Author: Chris Miles

6 HABITS THAT DRIVE SUCCESS

Posted on by Chris Miles

6 Habits That Drive Success

Trading is a particularly attractive career option because there is the potential for it to be very lucrative indeed… as long as you’re prepared to put the hard work in, of course.

 

The lifestyles that traders often lead can be a big draw, but don’t expect all those lavish holidays, fast cars and fancy clothes to simply land in your lap. Enjoying a successful career as a trader will require a lot of motivation and determination and you’ll really need to give it your all if you do want to see the big wins.

 

The most successful traders will put their trades at the very heart of everything they do. This doesn’t necessarily mean that all they do is trade currency pairs, but rather that their daily routine, their lifestyle and how they choose to live are all engineered to help support their trading, driving performance and providing support even when they’re not making trades.

 

It’s important to acknowledge that becoming a truly successful forex trader will take time and a lot of effort. But where to begin?

 

If you’re not sure which areas to focus on first, we thought we’d help you out by counting down some of the top habits that the most successful traders will have formed over the years. It could prove to be very enlightening reading indeed and help spur you on to really become the best trader you can be.

 

  1. Stick to a regular daily routine

 

As children, our parents strive to make sure that we have a regular routine from morning to night, something that really helps us to feel self, develop life skills and build healthy habits that, hopefully, last us a lifetime.

 

However, as we get older and we start to become responsible for ourselves, somehow that sense of routine can get a little lost… and before we know it, we ourselves are lost as well.

 

There are many psychological benefits associated with building a solid routine that you stick to, including lower stress levels, greater productivity, better sleep, greater efficiency, reduced anxiety… and a whole lot more. All of this will really help your trading and you’ll find you’re better able to make the decisions you need to if you’ve got a strong routine backing you up.

 

To start building a proper routine, write down your daily activities so you can see what you need to include. It can also be very helpful to work out what times are best for you to go to bed and wake up each day. Sticking to these times will help you fall into a routine far quicker, so perhaps start here if you’re struggling to stick to your daily routine.

 

  1. Embrace learning

 

Checking your ego at the door will stand you in amazing stead as a trader and you’re sure to start seeing more wins come your way if you accept at the outset that you don’t know everything about trading… and you probably never will.

 

Forex trading is an incredibly dynamic and fast-paced world, one that constantly evolves and changes… and if you don’t keep up with everything that’s going on and enjoy learning new concepts and ways of working, you will find yourself getting left behind sooner rather than later.

 

Developing a curious mind will certainly help you look at the bigger picture (very important for traders to do!) and discover new and exciting opportunities, as well as seeing new ways in which to capitalise on them. Embracing a culture of learning will help you be more agile and flexible in your approach – and you’ll probably find you enjoy trading all the more for it.

 

  1. Prioritise

 

Whether you’re new to trading or have been doing it for some time, it can easily get overwhelming if you’re not careful. There’s a lot of information flying about and it can sometimes feel a little insurmountable, causing paralysis of action where nothing gets done and your trades start to flounder.

 

Prioritising what’s most urgent and most important is absolutely key when it comes to trading success. First of all, work out what your most urgent deadlines and targets are and make those your very top priority. From there, you can look at what’s important but perhaps not that urgent, tasks that can be viewed from a more long-term perspective.

 

This will help you allocate your time more effectively, boosting efficiency and productivity gains and helping you to achieve your dreams and aspirations.

 

However, you may need to be a bit ruthless when it comes to eliminating any distractions that are neither urgent nor important, so make sure you do steer clear of anything you believe won’t serve you well as a trader. You’ve got to keep your eye on the ball, after all!

 

  1. Meditate

 

We write a lot about the importance of emotional management from a trading perspective and it’s certainly a top area of focus for the most successful traders out there.

 

But, of course, it’s a lot easier said than done to keep your emotions under control, especially if matters aren’t going your way. If you do start to make decisions when your heart is in charge, rather than your mind, you’ll likely start to make bad trades and start chasing losses… and this will only ever end in disaster.

 

However, there is a lot you can do to start mastering your own emotions and meditation is an incredibly useful weapon to have in this regard.

 

A recent study published in the Frontiers in Human Neuroscience journal found that mindfulness meditation can help keep negative feelings under control and even people who aren’t naturally mindful can start to reap the benefits with regular practice.

 

To get started with meditation, find a nice calm and quiet place, give yourself a time limit and then start to check in with your body, noticing how it feels, any area of tension, the sensation of your breath as you breathe in and out.

 

Your mind will wander naturally but the key is to keep bringing your attention back to your breath, rather than allowing your mind to focus on your thoughts. It might sound simple enough but it can be difficult to do at first. The more you practise, the better you’ll get, however!

 

  1. Make time for self-reflection

 

Self-aware traders are successful traders, so getting into the habit of reflecting on your progress, both as a trader and as a human being, can really make a big difference to your market performance.

 

Looking back on the past can help you identify weak and vulnerable areas that you could improve upon, learning from any mistakes you’ve made so you can avoid making similar errors in the future.

 

Doing this will help you see the bigger picture more easily, something that can be overlooked when you’re really zeroed in on the task at hand – so make sure you take a step back on a regular basis to help you grow and progress.

 

There are all sorts of ways you can start to self-reflect, whether that’s talking to yourself out loud, journaling, doing writing exercises, getting out and about in nature to calm your mind… it’s all about finding the right path for you, so try lots of different methods and techniques to see which you respond to most.

 

Asking yourself reflective questions is a great place to begin, however, and it can be done anywhere at any time. It’s all about trying to gain some useful insights so you can understand yourself and your needs better, so don’t shy away from asking the difficult questions.

 

Try asking yourself how you’ve been holding yourself back, what opportunities you’ve missed recently, what you’re most proud of, what’s been stressing you out the most and so on. Once you’ve got the answers to questions like these, you can then start to enact real, long-lasting, meaningful change.

