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Has Everything Changed for Major Pairs?

This week the public received startling news: on Wednesday morning, month-over-month CPI (a proxy for inflation) in the United States had unexpectedly remained static, clocking in at 0% whereas a moderate 0.2% increase had been forecast. Core CPI (which excludes food and energy prices) likewise came in lower than anticipated at 0.3% month-over-month, while Thursday saw the Producer Price Index surprisingly decline 0.5% month-over-month. This prompted a mass selloff of USD across major pairs on Wednesday and Thursday, with the US Dollar Index (DXY) temporarily plummeting by 1.8% from the start of the week while stock indices soared. While demand for USD has recovered a bit since, with the DXY now down only 0.87% from Sunday, it is worth asking: has everything changed for major pairs?

Argument A: The Bearish Case for USD

A 0% month-over-month inflation rate may signal that the worst of price increases is finally over in the US. Annual inflation might have peaked, and consumers can breathe a sigh of relief now that three key events have occurred: 1) energy prices have dropped significantly due to a dip in demand, while US natural gas storage and oil barrel inventories also exceed expectations. 2) The Federal Reserve has embraced monetary policy hawkishness, and their rapid 50-75 bp rate hikes have worked, successfully restricting borrowing and thus curbing demand. 3) Despite a tight labor market, the US unemployment rate consistently hovers around 3.5%, granting a subtle degree of price stability.

Argument B: The Bullish Case for USD

Unfortunately, despite 0% month-over-month inflation being a welcome respite from high inflation, this one piece of data does not capture the full economic picture. Here are three reasons to expect high inflation to continue in the US: 1) though having fallen, energy prices could likely remain volatile and high because underlying global energy supply problems (e.g., mutual sanctions on Russian exports, OPEC’s unreliable output, energy dependence) have not been resolved. 2) Considering the scale of monetary stimulus over the course of the pandemic, and the double-digit federal funds rate that was historically implemented to stamp out high inflation, it would be shocking if these past few rate hikes were enough for the Fed to bring 40-year highs to an end. 3) The hot labor market may cause wages to further play catch-up, contributing to core inflation.

My Bias: Bullish (With a Grain of Salt)

Despite this particular cooling CPI report, I am retaining my bullish bias on USD, though admittedly with less confidence than before. The international and domestic economic conditions at work do not appear to have changed in a significant fashion as consumers still grapple with the consequences of an unprecedented money supply, labor shortages, and energy instability. However, if US inflation data continues to fall behind market expectations, I will certainly reassess this bias.

Best Pairs to Trade

According to the EdgeFinder, A1 Trading’s market scanner that helps traders conduct economic and sentiment analysis, here are two optimal pairs to trade for USD bulls: 1) GBP/USD, which has a score of -7, earning a ‘strong sell’ signal; and 2) USD/TRY, which has a score of 4, earning a ‘buy’ signal.

Warning: Stock Market Looking Bleak

This morning US investors were greeted to yet another unwelcome, though perhaps not unexpected, decline in the stock market. At the time of writing, the Dow Jones Industrial Average has slid over 300 points today, or over 1%, after recovering slightly from dropping over 500 points earlier this morning. The Nasdaq and S&P 500 have likewise dropped over 1% intraday. While these events are disappointing in themselves, they are part of a recent disturbing downtrend of significant proportions, including a brief dip into bear market territory and the worst performing first half for the S&P 500 in fifty years. Unfortunately, there only appear to be several possible paths forward, with none of them favorable to stock market bulls. Let’s explore what this means for traders and investors as we issue a warning: stock market looking bleak.

Path #1: Selloff by Further Rate Hikes

One likely possibility for the US economy is that the Federal Reserve continues implementing further rate hikes to curb hyperinflation. This seems quite plausible for three reasons: a) high inflation in the US has thus far persisted, with the most recent CPI data for May reflecting a 1% increase in inflation month-over-month, and an 8.6% increase year-over-year; b) historically, high inflation seems likely to continue, considering cooling the similarly overheated US economy forty years ago required double-digit target interest rates; c) Jerome Powell, Chair of the Federal Reserve, has already signaled that the Fed is willing to continue rate hikes as necessary, perhaps even resorting to more 75 basis point ones if needed.

