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Sunday, October 24, 2010

Trading Psycology - Entry & Exit

One of the major problems faced by people who enter into trading and which they continue to face till they become professional traders is the difficulty that they face in choosing the right moment to enter and exit trades. I am no exception and i have faced the same situation when i started out trading and it took me close to 4-5 yrs to get to the right moment to enter/exit trades.

The trick behind entering any good trade is to cut out the emotion behind the entry. Normally what we do is that we see price rising and immediately, we are tempted into entering a long. The temptation is too strong. Guess what !! Thats exactly what the pros want you to do. Give in to emotions, give in to your temptations. They want you to trade emotionally. And the trick to be a successful trader is to do the opposite of what the pros want you to do. Why ? Cos thats what they do. They never enter on seeing rising prices.

Trading, as such, is very easy. All you need to do is to open a 1H or 4H or daily chart and you can easily see places where prices had reversed earlier and or had been well supported. All that you have to do is wait for price to reach such areas and take the trades accordingly. Its so easy on the face of it. But why do all of us struggle in doing this simple thing ? Its because of our emotions and our lack of discipline. We see a previous resistance being broken and price running up and we immediately jump into the bandwagon without noticing the simple logic that any good break will almost always be followed by a retracement back into the resistance region. We see price running up 50 pips after the break and we enter there and when there is a retrace back into the resistance region, we are down 50 pips, we get too scared and we close to escape more drawdown. Wat happens? Price simply moves up again to where we thought it would.

The key to successful trading is to control your emotions and have discipline. Wait for good entries, they are always there and will always be there. All you need to do is wait. Have patience, have discipline. You will succeed.