07. Trading Psychology Archives

Allow Your Trading Plan To Succeed

 

This is a trader question from the Fibonacci Trading Forum.

Vernon says:
I have the most difficulty with over analysis and Support/Resistance Zones that challenges me when it’s time to pull the trigger.

Neal’s reply;

The real problem is that you can’t catch any fish if you don’t put your hook into the water. If too much analysis stops you from trading, you are guaranteed zero success.

Sometimes it helps to step back and simplify. See my reply about finding high probability trades. Then make the decision to take the trade.

Let your trading plan work for you. Take the trades that match your trading plan. If you don’t trust the plan, then focus instead on making a plan that you can trust.

-Neal Hughes “FibMaster”.

Good Strategy For Trading Success

 

This is a trader question from the Fibonacci Trading Forum.

Vernon says:
What would make the biggest difference to my trading?
Combining the top-down analysis and finding an entry in the lower time
frame based Higher High or Higher Low and TRSI with Fibonacci.

Neal’s reply;

That’s a good strategy!

So, make it happen, find the setup, wait for confirmation, execute the trade, manage it, and exit..

Try to ignore the profit motive for a while. Whether you are trading the TRSI Bounce, TRSI Pop & Drop, TRSI Push, or any other strategy, focus first on keeping the risk within your tolerance. After some experience, you can analyze the results and make revisions to optimize for profits.

-Neal Hughes “FibMaster”.

Vernon says:
I also need suggestions for the following;
Building confidence and trust in the analysis and pulling the trigger
based on the price action, Fibonacci and TRSI.

Neal’s reply;

Confidence requires time and consistency, it needs to develop. Time and experience are part of the recipe, they are necessary ingredients.

There is no way to become confident without following a consistent strategy. Then apply the strategy consistently over many trades, and measure the result. You can speed up the process by analyzing past charts, as well as executing your strategy in live trades.

With experience and consistent diligence, you can develop confidence in your strategy. Start small, with lower risk, then adapt as your confidence builds.

-Neal Hughes “FibMaster”.

Simple Trading Strategy Wins

 

This is a trader question from the Fibonacci Trading Forum.

Vernon says:

Here is one of my biggest trading problems;

With all the different Fiblevels and Support / Resistance zones in the different time frames, I tend to hesitate once these levels are near and therefore need further confirmations.

Once there is confirmation based on price action, there will be nearby SK Fibonacci Support or Resistance, and this make me wait and analyze further and probably miss the trade.

Neal’s reply;

It is important to keep the context of the trade in focus. What is the trigger? What is required to keep you in the trade? What is required to get you out?

If your setup and trigger is good, then the trade is under way until you have reason to exit. If some predicted support/resistance gets in the way, it will get you out. Or if the predicted support resistance is not strong enough, you will remain in the trade. Your trading plan takes care of that.

If the support/resistance level interferes with your setup/trigger, you will not have a trigger, or you will not have a good setup. Then is not a good trade according to your trading plan, so there is no entry.

So, take the trades on appropriate setups, and let your trading plan take over. Keep it that simple, to avoid analysis paralysis. Trust your strategy, trust that your trading plan will get you in and out appropriately.

What I am really saying is that a simple trading strategy will be a winner, instead of over-analysis and complication. Get back to basics, trade your plan.

-Neal (FibMaster’s Fibonacci Trading Course)

Have You Lost Too Much Money, No Confidence?

This is a trader question from email.

Ivan says:
-Hi Neal,

I need a piece of advice.

When I started trading, I lost a lot of money and now have some problems to enter the market. It is some sort of mental problem. How to overcome it?

Thanks.
-Ivan

Neal responds:

Trading will always be risky. There is no way to trade without risk. so we must learn to accept risk, and to control it.

Unfortunately beginners have the greatest chance of failure, because their knowledge is lacking and their skill is non-existent. So it is common for beginners to lose a lot of money before they gain enough knowledge about risk control and survival.

