psychology of trading

Forex Entry Strategy – Kong Size Commitment

Forex Kong 13 Comments

Moving forward with the same general theme that has been discussed here for the last few weeks – it appears that the dollar is now (after a considerably drawn out correction upward) finally on its last legs. Overnight action has seen the EUR take a bit of a pop, and across the board accelerated dollar weakness is really starting to take shape. Gold has essentially traded flat, and U.S equities have formed a large “V type correction” but as well,  are more or less at levels seen two weeks ago.

I have begun my first “set” of currency trade purchases short the U.S dollar (and even smaller buys short the Japanese Yen) against my beloved commodity currencies – the Australian Dollar, the New Zealand Dollar and the Canadian Dollar. So to recap – I am now getting “short” USD/CAD and entering “long” AUD/USD, NZD/USD as well long AUD/JPY, NZD/JPY and CAD/JPY.

With consideration of the volatility in currency markets – a common strategy of mine is what I like to call “buying around the horn”. Meaning – I will place smaller orders several times throughout the coming days as price action moves in the desired direction – as opposed to a larger order at one specific price level with the expectation that I’ve “nailed it” exactly.

This strategy allows me to enter the market with very little risk (with smaller orders to start) and affords me the flexibility to add further to these positions at areas of support (should price dip) or add when momentum picks up (by placing orders above or below current prices) – looking to catch momentum in said direction. If price action stalls or trades sideways – I have only committed a small amount of capital and can relax knowing that I have ample dry powder when things really do start moving.

It is very possible (and even quite likely) that the dollar could move against these “preliminary trades” in coming days – but in approaching it this way – I welcome it! Any further strength in the dollar will only provide additions to my current plan – with a final “averaged entry price” being as good as anyone can expect.

Regardless – the most important element of this type of trade being your commitment. I don’t expect to get it right here this morning, not  in the slightest really – but I have initiated a sequence –  with firm belief in its outcome.

I am committed to the trade.

 

 

 

Patience – As Things Trade Sideways

Forex Kong 14 Comments

Sideways is not a direction I am particularly fond of. You can’t make money, and for those unable to distinguish the characteristics of “sideways” – you can also lose money – very fast.

Traders dream of mounting profits  – with day after day followed by yet another tall green candle, with  trend so clearly in place that a five-year old could trade it effectively. This is rarely the case. Where as – we are most often faced with  ambiguity, trendless markets, ranging stocks or currency pairs and a general sense of confusion as to “where the market is going next”. In fact, they say that markets are generally only trending 30% of the time – and that the remainder of time is spent grinding traders accounts to dust in the dreaded direction of….you guessed it – “sideways”.

Lets look at a quick example.

In the example above – clearly no trend is in place – and a trader is left struggling for days, looking for a definitive sense of direction. This (more often than not) pushes a trader to do things such as:

  •  Dump the position at a loss (even though – it’s just as likely that the direction will eventually turn in your favor).
  • Add to the position (creating even more exposure and risk) with thoughts that the small dips or bumps are buying or selling opportunities.
  • Hold the position – but with considerable stress –  with funds now tied up (day after day) and no profits to speak of.

For the inexperienced “sideways” is almost certain to cause significant emotional pain, and even more so –  pain to their account balance. I do my absolute best to avoid this at all costs but still – with years of experience, have learned to accept it as a part of trading, and that is virtually impossible to avoid 100%.

Patience is the key – as making decisions during times of “sideways” will almost certainly take its toll on both your account….and your emotions.

Risk On or Risk Off – Decide At Your Peril

Forex Kong 11 Comments

When looking at trading markets in general – I always consider a single (and very important) overlaying theme. Superceding  all others, and guiding my decision making process – regardless of asset class, current news headlines, technical indicators, price and sentiment (which has now become a commodity itself – being “resold” across the internet at any number of bogus websites) I will always look for the answer to one fundamental question.

Are investors currently considering taking on risk? – or looking to protect themselves against. Very simple and to the point.

Is risk on or is risk off ?

When risk is considered “on” – money flows to those assets where investors feel there is opportunity to see a return on their hard earned dollar. A time when things are “looking up” and investors feel somewhat safe in taking their money out of savings – and placing it elsewhere (the biggest measure of risk on this planet is currently the U.S stock market).

When risk is “off” – money flows back into savings accounts, back into “security” (out of risk and U.S equities) – and subsequently back into currencies such as the U.S dollar and the Japanese Yen ( are you starting to see how this works? ).

So……if nothing else – a fundamental knowledge/feel  as to weather or not  the current investment environment is “risk seeking” or “risk averse” can go a long way in keeping an investor / trader on the right side of the market.

And the question begs to be asked – is it risk on? – or risk off?

Planning The Attack – The Power Of Cash

Forex Kong 12 Comments

Being 100% in cash is one of the best feelings a trader can have. You’ve reduced your risk to absolutely zero and have effectively “brought the soldiers home” – now free to do any number of things. You can choose to take a break – if that’s whats needed. You can regroup / step back and take a new look at the field. You can heal (if by chance your last battle has left the troops – how shall we say….”defeated”?) – or you can use the opportunity to do what I always do. What I always do!

Plan the next attack.

There is no room for complacency anymore. The times of making an investment decision and “checkin on it next month” are well behind us now – anyone suggesting otherwise is a complete and total fool. If investing is a battle – then we are at war every single minute of every single day, for the rest of  our god given lives – period. Accept it….deal with it – own it.

My plan (oh yes – you guessed it) is to get on the offensive, mobilize the troops and “take it to em” with everything I’ve got. You see……the enemy has already shown it’s hand. Giant “printing presses” now in place along the lines. Aimed at the sky with such power and might as to “rain down dollars” on the innocent children and families below.

