Technical Analysis of the Forex Spot Markets using Elliott Waves, Chart Patterns, Candlesticks and other tools. Disclaimer: None of the comments in this blog shall be construed as professional trading or investment advice.
Here’s an update on my quick and dirty forecast on USDJPY Yesterday:
Prices have broken the wave d low, that my entry, and my stop is above the wave e high. If it breaks the wave e high at this point, then the count is wrong.
If you are trading this, be cautious as I know many people who do not think USDJPY would sink much further. Be prudent by take partial profits along the way if the trade moves your way.
From BusinessInsider.com’s article on “61 Behavioral Biases That Screw Up The Way You Think”, I decided to take a look at it’s source: Tim Richard's Psy-Fi Blog. I found that these were actually expanded from a list of “slightly odd behaviours in the sphere of investment”.
As a part of trading psychology, and a way to better understand ourselves as traders. I think these articles are a good read. And it’s good to identify some of our own biases and guard against them.
For the full article, click on the links above, and here are my thoughts on some of these Biases.
Often times when we speak to traders, they will share their winning trades with you. It is important to get the full picture and see both winning and losing trades. And often times, there are more things to learn from losing trades than winning ones. The goal is, naturally, to learn from mistakes and not make them again.
The next time someone shares their winning trade with you, ask (nicely) about all the trades the person had for the week or month.
Some people think that trading many currency pairs in many timeframes using many trading strategies is the best way to be profitable. Contrary to that, successful trades often focus on a few pairs of currencies, using only a few profitable strategies. Having too many strategies (and too many indicators in one) will likely only confuse you.
Sometimes, Less is More.
Bias Blind Spot: we agree that everyone else is biased, but not ourselves
I’m guilty of this one, and it’s important to recognize that we always have a bias. In fact, when you trade, you always have a bullish or bearish bias, why else would you trade in that direction? But it’s important to recognize that it’s a bias, not a fact, that you are trading.
Every trader has done this before – Ignore contradictory signals because he has already entered a trade. And again, this bias often only becomes clear after the trade his a stop and becomes reality. Here is where an opportunity to have a smaller loss is ignored, in favor or hope that other evidence which supports your trade will prevail.
This is the thought process behind the Martingale Money Management Strategy. “I’ve lost 5 times in a row, the next one will be a win!” That’s the reason that gambles double their bets each time they lose in a bid to win back the losses. Give it an unlimited number of tries, and you will have a win simply due to randomness / probability. However, you must first have very deep pockets as doubling up each time will quickly bankrupt you.
If you risked 1% of your account for your first trade, and doubled up each time you made a loss. In a string of 5 losses, you would have lost 24% of your account! It gets worse! In your 7th string of losses, you would have lost 96% of your entire account, and a string of 7 losses is not uncommon in trading!
And there you are! Remember, Psychology is a key pillar in trading!
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Wave .iv may be complete and wave .v could be in progress. Watch the price and trade safely!
Hi folks, it’s the weekend again! Hope everyone has something enjoyable planned out. For me, it’s time to look at the charts again and see what things might possibly go. I find the markets difficult to read, and the Euro crisis may be throwing the waves into greater strength or weaknesses across all currencies.
Let’s take a look at the USDCHF.
Daily Chart
Each vertical section in the chart is 1 month, so we get to see the monthly movement for USDCHF. My preferred wave count is that we are in the middle of a complex correction, with limited upside before it makes a wave C downwards to complete it’s correction. I’m looking at around 0.8600 where my wave 4 is for that correction.
If that’s correct, it should be making its way upwards to complete its wave (2) or (B).
The alternative wave count is that wave A is in fact the full retracement, and price is on its merry way up to far far away land from here. But the movement after preferred count wave A seems more corrective than impulsive. So that will be my alternate count.
8H Chart
* Each vertical segment represents 1 week in this 8h chart.
Counting up from preferred wave count A. I’m not sure if the move up is completed. My inclination is in fact, that wave 3 had extended, and we are merely completing wave v of 3.
So generally, looking to go long in the short term, until I see strong signs of reversal, which I will then be inclined to look for short trades in favor of a Wave C downwards.
Well, that’s my opinion of USDCHF right now. Remember, personal due diligence, and good money management!
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