Emotions - Good or Bad?

Recently I had a conversation about fear and greed. I was asked how I get over it. This is an interesting question everybody is looking to get an answer for. Yet this question is very general. First of all, we have to really know what we want to ask. We need to know what it is we are seeking the answer for. If we do not know what we want, we end up asking general questions. And as a consequence, we get general quick and dirty answers. "Do not trade based on emotions." It is easy to say "Don't be greedy!" or " Don't let the market scare you out!"

Emotions are a big topic. And all we find are short and quick answers, which every trader has heard at least a dozen times. The first time I got involved with trading, I kept reading this very same thing over and over in every book. It was like a mantra. 'Don't trade based on emotions!' We as traders think that emotions are a bad thing and we need to be completely emotion free. Many books teach to get rid of emotions. Find a mechanical trading system. Well, ideally a trader has the ability to be emotionless (when it comes to taking a position). But we forget we are humans. Emotions are a part of us. And they will always be a part of us. So logical conclusion would be to quit trading, right?

Well, no! I do not want to quit trading, because I am a human.

I was asked about my approach. I personally think we need to understand what emotions are. Where do they come from. Why do we have them. The emotion "Fear" is a safety mechanism. The emotion "Fear" keeps us safe. Fear is the very emotion that made and still makes surviving possible (this was in the past, it still is in present, and most probably will be the case in future). If our ancestors did not have this very emotion, we most probably would not be here as humans. The fear of getting burned makes us treat fire with respect. The fear of getting bitten makes us scared of petting with a Tiger, a Lion or maybe with an Aligator (that is if we are not Crocodile Dundee). I have a friend who is afraid of small dogs and cats. If we know why we have feelings and where they stem from, we may be better equipped in dealing with our emotions.

I personally think the understanding of emotions is a better way to deal with emotions when trading as opposed to ignoring our emotions. It is important to know that the fear of a loss is stronger than the sadness of losing. The degree of emotional pain of losing is stronger compared to the degree of emotional joy when you are winning. Now what does this tell us? Fear and losing have a stronger impact on us than happiness and winning. This is a bad combination (for trading) if you ask me. but taking evolution into perspective, this is the very recipe to survive the threats and dangers in the jungle. This is the result of millions of years of evolution.

Do not get me wrong. I do not say trade based on emotions. Emotions are a bad guide when it comes to trading. I don't say let emotions take control. 'En contraire mon frere'. Know about the feelings. Know how feelings can influence you. Learn to identify the emotions and only after you identified your emotion, deal acordingly with the emotion. I can't tell you how to do that. This is a very personal development. But I can share with you how I approach this.

I let go.

A trade is a trade. I do not give a single trade much value. I am happy if I hit the homerun. but I do not let the happiness become euphoria. Once I identify this is happening, I step back. I am able to do this, because I know there will will be many trades ahead. I know by heart I cannot win all trades. And I also know by heart that I cannot lose all trades.

Do I get sad if I lose? I wish I could say no. I do get sad.
Do I get carried away on a loss? Not at all. Because there are more trades to come.

I am not rushing after the fast pips. I do not need to trade every move. I do not chase a trade. I used to chase my trades. I kept repeating the same mistakes. And eventually I did realize that I was repeating the same thing over and over but expecting different results. And I beleive this is key to understanding the own self and make a change.

This is a big topic and there is much more to write. This topic could easily fill a book. I hope this article is helpful and you enjoyed reading it. There is more to come in a later part.
You'll find part II here.

Hope you enjoyed reading this article. If you have any questions please leave them in the comments section below.

Happy trading,
TT

Trades I took this week 19.12.-23.12.16

This time of the year I normally do not take a trade. But there were very few setups that I made an exception. Below are the trades.


EUR vs GBP

Unfortunately I was not at the computer to take a picture on time when I got stopped out. My stop was a pip above the red line that got triggered. This was a range trade. My entry was exactly (to the pippet) at the top of the candle that triggered the entry. My entry was executed on the m15 timeframe.

GBP vs USD

I too the trade based on the m5 timeframe. As price did close above the high of my setup candle I decided to scale out. If it was going to stop me out I did not want to take the full loss. At the same time this gave me the chance to participate on the move if it resumed the down move, which it did.

