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As a pioneer of providing MetaTrader 4 in Australia since 2006, our premium MT4 trading tools help provide you with real time trading alerts and a suite of MT4 add-ons to help improve your trading experience when trading the global markets. Whether you prefer to trade Forex, Indices or Commodities, our choice of premium MT4 trading tools will provide you with the analysis and tools needed to get to the next level. Our premium trading tools include: MT4 Genesis Autochartist You can get access to these premium tools for free!

To help enhance your trading experience, we offer all clients the opportunity to access each of these tools for free. Here’s how you can get our MT4 trading tools for free: Deposit $500 into your GO Markets live trading account and you are eligible to receive one of the following GO Markets MT4 trading tools: MT4 Genesis ; or Autochartist; Deposit $1,000 into your GO Markets live trading account and you are eligible to receive both of the GO Markets trading tools for free. Existing clients who already meet these requirements can also request access to MT4 Genesis and/or Autochartist.

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US Markets With relatively sound fundamentals driven by strong earnings growth so far in this earning season, US equity markets have continued their bullish trend. The S&P500 bounced back strong from its 100-day moving average in early July, and by going over the 2800 level, it seems to be on track to reach its all-time high of 2870, possibly even winning new grounds. Chart 1: US S&P 500 Whilst it is hard to make a case against the trend above, we also want to be ready for when markets descend into a (possibly overdue) correction phase.

UBS has recently released a note suggesting we are going to see some serious pain should the tariff war between U.S and China intensify. They also argue that the current rate of tariffs has minimal impact on the markets, but if the U.S takes it to the next level by putting a 10% tariff on US$200 billion worth of imports from China, then the S&P500 would most likely be hit by a 10% decline. They also predict that the S&P500 could drop by an additional 10 percent (a total of 20%) if the current situation between U.S and China escalates into a full-blown trade war.

On a macroeconomic level, we note that the difference between short term and long term interest rates is narrowing down rapidly. This phenomenon, also known as yield-flattening, is usually seen as a signal that long-term growth is potentially not as strong as short-term growth. When yield-flattening turns into yield-inversion (where short-term rates are higher than long-term rates) and is combined with increasing cost of borrowing for companies, higher inflation, and rising unemployment, it can be a serious sign of an upcoming recession.

Inflation expectations have somewhat stalled over the past few months, but as shown in the chart below they are on a clear strong upward trend. Chart 2: U.S five year break even (inflation expectation) US unemployment seems to be stable, but corporate borrowing costs are moving higher. Therefore, while traders enjoy the current calm they should also be on the watch for signs of risk.

This article primarily allows readers to understand better risk monitoring; by undertaking a historical analysis, we show some instruments’ sensitivity to volatility. Monitoring Risk: A common way to monitor market risk is to monitor volatility. In simple terms, you can think of volatility as the range of candlesticks in your candlestick chart.

In the more volatile periods, the candlestick ranges are larger, and in the less volatile periods, the candlestick ranges are smaller; as volatility is the magnitude of price swings whether upwards or downwards. Reading candlestick charts or price swings to determine the state of volatility is seen as backward looking. That means you would be only limited to past information to make an inference about the future state of the markets — This can be problematic for traders.

The Volatility Index measures the implied volatility as opposed to historical (or so called realized volatility). It is a forward-looking measure and roughly estimates how much volatility traders are incorporating into their pricing models. One of the reasons volatilities are so important to watch is that high volatilities will usually cause stock markets to fall rapidly.

With stocks falling fast, investors will switch to a risk-off mode, which in turn has a follow-on impact on all other markets including currencies, commodities, etc. To better see how the VIX affects other markets, we have selected 5 scenarios in Chart 3 where volatility has significantly jumped up over the past ten years. Chart 3: VIX over the past 10 years Table 1 shows the duration of each period and subsequent fall in the S&P500.

