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Posts Tagged Under: trading decisions

What is market context and how can it help you make better trading decisions

 

Trading in the right context can make a huge difference. Being able to understand the market context in which you are making trading decisions can help you filter out potentially troublesome trades and enable you to get into high probability trades more often. In this article, we will explain which tools and concepts to use when it comes to understanding the market context and how it can help you make better trading decisions.

 

Top down

Every good market analysis starts with a top-down, multi time frame analysis. Every week you should take a look at the monthly and weekly time frame first. You don’t necessarily need to get too much into the details here, especially if you are trading on the 4H, 1H or lower time frame, but understanding the higher time frame context is key. Here are a few things to look for and ask yourself on the higher time frame:


The difference between Momentum and Volatility, and how to use it in your trading

 

The misunderstandings and misconceptions between volatility and momentum can lead to expensive trading mistakes and can even result in totally flawed chart and market analysis and trading decisions.

Volatility and momentum are two fundamentally different things and we will explore the differences between the two concepts, how to measure volatility and momentum and how to use them for effective trading decisions.

 

What is volatility?

Volatility describes how much price fluctuates around a mean. If you would use a moving average and see price going back and forth around the moving average, markets are in a high volatility environment. Furthermore, if candlesticks have relatively long candle shadows, compared to the candle body, it also signals a volatile market.

Thus, volatility is also often referred to as a risk indicator because high price fluctuations can signal indecision in the markets and the powers between buyers and sellers are constantly shifting.

 

What is momentum?

To a certain degree, momentum

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How boring is your trading? Why professional trading should be boring

 

You often read that trading should not be exciting and that professional trading has to be somewhat “boring”. But what does exciting or boring in the context of trading really mean and how can you adopt a trading route that is more “boring”?  In this article, we show you the 4 different stages and types of trading, how excitement influences trading decisions and what a professional (boring) trading routine should look like.

Profitable Trading is BoringThe new trader – unconscious excitement

New traders don’t understand what trading is all about and how to approach the market in an efficient way – and it’s totally normal to start out this way. The new trader believes that trading is an activity where he can increase his net worth just by making a few investments;

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