Different types of risk traders face in trading

Risk is the first think that comes to any traders mind before he/she place an order, a novice traders become pro by controlling risk and managing their portfolio. Risk that retail traders should watch out for are :
1. Overall market risk – This is the risk of loss by reasons of movements in a market sector. These can be caused by any number of factors including political, economic, taxation or legislative. Specific examples include changes in interest rates, political changes, and changes in superannuation laws, internal crises or natural disasters. Market risk can be minimised by having a spread of investments across different types of assets.
2. Global risk – This is the vulnerability of an investment to international events or market factors. This would include movements in exchange rates, changes in trade or tariff policies and changes in international or bond markets.
3. Sector risk – The risks associated with an industry’s specific products or services such as, demand for the product or service; commodity prices; the economic and industry cycles; changes in consumption patterns; lifestyle and technology changes. This may be minimised by detailed research to identify quality investments, reviewing their performance and their place in a portfolio.
4. Equity specific asset risk – risks associated with the specific investment, for example, quality of the company’s directors; the strength of management and key personnel; profitability and asset base; debt level and fixed-cost structure; litigation; competition levels; liquidity of the investment.
5. Timing Risk – The possibility that you enter the market at a bad time, for example, just before a fall in the share market. This can be minimised by not investing all of your funds into the market at one time.
6. Speculative Risk – If an investment is described as speculative you should be aware that the investment could rise significantly but also fall by the same degree. You should not invest in speculative investments unless you understand and accept the risks fully and are prepared to accept any resultant loss.

How to trade confluence to increase your probability:

Confluence zone are great place to enter a trade because multiple types of traders get involve, which create a significant shift in supply and demand. We should look for Strong confluence zone to increase our probability in trading.

How to look for confluence zone:

Confluence zone are formed when multiple levels of entry signal occur near each other or overleap each other. We have to draw trend line, support resistance line and use tools to get the confluence zone. If you look for following level shown below, that will cover the most important entry level were traders will likely to enter a trade.

1.       Horizontal support and resistance levels from larger timeframe.

2.       Trend line support and resistance

3.       Equidistance channel support and resistance

4.       Fibonacci retracement levels

5.       Round numbers

6.       Pivot level

7.       Chart pattern

How to gain long term success in trading!

Over the period of ten years, I was lucky to get to know many traders (My students and fellow traders), from different background. It’s amazing, how common their approach towards trading is. I am not an outsider; I had the same approach when I started trading, I had no idea what the trading was about. It is somehow in people’s mind that trading is very easy and anyone can make fortune in this business. Yes, you know the truth now; it is so difficult to make consistent profit in this market, no matter what some people say. If you know it is difficult then your will approach would have been completely different, you will be spend time to learn the business and you will afraid to place your foot in to the market. It is important to be afraid and keep on learning before you put your hard earn money in trading.

To avoid bad trade, you must have specific trading rules that fit your mind set. You must have a strategy that will guide you to entry and exit. You need to allocate the capital that you willing to lose in case something goes wrong.

Try multi time frame approach:

1.       A set up in daily

2.       A set up in 4h

3.       A set up in 1h

4.       A set up in 30 min

Try to add a moving average to give you a direction

1.       20 EMA

2.       50 EMA

3.       50 SMA

Try trend line bounce and breakout.

Try Horizontal line bounce and breakout

Try triangle and flag pattern in your trading

Try to be a money manager before a trader

Try 4% risk in every trade never more than that

Give me a call if you still can make money in trading, I will help you out.

Psychological obstacles of trading

I have categorized the often-identified psychological obstacles of trading into the following categories:
2. Effects of the Ego – The Need to be Right 
3. Impact of the "Law of Small Numbers" 
4. Opinions of the Majority – "There's safety in numbers" 
5. The Appeal of Sophistication 
6. Excessive Need for Understanding
7. Excessive Pattern Recognition
8. Greed & Hope
9. Misplaced Optimism
10. Fascination with Predictions
11. Illusion of Control
I would like to explain all the point in my upcoming book.

What is a valid trend line?

We can draw a trend line just connecting two points in a chart but a valid trend line must

Have three points. Remember that drawing a trend line is not science so every trader draw it different way By drawing a trend line you could easily identify our entry point, if you are a conservative player you should enter after the third touch, but in the pic:1  shows that third time price broke the trend line which made it invalid for  trade bounce.

What to look for in an online Forex Firm/broker:

·       Low spreads - In Forex Trading the ‘spread’ is the difference between the buy and sell price of any given currency pair. The lower the spread saves the trader money. Most firms offer 4-5 pip spreads in the Major Currency pairs. The best firms offer clients 3-5 pips.

·       Low minimum account opening - Those who are new to trading, and for those that don’t have thousands of dollars in risk capital to trade, being able to open a mini trading account with only $200 is a great feature for new traders.

·       Instant automatic execution of your orders - This is very important when choosing a Forex firm.

·        You want instant execution of your orders and the price you see and ‘click’ is the price that you should get. Don’t settle with a firm that re-quotes you when you click on a price or a firm that allows for price ‘slippage’. This is very important when trading for small profits.

·       Free charting and technical analysis - You need a firm that gives you access to the best charting and technical analysis available to active traders. The firm that I recommend gives clients FREE professional charting services and even allows traders to trade directly on the charts!

·       High leverage - You want high leverage - the ability to trade a large amount with a small margin deposit. Some of the best firms offer .25% or 400:1 leverage.

·       Hedging capability - You want the flexibility of opening positions on the same currency pair in opposite directions without them eliminating each other and without margin increase!

What takes to make money in forex!

We are programmed to be competitive and defend our opinion and notion.Our society teaches us to be like that too,more or often thats a good indication,healthy competition is  not a bad thing,but in trading all our common human behavior seems to work against us.The more we try to compete with the market ,more we try to defend our opinion ,we will dig hole for us.
In trading, only logic prevail,emotion has no place in math but think of us, without emotion is like,fish without water,emotion is a huge part of our life.Emotion makes our life beautiful,
So is it  impossible to ask a trader to trade like robot or some of us robot like, very less emotion only logic dictate their life.

Few trades from my forex trading

Most of my trades based on market supply and demand imbalance ,in a certain market condition the number of buyers and sellers should be equal.This is the nature of the trading,but when the underlying supply and demand for the particular currency changes dramatically ,we see the market movement either up or down.That makes trading more of a waiting game for me.

What make traders lose money in Forex:

1.       Lack of knowledge about the market dynamics.

2.       Using leverage like crazy.

3.       Not trading Forex as business.

4.       Try to cut short the learning curve.

5.       False hope from the marketing hype.

6.       Lack of capital to make it in Forex.

7.       Trading Wrong trading strategy.

8.       Too complex trading strategy

9.       Too ambitious and high expectation in trading

10.   No faith in your system

11.   Not giving yourself and your system enough time to prove.

12.   Trading without money management skill.

13.   Using wrong money management.

14.   Not analysis your trading outcome regularly.

15.   Not able to understand what works for you and what doesn’t.

16.   Identity crisis as trader.

17.   Not enough knowledge in basic computer skill

18.   Trading too small time frame.