Update 30.12.2016

The remaing part got stopped today.

The trade was good for more than 100 pips. I decided to give this pair a chance to move south. The up move was accompanied with decreasing volume. The candle that stopped me out shows weakness. If it was a bullish move, we should have a strong close. We have high volume but a weak close which shows me rather bearish pressure. Actually price is back at an interesting level. But there is no more trading for me this year. Looking forward for 2017.

Happy trading,

TT

Setups for the week ahead 19.12.-23.12.16

EUR vs USD

Bearish bias for the week ahead.

After about two years we get a break below range support. This sets my bias in favour of the bears. Be aware that it is not a strong close. We may see a test of the range. Considering the time of the year odds are not in favour of a trend. All this needs to be taken into account when trading. My bias will remain bearish for the week ahead

NZD vs JPY

Bearish bias for the week.

Basically I am bullish above the 80 level. However, market structure suggest we are at resistance. And we have a reversal pattern in form of a Shooting Star. This puts my bias in favour of the bears for the week ahead.

NZD vs CAD

Bearish bias for the week.

Price is moving nicely off the ATH with healthy and strong bearish candles. This is a sign to look for shorts. With the close below the recent hihger low my bias is bearish.

GBP vs USD

Bearish bias for the week.

With the rate hike last week we may see an end to the recent GBP strength. We didn't see GBP pull back to the levels I was eyeing. We see now US strength kick. The last two candles engulf the previous candle. We may have formed a lower high. If that is the case, we should see price move lower and eventually break the swing low. This is not a scenario that is going to happen next week. Nothing is certain. It may never unfold. But with what I see on the charts my bias is bearish for the week ahead.

USDOLLAR

This is just as a reference. I do not trade this index. But I like to incorprate USDOLLAR into my analyis.

USDOLLAR did break out of the range and continues north after a short pause. I was expecting a pullback to the range level. But we do not always get that. We see a strong USDOLLAR. This translates to GBP/USD and EUR/USD weakness.

EUR vs JPY

Mixed signal.

There is no setup. However, price is approaching interesting levels. EUR vs JPY is in the vicinity of resistance. There is still potential for upward movement. But area this asset is now is interesting. We need further information to base trade ideas. It may take time. It may never unfold and move straight up. But there is one thing this chart tells me. I am not looking for longs. This is one way to reduce losses. Reduce possible losses by not taking trades.

SPX500

Mixed signal.

Price made a strong move up which is bullish. But every strong move pulls back. Knowing this and having a Shooting Star at the top of the move shows weakness. Chances are there we may get a pullback. But the trend is bullish. We need more information to formulate a trade setup.

AUD vs JPY

Mixed singal.

Basically I am bullish above 85. But price is at an interesting level and formed a Shooting Star, which is bearish. The weekly close will shed more light.

AUD vs USD

Bearish bias for the week.

Price did bounce nicely off 075 level. This puts my bias in favour of the bears.

EUR vs GBP

Mixed signal.

EUR vs GBP has trouble to move lower. Support did hold true. As long price stays above support I am bullish. But we need more evidence to forumulate a bullish setup.

NZD vs USD

Bearish bias for the week.

Price is starting to form lower highs. The Evening Star Pattern with the last candle engulfing the two bullish candles and closing below 0,70 puts my bias in favour of the bears. My medium term and long term bias are in line.

USD vs CAD

Bullish bias for the week.

The Bullish Engulfing Pattern above 1,30 and off the trend channel support puts my bias in favour of the bulls. It is interesting that the Bullish Engulfing Pattern is forming on top of the former range, which ads more confluence.

US Oil

-Bearish bias for the week.

US Oil was able to violate the recen highs and move high above the yellow zone only to come back and close barely above the yellow zone. This shows weakness and puts my bias in favour of the bears.

NGAS

Bearish bias for the week.

The Bearish Engulfing Pattern off previous resistance puts my bias in favour of the bears.

Happy trading,
TT

Setups for the week ahead 12.12.-16.12.16

EUR vs USD

Mixed signal.