 

  1. Practise gratitude

 

While we certainly advocate chasing your dreams and being ruthless in your pursuit of what sets your soul aflame, it’s just as important not to lose sight of where you are, what you’ve already achieved and the good that you already have in life.

 

Practising gratitude may not necessarily deliver exciting results on the trading floor, but it can make you happier, calmer and more content… and maintaining a balanced emotional state will certainly help you as a trader.

 

What’s particularly interesting about this approach is that the more you draw your attention to what you have to be grateful for, the more you’ll notice that you have.

 

If you’re not sure where to begin, going through the motions can gradually engender overall feelings of gratitude, so perhaps start by smiling, saying thanks and writing letters of gratitude more often. You’ll soon start seeing all sorts of new opportunities for gratitude everywhere you go!

 

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WHAT DOES FOREX MARKET SENTIMENT MEAN?

Posted on by Chris Miles

What Does Forex Market Sentiment Mean?

When it comes to trading forex, you are likely to have decided to include some technical analysis tools as part of your strategy. These help you to identify trends and patterns in the markets, and make informed trading decisions based on probabilities. They allow you to pinpoint the optimum entry and exit points, maximising your chances of making a profit.

 

Chances are, you have also learnt about fundamental analysis, and apply some of your knowledge when making trading decisions. This keeps you in the bigger picture about the factors which might influence the markets, to help identify opportunities and mitigate against loss.

 

However, a third analysis tool which is sometimes overlooked is sentiment analysis. Here’s a look at what sentiment analysis means in the forex market, and how you can use it to strengthen your trading strategy.

 

As the name suggests, sentiment analysis involves reading the ‘mood’ of the other traders in the market, and deciding whether the overriding sentiment is optimistic, or pessimistic. This might seem irrelevant when you can use hard facts such as economic data releases and price action charts, but it is more important than it might first appear.

 

The overall direction of emotion can have an influence on how the markets will move. Sometimes, this can be in direct opposition to your own thoughts and opinions, but you as an individual are not able to have any influence on the wider market sentiment. Therefore, regardless of your own hunches, you need to learn how to gauge the mood of the market.

 

You can then choose to go against the current direction, if you personally think that the market will move differently, or you can go along with it. The goal is to identify when a current trend is about to peak, so that you can take advantage of the swing point and maximise your gains, or avoid undue losses. 

 

Bullish and bearish markets

Before getting into more detail about sentiment analysis, it’s important to understand what bullish and bearish markets are. Both these terms reflect the mood of the majority of forex traders at any one point in time, and how optimistic they are about whether the market will rise or fall.

 

The terms ‘bull’ and ‘bear’ refer to the way these animals attack their enemies: bulls strike their horns upwards, so a bullish market means one where prices are expected to rise, and investors are buying.

 

Bears, on the other hand, attack with their claws, swiping downwards. Therefore, when prices are expected to fall and investors are selling, it is called a bearish market.

 

Because forex trading involves both buying and selling currencies, both market conditions can provide opportunities for traders, to either sell currencies at a profit when they are at their peak value, or to buy undervalued currencies in order to sell at a profit later.

 

The important thing is to recognise the characteristics which shape each type of movement, because the direction can change quickly and sharply. By learning to understand what makes it tick, you will have a much better chance or staying ahead of the curve.

 

You will then be able to watch out for the signs of change closely, and incorporate the market sentiment into your trading strategy. This will help you to manage risk better, and determine the most advantageous entry and exit points into the market.

 

What factors cause a bullish or bearish market?

Several factors influence whether a market is bullish or bearish. These can be economic, political, geopolitical, or technical. If you have already studied fundamental analysis, you will probably have a good idea of what type of events and data releases to look out for.

 

One of the most consistent pieces of data to follow is the interest rate, particularly at the moment when the central banks of most of the world’s major economies are making regular adjustments. Currently, interest rates are rising to try and control the inflation rate, which is also rising.

 

Markets normally move ahead of anticipated interest rate rises, so it’s important to follow the economic news. On the other hand, the markets often overreact to unexpected news, so it’s important not to follow the herd, and get caught up in turbulence.

 

At the moment, the world economic and political picture is especially complex. As the world’s economy continues to bounce back from the effects of the pandemic, employment rates are high. However, ongoing issues with supply chains, caused by backlogs which built up during lockdown periods, are still hampering recovery in some sectors.

 

Russia’s invasion of Ukraine has complicated the picture still further, sending energy and fuel prices soaring, and driving up the cost of basic foods such as bread and cooking oil. This in turn has led to sharply rising levels of inflation, which in most countries are not keeping up with the pace of wage growth, even though unemployment is generally low.

 

Differences between trading conditions in bull and bearish markets

Trading a bull or bear market isn’t simply about reversing your procedures, and the markets don’t act in direct opposition to the previous direction of movement. Bull markets tend to build up gradually, over months or even years. A current upward trend of a few weeks should not be interpreted as a bull market.

 

On the hand, bear markets can happen abruptly. Therefore, you should be ultra vigilant for any headwinds of change in a bull market, and be prepared to act fast. This means short selling, unless you are prepared to sit out the downturn over months or even years.

 

How to use sentiment indictors

Forex traders use tools called sentiment indicators to help them assess current market conditions. These can give an indication have how the majority of traders are behaving at any one particular time and date. This data can be expressed as percentage points to make it quick and easy to comprehend.

 

This data should be used as a part of your overall trading strategy, rather than a direct prompt to action. Here are some of the main methods used by forex traders.

 

Commitment of Traders Reports

Futures traders regularly check the Commitment of Traders (COT) reports, which are released every week by the Commodity Futures Trading Commission (CFTC). This is also a useful tool for forex traders to become familiar with, because it provides detailed information about the demand for currencies and commodities.

 

It can take some time to understand how to read the COT data, but in general you should bear in mind that the larger speculators and leveraged money and asset managers with trade in line with current trends, where as commercial traders follow counter trends, in order to hedge.

