Most forex newbies often think that taking more trades leads to catching more profits.
The more setups you take, the better your chances of winning, right?
This isn’t the lottery, y’all!
Overtrading refers to taking so many trade setups to the extent that you lose your market edge.
One of my favorite trading psychologists, Dr. Brett Steenbarger, explains that the root of overtrading is the mismatch between one’s profit expectations and market volatility.
In other words, traders often feel the need to catch multiple market moves in order to hit their goals.
While it’s helpful to set trading goals, there’s one major problem with this line of thinking.
The market does not move based on your expectations! This kind of mindset may lead a trader to overestimate his trading skills in an effort to reach his targets and mentally convince himself that he’s had a good trading day.
While this may work in some cases, it can wind up being harmful to your trading psychology when it makes you feel invincible and overconfident that you can trade in absolutely any market environment.
If you often catch yourself in this situation, don’t beat yourself up! It’s much more common than you think, and it happens even to seasoned traders.
You see, most of us have been conditioned to think that we must work harder and do more in order to achieve better results. While clocking in your 10,000 hours of deliberate practice has its merits, it’s a misconception to think that working harder equates to taking more trades. Working hard means taking the best (a.k.a. high probability) trade setups.
This could involve waiting patiently or sitting on the sidelines if you have to. Doing nothing and refraining to take a trade when it’s not aligned with your strategy is a trading decision in itself.
Of course this is much easier said than done, so here’s one simple trick that can help you avoid overtrading:
Take only ONE TRADE each day.
That’s right, no exceptions. If you catch a big win, you’re done for the day. If you snag a loss, you’re done for the day.
Day trading coach and author Galen Woods calls this the One Bullet Action Plan. Setting this absolute one-trade rule forces you to think like you have just one bullet left, which means that you have to aim properly and pull the trigger at the right time in order to make the most out of your only shot.
It sounds so simple, but it requires a lot of work.
You have to comb through the charts and all the available setups to see which ones line up with your strategy, so this addresses the psychological need to “do more.”
You must be extra picky in filtering out the “best” one for the day and at the same time be alert in catching the move.
Keep the wisdom of the great American philosopher Eminem in mind: “You only have one shot, do not miss your chance.”
What about undertrading?
Don’t worry about that just yet. Far more traders wipe out their accounts from overtrading than undertrading.
Once you are able to easily avoid overtrading, you’ll be able to fine-tune your market edge.
From there, sticking to high-probability setups will be like second nature to you, helping you stay consistently profitable in the long run.
Cable is hanging out at a strong area of interest, and the upcoming U.S. flash PMI releases might spur a big move.
Will the support-turned-resistance level hold?
If you’re unfamiliar with forex trading sessions, learn about them with our Forex Market Hours tool.
And don’t forget to check our newly released real-time Currency Strength Meter and Currency Volatility Meter!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data: Asian markets weighed down by slow vaccination pace, Delta concerns Taiwan to lower COVID-19 alert level Sydney lockdown to extend past July Australia flash manufacturing PMI down from 58.6 to 56.8 Australia flash services PMI slumped from 56.8 to 44.2 U.K. GfK consumer confidence index up from -9 to -7 U.K. retail sales up 0.5% vs. projected 0.2% dip on football season French flash manufacturing PMI down from 59.0 to 58.1, services PMI down from 57.8 to 57.0 German flash manufacturing PMI up from 65.1 to 65.6, services PMI up from 57.5 to 62.2 U.K. flash manufacturing PMI down from 63.9 to 60.4, services PMI down from 62.4 to 57.8 Upcoming Potential Catalysts on the Economic Calendar: U.K. retail sales at 6:00 am GMT Eurozone flash PMI readings starting 7:15 am GMT Canadian retail sales at 12:30 pm GMT U.S. Markit flash PMI readings at 1:45 pm GMT What to Watch: GBP/USD GBP/USD 1-hour Forex ChartGBP/USD 1-hour Forex Chart It’s a break-and-retest situation, forex fellas!
Cable is sitting right on the potential support-turned-resistance zone, still deciding whether to make a bounce or a break.
Will sellers defend the ceiling?
The 100 SMA is below the 200 SMA to hint that the path of least resistance is to the downside while Stochastic is already heading south. Price could follow suit since this means that selling pressure is present! If that’s the case, GBP/USD could slump back to the swing low at 1.3570 or lower.
