groups of large participants using currency exchange operations for other purposes. These are – exporters, importers, large investors, etc. Due to the fact that leading world currencies are freely convertible at freely floating rates, such operations may themselves become a source of income.

4. Money in Forex market – is goal.
In Forex market money is a means of production, goods.

Forex trading, unlike any other activity, in addition to serious professional knowledge, requires a creation of an exact trading system, strict obeying the rules of system, and continuing working on one’s you.

Are you ready to devote part of your time to studying and trading in Forex ?
Do not rush into a decision, the market will not run away from you, it is a long time without a break, dancing dance of death of deposits. Below, I quote the fundamental principles of Forex trading, a huge experience of practitioners lays behind these few lines. Don’t neglect any of them.

Fundamental principles of Forex trading.
· Before starting an active trade, Know yourself and your weaknesses.
Avoid carelessness in the work.
Trade with a clear, simple and exact plan.
· Remember that there can happen anything in the market.
· Do not trade against the trend, against the price movement of the market.
· Do not buy on the top point and sell at the bottom.
· Do not trade just because to trade.
· Learn how to wait, but waiting for - to act quickly.
· Trading - is a work on your weaknesses.
· Achievements the only emotionally stable traders.
· Don’t bemoan earned.
· Be prepared for losses and not be afraid of them.
· Do not let small losses become devastating.
· "Collect" profit till the last drop.
Yours faithfully,

Gani.
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Posted 08 January 2010 - 17:38

II. Setting personal goals, planning study Forex, practice on a demo. Knowing yourself and your weaknesses.

Below, I will give an example a rough plan how to cope with the set task in topic. Pay attention to the fact that this is a sample plan, eventually you will change it so that it would be comfortable for you. Periodically review each item, sum up, sets new goals.
Sample plan.



1. Summing up my life's journey so far. The objectives of my life.
Divide the global goals on a short-term. Write the date of implementation of Short-Term goals.

2. The available resources to achieve the goals:

- My abilities and weaknesses
Make a list of features of your character, your strengths and weaknesses that may help in the development of trading, which may interfere. Try to be as frank with yourselves. Do not be afraid of your negative character traits (you are not alone on the holiday of life - they are inherent to every human being on earth), with love and gratitude, accept yourself as you are. Forex can be a good teacher for you to work on you. The choice is yours – you will be with him to fight or make friends.



- Time
Determine for yourself how much time you devote to study and work at Forex.
Example:
throughout the day - 4-6 hours
week - 20-30 hours
month - 80-120 hours.
Also determine what time of day you work. <br style=""> <br style="">

- Financial resources
· Amount which you have for further work on a real account - respectively, which would avoid the psychological discomfort, open a demo account in the same amount. Money is a commodity, a tool with which you have to work. We must learn to apply them accordingly.
· How much do you want to earn per year, per month (by day).
What % - ratio Forex will be a source of income for you.



- What can help and hinder you to learn the profession trader. This refers to external factors: family members, pets, friends, business partners, communications,
and unforeseen circumstances.
While trading, maximum concentration is important. Forex does not forgive negligence, emotional imbalance, etc. Try to limit yourself at this time of unnecessary contact.
At the same time, discussing with peers or with family members, your successes and failures, you can visit the insight - a new qualitative vision of the market or the decision of some problems, telling others about the importance for you, you are telling it, especially me (looking at a different angles).



3. Is trading consistent with the goals of my life.

From all of the work done, move the temporary one, which will be reviewed at the end of time, how harmonically Trading can enter into your life than you have to sacrifice by going down this path that you can get. Decide what you want to trade.





4. Planning studying and practice of the profession trader and work on the demo.

To achieve the goal - to become a professional trader - you need by studying Forex and practical work on the demo, to see the whole picture, the relationship of each movement of prices of various TF, feel it. Forex is very complicated and capricious organism. You will never become a master of the situation, you will only be able to follow the market.
Tune in for the long-term work, based on the amount of time you identified the resources, make an individual work plan for the most comfortable for you. Divide it into smaller paragraphs to mandatory putting deadlines.
Do not hurry and do not try to embrace the boundless. The market will not go anywhere. Decide what you want to trade.