The last column in this table measures how fast the market has fallen over the volatility period. During the GFC, the market fell on average 0.15% per day for almost 367 trading days. Table1: Volatile Periods and their impact on S&P500 (measured close to close) Period Start Period end No of Days Change in S&P Average %Drop per business day Scenario 1 11/10/2007 6/03/2009 367.00 -56% -0.15% Scenario 2 26/04/2010 1/07/2010 49.00 -15% -0.31% Scenario 3 7/07/2011 4/10/2011 64.00 -17% -0.26% Scenario 4 19/08/2015 11/02/2016 127.00 -12% -0.09% Scenario 5 26/01/2018 9/02/2018 11.00 -9% -0.80% Source: Bloomberg Let’s explore how asset classes have performed during these scenarios.

Equity Indices: Watch the Nikkei We may have heard that correlations go to 1 during crises. This means that if a major risk event were to hit one corner of the world markets, others would be affected too. The table below shows that each time the S&P has sneezed (or gotten sick during the GFC) the rest of the world followed suit.

Table 2: Performance of major indices during crises (measured close to close) S&P 500 DAX 30 FTSE 100 ASX 200 Nikkei 225 Scenario 1 -56% -54% -47% -50% -59% Scenario 2 -15% -7% -16% -13% -18% Scenario 3 -17% -30% -18% -15% -16% Scenario 4 -12% -18% -14% -8% -22% Scenario 5 -9% -9% -7% -3% -10% Source: Bloomberg With the exception of Scenario 3, the Nikkei 225 has almost always dropped more than the U.S market. This means that traders would have received a bigger bang for their buck should they chose to short Japan 225 in risk-off environments. Interestingly, ASX 200 has been a better performer than S&P 500 in times of crises.

Precious Metals: Gold and Platinum We previously wrote about how Gold historically turns into a safe haven asset during crisis periods, as depicted in the table below. Unlike Gold, platinum does not hold up during these times, and in fact seems to have been instead highly correlated with stocks — an interesting fact for pair-traders. Table 3: Performance of Precious metals during crises (measured close to close) Gold Silver Platinum Scenario 1 26% -3% -24% Scenario 2 4% -3% -14% Scenario 3 6% -17% -15% Scenario 4 10% 3% -5% Scenario 5 -2% -6% -5% Source: Bloomberg Energy: A case for short-sellers?

During crises all energies can drop quite significantly. Specifically, let’s look at WTI, Brent, and Natural Gas. On average Oil tends to drop a bit more than Nat Gas, but the gap is not wide enough to make Oil a prime shorting candidate.

Table 4: Performance of energies during crises (measured close to close) Oil (Crude) Oil Brent Natural Gas Scenario 1 -45% -44% -43% Scenario 2 -13% -17% 14% Scenario 3 -23% -16% -12% Scenario 4 -36% -36% -27% Scenario 5 -10% -11% -26% Source: Bloomberg Currencies: Commodity currencies once more We have previously written about how USD, CHF and JPY become safe haven currencies during crises. Seeing the US Dollar Index and JPY going higher was not a surprise for us, but it is quite interesting to see the magnitude of AUDJPY’s drop, as it underperformed all other currencies in this analysis. The last row of Table 4 shows the average drop per currency.

The AUDJPY ‘s average decline is almost twice (or even more) that of others. Table 4: Performance of currencies during crises (measured close to close) USD index EURUSD AUDUSD JPYUSD GBPUSD CHFUSD AUDJPY AUDEUR CADUSD Scenario 1 13% -11% -29% 19% -31% 2% -40% -20% -24% Scenario 2 4% -6% -9% 7% -2% 1% -15% -3% -6% Scenario 3 6% -7% -11% 6% -3% -8% -16% -4% -9% Scenario 4 -1% 2% -3% 10% -8% -1% -12% -5% -6% Scenario 5 2% -1% -4% 0% -2% -1% -3% -2% -2% Average (including GFC) 5% -5% -11% 8% -9% -1% -17% -7% -9% Average (not including GFC) 3% -4% -8% 6% -5% -2% -13% -4% -6% Source: Bloomberg Given current markets conditions in the US, Europe, Asia and emerging economies, the smart trader would want to keep his finger on the pulse for any signs of changes in volatility. GO Markets Pty Ltd

Many traders consider trading daily timeframes but when used to trading the shorter timeframes, overnight holding costs of positions may not be something they have come across previously. This brief article has the aim of understanding why these trading costs exist and how they are calculated. But First…An important message about holding costs… Let us start by stating a little “reality check” perspective.