There is not setup yet other than price being at support. EUR/USD is at the bottom of the range. As long support holds, I treat support as support. I am not looking to short EUR/USD as long we did not get a break of support. I am rather looking for a bounce. Everybody is talking about a more hawkish fed. I do not want to discuss about that. The commone expectation is a rate hike. I am not going to position myself based on other people expectation. Bottom line, above support I am bullish, below support I am bearish.

EUR vs CAD

Bearish bias for the week.

EUR vs CAD did break support and closed below 1,40 with a strong bearish candle. This puts my bias in favour of the bears. I'll be keeping an eye for bearish setups.

GBP vs CAD

Bearish bias for the week.

Price formed a Bearish Engulfing Pattern below 1,70. GBP vs CAD finally managed to break below support. But there is still the 1,65 level as a psychological level that needs to get broken for a strong bearish bias.

EUR vs NZD

Bearish bias for the week.

EUR vs NZD did close below support and below 1,50 with a Bearish Outisde Bar. This puts my bias in favour of the bears for the week.

NZD vs CAD

Bearish bias for the week.

NZD vs CAD did break out of a small consolodation pattern. The close below the mother and below the 0,95 put my bias in favour of the bears. The first support level is only about 100 pips down at the level of the bull fractals. That is something to consider before taking a trade.

DAX30

Bullish bias for the week.

DAX performed a strong close above range resistance and closed above 11.000. This is a strong bullish sign. My bias is bullish for the week. Ideally we get a retrace back to range resistance which should act as support now. Even though my bias is bullish, I am not interested to take longs without a pullback first. Keep in mind that price is not in close proximity to resistance at 11.300.

Nikkei 225

Bullish bias for the week.

The strong blose above 19.000 puts my bias in favour of the bulls. Keep in mind that we have 5 successive bullish candles in a row. We may get a pullback sooner or later. The next interesting level where we may see an attempt for a pullback is about the 19.500 level (slightly below).

S&P 500

Bullish bias for the week.

Price is breaking ATHs. That is a strong bullish sign. I am not looking for weakness. My bias is bullish. Wednesday might change the whole picture. But what counts is what is now. And that is a strong bullish market.

EUR vs AUD

Bearish bias for the week.

My bias is bearish, however I am aware price is inside a support zone. But last week candle shows me a rejection, a close below a consolodation pattern. If I had to trade this asset, I'd be looking for short setups on pullbacks.

EUR vs GBP

Mixed signal.

Basically I am bearish below 0,85. But price is at support. This gives me a mixed bias.  I'll be keeping an eye for both long and short opportunities. And if there is something I like I might go for it.

GBP vs NZD

Bearish bias for the week.

Last week close confirmed the previous week Hanging Man. This happened at former resistance and below 1,80. This puts my bias in favour of the bears.

Happy trading,
TT

Trades I took this week 05.12.-09.12.16

I am transparent about my trades. I publish my winners and losers. This has the psychological effect to take only good trades. Good trades don't automatically mean winning trades. I wrote about this a couple months ago in the psychology section. Read more about this here. For the German translation here. I need to get more active in the section about psychology.

Below are the trades I took this week so far.

USD vs CHF

This asset was not really a favourite of mine in 'Setups for the week ahead 05.12.-09.12.16'.
I had the signal and took it.

NZD vs USD 

First trade.

I shortly after the first attempt there was a new signal. And I took it.

Update NZD/USD

I got taken out before the weekend. I am not going to take any new positions after this hour. Now am waiting for the weekly close.

All in all am happy with my trades, even though they didn't yield much.

Happy trading,

TT

Setups for the week ahead 05.12. - 09.12.16

EUR vs USD

Mixed signal.

Price is at range support and shows signs of a bounce. Last week close is not a convicing bullish close. As we are at range support I favour the bulls. 

EUR vs CAD

Mixed signal.

Basically we have a Bearish Outside Bar which is a bearish continuation pattern. But price is at support. I am bullish above 1,40. I am ready to go both ways. If I get a short trigger, my stops and take profit will be more aggressive. As price approaches 1,40 I'll get interested in longs. The weekly close will shed more light. 

AUD vs CAD

Bearish bias for the week ahead.

We have a break of minor support followed by a test of old support. Last week closed below parity and we have bearish continuation pattern. This puts my bias in favour of the bears for the week ahead.

NZD vs JPY

Mixed signal.

