Trend Extrapolation–A Common Novice Trader Error

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10 MOST COMMON MISTAKES MADE BY NOVICE FOREX TRADERS

Do you want to try trading Forex and succeed? Start with learning the most common mistakes beginners make in the foreign exchange market.

1. Intuitive trading decisions. The foreign exchange market is not a casino. However, novice traders view it as such, so they use mainly their intuition to make their decisions. While this may sometimes result in success, but ultimately, the trader ends up failing and losing money.

2. Unreasonable expectations. Some Forex companies promise in their promotions that you’ll get rich in no time. Don’t believe them. Yes, there are people who end up rich trading Forex, but there are also those who make a fortune by selling houses. In both cases, this does not happen in one day. It can take years to build up the right experience and turn Forex trading into a full-time profitable job.

3. Uncontrolled emotions. The main enemy and biggest mistake trigger of a novice trader is his emotions. When watching the deposit increase or decrease, beginners can lose their minds and take hasty steps to get more money or to stop losing it. This approach is no good. Decision-making should be well-reasoned, rather than emotion-based. In order not to increase tension, place a take-profit and a stop-loss and leave the market alone; don’t monitor it day and night.

4. Inability to use a stop-loss and a take-profit. When you place a market order and leave it open, you put the entire trading account at risk. For example, when you open a long position for the EUR/USD pair, you can put a stop-loss so that your Buy order will automatically close if the price falls below a certain level. You can limit the amount of losses for each separate order, especially if you’re unable to monitor the market all the time. A take-profit order works the same way: it locks in profits by setting a level at which the position should be closed.

5. Trading against the trend. No wonder they say “Trend is your friend.” You can try to catch short–term price movements or price correction. But in reality, you make a larger and more regular profit if you keep track of the long-term price movements and sell or buy in trend direction. Always watch the global price movements over long periods of time and only after that open trades on minor time frames.

6. Intraday short-term trading on minor time frames M1- M15. Beginners may find it difficult to trade on these time frames as they have no experience in time frame synthesis. External factors such as news also matter and can cause problems. In this case, trading can be extremely risky and can lead to large deposit losses. It is recommended to use bigger time intervals such as H1, H4, D1 and above, where the movements are more predictable and the trader can make wiser decisions.

7. Holding losses for too long. Unlike beginners, and experienced Forex trader can determine when the loss trend is not going to reverse. Instead of hoping for the better, a disciplined trader will take a loss and close the order. Sometimes, life teaches us lessons and we have to learn them and move on.

8. Trading news. When important data are released, prices can move tens or hundreds of pips in either direction within a few minutes or seconds. The movement is so swift that it is physically impossible to trade right. The market is extremely feverish and jumps up and down. Forex brokers widen spreads and reduce liquidity, which entails risks and high loss probability. We recommend beginners to refrain from trading during important economic news release.

9. Too many open positions. If you open too many positions, you are unlikely to respond to all the events properly and quickly. It is hard to focus on each position when you receive too much information.

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10. Excessive leverage. Leverage is a double-edged sword because it can improve returns from profitable trades and increase losses on unsuccessful ones. This happens especially in Forex trading, where the trading capital can be depleted if the market entry goes wrong.

Hopefully our advice will help you make smart decisions and trade successfully.

Novice Trader Errors – Mathematics and Statistics

Recently I read this article with a quote from Rosh that stuck with me:

https://championship.mql5.com/2020/en/news/23 – Rashid Umarov also complains about the low overall level of mathematical literacy among novice developers. “It is desirable that developers understand math, – Rashid says. – At least they should know mathematical analysis and statistics. These are basic disciplines, and you can’t do without them in trading.

High statistical literacy is quite clearly the case for Bobsley, the recent winner of the 2020 automated trading championships as he referenced statistical analysis that he performed for his Expert Advisor in one of his interviews:

https://championship.mql5.com/2020/en/news/39 – “It is followed by statistical market analysis, modeling and optimization. In this regard I’ve done a lot of work.”

So the question I have for everyone is, where would someone start learning about the mathematics/statistics that could be used for automated trading? Does anyone know of any books in particular? Perhaps some books that have helped you along your way?

Any suggestions would be greatly appreciated. Thank You

I’m a mathematician, so this might come off as a little biased, but the way to learn this stuff in depth is formal education. After a while, you can definitely start learning from books and self-directed study. In order, I’d suggest learning calculus and probability together. (You’ll need limits to move through standard probability topics, and integration to get in to distributions) You don’t need much probability past the Central Limit Theorem unless you want to start getting in to topics like brownian motion (that’s the kind of thing you might learn after a solid foundation in math). Finally, I’d suggest reading up on statistics, topics including prediction/confidence/coverage intervals, causation/correlation, maximum likelihood estimators and sampling protocol.

You can learn almost these topics in an arts/history approach to stats, but if you want a real understanding of the math behind it, I’d say the above is about the bare minimum to really “get it” in terms of what actually constitutes statements such as “I am 95% sure that. “, which translates in to intuition after experience.

Recently I read this article with a quote from Rosh that stuck with me:

https://championship.mql5.com/2020/en/news/23 – Rashid Umarov also complains about the low overall level of mathematical literacy among novice developers. “It is desirable that developers understand math, – Rashid says. – At least they should know mathematical analysis and statistics. These are basic disciplines, and you can’t do without them in trading.

High statistical literacy is quite clearly the case for Bobsley, the recent winner of the 2020 automated trading championships as he referenced statistical analysis that he performed for his Expert Advisor in one of his interviews:

https://championship.mql5.com/2020/en/news/39 – “It is followed by statistical market analysis, modeling and optimization. In this regard I’ve done a lot of work.”

So the question I have for everyone is, where would someone start learning about the mathematics/statistics that could be used for automated trading? Does anyone know of any books in particular? Perhaps some books that have helped you along your way?

Any suggestions would be greatly appreciated. Thank You

i learn from khanacademy

it taught me much more than my university course

Simple strategies in Forex do not require the use of complicated indicators, especially superimposed on each other. Reliability of strategy, minimization of risk depends on what tactics of risk management chooses the trader and what goals it pursues. This strategy is based on my favorite indicator TEMA, which is based on moving averages.

Let me remind you that this indicator best reflects the change without any delay, and this means that you do not miss the opportunity of successful entrance. Note: strategy as a core is not considered, because it provides only one entrance to the market in one day, but as training to operate the indicator and to understand how the market works, the strategy will do just fine.

Trading by trend: entrance conditions

Introductory data of the strategy:

  • trading by trend is held at the beginning of the European session. At the very beginning measure the trend by indicator and enter the market;
  • trading interval – 5 minutes;
  • currency pair – almost any of most liquid ones;
  • terminal to work with – Metatrader 4;
  • indicator parameters – TEMA (EMA_period = 200).

With the beginning of the session (at 9: 00 Eastern European time) look at the indicator in a time period from 00.00 till 09.00. At visual inclination more than 30°:

  • open a position in the direction of the trend;
  • set a fixed stop loss 10-15 points;
  • exit the market at a trailing stop with a length of 10-15 points.

The strategy is simple: we catch the momentum of the market after a night session. And even if the price reverses, we still have time to take a portion of our profits on the morning inertia of the market. In this case we can not speak about large income, but in general, trade with the trend can bring some money. Remember that many things depends on the psychological mood of the trader, and the use of such strategies is aimed not so much at making a profit, but for training, and strengthening the confidence. Because with every successful transaction you become wiser, more persistent and ambitious!

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