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Year 2017 is closing and I am in mood for some light-hearted banter yet to write meaningful article. So here I go talking about some behavioral economics and its implication on forex trader and his trading. Behavioral economics in essence is a method of analysis that applies psychological aspect of human behavior on economic decision-making.
Although the terms mentioned in this article have wide implications in different economic decision making process, I will keep the scope of these terms to forex trading and investing only.
  • Framing

Fig. 1
Framing refers to how a trader perceives a forex movement of a pair. It’s a glass half full or glass half empty kind of situation(same as above comic strip). In last 2 weeks gbp/nzd is correcting from 1.98 to 1.90 zone. So when price retrace to 1.93, a trader may think, wow the pair is at 3% discount and will try to buy only to find price go even lower. So it is important to see that pair is in strong corrective mode after more than 10% rise in last 2 months.
The key is to perceive the market correctly and never feel that “I am most intelligent”. Follow technical’s and wait for the pair to form a support/resistance in strong correction / r…
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Yuliya_N avatar
Yuliya_N 3 Jan.

Very nice article. Good job friend!

Annyrio avatar
Annyrio 3 Jan.

Very good!!!

hrustiashka avatar

Well written article!

Vlad73 avatar
Vlad73 8 Jan.

well done

Siarhei89 avatar
Siarhei89 14 Jan.

good article!!!

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I thought to write this article with a general misconception about forex trading people have in humorous way while comparing unrelated businesses Cab driving and Financial Investments . It is reference to normal people who want to invest their money and want to hire traders to grow their account exponentially. Although it is directed towards investors but other traders can also take some hint from it.
Traders are entrepreneurs and they will need investors. And it is often said Entrepreneurs are from Mars and Investors are from Venus. But in case of trading I found it even worst and it can only sorted if both the parties are in right mindset about each other expectations and expectancy(returns) of traders systems.
All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis. – Jesse Livermore

I think the least understood of the above statement is about ignorance. Newbie Investors have almost zero knowledge in financial markets. Trading is specialized knowledge based profession. I believe experienced traders understand: My focus is o
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black_box_xx avatar

It's interesting to read, thanks for the pictures!)

anashape avatar
anashape 22 Oct.

your best masterpiece!

pramuk avatar
pramuk 24 Nov.

Interesting piece! :)

robinhuda avatar
robinhuda 30 Dec.

nice article

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I have been trading for over 4 years and I still get the same feeling when in a trade today as I did in the first months of my trading life. My heart rate increases, palms get sweaty and I start to feel the adrenalin running through my body. One reaction that is somewhat new to the field is I start to hear this voice in my head that fills me with doubt. You know the one, why did I enter that trade? This isn’t going to work out? Should I just close this trade and walk away? I start pacing the room or even leave it, because it will all work out if I don’t watch. But I can’t help myself, I have to watch, every pip, no wait every tick! Oh it’s working out, I knew it would. But now what do? Should I close it or wait for the target profit. All the while the voice is there questioning every pip of profit and lost profit. Ultimately I decide to close, or is it the voice that decided that for me? Now, this is probably not that uncommon among traders, and needless to say I have had modest success with trading, surviving the last 4 years has been the greatest success. However, I don’t remember ever being filled with self doubt when I started trading full time 4 years ago. Compared with my ea…
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doctortyby avatar
doctortyby 14 Dec.

Congratulation for the courage to admit the fact that you have a voice that bothers you while you are trading and beyond that. The EGO usually lets traders think they are always in control and nothing can interrupt their total power. You are talking with your thoughts my friend, and you hear that voice in your head whenever you have to take an important decision and whenever you find yourself in a stressful situation not just trading decisions. Just pay attention to youself, and your conversations ;) It is a matter beyond the psychological and emotional factors.

NEDP82 avatar
NEDP82 17 Dec.

Thank you for your comment. I believe that the psychological factors of trading are the most important aspect of gaining success. I find a lot of traders neglect this aspect as they think they are above it. The article is intended to highlight a small side of the psychological factors, hopefully in a way people can relate to.

SpecialFX avatar
SpecialFX 17 Dec.

Interesting and personal article :) In my opinion, there is a problem with lack of confidence and your survival instinct kicking in. Without knowing you I would guess that the voice appeared after a long period of losses, am I right? Your mind is trying to avoid the pain of more losses, so you become obsessed. Maybe you should try developing a mechanical system and trading that way? I am a good system developer and mechanical trader, but I am the worst discretionary trader in the world, you need to understand who you are, and what kind of trading is compatible with your personality.

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