Trading is a skill–set like driving different vehicles, swimming in varied water bodies, etc. The skill set has to be acquired in full in order to make perfect job without any fear. Trading mainly requires right perception of the market to take trading decisions without any uncertainty.

Different classes of traders:

 Not all the human develop interest in trading. Some acquire a Professional degree in Finance and think that they can trade effectively for others or for themselves. But later continue to witness surprises in the market and mostly trade like any other emotional trader.

Many experienced traders advise to new entrants to the market how several combinations of statistics and fundamental data could be used to read the market and to derive the expected market moves. Still they use the disclaimers as they know that their expectations can go wrong and the traders should not blame them for the calls. They also teach the skill set more than to facilitate the traders to gain confidence in their trading.

Novice traders come to market under different perceptions. Some become traders under the influence of their associates earning quick money from the market. Those having gambling tendency and without knowing the magnitude of risk involved in trading enter into the market, initially may earn and later lose more when they take more exposure in the market when the going becomes good or due to over confidence. Later they search for ways and means of getting the knowledge in trading. But invariably they make such attempts under stress and the intention to earn back the lost money from the market. And in that process they fail to develop the right skill set to understand the market, because they focus more on the end achievement rather than to focus on  the process of making trading decisions and review of types of trades and identifying their scope and limitations and also when to apply the various types of trades. Many analysts think applying various types of statistical derivations will narrow down to entry and exit points in the market, but fail to focus on the strategies of trades, trading decisions risk aversion and emotional control. .

 

 

Trader’s psychology:

Most traders enter the market with the single objective of making quick money using their smarts or abilities. But when they realize that the market can move against them, then they try to find ways to decide on trades using technical and fundamental analysis. When they become more involved in such analysis the uncertainties, conflicting news, signals etc. inhibit them from trading and reading the market correctly. So a trader to trade at ease with definite market perception, certain skill sets are to be developed to read the intentions of the big traders or big market players or operators who trade against the herd of small traders.

Why Markets continue to give surprises:

Experienced traders may use various technical and fundamental analyses based on their market perception and derive the expected support and resistant levels and long term projections. They also create bullish or bearish feel to the herd of traders using their market commentary and future projections. But traders following various calls find that the market moves could be either attributed to the technical like over bought condition, short covering, and break-out on support or resistant or to the fundamental data released from time to time about the economic conditions of the respective countries of the currency pairs. They also find that such attributes when expected to have a long term effect on the currency pair, suddenly disappear or discounted and another attribute gains importance, like Euro and GBP weakening on weak European data and gain again when weak US data is released in a few hours gap. So traders are put into confusion when they are not able to understand the quick changes in the market moves (volatile moves) and sentiments and appear as surprise moves. By the time they try to find out the cause for such quick moves by searching various websites, forum and Financial TV channels, they find they have missed the market moves for a good trade, or lose a position or cut loss when they find their trade becomes negative. So when market appears to be unpredictable, the surprises dominate as market fear or greed continues to influence the traders to make distress trades.

Market moves

 

The international forex, commodity and stock markets exhibit intra-day volatility, swift in trading zone, consolidation, extended correction or rise, directionless conditions, surprise swing and trend reversal, while trading on market sentiments. Risk management during trading is often a major task for day traders, position traders, Banks, Treasuries and large financial institutions. Many statistical analysts use different algorithms and statistical models to project the future expected trends and directions- so called forecast. But such analysis use past performance records, and trend reversals come as a surprise to them, as the past performance doesn’t guarantee the future. The trend reversal during intra-day and for the long term is a major component to be understood well to be a successful trader. Then the next important factor is timing to take position and exit or profit booking. None of the conventional statistics provide timings and focus mostly on levels as the input for such analyses are only the levels and the averages of the levels.

Market attributes and big players

The traders at any given buy or sell level, will view the same level differently depending on the news or sentiment. The market makers/facilitators/operators use different strategies, news and rumors, political developments etc to their advantage to bring in swings within the market. They create a bullish mood to sell and bearish mood to buy. They never do hat-tricks. The shift in trading zone causes confusion and comes as a surprise to the trader who fails to act smartly and as a result misunderstands the direction or trend of the market. Traders should Keep in mind that the operators create the market sentiments and act against the traders from time to time.

