Thursday, February 19, 2009

Tape Reading skills required for currency trading.

"Trading technique is simply the ability through study, observation and experience to recognize the signals in each of the several phases of market movement" George Douglas Taylor.Tape reading is nothing more than monitoring the current price action and asking 'Is the price going up or down right now?'Even most novice observer has the ability to see that prices are moving higher or lower at any particular moment or for that matter when prices seem to be going nowhere or sideways.It is also fairly easy to watch a price go up and then tell when it stops going up-even if it turns out to be only a momentary pause.
If you can learn to follow the price action, you will be two steps ahead of the game because price is faster than any derivative."The only truth is current price". Your job as a currency trader will become ten times easier once you accept this.
There are two main tricks to monitoring price action.The first is to watch the price relative to another reference point.It is the easiest way to tell if the market is moving closer to or further away from a particular point.Some reference points, such as a swing high or the days opening price will have much more significance than those points involving some type of calculation.When watching price, the currency trader wants to know the following, how fast,how far, and in which direction.It takes two points to measure these things.One will always be the current price and pivot levels.
Watch the price with the intent to do something or to anticipate a certain response." The study of responses is an unerring guide to the technical position of the market" Richard Wycliff 1910.
The second main trick to monitoring price action is to watch for the markets response to a particular condition, in other words, anticipating a particular behavior.For example, if the market has been at a very low volatility point and just begins breaking-out of its particular trading range, one might anticipate that the price would begin to accelerate in an impulsive manner and not run into immediate resistance or on a directional play, if the price is moving in an impulsive manner in a trending market and then pauses to catch its breath on a mild reaction, one would expect it, then to continue on in the direction of the trend.When there is a particular behavior to anticipate it is easier to watch the price to see if it acts according to ones expectations.
Is the market failing to break on bad news?Is it find support after a series of advances?Does it run into an invisible overhead wall and sharply back off implying strong resistance?These are market responses to certain conditions.Part of studying price behavior and gaining experience as a currency trader is gradually learning what actions to anticipate.Then you must learn what the markets most probable response or outcome should be.
However it can also be a profitable strategy to recognize when a given signal or expected response is failing.Sometimes a failed signal can be more profitable than the normal expected response.For example, a classic failed response might be a scenario wherein price was consolidating in a pattern higher lows and higher highs-a classic triangle pattern.One would expect a break-out from a chart formation to have some follow through.However if price only penetrates the lows by a small amount and then turns upward, picking up volume and momentum as it goes, and comes out the upside, a very significant reversal has probably occured and there may be much more price advance to unfold.
One last trick to watching price action is to learn to think in terms of handles or levels.Use big round numbers as reference points for levels.It does not mean that you are placing orders at those numbers.It is just a simple way of organizing data that professional traders practice subconsciously.
PIVOT POINTS.An astute trader will always have the previous day's close in his head.He also knows the previous day's high and low.He also knows the opening price, for that tells if the buyers or sellers are in control for the day.The previous day's high and low and today's open have very strong psychological implications and are the most important pivot points to recognize.By concentrating on price action near these points, we can eliminate much of the hard work in tape reading.Many times the market will let us know right away if this is going to be an area of support or resistance.The previous day's high and low tend to overlap in congestion areas.Look to exit profitable trades immediately at these points in sideways markets.In trending markets the price will run through these points a bit before pausing.When the market is strongly trending the opening price becomes the most important.
If we are watching a high, low or opening price as a pivot point, we are watching to see whether there is any impulsive price action as the market approaches the point or moves further away from it.What is impulsive action?"A whoosh"The market moves rapidly as if just coming to life for the first time.It is usually a series of ticks in one direction without a tick in the opposite direction.A sequence like this tends to consolidate or pause a bit before being followed by more impulsive action.If we quantify these 'whooshes' which we can do in several ways, we will see that the market tends to have continuation moves at least 2/3's of the time.Not bad for arriving at a 'positive expectation' simply by following price action.
In conclusion, tape reading is not watching every trade that passes by but rather keeping an eye out for unusual impulsive action, unusual volume, or just observing the way the price trades at significant levels.Each price swing has forecasting value as to what the next most immediate move should be.We then follow the price action to see if that move plays out.
Tape reading is at the heart of swing trading.When looking for short term moves, price based derivative indicators will be too late to be of value.Ultimately, currency traders should feel a great sense of freedom when they can rely on simple charts to formulate a game plan or a conceptual road map in their heads and the movement on the tape to tell them their game plan is correct. Muraleedharan.

Wednesday, February 18, 2009

Be an Expert in your chosen approach.

You must devise a methodology and then use it.By practice, you become an expert in its application and then money flows in your way.To be truly successful you have to become intuitive, and this simply means you become an expert, in which you do, some thing you achieve through experience. You can observe market action and draw appropriate conclusions from that.But whichever style you adopt you need to decide what triggers you into a trade and also how to get out.To master trade selectivity, you have to become an expert in your chosen approach.The key aspect of your approach is that you filter out a vast amount of market information and just focus on those factors which you need to know.It is a lot easier becoming an expert in a narrow field than a wide one.The various sources of market information's are so vast, that is not possible to take it all in.Let alone become an expert in your chosen approach.You must decide what information you want, design your approach and then use it.Become an expert and you will find you become intuitive, that is when you can select only the best trading positions, the low risk ones.Then it will all go the right way.Muraleedharan.