If this comes to fruition, it would likely be bearish for the stock market since the Fed’s past several aggressive moves have ultimately prompted increased selling pressure for stocks. The Fed’s hawkishness particularly affects the stock market because its recent highs were due in large part to COVID-era dovish monetary policy, which shareholders ostensibly can’t rely on anymore.

Path #2: Selloff by Impending Recession

Another plausible possibility for the US economy is that it continues its descent into full-blown recession. Such features include recurring contractions in gross domestic product, higher unemployment rates, and lower consumer spending from the lack of work or decent income. This would likewise be a disaster for the stock market, since its performance is often interpreted as, and anticipated to be, a proxy for the health of the US economy. Low consumer spending equates to less money spent purchasing goods and services from businesses, as well as dwindling confidence and spare capital from potential buyers, sending share prices lower and forcing even more layoffs.

While a recession can theoretically cause low inflation via lower demand, and thus no more need for further interest rate hikes, the stock market would nonetheless be caught in the crossfire. While many economists anticipate recession being likely, if not imminent, even the Federal Reserve acknowledges the risks as they forecast higher unemployment and slower economic growth as unfortunate sacrifices for having stopped hyperinflation via contractionary monetary policy. The US stock market would thus be a central casualty if a recession is induced.

Path #3: Selloff by Stagflation

One particularly disturbing possibility for the US economy is the chance of stagflation, a nightmarish fusion of both recession and hyperinflation. This would entail most aspects of both paths 1 and 2 playing out simultaneously: economic activity would contract as consumers and businesses lose money in a vicious cycle, while prices remain unusually high, exacerbating the effects of recession. This unfortunately seems possible in the US because of how current global supply chain bottlenecks are contributing to inflation by restricting supply, causing the price of oil and other commodities to soar. Thus, there is a significant chance that this tragic phenomenon could occur, which would be doubly disastrous for the stock market.

The Bad News

Unfortunately, it is difficult to imagine a probable scenario in which the US stock market doesn’t plunge deeper into selling pressure. Continued bearishness over the next few years seems incredibly likely regardless of what exact problems deal these next few blows to the US economy. Thus, for any traders who are short-term stock market bulls, please know that the chances of a prolonged, near-future rally for equities seem slim. The US is no outlier, either; the global economy is currently afflicted with these same issues. We will have to weather this economic storm altogether.

Some Good News

However, for those who are long-term investors, any stock market selloffs can be understood as optimal buying opportunities. This is because the US economy, like other market or mixed economies, experiences business cycles: periods of expansion, followed by contraction, rinse and repeat. Due to the US’ abundance of natural resources, huge population, international influence, and more, the US economy is incredibly resilient and able to rebound from recession long-term.

This means that even if fundamentals don’t currently look good for the stock market, they are still promising through the decades, which net favors long-term shareholders and bulls. So long as investors stick to a thoroughly diversified portfolio, investing regularly in historically reliable funds such as index funds and other trustworthy ETFs, and abstain from premature selling due to worries and disappointment, bear markets present bargains for future wealth building.

Key Takeaways

Is Bitcoin Worth Buying Now

As the value of a bitcoin continues to depreciate this week, currently holding above the $20,000 support level after having fallen to nearly $18,000 on June 19th, it is worth reflecting on the cryptocurrency’s performance. Certain questions come to mind: has it lived up to investor and user expectations? Is it destined for endless cycles of volatile buying pressure and selling pressure? Is it worth buying these dips, or is it just a pyramid scheme as many economists have claimed? Is it a true alternative to fiat money as its mysterious inventor, Satoshi Nakamoto, ostensibly hoped it would be? Let’s explore these concerns, and the merits of Bitcoin, as we ask the central question: is Bitcoin worth buying now?

Supposed Benefits of Bitcoin

According to Bitcoin apologists, there are myriad benefits that warrant use of, and investment in, this cryptocurrency. Chief among them is its ‘decentralized’ status: rather than being issued, regulated, and influenced by a central bank and government, as is the case with fiat currencies, Bitcoin is liberated from these authorities by means of a blockchain. The blockchain is essentially a decentralized data storage system that is operated and shared via computer network, perfectly tracking all transactions and ‘mining’ of new bitcoins.

