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Successful traders

Successful traders Financial markets are full of surprises, letting some get enormously rich while others (who are in majority unfortunately) lose all their capitals. But being patient and striving to perfect their skills many of those who lost in the very beginning still have their chance to become lucky millionaires someday. On the other hand those who got rich in the beginning thus becoming all too confident and stubbornly righteous may someday turn into complete failures complaining about the injustice of financial markets. The stories of those failures are dull and monotonous and you can read them on any forum dedicated to trading, while the stories of those who succeeded and falling from the top climbed their again without losing their confidence are inspiring. Earning a lot of money dealing in volatility arbitrage is not rocket science. To keep one’s earnings augmenting the capital is a more tricky business. Many great traders and financiers became famous only after they manag…

Individual Trading Psychology

Individual Trading Psychology Emotional state of the trader directly affects his deposit. Even the best strategy verified for years can cause losses if a trader is upset or full of fear and hazard. A result of using any trading instrument even the best one mostly depends on a person but not external factors. A self-confident trader has more chances to make a profit even he uses the worst or silliest strategy because he controls his emotions. When trading in the financial markets you should always be mentally ready for your success. When any new trader has studied and started using a new strategy after some successful deals he imagines he is a great trader and guru of the market. On a wave of euphoria he carelessly ignores his own trading rules. It happens because of undue confidence which gives an illusion of impeccability. And this is the way of self-undoing. The result of it is the capital loss. No matter how the trader is successful at the beginning of his career it is very silly …

Psychology of Traders

Psychology of Traders In the financial markets there are many players who are sellers and buyers. And as any other persons gathered in a crowd they start following the common sentiments. A person saves individual traits until he becomes a part of the group. It happens because joining something bigger begins to control the person’s behavior. There can be many reasons for this but the most important reason is a sense of pressure of the large group. If you are a trader you should save your personality. This will give you a chance to recognize changes in the crowd sentiments and use this knowledge for making a profit. The psychology of the trading crowd in the financial markets has definite regularities and if you understand these regularities you can be a successful trader. At first to understand the motivators of the traders we should study who are they. According to the slang used in Wall Street we can divide all traders into four groups: • The bulls are the traders who play on price …

Trading Psychology

Trading Psychology What is the financial market? Isn’t it a crowd or lots of people selling or buying all the time? Many people just want to make a profit in the market. All price changes are evoked by changes of sellers’ and buyers’ opinion about the good and ideal price for trading at the current moment and in the ongoing conditions. Understanding this fact opens a lot of opportunities for a professional trader because the crowd psychology is very simple and one-dimensional. Studying the crowd sentiments and being out let you catch the moment of changing the tendency in the market and start or stop trading successfully. If the trader follows the crowd, is a part or stands against it his capital can easily become just memories. Technical analysis is the method helping to determine the crowd sentiment and its direction. The chart history and statistics show the changes of the traders’ sentiment during the whole trading period for every instrument. Mathematics and formulas will not be…

Basic Fundamental Indexes

Basic Fundamental Indexes When we trade in the financial markets we have an opportunity to make a huge profit and its size directly depends if we have correctly estimated the investment attractiveness. And the loss size depends on this as having bought an unprofitable asset we can lose our money. The method helping us to understand the time to invest to this asset is fundamental analysis. Like in the market you buy the thing after you have examined it, checked the quality and agreed with its price. In the financial markets you can estimate a good or investment object after you have examined the market situation and studied its economic indicators. It is a subject to trading in the stock market where you try to understand either to buy the stock or not by using the accounting reports of the company having issued these stocks. The attractiveness of the company is determined by its profitability, efficiency, stability and dividend rates. All these factors are the indicators of the compa…

Fundamental Analysis

Fundamental Analysis In online trading we should estimate short opportunities of the price movement and decide to trade online. Using the technical analysis we can see the signals showing a possible price direction after reaching any important levels – strength or indicator levels. But technical analysis does not guarantee a foreseen movement after the price has broken one of the levels. So the fundamental analysis helps us to understand where the price will move after reaching a key level. The Fundamental analysis is an estimation of a current economic situation in the company (for stock trading) or country (for currency trading) using statistical data. Simply said when economic indicators of the country and income of the company grow the currency and stocks become more attractive for investors as their prices increase too. So we see the following regularity: the country’s economy grows => the currency rate grows; the company’s income grows => its stock rate grows too. So any …