Holding costs, like “slippage” and Pip spreads are NOT ultimately the deciding factors as to whether you become a successful trader with sustainable positive results. Much is made of these, but the reality is there are other things which are far more impactful such as effective position sizing and appropriate and timely exits from trades. Nevertheless, for those of you that are treating trading seriously enough, indeed, let’s use the term “trading as a business”, as with all the above, holding costs should be considered in your trading.

So how does it work… To understand overnight holding costs it is worthwhile starting by looking at what you are doing when you trade a currency pair. If you are buying 0.5 EURUSD position for example, in practical terms you are ‘borrowing’ US dollars and buying euros with the proceeds. If this position is held “overnight”, (i.e. in practical terms this means at 4.59pm US EST), you pay interest on the US dollars you borrow, but earn interest on the euros you bought.

There is a long rate and a short rate which you can find on your MT4 platform (This obviously changes daily). Rates are set globally, and the actual dollar figure is dependent on the size of position you have. To find this on your platform: a.

Right click on your chosen currency pair in “Market Watch” b. In the drop-down menu choose “Specification”. This brings up a pop-up with details of the contract information relating to that specific currency pair. c.

Scroll down to find the long and short swap rates (the example shown is of EURUSD). This calculation creates either a debit or credit to your account per day (termed the swap rate) and is shown in the “swap” column in your trade window at the bottom of your screen. The calculation is as follows: Current long/short rate x number of lots = swap debit/credit in second currency For example, if we held long 5 mini-lots of EURUSD, the “swap long” shown is Long Swap rate of -12.88.

Therefore this looks like -12.88 x 0.5 (contracts) = -$6.44USD This is then converted into your account currency (so AUD if based in Australia) and shown accordingly as a debit. Likewise, If we held short 5 contract of EURUSD, then the calculation would be: 7.14 x 0.5 (contracts) = $3.57 This is then converted into your account currency) and shown accordingly as a credit. We trust that helps.

Of course, please get in touch with us if you need any more clarity on holding costs at any time. This article is written by an external Analyst and is based on his independent analysis. He remains fully responsible for the views expressed as well as any remaining error or omissions.

Trading Forex and Derivatives carries a high level of risk.

People often ask me how they can get an edge over other traders in the currency market. My simple answer is this. Study financial market history and it will greatly enhance your profit opportunity because Forex markets will highly likely react the same way each time based on how they reacted last time.

Human beings are what drive all financial markets and as a whole the big money is reasonably predictable in what it will do. It will likely do the same is it did last time when a similar event occurred. Take for example the Yen, which has risen some 17% in 2016 as the BOJ has tried to lower its value by printing more money and putting interest rates into the negative.

Each time the BOJ announces more of the same (money printing & bond and stock buying) the forex market buys more Yen. This is one of the reasons why you have to be in this business for the long haul because the longer you are in the business the more you learn about the history of how the forex market behaves. The average trader often doesn’t want to do the time and they want the profits quickly without doing the forex trading apprenticeship that is required.

This does not mean sitting in front of a computer for hours a day it simply means reading for 15 or 20 minutes a day about why price is moving. The chart is NOT making the price move, the news is making the price move and the chart is simply a reflection of how traders have interpreted the news and bought up or sold off a currency. Join with me and become a detective of forex trading and you will highly likely enhance your profit making potential.

You can join me every Wednesday evening at 7pm AEST for a free one-hour live currency coaching session. Simply click on this link to join the session. http://gomarkets.webinato.com/room1 Andrew Barnett | Director / Senior Currency Analyst Andrew Barnett is a regular Sky News Money Channel Guest and one Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Connect with Andrew: Email

It was only one month ago when oil was the most hated commodity in the market. Analysts were pessimistic and forecasts for oil with a $10 handle were circulating in the financial media. However, against all odds, oil suddenly managed to hold losses and surprisingly recovered by some 53% from a 12-year low in February.

