Daily Trading Journal – The perils of over trading

Happy New Year!!

Its been a while since I last updated my forex trading journal. Perhaps I should rename this as only a trading journal as the updates won’t be daily, but rather when there is something substantial to delve into.

First off… i’m back from my vacation and welcome the new year with dreams of making it big with Forex. For a moment, that dream did seem closer than it felt.

Over trading is a temptation

One of the biggest issues facing most traders is over trading  Over trading can happen when you think that you can always make a buck on price movement. Irrespective of how the market is moving. Sadly such impulse based decisions can prove to be expensive.

Over trading is purely psychologically based. So don’t listen to what your mind tells you. Entering into a market based on gut feel or a compelling downward falling candle bar is not the reason you should jump in. This can be compared to taking a gamble. The question is if you do not know where the price will stop or is likely to re-trace you would be setting yourself up for a potential loss.

Forex is about Analysis & Execution

Another important lesson that every trader should remember is that in forex, it is 80% analysis and 20% execution. While you do not have to spend days to find the right entry and exit position, analyzing and getting a feel of the overall prevailing trend can help you narrow down on your trades.

When it comes to analysis, the first step is to identify the trend followed by where the price could possibly retrace, getting a feel of how strong or weak the trend is and then placing your entry and exit levels.

To reiterate, I follow these simple steps now.

  • Identify the trend and its strength
  • Find out possible retracement levels
  • Reference at least one lower time frame and one higher time frame charts
  • Place trades accordingly

Money management is another essential factor. It is always advisable to be conservative rather than go on a impulse and end up trading 1 lot or more than what your usual position size is. This is even more important when you are trading on a impulse. So pay close attention to that. It is for a reason that traders often say that the amount you should risk should justify the gains and don’t place more than 2% of your equity at risk.

Get rid of distraction

The third important aspect is getting distracted by trading multiple pairs. Sometimes, in an effort to jump in on a trend, we (I) usually have more than 5 or 6 charts opened and try to browse back and forth in order to catch a trend. Such way of trading does only harm.

In your effort to catch the trend on ‘any’ pair you would lose out on the most important factor of analysis. Sure, one pair might catch your eye but if you do not know what the day’s trading high and low points are or if there was any fundamental news that is about to be released then it would only result in risking your account.

As a rule, focus on two instruments. I for one stick to XAGUSD and NZDUSD. The more you look at the chart for an instrument, the more familiar you will be. While initially it might seem difficult and maybe boring, understanding and having a general idea on an instrument helps to narrow down your trading possibilities.

Trust your indicators

I have learnt this lesson the hard way when yesterday morning, one of my indicators pointed to a SELL signal. Despite taking a position, a few minutes into the trade and I started to grow impatient. Trusting your indicators (that is if you are using the right ones) is one of the most basic steps to success. Sure, sometimes the market might reverse, but assuming you have done your research and have taken a position and if the candle moves against you, trusting your indicator (EMA cross over) becomes essential. This can only be achieved by practice and more practice.

In my coming updates, I will share my trading system which I think has been profitable for me. I make use of the trend, moving average cross over, and few other indicators to help me take a trade.

Lastly, I will leave you with this EA which I found to be especially useful.

EA for closing Pending Orders on Market Open

On Friday, towards close of market, I had placed a pending order on XAGUSD. But on a closer analysis I found that my trade was counter-trend. By the time I realized, it was too late the market was closed for the weekend. Any trader would know that you cannot modify any pending orders when the markets is closed.

I discovered this EA which closes pending orders on the first tick when the market opens. Assuming that your pending order was placed ahead and there are no gaps formed over the weekend, this EA can be very useful. Of course, there is a default MT4 script that can do this but it has found to throw up errors if you have many pending orders opened.

Delete Pending Orders on Market Open

Click here to download this EA (right click/save as). Refer to this article on installing expert advisors.

The setting for this EA is:

Time Elapsed = 0 infers that the EA should delete a pending order on the first tick.

JustCurrentSymbol = true infers that the EA should close a pending order on only the current symbol (setting this to false will close all pending orders on the first tick, irrespective of the symbols/instruments)
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Expert Advisor Files

MT4 EA to closed Pending Orders

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