This system enables Bitcoin users and investors to circumvent traditional bureaucratic and unreliable institutions such as banks and the aforementioned authorities by means of distributed ledgers, which can’t be tampered with. Other such benefits that follow from this include scarcity (there are a finite number of bitcoins to be mined, with no option for bitcoin-printing ad infinitum), privacy (the blockchain does not track your identity, credit score, etc.), simplicity (there is no need to fill out piles of paperwork for hefty transactions or pay clusters of fees to third-party institutions), and security (because it is entirely virtual, it cannot be stolen off your person, nor can Bitcoin’s blockchain be hacked or modified retroactively). For more information on supposed benefits, read here.

Criticisms of These Claims

Unfortunately, the past couple years in the financial markets have revealed an unpleasant truth: Bitcoin is apparently not nearly as decentralized as it intends to be. Even with no Bitcoin-specific central bank affecting its quantity or value via monetary policy, the value of a bitcoin is nonetheless vulnerable to the decisions of central banks worldwide.

As central banks around the world pulled out all the stops to stimulate their respective countries’ economies during COVID-induced slowdowns, even engaging in quantitative easing en masse to artificially promote lending and buying, Bitcoin’s value soared accordingly. Likewise, as many central banks have begun interest rate hikes and implementing quantitative tightening to quell near-ubiquitous hyperinflation, Bitcoin’s value has plummeted as investors flee risk assets. Thus, both Bitcoin’s all-time high of nearly $69,000 per coin in the fall of 2021, as well as its current drop down to the $20,000 zone, are relatively synchronized with global central bank efforts, particularly those of the US’ Federal Reserve. This behavior strongly indicates that Bitcoin’s price action is indirectly influenced by monetary policy after all, regardless of an innovative blockchain. After all, central banks exist to help control markets, not currencies alone.

Likewise, many of the other alleged perks of Bitcoin are less enticing than they appear at face-value. Regarding its scarcity, a limited supply of anything is not enough to guarantee it has a store of value, especially if demand for it is volatile. Regarding privacy, this may grant a user some comfort, but it is not too helpful here; surveillance states still exist, and you cannot approach the blockchain about refinancing a mortgage. Regarding simplicity, these features can also be interpreted as bugs: easy, peer-to-peer transactions of this kind are a scammer’s dream, and what you avoid paying in fees you might pay exponentially in unrealized/realized losses. Regarding security, these benefits are not particularly special; many consumers don’t carry physical cash around anymore, and banks’ mutable records can enable them to better protect customers from theft and mishaps, even retroactively.

Why It’s Worth Something

Nonetheless, despite all these legitimate concerns and chaotic volatility, Bitcoin is still valuable. How can we tell? Because its price isn’t at zero. This may seem silly, but it is true. For as long as demand for Bitcoin exists, it will always be worth something. It only ought to be recognized that this value is primarily the result of speculation, not fundamentals.

Though Bitcoin’s value will likely continue to depreciate as interest rates rise, consumer spending slows, and the novelty of cryptocurrency wears off in the face of disappointing losses, this is likely not the end of its story. Even as the utopian mythology and bizarre religious language surrounding the crypto movement (hopefully) fade, Bitcoin has historically proven itself as a viable way to make money, if you accept the inherent risk. After all, Bitcoin’s value is contingent upon the desire of institutions and regular Joes to make a quick buck, an intention pervasive throughout most of human history. To expect the value of a bitcoin to soon hit zero seems akin to expecting most casinos to close up shop soon.

How to Trade Safely

The notion of trading Bitcoin safely is a bit of an oxymoron, considering that Bitcoin is arguably one of the most unsafe assets available to own. However, with careful risk management, this is not an issue. Here is my personal approach to trading Bitcoin: 1) Keep your position size small enough that no actual damage can be done to your account, i.e., only purchase what you would feel completely comfortable losing. 2) Opt for holding a position for months or a few years as opposed to day trading, short-term swing trading, or investing. With both day and short-term swing trading, you risk missing out on the longer-term climbs, whereas investing should be reserved for trustworthy securities that have fundamentals which are promising decades down the road. 3) Have fun; at its best, trading Bitcoin has more in common with playing a game than making meaningful financial decisions.

