There are two factors influencing the chances of you acquiring success in your trading activities: your emotional and cognitive state of mind, and the story a chart represents. Success will be determined by the trader’s ability to get those two factors in complete sync, instead of a collision course which is the major reason people incur losses in the financial markets.
This article will focus on a few tips and tricks traders can incorporate to tilt the odds in their favor. These essential factors consist of effective deciphering of the charts and the mindset of the trader.
As a trader, your main concern is to accurately decipher price action through chart analysis. Every trade you perform should have educated reasoning backing it.
Price Action and Signals
Experience is everything here. You should develop an eye for identifying price action signals, and price patterns such as a pin bar signal. Identifying patterns earlier means increased returns.
Price action and patterns, which are backed by a trending market, are considered as strong trends. Examine all possible resistance and support levels to test the strength of the trend. Traders need to be able to distinguish between false signals and the white noise in the market, as these can alter a trader’s judgment.
Price patterns can vary quite a bit depending on the nature of market movement such as trending or consolidating market. In a range-bound market, you will have to examine the forming pattern’s proximity to support or resistance levels. If the price breaks out of a range, you would want to be on the right end of the price action.
Price retracement itself can be a signal for seasoned traders, especially those who’ve developed an eye for reading charts. This is where Fibonacci retracements are extremely valuable in determining key price levels. If you notice the price action retracing 50% after a major move, that itself is an absolute signal. Take it without pondering too much on it.
Aside from the technical aspect, the other major influencing factor is your mental and emotional state. Even the most successful analyst in the world would be unsuccessful if he or she is unable to eliminate their emotions from interfering in their trading decisions.
A lot of traders get hung up on hindsight and forget that tomorrow brings new opportunities. The smart thing to do in a bad situation is to learn from the mistakes you made and try to avoid them in the future. The trader needs to be in a relaxed disposition to be able to execute well thought of trades, as the idea of losing money can affect anyone’s judgment.
Eliminate the Burden of Money
A lot of young people are attracted to the idea of trading, as it is in-line with their desire to leave their jobs and acquire financial freedom. However, the stress of needing to make money will most certainly be the cause of your trading failure. Trading and investing for those who need to make money for their sustenance should not take up trading as their primary source of income. To be successful in the financial markets, you need to be completely free of stress.
Overconfidence is known to be the undoing of even the most successful individuals. Trader’s need to understand that not every trade will be profitable, and there will be some loses along with profits. Ultimately what matters is the overall performance.
Successfully restricting your emotional interference requires a successful trader to take a minimalistic approach to the markets. Patience and discipline are two of the most important attributes a trader needs. If you have made a nice profit, don’t try your luck, close your position, and have a good night’s sleep.
Education and relevant information are two of the most important aspects of stock trading. Trade Genie is a premier trading advisory and educational service. Incorporating professional financial advice along with your own knowledge increases the likelihood of generating decent amounts of profits. For more information, visit Trade Genie and experience how a professional can help you enhance your trading and hedging activities.
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