Given this sudden and strong change of direction, the obvious question traders now face is whether the recovery is going to continue. To be able to answer this question, we should first discuss the chain of historical events that drove oil prices lower and then see if anything is changed. The Days Of High Oil Prices The price of oil has significantly increased over the past 18 years.

It first went from being $10 a barrel in 1998 to $145 in 2008. This equates to a 1350% return which is way above the 75% return in stocks (represented by S&P500) during the same period. Then during the Global Financial Crisis, it got sold off heavily and declined by approximately 78% before finding a bottom in late December 2008.

Then from 2009 to May 2011, thanks to a global recovery in asset markets and pick up in the global demand, oil outperformed stocks again and rose by 276% to grab everybody’s attention on Wall Street. At this point, oil was only 24% lower than its all-time highs in 2008. The Technology Behind Oil Production The prolonged high prices encouraged further investments and developments in production methods previously deemed uneconomical.

By 2013, not only these methods (namely Shale and Fracking ) were profitable but they also helped U.S producers to significantly boost their production capacity. Based on the chart below, oil production in the U.S jumped from an average of 6,200 barrels per day (b/d) in 2012 to an average of 7,400 b/d in 2013 and continued going higher until 2016. US oil production since 2000 A Race To The Bottom As Oil Price Slips In the meantime, in response to the threat of new oil supplies from the U.S and to push those competitors (who mainly had higher production costs) out of business, the Persian Gulf oil rich countries, led by Saudi Arabia, decided to pump as much oil as they could to push the oil prices lower and keep their market share.

The combination of the above factors flooded the markets with so much oil that the world’s total daily supply exceeded the demand by a considerable amount. In January 2016, the International Energy Agency (IEA) warned that the world could “drown in oil” and markets may be left with a surplus of 1.5 million barrels a day in the first half of 2016. Average Daily Oil Surplus per quarter since 2012 The imbalance between supply and demand created such pressure that not only the price of oil dropped against USD, but according to the chart below, it significantly dropped against other major currencies as well.

Oil vs. Major Currencies Red line: oil in USD, Blue line: oil in Yen, Green line: oil in Euro and the black line is oil in AUD The Price Reversal No trend can last forever in the financial markets. At some stage during the life of any trend, prevailing market drivers will be replaced by new drivers that not only stop the trend but they reverse it.

In the case of oil, extremely low prices seem to have finally started to push higher oil producers (e.g. Shale oil companies) out of business. In their most recent report, the IEA suddenly changed their tone and said they now estimate that production outside of the Organization of Petroleum Exporting Countries (including the US) will decline by 750,000 barrels a day due to lower oil prices.

Less production is exactly the force needed to stop and reverse the bearish trend. U.S dollar coming off from its highs in both February and March was another factor that helped oil. Traditionally, commodities are measured against the greenback, so any weakness in USD will naturally put upward pressure on them.

Oil (the red line) vs. U.S Dollar (the black line) How far can the oil rally go? To answer this question, let’s take a look at the chart showing oil‘s major historical swings since 1992.

Eye catching in this chart is GFC’s 78% downwards move followed by a 276% rise. Collectively, between 2013 highs to the February 2016 lows, oil dropped by some 75% which is almost similar in size to the down move seen during the GFC. Whilst the size of the current move is similar to the GFC, it doesn’t make much economical sense to compare the aftermath of the GFC with the current situation, and target another +276% price increase.

Post GFC, asset markets in general embarked on a massive price appreciation wave driven by trillions of dollars of stimulus packages across the world. We don’t have the luxury of those market aids these days. If you exclude the GFC and get an average of the size of the uptrends that immediately followed pullbacks of 35% or more since 1992, you will get an average recovery rate of 151% from the downtrend lows.

If you apply this recovery rate to the closing price of the February low, you would get a target price of $65.16 which is only $3 shy of 50% Fibonacci retracement line drawn between 2013 high and the February low. Therefore, oil seems to have a fair bit to go. Daily WTI Crude Oil Closing prices Impact of Oil on Equities Usually higher oil prices equate to higher input costs that in turn lead to lower profit margins which is obviously not a good thing for the equity markets.

