by Ntombi Malatsi | Jun 7, 2020 | FOREX FOR BEGINNERS, FOREX TRAINING
There’s a thin line between trading and just gambling
The statement above can be very true for many people. It was also very true for me too for so many years. It is very easy to adopt a gambler’s mentality when trading the financial markets, especially when you are expecting trading to be exciting and you are viewing it as some cash slot machine. How you view your trading account makes all the difference and has an impact in your performance. There are a number of contributing factors which may lead a Forex trader into becoming just one more gambler without even being aware. On this post, I want to focus on this one big factor listed below.
Trading psychology
From the day a Forex trader decides to go from a demo to a live account, things change in so many ways. The trades that they do become emotion based instead of logic based. They become indecisive about so many things, like when to take profits, or when to cut the losses and whether to enter the market or not. If you start to feel like that, you have just discovered the effects of trading psychology. It is just a phase that is likely to pass if you really want it to pass. What you do after that, will determine whether you’ll succeed or you’ll become a gambler.
How does this affect your trading?
It actually clouds your judgement. There are two most important emotions that I am sure every trader has experienced in their trading career, these two are:
Fear
Fear can either cause you not to place a trade even when opportunities are plenty in the market, or it can make to you to close good running trades prematurely without giving them a chance to actually be profitable, and it can also cause you to hold on to a losing trade even when there is no hope for that particular trade, for the fear of being a loser. As long as one stays in the market, this emotion will at some point affect them. We all go through it at some stage of our trading journey or career.
The good news though is that it does get better with time. Actually, it does disappear completely. Think of the first time you had to be in the car driving alone and think of yourself now when driving alone. The fear that you had is no longer there. But if you stopped driving on that first day just because you became too scared and you ended up crashing your car, you would not be as experienced today. What made you become better was the fact that you never stopped driving and you faced your fears head on. That gave you strength to keep on trying and improving. You did not park your car and go back to public transport. It’s not just driving, there are so many other situations when you had fear and today you are a master in that area of your life simply because you did not give up.
Greed
Greed is the most dangerous zone, you don’t want to find yourself here. This emotion can cause you to take trades that are too risky with an aim to score big or to make massive profits in a short space of time or it can also be just about trying to appear clever and impress the crowd or even to be seen as the best. Greed can also make you to not close winning trades hoping that you can still make more out of them.
This emotion causes a trader never to be satisfied even when they make profits. They keep on holding on to a trade until they sometimes find themselves on the wrong side of the markets. When they are finally on the wrong side of the markets, they want to trade even more by opening more trades in the opposite direction to make up for a loss.
The good news again is that this emotion can be dealt with effectively as long as you are willing to put in the work that is needed. A good mentor/ coach is able to assist with such issues. I work together with my mentees to help them deal with these issues and I have had successful cases (but only where there was willingness and commitment from a mentee) Should you need private lessons, mentorship and coaching, you can enrol here.
Just like any other business whether online or offline, risk becomes part of it, but it should be a calculated risk because if it is not, it can eventually lead to the business closure. In closing, we can all be profitable traders as long as we understand that we never lose but learn, and we focus more on being consistent and getting it right because by getting it right, the profits start pouring eventually. Thank you for stopping by. If you find value in this post, kindly share with your peers and subscribe for weekly publications. You can also download the App on Google Playstore for a quick read and weekly tips which are only posted on the App.
by Ntombi Malatsi | May 29, 2020 | FOREX FOR BEGINNERS, FOREX TRAINING
Draw-down: A decline in an investment or fund. Let’s assume you start your account with $1000 and you lose about $100, that is a 10% draw-down (which is acceptable in my books, because you can recover it back). Being disciplined is one of the major challenges that many traders are faced with, but it is a skill that can be learned, but only if you are willing to learn.