The plan is flawed. And the spoils of war will soon go to those who have found ways to move quickly through the trenches, stay nimble, alert – and attack when given opportunity.

I plan to get ridiculously short the dollar in coming days – and expect and equally powerful move upward in all asset classes – as the “rain of dollars” floods markets and trenches alike….

What’s your plan?

 

(Seriously everyone – lets try to get in here this week and contribute – good or bad etc……lets hear what everybody’s thinking – It says “leave a reply” so……LEAVE ONE!)

Respect Mother Market – Be Thankful

Forex Kong 1 Comment

There are times in life when things just don’t go your way.

Times when outta nowhere, for no good reason at all …life just decides to “up’n crack you one” right in the face. Commonly, these “times” ride the coat tails of equally “good times” – ultimately doubling their surprise, and significantly magnifying their effect.

Well I’ve had tremendous success in the markets today…..but have failed miserably elsewhere. Unfortunately – I’ve allowed my emotions to get the better of me, I’ve let my discipline slide and I’ve made a costly mistake. I’ve hurt one of those closest to me, and just when I thought everything in life was going great – BAM! – one of those “times”.

You don’t expect it.You dont see it coming but when it does……Ouch.

A lesson in this? I dunno – I guess this being “Thanksgiving” for those of you in the United States, maybe a good dose of respect and appreciation for those you love – and thanks for all they’ve done for you. And for all you traders – putting things in perspective, likely the same……

Respect mother market…and appreciate what she’s given you.

Fear And Greed – Its Called A Market

Forex Kong 18 Comments

I look back on last night’s post and frankly……bust a gut. A touch “brash” fair enough – but……when there’s nothing else to say….well – there’s nothing else to say. Obviously the foresight gained through study of  currency markets ( opening Sunday afternoon) held true, and I live to blog another day “sans” consumption of crow. A massive upturn across markets, as Uncle Ben’s QE money finds its mark. How’d I know? – Common –  I told you a couple of days ago!

Regardless…some interesting observations here “blog wise” – as traffic literally falls off the map, with huge gains abound, green candles everywhere, happy smiley investors, and  tranquil “bliss” scattered ‘cross the net like tortilla’s in a hurricane. Apparently…..Kong no longer needed.

Tranquillo amigos. I booked my profits today at the NYSE close.

We go higher from here sure ….but “I” go higher with 4% more gas in the tank than this morning so……take it for what it’s worth…most guys are lucky to bank that….yearly.

Don’t be an ass if you see profits in this environment – take em. We’ve seen some fear here in recent days – with everyone scrambling for info…..scrambling for some ” sense of it all” – and now with one  big “up day” you think you’ve got this thing solved?

Please……..is that greed talking?

Mom Knows Best – Get Outside

Forex Kong 7 Comments

The pack fo dogs that had taken up residence across the street appears to have moved on. It’s much cooler here now, and the majority of Mexican families enjoying the last of their summer vacations, are also leaving  – in exchange for the steady stream of  “sun seeking retirees” now seen dotting the beach. There are fewer children now…their playful laughter will be missed.

My mother tells me that I need to find balance, and not spend my life staring at this confounded computer…she always knows best. Over the years I’ve come to recognize the importance of this – despite having incredible difficulty putting it into practice..I do try.I do try to find “balance”.

Often trading can become “all-consuming” for those of us who so enjoy the challenge. Day after day the constant battle, the math, the pressure, the flood of emotion accompanying every success or failure. The joy – the pain. So the importance of “getting away from it all”  and clearing ones head – cannot be understated.

The sea turtles are waiting. Their calming presence – a gift.

Find the time to get away from the screen – as we all know – come Monday…….the wolves will be waiting.

 

Act Smart – Trade Stupid

Forex Kong 8 Comments

At risk of alienating the entire viewing audience here at Forex Kong…… I’ve  spent at least a full second  (possibly two) considering the implications/ramifications of me just “letting it rip” and letting you really have it.

When people find themselves in losing positions, emotions run high – and with nowhere else to turn, it’s not uncommon  for  those of us with a “comment button” to bare the brunt of it. Trust me….I received several “nasty rants” today from people who don’t even frequent the blog! – complete strangers!

Well…………I will have none of it.

For those of you who can’t  take responsibility for you own decisions, or trade with absolutely ridiculous leverage, or have no actual idea what you are doing (short of taking  advice from some “snake oil salesman” and some bogus trade strategy), or for whatever reason think that this is gonna be easy…..please.

There’s nothing  for you here. You act smart…..but you trade stupid.

 

 

Kong……long risk ( even moreso now ) holding gold and silver til they rip the shares (options) from my hands.

 

Living With Ants – Trading With Wolves

Forex Kong 7 Comments

I live with ants.

Going back now…..some 12 or so years – the ants have become  my friends….my confidants……my unspoken and loyal followers…… my pals. Happily going about their business…..as I’ve done mine – a mutual respect if you will.Then I got involved with this “trading thing”……and the ants and I needed make room for “a new animal” – oddly…..enter….”the wolves”.

Hardly  indigenous to central or south america…these “wolves” kept poppin up….. via my computer screen! As my ants continued over and across….morning after morning,  we where now faced with these confounded wolves. Wolves I tell you! Wolves in my computer!

He he….again…..I digress.

Point being…….each and every day you enter the markets – be prepared. You will encounter wolves.Their teeth are sharp, they travel in packs, are highly organized and will gladly tear you to shreds at a moments notice.

I’ve got nothing to add “market wise” as things are going exactly as planned. But there will be much more on wolves, ants, rats, snakes, bulls, bears, roaches, hawks, doves – and the rest of the characters we trade with everyday.