Yours faithfully,

Gani.
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Posted 09 January 2010 - 20:14

III. Moments in Trading connected with psychology.

About the psychological problems that arise in the process of trading and, in particular, trading in Forex, written in the mountains of literature.
I just want to identify these psychological problems. You first coming to Forex should be prepared for them. What kind of problems are they?



1. Fear of losing money.

Fear of forex appears after the first failures in almost every novice trader. What appeared previously as simple and understandable (in training courses from the mouths of the teacher, the history of quotes on trading terminal, in demo account), suddenly turns out to be not so, as originally imagined himself a beginner. To his surprise he finds that:
a) quoting system of exchange itself is given in such a way that even in a strong trending movement there are required rollbacks, the simulation of a turn, suddenly mini-flat or something;

b) trader's own dealer often works against him - on the order entry suddenly appears: the price has changed, and the opening and closing of the transaction taking place is worse than the trader had planned;
c) a huge army of analysts' fundamental and technical analysis, reading of which novice strenuously trying to unravel the mystery of his failures, only confuse him completely.
What is the result: the fear and uncertainty in him appear even on those who have never had them.



2. Uncertainty in your trading system.

You have chosen to trade the trading system, for example Masterforex, you work in real, but you can see that not only lose profit, open the transaction later developed rules, you close it before, knowing pretty well that the currency has more potential progress. What to do? How to resist the fear and uncertainty?
Masterforex recommends:
a) go for a few days from a real account to a demo account. Your task will be to do no less than 20 transactions for one trading session correctly.

b) sum up your work in Forex market every evening, evaluate the result objectively, the potential of which is available to your trading system, and make notes for yourself how tomorrow you will be able to earn more than previous day.
c) Bring your trading system to automatic level on demo account . As taught B. Williams, work at the subconscious level.

3. The problem of "gambling man", when a trader can not miss a price movement, even knowing that it is Flat, that when you open the transaction in Flat - profits may be minimal, loss - the maximum, and the nerves in this "game" (not work) will be shaken at full.
Having faced with this problem, you must clearly answer one question - why did I come to Forex? To Play? To Work?

You have come to play - all psychological problems associated with gambling your money, then here only doctor can help you.
You come to work and earn. In this case - self-discipline and common sense! I would like to quote from the site o9f Borishpoltsa (one of well known traders): "One of the most important properties of a trader's ability is to wait. Can’t stand waiting? Calm down - the market existed until you; the market will be after you. So your profit will not escape from you.

Observe a cat - how it knows how to wait while hunting for a mouse or bird. It can wait for hours without feeling any inconvenience, even getting pleasure from it! And all of this is for to inflict an accurate and instant hit in a decisive moment. And if target escapes - cat goes without any regret about his business - "will catch tomorrow”. Most people whom I know can not wait. They are used to catch up. This is a fundamental difference I. Catching up is always late, though always in a hurry, he always acts out of place, as not ready to work out the changes. Emerging trader is doomed." Here, neither subtracted nor added. Capacious and colorful.

4. Self-doubt, lack of character and commitment, as in those moments, and in life in general.
What to do? Master wrote: Strategy, Tactics, plan, goal.
Recommendation:
a) Teach yourself discipline - where you open a transaction (known point, not 50 points after it). Where to close the position. Range of movement on GBP - not less than 70 points per session;
b) How many lots and where to go. How many pips you'll take. Check out the history of the behavior of currency pairs that are used (their behavior in Flat and various kinds of trends);
c) 2 pairs, in principle, is enough - but you need to know and feel them as your 5 fingers.



