FIGURE 1: DAILY CHART OF EURO BUND FUTURES (DECEMBER 2011–MARCH 2012). On this daily chart you see an outside day harami candlestick pattern.
TRADING PSYCHOLOGY
Your Life, Your Time, Your Money
In the high-risk trading world, we are confronted with fear, greed, and hope. Understanding why may help us embrace some of our emotional shortcomings and incorporate them into our trading.
The desire to make money is what attracts people to the financial markets, and even if you have found a method or plan that works for you, your emotions could get the better of you. To fight against such an occurrence, we must train to combat every type of situation that the trading life throws at us. Learning about the financial markets, making a plan, and then preparing for it is a must for every trader and investor.
Analyzing charts
Chart observation tells us that price action moves up and down. This analysis, however, becomes counterproductive once a trade has actually been initiated. If you are losing money on the trade, you must decide when to exit, but often that decision is not taken and the loss continues to grow. All too often, the losses end up big and the profits small.
To understand the problems that many traders face, especially during their first months of trading, you must define the time range of each trade. A trade based on a daily chart signal that is meant to run over a period of weeks, if not months, has a different profile from one placed on a 15-minute chart with the intention of running for minutes or hours. This becomes clear from Figures 1 and 2.
In Figure 1, you see the daily chart of the euro Bund futures from December 2011 to March 2012. In this chart, you see an outside day.
FIGURE 1: DAILY CHART OF EURO BUND FUTURES (DECEMBER 2011–MARCH 2012). On this daily chart you see an outside day harami candlestick pattern.