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Traders psychology (A burnt child dreads the fire)
November 2nd, 2009Trading psychology is the perception change that you go through once you are actively in the markets trading your own money. When trading on a demo account, it seems like it would be easy to make money and there seems to be no reason why you wouldn’t be able to start making money with a live account. Then, you make that first live trade and you start to feel indecisive about when to take profit, or cut your losses. You have just discovered the effects of trading psychology.
Trading psychology can affect your judgment while you are trading. There are two emotions in particular have been the source of ruin for forex traders over the years. Those two emotions are fear and greed. Fear will cause you to either not make a trade when the opportunity arises, or to close a trade prematurely without giving it a chance to be profitable. Greed will cause you to make trades that are too large or too risky, while trying to make massive gains. Greed can also cause you to try to wait for the “last pip” of a move instead of being satisfied with a “good run”.
The best way to combat trouble and to beat your emotions with trading psychology is by making a trading plan and sticking to it. Use well thought out risk management and don’t get in over your head. Remember that mastering your emotions will allow you to seize the real profit from the markets while emotions are high for others. If you can master your emotions and follow good risk management practices, you can be a successful forex trader.
Oil Market Overview 16.10.2009
October 18th, 2009This overview will demonstrate how to forecast oil price without any trading systems. All you need is to understand easy logic of forecasting. Our aim is to forecast futures contract on American crude oil, quoted on NYMEX.
First of all lets look on a contract specification of the contract – Trading Hours (All times are New York time) – Open outcry trading is conducted from 9:00 AM until 2:30 PM. Altogether we 5,5 hours of trading in the pit and 11 half hour bars – this will be our main period. Oil is traded 5 days in a week – 11*5=55 bars. We will use this values for technical forecast of oil price movement on the nearest week.
Fundamental analysis.
We already know, that demand became stronger after DOE announcement concerning problems with lack of gasoline and diesel fuel on national strategic commercial storehouses. Many traders predict, that within the next few days oil will cost more than 80 dollars per barrel – nonofficial level, set by OPEC. As we already said, main event of the week was report of DOE with information about decrease of all resources. Uncertainty on stock markets and stable dollar were off the game.
In spite of negative beginning of a new trading day on Asian stock markets, oil market proceeded its growth because of technical factors. Analysts suppose, that first powerful resistance level is nearby $78,6 per barrel. In addition, rebels in Nigeria announced about new attacks on oil companies. But oil quotation grow already 7 days, within this week oil raise in price at 8,7%, that may become a good reason for correction because of profit fixation
Technical analysis
For our forecasting we will use:
MACD (11,55,11) – for analysis of correlation dynamics day/week
2 Bollinger bands with periods 11,2 StDev and 55,1 StDev for defining of potential reverse points and zones of buy/sell
As You can see on the chart, yesterdays oil rally were quite expectable. Price pushed away from standard deviation of weekly and daily level, and price raised up immediately. Arrows on the chart are painted to demonstrate possible moments of entry. Checkmarks – to demonstrate moments of partial profit fixation. Moment of second bounce from level of standard weekly deviation was a great confirming signal for buying oil. On 16th of October on Asian tenders oil price is falling , that demonstrates yesterdays rally profit fixation. You can see on the chart, how accurate is MACD and how it indicates price falling after daily MA(11) breakout. At that moment contract is at the medium weekly level (MA55) and it means that we should fix profit from sell contracts.
There are 3 sceneries of further course of events:
- First – bounce from weekly level, price will grow and level 78.65 will be tested again
- Second – price will fall to level of standard deviation of the week, then it will bounce and maximal level will be tested
- Third scenery – price will fall to the control level of 15th October – $75.90 per barrel.
Further price movement is hard to predict without new Market Generated Data