Once a trader has had major losses, there is damage to the trader’s confidence. Patterns of fear are developed, because the pain of a large loss is so severe. Excess fear causes bad behavior, because our brain is trying to avoid future pain. This can cause the trader to avoid taking trades, to get into a trade late, to get out too early, to avoid placing a stop-loss etc. There are endless ways that fear can cause bad trading.

We have to tolerate a certain amount of fear because of the risk involved. Without risk, no gain is possible, no profits can result.

So how does a fearful trader recover, and start to trade more comfortably? How does a trader regain the lost confidence? It takes time, and experience.

First, eliminate the risk. If you can trade without risk, you can monitor your progress, and build confidence as your results prove to be positive. You can do this within a demo account. Take as long as necessary. After a few months, review the results, do you have confidence in your strategy, in your trading techniques?

Once you develop some confidence, you can begin to trade using risk capital. Once again, control the risk! Start with minimal leverage, and small positions. The goal is not to make huge profits. Focus on technique and strategy. Focus on building confidence. The goal is confidence, not large profits.

After some time, you will have enough confidence to take larger positions, and to use more leverage. Always monitor your fear and stress. If you are too uncomfortable, reduce the risk! You do not want to have another mentally devastating event. The goal is survival, building confidence. Take your time, this is a long-term project, not an overnight miracle!

-Neal. (FibMaster’s Fibonacci Trading Desk)

Moving From A Demo To A Live Trading Account

 

This is a trader question from email.

Bruce asks:
I’ve been trading in demo accounts to get started and am getting ready to start a real account with trading capital. In the past I have made some mistakes which have lost all my demo capital.

I’d like to start with a small account, using real money and grow it. How can I work a small account into a larger account?

Bruce.

Neal responds:
In a demo account you will probably be taking more significant risks. You will be testing new ideas, taking some bad trades, and experimenting. sometimes you’ll take trades with excessive risk. Any of those can erase your account, whether it’s a demo account or real money.

Don’t rush to a live account, because there are many lessons to be learned without risking actual cash. When you do trade a live account, you will be trading with a drastically different mindset, so there will be some adjustment and a new learning curve.

With a live account, trading real cash, you will have to learn to take smaller trades, with less risk, to trade more cautiously.

To build a small account, you will probably have to take smaller profits, have close stops, and avoid those long-shot big winners that you may have tried in your demo account. Try this in your demo account first. If you are consistently making smaller proftis and keeping risk under control, you could be ready to move to a live trading account.

Once you have developed confidence in a demo account, you will know when you are ready to use actual trading capital. If you are unsure, then you are not ready to make the move. Evaluate your confidence level before making the switch. The insecurities and fears you have will not be any less when real money is on the line. When you make the switch, trade conservatively for some time, that’s what it takes to survive.

The biggest difference between trading a demo account and a live account, is how you react to stress. It’s all in your mind, your comfort, your confidence. Developing that confidence through practical experience in a demo account is a great way to start. If you can remain calm and make good decisions while risking real money, you’ll make the transition smoothly.

-Neal. (FibMaster’s Fibonacci Trading Course)

Trading Discipline For Consistent Success

 

This post was inspired by an email I received from a struggling trader yesterday. She was asking about what is missing, why she is struggling to find consistency.

Trading can become very emotional. Before the trade, there is fear of entering a position. During the trade there is the fear of risk and the natural drive to take profits after the trade clears break-even. There is also greed, sometimes a winning trade looks too good, so the trader does not want to exit.

How can a trader work towards consistent performance, towards profits? The answer is to be disciplined. Discipline is one of the most important skills to have.

It takes discipline to define a trading plan, and to stick to it. Discipline is required to stick you your best setups, to enter and exit when you should, and to control your risk exposure.

Discipline is key to long-term trading success, to profits, and key to survival. If a trader doesn’t follow rules, trade optimally, then the trader will eventually fail. The next time you make “bad” trades, resolve to be more deliberate, and more disciplined.