Self control is something that should come from within, no amount of motivation or support can work if you are not doing your part. Traders need to understand that no matter how great the strategy or trading method is, if the emotions are not well checked, you are heading for trouble and a disaster is imminent. This is a very sensitive subject and not many traders are keen to talk about it.
It happens a lot, especially when you are still starting out, even seasoned traders do experience a draw-down. It is something normal, but it becomes abnormal when you cannot even figure out why you got your account into such a state in the first place. It then becomes very difficult to improve, especially if you do not keep a trading journal or even have a trading plan.
You had a very bad week and your confidence went out of the window. You feel so down and stupid, so ashamed and embarrassed, like you are such a loser and you think you need a break, maybe you do or maybe you don’t. There is absolutely nothing wrong with taking a break, but what exactly does taking a break mean? Does it mean walking away from your account and neglecting it without trying to figure out what you could be doing wrong or what could be the biggest contributor to your draw-down?
Trading is more about you than about a trading strategy
Most of the time, failing has nothing to do with your strategy or method of trading that you use, but a lot more to do with your emotions and your behaviour. A group of traders who are trading the exact same strategy can have different outcomes. I see this even with my own mentees, the outcomes aren’t the same. When you have lost more than 50% of your account’s equity, it is definitely time for you to take that break, evaluate yourself and work on your issues (if you have a coach, a good coach can help you with tools to sort out your issues but you have to be willing to do the work needed)
The problem is when you do not have a trading journal and you do not record your daily trades and the reasons behind them, it is almost impossible to recover and you won’t know what you did wrong, and therefore you won’t know what to fix. So while you are still reading here, check if your trading journal is in order (that’s if you have one), if you don’t have one, get it today and start writing In it from Monday and while you are still at it, also draft your own trading plan. If all these are really confusing for you, it is time you find yourself a coach (I can be one)
When is it a good break?
A good break means that you are going back to your demo account, you are decreasing the amount of money you are trading with by asking your broker to do a “withdrawal” for you on your demo to accommodate your new smaller equity on your live account. Get your trading journal in order, start writing In it right away. Do that for about a week and at the end of the first week, go back to review your daily trading activities and see if there are any mistakes you can pick up. Chances are, you will pick up some mistakes because you’ll be doing it with a sober mind, minus the emotions you get when you are trading live. Start fixing your mistakes on your demo account and see if you can improve or do better, chances are, you will improve and become a better trader. Gradually move back to your live account to get your emotions in check again. Start with a very small volume until you feel confident again.
When is it a bad break?
A bad break is when you walk away from your live account and you do not touch your demo account or even try to figure out what could have gone wrong and why you are in that situation in the first place. When you take a break, it is a bad break if you do nothing during that break. If you do that, chances are, you will go beyond a simple draw-down when you finally go back and you’ll head straight to a margin call (losing your account), because you will still come back with the same emotions and behaviour.
If you should know, a demo account is there to retest and retest. A trader is never too smart for a demo account. I used to do that all the time and it worked. That is how a trader becomes emotionally stable day by day and that is how you become rational. I hope you found this post informative. Thank you for stopping by, kindly share with your friends.
by Ntombi Malatsi | May 24, 2020 | FOREX FOR BEGINNERS, FOREX TRAINING
Welcome back. I hope you are keeping safe and still holding up well under lock down circumstances. Please continue to look after yourself and your families. Wash & sanitise those hands, wear that uncomfortable mask and keep the social distancing rules, we will soon be fine. OK, today I want to share something regarding trading capital.
I always say that a person who can take care of his/her account by protecting its equity no matter how small the account is, can definitely do the same with a bigger account. I have seen this with my mentees when I coach them on smaller accounts, they develop a lot of patience which is a much needed skill in trading. A smaller account can teach you how to be more patient. It is the same patience that will carry you when you start trading a bigger account. If you start with a bigger capital before working on getting skills such as patience and being more disciplined, you are more likely to mess up and loose all the money. My favourite saying is “get a skill and get it right” then work on your capital when you’ve worked well on yourself and you’ve got it right. I’ve also published a blog post on how to grow a smaller account.
