Habits that traders need to prevent

Hi traders! Successful trading is often not about unique trading system, it’s about doing certain things over and over again, or I would rather say – not doing them. Many beginner traders often do the same mistakes over and over again and if you would simply avoid what they do (or even do the opposite), you would get an edge on the market, Because this market is not about buying and selling in hurries or react according to market volatility.

I created my own TOP-3 list, you can add some more in commentaries to this post. I haven't uncluded money managent here, just chart patterns (market behavior) that traders fail to read properly (Because pattern do tend to trade with Historical Charts)

Selling «expensive» and buying «cheap»

Most popular terms used in the "trading" is «buying bottoms» and «selling tops». When price suddenly breaks out from some range (say, to the upside) and starts to move rapidly, most traders will sell against this rally. That’s an instinct as Indicators told you (As Most of them react after trend is matured or trend is strong). If we’ve seen before Low volatility and absence of significant price Behavior to whatever side, we tend to deny breakout, we treat to new prices as «unfair» and rush to open a trade. Why in this case most traders are in hurry? They thing that current price action won’t long last and price will quickly drop back to the previous trading range.

Let's take a look at Example

It has rallied heavily, and believe me – there were many traders caught in short positions. Price has finally moved back to day opening, but I’m not sure that any short-sellers could benefit from that movement. You can’t enter short position (or long position, any position) if you don’t know your risk, if you are unable to calculate or estimate it. You can, of course, but it won’t be low risk trade, your risk will not be defined (don’t tell me that you know your risk because you have your stop-loss)

So, in most cases shorting against such rally can be only reasonable when market is overbought and ready to liquidate to the downside. Such situations are pretty rare and this topic goes beyond our post.

To avoid catching tops and bottoms, I recommend to switch between timeframes from time to time. What is cheap for one timeframe trader, may be expensive for other timeframe trader.

Updates on the trades during the week

I want to remind that I have posted two updates in the week and both went exactly what I thought and eur/jpy went from 136.20 to 140.70 (at the time of update, And usd/chf recent trade from 0.9460 is still going strong and I expect after minor correction price will clear the new yearly high which is the only obstacle in its way and I have moved my stops from 0.9500 to 0.9575.

Idea was to go long at the breakout and Intermediate false breakout while prior trend was still strongly bullish(see chart above for better understanding i.e Usd/chf), And momentum was strong and the only resistance price was facing the yearly high and It has once again hold for minor correction and As of Month end, we can expect that the momentum to loose some space and Once things settle and big week ahead in which the focus turn once again on ECB meeting, NFP Payrolls and few other high Impact release, So expect big swing to carry on the momentum through.

If you Like My posts, Then watch my other Recommendations

Usd/chf update

As I mentioned in my earlier post, that Breaks often tells us which way price will go and If you have such activity and then it became easy to define why price has been moving so strongly in one direction.

If you closely watch the chart then you find that after strong downside activity, price accumulate for days, and then we had some strong breaks both Initiative and Liquidation , Then we saw before the FOMC Rate statement,We saw an Responsive break on previous day and that type of breaks often trap traders, when they look to sell the rally and just before the release we saw more selling activity, and then we saw immediate strong candles coming out false Intermediate breakout.

Scanning Activity in Usd/chf

I just watch the chart closely as I post in my previous post, As We have seen and the activity is the same as told and that is why I need to prefer to wait and watch before I enter and exit and couple of good entries in a week matching such activity is good for me and I always try my best to post all what I see in the chart.

Type of Breaks In currency Trading

I have explained in my earlier posts that I would try to cover most of the aspects in trading and Which can help us in determining the various Institution activity and when we see strong breakouts then we should see the background whether there is any entry to be offered by market makers, And Breaksoften give us clue which way price would go after such strong momentum.

Initiative,Liquidation and Responsive Breaks.

If You see such strong Initiative Breakouts which are followed by ranges at the bottom then this is know as Initiative Break, And when such breaks followed by immediate sell-off, then it give us clue that this market is driven by fear or some news release and Liquidation was a part of that release. But If you found the daily range and during the final hours of day close we saw strong breaks to the range to the upside or downside, Then It is know as Responsive Break

Most of the times when we see such activity, the after scanning all the activity we see momentum comes again and drives the price and momentum came again from lows to the upside and that momentum is strong then we should feel confident that earlier "Responsive Break", was a trap and price will be driven strongly to the upside as market as "Accumulated", whatever supply it holds and then value again shifts to the upside and price is drive more strongly.

For more help please check this update of usd chf chart

Update of Post Eurjpy : Value Migration

For those who did not check my earlier post How Value migrates, Then take a look at the post I made two days ago of Eur/jpy

Simple technique when value migrates it really won't lean around the areas for too long and we did need strong Initiative Break and strong candle off from the area I marked was the one we needed.

When Price reverse in strong trends then it does take time to consolidate and accumulate the supply but not in this case and we have several Intermediate breakouts and reversal from those lows were strong and final breakout after Value Migration was strong as rally to the downside lack momentum and we just need a strong Rotation center violation candle that did the trick in this case.

Updated Chart of eur/jpy

In above mentioned chart, I have clarify How Value migrates and that is how we need patience to trade the trend reversals but we should not be in hurry to trade only candles patterns breakouts as we should give time to breakout to see whether or not the part breakout has follow through.