This is the introduction to a 5-part series of articles titled: “Key Concepts to Correct Trading Behavior – A guide to relevant concepts for trading success in a market governed by High Frequency Trading (HFT) and Program Trading“,f ocusing on the most important concepts any trader should internalize in order to show a correct trading behavior, in a world where the majority of trading volume is generated by computer programs.
Notice that this series will become an eBook and include the most important section that will illustrate a practical application of the Bandwagon Theory to the daily chart of the EUR/USD forex cross (the section ‘The Psychology of Trading: the Bandwagon Theory illustrated’ will only be included in my free eBook that will make available on the home page of this Blog)
If you are still not part of the elite 5% of consistent traders and you want to be a successful trader, it is important you start thinking and doing something differently. One thing could be to re-focus on those key concepts that truly describe, explain and affect price behavior.
Such knowledge can be of help in understanding the psychology behind price moves and often it shows that rationalizing price behavior is not relevant, if not even counter-productive. In my opinion, for instance, all the hype on markets news and on its interpretation is misleading. News can and will only affect price on the smaller timeframes like 15min and 4-hour, but very often (if not always) it will have no effects on the outcome of well-formed daily and weekly setups.
Indeed, in trading perception is much more important than facts and their rational interpretation about how price should be affected, i.e. what the reaction of traders should be, after a key event. An introduction to each of the four concepts that are paramount for trading success, a list not including the use of price-derived indicators (I feel genuinely sorry for not matching expectations of the majority), will prepare the trader to build the needed beliefs or shift the existing beliefs to trade successfully.
If you are in the business for some time, you will have realized that trading success is all about beliefs and psychology. The concepts presented in the eBook and this series of articles are counter-intuitive, and probably this is the reason it is meaningful to analyze and study them carefully. A deep understanding of these key concepts will also uncover where the real profit opportunities lie.
They key concepts discussed in eBook and this series of articles are:
- The Bandwagon Theory
- The Psychology of Trading: the Bandwagon Theory illustrated (only included in the eBook)
- The Danger of Asking “Why?”
- Facts and “Truth” Do Not Make Money
- Professionals Trade People’s Psychology and Not the Markets
Please let me know what you think and have your feedback. Thank you.
If you think this series of articles is of interest please share it with your friends and fellow traders. Thank you!