This time however, it is different and higher oil prices are actually supportive of the stock markets. The reason behind this is that during the crash days, investors got nervous about probable bankruptcies in the energy sector and their follow-on impact on the overall market. The energy sector is very capital intensive in nature and companies usually take on large amounts of debt to carry on their operations.

In the face of the sharp decline in oil and gas prices, these companies went under tremendous pressure to service their debts. Market noticed this pressure in mid-2015 and started pricing a wave of defaults amongst the energy sector. The fear of a potential credit crisis pushed up the correlation between stocks and oil to a degree that the pair started to move in lock steps from November 2015 up to now.

Higher oil price takes some pressure off the oil companies and helps markets restore confidence. Therefore, for now, higher oil is a good thing for equity investors. Stocks and Oil moving together since November 2015 Red line: oil, Black line: S&P500, Blue line: ASX 200 Impact of Oil on the Australian dollar Higher oil price can positively impact the Australian dollar on two fronts.

First, as discussed earlier, higher oil can restore confidence back to the markets and can create a risk on environment. Given that the Aussie dollar is mainly accounted as a risk on asset, higher oil can be supportive of the AUD (please refer to our last month’s article for a detailed explanation of risk on/off status). Second, being a commodity driven currency, the Australian dollar has a direct relationship with commodities, including oil.

The chart below shows AUD and oil. As you can see, the pair is highly correlated. Further up moves in oil can take Aussie higher.

AUD (black line) vs. oil (the redline) The Headwinds As discussed throughout this article, at the moment, the main driving force behind oil prices is coming from the supply side. Any new piece of information that explicitly or implicitly implies a production cut (increase) will immediately benefit (hit) oil significantly. Since Iran’s sanctions were lifted in late 2015, it has been desperately trying to increase daily production by 1 million barrels a day (b/d) to get back to pre-sanction levels of 4 million b/d.

So far, Iran’s production increase has been slower than predicted. However, any future news on Iran’s success to increase production is likely to have severe price implications on oil. What are the trading opportunities on Crude Oil?

Taking a look at the Light Crude Oil contract on a weekly chart, it is amazing to see the journey it has taken since mid-2014. The initial drop in the first 34 weeks saw an incredible 57% of the value wiped off the contract, dropping from around $107 to $45. It goes without saying, the trend is down but the recent price action on the weekly chart has seen the price pop its head above the longer term moving average.

In this case, we are using a 26 period moving average on the weekly chart. The key thing to note on the weekly chart is the successive lower highs and lower lows, and despite the impressive rebound over the last 6 weeks, Crude has been unable to break old highs. So right now, the weekly chart is well and truly showing overbought in the midst of a very strong downtrend.

We can also see 2 lines of support/resistance around the $40 level and the $45 mark. As we write this, Crude has broken above the first level of resistance and looks like a continuation in place to target the $45 level. We are seeing some distributive selling over the last 2 weeks, as nervous longs take profits off the back of this nice rally.

On the daily chart (shown below) we can see some previous highs getting broken and the lows rising as well. This is a positive sign in the short term, but all traders should keep aware of the bigger picture and identify the potential trading opportunities accordingly. Generally speaking, we look for two key factors, which are time and price.

Right now we have had a lot of price movement in a short space of time. Crude has the potential to consolidate at current levels whilst time catches up. It would not be unusual to see price hover around the $40-$42.50 mark for a few weeks before this next major move is underway.

Having said that, we are talking about one of the most volatile and active contracts of 2015-2016, so predictions are considerably challenging at best. You will notice the stochastics indicator showing overbought on the daily chart as well but the chart continues to hit higher highs. In addition, we are starting to see some bearish divergence as price heads higher but the stochastics slowly trends lower.

Divergence is usually one of the most powerful signals in the market, so short term traders will be well advised to keep an eye on how that plays out. What are the prospects for the AUDUSD? The Aussie dollar has been one of the surprise packets in early 2016 as it tracked lower at an alarming rate, with an impressive push lower right on the New Year period.