Key Takeaways

4 Lessons from FOMC Yesterday

On June 15th, yesterday afternoon, the Federal Reserve released the Federal Open Market Committee’s (FOMC) latest Summary of Economic Projections, coupled with their corresponding statement. They revealed that the FOMC had decided to raise the Federal Funds Rate by a whopping 75 basis points (bps), to a range between 1.5-1.75%; such a hike has not been seen since 1994. Upon this news, and ostensibly in response to Federal Reserve Chair Jerome Powell’s press conference afterwards, financial markets saw a great deal of volatility. The US Dollar Index (DXY) made gains before closing lower at 104.66, while the Dow Jones oscillated between 30,000 and 31,000 before closing slightly higher. Today DXY continues to sink lower as the Dow abandons yesterday’s gains, falling over 800 points intraday, below 30,000. With this context in mind, let’s unpack this as we learn 4 lessons from FOMC yesterday.

1) The Fed is Becoming Increasingly Hawkish

The 75 bps rate hike decision was somewhat shocking. Though an increasing number of analysts began predicting it earlier this week (with speculation about a supposed leak occurring), such an aggressive measure is rare by contemporary standards. Powell made it clear the bold decision was taken in response to May’s hotter-than-expected inflation data, a disturbing 1% CPI increase month-over-month, or 8.6% year-over-year. Though this had not been the FOMC’s intention prior to this information, Powell emphasized that they are willing to roll with the punches and are open to further aggressive measures so long as inflation remains a serious threat.

While he did convey that they will be planning each hike on a case-by-case basis contingent upon inflation reports, he seemed to be signaling that the Fed’s responsibility for price stability must temporarily take precedent over currently maximizing employment, that it might be maximized long-term. This reflects the tone of the hawkish FOMC statement as well, factoring into the aforementioned economic projections, which anticipate increased unemployment, slower growth, and at least a 3% Federal Funds Rate by the end of 2022. While invariably negative news for the stock market, this is perhaps more ambiguous for USD than it appears at face-value, since a seemingly positive hawkish agenda may be undercut by worsening economic expectations.

2) Powell is Unpredictable (Even to Himself)

A generous interpretation of Powell’s decision and rationale is that he reacts swiftly to the latest information. A more cynical interpretation, which some of the questions at the press conference reflected, is that he is fickle and erratic, indicating one set of monetary policy plans before scrapping them for new ones. After all, today’s hawkish FOMC Chairman is nearly unrecognizable from the COVID-era Powell who was fixated on economic stimulus and near-zero interest rates.

However, to Powell’s credit, he is rather self-aware on this matter. He was transparent yesterday about the fact that he is entirely unsure to what extent each rate hike will cool the overheated US economy, particularly in light of pervasive supply chain issues and externalities due to the invasion of Ukraine. These are holistically unusual circumstances, and the FOMC is confined to conducting an ongoing sequence of interest rate experiments to eventually establish an inflation solution. Though honest, this degree of transparency has likely not helped the public or markets gain trust in the Federal Reserve, and thus may have contributed to today’s securities selloffs.

3) Leave Room for Baffling Market Reactions

Upon reading the statement and watching the press conference, the Fed’s intentions left little room for interpretation in my eyes, striking me as hawkish in a clear-cut fashion. While Powell did leave some wiggle room for less aggressive responses if future CPI reports reflect inflation slowing down, he made it quite clear that more 75 bps hikes are on the table, even likely. Taken altogether, all the information provided yesterday appeared overwhelmingly bullish for USD, and bearish for stocks. While yesterday saw another bout of odd buying pressure for stocks upon the rate hike news, today’s decline is unfortunately a more understandable return to form.

However, DXY is down over 1% today intraday as USD plummets in value against other currencies. Despite today’s news on higher-than-expected US unemployment claims, as well as worsening economic conditions according to the Federal Reserve Bank of Philadelphia, this USD outcome has been surprising. Although economic expectations in the US are becoming gradually bleaker as recession fears grow, I had imagined that demand for USD due to huge rate hikes and persistent inflation would have outweighed selling pressure. While I am still anticipating this to be the case, it is helpful to remember that there is no certainty in the markets, and every bullish or bearish signal must be taken with more than a grain of salt.

4) Technical Analysis Still Matters

One factor that likely aided selling pressure for USD was how much buying pressure it had encountered in the days leading up to FOMC, perhaps in anticipation of the suspected 75 bps hike. This bullish momentum reflected in USD pairs, many cases of which led price action to a key level of support or resistance. Touching these levels, in conjunction with how overbought USD was purely from the standpoint of various technical indicators such as the Relative Strength Index and Keltner Channels, was a good recipe for price action reversing course.

