The Second Trading Quarter

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Monthly Newsletter – Forex Psychology with Saira Khalid

Welcome to the new quarter of 2015 starting afresh in April. This is your time to shine in the second Trading quarter. The Day light saving ends and the London open times are tradeable for most in the Australian market. Here is a guide to know the times (frankly I simply look up as I find it confusing! Due to daylight savings across the globe I suggest you use www.forexfactory.com or simply use our Smart Charts with ForexCFDs to check out the Market open times).

According to GMT, for instance, forex trading hours move around the world like this: available in New York between 01:00 pm – 10:00 pm GMT; at 10:00 pm GMT Sydney comes online; Tokyo opens at 00:00 am and closes at 9:00 am GMT; and to complete the loop, London opens at 8:00 am and closes at 05:00 pm GMT.

Now it is a time of temptation for the day traders that they will need to watch out for as the London and New York both opening sessions are tradeable in EST for Aussie traders in the evening.

I want to address the personality patterns in trading in these excitable trading times. There are many trading challenges faced by a trader in pursuit of creating wealth via Trading Business. Let us address a few patterns and some solutions to help you move in the profitable direction steadily!

In “The daily Trading Coach” by Brett Steenbarger, Steenbarger has pointed out a few patterns to be aware of when trading. I have expanded on those suggestions and provided ways for you to measure and strategies to improving your trading results;

  • Emotional Patterns: How you feel the difference between when you are trading well and when you are trading poorly. Here I want to point out that you focus on your trade execution rather than results. I have noticed that individuals improve their trading significantly when they focus on their trade execution following a precise set of criteria rather than the positive or negative result achieved. Just focusing on the result misses the strategic execution.
  • Behavioural Patterns: Recognizable differences in the trade management of your best and worst trading episodes.

Behavioural Psychology is concerned with the observable behaviour rather than internal thinking processes. This discipline holds that all behavior is learnt from the environment.

Behavior is the result of stimulus – response (i.e. all behavior, no matter how complex, can be reduced to a simple stimulus – response association). John Watson (established school of behaviorism in psychology) described the purpose of psychology as: “To predict, given the stimulus, what reaction will take place; or, given the reaction, state what the situation or stimulus is that has caused the reaction”.

Feedback is the mechanism by which learning is directed towards a particular target. You can now journal your own feedback and use it to bring the change you desire. The desired result is obviously making money however this result has a higher probability of consistency if you know the stimulus that is creating that response. In my opinion that is trade execution in an emotionless methodical manner.

  • Cognitive Patterns: Thought process and concentration differences after your best and worst trades.

Cognitive psychology is the study of mental processes such as “attention, language use, memory, perception, problem solving, creativity, and thinking.”

You can journal if you have different thought patterns before a successful trade to a poorly executed trade. The trick is to journal this immediately after your trade rather than wait for the result and journal, as it is too late by then and you will not be able to coach yourself to successful patterns suitable to you.

Thoughts are things and they are a creative force creating a specific reality for you and it is no different in trading and it is in other areas of your life that you wish to enhance your performance. I suggest as a step 1 you observe your thoughts and journal them and step 2 you start consciously changing your thought patterns and one simple way to do this is to get into a trading state before each trading session. If you understand that the randomness in market is actually advantageous to your trading then you will reap the benefits in your account.

  • Physical Patterns: Differences in your energy levels, physical tension, subtle signs of relaxation and/ or tension when you are trading at your best and worst.

According to scientific description a physical property is an aspect of matter that can be measured without changing it while a chemical property can only be measured by changing the chemical identity of a substance. To measure your physical patterns the best start is to observe your body and your breath. If you become aware and get in tune with your body you will feel the changes in physical patterns prior to trade execution. It is good to check after the execution as well. It is important that you write out any symptom you experienced. In this way you can manage the subtle indicators that your physiology sends you and sometimes can save you entering spontaneous over excited trade entry leaving the profits in your trading account. Some of the indicators I have noticed are anxiousness, increased heartbeat, palm sweating, thirst, excitement, twitching, swallowing, stomach growling and body sensations.

  • Trading Patterns: Differences in size of trades, times of day, mode of entering and exiting trades, instruments being traded as a function of good versus poor trading.

Do you oversize trades to make up for prior losses? If so when do you specifically do that? Have you been overly risk averse and missing out on potential profitable entry that matched your checklist but fear kept you out? Have you adjusted your risk reward ratio to justify a trade entry? For example your trading plan states that on 180 profit booster I will trade only take 2:1 RRR but you adjust it to 1:1 just so you can enter the position.

Your progress and feedback is important I would love to hear your feedback on [email protected] and I can also review your trade plan with you in a coaching session. Let me hear how you go with observing yourself and how has this self-coaching techniques helped you Trade your Trading Plan. Stay tuned for the follow up news!

To your Prosperity and Success,

Saira

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