5. Greed and the desire to get all at once. Believe me, you won’t get everything. Listen to the experience of professionals. It is impossible to wake up as an adult if you have gone to bed as a child. You have to go through certain stages of your growth. Here they are:
a) demo account;
b) micro real trading account - the work of 0.01-0.02 and more lots,
gradually increasing the value of the fractional micro lot;
c) a standard Forex - 1 lot and above;
g) Work 50-100 or more lots, as a rule, the investors' accounts.
The difference between each of these stages is the same as between demo account and Microforex



6. Forex is as a drug to which a trader is addicted to and without which he can not simply live.

Reasons for that, I hope, are clear. Everyone subconsciously dreams about the beautiful and prosperous future and wants to pass this way the shortest and easiest way. Here, Forex appears, colorful ads of various DC, stories about Soros, reading of books "Playing in market is simple!" (playing is simple, but earning is difficult), etc.
In the end, losing one account, a person convinces himself that it was an accident. After losing the second account, concludes that much has been learned. After losing the third account, invents some other reason again ...
And how could it be otherwise? Think about it. Objectively, if nothing has changed neither in your trading system nor in your psychology, why your fourth trading account should not be played as the previous three accounts? Moreover, your way 1 to 1 is repeated by almost all Forex traders and of stock market.
The amount of your trading account should not cause you unnecessary emotions. For some it is a few hundred dollars to several thousand others, etc. It is a tool for your business development (working on Forex is work, not a game).

Masterforex-V offers his own vision of Forex as a business:
a) verification of your trading system (criterion – tripling the accounts of the demo);
b) when you open a live trading account, select the amount that you are not afraid to lose. There are micro accounts from 0.01 lots and mini 0.1 lots, depending on your financial situation;
c) try to get acquainted with those whom you are goint to open a live trading account. To do this, open a special section for the heads of various DC in our forum for your first acquaintance with them http://forum.masterf...p?showforum=45;

g) Being sure how you can get a week for 0.1 lot - go to the next 0.2 lots and try to take the same number of pips that you had earned with fewer lots. Take even greater risk with proportional number of lots in strong trend.
d) earnings partly taken out, partly capitalized. The part that you took out in the form of profit, just divide by the K-ration, and what you spend on everyday needs. Thus, you get a purely psychological double or triple system of support

n) Main is result, which you summarize and analyze in the evening of each working day and at the end of the week, records as the results in a notebook. And the same capitalization account is needed in order to be able to earn more. So keep calculations, both in terms of the total result, and in terms of interest you receive income.
g) Invest part of the capital in other absolutely not risky financial transactions (from deposits in the bank to purchasing real estate, etc.).
Listing all is impossible.
Now Forex has become your business.
Yours faithfully,

Gani.
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Posted 09 January 2010 - 21:04

IV. How active traders solve matters of psychology for themselves.

Masterforex-V
Let me give one example, how I personally was able to overcome the fear of opening transactions without hypnosis. Already earning a in a live account, I summed up my trades every night and saw what a huge percentage of the profit I do not get in Forex. I went to a demo account for 2 days. Result - I have sharply increased the demo for 2.5 days. And fear has virtually disappeared. An interesting remark of my relatives, when they saw the results on the demo account: "And why don’t you earn so much in a live account?
Note: I began to open transactions towards a weekly trend, adding position on each rollback with reversal moving averages, without obeying any rules of money management.
The belief that my method and Trading system is correct and can provide a normal profit helped me to overcome the fear.



AIB
Initially, during trading there was a whole bunch of fear and uncertainty, and the passion of the player, and greed. But I decided for myself that Forex is not a game but a job and work forever. First of all, I wrote my trading system point by point, where ther is a response to any emerging situation during trading. I know that my trading system is profitable, and I strictly follow all the items I have set as the rules.

Dominika
We are all alive, we are still inherent.
The main thing is not to lie to you, try to solve the problem, and not to stand in the position of the ostrich.

GRT
Writing a diary. Analysis of transactions per day in the evening. Analysis of the week in the weekend. And after some time to review. Well, do not hurry. Accumulate experience. Do not try to be all the time in the market, especially if your Trading system is not for M1.