Undercapitalised myth or underdeveloped mindset?
It’s definitely a mindset issue. It might be true that with a bigger account, you can achieve more. The truth is, not everyone with a bigger account succeeds. I have seen people failing with enough trading capital and people getting it right with a smaller trading capital. What separates the two is the fact that the one with a bigger capital is likely to rely on the money and neglect all the principles and things like patience. A person who trades a bigger account as a beginner is also likely to think that the account is immune to margin call because the capital is bigger (which is definitely not true) succeeding with a bigger account requires more discipline.
If you feel like you are not yet disciplined and you are still struggling to overcome that (I’ll assume that a person who is aware of this, would want to work on it) rather start small even if you have enough money to start big, start small while you train yourself on such issues (I love coaching my mentees on such issues, having a mentor/coach to help you, makes it easier to overcome). I am sure you have heard the “if I had a bigger account I would have made it ’‘ excuse (I hear this all the time, even from my mentees) I am saying it’s an excuse because I know that succeeding in Forex trading requires a lot more than just capital.
A Perfect Example
A person who has a job would say only if they can get a promotion and earn a bit more, financial life will improve as well, but the opposite usually happens if that person has discipline issues. They start to increase spending and always running short of money, this particular person needs more discipline than more money. They aren’t undercapitalised but underdeveloped. It is the mindset and the discipline that is needed, not more money.
Now back to Forex trading, when a beginner trader wins, they feel brilliant and invincible, then start to take wild risks and trade larger volumes than what the account can handle. This type of behaviour leads to losing money. The capital is not an issue here but the behaviour is . I have come to understand that if you can handle $1000 trading account, you can also handle a $5000 account using the same mentality and discipline. You can also destroy a $5000 account as quickly as you would do with a $1000 or even $500, It is all in the mentality. If you can manage yourself, you can manage your finances.
Thank you for stopping by and reading this post. Thank you for your continuous support by sharing my content with more people who may need to improve their trading lives. For private lessons, mentorship & coaching, you can check detailed information HERE and WhatsApp me for instant chat (see WhatsApp feature at the far bottom right of this post).
by Ntombi Malatsi | May 10, 2020 | FOREX FOR BEGINNERS, FOREX TRAINING
Is there a difference between stock market and Forex market?
Before I get into the U.S markets, I thought I should start by answering the question above. Yes, there is a difference between those two.
What is stock index trading?
Stock index trading is when you are trading a basket of stocks which makes up an Index. You can do that on your Forex trading platform and do it through an instrument.
Advantages of trading stock indices
- Stock indices have generally higher returns than the stock market they represent.
- The Volatility is reduced as compared to currencies.
- Stock index trading requires less research as opposed to trading /investing in individual stocks.
- When trading a stock index e.g. Nasdaq, you do not have to spend weeks analyzing all the companies under this umbrella but all you can do is just follow the instrument as you would do analyzing your currencies.
- Stock index trading does not require any traditional stock brokerage where you pay high fees, you can buy and sell on the same Forex trading platform as you would do with your currencies and it is cheaper.
There are different markets that one can focus on. In this post I will only focus on U.S markets and share a few stock Indices that you can choose from. I will do other markets as well in a different post.
U.S markets
1.Nasdaq
Sector: Technology. Nasdaq stands for National Association of Securities Dealers Automated Quotation. Nasdaq comprises of 100 companies listed on the stock exchange in the United States. This is one of the popular one’s amongst traders.
2. Dow Jones
Sector: Industrial. Dow Jones also known as the DOW, is the stock index that measures the stock performance of 30 large companies listed on the stock market in the United States.
3. S&P 500
Sector: Financial. The S&P 500 index measures the stock performances of 500 large companies that are listed on the stock exchange in the United States. The S&P market cap is 70 to 80% of the total US stock market capitalisation. It is a commonly used benchmark for stock portfolio performance in America and abroad.