A break past the 200 SMA dynamic inflection point and 61.8% Fib, on the other hand, could mean that pound bulls are charging again. This could take the pair back up to the next resistance near the 1.3900 handle.
It could all boil down to Uncle Sam’s flash PMI readings, with the manufacturing and services sectors not really slated to post big improvements for July.
Still, an upside surprise might encourage traders to buy up the Greenback, so y’all better keep your eyes peeled for the actual results!
3 Ways to Improve Your Trading Confidence : Forex trading is arguably one of the most difficult career paths one could choose. After all, it involves working under conditions that are full of uncertainties.
This means that traders rely on probabilities to come out successful, which could result in unexpected outcomes.
You may be swimming in pips one day and be down in the dumps the next!
Because of the nature of trading and its effects on the psyche, it is important to be mentally strong and have a lot of self-confidence.
In the most basic sense, I believe self-confidence is the ability to ACTIVELY focus on better performance (not success!) and stay away from negative thought patterns such as anxiety and fear.
Take note that I emphasized the word “performance” as focusing on success can make a trader overly cavalier or cocky, possibly leading to bad trade decisions.
But with the market constantly changing and the number of losing trades you will most likely incur, how can you remain self-confident?
1. Focus on the process. Almost every trader I know chose trading as a profession to make some dough. But as I’ve said in my one of my previous blog posts, being too focused on the returns of your investment can actually be detrimental to your account.
Remember that the market is unpredictable. There’s really no sure way for you to know exactly whether or not your trade is going to win or lose. Instead of focusing on your profit/loss statement, why not pour all that energy into making sure that you stick to your trading plan?
You shouldn’t obsess over the outcome of your trade, but rather, think about all the instances you followed your rules. Each time you follow your rules is a success story in itself. So give yourself a pat on the back every time you exercise self-discipline in waiting for a candle to close before pulling the trigger or closing your trade before the weekend.
You may not see the results now, but in the long-run, your discipline will translate to consistently avoiding mistakes, which in turn translates into confidence and consistently profitable trading.
2. Practice, practice, and more practice! Do you know the reason why the world-renowned boxing champion Floyd Mayweather spends weeks and weeks training for a fight that can last 36 minutes at most? It’s because, through preparation, he develops a sense of confidence through mastery.
Mayweather doesn’t know exactly what his opponent’s game plan is to knock him out. However, through deliberate practice, he has mastered fundamental boxing skills, how his body moves, and his own game plan to be prepared for whatever punches may come his way.
As a trader, you will never know what will affect sentiment and how the markets will react. This means that the key to confidence and success is to prepare yourself each day until you know you can handle any scenario the market can throw at you.
3. Look at the brighter side of things. Ask yourself this question, “Out of all the confident people you have ever met in your life, how many of them had a consistently negative outlook or attitude?” I’ll bet the answer is a very small percentage or maybe even none.
Successful and confident people tend to have a positive or optimistic attitude because when you focus on the positive, you tend to have positive results.
So, instead of feeling bad, sulking in the corner, and eating all the ice cream in the fridge when you’re in the middle of a massive drawdown, be positive and think of how you were able to follow your trade plan properly.
Also remind yourself that if you have a well-tested trade plan and risk management strategy, the law of averages will eventually work in your favor, and you will come out on top.
One way to practice this is by actively focusing on the things you’ve done right with every trade, especially if the trade is going against you.
“Reviewed recent and upcoming economic data?” Check! “Analyzed the charts?” Check! “Limited my risk?” Check! By making sure you’ve prepared all you can and focus on that, you are internalizing that losing trades will come no matter how much you prepare. This reduces your fear of losing trades, which gives you more confidence to take valid trade setups and act on good decisions. Like developing your trading skills, trading with confidence is easier said than done and won’t come without hard work.
However, I believe that in order to become a successful trader, one has to have a bit of swagger on the charts. After all, you wouldn’t want to be a soldier marching on to battle cowering under your shield, right?
How to Trade the News Using the Straddle Trade Strategy
What if there was a way to make money quickly even if you had no idea whether the market would move up or down?
It’s possible as long as there is sufficient price volatility.
And when can you get this volatility? When news like economic data or central bank announcements is released!