In all fairness, it seemed like all the global markets were crashing then as well, but fortunately our Aussie battler managed to find some support and rally off those newly established lows. Given Australia’s ability to dig natural resources out of the ground and sell them internationally, it comes as no surprise to see the AUD rising this quickly when we consider how strong Iron Ore, Crude and Gold have been since the start of 2016. So the weekly chart shows the AUD breaking new recent highs, hitting higher highs and successive higher lows.

In the short to medium term this bodes well. If we take a look at the support and resistance lines, you can see resistance is pressuring the AUD around the 0.7600 mark with plenty of distributive selling happening over the last 2 weeks, much like we saw in the price of Crude. This resistance extends back to early 2015 and again in mid-2015, so there is plenty of reason to keep a very close eye on current levels and tighten your trailing stops or wait for a pullback for potential long entries.

We also notice the stochastics is showing overbought, but do note that in an uptrend, the stochastics will always show overbought as it is plotting where is today’s close in relation to the high and low over the last 10 periods. On the daily chart you can see clearly the resistance levels that the AUD has powered through, taken no prisoners for those who may have been short. It is likely the sheer volume of those short the AUD that had to cover (buy back the AUD), resulting in the rapid escalation to the 0.7600 level.

There is no doubt for those who played the emotions of the market during this time, that they would have been smiling and are likely to still be smiling. Poking its head above the 0.7600 mark has produced a bevy of interested profit takers, taking money off the table, following a hand 250+pip run in 10 trading days. Remember, we mentioned on the weekly notes above how many times this level formed support previously, only to be broken at the middle of last year.

In addition, we can see some bearish divergence on the daily chart with the stochastics trending lower from well overbought. Right now the short and medium term trend is up, so best not to fight with that. The longer term 100 period moving average has also started to trend higher, so traders will want to pay attention there as well.

Given the strong move in such a short space of time, it would not be a bad thing to see the market pull back and provide a potentially handy level of entry to the long side. Having said that, momentum is favouring the bulls, so bargain hunters may not get a chance at a lower price for entry. The opinions and information conveyed in the GO Markets newsletter are the views of the author and are not designed to constitute advice.

Trading Forex and CFD's, including Crude Oil trading, is high risk. Ramin Rouzabadi (CFA, CMT) | Trading Analyst Ramin is a broadly skilled investment analyst with over 13 years of domestic and international market experience in equities and derivatives. With his financial analysis (CFA) and market technician (CMT) background, Ramin is adept at identifying market opportunities and is experienced in developing statistically sound investment strategies.

Ramin is a co-founder of exantera.com which is a financial website dedicated to risk analysis and quantitative market updates.

As a serious trader, one of the key areas you must work on is to develop an awareness of the way the market affects your mind, and subsequently the decisions you make whilst in a trading situation. What are trading biases? People have inbuilt set of belief and value systems that develop over the years through learning and instruction from others and experiences.

Many of these developmental factors are outside the trading context but when the trader interacts with the market, these individual natural ways of thinking and feeling become part of decision-making. Some of these natural in-built responses may not serve you well and are termed ‘cognitive biases’. In many instances in the ‘heat of the action’ when in OPEN trades, these ‘cognitive biases’ take over from your written and planned ‘trading system’ and become the major influence on your market behaviour.

Results that you may produce from your trading can reinforce these in-built biases making them more acute, and so have and ever-increasing influence on what you may do when in the market, until finally they potentially end up destroying the capital and also confidence of the investor. There are several of these outlined in the “behavioural finance” research literature and we intend over a series of articles to look at the more commonly described of these. Loss aversion A loss aversion bias is arguably one of the more common trading cognitive biases.

The trader has an overt focus on avoiding taking a loss in a trade. Obviously, taking a loss, with of course risk management to limit any such loss to a tolerable level (often 2-4% of trading account size) is an accepted reality of trading practice. However, in those with a loss aversion bias, there are two potential behavioural responses when in an open trade that may be damaging to capital and ultimately sabotage the potential for on-going successful trading outcomes. 1.

