How to Stop “Sucking” at Analysis – Follow Up

As the market has behaved so well since my last blog, I thought it best to follow up the trade I placed. If you missed that blog go and take a quick peek here. For those that can’t be bothered, let me do a quick recap.

Analysis Over Predictions

In my experience very few people suck at analysis (unless they over complicate their analysis rules), what they suck at is predictions. Most traders do, so don’t be hard on yourself. You don’t need to be a fortune teller to be a successful trader. Don’t guess what the market is going to do, just follow it when it moves.

How’s that for quick.

 

The Trade

It was a buy on the 1hr AUDJPY chart. Bounce on the trend line and break a counter trend line entry. Seen below:

AUDJPY Chart Analysis-follow up

As I said in the previous post, if I was a predicting man I would say that this pay was going to 85.00 ish to break the previous high. The problem with predictions is you start to believe them, you may have been saying that since the reversal at 81.50. And other traders would be looking on in wonder as the market gets closer and closer and closer. You will start to believe your own hype, your subconscious begins to filter out any information that doesn’t align with your view, your prediction.

Follow up screenshotYou start to ignore the market signals and interpret what you see to suit your prediction:

“Ok. So the market has broken the up trend line, but it’s finding support. It’s a fake out, it’s going to follow the backside of that trend line to 85.00.”

Because that’s where I’ve said it’s going and I’ve been saying it since 81.50. Look how good I am, I own this market.

 

 

 

 

 

 

What Happens Next

The problem with this way of thinking is it prevents you from being adaptive. If you analysis the market over predicting, your never wrong. Think about that for a moment. Because how are you going to feel if the market turns now and never comes back. Your 85.00 prediction is wrong… you are wrong. Those traders who saw your prediction will know you are wrong, they will tell others your wrong. Every one will point and stare, there goes that wrong trader.

Admittedly a bit over dramatic, but you get the picture. Some of you will totally understand if you have that kind of mind. So can you see the pressure you put yourself under by predicting.

What this all means is that even if you do see a sell signal on this pair, you will hope that this is one of the times when the signal is wrong. You won’t take the trade because that would be admitting you were wrong in your prediction. You would have to admit to yourself that your prediction was wrong before you would allow yourself to take that trade. And usually by then the trade has gone:

 

Analysis

For those of you who did read the previous post. Do you remember my analysis. “If however the market breaks the trend line and gives me a sell signal. I will close the buy (regardless of profit or loss) and take the sell.

follow up trade

I was late getting into the sell, because I was sleeping. When I checked my charts the sell signal was still valid so I took the loss of the buy trade and took the sell. It was easy for me to do, because at no point was I attached to the direction.

I’m not showing you this to boast, the market just allowed me to make my point clearer. For that I am thankful. It by no means works out like this every time. I’m also not telling you to trade trend lines breaks without due diligence and testing. My analysis of this pair had noticed the very strong level of resistance at that level. So I was prepared to change direction at the drop of a hat.

The market is going to do what ever it wants to do, don’t fight it… follow it.

 

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To Your Consistently Profitable Trading

Callum

 

P.S. What did you think of this Lesson? Please share it with us in the comments below!


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Callum McLean

Co-Founder and Trading Psychologist at Special FX Academy
Trading Psychology Coach and Certified NLP Coach. It is my belief that trading is 99% Psychological. And it is by understanding and improving your psychology, that you can be a successful trader. Success is a formula that everyone can and should learn.
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