This FOMC news is thus a great case study in (seemingly) straightforward fundamentals not exempting traders from having to conduct technical analysis. Even if foreign exchange markets favor USD bulls in the long run, bullish momentum will still almost certainly pause here and there while bears exhaust themselves. If this is the case, such a pause taking place at the intersection between key support/resistance levels and big central bank news was the perfect point to do so.

Key Takeaways

This morning saw demand for USD rapidly pick up steam as US inflation data came in hotter than expected. Month-over-month CPI had been forecast to rise by 0.7% in May; at 8:30 am Eastern Time, the Bureau of Labor Statistics revealed that it had increased by 1%, or 8.6% year-over-year, a forty-year high. Likewise, Core CPI (which excludes food and energy prices) was forecast to rise by 0.5% month-over-month, instead hitting 0.6%. On this news, the DXY is up 0.8% and has risen over the 104 level intraday, as EURUSD is down 1% and the S&P 500 is down nearly 3%. With this context in mind, let’s discuss 3 ways to capitalize on inflation now.

Trade Major Pairs

3 Ways to Capitalize on Inflation Now

This CPI news is a huge fundamental catalyst for USD pairs since it verifies that the US economy is indeed still overheating, validating further interest rate hikes by the Federal Reserve. This is very bullish for USD, which makes buying the USD against other currencies even more appealing. If traders are searching for optimal USD pairs to take positions in, a good place to start is by locating pairs where analysis leans in USD’s favor to the greatest degree possible.

Some such options include a) shorting GBPUSD and EURUSD, which receive -7 (‘strong sell’) and -5 (‘sell’) signals, respectively, from the EdgeFinder, and b) going long on USDJPY, which receives a 4 (‘buy’) EdgeFinder signal. Because USD experienced so much buying pressure this morning, conservative traders may want to find an opportune point of entry by conducting technical analysis, e.g., waiting for a pullback and retest of key support/resistance.

Buy XAUUSD

3 Ways to Capitalize on Inflation Now

Though admittedly a controversial opinion, I am waiting for an optimal point of entry to purchase gold against USD. XAUUSD experienced quite the selloff this morning before a startling recovery, jumping from a low of 1825 to hovering around 1855 at the time of writing this. This jump was seemingly prompted by finding support around the 1830 level, a clear zone of support on a 1-hour timeframe.

I interpret fundamentals being bullish for XAUUSD due to demand for the precious metal in several different industries and its historical status as a safe haven investment in times of economic crisis. There have been periods where gold’s rise in value does not correlate with USD depreciating in value, which is helpful to consider in cases like these. According to the latest COT data, institutional traders are similarly long on both USD (76%) and gold (73.56%). I am planning to purchase XAUUSD if price action retests the trendline depicted on the 1-day timeframe above, though this opportunity may not come if demand continues to grow quickly.

Invest in the Stock Market

3 Ways to Capitalize on Inflation Now

Though it may seem strange in the face of persisting hyperinflation and potential for recession, economic downturns and stock selloffs do present myriad buying opportunities for long-term investors. If you are not planning on retiring for decades, you can utilize dips in the stock market and indices to build wealth over time, assuming you are willing to sacrifice immediate results. For example, when the Dow plummets over 600 points like it has today, investors can seize these events as opportunities for cheap purchases that will yield returns years down the road.

If your investment portfolio keeps crashing in the meantime, this does not have to be discouraging since they are merely unrealized losses; they will likely grow in value through the decades if you are invested in index ETFs and other trustworthy funds. Any further selloffs present even more opportunities for regular, small purchases. (However, investing in individual stocks is a completely different story, and I personally believe that even the most skilled retail investors are not sufficiently equipped to handle the inherent risks involved.)

Key Takeaways

Why I Day Traded USDCHF

Price action for USD pairs was fascinating today as the DXY reflected bearish momentum that saw a low of nearly 102.15 intraday. This selloff was stopped at approximately 8:30 a.m. Eastern Time when eager buyers sent it soaring, eventually over the 103.3 level. Several factors were at play here, including important European Central Bank news and expectations for new US CPI data tomorrow. I took this opportunity to trade USDCHF this morning; it went well, and I entered and exited the trade in under an hour. Below I explore my process, and why I day traded USDCHF.