Fibonacci Retracements and Elliot Waves

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Fibonacci Retracements and Elliot Waves When a tendency is reversing or a new tendency is forming we always ask a question: “How much will the price move?” The different methods such as Fibonacci retracements help us to answer this question. At first let us understand what a retracement is. A retracement (correction) is a movement in the trend channel against to its direction. Thanks to the correction a trend channel is formed. You can see the example on the picture: Any movement is followed by the correction. And this is a structure of the market: at the beginning of the movement all participants bought and when the price movement stopped they wished to fix their profits and started to sell. This is a reason of the correction. The correction strength depends on a number of participants in the market. And here we have a question “How much deep will the correction be?” The Fibonacci retracements will help us to answer it. The Fibonacci Retracements are the horizontal levels used to su…

Trend Reversal Patterns

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Trend Reversal Patterns The very important point in trading is your understanding of the moment when the tendency has become weak and is going to reverse. The reversal signal will be the breakout of the trend line. You need to understand if this signal is true and what a target price will be after the breakout. The reversal price formations can answer this question. The reversal pattern is the price movement signalizing the tendency has become weak and is going to change its direction. Usually the reversal patterns appear at the maximums or minimums of the price chart. We know some reversal patterns and their properties. Let us start studying the reversal patterns with a double bottom and a double top. These formations appear at the strong levels when the price chart reaches them, cannot break out after two attempts and then reverse. As we see on the picture both formations look like usual and upturned letter “W”. Using this formation you can start trading after the price breaks out …

Trend Continuation Patterns

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Trend Continuation Patterns The trend continuation pattern is the price model indicating the tendency will continue after the current situation. While the model forming the price moves in a narrow range. There are some trend continuation patterns. We will discuss them and their signals. The flag formation is a rectangle sloping downward or upward and having a long pole. It is forming during a pause after a strong movement. The flag consists of its body and pole. The pole height indicates a target price after the end of the price formation. Usually the flag body includes 5 waves and price breaks out of the flag formation on the fifth wave. The strength of the formation depends on an angle of the formation slope against the main price movement – the more the flag body is directed downwards the stronger continuation signal it is. It is better to trade online after a breakout of the price formation. The pennant formation looks very much like a flag with the triangular body shape. The dif…

Graphical analysis

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Graphical analysis When we work in the market we always ask the same question “Where will the price move?” A chart analysis is one of the methods to answer this question. The chart analysis is a study of price patterns on the chart. If you remember them you will be able to foresee the future price movement. When you see the price pattern you met before you will likely suggest where it will end. As we know the price history repeats and it tells about the different price patterns which result can be foreseen and used. For example, this is the price movement in the trend channel. The price moves in the trend channel in accordance to the definite formation and gives us the signals of the tendency acceleration, deceleration and reversal. Let us consider each variant in detail: 1) The tendency acceleration is the situation when the price chart is not able to return to a trend line approaching to a channel line closer and closer; it breaks the line forming a new tendency with the same direc…

Candlestick Analysis

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Candlestick Analysis Looking at Japanese candlestick chart you can ask a question why this chart looks like this – black and white rectangles on the field. The idea of this chart came from Japan of the 18th century where the biggest rice traders used candles to see the rice price change. When the price had been changed traders took a new candle and cut it. So the rest piece of the candle was equal to the current price and they put it in the candles raw. The traders studied the candles and found the patterns which helped them to forecast the future rice price. Later in the early 90’s of the 20th century this chart was used by the brokers and Japanese rice traders’ knowledge was integrated into the modern exchange market. In this way the candlestick analysis appeared. The candlestick analysis uses different combinations of Japanese candlesticks to foresee the future price movement. The candlestick bars are rectangles with the upper and lower lines so they look like the real candles. Th…