What economic indicators affect these 3 Indices
The method of trading that I personally use, focuses more on fundamental analysis. Fundamental analysis is all about understanding the reasons why certain things happen in the markets. Economic data releases such as Consumer Price Index (CPI), employment data, GDP, trade wars and the Interest Rates are some of the key indicators in trading these indices. I cannot share these in detail over a blog post but I hope you have learned a thing or two about stock Indices. Thank you so much for stopping by and reading this post. kindly share with anyone who maybe in need of this content. Your shares are always appreciated.
by Ntombi Malatsi | May 2, 2020 | FOREX FOR BEGINNERS, FOREX TRAINING
I had to publish this blog post as soon as possible. Welcome back, if you aren’t subscribed yet, please feel free to do so. Check on the sidebar for a subscribe button, enter your email address, click subscribe, check your email for a confirmation link (which may be in spam/junk folder). Click on the link to confirm your subscription and you’ll be get all new publications delivered to your email. You can also download the app which is now available on Google Play Store. Back to the business of today, which is about COVID-19 Forex scams that are on the rise.
Due to the COVID-19 pandemic, all Central banks are resorting to cutting their Interest Rates to save their economies, most people are desperately in need of investments that can pay better returns. The drop in Interest Rates means less Returns On Investments (ROI) and less Interest on loans. Basically, lower Interest Rates makes borrowing more attractive and saving & investing less attractive. You can read more about how COVID-19 has affected the global markets on my latest blog post here. For that reason, scammers are having a field day targeting unsuspecting investors to invest in fake investment scams hidden under the Forex umbrella. The fraudsters are having it easy because when people hear the word Forex, they think of making quick buck or easy money (and that it is not the case at all).
Your smart phone is your ATM
The statement above has caused so many people to fall for anything that promises them high returns with just little effort . During this period of lock down, most people are bored, scared and panicking about the possibilities of loosing their jobs or being unable to save their small businesses after lock down. Most people are on their cell phones most of the time trying to find opportunities to make money online. Don’t be a victim, if it sounds too good to be true, it probably is, even during COVID-19. Don’t be fooled into believing that one only needs a smart phone to make money through Forex, there’s a lot of learning that needs to happen before one can make some money. I can also assure you that it won’t happen over night.
Be very cautious of cold calls
I have been getting a lot of questions regarding Forex investments where someone calls, sms’es or WhatsApps to present an “Investment” opportunity which promises incredibly high returns on a weekly or monthly basis. Some are even promising to double your investment in a week. The more you invest, the more money you make. Be very careful to never fill in any forms or agree to any verbal contract over the phone. I also get a lot of requests from people who are asking if I can trade for them (I don’t trade public funds, only my account). This has shown me that the level of desperation is very high and has inspired this blog post.
Be very scared if you are suddenly being head hunted by social media” fund managers”, you are likely to become a victim. I know for sure that I cannot guarantee the returns for myself even after so many years of trading the markets, I cannot imagine someone trying to promise hundreds of investors guaranteed profits, in most cases, those are just pyramid schemes hiding under the Forex umbrella. There’s a high possibility that NO funds ever end in a trading account, they just rotate money, paying new investors with old investors money until they run out of new investors which is when they collapse leaving many people bankrupt. DO NOT be a victim!
Investment websites
They make is so easy to fund and give you access to some dashboard where you can monitor your investment. Most of them pay you for recruiting more people and they usually have a very short lifespan. With the global Interest Rates drop, scammers are out here to use this opportunity to scam more people. Stay safe, stay at home, wash your hands regularly and also stay ALERT. DO NOT be a victim!
