arguments for resistance
1. 61.8% retrace @ $78.25
2. horizontal resistance @ $78.1, $78.75, $79.5
3. trendline resistance @ $80
4. relationship between dollar and commodity getting weaker
5. the rise has been based on low volume
6. eur/usd due to fall further in the coming as it target 1.40, although relationship weak the impact is still there regardless of how weak it is
7. we have had a fake out of the red trend lines = wedge formation ..........a fake out is usually followed by a true break out.
8. Oil moving with equity markets , equity markets looking very frothy and nearing there highs .....hence equity markets down , oil will go with it.
arguments for
1. up trend is till intact with HH's and HL's and no signs of reversal yet.
2. upward sloping trend line is intact
3.0 we are still trading with the wedge of red trend lines
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A trading plan is a must. I would be will to bet that virtually all successful traders have one. However, most new traders have no plan. In fact, I bet most new traders barely even have actual reasons for entering a trade. Imagine that you are planning to loan money to a new business as an investment. Could you picture yourself lending money to this person if they had no business plan and said they were going to start their business based on "their gut"? Of course a person would never be able to start a business by relying only on their gut. However, plenty of new traders start trading in exactly that manner.
Creating a trading plan is actually relatively easy. There are several core requirements that make up the plan. In my opinion, the main components of a trading plan are:
Trading objective (goals).
What and when to trade.
Money management.
The edge (trading strategy that puts the probabilities in your favor or a long sequence of trades).
Documentation and analysis of the results.
First, we have to define our trading objectives. Why are you trading? What is your end goal? Most new traders have completely unrealistic goals. For instance, a new trader might wan their $10,000 investment turn into $100,000 in their first year. While this is possible, it is highly improbable. These unrealistic expectations kill off a lot of traders before they ever had a chance. I think breaking even in the first year is an admirable goal; many traders do not do that. If a trader makes 20-30% on their initial investment in their first year, that is outstanding.
Next, we have to determine the basic outline of how to get there. What currency pairs (or other financial instruments) will you trade? This sounds simple, but it is easy to get off track by not defining this. I am in favor of utilizing as many pairs as you can comfortably manage, but I would not waste time with illiquid, choppy pairs. Other traders love choppy pairs. It's up to you. You also have to determine when you will trade and how often you will trade. Are you going to be a day trader or hold positions for a longer period of time? Your schedule and responsibilities may have some impact on that. But it is important to define these basic ideas to begin to form some consistency.
Money management is probably the most important aspect of trading. Would you rather have a fund manager who was a great analyst, but used poor money management? Or would you rather have a manager who was an average analyst, but used perfect money management? I think the answer is obvious. Even the best analyst will eventually blow out their account if they don't manage their risk properly. First, you need to determine how much risk capital you have to fund you account. Then you must determine how much you will risk on each trade. Most traders risk 1-3% of their account balance on each trade. This may sound low to the inexperienced, but after you blow our your account while risking too much, you will see why 1-3% is appropriate. It is also important to determine what your minimum risk:reward ratio will be. This could vary based on your overall trading strategy. Then calculate what your break-even winning percentage is. For instance, if your minimum risk:reward ratio is 1:2, you must win one out of three trades to break even.
Along with money management, it is vital to have an "edge". An edge puts the probabilities in your favor and allows you win more than you lose in the long run. Without an edge that makes you money over time, proper money management will only delay the inevitable as your account dwindles. There are many different methods to acquire this edge, but it is important to find one that is compatible with you. Also, back-testing may offer some help in determining an edge, but I think its value is overvalued. I think the true test of an edge is actually using it for future to trades, which will expose flaws in your execution of the strategy that back-testing won't.