It’s not easy! Discipline does not come naturally, it takes repetition to for good habits. Every time you sit down to trade, consider whether you are being disciplined. Review your strategy, confirm that your risk is acceptable, that your trade setups meet your requirements, that you are not exiting or entering trades emotionally.

It takes constant work. No-one is perfect. Every time you fail to trade your plan, stop for a while, focus on discipline.

-Neal “FibMaster” Hughes.

Fear, Greed, Managing Emotions While Trading

 

This is a trader question from the Fibonacci Trading Forum.

Justin says:
I need to develop trust – once I do the analysis, find an entry point and make the trade – I don’t trust the levels I’ve come up with and pull the trigger to exit right when it starts to go against me.

Neal responds:
It seems that you do not trust your entries? Or are you nervous about taking a loss?

There are two issues that come to mind… The first is the distrust of your triggers. The second is the question of how much room you should allow a trade to go against you, before it continues to your profit exit.

Traders who distrust their triggers should study past trades, and keep a log of current trades. Work to determine whether the trigger has a positive result over time. If you had not distrusted the trigger, and allowed the trade to continue, would it have been profitable? How many times would it be profitable vs unprofitable? Perform this analysis on historical charts, and current ones too. Calculate some statistics, and also plan a viable exit strategy on the losing trades. If you trust your ability to exit bad trades with a controllable risk, you may have less urgency to exit quickly.

On the topic of allowing a trade some room to move, we should discuss that in one of our live webinars. Since we are generally entering when a trade is moving in the right direction, we don’t want to allow too much of a move against our position, but some risk is inevitable.

-Neal

 

This is a trader question from the Fibonacci Trading Forum.

Justin says:
Hi Neal,

I appreciate you continuing to work to help us become better traders by helping us hone our skills. Here are the biggest things that affect my trading:

What do I struggle with the most?
Overanalyzing – I add Fiblevels on monthly, weekly, daily, 4 hour, etc to try and find the Fiblevels to ensure I don’t miss a level – Then question if the probability of the price action getting there so I slip into “analysis paralysis” and watch the trade slide right on by.

Neal responds:

Analysis Paralysis can be a real problem! If there is doubt about price reaching your profit objective, how about giving it a try, then exit if there is a trigger against your position? That way you are in the trade all the way if it gets there, and you exit with a smaller gain or loss if the trade stalls earlier. If you have enough confidence in the trigger, at least give it a chance?

Also, this issue about the minor (lesser) Fibonacci levels getting in the way, stopping your trading, we should discuss this in a live member webinar soon. This is a common error, I can help you with that.

-Neal

Pulling The Trigger Video Lesson

 

Today we had a 50 minute webinar for members of the Fibonacci Trading Forum, on the topic of “Pulling The Trigger”.

This webinar recording is packed with solutions to several other trading problems, as well as the “Pulling The Trigger” issue that many traders struggle with. The recording is available to members, for only $9.95 you can view it, and other recordings too.

Below is a free preview of the webinar, on YouTube;

FibMaster video Pulling The Trigger

When To Stay Out Of The Market, When To Trade

 

This is a trader question from the Fibonacci Trading Forum.

Bert says:
What is not working for me now?
Mental discipline of when to stay out of market and when to halt the trading. The patterns I was taught work there is no question but sometimes they don’t… So many times I’ll re-enter only to get stopped again. And of course once that happens I may hesitate on one that works. Blending the Higher Highs or Lower Lows and TRSI triggers is very helpful but I struggle with trusting a continuation of a trend.

Neal responds:

If you have confidence in your system, and your risk is within tolerance, it will be easier to stick with a trade, and to take the triggers.

Review your strategy, review the results. Check that your risk is acceptable, and whether your setups are reliable. Sure sometimes there will be losses, and some days it will be stressful. But over time you should come out ahead. With that knowledge, your profitable outcome, you should be able to trust the trend execute your plan.

-Neal (FOREX Fibonacci Trading)

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