The first thing to consider is which news reports to trade. Earlier, we discussed the biggest moving news releases.
Ideally, you would want to only trade those reports because there is a high probability the market will make a big move after their release.
The next thing you should do is take a look at the range at least 20 minutes before the actual news release.
The high of that range will be your upper breakout point, and the low of that range will be your lower breakout point. Note that the smaller the range is the more likely it is you will see a big move from the news report.
The breakout points will be your entry levels.
This is where you want to set your orders. Your stops should be placed approximately 20 pips below and above the breakout points, and your initial targets should be about the same as the range of the breakout levels.
Straddle Trade This is known as a straddle trade.
You are looking to play BOTH sides of the trades.
It doesn’t matter which direction the price moves, the straddle strategy will have you positioned to take advantage of it.
Now that you’re prepared to enter the market in either direction, all you have to do is wait for the news to come out.
Sometimes you may get triggered in one direction only to find that you get stopped out because the price quickly reverses in the other direction.
However, your other entry will get triggered and if that trade wins, you should recoup your initial losses and come out with a small profit.
A best-case scenario would be that only one of your trades gets triggered and the price continues to move in your favor so that you don’t incur any losses.
Either way, if done correctly you should still end up positive for the day.
One thing that makes a non-directional bias approach attractive is that it eliminates any emotions. You just want to profit when the move happens.
This allows you to take advantage of more trading opportunities because you will be triggered either way.
As most news events tend to have a limited impact on longer-term price action, setting realistic profit targets should help to increase the number of winning trades.
There are many more strategies for trading the news, but the concepts mentioned in this lesson should always be part of your routine whenever you are working out an approach to taking advantage of news report movements.
Goals are important! Not only do they represent expectations and aspirations, goals also serve as a bridge from reality to the ideal.
The moment you set a goal, you face reality by acknowledging the need to address your shortcomings or maybe simply fulfill your desire to do better.
I mean, you wouldn’t set a goal of finishing a full marathon if you’ve already done it, right? Of course, achieving that goal would be possible if you put some work in your running in the first place.
By putting in a substantial amount of effort that consequently leads to progress, goals keep you grounded when you see that it’s the little things that can make a big difference in the long run.
Small things like adding a minute to your jogging routine, drinking only a cup of coffee instead of your usual two, or moving your stop loss a pip or two above breakeven could have huge rewards down the road.
You then become more aware of yourself and realize your strengths. In this aspect, goals keep you motivated as each step you take gives you a better glimpse of what you’ll be like if you push yourself a little further.
Imagining yourself achieving success gets you closer to the real thing! Just ask Arnold Schwarzenegger who credits his seven Mr. Universe titles to his workout routine which included him just standing in the corner, visualizing himself winning again.
However, proper goal-setting is not as easy as it sounds.
Some traders often become too preoccupied with their desired outcomes, such as making a truckload of pips or bouncing back from their losses, that they overlook the realistic aspect of these goals.
You have to think about whether your goals are achievable depending on your trade plan, your risk management, and even your own personality.
Another reason why some traders fail to achieve their goals is the lack of concrete follow through. It’s not enough to set a particular weekly profit target, think happy thoughts, and expect it to magically become a reality.
Keep in mind that goals must be accompanied by specific steps to attain it, must be realistic, and must be action-oriented.
To facilitate this, one must also figure out which type of goal to aim for.
For beginner traders, it would be wise to set out on goals that focus on the process, as opposed to the outcome.
These types of goals help reinforce and shape your trading skills, so that you learn to trade properly. Whether or not you end up in a loss doesn’t matter – the point is that you trade the right way and focus on the process.
Examples of such process goals can pertain to certain aspects of trading like risk management (choosing the correct lot size) and execution (closing trades when they hit your stop loss). In the long run, it will be highly beneficial to your development as a trader.
On the other hand, if you are a more experienced trader, having outcome-oriented goals may prove to be more effective. Having a monetary or pip target can help remind you of what must be done in order to achieve the goal.
Remember though, you must first have the necessary skills and experience to actually know what process you must go through in order to hit your target.
No matter which type of goal you decide to choose, the goal should help you improve as a trader. The purpose of a goal is not only for you to achieve it; it should breed motivation, learning, and confidence.
By setting goals and striving to achieve them, you can accelerate your forex trading development exponentially.