Stop losses are often moved downwards in a long position (and upwards in a short position) from that originally planned on entry. This is an attempt to regain a losing position with the hope that a price may move back in your desired direction. There may be multiple such “moves” of that stop, each potentially inflicting more damage on capital way beyond any planned maximum risk level.

Commonly, there will be an internal dialogue to justify staying in a trade. 2. Conversely, so potentially acute is the fear of losing a profitable trade that such trades are often exited prematurely throwing out of the window any pre-planned profit target or trailing stop system articulated within your trading plan. The internal dialogue we have occasionally heard form traders is “you will never go broke taken a profit”.

So, in practice these two factors result in a reversal of the traditional market wisdom of ‘keeping your losses small and letting your profits run’, in that losses are extended, and profits are cut short. The basis of such a bias maybe be multi-fold, including: • Previous losses in investments, • Lack of education and confidence, • Over-confidence in your ability beyond competence with a view that a loss in a trade meaning you were “wrong” (an underlying feeling of “I am better than that”), • Pre-set beliefs about how the market SHOULD move i.e. trading what you think not what you see, • taking on the “trades of others” without due diligence and perhaps against your plan (e.g. in forums, trading rooms), • Incorrect position sizing with a small initial trading capital where the effect of trading fees is more acutely felt. And it can get worse… One of the MAJOR problems with a loss aversion bias is that it becomes cyclical in its severity, as results continue to fall short of what you had hoped.

This is not only with individual trades where losses may become more extended and even smaller than possible profits taken. Desperation may eventually set in, with an obsession to get trading capital back, whilst account value continues to diminish until the trade reaches a point of “no more pain” and leaves the market completely. This unfortunately has double impacts - not only has there been a loss of a trading capital now, but in many cases have been sufficiently painful that the individual may never again return to trading (so eliminating any potential for future positive investment experiences).

What you can do If this resonates with you, then the purpose of this article is fulfilled, as recognising and “owing” that there is something that needs to be addressed is the VITAL first step in making a change. Obviously, there are steps you can take to address this (and you MUST). Here are some suggestions: a.

You have a complete trading plan that articulates trading actions once in trades i.e. an exit strategy. b. Start a journal. Sometimes the very process of formally recording what you are doing helps in doing the right thing more consistently. c.

Press the “reset button” on your trading account. What we mean by this is an acceptance that your trading capital is what it is now. Rather than a mission to regain your initial capital this needs to be replaced by a drive to achieve consistently positive trading results (and including that taking a loss within your tolerable level is a positive outcome).

The long-term reality is that through changing this focus as described, addressing the bias through developing that consistency in action, you could give yourself the chance for some sustainable results. d. Re-align with your trading plan prior to every trading session. e. Make it a mission to “challenge” your existing plan on at least a 3-monthly basis through gathering an increased weight of evidence that its component parts are working for you as an individual trader.

This breeds confidence in actioning a plan, enabling more disciplined trading. f. There are a couple of ‘unhealthy’ statements that fly around the investment world which you need to check to not become part of your thinking. The first, “do not invest with money you can’t afford to lose” although is from a well-meaning perspective, arguably can contribute to a mindset which gives some sort of permission to lose.

The second and more dangerous from a capital perspective is “it is not a loss until you take it”. This is a massive distance away from what is recognised as good trading practice and is completely contradictory to the positive idea that you should take a loss as soon as it hits your tolerable dollar level. g. Take regular breaks from the market during any session, particularly when trading shorter timeframes, to re-align with purpose and plan. h.

Ensure that you are trading within your level of competence, have a personal trading development plan that outlines your learning for the next quarter. i. Trade smaller positions until you have evidence of developing good consistent habits that break away from your bias. There are a few different ways to action this, reducing your tolerable risk level significantly e.g. from 3% to 1% of trading account capital, or trading micro-lots rather than mini-lots are a couple of examples.

Finally, be gentle on yourself in terms of your development, biases by nature are usually deeply ingrained and will take some work to replace. Our education programmes inluding the popular Inner Circle group are there to help you move forward in your trading and our team is there to support 24 hours a day, 5 days a week.