 

When the market is overloaded with speculators, it tends to go into reversal. On the other hand, when there are fewer large speculators, it tends to lead to an upturn in the markets. When speculators are crossing over from short to long term positions, it tends to mean that conditions are set to remain consistent for the time being.

 

The terms of trade of the country you hold currencies for is also important. For example, if you are currently heavily invested in the Canadian dollar, you should monitor the demand for Canada’s major exports. These include oil, natural gas, agricultural produce, and timber. When world demand is high, such as at the moment, the value of the currency will rise.

 

What is risk sentiment?

A part of market sentiment is the attitude of investors and traders to risk. When the mood is risk-averse, which tends to happen during periods of recession, currencies which are regarded as a ‘safe-haven’, such as the US dollar and the Japanese Yen, tend to rise in value.

 

When confidence is high, during periods of consistent economic growth and high levels of employment, the market becomes more risk-tolerant. This means that traders are willing to take on higher risks in order to maximise their returns, and invest more in minors and emerging markets, such as Brazil, South Africa, and Turkey.

 

Commodities are also a good barometer of the appetite for risk. Gold tends to hold its value whatever the outer market conditions, whereas silver tends to rise and fall in line with demand.

 

Copper is one of the world’s most used metals, as it is needed for both construction and manufacturing. Therefore, when the price of copper is rising, it is a good indication that the market is bullish and risk-tolerant. Conversely, a fall in the price of copper indicates an industrial slowdown, and risk-averse safe haven currencies rise in value.

 

Open interest

The Open interest refers to the number of open positions there are for each currency. This data is available on the futures exchange, and it can be a useful tool for gauging the future strength or weakness of a currency.

 

In summary

Sentiment analysis is a useful tool for helping you to identify when the market is about to turn. This will help you to define and manage your trading strategy.  However, it should just be one of several tools, and not used as the sole indicator to guide your trading decisions.  

 

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HOW CAN YOUR PERSONALITY AFFECT YOUR TRADING?

Posted on by Chris Miles

How Can Your Personality Profile Affect Your Trading?

When you first start forex trading, you’ll find that there’s a very steep learning curve – and it might be some time before you start seeing serious returns on your investments consistently.

 

This can get a little bit frustrating, of course, as no one likes to lose… but the good news is that FX trading isn’t just about bringing in the big bucks and the journey is just as important as the destination for many traders out there.

 

What you might not yet have considered, especially if you’re just starting out with trading currency pairs, is that you’ll learn a huge amount about yourself as you trade and, in fact, this knowledge can be turned to your advantage and make you an even better trader… which is when you’ll start to see more positive winning trends over time.

 

Knowing what makes you tick, what your weaker areas are, where your vulnerabilities lie will only serve you in excellent stead as you progress in your trading career.

 

Identifying your strong points and your failings will show you exactly where you need to focus your attention and what needs the most work from a trading perspective.

 

So how do you go about finding out all this information and how can you use it to the benefit of your trading performance?

 

First of all, you need to work out just what your individual characteristics are and what your personality profile is, so you can start ironing everything out to give your trading a boost.

 

Luckily, a lot of the hard work has been done for you by Dr Van Tharp, a professional psychologist and trader coach who has written a vast amount of literature on trading psychology and personality… so you can bet that he knows what he’s talking about!

 

Dr Tharp has identified 15 different trader personality types:

 

  • The Accurate Trader
  • The Administrative Trader
  • The Artistic Trader
  • The Adventurous Trader
  • The Detailed Trader
  • The Facilitative Trader
  • The Fun Loving Trader
  • The Independent Trader
  • The Innovative Trader
  • The Planning Trader
  • The Socially Responsible Trader
  • The Spontaneous Trader
  • The Strategic Trader
  • The Supportive Trader
  • The Values Driven Trader

 

And if you want to find out where you sit among these 15, you can do so very easily indeed by heading over to the Van Tharp Institute website where there’s a handy little personality test you can take.

 

We’ve been doing a series of posts on the blog that have been delving a little deeper into each of the personality profiles so you can see where you fit in and what changes you could make (if any!) to how you trade based on what you learn about yourself.

 

In truth, you’ll probably find that you identify characteristics within yourself from several if not more of these profiles, but there’s no need to worry if you do have something of an overlap. It’s simply a matter of finding out what’s most applicable to you so you can analyse your trading on a deeper psychological level and change your strategy as appropriate.

 

In this blog, the last in the series we’ve been running, we’ll be looking at the Strategic Trader, the Supportive Trader and the Values Driven Trader. Where do you think you’ll position yourself?

 

The Strategic Trader

 

Now, if you’ve identified yourself as being a Strategic Trader, then you’re already in an incredibly strong position and definitely have what it takes on an intrinsic level to make a career out of trading.

 

Strategic Traders have all three of the core qualities Dr Tharp has identified among the top traders out there, so you already have all you need to really excel at fx trading… as long as you’re willing to put the work in, of course.

 

As a Strategic Trader, you’re able to see the bigger picture and make new connections between events to identify new possibilities and opportunities quickly and relatively easily.

 

You’re also able to make your decisions based on logic and analysis, which will certainly prove very useful from a trading point of view. And you’re decisive in general, orderly and able to tackle tasks sequentially, all of which can really help you on the trading floor.

 

Advice from Dr Tharp is to consider really studying some of the most successful traders out there and seeing what they do in different situations. This can help you see patterns in the market so you can work out what you need to do in order to take advantage… you may well find yourself joining the ranks of the greats sooner rather than later as well!

 

Another key trading skill that you’re likely to have in abundance is a really strong sense of independence and self-sufficiency. This is an essential quality for traders, so if this sounds like you, you really are in a strong position.

 

However, there are some challenges you need to be aware of that could get in the way of your success. For example, you may be such a logical person that you fail to see when your emotions are leading you astray.