ABV2006
In this work, there is always a ragged rhythm and doing all sorts of home and business, and continuously monitoring market is unrealistic and not very healthy, so it's important psychologically strictly and clearly to switch from the virtual reality and vice versa. In fact it can be difficult – people are too inertial system. Here is just useful psychophysical technique of the East - I just felt myself in the need, just doing gymnastics ... Just did the "two in one" - and exercise and education of the spirit and discipline.... Well, on the basis of all this, really try to improve the quality of transactions - to know and be able to go where 40-60% of the deposit on your TS - and then for 2-4 hours is enough in the day..

Dinet
Golden words of Westlock helped me psychologically: 1. not earned - not lost! 2. Greed leads to poverty!



ATEI
1. Fear. It is necessary to put an end to profession without overcoming fear. Loss of deposit is unavoidable, matter is how quickly this will happen. How I solved this problem for myself. I had never had fear as such an extreme form. I haven’t lost any single account and not because I'm "great" trader, but simply because of the innate caution. There was no stability, although the profit was rare. But fear prevented working with greater efficiency. So, I had taken 8 sessions of hypnosis with a professional therapist. What was the result? - Creating my own trading system based on TS of Masterforex-V. Now it is no difference for me what analysts of TA and FA write. I watch the Forum recommendations by Master and messages of guys in the "Strategy and tactics of the current trades”.

2. Uncertainty. I Overcame it after testing own TS on demo accounts and, very cautiously, in live accounts. I don’t see any other way. For beginners, use the TS of Masterforex-V, but using your mind. There should be no more than 2-3 PRINCIPAL trading signals. But how does it work, you need to know as "Our Father".
3. Excitement. I do not know, never encountered before. Above wrote about the innate caution.
3. Greed is won as follows. I tried to follow the rules of own the TS clearly (it's not so easy as it seems). The largest and the only loss is because of violation of own rules of TS which are written by my favorite myself. . Conclusion-discipline in our business is a great thing. That's very short. Otherwise, you can write a novel. I try to teach novices the same in the Department of MBA. And another quotation from Olga Swallow: Listen guys, then to avoid stepping on rakes



"THE FIRST GOLDEN RULE OF PROFESSIONAL TRADERS – TO SAVE DEPOSIT , PROTECT its amount.
SECOND RULE OF PROFESSIONAL TRADERS - get any (even the most minimal) profit, without having suffered any losses.
The first rule of just player - to make a profit at any cost - even at the cost of deposit.
I - am not a player, I –am a trader. It is difficult for me to understand players.
Therefore, we will talk about trade with the position of professional earning trader. "I specifically quoted, respected by me, Olga Swallow. These principles I try where possible to follow, and what I want you to do. I express my personal opinion. Not everyone can work the same way, it's like arguing whether T – 90 is best or the latest Mercedes model. All that brings profit to you is CORRECT.



Nurivev
I solved the issue as follows. I found TS that is right for me. For example, I do not like to be out of market for a long time so I work on M1 and M5, of course I look at H1 and H4, but this is a purely technical matter. And so it turns out that I have a rest. I think that one of the main is find your TS and the technique of Masterforex-V is for all occasions.

Attraktor-st
About impatience. (Well, there - better to wait until the situation becomes clearer, or give the profits to grow), to articles on this subject - I rephrased the rule of the Japanese analysis --
"If you want to open a deal - wait three candles
if you still will want to - open, if not - open to the other side! "



Magister.
The main thing is the ultimate goal (you must know clearly, why do you need, for what), is due, the amount earned. While you don’t know, or rather not sit down and write it on paper - it is unlikely you will implement it, this is not my claim, but all the people who have reached something in this life are talking about it, and so say the psychologists. Because our subconscious is arranged - yet it is not clearly see that you really want it and do you need, it begins to work, and may even begin to act against you ... In short, it is important to put the ultimate goal! Strategy - this is how I come to this goal, in what way I earn (find, get it) that money I need. For example, work on Forex; tactics - method by which you're going to do it. For me, this is technique MF plan: for example real number, which you can earn on this tactics a month (I have a 1200p in case of the worst scenario, as shown by the experience of work for 2 months for the MF method) is now down for a week: for example, 1200 / 4 = 300P. week, you can certainly continue to point for a single day, but I do not get that regularly day by day, so I put week as an end point.
Yours faithfully,

Gani.
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Posted 09 January 2010 - 21:09

Five stages of Trading.