Thank you for stopping by and reading this post, please kindly share with anyone who might need this content, you might save someone from being scammed. I am not a financial adviser, I only share my experiences through this blog. For financial advise, kindly contact a professional.
by Ntombi Malatsi | Apr 19, 2020 | FOREX FOR BEGINNERS, FOREX TRAINING
After such a long time of not posting any content, I finally found an opportunity to do so. To the subscribers, welcome back. If you just stumbled upon this blog, welcome and feel free to click on the subscribe button on the sidebar and enter your email address to subscribe for new publications to be delivered to your email every time there’s a new blog post . You will receive an email with a confirmation link, click on it and confirm subscription. Please note that the email may be in spam/junk folder.
The world is faced with the global pandemic called Covid-19 also known as corona virus. This pandemic has disrupted the world’s economies and created huge volatility in the markets which can be very dangerous to most traders but can also bring trading opportunities to some traders who are able to keep up with all the breaking news. In this post, I am going to share how the virus has impacted the Forex markets. Most traders still believe that trading Forex is just about a smart phone and reading through some lines (which is far from that, we will discuss this some other time)
Central Banks During Covid-19
The impact of corona virus has called for Central Banks to re-look their Interest Rates to save their economies. Over the past few weeks, Federal Reserve Bank, Bank of Canada and other Central Banks had to call for an emergency Rate Cut meeting. To understand why such a move, you have to understand the advantages of having lower Interest Rates. I will list them out below.
1: What is the role and function of a Central Bank?
- To set official bank rates used to manage inflation and exchange rates
- To issue a country’s currency
- To set targets and monitor economic data while they implement special tools.
2: Why would a Central Bank opt for lower interest rates?
- To encourage borrowing : When the Interest Rates of a country is cut, it also means that the people who are borrowing from the banks will be paying less Interest on their loans. That will then encourage consumers and even big companies to borrow for spending and bigger investments.
- To make saving less attractive: When the return on savings are lower, most people would opt for spending money than holding on to it.
- To weaken the currency: When the currency is weak, the country’s exports become more competitive and their imports more expensive which also encourages consumers to buy local because of the exchange rates.
- To lower Mortgage loans: When mortgage loans holders pay less interest on their existing loans, they may be left with more money and that should increase consumer spending in the country.
3: Oil Prices
The oil industry is also greatly affected by Covid-19. When the pandemic started to spread, oil was already under a lot of pressure due the price war. Goods are not moving due to the lock-down in most countries. As a result, there’s less demand of oil. Even when OPEC agreed on cutting supply, it didn’t help much with the price because there’s less demand. To learn more about OPEC and what happens to oil prices when they cut supply, or when there’s over supply, you can read this POST. Travel and tourism is largely affected. Jet fuel is not being used because international flights are halted as well as domestic ones. There is definitely an oversupply of oil which makes oil prices to remain low.
How to take advantage of the current situation in the markets?
The first thing that you need to do is to stay away from anyone who claims to be predicting the markets and knowing exactly what’s gonna happen next, avoid such people. Stay updated with business news, breaking news and follow the Central Banks and key economic indicators. During this time of crisis, the key economic indicators such as employment change, unemployment rates and so forth, may also be inaccurate because some surveys collect such data on a door-to-door basis, which is impossible to access homes during lock down.
If you have been trading but you have never cared or were never interested in what really moves the markets, now is the time to learn. As long as you have invested your money in Foreign Exchange, you will be affected by economic crisis (whether you choose to believe in it or not). Just like when it is winter, it affects all of us whether we believe in winter or not. I know a lot of traders started to pay attention when Brexit happened in 2016. Should you wish to learn more about the markets other than just reading charts, feel free to contact me for private coaching. You can also use the WhatsApp feature on the sidebar for instant chat.
Thank you so much for stopping by and reading this post. To help more individuals access this information, kindly share with your peers and stay tuned for more information, weekly economic news and practical tips that you can use to improve your trading. Please live a comment below and tell me if you like the new look. I am in love with this new home, a big shout out to my designer for a job well done and a fresh look.
Recent Comments