 

You also have a tendency to be a perfectionist and this could see you stall as a trader, so busy developing better systems and strategies that you actually neglect to trade at all… so be aware of this pitfall if you can.

 

The Supportive Trader

 

Unfortunately, if you’ve taken the personality test and your results suggest that you’re a Supportive Trader, you don’t have any of the three core qualities that help to really drive trading success.

 

But that doesn’t mean you won’t be able to bring home some big wins! It might just mean you have to try a little harder at it than others and, in this instance, knowing your strengths and weaknesses as a trader becomes even more important.

 

Supportive Traders are typically very dependable, practical and realistic, taking their responsibilities extremely seriously indeed. They’re also reluctant to take risks, which can prove problematic for trading strategies, as it may be necessary to take some quite significant risks when trading if you do want to make a lucrative career out of it.

 

Another area where you may fall down on as a Supportive Trader is your values and view of how life should be.

 

When something doesn’t fit in with your world view, you’re certainly vocal about it but you often find that you adapt your beliefs and outlook to fit in with someone else’s standards of what’s right and wrong, instead of trusting your own values and believing in yourself.

 

For trading, this could have some disastrous consequences… so if you’re determined to make it as a trader, this could be a great area to really prioritise first of all.

 

You do have some trading strengths, however, so with some work you may well see the success you’ve always dreamed of. For example, you can identify patterns and opportunities quickly that you’re able to hypothesise quickly to bring forth low-risk trading ideas.

 

And you can work well with simple systems and ways of working that put risk management at their core, so if you’re just starting out as a trader, this could be a good strategy for you to employ.

 

The Values Driven Trader

 

Here’s the good news! If you’ve worked out that you’re more of a Values Driven Trader than anything else, you’re already blessed with two out of the three top core qualities that make a successful trader! You’re able to see the big picture easily and you have no problem whatsoever making decisions, both of which will really help you in your trading career.

 

Typically, these kinds of traders trust their instincts above anything else and this can be a really advantageous trait to have as a trader. However, training and practice is essential if you are to turn this attribute to your real trading advantage, as it could lead you astray if you don’t have significant market experience.

 

Values Driven Traders are also often found to be creative and independent, which are also great skills to have for forex trading. You’re likely to have lots of great ideas for your planning and strategy, so if you are able to fully commit and put the hard graft in, there’s absolutely no reason why you shouldn’t perform well as a trader.

 

Something to really focus on is the analysis involved in trading. Without this, it’s probable that you won’t see the success you want, since you’ll be largely driven by your own instincts and gut feelings, rather than what the data says. So make sure you keep an eye out for this particular pitfall!

 

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6 MUST-HAVE TRADING MIND TOOLS

Posted on by Chris Miles

6 Must-Have Trading Mind Tools

Forex trading is a constant learning curve. An understanding of how the markets work and a grasp of some technical analysis tools are essential to make a good start, and get going with profitable trades. Once you have a solid trading strategy in place, it’s also important to understand yourself a little more deeply.

This may seem like a strange concept which has little to do with the world of currencies, percentage points, and candlestick charts. However, when you begin to unpack the psychology of what you are actually trying to achieve, it all starts to make more sense.

Ultimately, you are trading to make a profit for yourself, by taking controlled risks. This brings out two powerful and primal human emotions in even the most stoical of people: fear and greed. More specifically, it is a natural instinct to fear loss, and it is also natural to pursue personal gain.

No matter how thorough your knowledge of the forex markets, or how good your technical strategy is, without the right mental and emotional discipline, you will always be faced with a huge obstacle to better trading decisions.

To stop your instincts fighting against each other and hampering your efforts, you need to have some psychological tricks in your toolkit. Here are six of the most important tools to know about.

Know your biases

The first step is to accept that at some point you will feel emotions, such as excitement, greed, anxiety, and so on, no matter how calm you feel before starting trading. Understanding your particular weak links is the first line of defence. As human beings, we are all subject to unconscious biases in our worldview, and the same applies to trading.

One of the most common biases for inexperienced traders is overconfidence bias. This is often a stage that traders go through after their first run of successful trades. Everyone has an ego which needs a boost now and them, but in forex an overinflated ego can be the road to ruin.

Even if you are experiencing success, remember that it is rarely a consistent pattern in forex trading. Even experienced traders consider a 50% success rate to be good going. Convincing yourself that you know what you are doing, and you can ease up on the hard slog of daily reviews and analysis, will soon trip you up.

Instead, stick to your game plan, and don’t be tempted to loosen up your risk management strategy when faced with a string of winners.

Loss aversion bias is another common trait of new traders. It stems from the tendency to fear making a loss over pursuing a gain. This is a natural human trait, rather than a personal weakness, and it is a way of protecting ourselves from taking risks.

The fear of losing is a stronger motivator than the elation of victory in most people, which is possibly the result of evolution, where it was more important to avoid predators and stay alive, than to hunt down extra food. However, forex trading is all about taking managed risks, and an over-cautious attitude will hamper your progress.

Be wary of your comfort zone

Once you have a little experience and some success under your belt, it can be easy to settle down into a comfort zone. The human mind has a natural tendency to cut corners, and repeat past actions rather than venture to learn new ones. This has a necessary purpose, to make carrying out routine tasks quicker and easier.

However, forex trading is all about being ready for the unexpected, and staying in a comfort zone will soon mean you are in a danger zone. You need to be constantly looking ahead, at not assume that past strategies will always work for you in the future. While a consistent approach is important, becoming blinkered to new influences will mean you get left behind.

Keep up with the economic news, and make sure you understand how socio-political events influence the forex markets. We are currently living through turbulent times, so it is more important than ever to be on top of your knowledge, and be flexible in your attitude to trying out new techniques and strategies.

Know your personality type

While there are universal human traits which we are all prone to, we also have individual personalities. These are the result of our genetic inheritance, our upbringing, and the life experiences we have accumulated so far.

