Golfers get the yips – darts player get dartitis…

General over-analysis is one thing – too many indicators on a chart, too complicated a system, with too many ifs and buts in it – and common enough when you’re starting out learning about forex.

But what can happen after a while, maybe when you’ve been generally successful, had a few nice winning trades, but also a few losers, bigger than you’d like, is that you just don’t want to click that trade button. Call it overcautiousness, fear of failure, whatever.
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It’s not the fact that we’ve placed a losing trade, it’s the fact that we shouldn’t have placed a trade in the first place. We’ve all got a great set of excuses just to get that ‘trade’ button clicked in the first place, when we probably shouldn’t have.

Fact is, when I started out, I had the newbie’s disease of being unable to go 15 minutes with the charts in front of me without placing a trade. Being naturally conservative, I didn’t come to much harm, but it didn’t do the education much good.

Nowadays, I suffer mainly from #8 – constant tinkering with the mental system, without actually taking it as far as producing concrete rules and maybe even writing them down – and thinking I’ve got it all figured…
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Here’s a post going the other way – if you fancy yourself as a gambler, don’t learn about the forex business, it’s not for you.

Hey, it’s like poker.
It’s not like poker – just one of the many things it shouldn’t be like is poker.
You think that edge-of-the-seat stuff, adrenalin rushes, a bit of healthy panic are going to be integral and vital to the whole game? If you think that’s how the big guys do it, operating as if supercool, suave casino habitués, then you’d be way wrong. The big guys are nerds. They wouldn’t know what the hell they were doing in a real casino.
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When you take a loss on a forex trade, the plain fact is you’re making an admission that you were plain wrong. And that’s uncomfortable – and that’s when all the avoidance mechanisms kick in. We all, on occasion, are good at hanging in there too long just avoid have to admit the screw-up.

So why is it going to get better?
Hanging a bad position round your neck will suffocate you slowly. Better to cut it free and then you really can begin the process of learning then forgetting. Yes, learn from mistakes, it takes a bit of steel to go back and have a close look at what went wrong – it’s painful, no doubt about it – then keep the lesson and forget the feeling.
If you don’t, you’ll carry it for a day or two, and then – usually – your broker will do the job for you, like it or not. And those 2 days won’t have made you enjoy forex trading any more…
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The forex market? Predictable? – well, just at the moment, while we are hardly in normal trading conditions, that doesn’t necessary mean predictability is reduced…

For light reading, I have been checking James Surowiecki, The Wisdom of Crowds. The critical factor in this treatment of the subject is the consideration of a collection of individuals, all making independent decisions (given the same apparent input data) – yes, a bunch of forex traders, each of whom know it’s them against the rest – rather than the standard psychology of crowds.
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Fairly obvious really, but the thing about obsessions is they creep up on you.

A friend of mine does affiliate marketing – 14 hours a day at a screen, fixing up links, building a hundred or so rubbish web sites each designed to earn a dollar a day – so it mounts up, but it is a seriously brute force approach – and then there’s a heck of a lot of stress when a hundred sites go down at once. There are times, frankly, when he’s not a fun person to be near. He’s going to sacrifice a few luxuries like a social life, decent blood pressure readings, make his money and retire at 40. Maybe….
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Keep it simple (stupid) - if you do keep your trading simple, the point of it all is that you know where you stand, know what decision to make when faced with a set of circumstances and why you made it – all key factors in making the transition from rookie to professional.

And the obvious way to keep keep it as simple as possible at the beginning is to only trade one currency pair. Fewer variables, fewer moving parts, and a lot more chance for you to analyse charts, trends and trades with some accuracy. If you do try to handle 4 or 5 pairs at once, with all the major currencies involved, the individual characteristics of a pair, or even a currency, get lost in the blur of action. Learning the unique behavior of a pair is critical.
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Found this interview with Tom DeMark while surfing around – DeMark has always stressed:

• “My method is anti-trend, contratrend, it’s pattern recognition and price exhaustion.”
• “Make certain you’ve made your technique objective – it should be a definitive process.”
• Although, also – “Good discipline, a knowledge of limitations and good money management are more critical than the system or indicator.”

He also says that he retired on leaving business grad school – markets & investment have been a retirement hobby ever since, and not a proper job at all… Think I know what he means, sort of….

Spend your time looking at 1-hour candlestick charts and then switch to a 5-minute chart and what happens?

Suddenly, all these exciting trends jump out at you, making you think that here’s some action, better get on it… Major movements, established trends, breakouts? None of these. Remember the vertical scale – these are just a few pips here and there, the illusion is of faster, more dramatic activity. If you switch back to the longer period charts it all comes back into perspective.
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Charts can do this to us traders…

Or, more accurately, indicators can do this… Having just seen a nice march upwards, along the top Bollinger boundary, there’s a bit of a squeeze, and now the trend is into its third (Elliott?) wave. Everything worth consulting says go long, so it’s buy….
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