Stage One: Unconscious Incompetence.

This is the first step you take when starting to look into trading. you know that its a good way of making money because you've heard so many things about it and heard of so many millionaires. Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be?? - price either moves up or down - what's the big secret to that then - lets get cracking!

Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. you take lots of trades and lots of risks. when you enter a trade it turns against you so you reverse and it turns again .. and again, and again.

You try to turn around your losses by doubling up every time you trade - sometimes you'll get away with it but more often than not you will come away scathed and bruised

Well this is stage one - you are totally oblivious to your incompetence at trading. Stage one can last for a week or two of trading but the market is usually swift and you move onto stage two.

Stage Two - Conscious Incompetence

Stage two is where you realize that there is more work involved in this and that you might actually have to work a few things out.

You consciously realize that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit.

During this phase you will buy systems and e-books galore, read websites based everything from Russia to the Ukraine. and begin your search for the holy grail.

During this time you will be a system whore - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. every time you came upon a new indicator you'll be ecstatic that this is the one that will make all the difference.

You will test out automated systems on Meta-trader, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today.

You'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them because you are so sure you are right.

You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount because you've studied and you don't make that, you know as much as they do and they must be lying. but they're in there day after day and their account just grows whilst yours falls.

You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and over leverage your account even though everyone says you are mad to - but you know better.

You'll consider following the calls that others make but even then it won’t work so you try paying for signals from someone else - they don't work for you either.

This phase can last ages and ages - in fact in reality it can last well over a year - My own period lasted about 18 months.

Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times.

Then comes stage 3


Stage 3 - The Eureka Moment

Towards the end of stage two you begin to realize that it's not the system that is making the difference.

You realize that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right

You start to read books on the psychology of trading and identify with the characters portrayed in those books.

Finally comes the eureka moment.

The eureka moment causes a new connection to be made in your brain.

You suddenly realize that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins.

You start to work just one system that you mold to your own way of trading, you're starting to get happy and you define your risk threshold.

You start to take every trade that your 'edge' shows has a good probability of winning with.

When the trade turns bad you don't get angry or even upset because you know in your head that as you couldn't possibly predict it, it isn't your fault - as soon as you realize that the trade is bad you close it . The next trade will have higher odds of success because you know your simple system works.

You have realized in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what.

You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile

you weren't ready then, but you are now.

The eureka moment came the moment that you truly accepted that you cannot predict the market.

Then comes stage four


Stage 4 - Conscious Competence

Ok, now you are making trades whenever your system tells you to.

You take losses just as easily as you take wins

You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it loses and when you're on a loser you close it swiftly with little pain to your account

You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips - generally you are breaking even and not losing money.

You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away.

You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently.

You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again.

You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on.

This lasts about 6 months

Then comes Stage Five


Stage Five - Unconscious Competence

Now were cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level.

You are running on autopilot. You start to pick the really big trades and getting 100 pips in a day is becoming quite normal to you.

This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account.

You're a star in the trading chat room and people listen to what you say. You recognize yourself in their questions from about two years ago.

You pass on your advice but you know most of it is futile because they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two but a few will.

Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.

You can now say with your head held high "I'm a currency trader"

I hope you've enjoyed this text and can recognize yourself in some stage or another - personally I'm at stage four now and am constantly making good amounts of pips - I've been trading in total for about 3 years and the first two were hell on earth.

for those of you reading this who stick with it, ill look forward to the banter we have together in the future when we are both bored to death during the trading day


Yours faithfully,

Gani.
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