Instead of trying to separate your trading mindset from your natural inclinations, it’s better to understand what your dominant personality type is, and work with it, rather than against it.

Start by asking yourself a few questions, such as how patient, or impatient, you are. Do you thrive off making quick decisions, or do you prefer time to digest things? Are you disciplined and good at sticking to routines, or are you an impulsive person who likes to use their intuition?

Do you enjoy spotting patterns, and have strong spatial recognition skills? Do you prefer to get down with details, or assess the bigger picture? How do you act when you are under pressure: can you make quick decisions without panicking, or do you clam up with fear and indecision?

There’s no one single personality type that is most suited to trading: it’s more about recognising who you are, and playing to your strengths. If you’re good under pressure, comfortable with making snap decisions, and have a sharp eye for detail, you’re likely to thrive as a day trader, making a series of quick wins.

If you prefer space to think things over, are patient and methodical, and like to analyse the bigger picture, you may be better suited to swing trading, where you hold positions for longer.

Filter out the noise

We will always recommend that you learn as much as you can about forex trading before you start, but it is important to be selective about what information is going to be relevant to your personality and circumstances. For example, if you are going to be fitting trading around your day job, you may need to focus on day trading or swing trading.

Burying yourself in a miasma of tips, tricks, and techniques is likely to leave you paralysed with indecision, as it is impossible to act on all of it. Chances are, you will feel overwhelmed, and lose your appetite for trading completely. Instead, work on refining the plethora of information available, so that you filter out the least relevant stuff.

 This can be difficult, because even if you have a well-suited finely tuned strategy, you are still going to experience some setbacks, especially at first. Be prepared to keep learning, and make tweaks and adjustments, until you find out what works best for you. Traders sometimes refer to this sweet spot as finding their ‘edge’.

However, don’t become fixated with the idea that there is one perfect strategy out there which will be the answer to all your prayers. There are literally hundreds of different approaches to trading forex, and lots of them could work equally well for you. Searching for the holy grail will just mean a lot of wasted time which could have been spent trading.

 

Accept that the market is random

Accepting the random nature of the forex markets doesn’t mean that you should abandon a strategy and simply gamble. Rather, it means that accepting risk and losses are all part of the game. Even very experienced traders make losses, but they don’t get defeated by them.

If the losses become out of line with their expectations, they review their records to work out what might need some adjustment.

They then make some tweaks, maybe accept they were wrong, or just that they needed to respond to a change in the market movements, and then they carry on trading. It’s about averages and probabilities, not being always right or wrong, because literally no trader is. As long as you define and manage your risks, you are on the right path.

Align your lifestyle with your trading mindset

So you have accepted that we all bring human emotions into trading, and are aware of how these might influence your behaviour. To keep yourself in the optimum frame of mind, it can be really helpful to make some lifestyle adjustments.

Eating healthily, so that you are keeping your brain and body well supplied with nutrients, is very important. Poor nutrition can lead to poor sleep, poor concentration, and make it much more difficult for us to control our emotions. Exercising frequently also helps to manage stress, and keeps us feeling mentally alert and at the top of our game.

Many traders complement a well-balanced lifestyle with a meditation routine. This could be anything form 10 minutes in the morning, to a full hour. There is a huge range of advice out there on mindfulness techniques, which help you to clear the mind of everyday mental clutter, and improve your focus and concentration.

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DISCOVER YOUR TRADING PERSONALITY

Posted on by Chris Miles

Discover Your Trading Personality Today

Stagnation is the death knell for any truly successful and lucrative career in forex trading and if you truly want to make it in the trading world, you’ll need to make sure that you’re constantly growing and evolving, both as a trader and as a human being.

 

Trading performance is intrinsically linked with your emotions, your characteristics, your personal attributes… and making these a top priority as an integral part of your overall trading strategy will really serve you well as time goes on.

 

Remaining open-minded and flexible is absolutely key, as you may find that you have some characteristics that simply aren’t well suited to a life as a forex trader. But once you’re armed with all the information you need, you can start to think about how you can make improvements on a personal level to help support your trading.

 

So… where to begin?

 

The first step is to identify your particular set of personal characteristics so you can see where your strengths and weaknesses lie. Luckily, there is help at hand in this regard and if you head over to the Van Tharp Institute website, you’ll find a personality test to take that will help you see where you fit in among 15 different profiles.

 

Dr Van Tharp himself is a professional psychologist and trader coach, who’s written a library of books on trading psychology and personality. As resources go, his back catalogue could prove to be particularly enlightening reading if you do want to delve even further into the topic.

 

The 15 different trader personality types are:

 

  • The Accurate Trader
  • The Administrative Trader
  • The Artistic Trader
  • The Adventurous Trader
  • The Detailed Trader
  • The Facilitative Trader
  • The Fun Loving Trader
  • The Independent Trader
  • The Innovative Trader
  • The Planning Trader
  • The Socially Responsible Trader
  • The Spontaneous Trader
  • The Strategic Trader
  • The Supportive Trader
  • The Values Driven Trader

 

Over the last few blog posts, we’ve been looking closer at each of these profiles so you can start to build up an idea of where you might fit in and what this could potentially mean for your career.

 

It’s possible that you’ll identify with one or more of the profiles, so don’t worry if you do find a bit of overlap. The idea is simply to find out what’s most applicable to you so you can start to evaluate your decision-making on a deeper level, making changes to your trading plan as and when necessary.

 

In this blog, we’ll be looking at the Planning Trader, the Socially Responsible Trader and the Spontaneous Trader. Where do you think you’ll fit in?

 

The Planning Trader

 

First of all, congratulations if you took the test and you’ve found out that you’re a Planning Trader!

 

This means that you have all three top core qualities that Dr Van Tharp has identified as helping to make top traders… you’re able to see the bigger picture, you’re decisive, orderly and operate sequentially, and you make decisions based on logic and analysis.