Fundamental Analysis

In many ways, the fundamentals favor CHF: Q1 GDP growth in Switzerland was positive unlike for the US, unemployment is 1.5% lower than in the US, and year-over-year inflation is gradually climbing. However, the Swiss National Bank currently has its key interest rate at -0.75%, compared to the Federal Reserve’s 1%, which involved a 50 basis point rate hike. On top of this, both CHF and USD are historically safe haven assets, and USD has encountered recent bearish data and increased chances at volatility due to upcoming US CPI data (perhaps indirectly through today’s ECB announcements as well). Thus, I decided I felt comfortable enough to go long on USDCHF as a day trade, but not confident enough to sit in it for too long.

Technical Analysis

I felt that there were enough technical indications here to warrant a brief long position. On the 1-hour timeframe, the price moved rapidly outside the Keltner Channel walls, and met significant support in two places: the 0.972 zone and the trendline pictured. I interpreted this bearish candlestick as a hasty reaction to meeting resistance around 0.98 (a reaction that could be short lived in light of potential for USD volatility). Thus, I entered at the 0.973 level, and took profit just above the 0.978 level, since I was not confident it could break through 0.98 resistance.

Sentiment Analysis

Sentiment analysis also made me feel comfortable entering the position. According to A1 Trading’s EdgeFinder, recent COT data reveals 76% of institutional traders going long on USD, whereas just over 10% are going long on CHF. In contrast, less than 1/3 of retail traders are long on this pair. These are all incredibly bullish signs for USDCHF, making me feel confident in my purchase, especially as Switzerland grapples with neighboring eurozone issues and with today’s arguably banal ECB decision. However, given my aforementioned uncertainties about the pair’s fundamentals and mutual safe haven status, I still planned on an early exit.

Key Takeaways

3 Lies Traders Should Avoid Today

One of the things that makes retail trading unique as a pastime, or even a career, is the degree of honesty and self-reflection it requires. There are many jobs that offer some consistent semblance of leeway when it comes to making mistakes and honing a skill set, but trading is not one of them. No trader can negotiate a raise with the markets or hope for the markets to recognize their hard work; if anyone is not careful with their expectations and risk management, even just one losing trade can be catastrophic. Hence, why truthfulness matters in the world of retail trading: it often spells the difference between passive income and financial ruin. With that in mind, let’s explore 3 lies traders should avoid today.

“My strategy doesn’t need stop losses”

Regardless of a trader’s win rate, every trustworthy strategy incorporates stop losses to some meaningful degree. This is because it is as near certain as statistically possible that unmitigated risk in trading will eventually have terrible consequences. Even if a strategy somehow achieved a win rate over 95% with consistent incremental gains, unchecked risk would still be present in every trade, resulting in a handful of losses that could easily erase all prior profits in a fraction of the time (I know this from personal experience). Stop losses, especially trailing ones, are thus an indispensable tool for traders when it comes to safeguarding against inevitable losses and making their wins count in the long run.

“I will compound my account so fast”

Building a large trading account is a long, gradual process that requires plenty of discipline and patience. Because of this, if a retail trader approaches entering and exiting positions through the lens of a get-rich-quick scheme, they are bound to become disappointed and discouraged, and likely lose money along the way due to over-leveraging and impulsive trading. Thus, it is important for traders to generate realistic expectations for themselves, and not take success for granted. Some ways to practice this include a) thoroughly backtesting any strategies of choice, b) avoiding trading out of financial desperation, and c) recognizing that your value as a person has nothing to do with your account’s performance.

“Fundamentals don’t really matter”

Technical analysis is a wonderful tool for every trader to have equipped, and there are myriad technical indicators worth exploring and adding to any strategy. Likewise, sentiment analysis is valuable as well, since anticipating buying and selling pressure is at the heart of trading as a discipline. However, even with these two crucial forms of analysis at our disposal, it must never be taken for granted that traders are buying and selling real securities.