The final step is to keep track of your results. I typically have a spreadsheet that has the following fields at the top of the page:
Date
Symbol (e.g.- EUR/USD)
Action (buy or sell)
Lots (how many lots were bought/sold)
Risk (in dollars)
Profit potential (in dollars; you need one column for each profit target you have in your strategy)
Result (profit/loss in dollars)
Equity (account balance after the trade has closed)
Notes (to keep track of anything I want to remember about this trade)
This format makes tracking results very simple. Please notice I track everything in dollars because that is true unit of measure, not pips. This format also makes it very easy to plot your account equity curve on a chart. There are a ton of statistics we can draw from this information that would take too long to write on this feature. However, the biggest perk of tracking your trades is that you look at the big picture. If you don't write down this information, you will weight the past 3 trades very heavily and maybe be able to remember the past 10 trade results (but I doubt it). This spreadsheet will allow you to identify problems with your overall plan and trading strategy so you can fix them.
This is a pretty basic start to having a trading plan. Experienced traders know that many more details are eventually inserted into this template to prevent mistakes and encourage good habits. However, I feel the above is the bare minimum required to developing a viable trading plan.
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Today we will discuss why your results in your demo account will probably contrast sharply with the results in your live account. When most people start trading, they believe their results trading with fake money will be the same as their results trading with real money. Of course, that is almost never the case. The reason for this is that a person's emotions greatly impact their decision making ability when real money is on the line. We will go over why this is, and we will go over some tips for blurring the line between demo accounts and live accounts.
First off, I want to point out that I am not slamming demo trading. Trading a demo is how everyone should learn the basic mechanics of the trading platform. It also allows people to practice following their strategy and practice entering orders. If a trader goes in a slump, it can be effective to switch to the demo for a while. When a trader is in a slump, their brain is so focused on the money they are losing that they make mistakes left and right. Switching to demo relieves this pressure and reminds the trader that they still know how to trade well. The demo is also good for working on new strategies without risking money. However, the demo results usually do not translate to live money results.
To begin with, there is one basic reason the demo seems "easier" to trade. The reason is that you can have your fake cash refilled at any time. Therefore, what is the risk? There is no risk. If you screw up, then you can start over without any penalty. This takes a tremendous amount of pressure off of you. You could blow out 5 accounts and win big on one, but that doesn't mean you will ever be able to repeat that one big winning account again. This is the first aspect of the demo to realize, but there are far more important factor than this.
Let's say we have moved passed the obvious reason above that the demo isn't a 100% forecaster of live results. Let's say that you have some idea what you are doing, utilize proper risk management, have a strategy that gives you an edge, and have attained consistent results on your demo. The reality is that it is much easier to follow those guidelines when there is no real money involved. A trader's emotions are much stronger when trading with real money than on the demo. If you don't believe me, I doubt you have traded real money for very long. With real money you will be tempted to commit a number of trading sins: moving your stop farther away from the entry, exiting a position before it hits your profit targets, entering a trade that doesn't fulfill your criteria to get "revenge" after a prior loss, etc. I could go on forever with these mistakes, and you probably have plenty of your own that you could list.
So how do you make your results with real money resemble your results on the demo account? The first is to start trading with small positions of real money. Do not jump straight into risking what you think you should normally risk. If you are trading very small positions, you will not devastate your account, but you will learn what mistakes you make when you switch to live money. Even though you may be risking small amounts of money on each trade, your brain will work very differently than when you are operating on the demo.
Once you start making mistakes with real money as described above, take notes on what happened. Write down the mistake, what your mindset was, why you did what you did, and why what you did was wrong. The next step is to write down a solution to this problem. This will allow you to had valuable "rules" to your trading plan that will help protect you from your own emotions. In my opinion it is difficult (if not impossible) to correct these mistakes before you actually feel the pain of losing real money due to the mistake (even if it is a small amount risked on each trade).
Continue this process until you become more consistent in following your plan. Of course, you will never eliminate new mistakes entirely, but this process will help you become much more consistent in actually following your plan and not deviating from your strategy. This may be a brief explanation of how to bridge the gap between live and demo accounts, but I want to reemphasize how important it is to start by risking very small amounts of real money. Don't trade the demo forever because there is only a certain level of expertise you can gain from the demo. Trade the demo until you have a basic trading plan (with a strategy and money management) that you feel comfortable executing. At that point, trade small positions of real money and you will be able to improve your trading skills much more quickly than if you only used the demo for months and months.
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