 

As an individual, you’re probably decisive and perform well in leadership roles, happy to step in as and when circumstances dictate. You can develop trading systems quickly that suit your specific needs at different times and can implement them just as quickly.

 

You’re also very capable of spotting logical inefficiencies in the market, taking advantage of them as they pop up.

 

Another particular strength you’re likely to have is your ability to plan in advance, keeping both short and long-term goals at the forefront of your mind.

 

As Dr Van Tharp says, if you apply yourself properly and develop a solid plan for trading, while doing the work to gain a deeper understanding of what constitutes success, you have the potential to be very successful! So that’s great news!

 

No one is perfect, however, and it’s important to remember that you’re sure to have some weak areas that you could benefit from concentrating on. Arrogance has no place in forex trading, after all – and you should always make sure you’re open to self-improvement, no matter how seasoned you are as a trader.

 

One potential pitfall to be vigilant of is the loss trap. You may find that you’re so driven by your desire to be right about your trades that you start failing to honour your stops… so keep an eye out for this.

 

The Socially Responsible Trader

 

While, as a Socially Responsible Trader, you’re not in quite such a good position as a Planning Trader, you do still have one of the top three core qualities that make a top-notch trader… you’re able to see the bigger picture and you’re good at making decisions. So that’s a great start!

 

However, although this is undeniably good news, something you would be wise to be on your guard for is what’s actually driving your decisions. Is it your emotions or is it analysis and logic?

 

Emotions can really hinder trading success and it’s important to do all you can to keep them under control, good and bad. But the more you delve into your personality type, the more you’ll see areas to improve upon and find strategies to help you master your emotions, keeping you on track.

 

In terms of other characteristics, Socially Responsible Traders are typically motivated by their values and what feels right. You’re also able to commit to a clear trading plan and are able to stick to it, even when faced with serious challenges.

 

With a bit of focus and attention, you may also find that you’re able to identify multiple different systems and blend them together to help drive you towards achieving your trading goals.

 

As for obstacles that may well crop up, keep an eye out for the loss trap, as you probably hate being wrong… and you may want to prove your trading strategy is right at all costs!

 

The Spontaneous Trader

 

Again, you’re off to a great start if you’ve discovered that you’re a Spontaneous Trader… you can grasp the bigger picture and you’re able to make connections between events quickly, so you’re able to act sooner rather than later.

 

This is a great quality for a trader to have, but you may find that you become so engrossed in looking for possibilities that you forget to come up with a strong trading plan, one that will guide you on the road to achieving your vision.

 

Another potential problem that this type of trader may encounter is taking on too much risk without the proper preparation to back it up. Dr Van Tharp advises you to look into the concept of position sizing and what this means before you start to trade.

 

Distraction is also something you might want to be on your guard against. You may find yourself tempted away from following your trading plan by something new and exciting, even if your strategy is working well.

 

Always remember that you carried out all that analysis and research for a reason and your plan was devised with that in mind, so deviation without proper preparation could spell disaster if you’re not careful.

 

However, what’s particularly great about Spontaneous Traders is that they have no trouble whatsoever viewing trading like a business… and as long as they have a solid plan in place, there’s no reason at all why they shouldn’t be able to enjoy a long and lucrative career in forex trading.

 

That being said, just make sure you maintain a good work-life balance as well, while keeping an eye on your stress levels and ensuring that your emotions are kept in check.

 

So… now you’ve read all that, where do you think you fit in? Of course, you may not identify as any of these three personality types, so make sure you check back over our past blogs to see if any of the other profiles sound more like you.

 

The idea is that once you have an idea of some of the issues that could potentially have an impact on your trading, you can then take steps to enact meaningful change and drive self-improvement and self-awareness.

 

When it comes to trading performance, you’re the most important factor – and knowing what your strengths and weaknesses are can make a huge difference to how well you do.

 

So if you are starting to wonder how best to up your game in the future, perhaps begin by taking the personality test and go from there. Who knows where you could end up?

 

Thinking of starting forex prop trading? With our funding programmes, you can trade where you like, when you like. All you need is internet access and a trustworthy trading strategy. Get in touch with us today to find out more.

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6 WAYS TO TURN AROUND A LOSING STREAK

Posted on by Chris Miles

6 Ways To Turn Around A Losing Streak In Forex Trading

The forex market is the largest and most liquid financial market in the world, and is full of opportunities to make profitable trades. It’s also one of the most accessible markets, open almost 24/7, and with instant forex funding and high leverage available, even for a small initial investment.

 

For this reason, it attracts seasoned traders and beginners alike. It can be highly competitive, but it is possible to make good profits with the right approach. That’s not to say that it’s easy, and there are many pitfalls that the unwary and inexperienced trader can fall into.

 

Sometimes, you might make a run of losses, and start to wonder if it’s worth staying in the game. However, this is a normal phase that most traders go through at some point. Chances are, the professional traders you know considered quitting at some point after hitting a losing streak.

 

The only difference between them and other people is that they didn’t give up. Instead, they took stock, learnt from their mistakes, and carried on. This is exactly what you can do as well!

 

The other important thing to realise is that losing money is a normal part of forex trading. It doesn’t mean that you are bad at it. It’s impossible to make 100% profits all the time, and most traders accept a 50% win rate, so long as they are making more than they are losing.

 

Success in forex trading is about minimising your losses, and maximising your profits. Here are the steps you need to take to set you back on the right path.

 

Brush up on your knowledge

Live experience on the markets is where you cut your teeth as a trader, but this needs to be backed up with a good background knowledge about how the forex markets work. You should aim to have a good balance of technical analysis skills and fundamental analysis skills, which are integrated into your trading strategy.

 

Technical analysis

Technical analysis involves studying the price movements in the market, to help you predict future trends and understand past ones. This is because price action tends to flow in cycles, which can be used to judge the balance of probabilities for future action. Traders use charts and graphs to help them see data represented in a visual way.

