Saturday, March 19, 2016

In Trading, Less is more

We can witness the rise and fall in markets commonly. It is crucial in some ways, but it may also result in excessive loss of money if we try to trade everything.
There are some errors quite common like trading intra-day price variations or withdrawing a cost-effective trade simply because the market started retracing against your situation.  These kind of faults result because of giving unnecessary importance and effort to the regular price variations in a market.

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It is well known that less is more in trading. We can emphasize on the importance of this fact by notifying few key points about market dynamics, price action and how not to react at every fluctuation in the market.
The first and the foremost thing you need to do is accept the fact that stopping a “freight train” is a pretty tough job. A freight train in trading refers to the trends with a lot of momentum behind them, for example, if you look at the charts, you’ll realise that EURUSD, USDJPY or AUDUSD have long multi-month trends in them. It is not common for these trends to alter directions quickly or easily just like those freight trains.

Don’t Go Against the Trend
Hence, those short movements in these markets don’t really matter that much and reacting at these movements will be a bootless errand. Make the trend your friend, you can do this by not going against it every time the market fluctuates. Again coming back to the “freight train” reference, a trade in a huge market can pretty easily run you over if you stand in its way. Traders usually make this mistake of getting in these big-time trade’s way and get crushed.

Be Patient with Your Trade
The next key point is actually a fact, and it is that losing money SUCKS. Now obviously if you ask anyone, “Do you like losing your money?” they would reply with a resounding “NO”. Yet, if you put 10 people in front of a trading setup and teach them a little about trading, 9 of those people are going to sit there and look at every little market fluctuations all day long. They will do this EVEN if you tell them it’s going to cause them to lose money. Ironic right? They don’t want to lose their money but still they trade in a way that shows they apparently do want to lose their money.
The best way to NOT lose your money is by being patient with your trade. Once you enter the market, let the trade play for you, you cannot trade all those little movements in the market because all they are going to do is make you lose your money in the end.

The Long-term Dictates the Short-term
The last thing you need to remember is that, long-term dictates the short-term. For example, if you have the EURUSD down trend, short-term fluctuations to the upside are unlikely to stay very long. Hence, the long-term trend dictates the short-term fluctuations. Most of the traders try to trade every single movement in the market, they are over-confident about themselves and think they can trade every single counter-trade retrace, but sadly, they always fail in the end.


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