In a new age of gamification and excessive speculation fueling price action volatility in the markets, it can become easy to believe, even subconsciously, that trading is reducible to a worldwide chart-reading game. Therefore, it’s possible for many traders to miss out on significant fundamental catalysts and opportune points of entry and exit, because it is easy to forget that we are trading in real markets that are shaped by concrete circumstances and events in our world. Thus, whether a trader is buying or selling stocks, currency pairs, or bonds, it is always wise to conduct fundamental analysis, whether that be monitoring macroeconomic data, business fundamentals, or other variables.

Key Takeaways

In trading, money is the only tool that we use to make money. If prices go high after buying one, we become really happy. But the scenario gets completely opposite when we lose 5 in a row. We develop the fear that the trading account will be blown up soon. 

Trading is a very practical thing yet it brings tremendous excitement and joy for us. But it should not capture one’s emotion and logical mindset. Emotions should not make you trade. You should do it with logic and expertise. Still, there is always the fear of missing out. It’s high time to get ways for ‘how to overcome your trading fear’.  

This fear for a longer span of time not only leaves a negative effect on your trading decisions but also affects your overall mental health. There are some ways that expert traders follow to overcome fear and emotion. Professionals who can control their fear and emotion are prone to succeed most times. How have they achieved this mental robustness? Let’s explore-   

Trading Fear
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How to overcome your trading fear easily?- A step-by-step approach

1. Craft a Positive & Winning Performance

You must agree that successful trading is all about 90% mindset and 10% skills. After placing an order, if you find that you are breathing quickly or feeling negative, it’s sure that you are expecting something negative. When your mind is having a negative expectation, it can block your logical thinking ability. Anxiousness can let you make many common mistakes. 

Does negative thinking really matter? After researching well and taking suggestions from others yet you are anxious, there is a high possibility that you will get a negative outcome. In order to win, at the first move, you have to eliminate this negative attitude and turn that into a winning expectation. You should have the trust that you can trade successfully. 

Having negative outcomes in a row often breaks the confidence level of traders. In such a situation, keeping the mind cool is the first virtue that you have to achieve. You should remember your success and its way. You will get a way to win along with getting some vigor and confidence back. 

2. Try to learn something new in trading

Suppose, the situation is not going well for you. What’s you do in such an anxious situation? In such a situation, making perfect trading decisions is hard as you cannot logically analyze everything. This time can be spent on learning new things about trading. A new strategy of trading is always fun and can make you profitable in the future. 

There is no fixed time to learn new things in trading. Whenever you get time or make time, you can learn interesting trading things such as Iron condors, Credit Spreads operate, RSI, MACD indicators, and so on. 

There are various online forex day trading courses that you can join to master the genre. You will be more confident when you will gain new skills and know more about the ups and downs of trading. 

3. Conduct in-depth market research 

It’s important to research the market very well in order to understand the patterns of trades. If you don’t know what to do next, it can emotionally burden you. Even if you have placed an order yet you have some doubts. Take a step back and research the topics you want to know. Regular practice and study are important when it comes to mastering the art and science of trading. If you cannot manage the best guide for yourself, join a leading online trading academy to get expert help and training facilities. 

You can prepare a list of things that you find hard to understand and heard the first time. After that, you need to pick topics that you need to learn first based on your trading requirements. The trading list should be updated rather than increased on a regular basis and in a systematic way. Trading is a vast field and mastering that within a year is not possible. You have to go slow and steady for long or for your entire trading career. Learning has really no end in the trading field. 

4. Enable paper trade until you master

While learning new topics on a regular basis, you will get new strategies on your own. You will want to apply your newly developed strategies. But there will be some doubts for sure. These doubts can lead you towards trading fears and you can get controlled by your emotions. 

So, whenever you craft a new strategy and want to deploy that or wish to use a new indicator, you can enable paper trade before deploying it in real. Yes, paper trading is not perfect by many means but here you will definitely get a controlled environment. The controlled environment will help you in learning how to enable comfortable envelope-pushing with trades without risking your capital. 

5. Analyze 5 completely new charts

When it comes to how to overcome your trading fear after losing in a row, experts suggest analyzing new charts to get insights. It’s common for many traders to get emotionally attached to the stock, ETF, or any product they trade on. They spend many hours nurturing them and keeping hope in them. Keeping hope in everything can result in something counterproductive. So, it’s always better to search 5 new charts of companies where you do not that that much attachment. 