 

Even if you are not a natural with graphs, it is relatively easy to grasp the concept behind them, without going into an immense amount of fine detail. Start with line charts, which are the simplest form of technical analysis tool.

 

They plot the difference between the closing price of a currency pair, from the opening of one trading session to the next. Bar charts show the same information, but include more detail about fluctuations within the trading period. At this stage, it is also a good idea to brush up on your understanding of support and resistance levels.

 

Once you are comfortable with interpreting line and bar charts, there are plenty of more detailed tools and methods to learn about, such as candle stick charts, Bollinger Bands, Fibonacci retracements, Ichimoku charts, Elliot wave theory, harmonic price patterns, and much more.

 

Fundamental analysis

Fundamental analysis involves studying economic data releases and world geopolitical events to help monitor the direction of price action in the forex markets. Each currency is affected in different ways by the flow of trade between countries, which influences the currency price.

 

There are some well known economic indicators which affect currency price, such as Gross Domestic Product (GDP), the interest rate, the inflation rate, and the unemployment rate. Keep an eye on the economic data releases which are relevant to the currencies you trade in, and understand how they might influence price action.

 

Start with a practice account

One of the most common mistakes new forex traders make is to jump straight in with a live account. However, most platforms offer the chance to practice with a demo account, which simulate live trades, but you won’t be using any funds.

 

Even if you are confident in your strategy and have done your homework on analysis techniques, using a demo account can help you get used to the set-up of the platform, and avoid making basic keying errors on an unfamiliar piece of software. It is also a chance to test your mettle, and see how you perform under pressure.

 

Start with reasonably small amounts

One of the reasons that people are drawn to forex trading is the access to high amounts of leverage. While this is a huge advantage, and eventually may lead to excellent rewards, it is always best to start small. Most platforms will give you the option of using smaller than standard lot sizes.

 

The standard lot size in forex trading is 100,000 units of the base currency, but it is usual for brokers to offer mini lots of 10,000 units, or micro lots, which are 1,000 units of the base currency.

 

In some cases, you may even be able to trade nano lots, which are 100 units. While you will not make huge profits form such small amounts, it will also limit your losses until you are a more confident and experienced trader.

 

At the beginning, risk no more than 1% of your total funds on each trade. This way, you can build up slowly rather than plunge headlong into unchartered territory.

 

Know how much you can afford to lose

The foundation stone of your trading strategy should be understanding how much spare capital you have to play with. Always keep on top of your personal finances, and never risk losing money which you need to pay your bills and support yourself and your family in the day-to-day process of living.

 

This is referred to in forex trading as knowing your ‘risk tolerance.’ Without working this out in advance, you will probably end up losing sleep, and also risk losing a lot more! It is also a good idea to understand how stop-loss orders work, as these can protect you from making dramatic losses.

 

Make sure you have a trading routine

Even if you are trading part time, or fitting it around your day job, it’s important to have a disciplined approach to your trading. While there are no fixed paths to success, it’s important to remain consistent and patient with your chosen trading strategy.

 

Successful forex trading is not fuelled by gut instinct and the thrill of the chase; in fact, this is a recipe for disaster! Write down a checklist of the tasks you need to do throughout the day, and tick off each one when you have accomplished it. This will probably involve reviewing your economic calendar for the latest data releases first thing.

 

Also check the wider news reports for any significant geopolitical events which might affect your trading currencies. These include things such as election announcements, domestic unrest or international conflicts, natural disasters, changes of government, and so on.

 

You will then need to study the current market conditions to take stock of the overnight trending patterns, using your favoured technical analysis tools. This will help you to identify the best opportunities for trading over the coming hours. The next step is to review your open positions, in light of what you have already learnt.

 

Only now are you ready to start trading! Never be tempted to skip the previous tasks, no matter how impatient you are to get going with live trading. Which leads us onto the next point…

 

Learn about trading psychology

It is easy to underestimate the importance of being in the right mindset for trading. While it calls for a sharp mind and quick decisions, this must be balanced with good emotional control. Impulsive moves rarely pay off in the long term, so if you are someone who tends to be headstrong and act on instinct, you need to learn how to keep this in check.

 

When we are dealing with the prospect of making profits or losing money, two very primal and powerful human emotions come into play: fear and greed. Studies have shown that the fear of losing is more powerful than the pleasure of winning, which can lead us to be subconsciously overcautious when making trading decisions.

 

This may mean closing positions too early, or hanging on to losing positions for too long, and increasing losses. On the other hand, greed for greater profits can drive us to hang on to a profitable position for too long, and miss the optimum selling point.

 

So, how do we guard against such emotional biases in forex trading? The first step is to recognise that everyone is prone to them, no matter how cool under pressure we may be. The next step is to learn some techniques to help you view situations in a more detached and objective light.

 

Some people find that meditation is a good way to help them do this, and practice a routine for 20 minutes at the start of each day. It can help to prepare them for the rigours ahead, improve concentration, resilience, and reduce stress levels.

 

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THE MAJOR CURRECNIES

Posted on by Chris Miles

What You Need To Know About The World’s Major Currencies

The forex market is all about trading the world’s currencies against each other, as their value is in a constant state of flux. Forex traders track the movement of the market with technical analysis tools and other methods, in order to try and buy and sell currency pairs for a profit.

 

The language of forex currencies

Currencies in forex trading are always quoted against each other in pairs, and the exchange rate is the relative price of the two currencies. The base currency is always quoted first, and the quote currency second. Each currency is identified by a three-letter alphabetic code which is shorthand for the nation or economy, and the name of their currency.

 

For example, the US dollar is listed as the USD, the Euro is listed as the EUR, and the Great British Pound is listed as the GBP. Each currency is also linked to a numerical code which is used for computer algorithms, but traders always refer to the alphabetic code.