Thursday, January 22, 2009

Trade mangement Currency Trading.

Trading and money management professions are expensive to learn an not everyone who attempts to learn succeeds.Those who do succeed may profit handsomely.In this respect the trading profession is no different from the medical, engineering,technical,artistic,sporting and political professions.
Trade management ( Two approaches).
1) Scaling out approach.
Putting on the entire position upon the initial entry and then liquidating positions, of that positions (a) to cover costs (b) take a small profit (c) and finally to ride the trade as far as it will go with what remains of the position after partial liquidation.
2) Pyramiding approach.
Build the position by entering a position of it to test the waters.If the initial position becomes profitable, you then add to the position in stages until you have put on the entire position.
Much of any acceptability of the approaches depends upon your personal comfort level in handling risk and your financial capacity for handling risk Muraleedharan and

Tuesday, January 20, 2009

Levels of Currency Traders.

The most important asset to you as a currency trader is your raw intelligence, common sense, intuition, emotional control and skills developed through dedication, time and copious amounts of hard work.
Level one. Beginner Trader. Beginners study and paper trade for a minimum of one moth with pretend currency, gaining the experience required to establish a track record of profitable performance.
Level Two. Advanced Beginner.Trades one or two lots with real money, learning to overcome emotions and at the same time establish a track record of making money.
Level Three. Competent Trader.Trades with control over his emotional distractions, utilizes proper equity management and achieves a financial return.
Level Four.Proficient Trader. Trades are made utilizing confidence, education, experience and the trader achieves financial returns.
Level Five. Expert Trader.Instinctively executes profitable trades without emotion.

Monday, January 19, 2009

Currency Trading is a Specialised Knowledge.

Knowledge will not attract money, unless it is organized and intelligently directed through practical plans of actions, to the definite end of accumulation of money. Knowledge is only potential power.It becomes power only when, and if, it is organized into definite plans of action and directed to a definite end.The meaning of the word 'education' is to 'develop within'.An educated man is one who has developed the faculties of his mind, that he may acquire anything he wants, or its equivalent, without violating the rights of others. Knowledge has no value except that which can be gained from its application towards some worthy end.Successful men in all domains never stop acquiring specialized knowledge related to their major purpose, business or profession.The order of the day is specialization. Hence in order to succeed in currency trading you should acquire and practice the knowledge and skills required for currency trading.How long one has to practice? The answer is ' till you succeed' using P3R principle which is discussed elsewhere in this blog series.Do you have the resources to pass through the learning curve which leads you to build expertise in currency trading? The answer is 'You have to decide whether you have it or not'.This is the hard truth of the reality.But once you pass through the learning artist's phase and build your expertise, you can enjoy the wonderful results too like the legend of value trading' Warren Buffet'.You should get specialized in currency trading and get specialized in a single currency pair of your choice so that you can become an expert in that one pair which is enough to give you financial freedom. Muraleedharan

Wednesday, January 14, 2009

Own your future focussing on what you want and use currency trading as a vehicle to reach your goals.

You always find what you are looking for? " In the high desert, the buzzard circles looking for decaying flesh and he finds it.In the same sky humming bird is focused on sweet nectar of brilliant flowers blooming in the cactus, in the same desert and she finds it" Own your future focusing on what you want, leveraging your time and activities that advance you directly towards definite dreams and goals.It is your future and you are only responsible for it.You can have broadly the following goal setting areas. Spiritual,Social,Family,Mental,Physical and Financial. The following are some of that people want from life.You can have your own choices
1 ) Peace of mind.
2 ) Currency Trading Business.
3 ) More time with family and good family relationships.
4 ) Meaningful work with sense of accomplishment.
5 ) More time for hobbies and recreation.
6 ) More friends, deeper relationships, acceptance.
7 ) Excellent Health.
8 )Happiness, opportunities for having fun.
9 )Recognition for achievement.
10) Education of self and children without financial strain.
11)Be able to contribute generously to charities.
12)First class travel, no more vacations on relative route.
13)Financial security and no debt.
14)Be able to support family members financially.
15)Nicer House.
16)Nicer Car
17)Prosperity,financial independence.
18)Be able to buy luxuries and material processions.
19)Not having to worry about unexpected expenses.
20)To leave an estate to heirs.
These are some of goals people desire to achieve.You can have your own goals.The Currency Trading career can serve as a good vehicle to take you to your goals.

Tuesday, January 13, 2009

Multimodel Processing of information & trainning in extremity.

There are different learning styles and most people have strengths and weaknesses as learners.An acronym that is useful in remembering learning styles is VARK .V for visual, A for auditory, R for read and write, K for kinesthetic (kinesthetic learners learns by doing).If we hear it , see it,read it and do it the skill and information is more likely to become your second nature.You internalise the skills. TIE (Trainning in extremity).Successful trainning and development of expertise commonly involves performing skills under highly challenging and even adverse conditions.The expert performer builds mental toughness and develops the inner confidence that he or she can handle anything.Speed of processing and executing skills is every bit as important as acquiring these skills.Expertise consists of taking what starts out as effortful and making it automatic more and more efficient.Currency trading is a crucible of life, it distills in a matter of minutes, the basic human challenge, the need to judge,plan and seek values under conditions of risk and uncertainity.In mastering currency trading, we necesarily face and master oursleves.