After finalizing the list of charts, you should analyze each one deeply and prepare reasons to buy or sell them. In this way, you will be able to develop a neutral mindset. Such a practice will help you evaluate a position without having any emotional attachment. When there is a less emotional attachment, there is less trade fear and you can think more clearly. 

These are 5 steps that successful traders always follow to overcome trading fear. So, if you too are concerned about how to overcome your trading fear easily, following these steps will be a great help for you. 

Concluding to how to overcome your trading fear


Following these steps is easy and does not require any additional effort. These 5 steps are actually a system process that not only trains your mind but also helps you in having new skills. Gaining new skills is challenging yet you have to do it as the trading market is really complex. Effective and consistent effort on a regular basis can turn you into a successful trader. These steps are there to make you consistent and wise. 

 

Being in the 5% club means making consistent gains on your forex account. This is done by building an account through small and steady gains and building it at a rate in which you can control it. In this article, we will share a few attributes of profitable forex traders which we believe are critical to their success.

Unfortunately, 90-95% of forex traders fail to ever make it to a point where their winning trades outweigh their losing ones. Often times, the traders who fail to make it to the 5% club are those who expect to quickly make money through trading or attempt to flip accounts in a short period of time. Traders with this mindset will usually lose money quickly and burn out fast.

5 Reasons why Traders Fail: Tips from an Experienced Trader!

Profitable Forex Traders are Consistent

Plan your trade, trade your plan.

The first step to being successful in trading is creating a profitable strategy. This is achieved by spending significant time backtesting and researching forex trading strategies. The next step, which is often harder for traders, is to actually follow through with that plan. In stressful times traders have a tendency to change their approach to avoid losing a trade. This usually leaves traders in a worse situation than they would be in if they had stuck with their original plan. Make sure you've backtest your strategy and have the confidence to stick with it!

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Profitable Forex Traders

Trading Success Has To Be Earned

Becoming a profitable trader won't happen overnight. Trading successfully requires patience, consistency, and grit. There is no fast pass to success in trading. Trading requires lots of backtesting and strategizing to develop a plan which works for you. Your success in trading is a personal journey that only you can earn. Trading mentors can guide you on the path to success but in the end you are responsible for doing the work.

Profitable Forex Traders Love What They Do

If your only interest in trading forex is to make money, you probably won't make it too long before you burn out. As we mentioned previously, becoming a successful trader takes grit. You will likely lose many trades before you'll win some. For some traders, it takes years before they're consistently making more than they are losing. To be able to make it through these harder times you have to be motivated by something other than monetary success, because it won't always be there. You have to truly love trading and love the process.

A trade closed at breakeven is one that is neither a winner nor a loser. It closes at a particular price where profit and losses both equal to zero, or close enough.

The beauty of breakeven trades is that, although you may not increase your account with them, they enable you to protect your capital, which is crucial when being a part of this game.

Let's discuss the two types of regular breakeven trades and the psychology behind them.

Scenario 1

The above scenario usually unfolds through wild swings of price action and unpredictable market events, and it's a smart move to protect your capital and exit at breakeven.

However, traders often end up with breakeven trades for the wrong reasons, usually encounter fear and see a positive trade turn negative.

Scenario 2

You've been in a trade that hasn't been going well, and you are finally starting to see price creep back towards your entry level. Although it's never really a good idea to let losing trades run, doing so can work to our advantage.

As the saying says, "cut losses short, let profits run", and of course no one wants to close out on a trade in a loss, but sometimes it's the better thing to do; it gives you more time and energy to focus on other potential setups, instead of dreading the losing trade you're in right now.

Hope can lead a trader to hold a losing trade which they should have exited a long time ago. Closing a trade at breakeven is the best that you can do, and that doing so can save you from taking on more significant losses than necessary.

But obviously, no one knows exactly what will happen, so it's not like we can "choose" which scenario we want to make a reality. It's way easier said than done, but the message I'm trying to portray here, is that it's okay to close out early on a trade that is not moving in your favour.

It's essential to keep track of your breakeven trades; they reveal a lot about how you keep yourself together in times of extreme stress.

Next time you close at breakeven, take a step back and ask yourself what that zero in the P/L column means. Did you execute your trade according to plan, and the market just didn’t go your way? Or were you overcome by fear, greed, or hope?

Charge it towards your experience, make the adjustment to your forex trading plans, and move forward.

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