 

Forex traders track how much the quote currency has risen or fallen in value compared to the base currency by looking at the Percentage in Point, or ‘pip’ for short. This represents the change in value between two currencies, and it is the smallest whole unit price movement that can be made. It’s expressed as the last decimal place of a price quote.

 

A forex trader is always looking to buy currencies which they expect to rise in value (known as going long), or sell currencies which have risen in value (known as going short). They may also make the decision to sell off currencies which have not risen in value, but they expect to fall in value, in order to mitigate against further losses.

 

Currencies are purchased and sold in lots, and the lot size refers to the units of base currency in each trade. A standard lot size equals 100,000 units of the base currency. This might seem like a high amount, but because the changes in value are based on the pip percentage points, it is necessary to make any kind of worthwhile profit.

 

Forex traders usually trade through a broker platform, which offers them instant forex funding and allows them borrow money to make trades, even from a modest initial investment. This means that a trader with a prudent risk management plan and a strong technical understanding can make healthy profits, even through part time trading.

 

Most brokers will usually enable the trading of smaller lot sizes, known as mini lots, micro lots, and nano lots. This is useful for new traders who are just starting out in the market, and want to learn how to trade without the risk of significant financial losses. For example, a mini account can be opened with as little as $100.

 

The major currencies

Most new forex traders trade in the major currencies, because they have a high degree of liquidity on the market. This means that there are always plenty of buyers and sellers to be found, and they are less prone to dramatic fluctuations in value. The minor currencies and exotics (from developing or emerging economies) are more prone to volatility.

 

The six major currencies of the world are the US dollar (USD), the Euro (EUR), the Japanese Yen (JPY), the British Pound (GBP), the Swiss Franc (CHF), and the Canadian dollar (CAD). Here’s a look in more depth at what influence each currency has in the forex market.

 

The US dollar

The USD is the most traded currency in the world, and is the most widely accepted currency throughout the world. Some developing countries use it as their own major currency, instead of a more local one, for this reason. Other countries peg the value of their own currency to the US dollar, because it is regarded as the safest and most stable in the world.

 

The US dollar also the used as the standard currency lot for many high-value commodities, such as crude oil and precious metals. When there are significant fluctuations in the value of these commodities, such as rising oil prices, it has a direct impact on the value of the dollar. Therefore, most forex traders will keep an eye on the major commodity prices.

 

The Euro

The EUR is the second most traded currency in forex, despite only being introduced in 1999.  It is also the second most used currency around the world, and is the official currency of 19 of the 27 EU member countries. Most of these countries, such as Germany, France, and Spain, have strong, stable and well-developed economies.

 

Factors which influence the value of the Euro include the unemployment rate, the Consumer Price Index, and the inflation rate. One of the drawbacks of the Euro was demonstrated during the global financial crash of 2008/9.

 

Because it is tied to smaller and less stable economies such as that of Greece, as well as the larger ones, the problems of one affect the value of the Euro as a whole. It can be difficult to establish a status quo which is beneficial to all the parties, and it is more prone than other currencies to be moved by the influence of political events.

 

The Japanese Yen

The JPY is the third most frequently traded currency in the forex market, and the most traded Asian currency. It is used a measure of the wider economies of the Pan-Pacific region.

 

 Part of its popularity on the forex markets can be attributed to its role in the carry trade. This is because Japan’s interest rates are deliberately kept low, meaning that traders can borrow at low or no cost to invest elsewhere, and make a profit on the difference.

 

Although Japan has a strong economy built around manufacturing and export, the fact that the JPY is borrowed to such a high degree means that it rarely rises substantially in value during times of economic stability.

 

However, it has an advantage when there is turmoil and uncertainty in the markets, because it remains shielded from fluctuating interest and inflation rates, and it is seen as safer than the US dollar or Euro.

 

The JPY is a stable currency, and also very secure. Yen notes and coins carry advanced security features which makes it almost impossible to produce counterfeits.

 

The British Pound

The GBP, also known as sterling, is the world’s fourth most traded currency. It’s often paired with the USD and the EUR, but much less frequently against other currencies. The high value of the pound against other currencies makes it popular in the forex markets.

 

The value of the GBP is closely linked to the political stability of the country and the performance of the economy. The most common indices used to value the GPB include the Consumer Price Index, the Gross Domestic Product (GDP), the average earnings, the GDP per Capita, and the GDP Deflator.

 

The UK is traditionally regarded as a politically safe and stable country with a strong economy. However, the economy is currently under some extra pressure after the UK’s official withdrawal from the European Union at the beginning of this year.

 

The Swiss Franc

The CHF is regarded as a ‘safe haven’ currency, which is not prone to great volatility on the forex markets. Switzerland is a country with a tradition of maintaining political neutrality on the world stage. It is a not a member of either the EU or the G-7 countries, and it has a risk-averse approach to its economy.

 

Although the Swiss economy is small, it has one of the world’s larger reserves of gold, which tends to hold its value, meaning that it is protected from the effects of inflation. The CHF is seen as a good investment for those looking for a high degree of security, stability, and protection from inflation.

 

The Canadian dollar

The CAD is major currency because Canada is a country rich in natural resources, and it is one of the world’s major exporters of commodities such as crude oil, precious minerals, timber, and natural gas.

 

Therefore, the value of the CAD is closely correlated with the relative price of these commodities, and this can lead to periods of volatility on the forex markets.

 

Nonetheless, it is regarded as a benchmark currency by the world’s Central Banks. Canada’s close proximity to the US also helps to boost its trading position, as the US economy is the largest and most active in the world.

 

Other commodity currencies

Some references will also list the other commodity currencies, the Australian dollar (AUS) and the New Zealand dollar (NZD) as major currencies.

 

Australia is rich in natural resources, including precious minerals and metals, oil and agricultural products. This means that the AUS is popular with commodity focused forex traders, although subject to the market fluctuations you would expect.

 

Likewise, the NZD is a strong and stable commodity currency which is widely traded on the forex markets, and is popular with the island territories of the South Pacific.

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