Understanding the intention of the operator from time to time and trade accordingly will give promising results. But how do we understand when they bring in changes in levels faster than we think?…

The mental condition, market fear and the tendency to make emotional trades is common among all traders irrespective of the part of world they belong to. The real problem lies in the decision making process of the trading fraternity. In a given time some decide to sell and others decide to buy at a same level. Then the market perception is divided. Any one-side position takers lose and the other gains. At times, when the decision is not taken at the right time it may not be valid as the market moves up or down as a race against time and make the decisions wrong for both buyers and sellers.

Right market perception and timely decisions

Timely decision to enter and exit is the crucial factors needed for the traders. So the decision-making at the right time decides the profit or loss for any trader. Many decide to trade when the market trend is visible but after taking the apparent right trend position they miss the opportunity to see profit and lose. But the high net worth group of traders, the operators or the market markers deviate from the herd mentality of the traders and trap them very frequently. The market swing, shift in trading zone, emotion or aggressive buy or sell called spike, extended rise or corrections are part of market moves which can easily trigger and exploit human behavioral weakness, the mechanisms used by operators to exploit traders.

Trading is an art.

If trading style is developed like an art or skill set, then the market fear goes and we learn to tide over any market condition like driving a vehicle at ease when we have learnt the art of driving in any road condition. We also develop the road sense and try to read the intentions of the drivers of other vehicles and pedestrians during negotiations and navigations. Similarly we need to develop the insight to read the intentions of the big players from time to time from their market moves to trade unhurt.

Here are some golden rules that you can follow during your trading.

1. Margin availability: Always use only a maximum of 10% of your equity for taking positions. The remaining 90% should be used for protection of the positions during extended rise or correction. If you use a platform that supports hedging, then you could go up to a maximum of 25% to take positions and use the balance to place advance hedging  or entry stop when doing either way trades to enhance profitability.

2. Stops: Use stops to minimize losses. When stopped out, re-look at the market and the market has not gone much away from your stopped level for more than 30 min. then understand that it was a stop hunt move of the operator and re-enter the same directional trade to earn more than the stop-loss net profit making trading solution.

3. Grab the profit when seen. You can maximize the profit by using trailing stop and to protect a minimum profit.

4. Do n’t carry over a loss making trade for too long. You can cut the position with a nominal loss and re-enter after another study of the market trends.

Trades differ based on the variations in market conditions from time to time. Many traders make huge losses in markets based on misguided market perceptions of analysts, dealers of banks and anyone willing to offer FREE an opinion on the market. The reason is quite simple — knowingly or unknowingly they are all part of the operators group. So in the name of technical and fundamental analysis, and a nicely formatted disclaimer, they continue to misguide traders making currency trading look a lot similar to gambling.

The Trading solution

There are three type of trades:
1. Directional trade – Doing a Sell and Buy trade in other majors and commodity pairs.(EUR,GBP,YEN,CHF,AUD and CAD) – Sell near the high and book profit near the low.
2. Strategic trade – Doing a Buy and Sell trade in other majors and commodity pairs (EUR,GBP,YEN,CHF,AUD and CAD) – Buy near the low and book profit near the high.
3. Technical trade – Buy above the high in other majors and close during quick spikes / Sell below the low in other majors and book profit during quick downward spikes.

The high and lows can be determined during the day and are crucial levels to consider in trading decisions and positions taken – sell near the high or buy near the low when not cut for more than 30 min will mostly be safe trading strategy.
Identification of the operator intention and the selection of the right type of trade is the only solution that will give an assured profit.

Trade at Ease

The main attraction of trading is the potential to earn money faster than any other normal process of earning. Every one wants to earn in order to support and enhance their living conditions. But trading will look like gambling if you don’t understand the game and also the potential traps. An objective trader needs to have a strong mind to take calm decisions during distress conditions and not give in to emotional or frustrated decisions. Then he becomes a qualified trader.

Those who make emotional trades become the target of the operators. Operators know well that making very quick spikes trigger strong emotions and make traders do distress trades with the existing position or take new positions without having understood their overall intention. The question is – “Can you prevent such trades by understanding the intentions of the operators?”.

The answer is – “Yes, it is possible.” We can trade at ease by using hedging and advance hedging. We can use them instead of stops and aim to do either way trades if possible. Hedging will also help us to carry forward the positions without any equity loss, till a favorable move comes. Trading at ease is the objective.

We offer Professional trader training (PTT) for the subscribed members to learn the skill set and apply in the market and get the support till  reading of operators intentions from time to times become perfect and the market fear goes off.

Regards

Dr.S.Sivaraman

Founder and CEO

www.i-knowindices.com