We have 8 consecutive bullish weeks. Last week did close well above 80 which ads more power to the bulls. I won't be surprised to see a test of the grey rectangle. I am hesistant in taking a long trade after such a strong bullish move. However, if there is a long setup, I might take it. If I had to trade, it would be looking for a long setup.

GBP vs CAD

Mixed signal.

I am bearish below 1,70. There is no signal yet. If we get a weekly bearish close we'd have a confirmed Hanging Man formation. Without the weekly close the current weekly candle can be both, a bullish or a bearish sign. The long wick below can signal a rejection of lower prices which would confirm support. Or it could be a Hanging Man formation that needs to be confirmed. Price is inside the Bearish Engulfing Candle below 1,70. 

GBP vs USD

Bullish bias for the week.

We have a strong close above 1,25 and a break of a local high. This puts my bias in favour of the bulls.

DAX30 / Ger30

Bearish bias for the week.

Price formed a Bearish Engulfing Pattern at range resistance. A close below 10.500 would add more fuel in favour of the bears. 

Nikkei 225 / JPN225

Bearish bias for the week.

The Shooting Star just below 18.500 puts my bias in favour of the bears. The level this Shooting Star got formed is interesting. Call it Resistance or Supply. What counts is, we have a pattern that shows us signs of a bearish move ahead.

GBP vs JPY

Bullish bias for the week.

Even thoug price moved strong north, I have no reason to look for bearish setups. Looking to sell this pair is trying to sell strength. Without the Doji at the bottom of the up move, we have 7 consecutive bullish candles. Sooner or later we'll get a retracement. But there are no signs for that at the moment. An interesting level that I am having an eye on is 150 and above. That does not mean price is going to move more than 500 pips next week. But I am not looking for weakness unitl we reach that level. Unless the market shows me signs of weakness.

EUR vs GBP

Mixes signal.

We have 5 consecutive bearish candles. The market seems strong bearish. I do not want to buy weakness. However, price is at an interesting level which may turn out to be support. We need a successful test of this level to confirm we have support. The next strong support level would be the 80 level (about 500 pips south).

NZD vs USD

Bullish bias for the week.

We have a classic Morning Star Pattern. This is a bullish three candle reversal pattern. We have a bullish reversal pattern at support. We have a Market Structure shift. The overall trend is bearish. But we have signs of a trend shift in favour of the bulls. We have successiv higher highs followed by higher lows. The current minor bullish trend may turn out to be a strong pullback of the bearish trend. But what we see now is a bullish move and a bounce off support. As long price manages to stay above 0,70 and eventually breaks the 0,75 level we are in a bullish trend.

USD vs CAD

Bearish bias for the week ahead.

Price did break above the range and is now coming back to range resistance. This level should act as support. But what we currently see is a bearish reversal pattern engulfing the previous 5 candle bodies. USD/CAD was not able to stay above 1,35.

US Oil

Bullish bias for the week.

Even though we US Oil was not able to close above the yellow zone we have a stong push higher. The strong bullish candle with a close above 50 puts my bias in favour of the bulls. Sooner or later resistance is going to give in and we'll see price move to 60 and higher. The current Market Structure suggests we may get a close above 50 rather sooner than later. 

NGAS

Bullish bias for the week ahead.

I added this asset just recently to my list. The strong close above the recent high puts my bias in favour of the bulls. 

Note:

The cross currency analysis suggests a rather weak USD for the week ahead. So I will be looking for opportunities to sell the USD. Having a strong bearish bias on USD/CAD, a bullish bias on GBP/USD and NZD/USD make these assets more favourable opposed to EUR/USD or USD/CHF (the latter one is not listed here because USD/CHF is not as interesting as the ones listed for the week ahead. But the bias for USD/CHF is bearish as well). 

USD/JPY and USD/CHF are not really interesting for the week ahead. But since I mentioned USD weakness accross the currencies I might as well put the charts for these below.

USD vs JPY

We have a fist sign of weakness. But there is no signal yet. 

USD vs CHF

There is really nothing much to mention on both USD/JPY and USD/CHF other than the signs of weakness. USD/CHF is more intereting opposed to USD/JPY. There is no setup yet. But we have signs that USD strength is weakening and we may get a test of support. 

Happy trading,

TT